SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

|x|   Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
      Act of 1934 for the fiscal year ended May 31, 2002

|_|   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.
                       (Name of Registrant in its charter)

           New York                                           11-1975534
(State or other jurisdiction of                             (I.R.S. Employer
 incorporation or organization)                            Identification No.)


33 Walt Whitman Road, Huntington Station, NY                    11746
  (Address of principal executive office)                     (Zip Code)

Issuer's telephone number, including area code: (631) 423-6689

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

                                                     Name of each exchange
         Title of Each Class                         on which registered

Common Stock, par value $.001 per share                OTC Bulletin Board

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

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 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 |_|

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-K contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |X|

On October 8, 2002 the aggregate market value of the Common Stock of Star Multi
Care Services, Inc. held by non-affiliates equaled 765,600 shares with a market
value of $107,184 (based upon the closing price of the Common Stock on such date
on the NASD OTC Bulletin Board).

As of October 8, 2002, the Registrant had 1,059,232 shares of Common Stock
outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

None

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                                     PART I

Item 1.  Description of Business

General Background and History

Star Multi Care Services, Inc. (the "Company") is in the business of providing
professional and paraprofessional home health care personnel services to
elderly, ill and physically challenged individuals in their homes, and to a
lesser extent the Company provides health care facility staffing services for
hospitals and skilled nursing facilities. As of the close of the Company's
fiscal year the Company was licensed and / or certified in five states to
provide a full array of health care personnel services, which included
Registered Nurses, Licensed Practical Nurses, Home Health Aide, Nurse Aide, and
Personal Care Aide services. In some states the Company was also licensed and /
or certified to provide Physical Therapy, Speech Therapy, Occupational Therapy,
Respiratory Therapy, and Medical Social Work services.

The Company was established in 1938 in Brooklyn, New York and was purchased by
present management in 1986 at which time the primary focus of the organization
was the provision of facility staffing and private duty nursing services. After
the Company was acquired management successfully secured, in 1989, New York
State Department of Health approval as a Licensed Home Care Services Agency.
This expanded the Company's scope of services into the home care market.
Management initiated an IPO in 1991 with the Company becoming publicly traded on
the NASDAQ SmallCap Market, and in 1995 the Company began trading on the NASDAQ
National Market. On November 11, 1999 the Company reverted to trading on the
NASDAQ SmallCap Market, and on July 10, 2002, it began trading on the NASD OTC
Bulletin Board. In addition, the Company has maintained accreditation by the
Joint Commission on Accreditation of Health Care Organizations (JCAHO) since
1992 and was most recently awarded in May 2002 Joint Commission Accreditation
with Commendations, attesting to the Company's commitment to the delivery of
high quality health care services.

In conjunction with the Premier Asset Purchase Agreement, the New York and New
Jersey locations / operations of the Company were fully transferred to Premier.
At fiscal year end, the Company maintained 5 licensed offices within the three
remaining states it operates in, which include Pennsylvania (3 offices), Ohio (1
office), and Florida (1 office). In the Ohio and Pennsylvania locations, the
Company also maintains as a provision of State licensing and contracting
requirements Medicare Certified Home Health Agency operations in these states.
Star maintains full functionality for service provision across the Company 7
days a week, 24 hours a day. As of the fiscal year end, the Company employs over
1,000 full-time and part-time employees and services over 1,000 clients
annually. Additionally, the Company also has its corporate facilities and
executive offices in Huntington Station, New York.

Historically, the Company grew through a series of acquisitions that began in
1992 with the acquisition of certain assets from Unity Healthcare Holding
Company, Inc. and its subsidiaries (Unity). This expanded the Company's
operations within its existing New York and the adjacent New Jersey markets by
adding new contract rights for provision of home care services. In addition, the
Unity acquisition added new operations in the state of Florida, which included
both, Medicare certified (later discontinued in 1999) and licensed operations in
South Florida.

In 1993, the Company further expanded its home care operations in New York
through the acquisition of certain assets of DSI Health Care Services, Inc.
(DSI). This acquisition added new contract relationships within the New York
County of Nassau with facility based Certified Home Health Care Agencies, Long
Term Home Health Care Programs, and Hospices as well as expanded the Company's
existing Medicaid operations within the County.

In May of 1995, the Company acquired certain assets of Long Island Nursing
Registry, Inc. ("LINR"), which again augmented its existing operations in Nassau
County by both adding new contracts and expanding existing contract
relationships. The acquisition of LINR expanded Company operations into the new
markets of Suffolk and Onondaga (Syracuse Area) Counties (NY) for provision of
contract Medicaid Personal Care Services, Medicaid Skilled Nursing Services and
a variety contracts with facility based Certified Home Health Agencies, Long
Term Home Health Care Programs, and Hospice Programs; however, the Company
formally withdrew from the Syracuse market on May 1, 1999 by closing this office
in conjunction with its consolidation and restructuring initiatives.


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In August 1996, the Company and AMSERV Health Care, Inc. consummated a merger
whereby the Company acquired control of Amserv, which resulted in Amserv
becoming a wholly owned subsidiary of the Company. This acquisition
significantly expanded the Company within the northern and central New Jersey
markets by adding new office locations in New Jersey. Amserv Health Care of New
Jersey, Inc. was a provider of Medicaid and Medicaid Waiver reimbursed
paraprofessional services, as well as contract services with Certified Home
Health Agencies and Hospice Programs. In addition, this acquisition also brought
the Company operations in Ohio operating under the name of Amserv Health Care of
Ohio, Inc., d/b/a Central Star Home Health Services. This subsidiary company
provides Medicaid and Medicaid Waiver paraprofessional services as well as
facility staffing services for professional nursing staff. The office is also
Medicare Certified but currently provides no Medicare reimbursed services.

On September 9, 1997 the Company consummated an Agreement and Plan of Merger
with Extended Family Care Corporation (EFCC). The Agreement between the Company
and EFCC provided for the merger of EFCC Acquisition Corp. (Merger Sub), a New
York Corporation and a wholly-owned subsidiary of the Company with EFCC, with
EFCC merging with and into the Merger Sub. At the time, the EFCC acquisition
added to the Company's existing New York and New Jersey operations as well as
expanded these operations by introducing new service contracts that were similar
to and compatible with existing paraprofessional contracts in these regions.
Additionally, the Company added new market operations in Allentown,
Pennsylvania. This particular office predominantly specializes in the provision
of skilled Pediatric Nursing services. This office is both Medicaid approved and
Medicare certified.

On May 8, 2000, the Company through a subsidiary corporation, EFCC Acquisition
Corp. d/b/a Extended Family Care, acquired certain assets of the Pennsylvania
offices of US Home Care. The acquisition expanded the Company's existing
operations in Pennsylvania by adding three new locations in Philadelphia,
Lancaster and Pittsburgh. The acquisition introduced the Company into three new
major markets in Pennsylvania and added approximately $5 million in revenue. The
Philadelphia office was subsequently closed in December 2000.

Sale of Existing Operations

On July 3, 2001, the Company entered into Purchase Agreement with Premier Home
Healthcare Services, Inc. ("Premier") to acquire selected assets of the
Company's wholly owned subsidiary, Amserv Healthcare of New Jersey, Inc.,
operating the New Jersey operations of the Company and the New York operations
of the Company, with an aggregate purchase price of $5.5 million, $4.0 million
and $1.5 million for the New Jersey and New York operations, respectively. Sale
of the New Jersey Assets was completed on August 31, 2001 subject to a post
closing adjustment to the purchase price based upon certain revenue thresholds.
Additionally, on August 31, 2001, the Company entered into a Management
Agreement with Premier for management and operation of the Company's New York
operations pending New York State regulatory approval and the Company's
stockholder approval. Upon receipt of all necessary approvals, the sale of the
Company"s New York operations will be completed. The purchase price of the New
York operations was also subject to adjustment based upon certain revenue
thresholds. In the interim period between the effective date of the Management
Agreement with Premier and the closing of the New York operations, the Company
borrowed $800,000 from Premier which was secured by the assets that Premier was
to purchase in the form of a non-recourse promissory note. Additionally, under
the terms of the Purchase Agreement with Premier, Star had retained the account
receivables of the New York and New Jersey operations, equal to approximately
$4.5 million. Subsequent to the execution of the Purchase Agreement with Premier
and the closing of the New Jersey Assets in August 2001, the Company determined
that shareholder approval was not required for consummation of the sale of the
New York operations of the Company. As the Company has received New York State
regulatory approval for the sale of the New York operations and to facilitate
the closing of the sale of the these assets without shareholder approval, the
Company has agreed to a consensual foreclosure of the New York operations by
Premier, whereby all of the assets related to the Company's New York operations
will be transferred to Premier. Upon the completion of this consensual
foreclosure, the New York operations will have been transferred to Premier, in
the same manner had a closing actually occurred, with no additional liability
incurred by the Company. This foreclosure should be completed by the end of
November 2002.

The Company used the proceeds from the transaction with Premier to pay-off and
terminate its credit facility with Healthcare Finance Group, Inc. ("HFG"). The
Company paid HFG a total of $4.4 million in debt obligations and fees.

Organizational Restructuring Changes

Although the Company had implemented organizational restructuring plans over the
1999 and 2000 fiscal years in response to industry related reimbursement and
regulatory changes, the Company again initiated additional restructuring
activities in fiscal year 2001. This was done in response to: (1) continued
service volume shrinkage across the industry in all areas of reimbursement
including Medicare, Medicaid and commercial insurance; (2) the Company's need to
improve profitability in order to reduce financial obligation liabilities, and
(3) the Company's inability to secure adequate numbers of personnel to expand
client service volume due to an industry wide personnel shortage. The
restructuring activities were initiated and completed in the Company's second
quarter. These restructuring activities included;


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<PAGE>

o     Senior and middle management personnel changes.

o     General staff consolidations and reductions.

o     The closure of all non-profitable, marginally profitable and under
      performing divisions and locations.

o     The elimination of under performing, low margin and poor paying contracts.

In the 1999 and 2000 fiscal years, the Company also initiated and completed the
consolidation of certain licensed offices in both Florida and New York. The
licensed offices located in Miami Lakes and Lake Worth were consolidated and
centralized into the Company's Hollywood office to increase operational
efficiency in the region and reduce cost. Simultaneously, the Company terminated
certain under-performing low margin managed care contracts in the region to
increase the regional operating margin. Additionally, the Company, effective
February 26, 1999, discontinued Medicare Certified Home Health Agency operations
in Florida due to changes in the Medicare reimbursement and authorization
methodologies. In May 1999 the Company closed its Syracuse office due to cost
containment considerations.

Effective January 1, 1999, the Company successfully completed an 18 month,
automation restructuring project by placing all offices on the same operating
software for client intake, scheduling, personnel, clinical data base
management, billing and compliance. The system downloads data to the Resource
Center into a standard accounting package for payroll, billing, collection,
financial and general ledger processing. These changes marked a significant
transition from multiple operating systems to one integrated standardized
operating system. The Company continues to upgrade these systems to the most
recent releases available.

The Company continues to maintain a three-tier Corporate Compliance structure,
which includes:

      1.    Corporate Patient Care Committee which meets quarterly to review and
            establish new policies and procedures, and reviews internal audit
            findings by department and branch;

      2.    Regional Quality Improvement Audit Committees, which conduct a
            series of operational, financial, clinical and personnel audits
            across all offices and departments. These audits test all regulatory
            and operational aspects with all findings reported to the Director
            of Corporate Compliance. The Corporate Compliance Program provides
            an additional layer of internal audits, investigation, and
            reporting. The program provides for a Director of Corporate
            Compliance who operates under the direction of and reports directly
            to the Company's Board of Directors.

Customer Base

The Company maintains four types of customers, which form the base of its
referral source. The customer base includes Federally and State funded public
assistance programs (Medicare, Medicaid), other third party payors
(subcontracts), insurance companies and private pay customers.

A substantial portion of the Company's revenue is derived from home health care
services provided to patients who are eligible for Medicaid and Aging related
services referred to the Company through contract or subcontract relationships.
The Company maintained State and / or County approval and / or contracts in New
York, New Jersey, Ohio, and Pennsylvania for provision of professional and
paraprofessional Medicaid services which include Registered Nurse, Licensed
Practical Nurse, Home Health Aide, Personal Care Aide, Homemaking, and Live-in
Companion services. Each State maintain(ed/s) its own initial approval and
annual re-approval criteria, which are subject to audit and / or accreditation
processes. These services are reimbursed directly by State and / or local
government and represent a combination of federal, state and local funding.
Clients are referred to the Company by physicians, hospital discharge planning
departments and community based medical service organizations. The majority of
the business in the states of New York, New Jersey, Ohio, and Pennsylvania
was/is Medicaid reimbursed. If a contract was to be lost or an annual approval /
accreditation not secured, it could have a material and adverse effect on the
Company's operating results.

Although the Company discontinued Medicare operations in the State of Florida,
it is still federally certified to provide Medicare reimbursed Certified Home
Health Agency services in the states of Ohio and Pennsylvania; however, the
Company conducts no Medicare reimbursed business in these states.

During the fiscal years ended May 31, 2002, 2001, and 2000, 70%, 63% and 67%,
respectively, of the Company's revenue was attributable to Medicaid programs.
The principal reason for the increase in the most recent fiscal year is the
discontinuation in the New York and New Jersey markets where there had been
general service hour volume reductions in Medicaid services.


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<PAGE>

The Company's next largest customer base is derived from other third party
payors which consist of subcontracting relationships for provision of personnel
with community and facility based organizations that are reimbursed directly by
Medicaid or other governmental services, and insurance companies. This source
has accounted for 28%, 40% and 29% of revenue for fiscal years 2002, 2001, and
2000, respectively.

Private pay customers have represented approximately 1% - 2% of revenue in each
of the last three fiscal years. These clients for a variety of reasons choose to
pay privately because the client is ineligible for public assistance programs,
chooses to supplement services provided by Medicare or an insurance program, or
have elected to pay part or all of their care out of pocket. These customers
come predominantly through referrals from physicians, hospital discharge
planners, and community based organizations.

Marketing and Sales

The Company maintained marketing and sales activities in each of the five states
it operated in and concentrated its efforts through the use of regional
marketing/sales teams comprised of field service office administration and sales
representatives. The office Administration educated the sales staff regarding
new identified targets, regulatory changes and new service programs. The Company
believes in the use of office specific Operational Plans for the management and
marketing of regional sales. Post Premier acquisition marketing activities will
be conducted by the Office Administrator of each facility. The offices utilize a
formal Operational Plan. The individual Office Operational Plan format provides
for the comprehensive approach to office growth, marketing, and recruitment, as
well as the clinical and fiscal operation of each office. The plan objective is
to maximize internal growth and assure clinical / fiscal integrity. The plan
serves as the framework for development of a continual process for Quality and
Performance Improvement in all areas of responsibility including marketing. The
marketing component of the plan identifies all potential referral sources and
establishes a systematic referral source contact strategy across the marketing
and office staff. The plan is continually reassessed by management and refined
to ensure success, and serves as an evaluation tool to identify strengths as
well as areas needing organizational support.

The Company's office staff focuses on the sales and marketing component goals of
these plans. The Company targets the key representatives of the contracting
institutions, hospital discharge planning departments, insurance companies,
community based facilities, and physicians to secure contractual and referral
relationships. Representatives visit targeted facilities and programs, while
maintaining the Company's presence with existing referral sources and acting as
the first line of communication with new referral sources. Beyond the
traditional personnel services offered by the industry the Company offers
facility staffing, Shared Aide Team Model services, Skilled High Tech Nursing
and Pediatric Nursing specialty services. From an operational perspective the
Company markets quality benchmarks as demonstrated by its Joint Commission
accreditation (JCAHO), and a full functioning Corporate Compliance Program. The
sales representatives are supported by print and radio advertising, direct
mailing, and attendance at trade shows and regional health care functions.

Competition

The home health care and facility staffing industry has a variety of local,
regional and national organizations, which comprise the Company's competition
base. The Company has numerous competitors in each of the markets it serves,
however, regulatory and reimbursement changes are causing consolidation within
the industry at this time. Smaller local and regional operations are finding it
increasingly difficult to remain in the market. Companies similar in size to
Star or larger regionally based companies have emerged to be viewed by the
Company as its major competitors.

Competition is based on the quality of care provided to clients, the ability to
obtain personnel to deliver the authorized service and the price structure
offered by the organization. The Company believes that it has developed and
maintains high quality standards through its operational, clinical, and
compliance policies, procedures and activities. Additionally, the Company
maintains an aggressive recruitment and training philosophy, which has proven
effective. Cost effectiveness in operation, achieved through improved automation
platforms, new service delivery models, and economies of scale have enabled the
Company to be aggressive in its pricing structures while maintaining strong
operating margins.


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<PAGE>

Government Regulations, Licensing and Audits

The Company's business is subject to substantial and frequently changing
regulations by Federal, State, and Local authorities, which require significant
compliance responsibilities by the Company. Each State in which the Company
operates, maintains its own form of licensing standards and may maintain
Certificate of Need (CON) specific to the State that are above the minimum
standard requirements established by the Federal government for participation in
the Medicaid program. The imposition of more restrictive regulatory requirements
or the denial or revocation of any license, certification, Medicaid approval, or
permit necessary for operation in a particular market could have a material
adverse effect on the Company's operations. In addition, any future expansion
into new markets would require the Company to comply with all licensing, and /
or CON requirements and other regulations pertinent to that jurisdiction.

As of the close of fiscal year 2002, the Company continues to maintain all
applicable licenses and certifications in the states of Pennsylvania, Ohio, and
Florida. As a provider of services under some state Medicaid programs, the
Company is required by the Federal 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 the Company 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 are complied with.

With participation in the Medicaid program, the Company is 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 the Company or amounts due to the
Company as adjustments from the governmental agency.

Liability Insurance

The Company's employees and subcontractors routinely make decisions that can
have significant medical consequences to the patients in their care. As a
result, the Company is exposed to substantial liability in the event of
negligence or wrongful acts of its 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 $3,000,000 for all claims in
any single year. In addition, the Company 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 the Company will be able to maintain its existing
insurance at an acceptable cost or obtain additional insurance in the future, as
required. There can be no assurance that the Company'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 the Company
and its financial condition.

Employees

As of September 2002, the Company employed 40 permanent office and
administrative employees. The Company also has a roster of temporary
professional and paraprofessional employees (including registered nurses,
licensed practical nurses, home health aides, personal care aides and nurses'
aides). The Company treats all such persons as employees. The Company currently
has no union contracts with any of its employees and believes that its
relationship with its employees and independent contractors is good. The Company
pays its temporary employees at wages that it believes are competitive within
industry standards.


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Recruitment of Personnel

Recruitment of adequate numbers of temporary personnel continues to be
increasingly difficult in the home health industry resulting from a variety of
market forces. The previously strong economic environment, coupled with a
moderate to low reimbursement rate structure has hampered the industry in
general in recruiting adequate numbers of personnel to provide authorized
services. Field service personnel wages and benefit packages are below average
as compared to other service type industries outside of health care. Although
the downward economy should result in an influx of personnel available to the
industry, this trend has yet to occur.

To address this issue, the Company has focused on higher margin business or
attempted to negotiate revised contractual rate agreements with existing
referral sources in an effort to permit the Company to offer increased wage and
benefit packages to its temporary employees.

Additionally, the Company's focus has been on filling all monthly
office-training programs, development of off-site recruitment initiatives and
training locations, and recruitment of professional nursing personnel. This
project was implemented in March 2000 and has been moderately successful,
although future success of the program cannot be guaranteed.

Item 2. Description of Property

Description of Property

The Company leased as of fiscal year end a total of 12 facilities in five
states. As of the August 31, 2001 Premier transaction, the Company currently
maintains 6 leased facilities. The Company believes that its existing leases
will be negotiated as appropriate as they expire, or that alternative properties
can be leased on acceptable terms. The Company intends to seek lease space
reductions in its Florida Resource Center location by the end of the 3rd quarter
of FY 2002 in an effort to reduce operational costs. The Company also believes
that its present facilities are well maintained and are suitable for it to
maintain existing operations.

The following table describes the location and current use of each of the
Company's leased facilities as of September 2002:

Location                             Description
--------                             -----------

New York Facilities
-------------------
Huntington Station                   Corporate Executive Offices, Finance and
                                     Administration

Florida Facilities
------------------
Hollywood                            Nursing and Paraprofessional Services

Ohio Facilities
---------------
Mansfield                            Nursing and Paraprofessional Services

Pennsylvania Facilities
-----------------------
Allentown, Lancaster, Pittsburgh     Nursing and Paraprofessional Services


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Item 3. Legal Proceedings

On July 16, 1998, the Company was advised that an audit of Star Multi Care
Services of Florida, Inc. (d/b/a American Health Care Services) ("American"),
the Company's Florida 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 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. On July 11, 2001 the Company entered into a
Settlement Agreement with United States Department of Justice and the Office of
Inspector General of the Department of Health and Human Services. In order to
avoid the delay, uncertainty, inconvenience, and the expense of protracted
litigation of the claims, both parties mutually agreed upon a settlement amount
of $1.0 million payable by Star no later than November 8, 2001. The agreement
was subsequently amended to permit an extension of payment and, at August 23,
2002, $250,000 remains payable in installments through April 2003. The Company
anticipates that it will have the available funds necessary to complete the
payment by the due date.

On May 10, 1999 the Company entered into a Settlement Agreement with the State
of New York, whereby the State of New York will discharge and forever release
the Company, including its officers, directors and employees, for any further
liability regarding the Company's submission of claims for or receipt of
Medicaid payments for home health care services for the audited period of 1992
through 1996. The Attorney General stated in his press release that the Company
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, or a determination of guilt of any violation of
      any Federal, State or Local statute, rule or regulation.

(b)   The Company agreed to pay to New York State the total sum of $1,167,177,
      with an initial payment of $200,000. The balance was payable over four
      years at 9% interest.

As of May 31, 2002 the outstanding principal balance was approximately $270,000.

Except as otherwise provided in this Annual Report on Form 10-K, there are no
legal proceedings to which the Company is currently a party, or to which any of
its property is subject, that could possibly have a material adverse effect upon
the Company. Further, the Company knows of no legal proceeding pending or
threatened against any director or officer of the Company in their capacity as
such.


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<PAGE>

                                     PART II

Item 5. Market For Common Equity and Related Stockholder Matters

      Prior to November 11, 1999, the Company's Common Stock was quoted on the
Nasdaq National Market System, under the symbol "SMCS", and from November 11,
1999 through July 10, 2002, has been traded on the Nasdaq SmallCap market, under
the symbol "SMCS", and thereafter has been traded on the OTC Bulletin Board
under the symbol "SMCS". Until June 7, 1996, the Company's Common Stock was also
listed on the Pacific Stock Exchange.

      The following table sets forth the high and low sales prices per share for
the Common Stock during the periods indicated on the Nasdaq National Market
System or the Nasdaq SmallCap Market.

             Period                                    High             Low
Year ended May 31, 2000
First Quarter                                        $11.81           $ 6.21
Second Quarter                                        11.34             6.75
Third Quarter                                         17.63             3.75
Fourth Quarter                                        22.88             5.44

Year ended May 31, 2001
First Quarter                                        $ 6.75           $ 4.12
Second Quarter                                         4.31             1.88
Third Quarter                                          2.34             1.62
Fourth Quarter                                         1.82             1.39

Year ended May 31, 2002
First Quarter                                        $ 2.42           $ 1.80
Second Quarter                                         1.70             0.56
Third Quarter                                          0.71             0.39
Fourth Quarter                                         0.85             0.41

As of October 9, 2002 the Company had 1,059,232 shares of Common Stock
outstanding and 734 shareholders of record.

The Company did not pay cash dividends on its Common Stock during any of the
three years ended May 31, 2002, 2001 and 2000. It is the present policy of the
Company to retain earnings, if any, to finance the development and growth of its
business. In addition, the Company's agreement with its lender prohibits the
payment of cash dividends without the lender's prior consent.

On July 10, 2002, the Nasdaq Stock Market notified the Company that it did not
meet the maintenance criteria regarding the minimum market value of the public
float of at least $1 million, or a minimum shareholders' equity of $2.5 million,
for continued listing on the Nasdaq SmallCap Market. Accordingly, the Company's
stock has been delisted from Nasdaq, but is traded on the NASD OTC Bulletin
Board.

The Board of Directors approved a 1 for 3 reverse split of the Company's common
stock effective December 13, 1999. The Board authorized an amendment to the
Certificate of Incorporation whereby the common stock of Company would be split
in a ratio of one for three and in addition, the total authorized number of
common shares was reduced from 10 million to 5 million. The par value of the
common remained unchanged at $.001 per share. The amendment to the Certificate
of Incorporation was ratified and approved by the shareholders of the Company at
the 1999 Annual Meeting of Shareholders held on December 1, 1999.

The Board of Directors approved a 1 for 3 reverse split of the Company's common
stock effective January 25, 2001. The Board authorized an amendment to the
Certificate of Incorporation whereby the common stock of Company would be split
in a ratio of one for three shares. The amendment to the Certificate of
Incorporation was ratified and approved by the shareholders of the Company at
the 2000 Annual Meeting of Shareholders held on January 17, 2001. For all
periods presented the per share amounts have been restated to reflect the 1 for
3 reverse split that occurred in December 1999 and January 2001.


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<PAGE>

On April 30, 1999 the Company completed a private placement by the sale of
$575,000 Series A 8% Convertible Preferred Stock par value $1.00 per share
("Preferred Stock") to the Shaar Fund, Ltd., providing the Company net proceeds,
after fees and expenses, of $500,000. After sixty days, the Preferred Stock may
be converted to common stock equal to the lesser of: (a) 125% of the market
price three trading days immediately preceding the closing date, or (b) the
market price of the Company's common stock discounted from 10% to 30%, such
discount increasing with the passage of time. Holders of the preferred shares
can convert the stated value of their shares, in whole or in part, into common
stock at a maximum conversion price of $12.66 per share and have liquidation
preference over common shareholders. The Preferred Stock pays an 8% dividend
payable quarterly that may be converted into common stock at the option of the
Company. The investor also received a Common Stock Purchase Warrant (the
"Warrant") for the right to purchase 5,556 common stock shares of the Company at
115% of the closing bid price on the trading day immediately preceding the
closing date of this sale. These warrants expired on April 30, 2001. 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 dividends was registered by the Company under the Securities Act
of 1933 on Form S-3. The Company utilized the proceeds from this sale to satisfy
its working capital needs.

On July 24, 2002, the Company entered into a Securities Purchase and Exchange
Agreement with the holder of the Series A 8% Convertible Preferred Stock whereby
all of the outstanding and unconverted Series A 8% Convertible Preferred Stock,
including the accrued and unpaid dividends from the Series A Preferred Stock was
exchanged for 477 shares Series B 7% Convertible Preferred Stock, with each
share valued at $1,000, or a total of $477,000. The terms of the Series B 7%
Convertible Preferred Stock differs to the terms of the Series A 8% Convertible
Preferred Stock as follows: (i) the dividend on the preferred stock is 7% per
annum as compared to 8% on the Series A, (ii) the conversion price is equal to
the lesser of: (a) 125% of the market price three trading days immediately
preceding the closing date, or (b) the market price of the Company's common
stock discounted by 71% of the market rate, as compared to 70% for the Series A,
(iii) as the Company was not listed on The Nasdaq SmallCap Market at the time of
the issuance of the Series B stock, there is no limitation on the total
percentage of common stock that may be issues upon conversion as compared to the
number of outstanding common stock shares that existed at the time of issuance
of the Series B shares. The Series A shares had a 20% limitation to comply with
The Nasdaq Marketplace Rules.

Item 6. Selected Financial Data

The statement of operations for the years ended May 31, 2002, 2001, 2000, 1999,
and 1998 and balance sheet data as of May 31, 2002, 2001, 2000, 1999, and 1998
as set forth below have been derived from the audited financial statements of
the Company and should be read in conjunction with those financial statements
and notes thereto included elsewhere in this Annual Report on Form 10-K. In
addition, the selected financial data should be read in conjunction with
"Description of Business -- General" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
                                                                               Year Ended
                                                    -------------------------------------------------------------
                                                                                 May 31
                                                    -------------------------------------------------------------
                                                      2002        2001        2000        1999           1998 (1)

                                                           (IN THOUSANDS EXCEPT RATIO AND PER SHARE AMOUNTS)
<S>                                                 <C>         <C>         <C>         <C>            <C>
STATEMENT OF OPERATIONS DATA (4)

Net Revenue                                         $ 15,077    $ 38,679    $ 39,206    $ 47,108       $ 49,335

Income (Loss) from Operations                         (1,732)     (7,985)        103      (1,316)        (3,367)

Other Income (Expense)                                  (364)       (773)       (731)       (652)          (438)

Loss from Continuing Operations                       (2,638)     (8,759)       (628)     (1,322)        (2,622)

Extraordinary Item, net                                1,553          --          --          --             --

Loss from Discontinued Operations (4)                     --      (1,000)        (36)       (145)        (1,537)

Loss on Disposal of Discontinued Operations (6)           --          --          --         (88)            --

Net Loss                                              (1,085)     (9,759)       (664)     (1,556)        (4,159)
</TABLE>


                                       10
<PAGE>

<TABLE>
<S>                                                 <C>         <C>         <C>         <C>            <C>
Income (Loss) Per Share (3)

Loss from Continuing Operations                     $  (3.21)   $ (14.21)   $  (1.17)   $  (2.28)      $  (4.74)

Loss from Discontinued Operation                    $     --    $  (1.62)   $  (0.06)   $  (0.24)      $  (2.79)

Loss on Disposal of Discontinued Operations               --          --          --    $  (0.15)            --

Extraordinary Item                                  $   1.85           0           0           0              0

Net Loss                                            $  (1.36)   $ (15.83)   $  (1.23)   $  (2.67)      $  (7.51)

Shares Used in Computing Per Share Amounts               842         619         579         582            552

BALANCE SHEET DATA:

Cash and Cash Equivalents                           $     74    $     10    $    321    $  1,734       $  1,867

Working Capital                                         (481)     (6,023)      3,696       6,068            750

Total Assets                                           5,664      15,457      24,430      28,171         29,870

Total Long-Term Obligations                              990         312       5,784       7,601          1,066

Redeemable Preferred Stock                                --          --          --          --             --

Shareholders' Equity                                   2,216       2,880      12,658      13,388         14,433

Current Ratio                                           0.80        0.51        1.62        1.85           1.05

Cash Dividend Declared Per Common Share             $     --    $     --    $     --    $     --       $     --
</TABLE>

----------------

(1)   In September 1997, Star acquired EFCC Acquisition Corp. in a transaction
      accounted for as a purchase.

(3)   Effective January 1, 1998, STAR adopted SFAS No. 128, "Earnings Per
      Share."

(4)   Effective February 1999, STAR adopted a plan to abandon its Medicare
      business provided by one of its subsidiaries, Star Multi Care Services of
      Florida, d/b/a American Health Care Services as such operations of
      American have been shown as discontinued for all periods presented.


                                       11
<PAGE>

Item 7. Management's Discussion and Analysis of Financial Condition and Results
        of Operation

The following discussion and analysis provides information, which the Company's
management believes is relevant to an assessment and understanding of the
Company's results of operations and financial condition. This discussion should
be read in conjunction with the consolidated financial statements and notes
thereto, appearing elsewhere herein. All references to years or year ends are to
the Company's fiscal periods, which end on May 31.

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 [See Forward Looking Statements].

The Company is subject to significant external factors that could have a
significant impact on its business, including changes in Medicaid reimbursement,
government fraud and abuse initiatives, and other such factors that are beyond
the control of the Company. These factors, as well as future changes in
reimbursement methodologies and new or changes in interpretations of
regulations, could cause future results to differ materially from historical
trends.

Results of Operations

Year Ended May 31, 2002 Compared to Year Ended May 31, 2001

Net revenue for the year ended May 31, 2002 decreased $23,602,240 or 61.0% to
$15,077,134, compared to $38,679,374 for the year ended May 31, 2001. This
decrease was primarily attributable to the sale and closing of the Company's New
York and New Jersey facilities, as well as the closing of one of its
Pennsylvania facilities and, to a lesser extent, the elimination of poor margin
contracts in its remaining five facilities.

Gross profit margin percentages for the years ended May 31, 2002 and 2001 were
35.4% and 33.3%, respectively. The increase in the gross profit margin is
primarily attributable to an elimination of low profit margin contracts.

Selling, General and Administrative expenses ("SG&A"), as a percentage of net
revenue was 41.8% in 2002, as compared with 26.2% in 2001. This percentage
increase is principally attributable to the aforementioned significant decrease
in net revenue. Although the Company continues to restructure its overhead in an
effort to achieve profitable operations, certain restructuring efforts have
lagged behind the corresponding decline in revenue.

Interest expense for 2002 was $676,848, as compared to $773,432 for 2001. The
decrease is primarily the result of a decrease in the interest rate on
outstanding borrowings resulting from the Company's renegotiated credit facility
with a new lender and a reduction in the borrowings by the Company.

Year Ended May 31, 2001 Compared to Year Ended May 31, 2000

Net revenue for the year ended May 31, 2001 decreased $527,616 or 1.3% to
$38,679,374, compared to $39,206,990 for the year ended May 31, 2000. This
decrease was primarily attributable to the elimination of poor margin contracts,
closure of an unprofitable skilled nursing division in New Jersey, and the
closure or consolidation of several low volume offices.

Gross profit margin percentages for the years ended May 31, 2001 and 2000 were
33.3% and 30.3%, respectively. The increase in the gross profit margin is
primarily attributable to an elimination of low profit margin contracts, change
in wage and benefit programs for employees and contract rate increases in New
Jersey, Pennsylvania and Ohio.


                                       12
<PAGE>

Selling, General and Administrative expenses ("SG&A"), as a percentage of net
revenue, were 26% in 2001 and 2000.

Provision for doubtful accounts as a percentage of net revenue was 14.3% for
2001, compared to 1.4% for 2000. The increase in reserves for doubtful accounts
was attributable to (1) final determination that opportunities were exhausted to
collect older accounts receivable of Extended Family Care, Amserv Health Care of
New Jersey, Inc. and US Home Care; (2) the Company reaching timely filing /
refiling limits with some payors; and (3) cash flow difficulties of certain
customers.

Interest expense increased to $773,432 during fiscal 2001 as compared to
$731,948 in fiscal 2000, primarily as a result of a 1% increase in the lender's
interest rate during the year.

During fiscal 2001, the Company initiated a plan to dispose of its New York and
New Jersey operations to Premier. In connection with this plan of disposal, the
Company determined that the carrying value of certain intangibles exceeded their
fair values. Accordingly, the Company recorded a charge of $4,205,000 to reflect
the fair value of the assets to be disposed of in the sale.

As the Company fully reserved for any benefit from the operating loss for fiscal
year ended May 31, 2001, the Company's effective tax rate for 2001 was 0%, as
compared to 0% in 2000 and 31% in 1999. At May 31, 2001, the Company had a net
operating loss carry-forward for federal income tax purposes.

Year Ended May 31, 2000 Compared to Year Ended May 31, 1999

Net revenue for the year ended May 31, 2000 decreased $7,901,687 or 17% to
$39,206,990, compared to $47,108,677 for the year ended May 31, 1999. This
decrease was primarily attributable to a reduction in authorization of service
hours related to the New Jersey Medicaid Program, the reduction of visit
authorizations on Medicare subcontract services provided in New York and New
Jersey, resulting from a general reduction in the Medicare Program, and from the
termination of under performing contracts in the Company's Florida licensed
operations, as well as the discontinuance of the Florida Medicare operations.

Gross profit margin percentages for the fiscal years ended May 31, 2000 and 1999
were 30.3% and 30.5%, respectively.

Selling, General and Administrative expenses ("SG&A"), as a percentage of net
revenue was 26% in 2000, as compared with 27% in 1999. This decrease is
principally attributable to the Company's restructuring efforts during the
previous year.

Provision for doubtful accounts as a percentage of net revenue for the year
ended May 31, 2000 was 1.4%, compared to 3.4% for the year ended May 31, 1999.
Interest expense increased to $731,948 for 2000, as compared to $652,714 for
1999. Interest on the Credit Facility prior to September 14, 1999 was LIBOR plus
3% for 70% of eligible accounts receivable, and LIBOR plus 6% for the remaining
30%. On September 14, 1999, the Credit Facility was amended, and bore interest
at LIBOR plus 4% for 70% of eligible accounts receivable, and LIBOR plus 7% for
the remaining eligible accounts receivable. Interest of $77,412 paid to New York
State on the Medicaid settlement, as well as overall higher interest rates in
2000 as compared to 1999, contributed to the increase in interest expense.


                                       13
<PAGE>

Operating income for fiscal 2000 increased to $103,830 from a loss of
($1,316,993) for fiscal 1999, an increase of $1,420,823. The increase is
primarily attributable to significant decreases in operating expenses.

The Company's effective tax rate for 2000 was 0% as compared to 31% in 1999. At
May 31, 2000, the Company had a net operating loss carry-forward for federal
income tax purposes.

Discontinued Operations

In February 1999, the Company formally adopted a plan to liquidate its Medicare
business being provided by one of its subsidiaries, Star Multi Care Services of
Florida, Inc d/b/a American Health Care Services. Decreasing utilization,
together with decreasing reimbursement rates and increasing costs, forced
management to cease operations with its providers July 1, 1999. The Company
liquidated its assets and discharged its liabilities through an assignment for
benefit of creditors under Florida state law, and the Company was formally
dissolved on August 23, 2000.

Liquidity and Capital Resources

As of May 31, 2002, cash and cash equivalents were $74,235, an increase of
$63,724 from $10,511 as of May 31, 2001. The Company intends to keep its
outstanding borrowings under its Credit Facility at a minimum and, therefore,
keeps its available cash at a minimum; however, due to the nature of its
borrowing arrangement, advances are generally not available until the next day,
necessitating a small cash reserve.

Net cash used in operations for the year ended May 31, 2002 increased $2,290,957
to $(1,842,943) from $448,014 for the year ended May 31, 2001. The increase was
the result of expenditures during the Company's overhead restructuring to
position it to function at its reduced level of revenue.

On August 1, 2001, the Company entered into a $2 million, 3-year credit facility
(the "Credit Facility") with G.E. Capital Healthcare Financial Services, Inc.
(formerly Heller Healthcare Finance, Inc. The Credit Facility provides for the
Company to borrow up to 85% of eligible accounts receivable (as defined) that
are aged less than 150 days, at a borrowing rate of prime Plus 1%. Excluded from
the borrowing base were the accounts receivable from the New York and New Jersey
operations that were retained by the Company as part of the Premier transaction.
All of the assets of the Company collateralize the Credit Facility. The Company
is required to maintain tangible net worth (as defined) in excess of $(200,000).
At May 31, 2002, tangible net worth (as defined) was $556,328.

At May 31, 2002, the borrowing base totaled $1,344,173, and the outstanding loan
balance totaled $990,253, as compared to $5,005,937 and $3,847,315,
respectively, at May 31, 2001.

On July 11, 2001 the Company entered into a Settlement Agreement with United
States Department of Justice and the Office of Inspector General of the
Department of Health and Human Services. In order to avoid the delay,
uncertainty, inconvenience, and the expense of protracted litigation of the
claims, both parties mutually agreed upon a settlement amount of $1,000,000
payable by Star by November 8, 2001. On that date, the Company renegotiated the
payment of its obligation, making an installment of $250,000, with the balance
due in quarterly, non-interest bearing installments of $250,000 each, through
August 5, 2002. The aforementioned level of cash used in operating activities
has made it difficult for the Company to meet its renegotiated obligation, and
the parties again agreed to a modification of the payment terms. As of August
23, 2002, the remaining obligation is $250,000, which is payable in two $125,000
installments through April 5, 2003. The Company believes it will have the
available funds necessary to complete the payment by the required dates.


                                       14
<PAGE>

The Company does not anticipate any extraordinary material commitments for
capital expenditures for the Company's current fiscal year.

The Company believes that can meet its cash requirements for the next twelve
months through its existing credit sources. 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.

Inflation and Seasonality

The rate of inflation was insignificant during the year ended May 31, 2002. In
the past, the effects of inflation on personnel costs have been offset by the
Company's ability to increase its charges for services rendered. The Company
anticipates that it will be able to continue to do so in the near future. The
Company continually reviews its costs in relation to the pricing of its
services.

The Company's business is not seasonal.

Forward Looking Statements

Certain statements in this report on Form 10-K 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 that could
cause actual results to differ materially from the Company's expectations
include the impact of further changes in the Medicaid reimbursement system;
government regulation; health care reform; pricing pressures from third-party
payors, including managed care organizations; and changes in laws and
interpretations of laws or regulations relating to the health care industry.

GOVERNMENT REGULATION. As a home health care provider, the Company is subject to
extensive and changing state and federal regulations relating to the licensing
and certification of its offices and the sale and delivery of its products and
services. The federal government and Medicare fiscal intermediaries have become
more vigilant in their review of Medicare and Medicaid reimbursements to home
health care providers generally, and are becoming more restrictive in their
interpretation of those costs for which reimbursement will be allowed to such
providers. Changes in the law and regulations as well as new interpretations
enforced by the relevant regulatory agencies could have an adverse effect on the
Company's operations and the cost of doing business.

THIRD-PARTY REIMBURSEMENT AND MANAGED CARE. Because the Company is reimbursed
for its services primarily by the Medicaid programs, insurance companies,
managed care companies and other third-party payors, the implementation of
alternative payment methodologies for any of these payor could have an impact on
revenue and profit margins. 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 the Company's results
of operations.


                                       15
<PAGE>

      As Congress and state reimbursement entities assess alternative health
care delivery systems and payment methodologies, the Company cannot predict
which additional reforms may be adopted or what impact they may have on the
Company. Additionally, uncertainties relating to the nature and outcomes of
health care reforms have also generated numerous realignments, combinations and
consolidations in the health care industry that may also have an adverse impact
on the Company's business strategy and results of operations. The Company
expects continued industry consolidation.

BUSINESS CONDITIONS. The Company must continue to establish and maintain close
working relationships with physicians and physician groups, managed care
organizations, hospitals, clinics, nursing homes, social service agencies and
other health care providers. There can be no assurance that the Company will
continue to establish or maintain such relationships. The Company expects as
consolidation occurs that competition will intensify in future periods given the
increasing market demand for the type of services offered and the necessity to
maximize service volume due to anticipated operating margin decline.

ATTRACTION AND RETENTION OF EMPLOYEES. Maintaining quality managers and branch
administrators will play a significant part in the future success of the
Company. The Company's professional nurses and other health care personnel are
also key to the continued provision of quality care to the Company's patients.
The health care industry in general is experiencing both a professional and
paraprofessional shortage. The possible inability to attract and retain
qualified skilled management and sufficient numbers of credentialed health care
professionals and para-professionals could adversely affect the Company's
operations and quality of service.


                                       16
<PAGE>

                                    PART III

Item 10. Directors, Executive Officers, Promoters and Control Persons;
         Compliance with Section 16 (a) of the Exchange Act

STEPHEN STERNBACH

      Stephen Sternbach has been the Chairman of the Board of Directors,
President and Chief Executive Officer of the Company since 1987. From 1978 to
1986, Mr. Sternbach was associated with Automated Data Processing, Inc. ("ADP"),
a provider of information services where he held several marketing positions and
ultimately the position of Director of Sales. Mr. Sternbach has served on the
Board of Trustees of the Long Island Chapter of the National Multiple Sclerosis
Society since 1996. Mr. Sternbach earned a Masters Degree in Public
Administration from Syracuse University and a B.A. in Industrial Relations &
Personnel Administration from Ithaca College.

GREGORY TURCHAN

      Gregory Turchan was elected Senior Vice President, Chief Operating Officer
and a member of the Board of Directors of the Company on May 20, 1998.
Previously, he had served as Vice President-Operations of the Company since
1996. Mr. Turchan was originally employed by the Company in 1995 to assist in
the transition of an acquisition by the Company. Prior to 1995, Mr. Turchan
served as an officer of Long Island Nursing Registry, Inc., a home health care
provider acquired by the Company in 1995. Mr. Turchan resigned his position with
the Company and as a member of the Board of Directors on October 3, 2001.

CHARLES BERDAN

      Charles Berdan became a director of the Company in April 1994. Since
January 1999, Mr. Berdan has served as Regional Sales Manager for LearnFrame, an
online training company. From April 1994 through June 1998, Mr. Berdan has
served as a sales executive for Automatic Data Processing, Inc., a provider of
information services. From January 1993 to September 1993, Mr. Berdan was a Vice
President of the Senior Bulletin, a newspaper, which the Company purchased in
September 1993.

MATTHEW SOLOF

      Matthew Solof has been a director of the Company since November 1992.
Since 1991, he has been the President and Chief Executive Officer of AMI Group,
a real estate development and acquisition company, and President and Chief
Executive Officer of Mercantile Mortgage Association, a mortgage lending
company. Since 1996 he has been President and Chief Executive Officer of Landco
Mortgage Bankers, Inc., a New York State licensed mortgage banker. From 1983 to
1992, Mr. Solof was a trader at IRV Companies, a firm which specialized in oil
trading, and from 1981 to 1991, he was President and Chief Executive Officer of
Matthew Solof Trading Company, a firm which also specializes in oil trading. Mr.
Solof resigned from the Board of directors in September 2002.

GARY L. WEINBERGER

      Gary L. Weinberger has been engaged in the private practice of
orthodontics for more than 20 years. In addition, Dr. Weinberger is engaged as a
consultant on financial planning and management. Dr. Weinberger is a member of
the International Board of Standards and Practices for Financial Planners, the
International Association of Financial Planners, and the American Association of
Orthodontists. Mr. Weinberger resigned from the Board of Directors in July 2002.


                                       17
<PAGE>

Meetings of the Board of Directors

      During the Company's last fiscal year, its Board of Directors held three
(3) meetings and acted two times through unanimous written consent.

      The Stock Option Committee of the Board of Directors consisted of Messrs.
Gary Weinberger II, Matthew Solof and Charles Berdan. The function of this
committee, which held no meetings during the past fiscal year and acted three
(3) times through unanimous written consent without meeting, to administer the
Company's stock option plans.

      The Audit Committee of the Board of Directors consisted of Messrs. Gary
Weinberger, Matthew Solof and Charles Berdan and its function is to nominate
independent auditors, subject to approval by the Board of Directors, and to
examine and consider matters related to the audit of the Company's accounts, the
financial affairs and accounts of the Company, the scope of the independent
auditors' engagement and their compensation, the effect on the Company's
financial statements of any proposed changes in generally accepted accounting
principles, disagreements, if any, between the Company's independent auditors
and management, and matters of concern to the independent auditors resulting
from the audit, including the results of the independent auditors' review of
internal accounting controls. The Audit Committee held no meetings during the
past fiscal year.

      The Compensation Committee of the Board of Directors consisted of Messrs.
Weinberger, Matthew Solof and Charles Berdan and its function is to fix the
salaries, bonuses and other compensation arrangements of the executive officers
of the Company, and it also has the authority to examine, administer and make
recommendations to the Board with respect to benefit plans and arrangements
(other than the stock option plans which are administered by the Stock Option
Committee) of the Company and its subsidiaries. The Compensation Committee held
no meetings during the past fiscal year.

      The Compliance Committee of the Board of Directors consists of Messrs.
Charles Berdan, Gary L. Weinberger and Gregory Turchan. The function of this
committee, which had three (3) meetings during the past fiscal year, is to
examine and consider matters relating to regulatory and managerial compliance.

      The Board of Directors has no standing nominating committee.

      Each incumbent director attended at least 75% of the meetings of the Board
of Directors and the committee on which he served which were held while he was
serving as a director and/or committee member during the Company's last fiscal
year.

Compensation Committee Interlocks and Insider Participation

      No members of the Compensation Committee have a relationship that would
constitute an interlocking relationship with executive officers or directors of
another entity.

      Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of
its common stock, to file reports of ownership and changes of ownership with the
Securities and Exchange Commission ("SEC") and each exchange on which the
Company's securities are registered. Officers, directors and greater than
ten-percent shareholders are required by SEC regulation to furnish the Company
with copies of all ownership forms they file.

      Based solely on its review of the copies of such forms received by it, or
written representations from certain persons that no Form 5 was required for
those persons, the Company believes that, during the year ended May 31, 2002,
its officers, directors and greater than ten-percent shareholders complied with
all applicable Section 16 filing requirements.


                                       18
<PAGE>

Item 11. Executive Compensation

Summary Compensation Table

<TABLE>
<CAPTION>
                                        Annual Compensation                                   Long Term Compensation
                                        -------------------          --------------------------------------------------------------
                                                            Other                                      Awards
Name and                                                    Annual   Restricted                        ------
Principal                                                   Compen-    Stock          Securities             LTIP       All Other
Position                    Year   Salary($)    Bonus($)    sation     Awards    Underlying Options(#)    Payments($)  Compensation
-----------                 ----   ---------    --------   --------  ----------  ---------------------    -----------  ------------
<S>                         <C>     <C>          <C>             <C>   <C>           <C>                  <C>         <C>
Stephen Sternbach           2002    $275,529     $     0         --        --        100,000                          $32,660.40(2)
Chief Executive Officer,    2001    $289,956     $     0         --        --              0
President and               2000    $275,917     $25,000         --    67,098                             $27,000(1)
Chairman of the Board
</TABLE>

(1)   Represents $27,000 credited by the Company to a book reserve account as
      contingent deferred compensation for the benefit of Mr. Sternbach pursuant
      to a Non-Qualified Retirement and Death Benefit Agreement between the
      Company and Mr. Sternbach.

(2)   Represents forgiveness of note owed to Company.

Option/SAR Grants in Last Fiscal Year

<TABLE>
<CAPTION>

                                                                                        Potential
                                                                                        Realized Value at
                                                                                        Assumed Annual
                                                                                        Rates of Stock
                                                                                        Price
                                                                                        Appreciation
                                                                                        for Option Term
------------------------------------------------------------------------------------------------------------

(a)                     (b)               (c)              (d)               (e)           (f)      (g)
                    Number of         % of Total
                    Securities        Options/SARs
                    Underlying        Granted to
                    Options/SARs      Employees in     Exercise or Base  Expiration
Name                Granted (#)       Fiscal Year      Price ($/Sh)      Date              5%       10%
------------------------------------------------------------------------------------------------------------
<S>                 <C>                   <C>               <C>           <C>           <C>        <C>
Stephen Sternbach   100,000               71.4%             $.45          02/10/07      $12,433    $27,473
</TABLE>

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values

      The following table contains information concerning the number and value,
at May 31, 2000, of the exercised and unexercised options held by Mr.
Sternbach.

<TABLE>
<CAPTION>
                                                       Number of Securities
                                                       Underlying Unexercised         Value of Unexercised
                         Shares                        Options Held at Fiscal         In-the-Money Options Held at
                         Acquired on    Value          Year-End                       Fiscal Year-End (1)
Name                     Exercise (#)   Realized ($)   (Exercisable/Unexercisable)    (Exercisable/Unexercisable)
----                     ------------   ------------   ---------------------------    ---------------------------
<S>                      <C>            <C>            <C>                            <C>
Stephen Sternbach        0              0              151,112/0                      $0
</TABLE>

(1)   Fair market value of underlying securities (the closing price of the
      Company's Common Stock on the Nasdaq National Market) at fiscal year end
      (May 31, 2000), minus the then effective exercise price.


                                       19
<PAGE>

Employment Agreements and Termination of Employment and Change in Control
Arrangements.

The Company has an employment agreement with Stephen Sternbach dated as of
December 3, 1995 (the "Sternbach Employment Agreement"). The Sternbach
Employment Agreement has a term of five years and provides for an initial annual
salary of $250,000 (subject to annual increase by the amount of the increase in
the Consumer Price Index from the immediate preceding year) plus a bonus of 6%
of the Company's net profit before taxes in excess of $1,200,000, not to exceed
an aggregate annual bonus of $500,000. The Sternbach Employment Agreement
provides that after a Change in Control (as defined in the Sternbach Employment
Agreement) of the Company has occurred, if either Mr. Sternbach terminates his
employment within six months after he has obtained actual knowledge of the
Change in Control or the Company (or any successor thereto) terminates his
employment with the Company within one year after the Change in Control, Mr.
Sternbach will be entitled to receive (i) his salary, bonuses, awards,
perquisites and benefits including, without limitation, benefits and awards
under the Company's stock option plans and pension and retirement plans and
programs, accrued through the date Mr. Sternbach's employment with the Company
is terminated and (ii) a lump-sum payment in cash equal to 2.99 times Mr.
Sternbach's base amount.

On June 21, 2000, the Board of Directors of the Company renewed the employment
agreement with Stephen Sternbach originally dated as of December 3, 1995, as
amended, for an additional five year term (the "Renewed Sternbach Employment
Agreement"). The Renewed Sternbach Employment Agreement provides for an annual
salary of $280,813.52, his base salary prior to renewal (subject to annual
increase by the amount of the increase in the Consumer Price Index from the
immediate preceding year) plus a bonus of 6% of the Company's net profit before
taxes in excess of $1,200,000. The Renewed Sternbach Employment Agreement
provides that after a Change in Control (as defined in the Sternbach Employment
Agreement) of the Company has occurred, if either Mr. Sternbach terminates his
employment within six months after he has obtained actual knowledge of the
Change in Control or the Company (or any successor thereto) terminates his
employment with the Company within one year after the Change in Control, Mr.
Sternbach will be entitled to receive (i) his salary, bonuses, awards,
perquisites and benefits including, without limitation, benefits and awards
under the Company's stock option plans and pension and retirement plans and
programs, accrued through the date Mr. Sternbach's employment with the Company
is terminated and (ii) a lump-sum payment in cash equal to 2.99 times Mr.
Sternbach's base amount.

On October 6, 2001, Mr. Sternbach voluntarily waived the cost of living increase
that was scheduled to go into affect and further reduced his salary to $275,500
from $290,080. Additionally, in October 2002, he again waived the cost of living
increase that was scheduled to go into affect.

In addition, the Renewed Sternbach Employment Agreement terminated the
Non-Qualified Retirement and Death Benefit Agreement dated February 1, 1994
Instead, the Renewed Sternbach Employment Agreement provides for an annual
contribution by the Company to an investment vehicle of Mr. Sternbach's choice
equal to ten percent (10%) of his wages and will no longer be deemed deferred
compensation. Additionally, the Company shall continue to pay the premiums of a
life insurance policy, owned by Mr. Sternbach, insuring his life for $1.2
million. The cash value of this policy was assigned to Mr. Sternbach.

The Company and Mr. Sternbach are also parties to a Consulting Agreement (the
"Sternbach Consulting Agreement") pursuant to which the Company has agreed to
retain Mr. Sternbach as a consultant for a period of two years from the time
that his employment with the Company terminates. Pursuant to the Sternbach
Consulting Agreement, the Company has agreed to pay Mr. Sternbach $150,000 per
year and he will be entitled to participate in the health insurance and similar
benefits which the Company provides to any of its other consultants.


                                       20
<PAGE>

Compensation Committee Report

      Overview and Philosophy

      The Compensation Committee of the Board of Directors is composed of three
directors, Messrs. Berdan, Weinberger and Solof. The Compensation Committee is
responsible for developing and making recommendations to the Board of Directors
with respect to the Company's executive compensation policies. The Compensation
Committee's executive compensation philosophy (which is intended to apply to all
members of the Company's management, including its Chief Executive Officer) is
to provide competitive levels of compensation, integrate managements' pay with
achievement of the Company's performance goals, reward above average corporate
performance, recognize individual initiative and achievement and assist the
Company in attracting and retaining qualified management.

      The objectives of the Company's executive compensation program are to:

`           Support the achievement of desired Company performance.
      *     Provide compensation that will attract and retain superior talent
            and reward performance.

      The executive compensation program provides an overall level of
compensation opportunity that is competitive within the health care industry, as
well as with a broader group of companies of comparable size and complexity.


                                       21
<PAGE>

      Executive Officer Compensation


      The Company's executive officer compensation is comprised of base salary,
annual cash bonus and long-term incentive compensation in the form of stock
options and various benefits, including medical plans generally available to
employees of the Company.

      It is the philosophy of the Compensation Committee that compensation of
executive officers should be closely aligned with the financial performance of
the Company. Accordingly, benefits are provided through stock option incentives
and bonuses which are generally consistent with the goal of coordinating the
rewards to management with a maximization of shareholder return. In reviewing
Company performance, consideration is given to the Company's earnings. Also
taken into account are external economic factors that effect results of
operations. An attempt is also made to maintain compensation within the range of
that afforded like executive officers at companies whose size and business is
comparable to that of the Company.

      CEO Compensation

      In the case of Stephen Sternbach, the Chief Executive Officer, the
Compensation and Stock Option Committee evaluates the Company's mid and long
range strategic planning and its implementation as well as the considerations
impacting the compensation of executive officers generally which are described
above. Mr. Sternbach was awarded a bonus of $25,000 for the year ended May 31,
2000, that will be paid in fiscal 2000-2001.

      Benefits

      The Compensation Committee endorses the position that equity ownership by
management is beneficial in aligning managements' and shareholders' interest in
the enhancement of shareholder value. Stock options were granted at exercise
prices equal to the market value of the Company's Common Stock on the date of
grant.

      The Company provides to executive officers medical benefits that generally
are available to Company employees. The amount of perquisites, as determined in
accordance with the rules of the Securities and Exchange Commission relating to
executive compensation, did not exceed 10% of salary for fiscal 2000.

      Compensation of Directors

      The Company's non-employee directors are paid a fee of $750 for each Board
of Directors meeting which they attend. They are not paid any additional fee for
serving on any committees of the Board of Directors. However, in September 1998
and May 1999, the outside directors were granted a non-statutory stock option
for the right to purchase up to 1,667 and 3,334 shares, respectively, of common
stock of the Company.

      Performance Graph

      Set forth below is a graph comparing the yearly change in the cumulative
shareholder return of the Company's Common Stock with the National Association
of Securities Dealers Automated Quotation Market Index and a peer group index of
five competing companies for the same period. The comparison assumes $100 was
invested at the close of business on May 31, 1997 in the Company's Common Stock
and in each of the comparison groups, and assumes reinvestment of dividends. The
Company paid no cash dividends during the periods.


                                       22
<PAGE>

              COMPARISON OF CUMULATIVE TOTAL RETURN OF ONE OR MORE
          COMPANIES, PEER GROUPS, INDUSTRY INDEXES AND/OR BROAD MARKETS

<TABLE>
<CAPTION>
                              ------------------------ FISCAL YEAR ENDING ---------------------
<S>                            <C>        <C>        <C>        <C>        <C>        <C>
COMPANY/INDEX/MARKET           5/30/1997  5/29/1998  5/28/1999  5/31/2000  5/31/2001  5/31/2002

Star Multi Care Services          100.00      54.17      27.78      13.89       3.43       1.70
Customer Selected Stock List      100.00      68.83      45.37      25.94      51.73      85.18
NASDAQ Market Index               100.00     126.97     174.92     250.00     159.46     122.45
</TABLE>

The Customer Selected Stock List is made up of the following securities:

ALLIED HEALTHCARE INTL
GENTIVA HEALTH SVCS
NATIONAL HOME HLTH CARE
NEW YORK HEALTH CARE INC

Item 12. Security Ownership of Certain Beneficial Owners and Management

         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      Set forth below is the ownership of the Company's Common Stock at October
8, 2002: (i) the only persons or groups who were owners of record or were known
by the Company to beneficially own on October 8, 2002 more than 5% of the
outstanding shares of Common Stock; (ii) each director and nominee for director
of the Company; (iii) each executive officer named in the Summary Compensation
Table under the caption "Executive Compensation" below; and (iv) all directors
and executive officers of the Company as a group. The Company understands that,
except as noted below, each beneficial owner has sole voting and investment
power with respect to all shares attributable to such owner.

                                        Amount and Nature
Name and Address                          of Beneficial           Percent
of Beneficial Owner                        Ownership*          of Class (1)
-------------------                        ----------          ------------

Stephen Sternbach
c/o Star Multi Care Services, Inc.
33 Walt Whitman Road                       166,808(2)               14.2%
Huntington Station, NY 11746

Charles Berdan
c/o Star Multi Care Services, Inc.
33 Walt Whitman Road                        18,502 (3)              1.77%
Huntington Station, NY 11746


                                       23
<PAGE>

                                        Amount and Nature
Name and Address                          of Beneficial           Percent
of Beneficial Owner                        Ownership*          of Class (1)
-------------------                        ----------          ------------

Matthew Solof
33 Fairbanks Boulevard                      113,646(4)             10.78%
Woodbury, NY 11797

Gary L. Weinberger
c/o Star Multi Care Services, Inc.
33 Walt Whitman Road                         20,002(3)              1.92%
Huntington Station, NY 11746

Gregory Turchan
c/o Star Multi Care Services, Inc.
33 Walt Whitman Road                              0                    0%
Huntington Station, NY 11746

All directors and executive
officers of the Company as a group
(6 persons)                                 298,956                 24.0%

----------

*     All share amounts in this Proxy Statement have been adjusted to take into
      account the stock dividends effectuated on May 30, 1995, January 12, 1996
      and November 4, 1996, respectively, and the 1 for 3 reverse stock split
      effective on December 13, 1999 and on January 25, 2001.

(1)   Shares subject to options are considered outstanding only for the purpose
      of computing the percentage of outstanding Common Stock which would be
      owned by the optionee if the options were so exercised, but (except for
      the calculation of beneficial ownership by all executive officers and
      directors as a group) are not considered outstanding for the purpose of
      computing the percentage of outstanding Common Stock owned by any other
      person.

(2)   Includes 15,521 shares of the Company's Common Stock owned by the Stephen
      Sternbach Family Trust and by his spouse; Mr. Sternbach disclaims
      beneficial ownership with respect to these shares. Also includes 151,112
      shares of the Company's Common Stock which Mr. Sternbach has a currently
      exercisable option to purchase pursuant to the Company's 1992 Stock Option
      Plan.

(3)   Exclusively includes stock options granted the Company's common stock
      granted under the Company's 1997 Non-Employee Director Stock Option Plan.

(4)   Includes options to purchase 30,002 shares of the Company's common stock
      granted under the Company's 1997 Non-Employee Director Stock Option Plan.


                                       24
<PAGE>

Equity Compensation Plan Information

<TABLE>
<CAPTION>
Equity                              Number of                 Weighted-average      Number
Compensation Plans                  securities to be          exercise price of     securities
Approved by                         issued upon               outstanding           remaining
Security Holders                    exercise of               options, warrants     available for
                                    outstanding               and rights            future issuance
                                    options, warrants                               under equity
                                    and rights                                      compensation plans
                                                                                    (excluding securities
                                                                                    reflected in column (a)

                                    (a)                       (b)                   (c)
<S>                                 <C>                       <C>                   <C>
Star Multi Care Services, Inc.      291,822                   $  2.63               54,599
1992 Stock Incentive Plan

1995 Star Multi Care
Services Employee Stock
Purchase Plan                             0                         0               35,515

1997 Star Multi Care
Services Non-employee
Director                             70,614                   $  3.50               10,611
</TABLE>

Item 13. Certain Relationships and Related Transactions

      On March 20, 2001, Stephen Sternbach, Chief Executive Officer of the
Company, loaned the Company $100,000. Mr. Sternbach's loan was secured by the
assets of the Company and his security interest was subordinated to the
Company's primary lender. The term of the loan was for one year with annual
interest at the rate of 14%. On May 17, 2002, this promissory note was amended
whereby: (i) the principal amount loaned was increased to $125,000 and amended
to permit future additional borrowings; (ii) the term was extended for an
additional twelve months from May 17, 2002; and (iii) the interest rate was
lowered to 8%.


                                       25
<PAGE>

                         STAR MULTI CARE SERVICES, INC.

                             REPORT ON CONSOLIDATED
                              FINANCIAL STATEMENTS

                         THREE YEARS ENDED MAY 31, 2002

<PAGE>

                         STAR MULTI CARE SERVICES, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                         Page
                                                                         ----

Independent Auditors' Report                                             F-2

Consolidated balance sheets as of May 31, 2002 and 2001                  F-3

Consolidated statements of operations for the three years
   ended May 31, 2002                                                    F-4

Consolidated statement of shareholders' equity
   for the three years ended May 31, 2002                                F-5

Consolidated statements of cash flows for the three
   years ended May 31, 2002                                              F-6

Notes to consolidated financial statements                            F-7 - F-20


                                       F-1

<PAGE>

                          Independent Auditors' Report

Board of Directors and Shareholders
Star Multi Care Services, Inc.
Huntington, New York

We have audited the accompanying consolidated balance sheets of Star Multi Care
Services, Inc. as of May 31, 2002 and 2001 and the related consolidated
statements of operations, shareholders' equity and cash flows for each of the
three years in the period ended May 31, 2002. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Star Multi Care
Services, Inc. as of May 31, 2002 and 2001, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
May 31, 2002, in conformity with accounting principles generally accepted in the
United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1a to the
financial statements, the Company's significant recurring operating losses and
working capital deficiency raise substantial doubt about its ability to continue
as a going concern. Management's plans regarding those matters also are
described in Note 1a. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.


                                                /s/ HOLTZ RUBENSTEIN & CO., LLP

Melville, New York
August 23, 2002


                                       F-2

<PAGE>

                         STAR MULTI CARE SERVICES, INC.

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                  May 31,
                                                                      ---------------------------------
                                                                          2002                 2001
                                                                      ------------         ------------
                                    ASSETS
<S>                                                                   <C>                  <C>
CURRENT ASSETS:
   Cash and cash equivalents                                          $     74,235         $     10,511
   Accounts receivable, net of allowance for doubtful
      accounts of $200,000 and $5,402,000 at May 31,
      2002 and 2001, respectively                                        1,613,540            4,618,971
   Prepaid expenses and other current assets                                83,206              321,959
   Deferred income taxes                                                   206,000            1,290,000
                                                                      ------------         ------------
       Total current assets                                              1,976,981            6,241,441

PROPERTY AND EQUIPMENT, net                                                572,859            1,022,021
INTANGIBLE ASSETS, net                                                   1,659,303            6,221,134
DEFERRED INCOME TAXES                                                    1,404,000            1,755,000
OTHER ASSETS                                                                50,647              217,903
                                                                      ------------         ------------

                                                                      $  5,663,790         $ 15,457,499
                                                                      ============         ============

                     LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
   Revolving credit line                                              $         --         $  3,847,315
   Note payable                                                                 --              300,000
   Accrued payroll and related expenses                                    637,908            2,545,358
   Accounts payable                                                        586,629            1,243,222
   Accrued expenses                                                        758,368              636,180
   Due Medicare                                                            350,000            3,593,324
   Due officer                                                             125,000              100,000
                                                                      ------------         ------------
       Total current liabilities                                         2,457,905           12,265,399
                                                                      ------------         ------------

LONG-TERM LIABILITIES:
   Revolving credit line                                                   990,254                   --
   Other long-term liabilities                                                  --              311,828
                                                                      ------------         ------------
                                                                           990,254              311,828
                                                                      ------------         ------------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
   Convertible preferred stock - aggregate liquidation value
    $325,000; $1.00 par value, 5,000,000 shares authorized;
    325 and 455 shares issued, respectively                                    325                  455
   Common stock, $.001 par value, 5,000,000 shares authorized;
    1,024,021 and 701,409 shares issued, respectively                        1,024                  701
   Additional paid-in capital                                           21,669,864           21,585,317
   Subscription receivable                                                      --             (397,782)
   Deficit                                                             (19,064,891)         (17,917,728)
   Treasury stock, 26,367 common shares at May 31, 2002
    and 2001, respectively, at cost                                       (390,691)            (390,691)
                                                                      ------------         ------------
       Total shareholders' equity                                        2,215,631            2,880,272
                                                                      ------------         ------------

                                                                      $  5,663,790         $ 15,457,499
                                                                      ============         ============
</TABLE>

                 See notes to consolidated financial statements


                                      F-3
<PAGE>

                         STAR MULTI CARE SERVICES, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                   Years Ended
                                                                                      May 31,
                                                                    --------------------------------------------
                                                                        2002            2001            2000
                                                                    ------------    ------------    ------------
<S>                                                                 <C>             <C>             <C>
REVENUE, net                                                        $ 15,077,134    $ 38,679,374    $ 39,206,990
                                                                    ------------    ------------    ------------
OPERATING EXPENSES:
  Cost of revenue                                                      9,740,216      25,794,229      27,313,523
  Selling, general and administrative                                  6,299,390      10,127,989      10,209,179
  Depreciation and amortization                                          788,412       1,006,635       1,035,143
  Provision for (recovery of) doubtful accounts                          (19,229)      5,531,259         545,315
  Impairment of assets to be disposed                                         --       4,205,000              --
                                                                    ------------    ------------    ------------
                                                                      16,808,789      46,665,112      39,103,160
                                                                    ------------    ------------    ------------
OPERATING (LOSS) INCOME                                               (1,731,655)     (7,985,738)        103,830
                                                                    ------------    ------------    ------------
OTHER INCOME (EXPENSES):
  Gain on the sale of business                                           312,671              --              --
  Interest expense, net                                                 (676,848)       (773,432)       (731,948)
                                                                    ------------    ------------    ------------
                                                                        (364,177)       (773,432)       (731,948)
                                                                    ------------    ------------    ------------
LOSS BEFORE PROVISION FOR INCOME TAXES                                (2,095,832)     (8,759,170)       (628,118)
PROVISION FOR INCOME TAXES                                               542,000              --              --
                                                                    ------------    ------------    ------------
LOSS FROM CONTINUING OPERATIONS AND
  BEFORE EXTRAORDINARY ITEM                                           (2,637,832)     (8,759,170)       (628,118)
                                                                    ------------    ------------    ------------
DISCONTINUED OPERATIONS:
  Loss from discontinued operations, net of
    tax benefit of $-0-, $-0-, and $-0-                                       --      (1,000,000)        (36,373)
                                                                    ------------    ------------    ------------
LOSS FROM DISCONTINUED OPERATIONS                                             --      (1,000,000)        (36,373)
                                                                    ------------    ------------    ------------
EXTRAORDINARY ITEM:
  Gain on extinguishment of debt, net of income tax of $1,040,000      1,553,324              --              --
                                                                    ------------    ------------    ------------
NET LOSS                                                            $ (1,084,508)   $ (9,759,170)   $   (664,491)
                                                                    ============    ============    ============
LOSS PER COMMON SHARE:
  Continuing operations                                             $      (3.21)   $     (14.21)   $      (1.17)
  Discontinued operations                                                     --           (1.62)          (0.06)
  Extraordinary item                                                        1.85              --              --
                                                                    ------------    ------------    ------------
    Net loss                                                        $      (1.36)   $     (15.83)   $      (1.23)
                                                                    ============    ============    ============
WEIGHTED AVERAGE NUMBER OF
  SHARES OUTSTANDING:
  Basic                                                                  841,902         619,005         579,785
                                                                    ============    ============    ============
  Diluted                                                                841,902         619,005         579,785
                                                                    ============    ============    ============
</TABLE>

                 See notes to consolidated financial statements


                                      F-4
<PAGE>

                         STAR MULTI CARE SERVICES, INC.

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                             Common Stock           Preferred Stock
                                                         ---------------------   ----------------------
                                                                        Par                      Par         Paid in
                                                           Shares      Value      Shares        Value        Capital
                                                         ---------   ---------   ---------    ---------    ------------
<S>                                                        <C>       <C>              <C>     <C>          <C>
Balance, June 1, 1999                                      599,429   $     599         575    $     575    $ 21,468,081

  Shares issued under Employee Stock Purchase Plan           1,916           2          --           --           6,090
  Exercise of stock options including income tax benefit    10,048          10          --           --          70,381
  Dividends to preferred shareholders                        1,829           2          --           --          19,438
  Acquisition of treasury shares                                --          --          --           --              --
  Net loss                                                      --          --          --           --              --
                                                         ---------   ---------   ---------    ---------    ------------

Balance, May 31, 2000                                      613,222         613         575          575      21,563,990

  Exercise of stock options                                  3,334           3          --           --          13,747
  Conversion of preferred stock                             83,024          83        (120)        (120)             37
  Dividends to preferred shareholders                        1,829           2          --           --           7,543
  Net loss                                                      --          --          --           --              --
                                                         ---------   ---------   ---------    ---------    ------------

Balance, May 31, 2001                                      701,409         701         455          455      21,585,317

  Shares issued under Employee Stock Purchase Plan          39,326          39          --           --          62,608
  Conversion of preferred stock                            210,670         211        (130)        (130)            (81)
  Dividends to preferred shareholders                       72,616          73          --           --          22,020
  Other                                                         --          --          --           --              --
  Net loss                                                      --          --          --           --              --
                                                         ---------   ---------   ---------    ---------    ------------

Balance, May 31, 2002                                    1,024,021   $   1,024         325    $     325    $ 21,669,864
                                                         =========   =========   =========    =========    ============

<CAPTION>

                                                                                         Treasury Stock
                                                                                      ---------------------       Total
                                                       Subscription                                            Shareholders'
                                                        Receivable      Deficit        Shares       Value         Equity
                                                       ------------   ------------    ---------   ---------    ------------
<S>                                                      <C>          <C>                <C>      <C>          <C>
Balance, June 1, 1999                                    $(397,782)   $ (7,403,566)      15,278   $(278,922)   $ 13,388,985

  Shares issued under Employee Stock Purchase Plan              --              --           --          --           6,092
  Exercise of stock options including income tax benefit        --              --           --          --          70,391
  Dividends to preferred shareholders                           --         (50,002)          --          --         (30,562)
  Acquisition of treasury shares                                --              --       11,089    (111,769)       (111,769)
  Net loss                                                      --        (664,491)          --          --        (664,491)
                                                         ---------    ------------    ---------   ---------    ------------

Balance, May 31, 2000                                     (397,782)     (8,118,059)      26,367    (390,691)     12,658,646

  Exercise of stock options                                     --              --           --          --          13,750
  Conversion of preferred stock                                 --              --           --          --              --
  Dividends to preferred shareholders                           --         (40,499)          --          --         (32,954)
  Net loss                                                      --      (9,759,170)          --          --      (9,759,170)
                                                         ---------    ------------    ---------   ---------    ------------

Balance, May 31, 2001                                     (397,782)    (17,917,728)      26,367    (390,691)      2,880,272

  Shares issued under Employee Stock Purchase Plan              --              --           --          --          62,647
  Conversion of preferred stock                                 --              --           --          --              --
  Dividends to preferred shareholders                           --         (62,655)          --          --         (40,562)
  Other                                                    397,782              --           --          --         397,782
  Net loss                                                      --      (1,084,508)          --          --      (1,084,508)
                                                         ---------    ------------    ---------   ---------    ------------

Balance, May 31, 2002                                    $      --    $(19,064,891)      26,367   $(390,691)   $  2,215,631
                                                         =========    ============    =========   =========    ============
</TABLE>

                 See notes to consolidated financial statements


                                      F-5
<PAGE>

                         STAR MULTI CARE SERVICES, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                           Years Ended
                                                                              May 31,
                                                            --------------------------------------------
                                                                2002            2001            2000
                                                            ------------    ------------    ------------
<S>                                                         <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                  $ (1,084,508)   $ (9,759,170)   $   (664,491)
                                                            ------------    ------------    ------------
  Adjustments to reconcile net loss to net cash
    (used in) provided by operating activities:
      Provision for doubtful accounts                                 --       5,531,259         545,315
      Depreciation and amortization                              788,412       1,006,635       1,040,396
      Deferred income taxes                                    1,435,000         (41,000)        130,000
      Extraordinary item - gain on extinguishment of debt     (2,593,324)             --              --
      Gain on sale of business                                  (312,671)             --              --
      Loss on disposal of assets                                      --              --         168,579
      Impairment of assets to be disposed                             --       4,205,000              --
      Changes in operating assets and liabilities:
        (Increase) decrease in assets:
           Accounts receivable                                 3,005,431      (1,875,710)        947,714
           Prepaid expenses and other current assets             195,706           4,677          22,417
           Other assets                                          167,256           2,325         (18,469)
        Increase (decrease) in liabilities:
           Accounts payable and accrued expenses              (2,482,417)        997,391      (1,223,970)
           Due Medicare                                         (650,000)      1,000,000              --
           Other liabilities                                    (311,828)       (623,393)       (440,711)
                                                            ------------    ------------    ------------
      Total adjustments                                         (758,435)     10,207,184       1,171,271
                                                            ------------    ------------    ------------
      Net cash (used in) provided by operating activities     (1,842,943)        448,014         506,780
                                                            ------------    ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from sale of business, net                          5,001,274              --              --
  Purchase of intangibles                                             --        (108,446)             --
  Purchase of property and equipment                             (25,193)        (62,704)       (120,450)
  Business acquisitions net of cash acquired                          --              --        (387,399)
                                                            ------------    ------------    ------------
      Net cash provided by (used in) investing activities      4,976,081        (171,150)       (507,849)
                                                            ------------    ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net repayments on revolving credit line                     (2,857,061)     (1,001,568)     (1,376,601)
  Proceeds from note payable                                          --         300,000              --
  Repayment of note payable                                     (300,000)             --              --
  Proceeds from officer's loan                                    25,000         100,000              --
  Proceeds from issuance of stock under option plans              62,647          13,750          76,483
  Acquisition of treasury stock                                       --              --        (111,769)
                                                            ------------    ------------    ------------
      Net cash used in financing activities                   (3,069,414)       (587,818)     (1,411,887)
                                                            ------------    ------------    ------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS              63,724        (310,954)     (1,412,956)

CASH AND CASH EQUIVALENTS, beginning of year                      10,511         321,465       1,734,421
                                                            ------------    ------------    ------------
CASH AND CASH EQUIVALENTS, end of year                      $     74,235    $     10,511    $    321,465
                                                            ============    ============    ============

SUPPLEMENTAL DISCLOSURE:
  Income taxes paid                                         $     22,000    $     54,000    $    101,000
                                                            ============    ============    ============
  Interest paid                                             $    719,000    $    774,000    $    771,000
                                                            ============    ============    ============
</TABLE>

                 See notes to consolidated financial statements


                                      F-6
<PAGE>

                         STAR MULTI CARE SERVICES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                         THREE YEARS ENDED MAY 31, 2002

1.    Summary of Significant Accounting Policies:

      a.    Nature of operations

            The Company is principally engaged in providing temporary health
care personnel, including registered nurses, licensed practical nurses,
certified home health aides, nurses' aides and respiratory therapists to
hospitals, nursing homes, extended care facilities and in-home patients in
Florida, Ohio, New Jersey, Pennsylvania, upstate New York and the New York City
metropolitan area.

            On August 31, 2002, the Company sold to Premier Home Health Care
Services, Inc. ("Premier") certain assets related to the home health care
operation of the Company's New Jersey business, and certain assets related to
its home health care operations in New York. (See Note 19.)

            The accompanying financial statements have been prepared in
conformity with accounting principles generally accepted in the United States of
America, which contemplates continuation of the Company as a going concern;
however, the Company has sustained substantial operating losses in recent years.
In addition, the Company has used substantial amounts of working capital in its
operations. At May 31, 2002, current liabilities exceed current assets by
approximately $481,000.

            During Fiscal 2002, the Company negotiated a new credit facility and
sold its businesses in New York and New Jersey, in an effort to reduce its
working capital shortfall. In addition, the Company has continued to restructure
and consolidate its operations, in an effort to reduce operating expenses. The
continued operations of the Company are dependent upon the Company's ability to
generate increased revenue and improved operating results, or by obtaining
additional debt financing or equity funds to meet working capital needs.
Management believes that actions presently being taken provide the opportunity
for the Company to continue as a going concern.

      b.    Principles of consolidation

            The consolidated financial statements include the accounts of Star
Multi Care Services, Inc. and its subsidiaries (the "Company"), all of which are
wholly-owned. All significant intercompany transactions and accounts have been
eliminated.

      c.    Revenue recognition and allowance for doubtful accounts

            Net patient service revenue is reported at estimated net realizable
amounts from patients, third-party payors, and others for services rendered and
includes estimated retroactive revenue adjustments due to future audits,
reviews, and investigations. Retroactive adjustments are considered in the
recognition of revenue on an estimated basis in the period the related services
are rendered, and such amounts are adjusted in future periods as adjustments
become known or as years are no longer subject to such audits, reviews and
investigations. A provision for doubtful accounts is made for revenue estimated
to be uncollectible and is adjusted based upon management's evaluation of
current industry conditions, historical collection experience and other relevant
factors which, in the opinion of management, deserve recognition in estimating
the allowance for doubtful accounts.


                                       F-7

<PAGE>

1.    Summary of Significant Accounting Policies: (Cont'd)

      c.    Revenue recognition and allowance for doubtful accounts (cont'd)

            Under Medicaid, Medicare and other cost-based reimbursement
programs, the Company is reimbursed for services rendered to covered program
patients as determined by reimbursement formulas. Revenue from Medicaid programs
account for approximately 70%, 63% and 67% of the Company's net patient revenue
for the years ended May 31, 2002, 2001 and 2000. Laws and regulations governing
the Medicaid programs are extremely complex and subject to interpretation. As a
result, there is at least a reasonable possibility that recorded estimates will
change by a material amount in the near term.

      d.    Net income (loss) per common share

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

            The diluted calculation is determined by adjusting the basic
numerator for any changes in income or loss that would result from the assumed
exercise of potentially issued common shares. Additionally, the basic
denominator is increased to include the additional number of common shares that
would be outstanding if the potentially issued common shares had been issued, if
dilutive. Potentially issued common shares, consisting of options, are not
included in this calculation where the effect of the inclusion would be
anti-dilutive. The treasury stock method is used to reflect the dilutive effect
of outstanding options and warrants. For the years ended May 31, 2002, 2001 and
2000, the effect of any common stock equivalents would have been anti-dilutive.

            Net loss available to common shareholders was computed as follows:

<TABLE>
<CAPTION>
                                                                                Years Ended
                                                                                  May 31,
                                                        --------------------------------------------------------
                                                              2002               2001                 2000
                                                        ----------------    --------------       ---------------
       <S>                                              <C>                 <C>                  <C>
       Net loss                                         $    (1,084,508)    $   (9,759,170)      $      (664,491)
       Dividends on preferred shares                            (62,655)           (40,499)              (50,002)
                                                        ---------------     --------------       ---------------

       Net loss available to common
         shareholders                                   $    (1,147,163)    $   (9,799,669)      $      (714,493)
                                                        ===============     ==============       ===============
</TABLE>

      e.    Property and equipment

            Property and equipment is recorded at cost. The carrying amount of
assets and related accumulated depreciation and amortization are removed from
the accounts when such assets are disposed of, and the resulting gain or loss is
included in operations. Depreciation is computed by the straight-line method
over the estimated useful lives of the assets. Leasehold improvements are
amortized over the shorter of the remaining life of the lease or the life of the
improvements.

      f.    Intangible assets

            Intangible assets are stated at acquisition cost and are being
amortized on a straight-line basis over their estimated useful lives.


                                       F-8

<PAGE>

1.    Summary of Significant Accounting Policies: (Cont'd)

      g.    Cash equivalents

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

      h.    Income taxes

            Deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities,
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse. Temporary differences and
carryforwards giving rise to deferred taxes primarily relate to the allowance
for doubtful accounts, depreciation, accrued expenses and net operating loss
carryforwards.

      i.    Stock-based compensation

            The Company applies Accounting Principles Board ("APB") Opinion No.
25 and related interpretations in accounting for stock-based compensation to
employees. Stock compensation to non-employees is accounted for at fair value in
accordance with Statement of Financial Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation" ("SFAS No. 123").

      j.    Use of estimates

            The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Estimates also affect the reported amounts of revenues and expenses
during the period. Such estimates primarily relate to accounts receivable
valuation allowances, recoverability of goodwill, realization of deferred tax
assets and related valuation allowances and regulatory adjustments. Actual
results may differ from those estimates.

      k.    Impairment of long-lived assets

            In accordance with Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," an impairment loss is recognized whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable.

      l.    New accounting pronouncements

            In July 2001, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and
Intangible Assets." SFAS No. 141 requires the use of the purchase method of
accounting for business combinations and prohibits the use of the pooling of
interests method. SFAS No. 141 also expands the definition of intangible assets
acquired in a purchase business combination. SFAS No. 142 eliminates the
amortization of goodwill, requires annual impairment testing of goodwill and
introduces the concept of indefinite life intangible assets. It will be
effective in the first quarter of fiscal year 2003. The new rules also prohibit
the amortization of goodwill associated with business combinations that close
after June 30, 2001.


                                       F-9

<PAGE>

1.    Summary of Significant Accounting Policies: (Cont'd)

      l.    New accounting pronouncements (cont'd)

            Also in July 2001, the FASB issued SFAS No. 143, "Accounting for
Asset Retirement Obligations" which requires the recognition of a liability for
an asset retirement obligation in the period in which it is incurred. When the
liability is initially recorded, the carrying amount of the related long-lived
asset is correspondingly increased. Over time, the liability is accreted to its
present value and the related capitalized charges are depreciated over the
useful life of the asset. SFAS No. 143 is effective for fiscal years beginning
after June 15, 2002. In August 2001, the FASB issued SFAS No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets" which is effective for
fiscal periods beginning after December 15, 2001 and interim periods within
those fiscal years. SFAS No. 144 establishes an accounting model for impairment
or disposal of long-lived assets including discontinued operations. The Company
is currently evaluating the impact of SFAS Nos. 141, 142, 143 and 144. The
Company does not believe that these pronouncements will have a material effect
on the financial statements.

2.    Mergers and Acquisitions:

      On May 28, 2000, the Company acquired, through a wholly owned subsidiary,
certain assets of the Pennsylvania operations of U.S. HomeCare Corp. ("U.S.
HomeCare -Pennsylvania") for $300,000 in cash. The acquisition price was
allocated to contract costs, which is being amortized over a fifteen year
period.

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

3.    Impairment of Assets to be Disposed of:

      During and subsequent to fiscal 2001, the Company initiated and completed
a plan to dispose of its New York and New Jersey offices by way of a sale of
these operations (see Note 19.) In connection with this plan of disposal, the
Company determined that the carrying value of goodwill associated with these
operations exceeded their fair values. Accordingly, a loss of $4,205,000, which
is included in operating expenses, and represents the excess of the carrying
value of approximately $8,800,000 over the fair value of approximately
$4,600,000, has been charged to operations in fiscal 2001.

4.    Property and Equipment:

       Property and equipment consists of the following:

                                                              May 31,
                                                    ----------------------------
                                                       2002              2001
                                                    ----------        ----------

Furniture and fixtures                              $  435,000        $  631,000
Computer equipment                                   1,788,000         2,168,000
Leasehold improvements                                 115,000           131,000
Other                                                  271,000           300,000
                                                    ----------        ----------
                                                     2,609,000         3,230,000
Less accumulated depreciation                        2,036,000         2,208,000
                                                    ----------        ----------

                                                    $  573,000        $1,022,000
                                                    ==========        ==========


                                      F-10

<PAGE>

5.    Intangible Assets:

      Intangible assets are as follows:

                                                           May 31,
                                     Amortization  ------------------------
                                        Period         2002          2001
                                     ------------  ----------    ----------
Goodwill                                5 - 40     $1,647,000    $5,867,000
Customer contracts                     11 - 15        395,000     1,856,000
Covenants not-to-compete                2 - 8          25,000       335,000
Nurses' list                            9 - 15             --       563,000
Other                                   2 - 25             --       848,000
                                                   ----------    ----------
                                                    2,067,000     9,469,000
Less accumulated amortization                         408,000     3,248,000
                                                   ----------    ----------

                                                   $1,659,000    $6,221,000
                                                   ==========    ==========

6.    Accrued Expenses:

      Accrued expenses are as follows:

                                                               May 31,
                                                     ---------------------------
                                                       2002               2001
                                                     --------           --------

Medicaid settlement (a)                              $270,000           $252,000
Professional fees                                     228,000            141,000
Interest                                                7,000             47,000
Other                                                 253,000            196,000
                                                     --------           --------

                                                     $758,000           $636,000
                                                     ========           ========

      (a) In August 1995, the Office of Deputy Attorney General for Medicaid
Fraud Control conducted a review of personnel, clinical and billing records for
the years 1992 through 1995. In fiscal year 2000, the Company accrued $1,000,000
in connection with this matter.

            Additionally, errors were discovered in certain cost reports that
had been previously submitted to the New York State Department of Social
Services during the years 1993 through 1995. The Company filed amended cost
reports, which was expected to result in a retroactive calculation of the
Medicaid reimbursement rate and the imposition of overpayment assessments
against the Company. In fiscal year 2000, the Company accrued $660,000 in
contemplation of a settlement and offset the accrual against existing accounts
receivable from Medicaid.

            In May 2000, the Company negotiated a $1,167,000 settlement with the
State of New York in connection with these matters. The settlement agreement
provided for an initial payment of $200,000, with the balance payable over four
years at 9% interest per annum. Included in accrued expenses and other long-term
liabilities at May 31, 2002 was $270,000 and $0, respectively, and at May 31,
2001 was $252,000 and $270,000, respectively.

7.    Revolving Credit Line:

      The Company has a $2,000,000 revolving credit facility (the "Credit
Facility"). The Credit Facility permits the Company to borrow up to 85% of
eligible accounts receivable (as defined) that are aged less than 150 days at
the lender's prime rate (4 3/4% at May 31, 2002) plus 1%. The Credit Facility,
which expires on August 31, 2004, requires the Company to meet certain financial
ratios and covenants. All the assets of the Company collateralize the Credit
Facility.


                                      F-11

<PAGE>

8.    Due Officer:

      The loan payable to the Company's President and CEO, which is due on
May 16, 2003, bears interest at 8% per annum.

9.    Income Taxes:

      The Company files a consolidated U.S. federal income tax return that
includes all wholly owned subsidiaries. State tax returns are filed on a
consolidated, or separate basis depending on the applicable laws. At May 31,
2002, the Company has a net operating loss carryforward of approximately
$8,487,000 for federal income tax purposes which may be applied against future
taxable income through 2022.

      The provision (benefit) for income taxes from continuing operations
consists of the following:

                                                    Years Ended
                                                       May 31,
                                    -------------------------------------------
                                       2002             2001             2000
                                    ---------        ---------        ---------

Current:
  Federal                           $      --        $  21,000        $(178,000)
  State and local                     147,000           20,000           48,000
                                    ---------        ---------        ---------
                                      147,000           41,000         (130,000)
                                    ---------        ---------        ---------
Deferred:
  Federal                             395,000          (41,000)         173,000
  State and local                          --               --          (43,000)
                                    ---------        ---------        ---------
                                      395,000          (41,000)         130,000
                                    ---------        ---------        ---------

                                    $ 542,000        $      --        $      --
                                    =========        =========        =========

      The components of the net deferred tax assets are as follows:

                                                             May 31,
                                                 ------------------------------
                                                     2002               2001
                                                 -----------        -----------

Deferred tax assets:
  Allowance for doubtful accounts                $    78,000        $ 2,107,000
  Accrued expenses                                   117,000            523,000
  Tax credits                                        223,000            217,000
  Net operating loss carryforward                  2,885,000          1,689,000
  Stock compensation                                      --             56,000
  Other                                               12,000             58,000
                                                 -----------        -----------
                                                   3,315,000          4,650,000
Valuation allowance                               (1,337,000)        (1,337,000)
                                                 -----------        -----------
                                                   1,978,000          3,313,000
                                                 -----------        -----------
Deferred tax liabilities:
  Depreciation and amortization                      368,000            268,000
                                                 -----------        -----------
                                                     368,000            268,000
                                                 -----------        -----------

Net deferred tax assets                          $ 1,610,000        $ 3,045,000
                                                 ===========        ===========


                                      F-12
<PAGE>

9.    Income Taxes: (Cont'd)

      A reconciliation between the actual income tax expense (benefit) and
income taxes computed by applying the statutory federal income tax rate to
income from continuing operations is as follows:

<TABLE>
<CAPTION>
                                                           Years Ended
                                                             May 31,
                                            ---------------------------------------
                                                2002           2001         2000
                                            -----------    -----------    ---------
<S>                                         <C>            <C>            <C>
Computed federal income tax
  at statutory rates                        $  (713,000)   $(3,318,000)   $(214,000)
State taxes, net of federal benefit            (126,000)      (586,000)     (38,000)
Items without tax benefit                     1,170,000      1,709,000      102,000
Adjustments to prior years' tax liability            --        546,000      (50,000)
Valuation allowance                                  --      1,377,000      200,000
Other, net                                      164,000        272,000           --
                                            -----------    -----------    ---------

                                            $   495,000    $        --    $      --
                                            ===========    ===========    =========
</TABLE>

10.   Due Medicare:

      On June 17, 2002, the Company entered into a settlement agreement (the
"Agreement") with the Office of Inspector General ("OIG") of the Department of
Health and Human Services to settle outstanding claims related to the Company's
discontinued Medicare business (Note 21) during the years 1995 to 1996. The
Agreement provides for the Company to pay $1,000,000 120 days after the
settlement date in satisfaction of the outstanding claims by the OIG. The
Company accrued this amount as of May 31, 2001, and included this amount in loss
from discontinued operations in the statement of operations.

      Subsequently, the OIG agreed to modify the payment terms of the settlement
to four equal quarterly payments of $250,000 with the first payment due on or
before November 8, 2001. On May 7, 2002, the payment terms of the settlement
were modified again, which resulted in a reduction of the May 2002 payment to
$150,000. The remaining balance of $350,000 is to be paid in three installments
by April 5, 2003.

11.   Shareholders' Equity:

      Preferred stock

            The Company has authorized 5,000,000 shares of preferred stock,
$1.00 par value, which the Board of Directors has authority to issue from time
to time in series. The Board of Directors also has the authority to fix, before
the issuance of each series, the number of shares in each series and the
designation, preferences, rights and limitations of each series.


                                      F-13

<PAGE>

11.   Shareholders' Equity: (Cont'd)

      Series A Convertible Preferred Stock

      In April 2001, the Company completed a private placement by the sale of
575 Series A 8% Convertible Preferred Stock ("Series A Preferred") for $575,000.
After sixty days from the closing date, the Series A Preferred may be converted
to common stock equal to the lessor of: (i) 125% of the market price of common
stock three trading days immediately preceding the closing date, or (ii) the
market price of the Company's Common stock discounted from 10% to 30%, such
discount increasing with the passage of time. Holders of the Series A Preferred
can convert the stated value of their shares, in whole or in part, into common
stock at a maximum conversion price of $12.66 per share (45,432 shares), and
have liquidation preference over common shareholders and Series B Preferred. The
Series A Preferred pays an 8% annual dividend payable quarterly that may be
converted to common stock at the option of the Company.

      During the years ended May 31, 2002 and 2001, 130 and 120 shares of
convertible preferred stock were converted into 210,670 and 83,024 shares of
common stock, respectively.

      Series B Convertible Preferred Stock

      Subsequent to year end, the Company amended its certificate of
incorporation to provide for the creation of a Series B 7% Convertible Preferred
Stock ("Series B Preferred"). The Board of Directors approved the authorization
of 500 shares of the Series B Preferred with a par value of $1.00. The Series B
Preferred pays a 7% annual dividend payable quarterly, and may be converted to
common stock equal to the lessor of: (i) 125% of the market price of the common
stock, or (ii) the price equal to 71% of the lowest Closing Bid Price of the
common stock for the 28 day period prior to the conversion date. Holders of the
Series B Preferred have a liquidation preference over common shareholders. On
July 24, 2002, the holders of Series A Preferred exchanged all their shares,
including accrued and unpaid dividends for 477 shares of Series B Preferred.

12.   Stock Option Plans:

      Incentive stock option plans

      The Company has two stock option plans (the "Plans") as adopted and as
adjusted for stock dividends. Participants may be granted either Incentive Stock
Options or Non-Qualified Stock Options to purchase shares of common stock. The
purpose of the Plans is to promote the overall financial objectives of the
Company and its shareholders by motivating those persons selected to participate
in the Plans to achieve long-term growth in shareholder equity in the Company
and by retaining the association of those individuals who are instrumental in
achieving this growth. Such options become exercisable at various intervals
based upon vesting schedules as determined by the Compensation Committee. The
options expire between September 2003 and December 2008.

      The incentive stock options may be granted to employees and consultants of
the Company at a price not less than the fair market value on the date of grant.
All such options are authorized and approved by the Board of Directors, based on
recommendations of the Compensation Committee.

      Non-Employee Directors Stock Option Plan

      The Company has adopted a non-qualified stock option plan for all
non-employee Directors of the Company. The plan is designed to provide an
incentive to Directors and attract and retain the services of experienced and
knowledgeable non-employee Directors. The plan expires on March 25, 2007.


                                      F-14
<PAGE>

12.   Stock Option Plans: (Cont'd)

      A summary of the Company's various fixed stock option plans as of May 31,
2002, 2001 and 2000, and changes during the years then ended is presented below.

<TABLE>
<CAPTION>
                                                                    Years Ended May 31,
                                       ---------------------------------------------------------------------------------
                                               2002                        2001                        2000
                                       -----------------------     ------------------------     ------------------------
                                                     Weighted                     Weighted                     Weighted
                                                      Average                      Average                      Average
                                                     Exercise                     Exercise                     Exercise
       Fixed Stock Options              Shares         Price        Shares          Price        Shares          Price
       -------------------               -------     ---------     ---------      ---------     ---------      ---------
<S>                                      <C>         <C>             <C>          <C>              <C>         <C>
Outstanding, beginning of year           291,459     $    6.18       141,778      $   11.40        70,580      $   21.00

Granted                                  130,000          0.44       167,500           1.98        97,614           5.28
Exercised                                     --            --        (3,334)          4.13       (10,048)          7.02
Canceled                                (129,637)         8.43       (14,485)          9.11       (16,368)         18.99
                                       ---------                    --------                    ---------

Outstanding, end of year                 291,822     $    2.63       291,459      $    6.18       141,778      $   11.40
                                       =========                   =========                    =========

Options exercisable at year end          291,822     $    2.63       284,648      $    6.19       128,433      $   11.61
                                       =========                   =========                    =========

Weighted average fair value of
   options granted during the year                   $    0.39                    $    1.64                    $    1.86
                                                     =========                    =========                    =========
</TABLE>

The following table summarizes information about stock options outstanding at
May 31, 2002:

<TABLE>
<CAPTION>
                                             Options Outstanding                             Options Exercisable
                               ----------------------------------------------            ---------------------------
                                                  Weighted
                                                  Average           Weighted                                Weighted
     Range of                                    Remaining          Average                                 Average
     Exercise                     Number        Contractual         Exercise                Number          Exercise
      Price                     Outstanding         Life              Price              Outstanding          Price
----------------               ------------     ------------       ----------            -----------       --------
<S>                               <C>               <C>           <C>                       <C>           <C>
    $.41 - $1.75                  220,000           4.23          $     1.09                220,000       $     1.09
   $3.75 - $4.13                   30,939           2.73          $     4.10                 30,939       $     4.10
       $6.60                       20,000           2.55          $     6.60                 20,000       $     6.60
  $11.14 - $13.61                  20,327           1.36          $    11.88                 20,327       $    11.88
       $46.13                         556           5.34          $    46.13                    556       $    46.13
</TABLE>

      Shares reserved for future issuance at May 31, 2002 are comprised of the
following:

       Incentive stock option plans                                  54,599
       Non-employee Directors stock option plan                      10,611
       Employee stock purchase plan                                  35,515
                                                                   --------

                                                                    100,725
                                                                   ========

      In November 1995, the Company adopted an Employee Stock Purchase Plan
whereby certain employees can purchase shares of common stock at the lesser of
85% of fair market value of the stock at the beginning or end of the calendar
year. Since inception of this Plan, a total of 5,088 shares were issued.


                                      F-15

<PAGE>

12.   Stock Option Plans: (Cont'd)

      In accordance with APB Opinion No. 25, no compensation expense has been
recognized for the stock option plans. Had the Company recorded compensation
expense for the stock options based on the fair value at the grant date for
awards in the years ended May 31, 2002, 2001 and 2000 consistent with the
provisions of SFAS No. 123, the Company's net loss and net loss per share would
have changed to the following pro forma amounts:

<TABLE>
<CAPTION>
                                                                           Years Ended May 31,
                                                      ----------------------------------------------------------
                                                            2002                  2001                  2000
                                                      ---------------       --------------        --------------
       <S>                                            <C>                   <C>                   <C>
       Net loss, as reported                          $    (1,037,894)      $   (9,759,170)       $     (664,491)
       Net loss, pro forma                                 (1,080,894)          (9,936,997)             (782,173)
       Basic loss per share, as reported                        (1.31)              (15.83)                (1.23)
       Basic loss per share, pro forma                          (1.36)              (16.12)                (1.44)
       Diluted loss per share, as reported                      (1.31)              (15.83)                (1.23)
       Diluted loss per share, pro forma                        (1.36)              (16.12)                (1.44)
</TABLE>

      The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following range of
weighted-average assumptions used for grants in years ended May 31, 2002, 2001
and 2000.

<TABLE>
<CAPTION>

                                                                           Years Ended May 31,
                                                       ---------------------------------------------------------
                                                             2002                 2001                 2000
                                                       ---------------      --------------       ---------------
       <S>                                                  <C>                  <C>                  <C>
       Dividend yield                                         0.00%                0.00%                0.00%
       Volatility                                           131.00%              128.01%               94.16%
       Risk-Free interest rate                                5.25%                5.25%                5.25%
       Expected life                                          5 years              5 years              1.24 years
</TABLE>

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

13.   Related Party Transactions:

      Stock subscription receivable

      On April 20, 1995, the Company accepted a non-recourse promissory note
from the former Chief Executive Officer of AMSERV, Eugene J. Mora, in the
original principal amount of $198,440, bearing interest at a rate of 10% per
annum and maturing in April 2001, and $1,100 in cash for the exercise of options
for 4,999 shares of the Company's common stock. The promissory note is secured
by 8,069 shares of the Company's common stock owned by Mr. Mora. On January 16,
1996, the promissory note was amended to become a recourse promissory note,
secured by 4,999 shares of common stock owned by Mr. Mora, with interest at a
rate of 5.73% per annum. Also on January 16, 1996, the Company accepted an
additional recourse promissory note from Mr. Mora in the original principal
amount of $199,342, bearing interest at a rate of 5.73% per annum and maturing
in January 2002, and $1,105 in cash for the exercise of options for 5,022 shares
of the Company's common stock.


                                      F-16
<PAGE>

13.   Related Party Transactions:

      Stock subscription receivable

            In accordance with the settlement agreement with Mr. Mora, the
Company agreed to forgive the subscription receivable in consideration for Mr.
Mora entering into a covenant not-to-compete agreement with the Company.
Accordingly during fiscal 2002, the Company wrote off the subscription
receivable and increased intangible assets by the amount of the note receivable
and the unpaid accrued interest in the aggregate amount of $440,000.

14.   Fair Value of Financial Instruments:

      The methods and assumptions used to estimate the fair value of the
following classes of financial instruments were:

      Current Assets and Current Liabilities: The carrying amount of cash,
      current receivables and payables and certain other short-term financial
      instruments approximate their fair value.

      Long-Term Debt: The fair value of the Company's long-term debt, including
      the current portions, was estimated using a discounted cash flow analysis,
      based on the Company's assumed incremental borrowing rates for similar
      types of borrowing arrangements. The carrying amount of variable rate debt
      at May 31, 2002 and 2001 approximates its fair value.

15.   Concentrations of Credit Risk and Major Customers:

      Financial instruments which potentially expose the Company to
concentrations of credit risk consist principally of trade accounts receivable
and temporary cash investments.

      The Company provides temporary health care personnel to hospitals, nursing
homes, extended care facilities and in-home patients. At May 31, 2002 and 2001,
approximately 40% and 45%, respectively, of accounts receivable was due from
Medicaid. Credit losses relating to customers historically have not been
significant and within management's expectations.

      The Company places its temporary cash investments with high credit quality
financial institutions.

16.   Business Risks:

      The Company's primary business, offering home health care services, is
heavily regulated at both the federal and state levels. While the Company is
unable to predict what regulatory changes may occur or the impact of any
particular change, the Company's operations and financial results could be
negatively affected. Further, the Company operates in a highly competitive
industry, which may limit the Company's ability to price its services at levels
that they believe appropriate. These competitive factors may adversely affect
the Company's financial results.


                                      F-17
<PAGE>

17.   Commitments:

      a.    Employment agreement

            The Company has an employment agreement, as amended, with an officer
which expires in December 2005. The aggregate commitment for future salary,
excluding bonuses, under the agreement is $1,264,000. The agreement also
provides for increases based on the consumer price index increases and certain
bonuses based upon annual pretax income. The aggregate minimum commitment for
future salaries under the agreements is as follows:

                       Years Ending
                          May 31,
                       ------------
                           2003                                $ 280,800
                           2004                                  280,800
                           2005                                  280,800
                           2006                                  140,400
                                                               ---------

                                                               $ 982,800
                                                               =========

      b.    Leases

      The Company conducts its operations from leased office space under various
operating leases which expire at various dates through 2004.

      As of May 31, 2002 future net minimum rental payments under operating
leases having initial or remaining noncancellable terms in excess of one year
are as follows:

                       Years Ending
                          May 31,
                       -------------
                           2003                                $ 182,000
                           2004                                  120,000
                           2005                                  122,000
                           2006                                   83,000
                           2007                                   20,000
                                                               ---------

                                                               $ 527,000
                                                               =========

      Rental expenses for operating leases for fiscal years ended 2002, 2001 and
2000 were approximately $576,000, $621,000 and $662,000, respectively.

18.   Contingencies:

      The Company is a defendant in several actions which are routine and
incidental to its business. In management's opinion, settlement of these actions
will not have a material adverse effect on the Company's consolidated financial
position, liquidity or results of operations.

19.   Gain on Sale of Business:

      On July 3, 2001 the Company entered into an agreement with Premier Home
Health Care Services, Inc. ("Premier") to sell selected assets and home health
care operations of the Company's New Jersey ("NJ Assets") and New York ("NY
Assets") operations for an aggregate sales price of $5.5 million, subject to a
post closing adjustment based upon certain revenue thresholds. The allocation of
the sales price was $4.0 million for the NJ Assets, and $1.5 million for the NY
Assets, respectively.


                                      F-18

<PAGE>

19.   Gain on Sale of Business: (Cont'd)

      During fiscal 2002, the Company completed the sale of the NY and NJ Assets
for an adjusted sales price of $5,250,000, and recognized a gain of
approximately $313,000 on the sale, net of various transaction costs.

20.   Extraordinary Item:

      In February 1999, the Company adopted a plan to discontinue its Medicare
business provided by one of its subsidiaries, Star Multi Care Services of
Florida, Inc d/b/a American Health Care Services. The subsidiary ceased
operations on July 1, 1999, and in connection with its Medicare business, the
subsidiary was overpaid $2,593,324 by Medicare through its final date of
operation and was included in due Medicare on the balance sheet.

      The subsidiary liquidated its assets and discharged its liabilities
through an assignment for benefit of creditors under Florida State law, and the
subsidiary was dissolved. In connection with the dissolution and liquidation of
the subsidiary, the Company has recorded an extraordinary gain of approximately
$1,553,000 (net of income taxes of $1,040,000) for the extinguishment of the
debt related to the Medicare overpayments made to the subsidiary. This gain has
been presented as an extraordinary item for the year ended May 31, 2002.

21.   Discontinued Operations:

      In February 1999, the Company adopted a plan to abandon its Medicare
business being provided by one of its subsidiaries, American Health Care
Services ("American") in the State of Florida. The Company ceased operations
effective July 1, 1999. The Company liquidated its assets and discharged its
liabilities through an assignment for the benefit of creditors proceeding.
Accordingly, the operating results of American, including provisions for
estimated losses during the phase-out period of approximately $128,000 have been
segregated from continuing operations and reported as a separate line item on
the statement of operations.

      Operating results (exclusive of any corporate charges or interest expense
and the aforementioned provisions) from discontinued operations are as follows:

<TABLE>
<CAPTION>
                                                          Years Ended
                                                             May 31,
                                          --------------------------------------------
                                              2002            2001             2000
                                          -----------     -----------      -----------
<S>                                       <C>             <C>              <C>
Revenue, net                              $        --     $(1,000,000)     $    40,953
                                          -----------     -----------      -----------
Costs and expenses:
  Costs of revenue                                 --              --              623
  Selling, general and administrative              --              --           64,862
  Depreciation and amortization                    --              --            5,254
                                          -----------     -----------      -----------
                                                   --              --           70,739
                                          -----------     -----------      -----------
Operating loss                                     --      (1,000,000)         (29,786)
Other deductions                                   --              --           (6,587)
                                          -----------     -----------      -----------
Loss before income taxes                           --      (1,000,000)         (36,373)
Income tax benefit                                 --              --               --
                                          -----------     -----------      -----------

Net loss                                  $        --     $(1,000,000)     $   (36,373)
                                          ===========     ===========      ===========
</TABLE>


                                      F-19
<PAGE>

21.   Discontinued Operations: (Cont'd)

      Assets and liabilities for the fiscal year ending 2002 and 2001 are as
follows:

                                                               May 31,
                                                    ----------------------------
                                                       2002              2001
                                                    ----------        ----------

Total assets                                        $       --        $       --
Total liabilities                                      350,000         3,593,000

22.   Supplementary Information - Statement of Cash Flows:

      During the years ended May 31, 2002, 2001 and 2000, the Company issued
72,616, 1,829 and 1,829 shares of common stock in satisfaction of $22,093,
$7,545 and $19,440, respectively, of dividends to preferred shareholders.

23.   Selected Quarterly Financial Results (Unaudited):

<TABLE>
<CAPTION>
                                                               Fiscal Quarter Ended
                                         ------------------------------------------------------------------
                                          August 31,       November 30,      February 28,        May 31,
                                             2001              2001              2002              2002
                                         ------------      ------------      ------------      ------------
                                                        (In thousands except per share data)
<S>                                      <C>               <C>               <C>               <C>
Revenue, net                             $      7,984      $      2,370      $      2,288      $      2,435
Operating Loss                                    (63)             (809)             (705)              (95)
Loss Before Extraordinary Item                   (532)             (886)             (831)             (342)
Extraordinary Item                              1,608                --                --               (55)
Net Income (Loss)                               1,076              (886)             (831)             (397)

Basic Income (Loss) Per Share:
   Loss Before Extraordinary Item               (0.80)            (1.16)            (0.98)            (0.38)
   Extraordinary Item                            2.38                --                --             (0.06)
   Net Income (Loss)                             1.58             (1.16)            (0.98)            (0.44)

Diluted Income (Loss) Per Share:
   Loss Before Extraordinary Item               (0.78)            (1.16)            (0.98)            (0.38)
   Extraordinary Item                            2.32                --                --             (0.06)
   Net Income (Loss)                             1.54             (1.16)            (0.98)            (0.44)

Weighted Average Shares Outstanding:
   Basic                                      675,042           770,860           858,954           995,611
                                         ============      ============      ============      ============
   Diluted                                    694,033           770,860           858,954           995,611
                                         ============      ============      ============      ============
</TABLE>

      Income (loss) per share is computed independently for each of the quarters
presented. Therefore, the sums of the quarterly income (loss) per share do not
necessarily equal the total for the year.


                                      F-20
<PAGE>

Item 14. Exhibits and Reports on Form 8-K

      (a)   Documents filed as part of this Report:

1.    Financial Statement Schedules

3.    Exhibits: The following Exhibits are filed as a part of this Report:

           Exhibit No.  Description

            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)   Amended and Restated By-laws adopted by the Board of
                        Directors on February 11, 2002 file as Exhibit 3.1 to
                        Form 10-Q for the period ended February 28, 2002.

            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 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)         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.)

            (i)         LOAN AND SECURITY AGREEMENT dated August 31, 2001, by
                        and among STAR MULTI CARE SERVICES, INC., AMSERV HEALTH
                        CARE OF OHIO, INC., AMSERV HEALTH CARE OF NEW JERSEY,
                        INC., and EFCC ACQUISITION CORP. and HELLER HEALTHCARE
                        FINANCE, INC.

            (j)         Revolving Credit Note dated August 31, 2001 for $2.0
                        million payable by Star Multi Care Services, Inc.,
                        Amserv Healthcare of Ohio, Amserv Healthcare of New
                        Jersey, Inc. and EFCC Acquisition Corp. to Heller
                        Healthcare Finance, Inc.

            (k)         Amendment No. 1 dated December 19, 2001 of the LOAN AND
                        SECURITY AGREEMENT dated August 31, 2001, by and among
                        STAR MULTI CARE SERVICES, INC., AMSERV HEALTH CARE OF
                        OHIO, INC., AMSERV HEALTH CARE OF NEW JERSEY, INC., and
                        EFCC ACQUISITION CORP. and HELLER HEALTHCARE FINANCE,
                        INC.

            21.         List of subsidiaries.

            23.   (a)   Consent of Holtz Rubenstein & Co., LLP. previously
                        filed.

                  (b)   Consent of Muenz & Meritz, P.C. included in Exhibit 5.1.
                        previously filed.

            99.1        Chief Executive Officer Certification pursuant to
                        Section 906 of the Sarbanes-Oxley Act of 2002.


                                       27

<PAGE>

            99.2        Chief Financial Officer Certification pursuant to
                        Section 906 of the Sarbanes-Oxley Act of 2002.

----------
*     Incorporated by reference to the Company's Registration Statement on Form
      S-18 dated May 14, 1991. (Registration No. 33-39697-NY)

(b) Reports on Form 8-K

None


                                       28
<PAGE>

      In accordance with Section 13 or 15(d) of the Exchange Act the Registrant
caused this report to be signed on its behalf by the undersigned, hereunto duly
authorized.

Date October 11, 2002                       STAR MULTI CARE SERVICES, INC.


                                            By /s/ Stephen Sternbach
                                              ----------------------------------
                                            Stephen Sternbach,
                                            Chairman of the Board, President and
                                            Chief Executive Officer

            In accordance with the Exchange Act, this Report has been signed
below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated:

<TABLE>
<S>                         <C>                                      <C>
/s/ Stephen Sternbach       Chairman of the Board, President and     October 11, 2002
---------------------       Director

/s/ Charles Berdan          Director                                 September 13, 2001
---------------------
Charles Berdan

/s/ David Schoenberg        Chief Financial Officer                  October 11, 2002
---------------------
David Schoenberg
</TABLE>


                                       29
<PAGE>

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
              PURSUANT TO REGULATION ss.240.15D-14 AS PROMULAGATED
                    BY THE SECURITIES AND EXCHANGE COMMISSION

In connection with the Annual Report of Star Multi Care Services, Inc. (the
"Company") on Form 10-K for the period ended May 31, 2002, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Stephen
Sternbach, Chairman of the Board, President and Chief Executive Officer of the
Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 pursuant to Regulation
ss.240.15d-14 as promulgated by the Securities and Exchange Commission, that:

(1) I have reviewed the Report being filed;

(2) Based on my knowledge, the Report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by the Report;

(3) Based on my knowledge, the financial statements, and other financial
information included in the Report, fairly present in all material respects the
financial condition, results of operations and cash flows of the issuer as of,
and for, the periods presented in the Report;

(4) I and the other certifying officers are responsible for establishing and
maintaining disclosure controls and procedures (as such term is defined in
paragraph (c) of this section) for the issuer and have:

      (i) Designed such disclosure controls and procedures to ensure that
      material information relating to the issuer, including its consolidated
      subsidiaries, is made known to them by others within those entities,
      particularly during the period in which the periodic Reports are being
      prepared;

      (ii) Evaluated the effectiveness of the issuer's disclosure controls and
      procedures as of a date within 90 days prior to the filing date of the
      Report ("Evaluation Date"); and

      (iii) Presented in the Report their conclusions about the effectiveness of
      the disclosure controls and procedures based on their evaluation as of the
      Evaluation Date;


<PAGE>

(5) I and the other certifying officers have disclosed, based on their most
recent evaluation, to the issuer's auditors and the audit committee of the board
of directors (or persons fulfilling the equivalent function):

      (i) All significant deficiencies in the design or operation of internal
      controls which could adversely affect the issuer's ability to record,
      process, summarize and Report financial data and have identified for the
      issuer's auditors any material weaknesses in internal controls; and

      (ii) Any fraud, whether or not material, that involves management or other
      employees who have a significant role in the issuer's internal controls;
      and

(6) I and the other certifying officers have indicated in the Report whether or
not there were significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the date of their
most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.

                                            By /s/ Stephen Sternbach
                                               ----------------------------
                                                   Stephen Sternbach
                                                   Chairman of the Board,
                                                   President and
                                                   Chief Executive Officer


<PAGE>

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
              PURSUANT TO REGULATION ss.240.15D-14 AS PROMULAGATED
                    BY THE SECURITIES AND EXCHANGE COMMISSION

In connection with the Annual Report of Star Multi Care Services, Inc. (the
"Company") on Form 10-K for the period ended May 31, 2002, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, David
Schoenberg, Secretary and Chief Financial Officer of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 pursuant to Regulation ss.240.15d-14 as promulgated
by the Securities and Exchange Commission, that:

(1) I have reviewed the Report being filed;

(2) Based on my knowledge, the Report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by the Report;

(3) Based on my knowledge, the financial statements, and other financial
information included in the Report, fairly present in all material respects the
financial condition, results of operations and cash flows of the issuer as of,
and for, the periods presented in the Report;

(4) I and the other certifying officers are responsible for establishing and
maintaining disclosure controls and procedures (as such term is defined in
paragraph (c) of this section) for the issuer and have:

      (i) Designed such disclosure controls and procedures to ensure that
      material information relating to the issuer, including its consolidated
      subsidiaries, is made known to them by others within those entities,
      particularly during the period in which the periodic Reports are being
      prepared;

      (ii) Evaluated the effectiveness of the issuer's disclosure controls and
      procedures as of a date within 90 days prior to the filing date of the
      Report ("Evaluation Date"); and

      (iii) Presented in the Report their conclusions about the effectiveness of
      the disclosure controls and procedures based on their evaluation as of the
      Evaluation Date;

<PAGE>

(5) I and the other certifying officers have disclosed, based on their most
recent evaluation, to the issuer's auditors and the audit committee of the board
of directors (or persons fulfilling the equivalent function):

      (i) All significant deficiencies in the design or operation of internal
      controls which could adversely affect the issuer's ability to record,
      process, summarize and Report financial data and have identified for the
      issuer's auditors any material weaknesses in internal controls; and

      (ii) Any fraud, whether or not material, that involves management or other
      employees who have a significant role in the issuer's internal controls;
      and

(6) I and the other certifying officers have indicated in the Report whether or
not there were significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the date of their
most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.

                                            By /s/ David Schoenberg
                                               ----------------------------
                                                   David Schoenberg
                                                   Secretary and
                                                   Chief Financial Officer

<PAGE>


                                INDEX OF EXHIBITS

           Exhibit No.  Description

            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)   Amended and Restated By-laws adopted by the Board of
                        Directors on February 11, 2002 file as Exhibit 3.1 to
                        Form 10-Q for the period ended February 28, 2002.

            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 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)         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.)

            (i)         LOAN AND SECURITY AGREEMENT dated August 31, 2001, by
                        and among STAR MULTI CARE SERVICES, INC., AMSERV HEALTH
                        CARE OF OHIO, INC., AMSERV HEALTH CARE OF NEW JERSEY,
                        INC., and EFCC ACQUISITION CORP. and HELLER HEALTHCARE
                        FINANCE, INC.

            (j)         Revolving Credit Note dated August 31, 2001 for $2.0
                        million payable by Star Multi Care Services, Inc.,
                        Amserv Healthcare of Ohio, Amserv Healthcare of New
                        Jersey, Inc. and EFCC Acquisition Corp. to Heller
                        Healthcare Finance, Inc.

            (k)         Amendment No. 1 dated December 19, 2001 of the LOAN AND
                        SECURITY AGREEMENT dated August 31, 2001, by and among
                        STAR MULTI CARE SERVICES, INC., AMSERV HEALTH CARE OF
                        OHIO, INC., AMSERV HEALTH CARE OF NEW JERSEY, INC., and
                        EFCC ACQUISITION CORP. and HELLER HEALTHCARE FINANCE,
                        INC.

            21.         List of subsidiaries.

            23.   (a)   Consent of Holtz Rubenstein & Co., LLP. previously
                        filed.

                  (b)   Consent of Muenz & Meritz, P.C. included in Exhibit 5.1.
                        previously filed.

            99.1        Chief Executive Officer Certification pursuant to
                        Section 906 of the Sarbanes-Oxley Act of 2002.

            99.2        Chief Financial Officer Certification pursuant to
                        Section 906 of the Sarbanes-Oxley Act of 2002.
-----------

*     Incorporated by reference to the Company's Registration Statement on Form
      S-18 dated May 14, 1991. (Registration No. 33-39697-NY)


                                       30