CONTINUCARE CORPORATION
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-139371
PROSPECTUS SUPPLEMENT NO. 2
(To Prospectus dated February 1, 2007)
CONTINUCARE CORPORATION
This Prospectus Supplement No. 2 modifies and supersedes certain information
contained in our prospectus dated February 1, 2007, as supplemented on February 23, 2007 (the
Prospectus), with respect to the offer and sale from time to time of up to 3,000,000 shares of
our common stock by the Selling Shareholders. This Prospectus Supplement No. 2 is not complete
without, and may not be delivered or utilized except in connection with, the Prospectus.
Capitalized terms used but not defined in this Prospectus Supplement No. 2 have the meanings given
to them in the Prospectus.
Please see Risk Factors beginning on page 3 of the Prospectus for a discussion of
certain factors you should consider in connection with investing in the securities covered by the
Prospectus.
Neither the Securities and Exchange Commission nor any state securities commission
has approved or disapproved of these securities or determined if this Prospectus Supplement No. 2
or the Prospectus is truthful or complete. Any representation to the contrary is a criminal
offense.
The date of this Prospectus Supplement No. 2 is April 2, 2007.
This Prospectus Supplement No. 2 modifies and supersedes certain information contained in the
Prospectus as follows:
The Prospectus states under the sections entitled Selling Shareholders and Plan of
Distribution that Jose M. Garcia, Sr. and Carlos Garcia, two of the Selling Shareholders, may each
sell under the Prospectus up to 337,583 shares of common stock (the First Tranche Shares) between
April 1, 2007 and June 30, 2007 and up to 433,333 shares of common stock (the Second Tranche
Shares) between July 1, 2007 and September 30, 2007. Notwithstanding the foregoing, in addition
to the First Tranche Shares that may be offered and sold by each of Jose M. Garcia, Sr. and Carlos
Garcia between April 1, 2007 and June 30, 2007, these Selling Shareholders may also offer and sell
the Second Tranche Shares between April 1, 2007 and September 30, 2007.
PROSPECTUS
CONTINUCARE CORPORATION
Up to 3,000,000 Shares of Common Stock
This prospectus relates to the offer and sale from time to time of up to 3,000,000 shares of
our common stock by the persons listed in this prospectus under the heading Selling Shareholders.
The Selling Shareholders are the former principals and certain former employees or consultants of
Miami Dade Health Centers, Inc. and its affiliated companies who obtained their shares in
connection with our acquisition of these companies.
The prices at which the Selling Shareholders may sell the shares will be determined by
prevailing market prices or through privately-negotiated transactions. We will not receive any
proceeds from the sale of the shares in this offering.
Our common stock is traded on the American Stock Exchange under the symbol CNU. On February
1, 2007, the last reported sale price of our common stock on the American Stock Exchange was $2.76
per share.
Investing in these securities involves significant risks. See Risk Factors beginning on page 3 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has approved or
disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any
representation to the contrary is a criminal offense.
The date of this prospectus is February 1, 2007.
TABLE OF CONTENTS
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We have not authorized anyone to provide you with information different from that contained or
incorporated by reference in this prospectus. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of common stock.
i
ABOUT CONTINUCARE
The following summary highlights selected information and does not contain all of the
information that is important to you. We urge you to carefully read this entire prospectus and the
documents we have referred to in Incorporation of Certain Documents by Reference on page 14 for
more information about us and our financial statements. You should pay special attention to the
risks of investing in our common stock discussed under Risk Factors. Except where the context
otherwise requires, the terms we, us, our or Continucare refer to the business of
Continucare Corporation and its consolidated subsidiaries, including the MDHC Companies.
We are a provider of primary care physician services. Through our network of 18 medical
centers we provide primary health care services on an outpatient basis. We also provide practice
management services to independent physician affiliates (IPAs). All of our medical centers and
IPAs are located in Miami-Dade, Broward and Hillsborough Counties, Florida. For the three-months
ended September 30, 2006, approximately 95% of our revenue was generated by providing services to
Medicare-eligible members under risk arrangements that require us to assume responsibility to
provide and pay for all of our patients medical needs in exchange for a capitated fee, typically a
percentage of the premium received by an HMO from various payor sources.
Effective October 1, 2006, we consummated our acquisition (the Acquisition) of substantially
all of the assets of Miami Dade Health Centers, Inc. and its affiliated companies (the MDHC
Companies). Upon completion of the Acquisition, we entered into a registration rights agreement
with a representative of the MDHC Companies. Pursuant to the registration rights agreement, we
agreed to file this registration statement with respect to 3.0 million shares of our common stock
issued to the MDHC Companies in connection with the Acquisition. We have agreed to use
commercially reasonable efforts to cause this registration statement to be declared effective no
later than April 1, 2007 and to maintain its effectiveness until October 1, 2007.
****
We are a Florida corporation incorporated in 1996 as the successor to a Florida corporation
formed earlier in 1996. Our principal executive offices are located at 7200 Corporate Center
Drive, Suite 600, Miami, Florida 33126. Our telephone number is 305-500-2000.
2
RISK FACTORS
Investing in our common stock involves substantial risks. You should carefully consider the
risks and uncertainties described below and the other information included or incorporated by
reference in this prospectus before purchasing our common stock. The risks and uncertainties
described below are not the only ones we face. Additional risks and uncertainties not known to us
on the date of this prospectus or that we currently consider immaterial may also impair our
business operations. If any of the following risk events identified below actually occurs, our
business, financial condition or results of operations would likely suffer. In that case, the
trading price of our common stock could fall, and you may lose all or part of your investment.
Our operations are largely dependent on two health maintenance organizations.
Prior to the Acquisition, we derived substantially all of our net medical services revenues
under our managed care agreements with two health maintenance organizations (HMOs), Humana
Medical Plans, Inc. (Humana) and Vista Healthplan of South Florida, Inc. and its affiliated
companies (Vista). During the fiscal year ended June 30, 2006, we generated approximately 80% of
our net medical services revenues from contracts with Humana and 20% of our net medical services
revenues from contracts with Vista. Most of our business with Humana is governed by one agreement
(the Humana POP Agreement). As a result of the Acquisition, we expect to derive net medical
services revenues under managed care agreements with other HMOs, including, without limitation,
WellCare of Florida, Inc., HealthEase of Florida, Inc., Summit Health Plan, Inc. and United
HealthCare of Florida, Inc., however, the loss of the Humana POP Agreement or our managed care
agreement with Vista, or significant reductions in payments to us under these contracts, could have
a material adverse effect on our business, financial condition and results of operations.
Under our most important contracts we are responsible for the cost of medical services to our
patients in return for a fixed fee.
Our most important contracts with Humana and Vista are full risk agreements under which we
receive for our services fixed monthly payments per patient at a rate established by the contract,
also called a capitated fee. In return, we assume full financial responsibility for the provision
of all necessary medical care to our patients, even services we do not provide directly.
Accordingly, we will be unable to adjust the revenues we receive under those contracts, and if
medical claims expense exceeds our estimates our profits may decline. Relatively small changes in
the ratio of our health care expenses to capitated revenues we receive can create significant
changes in our financial results.
If we are unable to manage medical benefits expense effectively, our profitability will likely be
reduced.
We cannot be profitable if our costs of providing the required medical services exceed the
revenues that we derive from those services. However, our most important contracts with Humana and
Vista require us to assume full financial responsibility for the provision of all necessary medical
care in return for a capitated fee per patient at a rate established by the contract. Accordingly,
as the costs of providing medical services to our patients under those contracts increases, the
profits we receive with respect to those patients decreases. If we cannot continue to improve our
controls and procedures for estimating and managing our costs, our business, results of operations,
financial condition and ability to satisfy our obligations could be adversely affected.
A failure to estimate incurred but not reported medical benefits expense accurately will affect our
profitability.
Our medical benefits expense includes estimates of medical claims incurred but not reported,
or IBNR. We estimate our medical cost liabilities using actuarial methods based on historical data
adjusted for payment patterns, cost trends, utilization of health care services and other relevant
factors. Actual conditions, however, could differ from those assumed in the estimation process.
Due to the inherent uncertainties associated with the factors used in these assumptions, materially
different amounts could be reported in our financial statements for a particular period under
different possible conditions or using different, but still reasonable, assumptions. Adjustments,
if necessary,
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are made to medical benefits expense when the criteria used to determine IBNR change and when
actual claim costs are ultimately determined. Although we believe our past estimates of IBNR have
been adequate, they may prove to have been inadequate in the future and our future estimates may
not be adequate, any of which would adversely affect our results of operations. Further, our
inability to estimate IBNR accurately may also affect our ability to take timely corrective
actions, further exacerbating the extent of any adverse effect on our results.
We compete with many health care providers for patients and HMO affiliations.
The health care industry is highly competitive. We compete for patients with many other
health care providers, including local physicians and practice groups as well as local, regional
and national networks of physicians and health care companies. We believe that competition for
patients is generally based upon the reputation of the physician treating the patient, the
physicians expertise, and the physicians demeanor and manner of engagement with the patient, and
the HMOs that the physician is affiliated with. We also compete with other local, regional and
national networks of physicians and health care companies for the services of physicians and for
HMO affiliations. Some of our competitors have greater resources than we do, and we may not be
able to continue to compete effectively in this industry. Further, additional competitors may
enter our markets, and this increased competition may have an adverse effect on our revenues.
We may not be able to successfully recruit or retain existing relationships with qualified
physicians and medical professionals.
We depend on our physicians and other medical professionals to provide medical services to our
managed care patients and independent physicians contracting with us to participate in provider
networks we develop or manage. We compete with general acute care hospitals and other health care
providers for the services of medical professionals. Demand for physicians and other medical
professionals are high and such professionals often receive competing offers. If we are unable to
successfully recruit and retain medical professionals our ability to successfully implement our
business strategy could suffer. No assurance can be given that we will be able to continue to
recruit and retain a sufficient number of qualified physicians and other medical professionals.
Our business exposes us to the risk of medical malpractice lawsuits.
Our business entails an inherent risk of claims against physicians for professional services
rendered to patients, and we periodically become involved as a defendant in medical malpractice
lawsuits. Medical malpractice claims are subject to the attendant risk of substantial damage
awards. Although we maintain insurance against these claims, if liability results from any of our
pending or any future medical malpractice claims, there can be no assurance that our medical
malpractice insurance coverage will be adequate to cover liability arising out of these
proceedings. There can be no assurance that pending or future litigation will not have a material
adverse affect on us or that liability resulting from litigation will not exceed our insurance
coverage.
Our revenues will be affected by the Medicare Risk Adjustment program.
The majority of patients to whom we provide care are Medicare-eligible and participate in the
Medicare Advantage program. Centers for Medicare and Medicaid Services is now implementing its
Medicare Risk Adjustment project during which it is transitioning its premium calculation
methodology to a new system that takes into account the health status of Medicare Advantage
participants in determining premiums paid for each participant rather than only considering
demographic factors, as was historically the case. Beginning January 1, 2004, the new risk
adjustment system required that ambulatory data be incorporated into the premium calculation,
starting from a blend consisting of a 30% risk adjustment payment and the remaining 70% based on
demographic factors. For 2005, the blend of demographic risk adjustment payments and demographic
factors were given equal weight. For 2006, the blend consists of a 75% risk adjustment payment and
25% based on demographic factors. For 2007, the premium calculation will be 100% based on risk
adjustment payments.
We believe the risk adjustment methodology has generally increased our revenues per patient to
date but cannot assure what future impact this risk adjustment methodology will continue to have on
our business, results of
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operations, or financial condition. It is also possible that the risk adjustment methodology
may result in fluctuations in our medical services revenues from year to year.
We presently operate only in Florida.
All of our medical services revenues are presently derived from our operations in Florida.
Adverse economic, regulatory, or other developments in Florida (including hurricanes) could have a
material adverse effect on our financial condition or results of operations. In the event that we
expand our operations into new geographic markets, we will need to establish new relationships with
physicians and other health care providers. In addition, we will be required to comply with laws
and regulations of states that differ from the ones in which we currently operate, and may face
competitors with greater knowledge of such local markets. There can be no assurance that we will
be able to establish relationships, realize management efficiencies or otherwise establish a
presence in new geographic markets.
Failure to achieve and maintain effective internal controls in accordance with Section 404 of the
Sarbanes-Oxley Act of 2002 could have a material adverse effect on our business and stock price.
We are not presently subject to the assessment and attestation processes required by Section
404 of the Sarbanes-Oxley Act of 2002 (Section 404). However, we expect that we will become
subject to those Securities and Exchange Commission rules as of the end of our current fiscal year
ending June 30, 2007 and, accordingly, in our Annual Report on Form 10-K for the fiscal year ended
June 30, 2007, we will be required to provide an assessment of the effectiveness of our internal
controls and to receive a report by our independent registered public accounting firm addressing
these assessments. While we believe that we will be able to timely meet our obligations under
Section 404 and that our management will be able to certify as to the effectiveness of our internal
controls, if we are unable to timely comply with Section 404, if our management is unable to
certify as to the effectiveness of our internal controls or if our auditors are unable to attest to
that certification or provide their own opinion, the stock price of our common stock may be
adversely affected. If we fail to maintain the adequacy of our internal controls, we may not be
able to ensure that we can conclude on an ongoing basis that we have effective internal control
over financial reporting in accordance with Section 404. Absolute assurance also cannot be
provided that testing will reveal all material weaknesses or significant deficiencies in internal
control over financial reporting.
Prior to the Acquisition, the entities comprising the MDHC Companies were privately-held
businesses and were not subject to the same requirements for internal controls as public companies.
While we intend to address any material weaknesses at any and all acquired companies (including the
MDHC Companies), there is no assurance that this will be accomplished. If we fail to strengthen
the effectiveness of any acquired companies internal controls, we may not be able to conclude on
an ongoing basis that we have effective internal controls over financial reporting in accordance
with Section 404. Failure to achieve and maintain an effective internal control environment could
have a material adverse effect on our stock price.
A significant portion of our voting power is concentrated.
One of our directors, Dr. Phillip Frost, and entities affiliated with him, beneficially owns
approximately 32% of our outstanding common stock and the principals of the MDHC Companies, in the
aggregate, beneficially own approximately 26% of our outstanding common stock.
Based on the significant beneficial ownership of our common stock by Dr. Frost and the
principals of the MDHC Companies, they, collectively, are able to control corporate actions
requiring shareholder approval, including the election of directors, and are able to effectively
control any shareholder votes or actions with respect to such matters. This influence may make us
less attractive as a target for a takeover proposal. It may also make it more difficult to
discourage a merger proposal that Dr. Frost or the principals of the MDHC Companies favor or to
wage a proxy contest for the removal of incumbent directors. As a result, this may deprive the
holders of our common stock of an opportunity they might otherwise have to sell their shares at a
premium over the prevailing market price in connection with a merger or acquisition of us with or
by another company.
5
We are dependent on our executive officers and other key employees.
Our operations are highly dependent on the efforts of our Chief Executive Officer and our
other key employees. With the exception of the employment agreements entered into with certain
principals of the MDHC Companies in connection with the Acquisition, as more fully described in
this prospectus, our executive officers and key employees do not have employment agreements with
us, but are instead employed on an at will basis. While we believe that we could find
replacements, the loss of any of their leadership, knowledge and experience could negatively impact
our operations. Replacing any of our executive officers or key employees might be difficult or
take an extended period of time because a limited number of individuals in the managed care
industry have the breadth and depth of skills and experience necessary to operate a business such
as ours. Our success is also dependent on our ability to hire and retain qualified management,
technical and medical personnel. We may be unsuccessful in recruiting and retaining such
personnel, which could negatively impact our operations.
We depend on the management information systems of our affiliated HMOs.
Our operations are dependent on the management information systems of the HMOs with which we
contract. Our affiliated HMOs provide us with certain financial and other information, including
reports and calculations of costs of services provided and payments to be received by us. Both the
software and hardware our HMO affiliates use to provide us with that information have been subject
to rapid technological change. Because we rely on this technology but do not own it, we have
limited ability to ensure that it is properly maintained, serviced and updated. In addition,
information systems such as these may be vulnerable to failure, acts of sabotage, such as
hacking, and obsolescence. If either of our principal HMO affiliates were to temporarily or
permanently lose the use of the information systems that provide us with the information on which
we depend or the underlying patient and physician data, our business and results of operations
could be materially and adversely affected. Because our HMO affiliates generate certain of the
information on which we depend, we have less control over the manner in which that information is
generated than we would if we generated the information internally.
We depend on our information processing systems.
Our information processing systems allow us to monitor the medical services we provide to
patients. They also enable us to provide our HMO affiliates with information they use to calculate
the payments due to us. These systems are vital to our growth. Although we license most of our
information processing systems from third-party vendors we believe to be reliable, we developed
certain elements of our information processing systems on our own. Our current systems may not
perform as expected or provide efficient operational solutions if:
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we fail to adequately identify or are unsuccessful in implementing all of our
information and processing needs; |
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our processing or information systems fail; or |
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we fail to upgrade systems when required. |
Volatility of our stock price could adversely affect you.
The market price of our common stock could fluctuate significantly as a result of many
factors, including factors that are beyond our ability to control or foresee and which, in some
cases, may be wholly unrelated to us or our business. These factors include:
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state and federal budget decreases; |
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adverse publicity regarding HMOs and other managed care organizations; |
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government action regarding eligibility; |
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changes in government payment levels; |
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changes in state mandatory programs; |
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changes in expectations of our future financial performance or changes in financial
estimates, if any, of public market analysts; |
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announcements relating to our business or the business of our competitors; |
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conditions generally affecting the managed care industry or our provider networks; |
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the success of our operating strategy; |
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the operating and stock price performance of other comparable companies; |
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the termination of any of our contracts; |
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regulatory or legislative changes; |
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acts of war or terrorism or an increase in hostilities in the world; and |
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general economic conditions, including inflation and unemployment rates. |
We will not receive any of the proceeds from this offering.
We initially issued the shares of common stock covered by this prospectus to the MDHC
Companies on October 1, 2006 in connection with the Acquisition, and the MDHC Companies immediately
transferred or assigned such shares to the Selling Shareholders. The shares of common stock
offered by this prospectus are offered by the Selling Shareholders identified elsewhere in this
prospectus for their own accounts, and we will not receive any of the proceeds from this offering.
7
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
All statements included or incorporated by reference in this propsectus other than statements
of historical fact, are forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended (the Exchange Act), and we intend that such forward-looking statements be subject to the
safe harbors created thereby. These forward-looking statements are based on our current
expectations, estimates and projections about our industry, managements beliefs, and certain
assumptions made by us, all of which are subject to change. Forward-looking statements can often
be identified by words such as anticipates, expects, intends, plans, predicts,
believes, seeks, estimates, may, will, should, would, could, potential,
continue, or similar expressions, and variations or negatives of these words. These
forward-looking statements are not guarantees of future results and are subject to risks,
uncertainties and assumptions that are difficult to predict. Therefore, our actual results could
differ materially and adversely from those expressed in any forward-looking statement as a result
of various factors. Forward-looking statements may include statements about:
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Our ability to make capital expenditures and respond to capital needs; |
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Our ability to enhance the services we provide to our patients; |
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Our ability to strengthen our medical management capabilities; |
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Our ability to improve our physician network; |
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Our ability to enter into or renew our managed care agreements and negotiate terms
which are favorable to us and affiliated physicians; |
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The estimated increase in our intangible assets as a result of our acquisition of
the MDHC Companies, and its impact on us; |
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Our ability to respond to future changes in Medicare reimbursement levels and
reimbursement rates from other third parties; |
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Our compliance with applicable laws and regulations; |
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Our ability to establish relationships and expand into new geographic markets; |
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Our ability to expand our network through additional medical centers or other facilities; |
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The potential impact on our claims loss ratio as a result of the Medicare Risk
Adjustments (MRA), the Medicare Prescription Drug, Improvement and Modernization Act
of 2003 (the Medicare Modernization Act) and the enhanced benefits our HMO affiliates
offered under their Medicare Advantage Plans; |
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Changes in the component of our medical claims expense attributable to the Medicare
Prescription Drug Program; |
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The ability of our stop-loss insurance coverage to limit the financial risk to us of
our risk arrangements with the HMOs; |
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The application and impact of Statement of Financial Account Standards No. 123(R) on
our future results of operations; |
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Our ability to utilize our net operating losses for federal income tax purposes; |
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The impact of the newly effective Medicare prescription drug plan on our results of operations; and |
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Our intent to repurchase our common stock under our stock repurchase program. |
Forward-looking statements involve risks and uncertainties that cannot be predicted or
quantified and, consequently, actual results may differ materially from those expressed or implied
by such forward-looking statements. Forward-looking statements, therefore, should be considered in
light of all of the information included or incorporated by reference in this prospectus, including
the section entitled Risk Factors. Such risks and uncertainties include, but are not limited to
the following:
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Our dependence on two HMOs for substantially all of our revenues; |
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Our ability to respond to capital needs; |
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Our ability to achieve expected levels of patient volumes and control the costs of
providing services; |
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Pricing pressures exerted on us by managed care organizations; |
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The level of payments we receive from governmental programs and other third party payors; |
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Our and our HMO affiliates ability to improve efficiencies in utilization with
respect to the Medicare Prescription Drug Program; |
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Our ability to rapidly integrate the MDHC Companies operations and personnel; |
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The realization of the expected synergies and benefits of the acquisition of the MDHC Companies; |
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Our ability to comply with Section 404 of the Sarbanes-Oxley Act of 2002; |
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Our ability to serve a significantly larger patient base; |
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Trends in patient enrollment; |
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Our ability to successfully recruit and retain qualified medical professionals; |
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Future legislative or regulatory changes, including possible changes in Medicare
programs that may impact reimbursements to health care providers and insurers or the
benefits we expect to realize from our acquisition of the MDHC Companies; |
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Our ability to comply with applicable laws and regulations; |
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The impact of the Medicare Modernization Act and MRA on payments we receive for our
respective managed care operations, including the risk that any additional premiums we
may receive as a result of the newly effective Medicare Prescription Drug Plan will not
be sufficient to compensate us for the expenses that we incur as a result of that plan; |
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Technological and pharmaceutical improvements that increase the cost of providing,
or reduce the demand for, health care; |
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Changes in our revenue mix and claims loss ratio; |
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Changes in the range of medical services we provide or for which our HMO affiliates
offer coverage; |
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Our ability to enter into and renew managed care provider agreements on acceptable terms; |
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Loss of significant contracts with HMOs; |
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The ability of our compliance program to detect and prevent regulatory compliance problems; |
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Delays in receiving payments; |
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Increases in the cost of insurance coverage, including our stop-loss coverage, or
the loss of insurance coverage; |
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The collectibility of our uninsured accounts and deductible and co-pay amounts; |
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Federal and state investigations; |
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Lawsuits for medical malpractice and the outcome of any such litigation; |
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Changes in estimates and judgments associated with our critical accounting policies; |
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Our dependence on our information processing systems and the management information
systems of our HMO affiliates; |
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Impairment charges that could be required in future periods; |
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The impact on our liquidity of any repurchases of our common stock that we may effect; |
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The inherent uncertainty in financial forecasts which are based upon assumptions
which may prove incorrect or inaccurate; |
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General economic conditions; and |
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Uncertainties generally associated with the health care business. |
We caution our investors not to place undue emphasis on these forward-looking statements,
which speak only as of the date of this prospectus and we assume no responsibility to update our
forward-looking statements as a result of new information, future events or otherwise.
9
USE OF PROCEEDS
We will not receive any proceeds from this offering. The Selling Shareholders will receive
all of the proceeds from this offering.
10
SELLING SHAREHOLDERS
We initially issued the shares of common stock covered by this prospectus to the MDHC
Companies, and the MDHC Companies immediately transferred or assigned such shares to the Selling
Shareholders. We are registering the shares of common stock covered by this prospectus in
fulfillment of our obligations under the registration rights agreement we entered into in
connection with the Acquisition. Between April 1, 2007 and September 30, 2007, the Selling
Shareholders may from time to time offer and sell pursuant to this prospectus, or prospectus
supplement, the common stock covered by this prospectus as described in more detail under Plan of
Distribution. No offer or sale under this prospectus may be made by a holder of the shares unless
that holder is listed as a Selling Shareholder in the table below or until that holder has notified
us and a supplement to this prospectus has been filed or an amendment to this registration
statement has become effective.
In connection with the Acquisition, we entered into one-year employment agreements with each
of Luis Cruz, M.D., Jose M. Garcia, Sr. and Carlos Garcia, the principal shareholders of the MDHC
Companies. Under these employment agreements, Dr. Cruz was appointed to Continucares Board of
Directors and is employed as Vice Chairman of Continucares Board of Directors at an annual salary
of $225,000, Mr. Jose Garcia is employed as Continucares Executive Vice President at an annual
salary of $275,000, and Mr. Carlos Garcia is employed as Continucares President Diagnostics
Division at an annual salary of $225,000. In addition, Sadita Bustamante, the former Chief
Operating Officer of the MDHC Companies, is employed as Continucares Senior Vice President of
Center Operations. The other Selling Shareholders named herein (with the exception of HAC
Advisors, LLC) were previously associated with the MDHC Companies, and effective October 1, 2006
are associated with us, as either employees or consultants. Other than as disclosed herein or in
the documents incorporated by reference in this prospectus, none of the Selling Shareholders listed
below have had a material relationship with us in the past three years.
The table below sets forth (i) the name, (ii) the number of shares of common stock
beneficially owned, (iii) the percentage of common stock beneficially owned, and (iv) the number of
shares of common stock being offered by each Selling Shareholder. Unless otherwise indicated
below, to our knowledge, all persons named in the table have sole voting and investment power with
respect to their shares of common stock. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission (the SEC), and includes voting and investment
power with respect to the shares. The inclusion of any shares in this table does not constitute an
admission of beneficial ownership for the person named below. We cannot estimate the amount of our
common stock that will be beneficially owned by the Selling Shareholders after completion of this
offering because the Selling Shareholders may offer all, some or none of the shares of our common
stock beneficially owned by them.
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Number of Shares of Common Stock |
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Offered Under this Prospectus |
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Number of Shares of |
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Common Stock Owned |
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Percent of Common |
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Between |
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Between |
Name of Selling |
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Prior to this |
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Stock Owned Prior |
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April 1, 2007 |
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July 1, 2007 and |
Shareholder |
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Offering |
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to this Offering (1) |
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and June 30, 2007 |
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September 30, 2007 |
Luis Cruz Childrens
Irrevocable Trust A
(2)(3) |
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1,532,819 |
(4) |
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2.19 |
% |
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84,396 |
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108,333 |
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Luis Cruz Childrens
Irrevocable Trust B
(2)(3) |
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1,532,820 |
(5) |
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2.19 |
% |
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84,396 |
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108,334 |
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Luis Cruz Childrens
Irrevocable Trust C
(2)(3) |
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1,532,820 |
(5) |
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2.19 |
% |
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84,396 |
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108,333 |
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Luis Cruz Childrens
Irrevocable Trust D
(2)(3) |
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1,532,820 |
(5) |
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2.19 |
% |
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84,396 |
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108,334 |
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Jose M. Garcia, Sr. (3) |
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6,131,280 |
(6) |
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8.76 |
% |
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337,583 |
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433,333 |
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11
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Number of |
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Shares of |
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Number of Shares |
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Common Stock |
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Percent of Common |
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of Common Stock |
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Name of Selling |
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Owned Prior to |
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Stock Owned Prior |
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Offered Under this |
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Name of Selling |
Shareholder |
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this Offering |
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to this Offering (1) |
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Prospectus |
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Shareholder |
Carlos Garcia (3) |
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6,131,280 |
(6) |
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8.76 |
% |
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337,583 |
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433,333 |
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Sadita Bustamante |
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400,000 |
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* |
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120,000 |
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0 |
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Alfredo Ginory MD |
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300,000 |
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* |
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90,000 |
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0 |
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Enrique Gomez MD |
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20,000 |
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* |
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6,000 |
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0 |
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Benjamin Kremor MD |
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10,000 |
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* |
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3,000 |
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0 |
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James Gorlick, MD |
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10,000 |
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* |
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3,000 |
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0 |
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Jose Gonzalez MD |
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10,000 |
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* |
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3,000 |
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0 |
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Odalys Frantela MD |
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10,000 |
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* |
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3,000 |
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0 |
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Jose Carrences |
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10,000 |
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* |
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3,000 |
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0 |
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Tomas Cabrera |
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10,000 |
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* |
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3,000 |
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0 |
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John Niven |
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10,000 |
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* |
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3,000 |
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0 |
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Luis Andux |
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10,000 |
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* |
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3,000 |
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0 |
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Barbara Ensenat |
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20,000 |
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* |
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6,000 |
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0 |
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Alfredo del Rio |
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10,000 |
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* |
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3,000 |
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0 |
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Ghanem Bahjat MD |
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7,500 |
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* |
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2,250 |
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0 |
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Amarillis Vazquez MD |
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7,500 |
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* |
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2,250 |
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0 |
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Leon Martinez MD |
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7,500 |
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* |
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2,250 |
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0 |
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Zoraida de Armas |
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5,000 |
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* |
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1,500 |
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0 |
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Isabel Gonzalez |
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5,000 |
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* |
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1,500 |
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0 |
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Hector Placeres |
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25,000 |
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* |
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7,500 |
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0 |
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Ectore Garcia |
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50,000 |
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* |
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15,000 |
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0 |
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Pedro Recdondo |
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2,500 |
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* |
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750 |
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0 |
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Roberto Guibert |
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2,500 |
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* |
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750 |
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0 |
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Elena Delgado |
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2,500 |
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* |
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750 |
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0 |
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Pablo Perez |
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2,500 |
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* |
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750 |
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0 |
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Teresita Cabrera |
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10,000 |
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* |
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3,000 |
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0 |
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HAC Advisors, LLC (7) |
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400,000 |
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* |
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(8 |
) |
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(8 |
) |
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* |
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Less than one percent. |
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(1) |
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Based on 70,003,567 shares of common stock outstanding as of December 31, 2006. |
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(2) |
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Luis Cruz, M.D., as the sole trustee of Luis Cruz Childrens Irrevocable Trust A, Luis Cruz
Childrens Irrevocable Trust B, Luis Cruz Childrens Irrevocable Trust C and Luis Cruz
Childrens Irrevocable Trust D (the Trusts), is the natural person who has voting and
investment control of the shares of common stock being offered by the Trusts. |
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(3) |
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On October 12, 2006, Jose M. Garcia, Sr., Carlos Garcia and the Trusts (the Group),
collectively, as a group, filed a Schedule 13D with regard to the shares of common stock
beneficially owned by the Group. |
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(4) |
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Includes 104,279 shares of common stock held in escrow in connection with the Acquisition. |
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(5) |
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Includes 104,278 shares of common stock held in escrow in connection with the Acquisition. |
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(6) |
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Includes 417,113 shares of common stock held in escrow in connection with the Acquisition. |
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(7) |
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Carl Kleidman and Harold Blue are the natural persons who have voting and investment control
of the securities being offered by HAC Advisors, LLC. |
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(8) |
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The offering of the 400,000 shares of common stock beneficially owned by HAC Advisors, LLC may
be made from time to time over the six-month period beginning on April 1, 2007 and ending on
September 30, 2007. |
12
PLAN OF DISTRIBUTION
The Selling Shareholders may sell all or a portion of the shares of common stock benefically
owned by them and offered hereby on any national securities exchange or quotation service that
lists or quotes the common stock, in private transactions or in the over-the counter market at
prices related to the prevailing prices of the shares on the American Stock Exchange. The Selling
Shareholders may also sell shares of common stock pursuant to Rule 144 of the Securities Act of
1933, as amended (the Securities Act), if available, rather than under this prospectus. The
Selling Shareholders may sell all or a portion of the shares offered hereby through one or more
underwriters, broker-dealers or agents. If the shares are sold through underwriters or
broker-dealers, the Selling Shareholders will be responsible for underwriting discounts or
commissions or agents commissions. The Selling Shareholders may not deliver shares of common
stock under this prospectus in settlement of any short sale or other short derivative position or
hedging arrangement established by such Selling Shareholder prior to April 1, 2007. The offering
of shares by Luis Cruz, M.D., Jose M. Garcia, Sr. and Carlos Garcia may be made from time to time
over two three-month periods beginning on April 1, 2007 and ending on September 30, 2007. The
offering of shares by the other Selling Shareholders, other than HAC Advisors, LLC, named herein
may be made from time to time over the three-month period beginning on April 1, 2007 and ending on
June 30, 2007. The offering of shares by HAC Advisors, LLC may be made from time to time over the
six-month period beginning on April 1, 2007 and ending on September 30, 2007.
The Selling Shareholders may be deemed to be underwriters within the meaning of the Securities
Act. Any Selling Shareholder may effect such transactions by selling to or through one or more
broker-dealers, and such broker-dealers may receive compensation in the form of concessions or
commissions from the Selling Shareholders. The Selling Shareholders and any broker-dealers that
participate in the distribution may under certain circumstances be deemed to be underwriters within
the meaning of the Securities Act, and any commissions received by such broker-dealers and any
profits realized on the resale of shares by them may be deemed to be underwriting discounts and
commissions under the Securities Act.
The Selling Shareholders and other persons participating in the sale or distribution of the
shares may be subject to applicable provisions of the Exchange Act, and the rules and regulations
promulgated thereunder, that limit the timing of purchases and sales of any of the shares by the
Selling Shareholders and any other person, including Regulation M. The anti-manipulation rules
under the Exchange Act may apply to sales of shares in the market and to the activities of the
Selling Shareholders and their affiliates. Furthermore, Regulation M may restrict the ability of
any person engaged in the distribution of the shares to engage in market-making activities with
respect to the particular shares being distributed for a period of up to five business days before
the distribution. These restrictions may affect the marketability of the shares and the ability of
any person or entity to engage in market-making activities with respect to the shares.
We have agreed, subject to certain conditions, to use our commercially reasonable efforts to
cause the registration statement relating to the offering and sale by the Selling Shareholders of
the shares of common stock covered by this prospectus to be declared effective by April 1, 2007 and
to maintain its effectiveness until October 1, 2007.
The Selling Shareholders will pay the fees and expenses of filing, qualification and other
fees and expenses of complying with state blue sky or securities laws as well applicable stock
transfer taxes, brokerage commissions, underwriting discounts or commissions and any fees of their
counsel. We will pay the fees and expenses of our counsel as well as any accounting fees and
expenses and the fees and expenses of any other experts necessary in connection with the
preparation, filing, amending or supplementing of the registration statement of which this
prospectus is a part.
We have agreed that we will indemnify the Selling Shareholders against certain liabilities,
including certain liabilities under the Securities Act, and the Selling Shareholders have agreed to
indemnify us for certain liabilities resulting from information they provided to us or from certain
sales of common stock under this registration statement, including liabilities under the Securities
Act.
13
LEGAL MATTERS
Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A., Miami, Florida, will pass on the
validity of the shares of common stock offered by the Selling Shareholders under this prospectus.
EXPERTS
Ernst & Young LLP, independent registered public accounting firm, has audited our consolidated
financial statements included in our Annual Report on Form 10-K for the year ended June 30, 2006,
as set forth in their report, which is incorporated by reference in this prospectus and elsewhere
in the registration statement. Our financial statements are incorporated by reference in reliance
on Ernst & Young LLPs report, given on their authority as experts in accounting and auditing.
Moore Stephens Lovelace, P.A., independent certified public accountants, have audited the MDHC
Companies combined balance sheets as of December 31, 2005 and December 31, 2004 and the MDHC
Companies combined statements of operations, changes in owners deficit and cash flows for the
years ended December 31, 2005, December 31, 2004 and December 31, 2003 included in our Current
Report on Form 8-K/A, as set forth in their report, which is incorporated by reference in this
prospectus and elsewhere in the registration statement. The MDHC Companies financial statements
are incorporated by reference in reliance on Moore Stephens Lovelace, P.A.s report, given on their
authority as experts in accounting and auditing.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
We are incorporating by reference into this prospectus information we have filed with the
SEC, which means that we are disclosing important information to you by referring you to documents
filed with the SEC. The information incorporated by reference is considered to be part of this
prospectus, and the information that we file later with the SEC will automatically update and
supersede this information. We incorporate by reference the documents listed below and any future
filings we will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act from
the date of this prospectus and prior to the termination of this offering, other than information
furnished pursuant to Items 9 or 12 of Form 8-K:
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Our annual report on Form 10-K for the year ended June 30, 2006 filed on September
18, 2006, as amended by our annual report on Form 10-K/A for the year ended June 30,
2006, filed on October 30, 2006; |
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Our quarterly report on Form 10-Q for the quarter ended September 30, 2006, filed on
November 13, 2006; |
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Our current report on Form 8-K dated September 26, 2006, filed on October 2, 2006,
as amended by our current report on Form 8-K/A dated September 26, 2006, filed on
December 14, 2006; and |
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Our Registration Statement on Form 8-A filed on September 4, 1996, registering our
common stock under Section 12(b) of the Exchange Act, including any further amendment
or reports filed for the purpose of updating such description. |
14
You may request a copy of these filings by writing or telephoning us at the following address:
Continucare Corporation
7200 Corporate Center Drive, Suite 600
Miami, Florida 33126
Attention: Corporate Secretary
(305) 500-2000
Exhibits to the filings will not be sent, however, unless those exhibits have been
specifically incorporated by reference in this prospectus.
Any statement contained in a document incorporated by reference, or deemed to be incorporated
by reference, in this prospectus shall be deemed to be modified or superseded for purposes of this
prospectus to the extent that a statement contained herein or in any other subsequently filed
document which also is incorporated by reference in this prospectus modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this prospectus. Statements contained in this prospectus as
to the contents of any contract or other document referred to in this prospectus do not purport to
be complete and, where reference is made to the particular provisions of such contract or other
document, such provisions are qualified in all respects by reference to all of the provisions of
such contract or other document.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other information with the
SEC. You may read and copy any document we file at the SECs public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Our SEC filings are also available to the public from
the SECs website at http://www.sec.gov.
In addition, you can inspect the reports, proxy statements and other information we file at
the offices of the American Stock Exchange, Inc., 86 Trinity Place, New York, New York 10006.
We have filed with the SEC a registration statement on Form S-3 under the Securities Act to
register with the SEC the shares described herein. This prospectus, which is a part of the
registration statement, does not contain all of the information set forth in the registration
statement. For further information about us and our common stock, you should refer to the
registration statement.
15