Opticare Announces Its Expected Restatement of 2003 Financial
Statements to Reflect the Reclassification of Its Long Term Debt,
The Amended Terms of Its Loan Agreement and Its Delay in Filing
Form 10-Q for the Quarter Ended June 30, 2004 WATERBURY, Conn.,
Aug. 23 /PRNewswire-FirstCall/ -- OptiCare Health Systems, Inc.
(AMEX:OPT) announced today that it has conducted a preliminary
review of the classification of its long term debt in its
previously reported financial statements for the year ended
December 31, 2003 and that the filing of its Form 10-Q for the
quarter ended June 30, 2004 will be delayed pending completion of
this review and the previously announced review of its accounting
for inventory and the restatement of its financial statements for
the quarter ended March 31, 2004. The company now believes its
classification as a long term liability of approximately $9.7
million and approximately $1.6 million as of December 31, 2003 and
December 31, 2002, respectively, owed under its loan agreement with
its senior lender, should be classified as a current liability. In
its Form 10-K for the year ended December 31, 2003, the company
reported current portions of long-term debt of approximately $1.1
million and approximately $1.3 million as of December 31, 2003 and
December 31, 2002, respectively, and long-term debt of
approximately $11.5 million and approximately $2.6 million as of
December 31, 2003 and December 31, 2002, respectively. The company
expects current portions of long-term debt will be approximately
$10.8 million and approximately $2.8 million as of December 31,
2003 and December 31, 2002, respectively, and long-term debt will
be approximately $1.8 million and approximately $1.0 million as of
December 31, 2003 and December 31, 2002, respectively. Accordingly,
the company expects to restate its previously reported financial
statements for the year ended December 31, 2003 to reflect the
reclassification of the debt. The company does not expect any
change in the net income or loss available to common stockholders
as originally reported for such periods as a result of the expected
restatement. The Company's management now believes that the amounts
outstanding pursuant to certain provisions contained in the credit
facility should have been classified as current liabilities rather
than long-term debt, pursuant to the provisions of consensus 95-22
issued by the Financial Accounting Standards Board's Emerging
Issues Task Force. Based upon the review and the expected
restatement, the company concluded on August 17, 2004, that the
company's previously reported financial statements for the year
ended December 31, 2003 should no longer be relied upon pending the
filing of its amended Annual Report on Form 10-K for the year ended
December 31, 2003 which the company expects to file with the
Securities and Exchange Commission by September 3, 2004. The
Company has notified and discussed this matter with its independent
registered public accounting firm. The company previously filed a
Form 12b-25 with the Securities and Exchange Commission which
extended the due date of its Quarterly Report on Form 10-Q for the
quarter ended June 30, 2004 from August 16, 2004 to August 23,
2004. The company, however, is delaying the filing of the Form 10-Q
to assess the impact of this restatement and the previously
announced restatement of its March 31, 2004 financial statements on
the disclosure in the Form 10-Q before it is filed with the
Securities and Exchange Commission. The company expects to file the
Form 10-Q as soon as practicable after completion of these
restatements, which the company expects to complete by September 3,
2004. The company anticipates that in its consolidated statement of
operations for the quarter ended June 30, 2004, it will report
total net revenues for the six months ended June 30, 2004 of
approximately $60.3 million, down from approximately $63.4 million
for the six months ended June 30, 2003. Total net revenues for the
three months ended June 30, 2004 is estimated at approximately
$30.8 million, down from approximately $32.0 million for the three
months ended June 30, 2003. These decreases in total net revenues
principally resulted from decreased revenues at Wise Optical and
the Buying Group and lost revenues from terminated contracts
related to Managed Vision. Loss from continuing operations for the
six months ended June 30, 2004 is estimated at approximately $1
million, down from approximately $2.0 million for the six months
ended June 30, 2003. Loss from continuing operations for the three
months ended June 30, 2004 is estimated at approximately $0.1
million, down from approximately $2.2 million for the three months
ended June 30, 2003. These decreases in loss from continuing
operations principally resulted from the company's efforts to
improve operating results at Wise Optical and the resulting
decrease in expenditures. Net loss to common stockholders for the
six months ended June 30, 2004 is estimated at approximately $2.3
million, which is equal to the net loss to common stockholders of
$2.3 million for the six months ended June 30, 2003. Net loss to
common stockholders for the three months ended June 30, 2004 is
estimated at approximately $1.1 million, down from approximately
$2.3 million for the three months ended June 30, 2003. These
decreases in net loss to common stockholders principally resulted
from the company's efforts to improve operating results at Wise
Optical and the resulting decrease in expenditures. Additionally,
the company stated that on August 16, 2004, the company amended the
terms of its loan agreement with its senior lender. In connection
with the amendment, the company received a waiver from its senior
lender for any non-compliance with the minimum fixed charge ratio
covenant under the loan agreement as of March 31, 2004, April 30,
2004, May 31, 2004 and June 30, 2004 as a result of the restatement
of its March 31, 2004 financial statements. The amendment also
amended the loan agreement with its senior lender to, among other
things, extend the maturity date of the revolving credit facility
from January 25, 2006 to January 25, 2007, (ii) provide access to a
$2.0 million temporary over-advance bearing interest at prime plus
5 1/2%, and in no event less than 6%, which is to be repaid in
eleven monthly installments of $100,000 commencing on October 1,
2004 with the remaining balance to be repaid in full by August 31,
2005, which is guaranteed by the company's major stockholder,
Palisade Concentrated Equity Partnership, L.P., (iii) change the
fixed charge ratio covenant from 1.5 to 1 to not less than 1 and to
extend the next test period for this covenant to March 31, 2005,
(iv) decrease the minimum tangible net worth financial covenant
from $(2.0) million to $(3.0) million and (v) add a debt service
coverage ratio covenant of between 0.7 to 1.0 beginning October 31,
2004 through February 28, 2005. In addition, the waiver and
amendment increased the termination fee payable if the company
terminates the revolving credit facility by 2% and increased the
yield maintenance amount payable, in lieu of the termination fee,
if the Company terminates the revolving credit facility pursuant to
a refinancing with another commercial financial institution, by 2%.
The yield maintenance amount was also changed to mean an amount
equal to the difference between (i) the all-in effective yield
which could be earned on the revolving balance through January 25,
2007 and (ii) the total interest and fees actually paid to its
senior lender on the revolving credit facility prior to the
termination or repayment date. The company paid its senior lender
$25,000 in financing fees in connection with this waiver and
amendment. About OptiCare Health Systems, Inc. OptiCare Health
Systems, Inc. is an integrated eye care services company focused on
vision benefits management, the distribution of products and
software services to eye care professionals, and consumer vision
services, including medical, surgical and optometric services and
optical retail. This press release may contain forward-looking
statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. These statements
include, but are not limited to, the expected outcome of the
review, the expectation of restating the company's financial
statements, the expected impact of a restatement on the company's
financial statements, including, but not limited to, the
expectation that the restatement will not change the net income or
loss available to common stockholders as originally reported and
the expected classification of the company's debt to its senior
lender, the expected timing of restating the company's financial
statements and filing the Form 10-Q, the expected financial results
for the three and six months ended June 30, 2004, as well as other
statements containing words such as "plan," "anticipate," "expect,"
"intend," "believe," "will," or similar expressions. The company's
actual results could differ materially from those expressed or
indicated by any forward-looking statements. Factors that could
cause or contribute to such differences include, but are not
limited to, the results of the ongoing review, the impact of the
expected restatement, the reaction of the company's stockholders,
customers, venders and lenders to the review and anticipated
restatement, the risk that the company may not be able to improve
cash flow, may not be able to successfully integrate its
acquisitions, to retain and attract qualified employees, the impact
of current and future governmental regulations in existing lines of
business, the company's ability to successfully and profitably
manage its operations and growth of the operations, if any, the
risks related to managed care contracting, and the ability of the
company to successfully raise capital on commercially reasonable
terms, if at all. Investors are cautioned that all forward-looking
statements involve risks and uncertainties, including those risks
and uncertainties detailed in the company's filings with the
Securities and Exchange Commission, including its Annual Report on
Form 10-K for the fiscal year ending December 31, 2003.
Forward-looking statements speak only as of the date they are made,
and the company undertakes no duty or obligation to update any
forward-looking statements in light of new information or future
events. DATASOURCE: OptiCare Health Systems, Inc. CONTACT:
Christopher J. Walls, General Counsel, OptiCare Health Systems,
Inc., +1-203-596-2236
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