OPT Opticare Health

OptiCare Restates its 2002 and 2003 and First Quarter 2004 Financial Statements, Files its Form 10-Q for the Second Quarter 2004 and Reports Second Quarter 2004 Financial Results WATERBURY, Conn., Sept. 2 /PRNewswire-FirstCall/ -- OptiCare Health Systems, Inc. (AMEX:OPT) announced today that it has completed its previously announced review of its classification of long term debt in its previously reported financial statements for the years ended December 31, 2002 and 2003 and its previously announced review of its accounting for inventory during the quarter ended March 31, 2004 and has restated its financial statements for the years ended December 31, 2002 and 2003 and for the quarter ended March 31, 2004. The company also filed its Form 10-Q for the quarter ended June 30, 2004. In connection with the restatement of its 2002 and 2003 financial statements, the company reclassified approximately $9.7 million and approximately $1.6 million owed under its loan agreement with its senior lender as of December 31, 2003 and December 31, 2002, respectively, from a long term liability to a current liability. The restated financial statements reported current portions of long-term debt of approximately $10.8 million and approximately $2.8 million as of December 31, 2003 and December 31, 2002, respectively, and long term debt of approximately $1.8 million and approximately $1.0 million as of December 31, 2003 and December 31, 2002, respectively. The company concluded 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. There was no change in the net income or loss available to common stockholders as originally reported for such periods as a result of this restatement. In connection with the restatement of its first quarter 2004 financial statements, the company determined that at March 31, 2004 its inventory was overstated by approximately $0.7 million and an inventory liability was understated by approximately $0.3 million. The effect of these changes resulted in an approximate $0.2 million reduction to revenue and an approximate $0.8 million increase to cost of goods sold, which resulted in a net income reduction of approximately $1.0 million for the quarter ended March 31, 2004. As a result, the restated financial statements reported a net loss to common stockholders for the quarter ended March 31, 2004 of approximately $1.1 million opposed to approximately $0.2 million as originally reported and net loss per common share for the quarter ended March 31, 2004 of $0.04 opposed to $0.01 as originally reported. The company concluded that the overstatement of inventory resulted primarily from mathematical errors in the calculation of inventory. The company also announced today that it reported 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 and total net revenues for the three months ended June 30, 2004 of approximately $30.8 million, down from approximately $32.0 million for the three months ended June 30, 2003. The company also reported loss from continuing operations for the six months ended June 30, 2004 of approximately $1.0 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 of approximately $0.1 million, down from approximately $2.2 million for the three months ended June 30, 2003; net loss to common stockholders for the six months ended June 30, 2004 of approximately $2.3 million, which is equal to the net loss to common stockholders of approximately $2.3 million for the six months ended June 30, 2003; and net loss to common stockholders for the three months ended June 30, 2004 of approximately $1.1 million, down from approximately $2.3 million for the three months ended June 30, 2003. Additionally, the company stated that on August 27, 2004, the company amended the terms of its loan agreement with its senior lender to remove the condition precedent that there is no material adverse effect or material adverse change with respect to the company from the lender's obligation to advance funds to the company and to remove the occurrence of a material adverse effect or material adverse change with respect to the company from the definition of events of default under the loan agreement. In connection with this amendment, the company's major stockholder, Palisade Concentrated Equity Partnership, L.P., guaranteed an additional $1,000,000 of the company's obligations under the loan agreement. 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, 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 impact of the restatements, the reaction of the company's stockholders, customers, venders and lenders to the reviews and restatements, 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. OPTICARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (Amounts in thousands) (Unaudited) June 30, December 31, June 30, 2004 2003 2003 ASSETS CURRENT ASSETS: Cash and cash equivalents $2,362 $1,695 $3,881 Accounts receivable, net 9,031 7,867 9,600 Inventories 5,243 5,770 6,463 Deferred income taxes, current - - 1,660 Assets held for sale 1,115 1,652 1,656 Other current assets 1,090 565 841 TOTAL CURRENT ASSETS 18,841 17,549 24,101 Property and equipment, net 4,037 4,647 5,551 Goodwill, net 17,892 17,892 19,531 Intangible assets, net 1,124 1,179 1,235 Deferred income taxes, non-current - - 3,320 Assets held for sale, non-current 792 1,339 1,496 Other assets 3,139 3,249 3,028 TOTAL ASSETS $45,825 $45,855 $58,262 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $8,936 $5,525 $8,114 Accrued expenses 6,590 5,379 4,990 Current portion of long-term debt 9,306 10,828 12,395 Liabilities of held for sale business 1,057 1,241 1,389 Other current liabilities 1,022 548 435 TOTAL CURRENT LIABILITIES 26,911 23,521 27,323 Long-term debt, less current portion 63 1,775 54 Other liabilities 539 512 550 TOTAL NON-CURRENT LIABILITIES 602 2,287 604 Series B 12.5% mandatorily redeemable, convertible preferred stock-related party 5,986 5,635 5,317 STOCKHOLDERS' EQUITY: Series C preferred stock- related party 1 1 1 Common stock 31 30 30 Additional paid-in-capital 79,534 79,700 79,966 Accumulated deficit (67,240) (65,319) (54,979) TOTAL STOCKHOLDERS' EQUITY 12,326 14,412 25,018 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $45,825 $45,855 $58,262 OPTICARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations (Amounts in thousands, except share data) (Unaudited) Three Months Six Months Ended June 30, Ended June 30, 2004 2003 2004 2003 NET REVENUES: Managed vision $6,267 $7,480 $12,317 $14,888 Product sales 17,880 19,174 35,837 36,938 Other services 5,517 4,819 10,460 9,173 Other income 1,098 530 1,718 2,368 Total net revenues $30,762 32,004 60,332 63,367 OPERATING EXPENSES: Medical claims expense 4,717 5,514 9,360 11,257 Cost of product sales 13,761 14,626 27,963 28,568 Cost of services 2,427 2,043 4,468 3,898 Selling, general and administrative 9,234 9,318 18,017 17,739 Loss from early extinguishment of debt - 1,847 - 1,847 Depreciation 420 359 811 702 Amortization 27 29 56 58 Interest 277 630 596 1,389 Total operating expense 30,863 34,366 61,271 65,458 Loss from continuing operations before taxes (101) (2,362) (939) (2,091) Income tax expense (benefit) 46 (183) 52 (72) Loss from continuing operations (147) (2,179) (991) (2,019) Discontinued operations (Note 3) Income (loss) from discon- tinued operations (including loss on disposal of $580) (810) 9 (929) 5 Income tax expense (benefit) - (3) - (2) Income (loss) on discon- tinued operations (810) 6 (929) 3 Net loss (957) (2,173) (1,920) (2,016) Preferred stock dividends (177) (160) (351) (300) Net loss to common stockholders $(1,134) $(2,333) $(2,271) $(2,316) EARNINGS (LOSS) PER SHARE- BASIC AND DILUTED: Loss from continuing operations $(0.01) $(0.08) $(0.04) $(0.08) Discontinued operations (0.03) 0.00 (0.03) 0.00 Net income (loss) (0.04) (0.08) (0.07) (0.08) DATASOURCE: OptiCare Health Systems, Inc. CONTACT: Christopher J. Walls, General Counsel of OptiCare Health Systems, Inc., +1-203-596-2236

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