<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-15223
OPTICARE HEALTH SYSTEMS, INC.
(Exact Name of Registrant as
Specified in Its Charter)
DELAWARE 76-0453392
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
87 GRANDVIEW AVENUE, WATERBURY, CONNECTICUT 06708
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code:
(203) 596-2236
Indicate by check X whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
The number of shares outstanding of the registrant's Common Stock, par
value $.001 per share, at August 1, 2000 was 12,598,782 shares.
<PAGE>
INDEX TO FORM 10-Q
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at June 30, 2000
(unaudited) and December 31, 1999 3
Condensed Consolidated Statements of Operations for the
three and six months ended June 30, 2000 and 1999
(unaudited) 4
Condensed Consolidated Statements of Cash Flows for the
six months ended June 30, 2000 and 1999 (unaudited) 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market
Risk 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURE 19
2
<PAGE>
OPTICARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
--------- ---------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,540 $ 2,921
Accounts receivable, net 12,514 10,557
Inventories 3,250 3,029
Deferred income taxes, current 2,497 2,579
Other current assets 1,945 2,259
--------- ---------
TOTAL CURRENT ASSETS 22,746 21,345
Property and equipment, net 10,077 9,598
Intangible assets, net 31,835 32,443
Deferred income taxes, non-current 935 951
Other assets 2,714 2,403
--------- ---------
TOTAL ASSETS $ 68,307 $ 66,740
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 7,689 $ 7,619
Accrued expenses 8,652 8,259
Current portion of long-term debt 4,888 3,459
Deferred income tax liability 585 397
Other current liabilities 435 920
--------- ---------
TOTAL CURRENT LIABILITIES 22,249 20,654
Long-term debt, less current portion 28,740 39,689
Other liabilities 1,035 1,123
--------- ---------
TOTAL LIABILITIES 52,024 61,466
--------- ---------
STOCKHOLDERS' EQUITY:
Series A Convertible Preferred Stock, $.001 par value, 550,000 shares
Authorized; 418,803 shares issued and outstanding 1 1
Common Stock, $0.001 par value; 50,000,000 shares authorized;
12,598,782 and 8,972,128 shares outstanding at June 30, 2000 and
December 31, 1999, respectively. 13 9
Additional paid-in-capital 59,873 47,784
Accumulated deficit (43,604) (42,520)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 16,283 5,274
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 68,307 $ 66,740
========= =========
</TABLE>
See notes to condensed consolidated financial statements
3
<PAGE>
<TABLE>
OPTICARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS
JUNE 30, ENDED JUNE 30,
----------------------------- -----------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET REVENUES:
Laser correction and professional services $ 2,521 $ 300 $ 4,772 $ 300
Managed care services 8,991 5,271 17,956 9,733
Other integrated services 22,705 15,675 46,081 29,309
----------- ----------- ----------- -----------
Total net revenues 34,217 21,246 68,809 39,342
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Cost of product sales 10,857 11,833 22,153 21,379
Medical claims expense 7,206 4,579 14,414 7,727
Salaries, wages and benefits 10,275 2,651 20,569 5,272
Selling, general and administrative 3,704 1,116 7,291 2,480
Terminated merger costs 1,810 - 1,810 -
Depreciation 659 252 1,294 493
Amortization 443 54 815 125
Interest 742 685 1,435 1,663
----------- ----------- ----------- -----------
Total operating expenses 35,696 21,170 69,781 39,139
----------- ----------- ----------- -----------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES (1,479) 76 (972) 203
Income tax expense (benefit) (101) 21 112 68
----------- ----------- ----------- -----------
INCOME (LOSS) FROM CONTINUING
OPERATIONS (1,378) 55 (1,084) 135
LOSS FROM DISPOSAL OF DISCONTINUED
OPERATIONS, NET OF TAX - (2,317) - (2,317)
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ (1,378) $ (2,262) $ (1,084) $ (2,182)
=========== =========== =========== ===========
INCOME (LOSS) PER COMMON SHARE -
BASIC AND DILUTED:
Income (loss) from continuing operations
per common share (0.11) 0.02 (0.09) (0.20)
=========== =========== =========== ===========
Net income (loss) per common share (0.11) (0.97) (0.09) (1.20)
=========== =========== =========== ===========
Weighted average common shares outstanding 12,574,343 2,325,124 12,087,992 2,325,124
=========== =========== =========== ===========
</TABLE>
See notes to condensed consolidated financial statements
4
<PAGE>
OPTICARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30,
---------------------------------
2000 1999
------- -------
<S> <C> <C>
OPERATING ACTIVITES:
Net income (loss) $(1,084) $(2,182)
Add: Loss from discontinued operations - 2,317
------- -------
Income (loss) from continuing operations (1,084) 135
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation 1,294 493
Amortization 815 125
Changes in operating assets and liabilities
Accounts receivable (1,957) (1,183)
Inventories (221) (179)
Other current assets 396 24
Other assets (502) 76
Accounts payable and accrued expenses 463 2,899
Other current liabilities (297) -
Other liabilities (285) (51)
Cash used in discontinued operations - (1,396)
------- -------
Net cash provided by (used in) operating activities (1,378) 943
------- -------
INVESTING ACTIVITIES:
Purchases of equipment (1,441) (229)
Cash placed in escrow (1,250)
------- -------
Net cash (used in) investing activities (1,441) (1,479)
------- -------
FINANCING ACTIVITIES:
Net proceeds from issuance of common stock 10,093 -
Principal payments on long-term debt (8,205) (1,597)
Net increase in revolving credit facility 550 -
------- -------
Net cash provided by (used in) financing activities 2,438 (1,597)
------- -------
Increase (decrease) in cash and cash equivalents (381) (2,133)
Cash and cash equivalents at beginning of period 2,921 5,956
------- -------
Cash and cash equivalents at end of period $ 2,540 $ 3,823
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 1,136 $ -
Cash paid for income taxes $ - $ -
</TABLE>
See notes to condensed consolidated financial statements
5
<PAGE>
OPTICARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements of OptiCare
Health Systems, Inc., a Delaware corporation, and subsidiaries (the "Company")
for the three and six months ended June 30, 2000 and 1999 have been prepared in
accordance with generally accepted accounting principles for interim financial
information and the instructions to Form 10-Q and Article 10 of Regulation S-X
of the Securities Exchange Act of 1934 and are unaudited. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of only normal recurring accruals)
necessary for a fair presentation of the consolidated financial statements have
been included. The results of operations for the three and six months ended June
30, 2000 are not necessarily indicative of the results to be expected for the
full year. The condensed consolidated balance sheet as of December 31, 1999 was
derived from the Company's audited financial statements, but does not include
all disclosures required by generally accepted accounting principles.
Certain prior period amounts have been reclassified to conform to the
current period presentation.
2. MERGERS AND ACQUISITIONS
OptiCare Health Systems, Inc. is an integrated eye health services company
focused on managed care and professional eye care services. The Company's
current form is the result of mergers (the "Mergers") completed on August 13,
1999 by and among Saratoga Resources, Inc. and two eye care services companies,
OptiCare Eye Health Centers, Inc. and Prime Vision Health, Inc. ("Prime"). For
accounting purposes, Prime was the accounting acquirer. Accordingly, the
operating results for the three and six months ended June 30, 2000 represent the
operating results of the combined companies, while the results of operations for
the three and six month periods ended June 30, 1999 represent the historical
operating results of Prime only.
On October 1, 1999 the Company purchased Cohen Systems, Inc. (the "Cohen
Acquisition"), a software systems provider, specializing in point of sale and
internet-based solutions for optical retail and optical manufacturing
laboratories.
Assuming the Mergers and Cohen Acquisition had occurred on January 1, 1999,
pro forma net revenue, income from continuing operations and net loss of the
Company for the six months ended June 30, 1999 would have been $65,249, $311 and
$(2,006), respectively. On the same pro forma basis, basic and diluted income
per common share from continuing operations for the six months ended
June 30, 1999 would have been $0.03 and basic and diluted net loss per common
share for the six months ended June 30, 1999 would have been $(0.22). This
pro forma information is for informational purposes only and is not necessarily
indicative of the results that would have been obtained had these events
actually occurred at the beginning of the period presented, nor does it intend
to be a projection of future results.
6
<PAGE>
OPTICARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3. DISCONTINUED OPERATIONS
In December 1998, Prime began the process of discontinuing its ophthalmology
operations and recorded a loss on the disposal of these discontinued operations.
The disposal of these operations continued in 1999 through the cancellation of
the administrative service agreements with affiliated ophthalmologists and the
repurchase of practice assets by the physicians. During the three months ended
June 30, 1999, the Company revised its estimate of loss on the disposal of its
ophthalmology operations and accordingly recorded an additional loss on the
disposal of $2,317, net of a tax benefit of $212.
4. EARNINGS PER SHARE
The following tables sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
---------------------------- ----------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Income (loss) from continuing operations
Applicable to common stockholders:
Income (loss) from continuing operations $ (1,328) $ 55 $ (1,034) $ 135
Preferred stock dividends - - - (600)
----------- ----------- ----------- -----------
Income (loss) from continuing operations
applicable to common stockholders $ (1,328) $ 55 $ (1,034) $ (465)
=========== =========== =========== ===========
Net income (loss) applicable to common
Stockholders:
Net income (loss) $ (1,328) $ (2,262) $ (1,034) $ (2,182)
Preferred stock dividend - - - (600)
----------- ----------- ----------- -----------
Net income (loss) available to common stockholders $ (1,328) $ (2,262) $ (1,034) $ (2,782)
=========== =========== =========== ===========
Weighted average common shares outstanding -
basic and diluted 12,574,343 2,325,124 12,087,992 2,325,124
=========== =========== =========== ===========
Income (loss) from continuing operations
Per common share - basic and diluted $ (0.11) $ 0.02 $ (0.09) $ (0.20)
=========== =========== =========== ===========
Net income (loss) per common share - basic
and diluted $ (0.11) $ (0.97) $ (0.09) $ (1.20)
=========== =========== =========== ===========
</TABLE>
The effect of options, warrants and convertible preferred stock has been
excluded from the calculation of diluted earnings per share due to
anti-dilution. In addition, the weighted average common shares outstanding in
1999 have been adjusted to reflect the conversion associated with the reverse
merger with Saratoga in August 1999.
7
<PAGE>
OPTICARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5. SEGMENT INFORMATION
The Company currently manages the operations of the business through three
operating segments: (1) Laser Correction and Professional Services (2) Managed
Care Services and (3) Other Integrated Services. Management assesses the
performance of its segments based on income before income taxes, interest
expense, depreciation and amortization, and other corporate overhead. Summarized
financial information, by segment, for the three and six months ended June 30,
2000 and 1999 is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
REVENUES:
Laser correction and professional services $ 2,521 $ 300 $ 4,772 $ 300
Managed care services 9,690 5,271 19,275 9,733
Other integrated services 25,712 17,910 50,864 36,473
------- ------- ------- -------
Segment totals 37,923 23,481 74,911 46,506
Elimination of inter-segment revenues (3,706) (2,235) (6,102) (7,164)
------- ------- ------- -------
Total net revenue $34,217 $21,246 $68,809 $39,342
======= ======= ======= =======
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE TAX:
Laser correction and professional services $ 978 $ 300 $ 1,626 $ 300
Managed care services 761 803 1,410 622
Other integrated services 1,285 25 2,802 1,688
------- ------- ------- -------
Segment totals 3,024 1,128 5,838 2,610
Depreciation (659) (252) (1,294) (493)
Amortization (443) (54) (815) (125)
Interest expense (742) (685) (1,435) (1,663)
Corporate (including terminated merger costs) (2,659) (61) (3,266) (126)
======= ======= ======= =======
Income (loss) from continuing operations
before income taxes $(1,479) $ 76 $ (972) $ 203
======= ======= ======= =======
</TABLE>
6. CONTINGENCIES
The Company is both a plaintiff and defendant in lawsuits incidental to its
current and former operations. Such matters are subject to many uncertainties
and outcomes are not predictable with assurance. Consequently, the ultimate
aggregate amount of monetary liability or financial impact with respect to these
matters at June 30, 2000 cannot be ascertained. Management is of the opinion
that, after taking into account the merits of defenses, insurance coverage and
established reserves, the ultimate resolution of these matters will not have a
material adverse effect in relation to the Company's consolidated financial
statements or results of operations.
8
<PAGE>
OPTICARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
7. STOCKHOLDERS' EQUITY
In January 2000, the Company completed the sale of 3,571,429 registered
shares of common stock. Gross proceeds from the offering, based on the offering
price of $3.50 per share, totaled $12,500, including the cancellation of a
$2,000 subordinated note payable previously issued by the Company. The shares
were issued under a registration statement filed with the Securities and
Exchange Commission on January 18, 2000. The Company used $7,000 of the net
proceeds to pay down long-term debt and used the remaining proceeds for, among
other things, business expansion, working capital and general corporate
purposes.
8. VISION TWENTY-ONE, INC. MERGER
On June 19, 2000, the Company notified Vision Twenty-One, Inc. ("Vision
Twenty-One") that it was terminating the merger agreement with Vision Twenty-One
pursuant to which the Company would have acquired Vision Twenty-One, effective
June 29, 2000, unless certain defaults were cured to the Company's satisfaction
on or prior to that date. The defaults were not cured to the Company's
satisfaction by June 29, 2000 and the termination of the merger agreement became
effective on that date.
In June 2000, the Company recorded a one-time charge of $1,810 of merger
costs associated with the terminated merger with Vision Twenty-One. These costs
consisted primarily of professional fees.
9. SUBSEQUENT EVENTS
In July 2000 the Company was informed by Anthem Blue Cross and Blue Shield
of Connecticut ("Anthem"), a managed care customer in Connecticut, that
effective December 1, 2000 it will end its managed care contract with the
Company on Anthem's commercial Health Maintenance Organization ("HMO") business.
Anthem also informed the Company that it intends to withdraw from the Medicare +
Choice market in Connecticut, effective January 1, 2001. The commercial HMO and
Medicare + Choice contracts represent approximately $6.4 million in total
annual revenue to the Company. The Company will continue to provide managed care
services for Anthem's Medicaid business.
9
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion may be understood more fully by reference to the
financial statements, notes to the financial statements, and management's
discussion and analysis contained in the Company's Annual Report on Form 10-K
for the year ended December 31, 1999, as filed with the Securities and Exchange
Commission.
OVERVIEW. OptiCare Health Systems, Inc. (the "Company") is an integrated eye
care services company focused on managed care and professional eye care
services. On August 13, 1999 Saratoga Resources, Inc. ("Saratoga"), a Delaware
corporation, PrimeVision Health, Inc. ("Prime") and OptiCare Eye Health Centers,
Inc. merged (the "Mergers"). In this transaction Prime merged with Saratoga
through a reverse acquisition by Prime of Saratoga at book value with no
adjustments reflected to historical values. Immediately following the Prime
Merger, OptiCare Eye Health Centers, Inc. was acquired by Saratoga, which was
accounted for under the purchase method of accounting with the excess of
purchase price over the estimated fair value of net assets acquired recorded as
goodwill. The financial results for the three and six months ended June 30, 2000
are based upon consolidated operating results reported by the Company and its
subsidiaries, including OptiCare Eye Health Centers, Inc., while the financial
results for three and six months ended June 30, 1999 are based solely upon the
results reported by Prime and its subsidiaries.
The Company executes its business through three business segments: (1) laser
correction and professional services (2) managed care services and (3) other
integrated services. The laser correction and professional services segment
includes the development of laser correction centers and provides marketing,
systems, software and other services to eye care professionals. The managed care
services segment contracts with managed care plans to manage the eye health
portion of managed care plans. The other integrated services segment owns and
operates fully integrated eye health centers, retail optical stores and a buying
group program for optical products.
RESULTS OF OPERATIONS
Three Months Ended June 30, 2000 Compared to the Three Months Ended
June 30, 1999
Laser correction and professional services revenue. Laser correction and
professional services revenue was $2.5 million for the three months ended
June 30, 2000 compared to $0.3 million for the three months ended June 30, 1999,
an increase of $2.2 million. This increase in revenue was comprised of $1.2
million in laser vision correction and ambulatory surgery services as a result
of the merger with OptiCare Eye Health Centers in August 1999, and $0.6 million
in sales of software systems by Cohen Systems, Inc., which was acquired in
October 1999. The remaining increase in revenue of $0.4 million represents an
increase in Health Service Organization ("HSO") revenue, primarily the result of
an increase in HSO agreements with a number of ophthalmology practices.
Managed care services revenue. Managed care services revenue increased to
$9.0 million for the three months ended June 30, 2000 from $5.3 million for the
three months ended June 30, 1999, an increase of $3.7 million or 70.6%. Of this
increase, approximately $2.5 million represents revenue associated with managed
care contracts held by OptiCare Eye Health Centers that were acquired in
connection with the Mergers. The remaining increase is due to new managed eye
care contracts as well as growth in existing member lives.
Effective December 1, 2000, Anthem Blue Cross and Blue Shield of Connecticut
("Anthem"), a managed care customer in Connecticut, will end its managed care
contract with the Company on Anthem's commercial Health Maintenance Organization
("HMO") business. Anthem also intends to
10
<PAGE>
withdraw from the Medicare + Choice market in Connecticut, effective January 1,
2001. The commercial HMO and Medicare + Choice contracts represent approximately
$6.4 million in total annual revenue to the Company. Management believes that
the reduction in revenue associated with the loss of these contracts will be
mitigated by the addition of new managed care contracts and growth in existing
contracts.
Other integrated services revenue. Other integrated services revenue
increased to $22.7 million for the three months ended June 30, 2000 from $15.7
million for the three months ended June 30, 1999, an increase of $7.0 million or
44.8%. This increase represents a $9.9 million increase in optometry and
ophthalmology revenue, primarily associated with revenue generated by OptiCare
Eye Health Centers and is partially offset by a $2.8 million decrease in buying
group revenue resulting primarily from a decrease in purchasing volume.
Cost of product sales. Cost of product sales decreased to $10.9 million for
the three months ended June 30, 2000 from $11.8 million for the three months
ended June 30, 1999, a decrease of $0.9 million or 8.2 %. This decrease is
comprised of a $2.8 million decrease in cost of sales related to the buying
group program, which is consistent with the decrease in revenue, and is
partially offset by an increase of approximately $1.5 million in cost of product
sales associated with the optometry, ophthalmology and surgical centers
operations of OptiCare Eye Health Centers and $0.1 million in cost of product
sales from Cohen Systems. The remaining increase of $0.3 million is attributed
to increased costs in other optometry areas.
Medical claims expense. Medical claims expense increased to $7.2 million for
the three months ended June 30, 2000 from $4.6 million for the three months
ended June 30, 1999, an increase of $2.6 million. Of this increase approximately
$2.1 represents medical claims expense associated with managed care contracts
acquired in connection with the merger with OptiCare Eye Health Centers. The
remaining increase is attributed to new managed care contracts and growth in
existing contracts, and is consistent with the increase in managed care services
revenue.
Salaries wages and benefits. Salaries, wages and benefits increased to $10.3
million for the three months ended June 30, 2000 from $2.7 million for the three
months ended June 30, 1999, an increase of $7.6 million. Of this increase, $5.5
million represents compensation expenses of OptiCare Eye Health Centers and $0.2
million represents compensation expenses of Cohen Systems for the three months
ended June 30, 2000. The remaining increase primarily represents increased
employee costs associated with an increase in operations and corporate staff,
which were added to support the company's combined business.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased to $3.7 million for the three months ended
June 30, 2000 from $1.1 million for the three months ended June 30, 1999, an
increase of $2.6 million. Of this increase, $1.8 million represents the general
and administrative expenses of OptiCare Eye Health Centers for the three months
ended June 30, 2000. The remaining increase is attributed to increased costs
associated with the Company's overall growth.
Terminated merger costs. Terminated merger costs of $1.8 million represent
non-recurring costs associated with the merger with Vision Twenty-One, which was
terminated in June 2000. These costs consist primarily of professional fees.
Income (loss) from continuing operations before income taxes. The company
reported a loss from continuing operations before income taxes of $1.5 million
for the three months ended June 30, 2000 compared to income from continuing
operations before income taxes of $0.1 million for the three months ended June
30, 1999, a decrease of $1.6 million. This decrease was primarily attributed to
$1.8 million of costs associated with the proposed merger with Vision
Twenty-One, which was terminated in June 2000. The Company's income from
continuing operations before income taxes without taking into effect the
costs associated with the terminated merger would have been $0.3 million.
11
<PAGE>
Income tax expense (benefit). The company reported a $0.1 million income tax
benefit for the three months ended June 30, 2000 compared to a $0.1 million
income tax expense for the three months ended June 30, 1999. The income tax
benefit for the three months ended June 30, 2000 is the result of a tax benefit
related to the terminated merger costs partially offset by income tax expense on
current operations.
Loss from discontinued operations, net of tax. In December 1998, Prime began
the process of discontinuing its ophthalmology operations and recorded a loss on
the disposal of these discontinued operations. The disposal of these operations
continued in 1999 through the cancellation of the administrative service
agreements with affiliated ophthalmologists and the repurchase of practice
assets by the physicians. During the three months ended June 30, 1999, the
company revised its estimate of loss on the disposal of these ophthalmology
operations, and accordingly recorded an additional loss of $2.5 million, net of
a tax benefit of $0.2 million.
Six Months Ended June 30, 2000 Compared to the Six Months Ended June 30, 1999
Laser correction and professional services revenue. Laser correction and
professional services revenue was $4.8 million for the six months ended June 30,
2000 compared to $0.3 million for the six months ended June 30, 1999, an
increase of $4.5 million. This increase is comprised of approximately $2.4
million in laser vision correction and ambulatory surgery services resulting
from the merger with OptiCare Eye Health Centers in August 1999 and $1.1 million
in sales of software systems by Cohen Systems, Inc., which was acquired in
October 1999. The remaining increase of $1.0 million represents an increase in
other sales and services, primarily due to an increase in Health Service
Organization agreements.
Managed care services revenue. Managed care services revenue increased to
$18.0 million for the six months ended June 30, 2000 from $9.7 million for the
six months ended June 30, 1999, an increase of $8.3 million or 85%. Of this
increase, approximately $5.1 million represents revenue associated with managed
care contracts held by OptiCare Eye Health Centers, which were acquired in
connection with the merger. The remaining increase is due to new managed eye
care contracts as well as growth in existing member lives.
Other integrated services revenue. Other integrated services revenue
increased to $46.1 million for the six months ended June 30, 2000 from $29.3
million for the six months ended June 30, 1999, an increase of $16.8 million.
This increase is comprised of a $19.7 million increase in optometry and
ophthalmology revenue, primarily generated by OptiCare Eye Health Centers for
the six months ended June 30, 2000. This increase is offset by a $2.8 million
decrease in buying group revenue resulting primarily from a decrease in
purchasing volume.
Cost of product sales. Cost of product sales increased to $22.2 million for
the six months ended June 30, 2000 from $21.4 million for the six months ended
June 30, 1999, an increase of $0.8 million. This increase is due to
approximately $2.9 million of cost of product sales associated with the
optometry, ophthalmology and surgical centers operations of OptiCare Eye Health
Centers and $0.2 million of cost of product sales of Cohen Systems for the six
months ended June 30, 2000. These increases were partially offset by a $2.8
million decrease in costs of product sales associated with the Buying Group
program, which is consistent with the decrease in revenue. The remaining
increase of $0.5 million represents increased costs associated with the growth
of other sales and services of the company.
Medical claims expense. Medical claims expense increased to $14.4 million
for the six months ended June 30, 2000 from $7.7 million for the six months
ended June 30, 1999, an increase of $ 6.7 million. Of this increase, $ 4.2
million represents medical claims expenses on managed care contracts of OptiCare
Eye Health Centers, which were acquired in connection with the merger. The
remaining increase is primarily due to new managed care contracts and growth in
existing contracts, and is consistent with the increase in managed care services
revenue.
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Salaries wages and benefits. Salaries, wages and benefits increased to $20.6
million for the six months ended June 30, 2000 from $5.3 million for the six
months ended June 30, 1999, an increase of $15.3 million. Of this increase,
$11.0 million represents compensation expenses of OptiCare Eye Health Centers
and $0.5 million represents compensation expenses of Cohen Systems for the six
months ended June 30, 2000. The remaining increase primarily represents
increased employee costs associated with an increase in corporate and operations
staff added to support the company's combined business and servicing increased
managed care contracts.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased to $7.3 million for the six months ended June
30, 2000 from $2.5 million for the six months ended June 30, 1999, an increase
of $4.8 million. This increase is primarily attributed to $3.8 million of
general and administrative expenses of OptiCare Eye Health Centers for the six
months ended June 30, 2000. The remaining increase represents an increase in
costs associated with the company's overall growth.
Terminated merger costs. Terminated merger costs of $1.8 million represent
non-recurring costs associated with the merger with Vision Twenty-One, which was
terminated in June 2000. These costs consist primarily of professional fees.
Depreciation. Depreciation increased to $1.3 million for the six months
ended June 30, 2000 from $0.5 million for the six months ended June 30, 1999, an
increase of approximately $0.8 million. This increase represents depreciation
expense of OptiCare Eye Health Centers for the six months ended June 30, 2000.
Amortization. Amortization increased to $0.8 million for the six months
ended June 30, 2000 from $0.1 million for the six months ended June 30, 1999, an
increase of approximately $0.7 million. This increase is the result of the
Mergers and related goodwill amortization.
Interest expense. Interest expense decreased to $1.4 million for the six
months ended June 30, 2000 from $1.7 million for the six months ended June 30,
1999 a decrease of approximately $0.3 million or 13.7%. Interest expense
primarily relates to the company's bank indebtedness and notes payable to
sellers in connection with acquisition activities. The decrease in interest
expense primarily results from the reduction in the Company's outstanding bank
debt and reduced interest rate associated with the Mergers in August 1999.
Income (loss) from continuing operations before income taxes. The company
reported a loss from continuing operations before income taxes of $1.0 million
for the six months ended June 30, 2000 compared to income from continuing
operations before income taxes of $0.2 million for the six months ended June 30,
1999, a decrease of $1.2 million. This decrease was primarily the result of a
$1.8 million charge representing merger costs related to the proposed merger
with Vision Twenty-One, which was terminated in June 2000. The Company's
income from continuing operations before income taxes without taking into
effect the costs associated with the terminated mergers would have been
$0.8 million.
Income tax expense. The provision for income taxes for the six months ended
June 30, 2000 and June 30, 1999 was $0.1 million. The income tax provision for
the six months ended June 30, 2000 was the result of income tax expense from
continuing operations offset by tax benefits related to the terminated merger
costs.
Loss from discontinued operations, net of tax. During the six months ended
June 30, 1999, the company revised its estimate of loss on the disposal of
Prime's ophthalmology division and recorded an additional loss of $2.5 million,
net of a tax benefit of $0.2 million.
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LIQUIDITY AND CAPITAL RESOURCES
In August 1999, in connection with the mergers, the company entered into a
loan agreement (the "Credit Facility") with Bank Austria Creditanstalt Corporate
Finance, Inc., as agent for the lenders ("Bank Austria"). Borrowings from the
Credit Facility were used to pay certain indebtedness of PrimeVision Health and
OptiCare Eye Health Centers and to fund the company's business operations. The
Credit Facility is comprised of a term loan and up to a $12.7 million revolving
credit facility and is secured by a security interest in substantially all of
the assets of the Company. The Company is required to maintain certain financial
ratios, which are calculated on a quarterly and annual basis, as part of the
financial covenants set forth in the Credit Facility. After giving effect to the
amendment discussed below, the Credit Facility terminates on June 1, 2003 and
all amounts outstanding thereunder are due and payable. As of June 30, 2000, the
Company had $18.5 million of borrowings outstanding under the term loan and
$12.1 million of advances outstanding under the revolving credit facility.
The interest rate applicable to the credit facility equals the Base Rate or
the Eurodollar Rate (each, as defined in the loan agreement with Bank Austria
("Loan Agreement")), as the company may from time to time elect, in accordance
with the provisions of the Loan Agreement. The base rate, after giving effect to
the amendment discussed below, is generally the higher of (a) the prime rate of
Bank Austria for domestic commercial loans in effect on such applicable day or
(b) the federal funds rate in effect on such applicable day plus three-quarters
of one percent (3/4 of 1%), which generally equals LIBOR plus 2.25%. The
Eurodollar rate will generally equal the offered rate quoted by Bank Austria in
the inter-bank Eurodollar market for U.S. dollar deposits of an aggregate amount
comparable to the principal amount of the Eurodollar loan to which the quoted
rate is to be applicable.
The Company's credit facility was amended as of June 30, 2000 in several
respects. Pursuant to the amendment, among other things, (i) the terminated
merger costs associated with the Vision Twenty-One merger were excluded from the
calculation of the financial covenants and the Company's borrowing availability;
(ii) the interest rate was increased by one-half of one percent (1/2 of 1%) to
the amount set forth above; (iii) the term was reduced by one year with the
termination date changing from June 1, 2004 to June 1, 2003; and (iv) the
Company agreed to raise, or enter into binding commitments to raise, no less
than $5,000,000 by January 1, 2001 through the issuance of equity or
subordinated indebtedness or other means reasonably approved by Bank Austria. In
accordance with the terms of the Credit Facility, 50% of any capital raised
through the issuance of equity or subordinated indebtedness would be used to
reduce indebtedness under the Credit Facility. The remainder would be used for
capital expenditures and to meet working capital requirements. In the event
other means were used to raise such capital, the Company could be required to
use up to all of such funds to reduce indebtedness under the Credit Facility.
Net cash used in operating activities for the six months ended June 30, 2000
totaled $1.4 million primarily due to $0.8 million of cash used to reduce
accounts payable and accrued expenses and a $2.0 million increase in accounts
receivable driven by higher revenue. These and other changes in working capital
were partially offset by approximately $1.0 million of income, excluding the
noncash impact of depreciation and amortization.
Net cash provided by operating activities for the six months ended June 30,
1999 of $0.9 was primarily due to income from continuing operations of $0.8
million, excluding the noncash impact of depreciation and amortization, and a
$2.9 million increase in accounts payable and accrued expenses, which was offset
by a $1.2 million increase in accounts receivable and $1.4 million of cash used
in discontinued operations.
The company used $1.4 million of net cash in investing activities during the
six months ended June 30, 2000, compared to $1.5 million during the six months
ended June 30, 1999. The company invested $1.4 million in property and equipment
during the six months ended June 30, 2000 compared to $0.2 million for the six
months ended June 30, 1999. Fixed asset purchases in 2000 were comprised of
improvements to existing facilities, the purchase of equipment and the upgrade
of certain information systems, which were incurred primarily to support the
integration and growth of the Company subsequent to the Mergers.
Net cash provided by financing activities was $2.4 million for the six
months ended June 30, 2000 compared to net cash used in financing activities of
$1.6 million for the six months ended June 30,1999. The
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primary sources of cash from financing activities for the six months ended June
30, 2000 was $10.0 million of net proceeds from the sale of 3,571,429 registered
shares of common stock in January 2000 and $0.6 million in advances on the
revolving credit facility. Cash used in financing activities for the six months
ended June 30, 2000 was $8.2 million of principal payments on long-term debt.
Net cash used in financing activities of $1.6 million for the six months ended
June 30, 1999 was used to pay down long-term debt.
As of June 30, 2000, under an agreement with the Texas Department of
Insurance, the Company is required to maintain a restricted investment of
$500,000. In addition, the Company is not allowed to declare or pay dividends or
otherwise transfer any funds from its limited purpose health maintenance
organization in Texas without prior approval from the Department of Insurance.
The Company does not believe the requirements of the Texas Department of
Insurance will have a material impact on the Company's liquidity. In July 2000,
a dividend of $500,000 was approved by the Texas Department of Insurance and
paid to the parent of the Texas limited purpose health maintenance organization.
The company's principal sources of liquidity are from cash flows generated
from operations and from borrowing under the Company's Credit Facility. The
Company's principal uses of liquidity are to provide working capital, meet debt
service requirements and finance the Company's growth. As of June 30, 2000, the
Company had cash and cash equivalents of approximately $2.5 million and $0.3
million of additional borrowing capacity available under its revolving credit
facility, net of a $0.4 million letter of credit obligation. The Company intends
to raise additional capital through the issuance of equity or subordinated
indebtedness in public or private transactions, or through other means, in order
to repay indebtedness under and remain in compliance with its Credit Facility,
consistent with the June 30, 2000 amendment discussed above, and for capital
expenditures and to meet working capital requirements for the next twelve
months. While the company believes it will be successful in its capital raising
efforts, there can be no assurances that the Company will be successful in
raising such additional capital, that such capital will be available on a timely
basis or available on commercially reasonable terms or without causing
substantial dilution to stockholders. The failure by the Company to raise such
capital may have a material adverse impact on the business and operations of the
Company.
IMPACT OF INFLATION AND CHANGING PRICES
The Company is subject to pre-determined Medicare reimbursement rates which,
for certain products and services, have decreased over the past three years. A
decrease in Medicare reimbursement rates could have an adverse affect on the
Company's results of operations if it can not manage these reductions through
increases in revenues or decreases in operating costs. To some degree, prices
for health care are driven by Medicare reimbursement rates, so that the
Company's non-Medicare business is also affected by changes in Medicare
reimbursement rates.
Management believes that inflation has not had a material effect on the
Company's revenues for the three and six-month periods ended June 30, 2000 and
1999.
FORWARD-LOOKING INFORMATION
Certain statements in this Form 10-Q and elsewhere (such as in other
filings by the Company with the Securities and Exchange Commission, press
releases, presentations by the Company or its management and oral statements)
may constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
include those relating to future opportunities, the outlook of customers, the
reception of new services, technologies and pricing methods, existing and
potential strategic alliances, the Company's ability to successfully raise
capital on a timely basis on commercially reasonable terms, development and
execution of an e-commerce strategy, the success of initiatives including
opening laser vision correction centers and the likelihood of incremental
revenues offsetting expense related to those new initiatives. In addition, such
forward-looking statements involve known and unknown risks, uncertainties, and
other factors which may cause the actual results, performance or achievements of
the Company to be materially different from any future results expressed
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or implied by such forward-looking statements. Such factors include: changes
in the regulatory environment applicable to the Company's business, demand
and competition for the Company's products and services, general economic
conditions, risks related to the eye care industry, the Company's ability to
successfully integrate and profitably operate its operations, the risks related
to maintaining or losing managed care contracts, the ability to raise capital
and/or obtain adequate cash flows from its operations to sustain its operations,
and other risks detailed from time to time in the Company's periodic earnings
releases and reports filed with the Securities and Exchange Commission, as well
as the risks and uncertainties discussed in this Form 10-Q. The Company
undertakes no obligation to publicly update or revise forward looking statements
to reflect events or circumstances after the date of this Form 10-Q or to
reflect the occurrence of unanticipated events.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to market risk from exposure to changes in interest
rates based on financing activities under the Company's credit facility. The
nature and amount of the Company's indebtedness may vary as a result of future
business requirements, market conditions and other factors. The extent of the
company's interest rate risk is not quantifiable or predictable due to the
variability of future interest rates and financing needs. The Company does not
expect changes in interest rates to have a material effect on income or cash
flows in the year 2000, although there can be no assurances that interest rates
will not significantly change. The Company did not use derivative instruments to
adjust the Company's interest rate risk profile during the six months ended June
30, 2000.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
OptiCare Eye Health Centers Physicians Action and Countersuits. Seven
physicians employed by OptiCare, P.C. commenced an action in January 1999 in the
Connecticut Superior Court complaining of inducements that led them to affiliate
with OptiCare Eye Health Centers. Shortly after the commencement of the action,
three of the plaintiffs withdrew from the lawsuit. The remaining four plaintiffs
sought damages for individual harm they claim to have suffered. One plaintiff
also purported to sue derivatively on behalf of OptiCare Eye Health Centers for
harm suffered by the shareholders. The defendants deny the factual and legal
validity of the claims asserted and have moved to dismiss the complaint. The
derivative portion of the complaint was dismissed on June 14, 1999. Dr.
Yimoyines, our Chairman, Chief Executive Officer and President, has been named
as a defendant in this action.
OptiCare Eye Health Centers and OptiCare, P.C. instituted actions in January
and February, 1999, in the Connecticut Superior court against two physicians for
unfair trade practices, tortious interference and abuse of process based on
defendants' course of conduct that plaintiffs complain is unlawfully designed to
force plaintiffs to modify the defendants' employment contracts. Defendants have
moved to strike the complaint. OptiCare Eye Health Centers and OptiCare, P.C.
are opposing the motion to strike, and if successful in their opposition, intend
to vigorously pursue their claims. OptiCare Eye Health Centers and OptiCare,
P.C. have also brought a counterclaim against three of the physicians for
anticipatory breach of contract. The foregoing actions have been consolidated in
Connecticut Superior Court.
We entered into settlement agreements with three of the four remaining
physician plaintiffs at the end of June, 2000. The settling physicians withdrew
from the action on June 30, 2000 and we subsequently withdrew our claims against
them. In the settlements, we authorized the physicians to operate competing
practices in certain areas of Connecticut, and the physicians agreed to enter
into ongoing service arrangements with us. The settlements did not result in any
payments to the physicians. We remain in litigation with the last of the
physician plaintiffs. In July 2000, we moved the Connecticut Superior Court to
enjoin the remaining physician plaintiff from breaching his covenant not to
compete with the Company, and in August 2000 the court granted this motion.
Because six of the seven plaintiffs have withdrawn from this action and we have
prevailed in our motion to enforce our covenant not to compete against the
remaining physician plaintiff, we no longer believe this action is material to
the financial condition of the company.
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Missouri Action, counterclaim and Related Put Option. PrimeVision Health
commenced an action (the "Missouri Action") in United States District Court for
the Eastern District of Missouri, in August 1998, seeking damages from an
ophthalmologist (the "Missouri Seller") who sold his ophthalmology practice to
PrimeVision Health. PrimeVision Health has alleged that the Missouri Seller
falsely and fraudulently inflated the value of the corporation he sold to
PrimeVision Health, in the amount of approximately $2 million. The Missouri
Seller counterclaimed against PrimeVision Health for, among other things,
enforcement of a put option, damages for allegedly malicious prosecution and a
declaration that his administrative services agreement with PrimeVision Health
is terminated and of no further force or effect.
As part of the purchase transaction, PrimeVision Health issued a put option
by which the Missouri Seller, at his election, may require PrimeVision Health to
purchase the balance of his ophthalmology practice, based on substantially the
same valuation which PrimeVision Health is challenging in court. The exercise
price that would be payable by PrimeVision Health under the put option was
approximately $4 million. In January 1999, the Missouri Seller exercised the put
option. PrimeVision Health asserted to the Missouri Seller that PrimeVision
Health was not obligated to honor the put for the same reasons that PrimeVision
Health sought damages in the Missouri Action - that the value of the corporation
sold by the Missouri Seller to PrimeVision Health was falsely inflated.
PrimeVision Health and the Missouri Seller agreed in principle to settle
the Missouri Action in the second week of August, 2000. As part of the
settlement, the Missouri Action will be dismissed and the put option will be
terminated in exchange for the payment of cash and the issuance of common stock
and warrants to purchase common stock to the Missouri Seller. The cash, common
stock and warrants will not collectively have a material impact to our financial
position. The parties are in the process of preparing a definitive settlement
agreement and related documentation.
Attorney General Inquiry. In July 2000, we were informed that the Office
of the Attorney General of the State of Connecticut was inquiring into our
claims payment practices in the State of Connecticut. The inquiry relates to our
Managed Care Services business, which has significant operations in the State of
Connecticut. The Company intends to vigorously defend itself in this inquiry,
and we do not believe the inquiry will have a material impact on our financial
condition or results of operations. However, there can be no assurances that
there will not be a material impact.
ITEM 5. OTHER INFORMATION
As previously disclosed, on June 19, 2000, we notified Vision Twenty-One,
Inc. ("Vision Twenty-One") that we were terminating the merger agreement with
them pursuant to which we would have acquired Vision Twenty-One, effective June
29, 2000, unless certain defaults were cured to our satisfaction on or prior to
that date. The defaults were not cured to our satisfaction by June 29, 2000 and
the termination of the merger agreement became effective on that date.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits
The following Exhibits are filed as part of this Quarterly Report on
Form 10-Q:
Exhibit Description
2.1 Agreement and Plan of Merger and Reorganization among Vision
Twenty-One, Inc., OC Acquisition Corp. and OptiCare Health
Systems, Inc., incorporated by reference to Appendix A to the
Registration Statement on Form S-4 filed with the Securities and
Exchange Commission on May 12, 2000.
3.1 Certificate of Incorporation of Registrant, incorporated by
reference to Exhibit 3.1 to the Registrant's Annual Report on Form
10-KSB filed February 3, 1995.
3.2 Certificate of Amendment of the Certificate of Incorporation,
dated as of August 13, 1999, as filed with the Delaware Secretary
of State on August 13, 1999, incorporated by reference to Exhibit
3.1 to Registrant's report on Form 8-K filed on August 30, 1999.
3.3 Amended and Restated By-laws of Registrant adopted March 27, 2000,
incorporated by reference to Exhibit 3.3 to the Registrant's
Annual Report on Form 10-K filed on march 30, 2000.
10.1 Amended and Restated Loan and Security Agreement, dated as of
August 13, 1999, among Consolidated Eye Care, Inc., OptiCare Eye
Health Centers, and PrimeVision Health, Inc. as borrowers, the
Registrant as the Parent, the lenders named therein (the
"Lenders"), Bank Austria, AG (the "LC Issuer"), and Bank Austria
Creditanstalt Corporate Finance, Inc., as the agent (the
"Agent")(excluding schedules and other attachments thereto),
incorporated by reference to Exhibit 10.1 to the Registrant's
report on Form 8-K filed on August 30, 1999.
10.2 Guaranty dated as of August 13, 1999, among the Registrant,
OptiCare Eye Health Centers, PrimeVision Health, Inc.,
Consolidated Eye Care, Inc. and each of the other subsidiaries and
affiliates of the Registrant listed on the signature pages
thereto, in favor of the Lenders, the LC Issuer and the Agent,
incorporated by reference to Exhibit 10.2 to the Registrant's
report on Form 8-K filed on August 30, 1999.
10.3 Security Agreement dated as of August 13, 1999, among the
Registrant and the other parties listed on the signature page
thereto in favor of the Agent for the benefit of the Lenders and
the LC Issuer, incorporated by reference to Exhibit 10.3 to the
Registrant's report on Form 8-K filed on August 30, 1999.
10.4 Conditional Assignment and Trademark Security Agreement dated as
of August 13, 1999, between the Registrant and the Agent for the
benefit of the Lenders and the LC Issuer, incorporated by
reference to Exhibit 10.4 to the Registrant's report on Form 8-K
filed on August 30, 1999.
10.5 Pledge and Security Agreement, dated as of August 13, 1999, among
each of the Registrant, OptiCare Eye Health Centers, PrimeVision
Health, Inc., Consolidated Eye Care, Inc. and each of the other
subsidiaries and affiliates of the Company listed on the signature
pages thereto, in favor of the Agent for the benefit of the
Lenders and the LC Issuer, incorporated by reference to Exhibit
10.5 to the Registrant's report on Form 8-K filed on August 30,
1999.
10.6 Assignment of Notes and Security Agreement, dated as of August 13,
1999, between PrimeVision Health, Inc. and the Agent, incorporated
by reference to Exhibit 10.6 to the Registrant's report on Form
8-K filed on August 30, 1999.
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10.7 Agreement and Plan of Merger, dated as of April 12, 1999, among
the Registrant (then known as "Saratoga Resources, Inc."),
OptiCare Shellco Merger Corporation, Prime Shellco Merger
Corporation, OptiCare Eye Health Centers, Inc., a Connecticut
corporation, and PrimeVision Health, Inc., incorporated herein by
reference to Exhibit 2 to the Registration Statement on Form S-4,
registration no. 333-78501, first filed on May 14, 1999, as
amended ("Registration Statement 333-78501").
10.8 Registration Rights Agreement dated as of August 13, 1999 between
Registrant and Bank Austria Creditanstalt Corporate Finance, Inc.,
incorporated by reference to Exhibit 10.37 to the Registrant's
Annual Report on Form 10-K filed on March 30, 2000.
10.9 First Amendment to Amended and Restated Loan and Security
Agreement, dated as of June 30, 2000 by and among the Lenders and
the Agent.
10.10 Employment Agreement between the Registrant and Jason M. Harrold,
effective July 1, 2000. +
10.11 Vision care capitation agreement between OptiCare Eye Health
Centers and Blue Cross & Blue Shield of Connecticut, Inc. (and its
affiliates) dated October 23, 1999, incorporated by reference to
Exhibit 10.9 to the Registration Statement 333-78501.
10.12 Eye care services agreement between OptiCare Eye Health Centers
and Anthem Health Plans, Inc. (d/b/a Anthem Blue Cross and Blue
Shield of Connecticut), effective November 1, 1998, incorporated
by reference to Exhibit 10.10 to the Registration Statement
333-78501.
27 Financial Data Schedule (for EDGAR filing only).
+ Management or compensatory plan.
b. Reports filed on Form 8-K filed in the period covered by this report:
The Company filed a Current Report on Form 8-K with the Securities
and Exchange Commission on June 20, 2000 associated with the Company's
press release, which discussed the termination of the merger agreement
with Vision Twenty-One, Inc.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be filed on its behalf by the
undersigned, hereunto duly authorized.
Date: August 14, 2000 OPTICARE HEALTH SYSTEMS, INC.
By: /s/ Steven L. Ditman
---------------------------------
Steven L. Ditman
Executive Vice President and Chief
Financial Officer (Principal Financial
and Accounting Officer and duly
authorized officer)
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