##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 10-K


|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
|          
|           |  | For the Fiscal Year Ended December 31, 2005                                                 
|          
|OR        
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
|          
|           |  | For the transition period
    from           to                                             

Commission File Number
001-12776


REFAC OPTICAL GROUP


(Exact name of registrant as specified in its charter)


|                                                                   |  |                                         
|------------------------------------------------------------------ |  | ----------------------------------------
|Delaware                                                           |  | 13-1681234                              
|(State or other jurisdiction of
    incorporation or organization) |  | (I.R.S. Employer
    Identification No.)

One Bridge Plaza, Suite 550


Fort Lee, New Jersey
07024-7102


(Address of principal executive offices) (Zip Code)


Registrants telephone number, including area
code: (201) 585-0600


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


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


Common Stock, par value $.001 per share


(Title of Class)


o þ


o þ


þ o


S-K 10-K 10-K. o


12b-2


o o þ


12b-2 o þ






DOCUMENTS INCORPORATED BY REFERENCE


S-4,










---

TABLE OF CONTENTS



|                                                        |                                                                                                                      |  |  |  |  |  |  | 
|------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                                 
|                                                        | Item 1. Business                                                                                                    
|                                                        | Item 1A. Risk Factors                                                                                               
|                                                        | Item 2. Properties                                                                                                  
|                                                        | Item 3. Legal Proceedings                                                                                           
|                                                        | Item 4. Submission of Matters to a Vote of Security Holders                                                         
|PART II                                                
|                                                        | Item 5. Market for the Companys Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities
|                                                        | Item 6. Selected Financial Data                                                                                     
|                                                        | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operation                        
|                                                        | Item 7A. Quantitative and Qualitative Disclosures About Market Risk                                                 
|                                                        | Item 8. Financial Statements and Supplementary Data                                                                 
|                                                        | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                        
|                                                        | Item 9A. Controls and Procedures                                                                                    
|                                                        | Item 9B. Other Information                                                                                          
|PART III                                               
|                                                        | Item 10. Directors and Executive Officers of the Registrant                                                         
|                                                        | Item 11. Executive Compensation                                                                                     
|                                                        | Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters            
|                                                        | Item 13. Certain Relationships and Related Transactions                                                             
|                                                        | Item 14. Principal Accounting Fees and Services                                                                     
|PART IV                                                
|                                                        | Item 15. Exhibits and Financial Statement Schedules                                                                 
|SIGNATURES                                             
|EXHIBIT INDEX                                          
|EX-10.14: AMENDMENT TO EMPLOYMENT AGREEMENT            
|EX-10.27: LOAN AND SECURITY AGREEMENT                  
|EX-10.28: AMENDMENT TO LOAN AND SECURITY AGREEMENT     
|EX-10.29: AMENDMENT TO LOAN AND SECURITY AGREEMENT     
|EX-10.30: AMENDMENT TO LOAN AND SECURITY AGREEMENT     
|EX-10.31: AMENDMENT TO LOAN AND SECURITY AGREEMENT     
|EX-10.32: AMENDMENT TO LOAN AND SECURITY AGREEMENT     
|EX-10.35: AMENDMENT TO LICENSED DEPARTMENT AGREEMENT   
|EX-10.36: AMENDMENT TO LICENSED DEPARTMENT AGREEMENT   
|EX-10.37: AMENDMENT TO LICENSED DEPARTMENT AGREEMENT   
|EX-10.38: AMENDMENT TO LICENSED DEPARTMENT AGREEMENT   
|EX-10.40: AMENDMENT TO PARTICIPATING PROVIDER AGREEMENT
|EX-10.41: AMENDMENT TO PARTICIPATING PROVIDER AGREEMENT
|EX-10.42: AMENDMENT TO PARTICIPATING PROVIDER AGREEMENT
|EX-10.77: SURRENDER OF LEASE                           
|EX-21.1: SUBSIDIARIES                                  
|EX-23.1: CONSENT OF GRANT THORNTON LLP                 
|EX-31.1: CERTIFICATION                                 
|EX-31.2: CERTIFICATION                                 
|EX-32.1: CERTIFICATION                                 



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##### Table of Contents






PART I







|        |         
|------- | --------
|Item 1. | Business

Background


Company Registrant


Palisade Merger Palisade


Board U.S. Vision OptiCare


Mergers


As a result of the
Companys acquisitions of U.S. Vision and OptiCare on
March 6, 2006, the Companys results for 2005 are not
indicative of the results to be expected for any future
periods.




Licensing Business (Pre-Merger)




1



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Patlex


Patents and Trademarks.


Employees.


Financial Information About Segments




Financial Information About Foreign and Domestic
Operations




Retail Optical Business (Post-Merger)




U.S. Vision






2



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United States


|              |  |           |    | 
|------------- |  | --------- | -- | 
|              |  | Number    |   
|State         |  | of Stores |   
|              |  |           |   
|Alabama       |  |           | 8  | 
|Alaska        |  |           | 1  | 
|Arizona       |  |           | 7  | 
|Arkansas      |  |           | 10 | 
|California    |  |           | 48 | 
|Colorado      |  |           | 6  | 
|Connecticut   |  |           | 6  | 
|Delaware      |  |           | 2  | 
|Florida       |  |           | 41 | 
|Georgia       |  |           | 14 | 
|Idaho         |  |           | 2  | 
|Illinois      |  |           | 33 | 
|Indiana       |  |           | 13 | 
|Iowa          |  |           | 2  | 
|Kansas        |  |           | 2  | 
|Kentucky      |  |           | 9  | 
|Louisiana     |  |           | 6  | 
|Maine         |  |           | 6  | 
|Maryland      |  |           | 13 | 
|Massachusetts |  |           | 1  | 
|Michigan      |  |           | 25 | 
|Minnesota     |  |           | 13 | 
|Mississippi   |  |           | 2  | 

3



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|               |       |           |    |     | 
|-------------- | ----- | --------- | -- | --- | 
|               |       | Number    |   
|State          |       | of Stores |   
|               |       |           |   
|Missouri       |       |           | 11 |    
|Montana        |       |           | 3  |    
|Nebraska       |       |           | 2  |    
|Nevada         |       |           | 2  |    
|New Hampshire  |       |           | 8  |    
|New Jersey     |       |           | 14 |    
|New Mexico     |       |           | 2  |    
|New York       |       |           | 18 |    
|North Carolina |       |           | 7  |    
|North Dakota   |       |           | 6  |    
|Ohio           |       |           | 24 |    
|Oregon         |       |           | 3  |    
|Pennsylvania   |       |           | 40 |    
|South Carolina |       |           | 3  |    
|South Dakota   |       |           | 2  |    
|Tennessee      |       |           | 7  |    
|Texas          |       |           | 30 |    
|Utah           |       |           | 3  |    
|Vermont        |       |           | 1  |    
|Virginia       |       |           | 12 |    
|Washington     |       |           | 10 |    
|West Virginia  |       |           | 3  |    
|Wisconsin      |       |           | 12 |    
|Wyoming        |       |           | 2  |    
|               | Total |           |    | 495 | 

Canada


|                 |       |           |    |    | 
|---------------- | ----- | --------- | -- | -- | 
|                 |       | Number    |   
|Province         |       | of Stores |   
|                 |       |           |   
|Alberta          |       |           | 6  |   
|British Columbia |       |           | 4  |   
|Manitoba         |       |           | 2  |   
|Ontario          |       |           | 11 |   
|Quebec           |       |           | 6  |   
|Saskatchewan     |       |           | 1  |   
|                 | Total |           |    | 30 | 



| |                                 
| | --------------------------------
| | On-Site Independent Optometrists



4



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| |        
| | -------
| | Pricing





| |                          
| | -------------------------
| | Marketing and Advertising

on-site




| |                                     
| | ------------------------------------
| | Material Contracts and Relationships

Managed Vision Care. CMV Luxottica


Relationship with Host Stores.




Patents and Trademarks. Material Contracts
and Relationships  Relationships with Host
Stores


5



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Purchasing.










Optical Laboratory.


Management Information Systems. point-of


6



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Competition.






Government Regulation.








7



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Employees.


OptiCare


Consumer Vision Managed
Vision




| |                
| | ---------------
| | Consumer Vision



Customers and Patients.


Professional Services.


Professional Optometric Practices.


Surgical Centers.


8



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Optical Laboratory.




|                               |  |              |     |  |      |  |     |      |  |  |     | 
|------------------------------ |  | ------------ | --- |  | ---- |  | --- | ---- |  |  | --- | 
|                               |  | Year Ended   |    
|                               |  | December 31, |    
|                               |  |              |    
|Product or Services            |  | 2005         |     |  | 2004 |  |     | 2003 | 
|                               |  |              |     |  |      |  |     |      | 
|Optical products               |  |              | 28% |  |      |  | 27% |      |  |  | 25% | 
|Professional eye care services |  |              | 27% |  |      |  | 27% |      |  |  | 25% | 

Purchasing.


Competition.


Government Regulation. U.S. Vision  Government
Regulation




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Corporate Practice of Ophthalmology and Optometry. The
    laws of Connecticut prohibit the practice of ophthalmology and
    optometry by corporations that are not owned entirely by
    licensed physicians specializing in ophthalmology and
    optometrists. Consumer Visions Professional Services and
    Support Agreement with OptiCare P.C., its professional
    affiliate, specifically provides that all decisions required by
    law to be made by licensed ophthalmologists or optometrists
    shall be made only by such licensed persons, and that Consumer
    Vision shall not engage in any services or activities which
    would constitute the practice of ophthalmology or optometry. If
    health care regulations and their interpretations change in the
    future, Consumer Vision may have to revise the terms of such
    agreement to comply with regulatory changes.
|
| | Surgical Facility Regulations. Its licensed ophthalmic
    outpatient surgical facility in Waterbury, Connecticut is
    subject to the terms of Certificate of Need approvals from the
    Office of Health Care Access and licensure under the provisions
    of the Connecticut Public Health Code. The facility also is a
    participating provider under the federal Medicare and
    Connecticut Medicaid programs and has provider agreements with
    various commercial and governmental third-party payers.
    Violation of any of the terms                                                                                                                                                                                                                                                                                                                                                  

9



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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | and conditions of the Certificate of Need approvals and the
    Connecticut Public Health Code license governing the
    facilitys operation could result in fines or other
    sanctions against the facility and its operators, including
    Consumer Vision being enjoined or precluded from further
    operation of the facility. Failure to adhere to the terms of
    participation for the Medicare or Medicaid programs or a
    violation of billing or other requirements for the public and
    private third-party payment programs governing the facility
    could result in civil or criminal sanctions against the facility
    and its operators, refund obligations or claims denials and/or
    termination or exclusion from participation in Medicare,
    Medicaid or other payer programs. The structure of relationships
    involving the facility and clinicians providing services in
    conjunction with the facility also is subject to federal fraud
    and abuse statutes (including the anti-kickback statute) and
    related state and federal authorities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| | Excimer Laser Regulation. Medical devices, including the
    excimer laser used in OptiCares Danbury, Connecticut laser
    surgery center, are subject to regulation by the U.S. Food
    and Drug Administration (FDA). Failure to
    comply with applicable FDA requirements could subject Consumer
    Vision, its affiliated providers or laser manufacturers to
    enforcement action, product seizures, recalls, withdrawal of
    approvals and civil and criminal penalties. Further, failure to
    comply with regulatory requirements could result in a limitation
    on, or prohibition of, Consumer Visions use of excimer
    lasers. Currently, the FDA recognizes that physicians may, in
    their medical judgment, determine that a particular FDA approved
    laser is appropriate to use for a particular procedure, even if
    such use has not been evaluated by the FDA. The FDAs
    policy on such non-FDA approved use is that it falls under the
    practice of medicine and is not within the jurisdiction of the
    FDA. If the FDA was to adversely change its policy with regard
    to non-FDA approved uses, or take any other adverse regulatory
    action, it could have a detrimental effect on Consumer
    Visions use of excimer lasers.                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| | Regulation of Laser Vision Marketing. The marketing and
    promotion of laser correction and other vision correction
    surgery procedures in the U.S. is subject to regulation by
    the FDA and the Federal Trade Commission
    (FTC). The FDA and FTC have released a joint
    communiqué on the requirements for marketing these
    procedures in compliance with the laws administered by both
    agencies. The FTC staff also issued more detailed staff guidance
    on the marketing and promotion of these procedures. It has been
    monitoring marketing activities in this area through a
    non-public inquiry to identify activities that may require
    further FTC attention. The FDA has traditionally taken the
    position that the promotion and advertising of lasers by
    manufacturers and physicians should be limited to the uses
    approved by the FDA. Although the FDA does not prevent
    non-approved uses of excimer lasers, the FDA reserves the right
    to regulate advertising and promotion of non-FDA-approved uses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | Prohibitions of Certain Referrals. The Omnibus Budget
    Reconciliation Act of 1993 includes a provision that
    significantly expands the scope of the Ethics in Patient
    Referral Act, also known as the Stark Law. The
    provisions of the Stark Law originally prohibited a physician
    from referring a Medicare or Medicaid patient to any entity for
    the provision of clinical laboratory services if the physician
    or a family member of the physician had an ownership interest in
    or compensation relationship with the entity. Revisions to the
    Stark Law since 1993 prohibit a referral to an entity in which
    the physician or a family member has a prohibited ownership
    interest or compensation relationship if the referral is for any
    of a list of designated health services, which
    includes prosthetic devices. Under federal authority
    and the standards imposed by various state Medicaid programs,
    eyeglasses and contact lenses for patients who have undergone
    certain ophthalmic procedures would be considered prosthetic
    devices covered by the Stark Law and regulations. The Stark
    regulations provide that the prohibition of referrals for these
    types of eyewear does not apply if the arrangement between the
    physician and the eyewear seller conforms to the Medicare and
    Medicaid anti-kickback statute (42 USC
    Section 1320a-7b),
    referred to as the Anti-Kickback Statute, and other regulatory
    requirements. There can be no assurance that future
    interpretations of such laws and future regulations promulgated
    thereunder will not affect OptiCares existing relationship
    with its professional affiliate.
|
| | Advertising Restrictions. Many states have laws that
    prohibit licensed eye care professionals from using advertising
    that includes any name other than their own, or from advertising
    in any manner that is likely to mislead a person to believe that
    a non-licensed professional is eligible to be engaged in the                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | delivery of eye care services. Advertising is prohibited if it
    is undertaken in a manner that is deemed inappropriate for a
    professional or likely to mislead. There are regulatory
    requirements in Connecticut delineating certain specific
    advertising requirements with which Consumer Vision must comply.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | Health Insurance Portability and Accountability
    Act  Administrative Simplification. This federal
    statute and its regulations, discussed below in Managed
    Vision  Government Regulation are also
    applicable to the Consumer Vision.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| | Interpretation and Implications. The laws described above
    provide for civil and criminal penalties and have been subject
    to limited judicial and regulatory interpretation. They are
    enforced by regulatory agencies that are vested with broad
    discretion in interpreting their meaning. OptiCares
    agreements and activities have not been examined by federal or
    state authorities under these laws and regulations. There can be
    no assurance that review of OptiCares business
    arrangements will not result in determinations that adversely
    affect its operations or that certain material agreements
    between it and eye care providers or third-party payers will not
    be held invalid and unenforceable. Any limitation on
    OptiCares ability to continue operating in the manner in
    which it has operated in the past could have an adverse effect
    on OptiCares business, financial condition and results of
    operations.

Managed Vision








Products and Services. Direct-to


11



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Provider Contracting  Upon obtaining a managed
    care contract, Managed Vision typically defines and/or develops
    a network of ophthalmologists, optometrists and opticians,
    facilities and anesthesiologists to provide the eye care
    services required under the contract.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | Provider Credentialing  Under several
    contracts, Managed Vision credentials eye care
    professionals (i.e., establish to both its, and the third-party
    payers satisfaction, the credentials of such
    professionals) who provide the eye care services specified under
    the contract to the third-party payers members. In
    addition to its network enrollment process, Managed Vision
    credentials when requested by the health plan or as required by
    state law consistent with the standards established by those
    plans or applicable law. In those instances, Managed Vision
    undertakes a review process on each prospective eye care
    professional, which includes obtaining a copy of the state
    license and Drug Enforcement Agency number, verifying hospital
    privileges, liability insurance and board certification and
    reviewing work history.
|
| |  | Claims Payment  For most contracted payers,
    Managed Vision pays claims to its network providers for services
    rendered in the fulfillment of vision benefits for members.
    Managed Vision also has Internet capabilities for authorizations
    (if needed), direct claim submission and claim tracking.
    Additionally, Managed Vision accepts claims via electronic data
    interchange, enabling providers to send claims through their own
    practice management software.                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | Systems  To enhance its claims payment
    administration, Managed Vision utilizes proprietary systems,
    which allow it to strictly follow Center for Medicare and
    Medicaid Services rules for payment of eye care claims. In
    addition, Managed Vision has posted on-line its clinical
    criteria for treatment of every eye care condition for which it
    provides covered services. Managed Visions providers can
    use its secure web server to check these criteria and to inform
    themselves of new or modified criteria as changes occur.                                                                                                                                                                                                                                                                                                                                       
|
| |  | Utilization Management  Managed Visions
    Utilization Management staff ensures that established clinical
    criteria are followed in provision of services and benefits to
    members. Using proprietary clinical criteria for eye care
    procedures that are based on Center for Medicare and Medicaid
    Services local carrier policy and the American Academy of
    Ophthalmologys guidelines; Managed Vision works with eye
    care professionals to determine appropriate eye care treatments.                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | Plan Member Relations  Service representatives
    answer plan members questions relating to their benefits
    and the status of their claims and help resolve complaints
    relating to their eye care treatment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | Provider Relations  Managed Vision
    continuously educates providers concerning the various plan
    benefits being administered. In addition, with the assistance of
    Managed Visions staff, providers may obtain any required
    authorizations prior to performing certain eye care procedures.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | Quality Management  Managed Visions
    Quality Management Department tracks complaints and concerns and
    conducts surveys for members, providers and payers to ensure
    that all parties are satisfied with the services and the service
    levels provided. Department personnel also recommend, or take,
    steps to address conditions from which valid complaints have
    arisen. In addition, Managed Vision performs
    retrospective-outcome studies and other quality assessment
    studies on the care rendered by its network of providers.                                                                                                                                                                                                                                                                                                                                           
|
| |  | Claim Data Analysis  Managed Visions
    financial analysts review claim and other data to provide
    feedback to management and to the insurance companies and other
    payers with which it has claims payment contracts concerning its
    performance, enabling management to maintain profitability while
    providing excellent service.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

Competition.


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Government Regulation.


Licensing Requirements. AECC


Direct-to








Regulation of OptiCares Captive Insurance
Subsidiary.


Regulation of OptiCares HMO Subsidiary. paid-in


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Preferred Provider Networks. PPN


Any Willing Provider Laws.


Health Insurance Portability and Accountability
Act  Administrative Simplification. HIPAA HHS






| |                                                        
| | -------------------------------------------------------
| | OptiCare Trademarks, Domain Names and Assumed
    Names









| |                   
| | ------------------
| | OptiCare Employees



14



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Item 1A.     Risk
Factors


Successful Integration will be Complex and
Time-Consuming.




We May not be able to Compete Effectively with Other Eye
Care Distributors and Other Eye Care Services Companies which
Have More Resources and Experience than us.










U.S. Visions Business is Materially Dependent Upon
the Revenues that it Derives as a Participating Provider under
its Agreement with CMV




15



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Our Business is Subject to Health Care Regulations, Which
Could Materially Adversely Affect Our Business, Financial
Condition and Results of Operations.






| |   |                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------
| |  | anti-kickback statutes;                                                                                      
|
| |  | self-referral laws;                                                                                          
|
| |  | insurance and licensor requirements associated with the managed
    care business;                           
|
| |  | civil false claims acts;                                                                                     
|
| |  | corporate practice of medicine restrictions;                                                                 
|
| |  | fee-splitting laws;                                                                                          
|
| |  | facility license requirements and certificates of need;                                                      
|
| |  | regulation of medical devices, including laser vision correction
    and other refractive surgery procedures;
|
| |  | FDA and FTC guidelines for marketing laser vision
    correction; and                                        
|
| |  | regulation of personally identifiable health information.                                                    



Changes in the Regulatory Environment Applicable to the
Retail Eye Care Business, Including Health-Care Cost Containment
Efforts by Medicare, Medicaid and Other Third-Party Payers may
Adversely Affect the Companys Profits.




Risks Related to the Eye Care Industry, Including the Cost
and Availability of Medical Malpractice Insurance, and Possible
Adverse Long-Term Experience With Laser and Other Surgical
Vision Correction Could Have a Material Adverse Effect on Our
Business, Financial Condition and Results of Operations




16



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Managed Care Companies Face Increasing Threats of
Private-Party Litigation, Including Class Actions, Over the
Scope of Care for Which Managed Care Companies Must Pay.




Loss of the Services of Key Management Personnel Could
Adversely Affect the Companys Business.




Palisade Owns Sufficient Shares of the Companys
Common Stock to Control the Companys Board of Directors
and Control the Outcome of any Stockholder Vote.




Conflicts of Interest May Arise Between Palisade and the
Company.








17



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OptiCare and U.S. Vision Have Not Had Profitable
Operations in Recent Years, and We Cannot Assure that the
Company will be Profitable.




If We Fail to Execute Our Growth Strategy, We May Not Be
Profitable.










OptiCares Business is Substantially Dependent on a
Professional Services and Support Agreement with a Professional
Affiliate.






18



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If OptiCares Managed Vision Care Division Fails to
Negotiate Profitable Capitated Fee Arrangements, it Could Have A
Material Adverse Effect on the Results of Operations and
Financial Condition of the Combined Company.




U.S. Visions Revenues Depend Largely Upon its
Lease Arrangement with J.C. Penney Company, Inc.










U.S. Visions Revenues Also Depend Upon its
Lease Arrangements with Other Department Stores.




19



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U.S. Visions Business is Materially Dependent
upon a Single Laboratory.




Failure to Have Vision Care Professionals Available in or
Near U.S. Visions Vision Centers Would Adversely
Affect its Ability to Win Managed Care and Host Store Contracts,
and Could Prevent U.S. Vision From Operating in Some
States.




Compliance with Section 404 of the Sarbanes-Oxley Act
of 2002 is Likely to be Costly.







Item 2.     Properties




| |          
| | ---------
| | Corporate







| |            
| | -----------
| | U.S. Vision





20



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##### Table of Contents







| |         
| | --------
| | OptiCare














Item 3.     Legal
Proceedings


OptiVest, LLC v.






21



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|        |                                                    
|------- | ---------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security Holders








PART II







|        |                                                                                                                     
|------- | --------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for the Companys Common Stock, Related
    Stockholder Matters and Issuer Purchases of Equity
    Securities





|               |  |      |      |  |      |   |      |      |  |   |      |  |  |   |      | 
|-------------- |  | ---- | ---- |  | ---- | - | ---- | ---- |  | - | ---- |  |  | - | ---- | 
|               |  | 2005 |      |  | 2004 |  
|               |  |      |      |  |      |  
|               |  | High |      |  | Low  |   |      | High |  |   | Low  | 
|               |  |      |      |  |      |   |      |      |  |   |      | 
|First quarter  |  | $    | 4.25 |  |      | $ | 4.10 |      |  | $ | 5.06 |  |  | $ | 4.72 | 
|Second quarter |  |      | 6.10 |  |      |   | 4.10 |      |  |   | 4.80 |  |  |   | 4.68 | 
|Third quarter  |  |      | 8.00 |  |      |   | 5.86 |      |  |   | 4.83 |  |  |   | 4.65 | 
|Fourth quarter |  |      | 8.50 |  |      |   | 7.85 |      |  |   | 4.66 |  |  |   | 4.11 | 

EQUITY COMPENSATION PLANS




|                                                              |  |                      |         |  |                     |   |      |                      |  |  |       | 
|------------------------------------------------------------- |  | -------------------- | ------- |  | ------------------- | - | ---- | -------------------- |  |  | ----- | 
|                                                              |  | Number of Securities |         |  |                     |   |     
|                                                              |  | to be Issued         |         |  | Weighted Average    |   |      | Number of Securities | 
|                                                              |  | Upon Exercise of     |         |  | Exercise Price of   |   |      | Remaining Available  | 
|Plan Category                                                 |  | Outstanding Options  |         |  | Outstanding Options |   |      | for Future Issuance  | 
|                                                              |  |                      |         |  |                     |   |      |                      | 
|                                                              |  | (a)                  |         |  | (b)                 |   |      | (c)                  | 
|Equity compensation plans approved by security holders        |  |                      | 523,500 |  |                     | $ | 5.75 |                      |  |  | 5,000 | 
|Equity compensation plans not approved by security holders(1) |  |                      | 50,000  |  |                     | $ | 4.92 |                      |  |  |      | 
|                                                              |  |                      |         |  |                     |   |      |                      | 
|Total                                                         |  |                      | 573,500 |  |                     | $ | 5.68 |                      |  |  | 5,000 | 
|                                                              |  |                      |         |  |                     |   |      |                      | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The Company granted to Cole Limited, Inc.
    (CL), an option to
    purchase 50,000 shares of the Companys common
    stock at a per share exercise price of $4.92, which was equal to
    the fair market value of the Companys common stock on the
    date of the grant. Although this option was not issued pursuant
    to any option plan, it is governed by the same terms set forth
    in the Companys 2003 Stock Incentive Plan.

SALE OF UNREGISTERED SECURITIES


CL Stock Purchase
Agreement Securities Act


22



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Consulting
Agreement


ISSUER PURCHASES OF EQUITY SECURITIES


|                           |       |                  |        |        |                |                     |      |                    |                  |  |                 |        |  |  |         |  | 
|-------------------------- | ----- | ---------------- | ------ | ------ | -------------- | ------------------- | ---- | ------------------ | ---------------- |  | --------------- | ------ |  |  | ------- |  | 
|                           |       |                  |        |        |                |                     |      | Maximum            |                 
|                           |       |                  |        |        |                | Total Number of     |      |                    | Number of Shares | 
|                           |       |                  |        |        |                | Shares Purchased as |      |                    | that may yet be  | 
|                           |       | Total Number of  |        |        | Average Price  |                     |      | Part of Publicly   |                  |  | Purchased Under |       
|Period                     |       | Shares Purchased |        |        | Paid per Share |                     |      | Announced Plans(1) |                  |  | the Plans       |       
|                           |       |                  |        |        |                |                     |      |                    |                  |  |                 |       
|September 1 - September 30 |       |                  | 16,330 |        |                | $                   | 8.29 |                    |                  |  | 16,330          |        |  |  | 634,132 | 
|October 1 - October 31     |       |                  | 10,580 |        |                | $                   | 8.29 |                    |                  |  | 10,580          |        |  |  | 623,552 | 
|November 1 - November 30   |       |                  | 18,495 |        |                | $                   | 8.29 |                    |                  |  | 18,495          |        |  |  | 605,057 | 
|December 1 - December 31   |       |                  | 20,162 |        |                | $                   | 8.29 |                    |                  |  | 20,162          |        |  |  | 584,895 | 
|                           |       |                  |        |        |                |                     |      |                    |                  |  |                 |       
|                           | Total |                  |        | 65,567 |                |                     | $    | 8.29               |                  |  |                 | 65,567 |  |  |         |  | 
|                           |       |                  |        |        |                |                     |      |                    |                  |  |                 |       






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Pursuant to the Companys merger agreement (the
    Palisade Merger Agreement), dated as of
    August 19, 2002, as amended, with Palisade, certain
    stockholders hold a non-transferable right to sell their shares
    of Company common stock to the Company for a price determined
    based upon the Companys liquid distributable assets
    (LDA) as of June 30, 2005. Such
    calculation has been made and finalized at $8.29 per share.
    This right to sell the shares is non-transferable and is limited
    to stockholders who held their shares continuously from the date
    of the Palisade Merger through August 8, 2005, the date
    that the LDA calculation was finalized. The Company has
    restricted $4,849,000 of its cash and investments being held to
    maturity as of December 31, 2005 to maintain the Contingent
    Fund (as defined in the Palisade Merger Agreement). As of
    December 31, 2005 a total of 65,567 shares have been
    redeemed for a total amount of $544,000. Any Contingent Fund
    amounts that are related to Payment Rights that are not properly
    exercised on or before September 30, 2006 will become
    unrestricted. See Note 2 to the financial statements.

23



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|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data

REFAC OPTICAL GROUP AND SUBSIDIARIES


SELECTED FINANCIAL INFORMATION


|                                                                                             |  |                                          |       |   |      |   |       |      |  |   |        |   |  |      |        |   |  |   |        |  
|-------------------------------------------------------------------------------------------- |  | ---------------------------------------- | ----- | - | ---- | - | ----- | ---- |  | - | ------ | - |  | ---- | ------ | - |  | - | ------ | -
|                                                                                             |  | Year Ended December 31,                  |      
|                                                                                             |  |                                          |      
|                                                                                             |  | 2005                                     |       |   | 2004 |   |       | 2003 |  |   | 2002   |   |  | 2001 |       
|                                                                                             |  |                                          |       |   |      |   |       |      |  |   |        |   |  |      |       
|                                                                                             |  | (In thousands, except per share amounts) |      
|Revenues                                                                                     |  | $                                        | 2,409 |   |      | $ | 1,779 |      |  | $ | 1,804  |   |  | $    | 6,415  |   |  | $ | 4,840  |  
|Net income (loss) from continuing operations                                                 |  | $                                        | (925  | ) |      | $ | (239  | )    |  | $ | (1,534 | ) |  | $    | 2,511  |   |  | $ | 2,764  |  
|Income (loss) from discontinued operations  net of
    taxes                                |  |                                          |      |   |      | $ | 14    |      |  | $ | 38     |   |  | $    | (1,697 | ) |  | $ | (1,680 | )
|Loss from cumulative effect of change in accounting
    principle  net of taxes             |  |                                          |      |   |      |   |      |      |  |   |       |   |  | $    | (2,083 | ) |  |   |       |  
|Net income (loss)                                                                            |  | $                                        | (925  | ) |      | $ | (225  | )    |  | $ | (1,496 | ) |  | $    | (1,269 | ) |  | $ | 1,084  |  
|Income (loss) per common share from continuing
    operations  basic                        |  | $                                        | (0.13 | ) |      | $ | (0.03 | )    |  | $ | (0.27  | ) |  | $    | 0.66   |   |  | $ | 0.73   |  
|Income (loss) per common share from discontinued
    operations  basic                      |  |                                          |      |   |      |   |      |      |  | $ | 0.01   |   |  | $    | (0.44  | ) |  | $ | (0.44  | )
|Loss per common share from cumulative effect of change in
    accounting principle  basic   |  |                                          |      |   |      |   |      |      |  |   |       |   |  | $    | (0.55  | ) |  |   |       |  
|Income (loss) per common share on net income  basic                                         |  | $                                        | (0.13 | ) |      | $ | (0.03 | )    |  | $ | (0.26  | ) |  | $    | (0.33  | ) |  | $ | 0.29   |  
|Income (loss) per common share from continuing
    operations  diluted                      |  | $                                        | (0.13 | ) |      | $ | (0.03 | )    |  | $ | (0.27  | ) |  | $    | 0.66   |   |  | $ | 0.73   |  
|Income (loss) per common share from discontinued
    operations  diluted                    |  |                                          |      |   |      |   |      |      |  | $ | 0.01   |   |  | $    | (0.44  | ) |  | $ | (0.44  | )
|Loss per common share from cumulative effect of change in
    accounting principle  diluted |  |                                          |      |   |      |   |      |      |  |   |       |   |  | $    | (0.55  | ) |  |   |       |  
|Income (loss) per common share on net income  diluted                                       |  | $                                        | (0.13 | ) |      | $ | (0.03 | )    |  | $ | (0.26  | ) |  | $    | (0.33  | ) |  | $ | 0.29   |  

|                     |  |                    |        |  |      |   |        |      |  |   |        |  |  |      |        |  |  |   |        | 
|-------------------- |  | ------------------ | ------ |  | ---- | - | ------ | ---- |  | - | ------ |  |  | ---- | ------ |  |  | - | ------ | 
|                     |  | As of December 31, |       
|                     |  |                    |       
|                     |  | 2005               |        |  | 2004 |   |        | 2003 |  |   | 2002   |  |  | 2001 |       
|                     |  |                    |        |  |      |   |        |      |  |   |        |  |  |      |       
|Total assets         |  | $                  | 37,326 |  |      | $ | 38,768 |      |  | $ | 39,023 |  |  | $    | 24,292 |  |  | $ | 24,387 | 
|Dividends            |  |                    |       |  |      |   |       |      |  |   |       |  |  |      |       |  |  |   |       | 
|Stockholders Equity |  | $                  | 30,764 |  |      | $ | 31,197 |      |  | $ | 31,898 |  |  | $    | 21,340 |  |  | $ | 22,592 | 

24



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|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operation



Board




As a result of the
Companys acquisitions of U.S. Vision and OptiCare on
March 6, 2006, the Companys results for 2005 are not
indicative of the results to be expected for any future
periods.


Results of Continuing Operations


Patlex


25



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OXO


|                                           |  |                     |      |  |      |  |      |      |  |  |      | 
|------------------------------------------ |  | ------------------- | ---- |  | ---- |  | ---- | ---- |  |  | ---- | 
|                                           |  | For the Years Ended |     
|                                           |  | December 31,        |     
|                                           |  |                     |     
|Description                                |  | 2005                |      |  | 2004 |  |      | 2003 | 
|                                           |  |                     |      |  |      |  |      |      | 
|Revenues from licensing-related activities |  |                     | 97%  |  |      |  | 90%  |      |  |  | 98%  | 
|Consulting income                          |  |                     | 3%   |  |      |  | 10%  |      |  |  | 2%   | 
|                                           |  |                     |      |  |      |  |      |      | 
|Total                                      |  |                     | 100% |  |      |  | 100% |      |  |  | 100% | 
|                                           |  |                     |      |  |      |  |      |      | 





Selling, General and Administrative (SG&A)
Expenses




Dividends, Interest and Other Income




Income Taxes


26



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##### Table of Contents





RIL






Inflation


Results of Discontinued Operations


Liquidity and Capital Resources




|                                   |       |      |            |            |      |   |            |            |  |   |            |            | 
|---------------------------------- | ----- | ---- | ---------- | ---------- | ---- | - | ---------- | ---------- |  | - | ---------- | ---------- | 
|Description                        |       | 2005 |            |            | 2004 |   |            | 2003       | 
|                                   |       |      |            |            |      |   |            |            | 
|Cash and cash equivalents          |       | $    | 5,384,000  |            |      | $ | 457,000    |            |  | $ | 799,000    |           
|Available for sale securities      |       |      |           |            |      |   | 1,000,000  |            |  |   | 1,000,000  |           
|Investments being held to maturity |       |      | 24,229,000 |            |      |   | 29,342,000 |            |  |   | 28,682,000 |           
|                                   |       |      |            |            |      |   |            |            | 
|                                   | Total |      | $          | 29,613,000 |      |   | $          | 30,799,000 |  |   | $          | 30,481,000 | 
|                                   |       |      |            |            |      |   |            |            | 

27



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##### Table of Contents













Palisade Merger Agreement Payment
Right LDA


Contractual Obligations




28



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##### Table of Contents





|                                                |  |                        |           |           |          |   |         |             |           |   |             |  |  |         |         |  |  |  |   | 
|----------------------------------------------- |  | ---------------------- | --------- | --------- | -------- | - | ------- | ----------- | --------- | - | ----------- |  |  | ------- | ------- |  |  |  | - | 
|                                                |  | Payments Due By Period |          
|                                                |  |                        |          
|                                                |  |                        |           | Less than |          |   |         |             | More than |  
|Contractual Obligations                         |  | Total                  |           |           | One Year |   |         | 1 - 3 Years |           |   | 3 - 5 Years |  |  | 5 Years |        
|                                                |  |                        |           |           |          |   |         |             |           |   |             |  |  |         |        
|                                                |  | (In thousands)         |          
|Operating lease Obligations                     |  | $                      | 2,407,000 |           |          | $ | 614,000 |             |           | $ | 1,272,000   |  |  | $       | 521,000 |  |  |  |  | 
|Consulting Agreement (see Note 7)               |  |                        | 42,000    |           |          |   | 42,000  |             |           |   |            |  |  |         |        |  |  |  |  | 
|Management Incentive Compensation (see Note 6B) |  |                        | 421,000   |           |          |   | 421,000 |             |           |   |            |  |  |         |        |  |  |  |  | 



Critical Accounting Policies


LDA


New Accounting Pronouncements


FASB FAS 154






29



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FORWARD LOOKING STATEMENTS











|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures About Market
    Risk



30



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|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data

REFAC OPTICAL GROUP


BALANCE SHEETS


|                                                                                                                                                    |                                                                  |                                            |        |        |        |  |        |        |        | 
|--------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------- | ------------------------------------------ | ------ | ------ | ------ |  | ------ | ------ | ------ | 
|                                                                                                                                                    |                                                                  | December 31,                               |       
|                                                                                                                                                    |                                                                  |                                            |       
|                                                                                                                                                    |                                                                  | 2005                                       |        |        | 2004   | 
|                                                                                                                                                    |                                                                  |                                            |        |        |        | 
|                                                                                                                                                    |                                                                  | (Amounts in thousands,                     |       
|                                                                                                                                                    |                                                                  | except share and per                       |       
|                                                                                                                                                    |                                                                  | share data)                                |       
|ASSETS                                                                                                                                             
|Current Assets                                                                                                                                      |                                                                  |                                            |        |        |        |  |        |       
|                                                                                                                                                    | Cash and cash equivalents                                        |                                            | $      | 5,384  |        |  | $      | 457    |       
|                                                                                                                                                    | Royalties and accounts receivable                                |                                            |        | 68     |        |  |        | 286    |       
|                                                                                                                                                    | Notes receivable  current portion                               |                                            |        | 29     |        |  |        | 64     |       
|                                                                                                                                                    | Investments being held to maturity                               |                                            |        | 24,229 |        |  |        | 29,342 |       
|                                                                                                                                                    | Income taxes receivable                                          |                                            |        |       |        |  |        | 23     |       
|                                                                                                                                                    | Prepaid expenses, deferred income taxes and other current assets |                                            |        | 569    |        |  |        | 803    |       
|                                                                                                                                                    | Restricted cash and investments being held to maturity           |                                            |        | 4,849  |        |  |        | 5,416  |       
|                                                                                                                                                    |                                                                  |                                            |        |        |        | 
|                                                                                                                                                    |                                                                  | Total current assets                       |        |        | 35,128 |  |        |        | 36,391 | 
|                                                                                                                                                    |                                                                  |                                            |        |        |        | 
|Property and equipment  net                                                                                                                        |                                                                  |                                            | 558    |        |        |  | 747    |       
|Available for sale securities                                                                                                                       |                                                                  |                                            |       |        |        |  | 1,000  |       
|Notes receivable                                                                                                                                    |                                                                  |                                            | 1,078  |        |        |  | 141    |       
|Deferred income taxes and other assets                                                                                                              |                                                                  |                                            | 563    |        |        |  | 489    |       
|                                                                                                                                                    |                                                                  |                                            |        |        |        | 
|                                                                                                                                                    |                                                                  | Total Assets                               |        | $      | 37,326 |  |        | $      | 38,768 | 
|                                                                                                                                                    |                                                                  |                                            |        |        |        | 
|                                                                                                                                                   
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                               
|Current Liabilities                                                                                                                                 |                                                                  |                                            |        |        |        |  |        |       
|                                                                                                                                                    | Accounts payable and accrued expenses                            |                                            | $      | 1,067  |        |  | $      | 685    |       
|                                                                                                                                                    | Deferred revenue                                                 |                                            |        | 149    |        |  |        | 142    |       
|                                                                                                                                                    | Deferred incentive compensation                                  |                                            |        | 421    |        |  |        | 1,239  |       
|                                                                                                                                                    | Other liabilities                                                |                                            |        | 76     |        |  |        | 89     |       
|                                                                                                                                                    |                                                                  |                                            |        |        |        | 
|                                                                                                                                                    |                                                                  | Total current liabilities                  |        |        | 1,713  |  |        |        | 2,155  | 
|                                                                                                                                                    |                                                                  |                                            |        |        |        | 
|Temporary Equity                                                                                                                                    |                                                                  |                                            | 4,849  |        |        |  | 5,416  |       
|Stockholders Equity                                                                                                                                |                                                                  |                                            |        |        |        |  |        |       
|Common stock, $.001 par value; authorized
    20,000,000 shares; issued 7,051,393 as of December 31,
    2005 and 6,993,393 as of December 31, 2004 |                                                                  |                                            | 7      |        |        |  | 7      |       
|Additional paid-in capital                                                                                                                          |                                                                  |                                            | 23,368 |        |        |  | 22,238 |       
|Unearned compensation                                                                                                                               |                                                                  |                                            | (89    | )      |        |  |        |       
|Retained earnings                                                                                                                                   |                                                                  |                                            | 8,523  |        |        |  | 9,448  |       
|Treasury stock, at cost, 88,673 and 22,656 shares of common
    stock, $.001 par value at December 31, 2005 and 2004,
    respectively              |                                                                  |                                            | (738   | )      |        |  | (159   | )     
|Receivable from issuance of common stock                                                                                                            |                                                                  |                                            | (308   | )      |        |  | (337   | )     
|                                                                                                                                                    |                                                                  |                                            |        |        |        | 
|                                                                                                                                                    |                                                                  | Total stockholders equity                 |        |        | 30,764 |  |        |        | 31,197 | 
|                                                                                                                                                    |                                                                  |                                            |        |        |        | 
|                                                                                                                                                    |                                                                  | Total Liabilities and Stockholders Equity |        | $      | 37,326 |  |        | $      | 38,768 | 
|                                                                                                                                                    |                                                                  |                                            |        |        |        | 



31



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REFAC OPTICAL GROUP


STATEMENTS OF OPERATIONS


|                                                                                                    |                                              |                               |           |       |       |   |           |       |       |   |           |       |       |  
|--------------------------------------------------------------------------------------------------- | -------------------------------------------- | ----------------------------- | --------- | ----- | ----- | - | --------- | ----- | ----- | - | --------- | ----- | ----- | -
|                                                                                                    |                                              | Years Ended December 31,      |          
|                                                                                                    |                                              |                               |          
|                                                                                                    |                                              | 2005                          |           |       | 2004  |   |           | 2003  |      
|                                                                                                    |                                              |                               |           |       |       |   |           |       |      
|                                                                                                    |                                              | (Amounts in thousands, except |          
|                                                                                                    |                                              | share and per share data)     |          
|Revenues                                                                                            |                                              |                               |           |       |       |   |           |       |       |   |           |      
|                                                                                                    | Licensing-related activities                 |                               | $         | 2,344 |       |   | $         | 1,609 |       |   | $         | 1,774 |      
|                                                                                                    | Related party consulting services            |                               |           | 65    |       |   |           | 170   |       |   |           | 30    |      
|                                                                                                    |                                              |                               |           |       |       |   |           |       |      
|Total revenues                                                                                      |                                              |                               | 2,409     |       |       |   | 1,779     |       |       |   | 1,804     |      
|                                                                                                    |                                              |                               |           |       |       |   |           |       |      
|Costs and Expenses                                                                                  |                                              |                               |           |       |       |   |           |       |       |   |           |      
|                                                                                                    | Licensing-related activities                 |                               |           | 118   |       |   |           | 124   |       |   |           | 119   |      
|                                                                                                    | Selling, general and administrative expenses |                               |           | 4,154 |       |   |           | 2,606 |       |   |           | 4,216 |      
|                                                                                                    |                                              |                               |           |       |       |   |           |       |      
|Total costs and expenses                                                                            |                                              |                               | 4,272     |       |       |   | 2,730     |       |       |   | 4,335     |      
|                                                                                                    |                                              |                               |           |       |       |   |           |       |      
|Other Income and Expenses                                                                           |                                              |                               |           |       |       |   |           |       |       |   |           |      
|                                                                                                    | Dividend and interest income                 |                               |           | 1,095 |       |   |           | 477   |       |   |           | 323   |      
|                                                                                                    | Other income (expense)                       |                               |           | (98   | )     |   |           | 105   |       |   |           |      |      
|                                                                                                    |                                              |                               |           |       |       |   |           |       |      
|Total other income and expenses                                                                     |                                              |                               | 997       |       |       |   | 582       |       |       |   | 323       |      
|                                                                                                    |                                              |                               |           |       |       |   |           |       |      
|Loss before provision for taxes on income                                                           |                                              |                               | (866      | )     |       |   | (369      | )     |       |   | (2,208    | )    
|Provision (benefit) for taxes on income                                                             |                                              |                               | 59        |       |       |   | (130      | )     |       |   | (674      | )    
|                                                                                                    |                                              |                               |           |       |       |   |           |       |      
|Net loss from continuing operations                                                                 |                                              |                               | (925      | )     |       |   | (239      | )     |       |   | (1,534    | )    
|Gain from discontinued operations  net of provision
    for taxes of $0, $15 and $21, respectively |                                              |                               |          |       |       |   | 14        |       |       |   | 38        |      
|                                                                                                    |                                              |                               |           |       |       |   |           |       |      
|Net loss                                                                                            |                                              | $                             | (925      | )     |       | $ | (225      | )     |       | $ | (1,496    | )    
|                                                                                                    |                                              |                               |           |       |       |   |           |       |      
|Basic and diluted earnings (loss) per share:                                                        |                                              |                               |           |       |       |   |           |       |       |   |           |      
|                                                                                                    | From continuing operations                   |                               | $         | (0.13 | )     |   | $         | (0.03 | )     |   | $         | (0.27 | )    
|                                                                                                    | From discontinued operations                 |                               |           |      |       |   |           |      |       |   |           | 0.01  |      
|                                                                                                    |                                              |                               |           |       |       |   |           |       |      
|                                                                                                    |                                              | Total                         |           | $     | (0.13 | ) |           | $     | (0.03 | ) |           | $     | (0.26 | )
|                                                                                                    |                                              |                               |           |       |       |   |           |       |      
|Basic and diluted weighted average shares outstanding                                               |                                              |                               | 7,009,638 |       |       |   | 6,992,105 |       |       |   | 5,717,128 |      



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REFAC OPTICAL GROUP


STATEMENTS OF CASH FLOWS


|                                                     |                                                                                               |                                                  |       |       |      |   |        |        |      |   |         |         |        |  
|---------------------------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------------ | ----- | ----- | ---- | - | ------ | ------ | ---- | - | ------- | ------- | ------ | -
|                                                     |                                                                                               | Years Ended December 31,                         |      
|                                                     |                                                                                               |                                                  |      
|                                                     |                                                                                               | 2005                                             |       |       | 2004 |   |        | 2003   |     
|                                                     |                                                                                               |                                                  |       |       |      |   |        |        |     
|                                                     |                                                                                               | (Amounts in thousands)                           |      
|Cash Flows from Operating Activities                 |                                                                                               |                                                  |       |       |      |   |        |        |      |   |         |        
|                                                     | Net loss                                                                                      |                                                  | $     | (925  | )    |   | $      | (225   | )    |   | $       | (1,496  | )     
|                                                     | Adjustments to reconcile net loss to net cash provided by (used
    in) operating activities: |                                                  |       |       |      |   |        |        |      |   |         |         |       
|                                                     |                                                                                               | Depreciation and amortization                    |       |       | 180  |   |        |        | 169  |   |         |         | 422    |  
|                                                     |                                                                                               | Amortization of unearned compensation            |       |       | 100  |   |        |        |     |   |         |         |       |  
|                                                     |                                                                                               | Loss on settlement agreement                     |       |       |     |   |        |        | 13   |   |         |         |       |  
|                                                     |                                                                                               | Loss on disposal of assets                       |       |       | 14   |   |        |        |     |   |         |         |       |  
|                                                     |                                                                                               | Deferred income taxes and other assets           |       |       | 167  |   |        |        | (171 | ) |         |         | 149    |  
|                                                     |                                                                                               | Compensation expense related to director options |       |       |     |   |        |        |     |   |         |         | 48     |  
|                                                     |                                                                                               | Loss on sale of assets                           |       |       |     |   |        |        | 2    |   |         |         | 6      |  
|                                                     |                                                                                               | Loss associated with appraisal rights settlement |       |       |     |   |        |        |     |   |         |         | 29     |  
|                                                     |                                                                                               | Income tax benefit on stock option exercise      |       |       | 28   |   |        |        | 24   |   |         |         |       |  
|                                                     | (Increase) decrease in assets:                                                                |                                                  |       |       |      |   |        |        |      |   |         |         |       
|                                                     |                                                                                               | Royalties and accounts receivable                |       |       | 218  |   |        |        | 192  |   |         |         | 189    |  
|                                                     |                                                                                               | Prepaid expenses and other current assets        |       |       | (41  | ) |        |        | (41  | ) |         |         | (414   | )
|                                                     |                                                                                               | Security deposit                                 |       |       |     |   |        |        | (10  | ) |         |         |       |  
|                                                     |                                                                                               | Income taxes receivable                          |       |       | 23   |   |        |        | 613  |   |         |         | 3,273  |  
|                                                     |                                                                                               | Deferred incentive compensation                  |       |       | 34   |   |        |        | 331  |   |         |         | 1,632  |  
|                                                     | Increase (decrease) in liabilities:                                                           |                                                  |       |       |      |   |        |        |      |   |         |         |       
|                                                     |                                                                                               | Accounts payable and accrued expenses            |       |       | 382  |   |        |        | (8   | ) |         |         | 495    |  
|                                                     |                                                                                               | Deferred revenue                                 |       |       | 7    |   |        |        | (3   | ) |         |         | 10     |  
|                                                     |                                                                                               | Deferred incentive compensation                  |       |       | (818 | ) |        |        | (107 | ) |         |         | (1,054 | )
|                                                     |                                                                                               | Other liabilities                                |       |       | (13  | ) |        |        | (109 | ) |         |         | (21    | )
|                                                     |                                                                                               |                                                  |       |       |      |   |        |        |     
|Net cash provided by (used in) operating activities  |                                                                                               |                                                  | (644  | )     |      |   | 670    |        |      |   | 3,268   |        
|                                                     |                                                                                               |                                                  |       |       |      |   |        |        |     
|Cash Flows from Investing Activities                 |                                                                                               |                                                  |       |       |      |   |        |        |      |   |         |        
|                                                     | Proceeds from (purchase of) investments being held to maturity                                |                                                  |       | 5,682 |      |   |        | (1,332 | )    |   |         | (21,711 | )     
|                                                     | Proceeds from (purchase of) available for sale securities                                     |                                                  |       | 1,000 |      |   |        |       |      |   |         | (1,000  | )     
|                                                     | Proceeds from (issuance of) notes receivable                                                  |                                                  |       | (902  | )    |   |        | 289    |      |   |         | 213     |       
|                                                     | Proceeds on disposal of assets                                                                |                                                  |       |      |      |   |        |       |      |   |         | 2       |       
|                                                     | Additions to property and equipment                                                           |                                                  |       | (5    | )    |   |        | (141   | )    |   |         | (24     | )     
|                                                     |                                                                                               |                                                  |       |       |      |   |        |        |     
|Net cash provided by (used in) investing activities  |                                                                                               |                                                  | 5,775 |       |      |   | (1,184 | )      |      |   | (22,520 | )      
|                                                     |                                                                                               |                                                  |       |       |      |   |        |        |     
|Cash Flows from Financing Activities                 |                                                                                               |                                                  |       |       |      |   |        |        |      |   |         |        
|                                                     | Proceeds from sale of common stock                                                            |                                                  |       | 246   |      |   |        |       |      |   |         | 16,869  |       
|                                                     | Purchase of treasury stock                                                                    |                                                  |       | (579  | )    |   |        |       |      |   |         |        |       
|                                                     | Appraisal rights settlement cost                                                              |                                                  |       |      |      |   |        |       |      |   |         | (187    | )     
|                                                     | Proceeds from repayment of officer loan                                                       |                                                  |       | 29    |      |   |        | 28     |      |   |         |        |       
|                                                     | Proceeds from exercise of stock options                                                       |                                                  |       | 100   |      |   |        | 144    |      |   |         | 39      |       
|                                                     |                                                                                               |                                                  |       |       |      |   |        |        |     
|Net cash provided by (used in) financing activities  |                                                                                               |                                                  | (204  | )     |      |   | 172    |        |      |   | 16,721  |        
|                                                     |                                                                                               |                                                  |       |       |      |   |        |        |     
|Net increase (decrease) in cash and cash equivalents |                                                                                               |                                                  | 4,927 |       |      |   | (342   | )      |      |   | (2,531  | )      
|Cash and cash equivalents at beginning of year       |                                                                                               |                                                  | 457   |       |      |   | 799    |        |      |   | 3,330   |        
|                                                     |                                                                                               |                                                  |       |       |      |   |        |        |     
|Cash and cash equivalents at end of year             |                                                                                               | $                                                | 5,384 |       |      | $ | 457    |        |      | $ | 799     |        
|                                                     |                                                                                               |                                                  |       |       |      |   |        |        |     



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REFAC OPTICAL GROUP


STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY


|                                                                     |  |                                           |            |   |                 |   |      |            |  |  |           |  |  |          |                |            |              |               |        |           |  |   |        |   |  |        |         |   |       |  |            |   |  |   |         |   |  |   |      |  
|-------------------------------------------------------------------- |  | ----------------------------------------- | ---------- | - | --------------- | - | ---- | ---------- |  |  | --------- |  |  | -------- | -------------- | ---------- | ------------ | ------------- | ------ | --------- |  | - | ------ | - |  | ------ | ------- | - | ----- |  | ---------- | - |  | - | ------- | - |  | - | ---- | -
|                                                                     |  | Common Stock                              |            |   | Common Stock    |   |      |            |  |  |           |  |  |          |                | Receivable |             
|                                                                     |  | Par Value $.10                            |            |   | Par Value $.001 |   |      | Additional |  |  |           |  |  |          | Treasury Stock |            |              | from Issuance |       
|                                                                     |  |                                           |            |   |                 |   |      | Paid-In    |  |  | Unearned  |  |  | Retained |                |            |              |               |        | of Common | 
|                                                                     |  | Shares                                    |            |   | Amount          |   |      | Shares     |  |  | Amount    |  |  | Capital  |                |            | Compensation |               |        | Earnings  |  |   | Shares |   |  | Amount |         |   | Stock | 
|                                                                     |  |                                           |            |   |                 |   |      |            |  |  |           |  |  |          |                |            |              |               |        |           |  |   |        |   |  |        |         |   |       | 
|                                                                     |  | (Amounts in thousands, except share data) |           
|Balance, December 31, 2002                                           |  |                                           | 5,453,637  |   |                 | $ | 545  |            |  |  |          |  |  |          |               |            |              | $             | 9,991  |           |  |   |        |   |  | $      | 25,043  |   |       |  | 1,655,626  |   |  | $ | (13,874 | ) |  | $ | (365 | )
|Issuance of common stock upon exercise of stock options              |  |                                           | 1,500      |   |                 |   |      |            |  |  |           |  |  |          |                |            |              |               | 4      |           |  |   |        |   |  |        |         |   |       |  |            |   |  |   |         |   |  |   |      |  
|Merger                                                               |  |                                           | (5,455,137 | ) |                 |   | (545 | )          |  |  | 3,512,006 |  |  |          | 4              |            |              |               | 542    |           |  |   |        |   |  |        | (13,874 | ) |       |  | (1,655,626 | ) |  |   | 13,874  |   |  |   |      |  
|Modification of non- employee director stock options                 |  |                                           |            |   |                 |   |      |            |  |  |           |  |  |          |                |            |              |               | 48     |           |  |   |        |   |  |        |         |   |       |  |            |   |  |   |         |   |  |   |      |  
|Appraisal rights settlement                                          |  |                                           |            |   |                 |   |      |            |  |  |           |  |  |          |                |            |              |               | (14    | )         |  |   |        |   |  |        |         |   |       |  | 22,656     |   |  |   | (159    | ) |  |   |      |  
|Issuance of common stock upon exercise of stock options              |  |                                           |            |   |                 |   |      |            |  |  | 2,000     |  |  |          |               |            |              |               | 35     |           |  |   |        |   |  |        |         |   |       |  |            |   |  |   |         |   |  |   |      |  
|Stock issuance to Palisade                                           |  |                                           |            |   |                 |   |      |            |  |  | 3,469,387 |  |  |          | 3              |            |              |               | 16,878 |           |  |   |        |   |  |        |         |   |       |  |            |   |  |   |         |   |  |   |      |  
|Net Loss                                                             |  |                                           |            |   |                 |   |      |            |  |  |           |  |  |          |                |            |              |               |        |           |  |   |        |   |  |        | (1,496  | ) |       |  |            |   |  |   |         |   |  |   |      |  
|                                                                     |  |                                           |            |   |                 |   |      |            |  |  |           |  |  |          |                |            |              |               |        |           |  |   |        |   |  |        |         |   |       | 
|Balance, December 31, 2003                                           |  |                                           |           |   |                 |   |     |            |  |  | 6,983,393 |  |  | $        | 7              |            |              | $             | 22,742 |           |  |   |        |   |  | $      | 9,673   |   |       |  | 22,656     |   |  | $ | (159    | ) |  | $ | (365 | )
|Issuance of common stock upon exercise of stock options              |  |                                           |            |   |                 |   |      |            |  |  | 10,000    |  |  |          |                |            |              |               | 144    |           |  |   |        |   |  |        |         |   |       |  |            |   |  |   |         |   |  |   |      |  
|Tax benefit from exercise of stock option                            |  |                                           |            |   |                 |   |      |            |  |  |           |  |  |          |                |            |              |               | 24     |           |  |   |        |   |  |        |         |   |       |  |            |   |  |   |         |   |  |   |      |  
|Temporary Equity                                                     |  |                                           |            |   |                 |   |      |            |  |  |           |  |  |          |                |            |              |               | (672   | )         |  |   |        |   |  |        |         |   |       |  |            |   |  |   |         |   |  |   |      |  
|Net Loss                                                             |  |                                           |            |   |                 |   |      |            |  |  |           |  |  |          |                |            |              |               |        |           |  |   |        |   |  |        | (225    | ) |       |  |            |   |  |   |         |   |  |   |      |  
|                                                                     |  |                                           |            |   |                 |   |      |            |  |  |           |  |  |          |                |            |              |               |        |           |  |   |        |   |  |        |         |   |       | 
|Balance, December 31, 2004                                           |  |                                           |           |   |                 |   |     |            |  |  | 6,993,393 |  |  | $        | 7              |            |              | $             | 22,238 |           |  |   |        |   |  | $      | 9,448   |   |       |  | 22,656     |   |  | $ | (159    | ) |  | $ | (337 | )
|Proceeds from stock purchase                                         |  |                                           |            |   |                 |   |      |            |  |  | 50,000    |  |  |          |                |            |              |               | 246    |           |  |   |        |   |  |        |         |   |       |  |            |   |  |   |         |   |  |   |      |  
|Issuance of common stock upon exercise of stock options              |  |                                           |            |   |                 |   |      |            |  |  | 8,000     |  |  |          |                |            |              |               | 100    |           |  |   |        |   |  |        |         |   |       |  |            |   |  |   |         |   |  |   |      |  
|Stock options granted for services                                   |  |                                           |            |   |                 |   |      |            |  |  |           |  |  |          |                |            |              |               | 189    |           |  | $ | (189   | ) |  |        |         |   |       |  |            |   |  |   |         |   |  |   |      |  
|Amortization of unearned compensation                                |  |                                           |            |   |                 |   |      |            |  |  |           |  |  |          |                |            |              |               |        |           |  |   | 100    |   |  |        |         |   |       |  |            |   |  |   |         |   |  |   |      |  
|Tax benefit from exercise of stock option                            |  |                                           |            |   |                 |   |      |            |  |  |           |  |  |          |                |            |              |               | 28     |           |  |   |        |   |  |        |         |   |       |  |            |   |  |   |         |   |  |   |      |  
|Repayment of note receivable from officer                            |  |                                           |            |   |                 |   |      |            |  |  |           |  |  |          |                |            |              |               |        |           |  |   |        |   |  |        |         |   |       |  |            |   |  |   |         |   |  | $ | 29   |  
|Temporary Equity                                                     |  |                                           |            |   |                 |   |      |            |  |  |           |  |  |          |                |            |              |               | 567    |           |  |   |        |   |  |        |         |   |       |  |            |   |  |   |         |   |  |   |      |  
|Purchase of 65,567 shares of common stock held as treasury
    stock |  |                                           |            |   |                 |   |      |            |  |  |           |  |  |          |                |            |              |               |        |           |  |   |        |   |  |        |         |   |       |  | 65,567     |   |  | $ | (579    | ) |  |   |      |  
|Net Loss                                                             |  |                                           |            |   |                 |   |      |            |  |  |           |  |  |          |                |            |              |               |        |           |  |   |        |   |  | $      | (925    | ) |       |  |            |   |  |   |         |   |  |   |      |  
|                                                                     |  |                                           |            |   |                 |   |      |            |  |  |           |  |  |          |                |            |              |               |        |           |  |   |        |   |  |        |         |   |       | 
|Balance, December 31, 2005                                           |  |                                           |           |   |                 |   |     |            |  |  | 7,051,393 |  |  | $        | 7              |            |              | $             | 23,368 |           |  | $ | (89    | ) |  | $      | 8,523   |   |       |  | 88,223     |   |  | $ | (738    | ) |  | $ | (308 | )
|                                                                     |  |                                           |            |   |                 |   |      |            |  |  |           |  |  |          |                |            |              |               |        |           |  |   |        |   |  |        |         |   |       | 



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REFAC OPTICAL GROUP


NOTES TO FINANCIAL STATEMENTS


Note 1  Business and Summary of Significant
Accounting Policies


Company


U.S. Vision OptiCare




|   |                      
|-- | ---------------------
|A. | Basis of Presentation



Palisade Palisade Merger Palisade Merger Agreement




SFAS






|   |            
|-- | -----------
|B. | Investments

Held to maturity securities or Available
for sale securities. Held to maturity securities Available for sale securities


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REFAC OPTICAL GROUP


NOTES TO FINANCIAL STATEMENTS  (Continued)






|   |             
|-- | ------------
|C. | Income Taxes





|   |                    
|-- | -------------------
|D. | Accounts Receivable





|   |                         
|-- | ------------------------
|E. | Stock Based-Compensation



|                                                                                                                                                                                             |                   |      |            |       |      |   |          |       |   |   |            |       |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------- | ---- | ---------- | ----- | ---- | - | -------- | ----- | - | - | ---------- | ----- | -
|                                                                                                                                                                                             |                   | 2005 |            |       | 2004 |   |          | 2003  |  
|                                                                                                                                                                                             |                   |      |            |       |      |   |          |       |  
|Net loss, as reported                                                                                                                                                                        |                   | $    | (925,000   | )     |      | $ | (225,000 | )     |   | $ | (1,496,000 | )    
|Less: Total stock-based employee and director compensation
    expense determined under fair value based on methods for awards
    granted, modified, or settled, net of related tax effects |                   |      | (269,000   | )     |      |   | (103,000 | )     |   |   | (150,000   | )    
|Add: Additional compensation expense for modification of
    non-employee director stock options, net of related tax effect                                                                  |                   |      |           |       |      |   |         |       |   |   | 48,000     |      
|                                                                                                                                                                                             |                   |      |            |       |      |   |          |       |  
|Pro forma net loss                                                                                                                                                                           |                   | $    | (1,194,000 | )     |      | $ | (328,000 | )     |   | $ | (1,598,000 | )    
|                                                                                                                                                                                             |                   |      |            |       |      |   |          |       |  
|Loss per share, as reported                                                                                                                                                                  |                   |      |            |       |      |   |          |       |   |   |            |      
|                                                                                                                                                                                             | Basic and diluted |      | $          | (0.13 | )    |   | $        | (0.03 | ) |   | $          | (0.26 | )
|Pro forma loss per share                                                                                                                                                                     |                   |      |            |       |      |   |          |       |   |   |            |      
|                                                                                                                                                                                             | Basic and diluted |      | $          | (0.17 | )    |   | $        | (0.05 | ) |   | $          | (0.28 | )

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REFAC OPTICAL GROUP


NOTES TO FINANCIAL STATEMENTS  (Continued)






|   |                   
|-- | ------------------
|F. | Earnings Per Share



|                                     |  |      |           |  |      |  |           |      |  |  |           | 
|------------------------------------ |  | ---- | --------- |  | ---- |  | --------- | ---- |  |  | --------- | 
|                                     |  | 2005 |           |  | 2004 |  |           | 2003 | 
|                                     |  |      |           |  |      |  |           |      | 
|Basic shares                         |  |      | 7,009,638 |  |      |  | 6,992,105 |      |  |  | 5,717,128 | 
|Dilution: Stock options and warrants |  |      |          |  |      |  |          |      |  |  |          | 
|                                     |  |      |           |  |      |  |           |      | 
|Diluted shares                       |  |      | 7,009,638 |  |      |  | 6,992,105 |      |  |  | 5,717,128 | 
|                                     |  |      |           |  |      |  |           |      | 





|   |                          
|-- | -------------------------
|G. | Cash and Cash Equivalents





|   |                    
|-- | -------------------
|H. | Revenue Recognition





|   |                                        
|-- | ---------------------------------------
|I. | Using Estimates in Financial Statements





|   |            
|-- | -----------
|J. | Intangibles



|                               |       |              |       |       |      |   |       |       | 
|------------------------------ | ----- | ------------ | ----- | ----- | ---- | - | ----- | ----- | 
|                               |       | December 31, |      
|                               |       |              |      
|                               |       | 2005         |       |       | 2004 |  
|                               |       |              |       |       |      |  
|Patents                        |       | $            | 3,000 |       |      | $ | 3,000 |      
|Less: accumulated amortization |       |              | 1,000 |       |      |   | 1,000 |      
|                               |       |              |       |       |      |  
|                               | Total |              | $     | 2,000 |      |   | $     | 2,000 | 
|                               |       |              |       |       |      |  

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REFAC OPTICAL GROUP


NOTES TO FINANCIAL STATEMENTS  (Continued)




|   |                       
|-- | ----------------------
|K. | Property and Equipment







|   |                  
|-- | -----------------
|L. | Reclassifications





|   |                                    
|-- | -----------------------------------
|M. | Fair Value of Financial Instruments





|   |                              
|-- | -----------------------------
|N. | New Accounting Pronouncements

FASB FAS 154




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REFAC OPTICAL GROUP


NOTES TO FINANCIAL STATEMENTS  (Continued)




Note 2  Palisade Merger


Old Refac Common Stock Common
Stock Payment Right Payment
Amount LDA












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REFAC OPTICAL GROUP


NOTES TO FINANCIAL STATEMENTS  (Continued)




Note 3  Acquisition of U.S. Vision and
OptiCare










Note 4  Related Party Transactions


PCM






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REFAC OPTICAL GROUP


NOTES TO FINANCIAL STATEMENTS  (Continued)






PCS


Note 5  Income Taxes


Tax Refund RIL


Income Tax Provision


|                |  |      |          |   |      |   |          |      |  |   |          |  
|--------------- |  | ---- | -------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                |  | 2005 |          |   | 2004 |   |          | 2003 | 
|                |  |      |          |   |      |   |          |      | 
|Federal         |  | $    | (138,000 | ) |      | $ | 34,000   |      |  | $ | (730,000 | )
|Deferred        |  |      | 197,000  |   |      |   | (164,000 | )    |  |   | 96,000   |  
|State and local |  |      |         |   |      |   |         |      |  |   | (40,000  | )
|                |  |      |          |   |      |   |          |      | 
|                |  | $    | 59,000   |   |      | $ | (130,000 | )    |  | $ | (674,000 | )
|                |  |      |          |   |      |   |          |      | 

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REFAC OPTICAL GROUP


NOTES TO FINANCIAL STATEMENTS  (Continued)




|                                             |  |      |     |    |      |  |     |      |  |  |     |   
|-------------------------------------------- |  | ---- | --- | -- | ---- |  | --- | ---- |  |  | --- | --
|                                             |  | 2005 |     |    | 2004 |  |     | 2003 | 
|                                             |  |      |     |    |      |  |     |      | 
|Statutory rate                               |  |      | (34 | )% |      |  | (34 | )%   |  |  | (34 | )%
|Permanent differences related to merger      |  |      | 48  | %  |      |  |    |      |  |  | 5   | % 
|State and local                              |  |      |    |    |      |  |    |      |  |  | (2  | )%
|Dividend Received Exclusion                  |  |      |    |    |      |  | (1  | )%   |  |  |    |   
|Settlement of federal income tax examination |  |      | (5  | )% |      |  |    |      |  |  |    |   
|Other                                        |  |      | (2  | )% |      |  |    |      |  |  |    |   
|                                             |  |      |     |    |      |  |     |      | 
|Provision (benefit) for taxes on income      |  |      | 7   | %  |      |  | (35 | )%   |  |  | (31 | )%
|                                             |  |      |     |    |      |  |     |      | 

Deferred Taxes


|                     |                                                            |                           |   |         |           |  |   |         |           | 
|-------------------- | ---------------------------------------------------------- | ------------------------- | - | ------- | --------- |  | - | ------- | --------- | 
|                     |                                                            | December 31,              |  
|                     |                                                            |                           |  
|                     |                                                            | 2005                      |   |         | 2004      | 
|                     |                                                            |                           |   |         |           | 
|Deferred tax assets: |                                                            |                           |   |         |           |  |   |        
|                     | Assets transferred to the Company from former subsidiaries |                           | $ | 60,000  |           |  | $ | 201,000 |          
|                     | Management incentive compensation and bonuses              |                           |   | 259,000 |           |  |   | 482,000 |          
|                     | Federal and state net operating loss carryforwards         |                           |   | 516,000 |           |  |   | 480,000 |          
|                     | Deferred rent and contingent loss on leasehold             |                           |   | 98,000  |           |  |   | 67,000  |          
|                     | Unearned Compensation                                      |                           |   | 40,000  |           |  |   |        |          
|                     | Depreciation, insurance policies and other                 |                           |   | 136,000 |           |  |   | 84,000  |          
|                     |                                                            |                           |   |         |           | 
|                     |                                                            | Total deferred tax assets |   |         | 1,109,000 |  |   |         | 1,314,000 | 
|                     | Less: Valuation allowance                                  |                           |   | 251,000 |           |  |   | 287,000 |          
|                     |                                                            |                           |   |         |           | 
|                     |                                                            | Net deferred tax assets   |   | $       | 859,000   |  |   | $       | 1,027,000 | 
|                     |                                                            |                           |   |         |           | 





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##### Table of Contents



REFAC OPTICAL GROUP


NOTES TO FINANCIAL STATEMENTS  (Continued)


Note 6  Commitments




|   |                      
|-- | ---------------------
|A. | Leasehold Obligations

















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REFAC OPTICAL GROUP


NOTES TO FINANCIAL STATEMENTS  (Continued)




|     |  |         |         |  |          |          |         |          |  |   |         |  
|---- |  | ------- | ------- |  | -------- | -------- | ------- | -------- |  | - | ------- | -
|     |  |         |         |  |          | Net Rent |        
|     |  | Rental  |         |  | Sublease |          |         | Expense  | 
|Year |  | Expense |         |  | Income   |          |         | (Income) | 
|     |  |         |         |  |          |          |         |          | 
|2003 |  | $       | 508,000 |  |          | $        | 592,000 |          |  | $ | (84,000 | )
|2004 |  | $       | 525,000 |  |          | $        | 548,000 |          |  | $ | (23,000 | )
|2005 |  | $       | 591,000 |  |          | $        | 352,000 |          |  | $ | 239,000 |  









|   |                                                 
|-- | ------------------------------------------------
|B. | Employment Agreements and Incentive Compensation





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REFAC OPTICAL GROUP


NOTES TO FINANCIAL STATEMENTS  (Continued)




GLDA




| |   |                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the LDA of the Company as of June 30, 2005, as calculated
    under the Palisade Merger Agreement, plus                                                                                                                                               
|
| |  | the signing bonus, retention and incentive compensation payments
    paid or payable to him and the signing bonus and incentive
    compensation payments paid or payable to the Companys Vice
    President as a result of the Palisade Merger, less
|
| |  | the sum of $17,844,000.                                                                                                                                                                                                                               









|   |                                                
|-- | -----------------------------------------------
|C. | Deferred Compensation/ Post-Retirement Benefits



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##### Table of Contents



REFAC OPTICAL GROUP


NOTES TO FINANCIAL STATEMENTS  (Continued)




Note 7  Consulting Agreement


Consulting Agreement CL 96-18,




Note 8  Investments Held to Maturity




Note 9  Property and Equipment




|                                |  |              |           |   |      |   |           |  
|------------------------------- |  | ------------ | --------- | - | ---- | - | --------- | -
|                                |  | December 31, |          
|                                |  |              |          
|                                |  | 2005         |           |   | 2004 |  
|                                |  |              |           |   |      |  
|Leasehold improvements          |  | $            | 932,000   |   |      | $ | 932,000   |  
|Furniture and fixtures          |  |              | 195,000   |   |      |   | 352,000   |  
|Computer software and equipment |  |              | 80,000    |   |      |   | 70,000    |  
|Office and other equipment      |  |              | 23,000    |   |      |   | 23,000    |  
|                                |  |              |           |   |      |  
|                                |  |              | 1,230,000 |   |      |   | 1,377,000 |  
|Less: Accumulated depreciation  |  |              | (672,000  | ) |      |   | (630,000  | )
|                                |  |              |           |   |      |  
|                                |  | $            | 558,000   |   |      | $ | 747,000   |  
|                                |  |              |           |   |      |  



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REFAC OPTICAL GROUP


NOTES TO FINANCIAL STATEMENTS  (Continued)


Note 10  Stockholders Equity




| |                   
| | ------------------
| | Stock Option Plans



1990 Plan


1998 Plan






|                                 |  |      |         |          |       |   |      |      |          |  |         |   |  |          |      |  |       |  |         |   |  |   |      | 
|-------------------------------- |  | ---- | ------- | -------- | ----- | - | ---- | ---- | -------- |  | ------- | - |  | -------- | ---- |  | ----- |  | ------- | - |  | - | ---- | 
|                                 |  |      |         | Weighted |       |   |      |      | Weighted |  |         |   |  | Weighted |     
|                                 |  |      |         | Average  |       |   |      |      | Average  |  |         |   |  | Average  |     
|                                 |  |      |         | Exercise |       |   |      |      | Exercise |  |         |   |  | Exercise |     
|                                 |  | 2005 |         |          | Price |   |      | 2004 |          |  | Price   |   |  | 2003     |      |  | Price | 
|                                 |  |      |         |          |       |   |      |      |          |  |         |   |  |          |      |  |       | 
|Outstanding at beginning of year |  |      | 182,500 |          |       | $ | 7.45 |      |          |  | 232,500 |   |  | $        | 6.47 |  |       |  | 244,000 |   |  | $ | 6.32 | 
|Options granted                  |  |      |        |          |       |   |     |      |          |  |        |   |  |          |     |  |       |  |        |   |  |   |     | 
|Options exercised                |  |      | (40,000 | )        |       |   | 2.50 |      |          |  | (50,000 | ) |  |          | 2.88 |  |       |  | (11,500 | ) |  |   | 3.42 | 
|Options forfeited                |  |      |        |          |       |   |     |      |          |  |        |   |  |          |     |  |       |  |        |   |  |   |     | 
|                                 |  |      |         |          |       |   |      |      |          |  |         |   |  |          |      |  |       | 
|Outstanding at end of year       |  |      | 142,500 |          |       | $ | 8.84 |      |          |  | 182,500 |   |  | $        | 7.45 |  |       |  | 232,500 |   |  | $ | 6.47 | 
|                                 |  |      |         |          |       |   |      |      |          |  |         |   |  |          |      |  |       | 
|Exercisable at end of year       |  |      | 142,500 |          |       | $ | 8.84 |      |          |  | 182,500 |   |  | $        | 7.45 |  |       |  | 232,500 |   |  | $ | 6.47 | 
|                                 |  |      |         |          |       |   |      |      |          |  |         |   |  |          |      |  |       | 

47



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REFAC OPTICAL GROUP


NOTES TO FINANCIAL STATEMENTS  (Continued)




|            |       |  |                |          |      |               |          |  |          |  |  |                |      |  |          |   |      |       |  |  |         |  |  |   |      | 
|----------- | ----- |  | -------------- | -------- | ---- | ------------- | -------- |  | -------- |  |  | -------------- | ---- |  | -------- | - | ---- | ----- |  |  | ------- |  |  | - | ---- | 
|            |       |  |                | Weighted |      |               | Weighted |  |          |  |  | Weighted       |     
|Price Range |       |  | Outstanding at |          |      | Average       |          |  | Average  |  |  | Exercisable at |      |  | Average  |  
|            |       |  | December 31,   |          |      | Contract Life |          |  | Exercise |  |  | December 31,   |      |  | Exercise |  
|Minimum     |       |  | Maximum        |          |      | 2005          |          |  | (Years)  |  |  | Price          |      |  | 2005     |   |      | Price | 
|            |       |  |                |          |      |               |          |  |          |  |  |                |      |  |          |   |      |       | 
|$           | 3.50  |  |                | $        | 5.90 |               |          |  | 7,500    |  |  |                | 3.96 |  |          | $ | 3.81 |       |  |  | 7,500   |  |  | $ | 3.81 | 
|$           | 5.91  |  |                | $        | 7.10 |               |          |  | 10,000   |  |  |                | 2.96 |  |          | $ | 6.88 |       |  |  | 10,000  |  |  | $ | 6.88 | 
|$           | 7.11  |  |                | $        | 9.50 |               |          |  | 125,000  |  |  |                | 1.20 |  |          | $ | 9.30 |       |  |  | 125,000 |  |  | $ | 9.30 | 
|            |       |  |                |          |      |               |          |  |          |  |  |                |      |  |          |   |      |       | 
|            | Total |  |                |          |      |               |          |  | 142,500  |  |  |                | 1.47 |  |          | $ | 8.84 |       |  |  | 142,500 |  |  | $ | 8.84 | 
|            |       |  |                |          |      |               |          |  |          |  |  |                |      |  |          |   |      |       | 

Common
Stock


2003 Plan


|                                 |  |      |         |          |       |   |      |      |          |  |         |  |  |          |      |  |       |  |         |  |  |   |      | 
|-------------------------------- |  | ---- | ------- | -------- | ----- | - | ---- | ---- | -------- |  | ------- |  |  | -------- | ---- |  | ----- |  | ------- |  |  | - | ---- | 
|                                 |  |      |         | Weighted |       |   |      |      | Weighted |  |         |  |  | Weighted |     
|                                 |  |      |         | Average  |       |   |      |      | Average  |  |         |  |  | Average  |     
|                                 |  |      |         | Exercise |       |   |      |      | Exercise |  |         |  |  | Exercise |     
|                                 |  | 2005 |         |          | Price |   |      | 2004 |          |  | Price   |  |  | 2003     |      |  | Price | 
|                                 |  |      |         |          |       |   |      |      |          |  |         |  |  |          |      |  |       | 
|Outstanding at beginning of year |  |      | 195,000 |          |       | $ | 4.66 |      |          |  | 150,000 |  |  | $        | 4.64 |  |       |  |        |  |  | $ |     | 
|Options granted                  |  |      | 300,000 |          |       |   | 4.52 |      |          |  | 45,000  |  |  |          | 4.72 |  |       |  | 150,000 |  |  |   | 4.64 | 
|Options exercised                |  |      |        |          |       |   |     |      |          |  |        |  |  |          |     |  |       |  |        |  |  |   |     | 
|Options forfeited                |  |      |        |          |       |   |     |      |          |  |        |  |  |          |     |  |       |  |        |  |  |   |     | 
|                                 |  |      |         |          |       |   |      |      |          |  |         |  |  |          |      |  |       | 
|Outstanding at end of year       |  |      | 495,000 |          |       | $ | 4.57 |      |          |  | 195,000 |  |  | $        | 4.66 |  |       |  | 150,000 |  |  | $ | 4.64 | 
|                                 |  |      |         |          |       |   |      |      |          |  |         |  |  |          |      |  |       | 
|Exercisable at end of year       |  |      | 280,003 |          |       | $ | 4.60 |      |          |  | 115,001 |  |  | $        | 4.65 |  |       |  | 5,000   |  |  | $ | 4.64 | 
|                                 |  |      |         |          |       |   |      |      |          |  |         |  |  |          |      |  |       | 



|            |       |  |                |          |      |               |          |  |          |  |  |                |      |  |          |   |      |       |  |  |         |  |  |   |      | 
|----------- | ----- |  | -------------- | -------- | ---- | ------------- | -------- |  | -------- |  |  | -------------- | ---- |  | -------- | - | ---- | ----- |  |  | ------- |  |  | - | ---- | 
|            |       |  |                | Weighted |      |               | Weighted |  |          |  |  | Weighted       |     
|Price Range |       |  | Outstanding at |          |      | Average       |          |  | Average  |  |  | Exercisable at |      |  | Average  |  
|            |       |  | December 31,   |          |      | Contract Life |          |  | Exercise |  |  | December 31,   |      |  | Exercise |  
|Minimum     |       |  | Maximum        |          |      | 2005          |          |  | (Years)  |  |  | Price          |      |  | 2005     |   |      | Price | 
|            |       |  |                |          |      |               |          |  |          |  |  |                |      |  |          |   |      |       | 
|$           | 4.10  |  |                | $        | 4.70 |               |          |  | 265,000  |  |  |                | 8.38 |  |          | $ | 4.28 |       |  |  | 163,335 |  |  | $ | 4.38 | 
|$           | 4.71  |  |                | $        | 5.20 |               |          |  | 230,000  |  |  |                | 4.87 |  |          | $ | 4.91 |       |  |  | 116,668 |  |  | $ | 4.92 | 
|            |       |  |                |          |      |               |          |  |          |  |  |                |      |  |          |   |      |       | 
|            | Total |  |                |          |      |               |          |  | 495,000  |  |  |                | 6.75 |  |          | $ | 4.57 |       |  |  | 280,003 |  |  | $ | 4.60 | 
|            |       |  |                |          |      |               |          |  |          |  |  |                |      |  |          |   |      |       | 

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REFAC OPTICAL GROUP


NOTES TO FINANCIAL STATEMENTS  (Continued)




| |                
| | ---------------
| | Preferred Stock



Note 11  Concentrations




Note 12  Wrench versus Taco Bell
Litigation


RL


Note 13  Accounts Payable and Accrued
Expenses




|                                         |  |                          |           |  |      |   |         | 
|---------------------------------------- |  | ------------------------ | --------- |  | ---- | - | ------- | 
|                                         |  | Years Ended December 31, |          
|                                         |  |                          |          
|                                         |  | 2005                     |           |  | 2004 |  
|                                         |  |                          |           |  |      |  
|Accounts payable                         |  | $                        | 206,000   |  |      | $ | 10,000  | 
|Amounts payable under service agreements |  |                          | 69,000    |  |      |   | 71,000  | 
|Accounting and auditing                  |  |                          | 123,000   |  |      |   | 91,000  | 
|Deferred rent                            |  |                          | 57,000    |  |      |   | 72,000  | 
|Legal                                    |  |                          | 52,000    |  |      |   | 28,000  | 
|Tax reserve                              |  |                          |          |  |      |   | 281,000 | 
|Reserve on rental loss                   |  |                          | 188,000   |  |      |   | 96,000  | 
|Management bonuses                       |  |                          | 228,000   |  |      |   |        | 
|Merger expenses                          |  |                          | 118,000   |  |      |   |        | 
|Other                                    |  |                          | 26,000    |  |      |   | 36,000  | 
|                                         |  |                          |           |  |      |  
|Total                                    |  | $                        | 1,067,000 |  |      | $ | 685,000 | 
|                                         |  |                          |           |  |      |  

Note 14  Business and Asset Dispositions




|   |                                 
|-- | --------------------------------
|A. | Sale of the Graphic Design Group

DM2


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REFAC OPTICAL GROUP


NOTES TO FINANCIAL STATEMENTS  (Continued)








|   |                                 
|-- | --------------------------------
|B. | Sale of Licensing-Related Assets

GHE




|   |                  
|-- | -----------------
|C. | OXO International

OXO




|   |                                 
|-- | --------------------------------
|D. | Sale of the Product Design Group

PG 1 2


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REFAC OPTICAL GROUP


NOTES TO FINANCIAL STATEMENTS  (Continued)






PG-INC PGBT


PG-INC




|   |            
|-- | -----------
|E. | Sale of RIL

RCP 1 2


Note 15  Unaudited Selected Quarterly
Financial Data


|                                                                              |  |         |           |  |         |   |          |         |  |   |          |   |  |   |          |  
|----------------------------------------------------------------------------- |  | ------- | --------- |  | ------- | - | -------- | ------- |  | - | -------- | - |  | - | -------- | -
|                                                                              |  | 2005    |          
|                                                                              |  |         |          
|                                                                              |  | First   |           |  | Second  |   |          | Third   |  |   | Fourth   |  
|                                                                              |  | Quarter |           |  | Quarter |   |          | Quarter |  |   | Quarter  |  
|                                                                              |  |         |           |  |         |   |          |         |  |   |          |  
|Total revenues                                                                |  | $       | 1,839,000 |  |         | $ | 189,000  |         |  | $ | 326,000  |   |  |   | 55,000   |  
|Cost of revenues                                                              |  |         | 28,000    |  |         |   | 33,000   |         |  |   | 29,000   |   |  |   | 28,000   |  
|Net income (loss) from continuing operations                                  |  |         | 882,000   |  |         |   | (614,000 | )       |  |   | (454,000 | ) |  |   | (739,000 | )
|Net income (loss)                                                             |  | $       | 882,000   |  |         | $ | (614,000 | )       |  | $ | (454,000 | ) |  | $ | (739,000 | )
|Net income (loss) from continuing operations per basic and
    diluted shares |  | $       | 0.13      |  |         | $ | (0.09    | )       |  | $ | (0.06    | ) |  |   | (0.11    | )
|Net income (loss) per basic and diluted shares                                |  | $       | 0.13      |  |         | $ | (0.09    | )       |  | $ | (0.06    | ) |  |   | (0.11    | )

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REFAC OPTICAL GROUP


NOTES TO FINANCIAL STATEMENTS  (Continued)


|                                                                              |  |         |          |   |         |   |         |         |  |   |         |  |  |   |          |  
|----------------------------------------------------------------------------- |  | ------- | -------- | - | ------- | - | ------- | ------- |  | - | ------- |  |  | - | -------- | -
|                                                                              |  | 2004    |         
|                                                                              |  |         |         
|                                                                              |  | First   |          |   | Second  |   |         | Third   |  |   | Fourth  | 
|                                                                              |  | Quarter |          |   | Quarter |   |         | Quarter |  |   | Quarter | 
|                                                                              |  |         |          |   |         |   |         |         |  |   |         | 
|Total revenues                                                                |  | $       | 403,000  |   |         | $ | 491,000 |         |  | $ | 519,000 |  |  | $ | 366,000  |  
|Cost of revenues                                                              |  |         | 31,000   |   |         |   | 30,000  |         |  |   | 31,000  |  |  |   | 32,000   |  
|Net income (loss) from continuing operations                                  |  |         | (174,000 | ) |         |   | (39,000 | )       |  |   | 126,000 |  |  |   | (152,000 | )
|Net income (loss)                                                             |  | $       | (169,000 | ) |         | $ | (39,000 | )       |  | $ | 131,000 |  |  | $ | (148,000 | )
|Net income (loss) from continuing operations per basic and
    diluted shares |  | $       | (0.02    | ) |         | $ | (0.01   | )       |  | $ | 0.02    |  |  | $ | (0.02    | )
|Net income (loss) per basic and diluted shares                                |  | $       | (0.02    | ) |         | $ | (0.01   | )       |  | $ | 0.02    |  |  | $ | (0.02    | )

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




Refac Optical Group










| |                       
| | ----------------------
| | /s/ GRANT THORNTON LLP





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|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure








|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

13a-15(e) 15d-15(e) Exchange Act


13a-15(f) 15d-15(f)







|         |                  
|-------- | -----------------
|Item 9B. | Other Information






PART III







|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant







| |                   
| | ------------------
| | Executive Officers



|                         |  |     |    |                    |                   |  |      |             |  |                                                                                                               
|------------------------ |  | --- | -- | ------------------ | ----------------- |  | ---- | ----------- |  | --------------------------------------------------------------------------------------------------------------
|                         |  |     |    | Served in Such     |                   |  |     
|                         |  |     |    | Position or Office |                   |  |     
|Name                     |  | Age |    |                    | Continually Since |  |      | Position(1)
|                         |  |     |    |                    |                   |  |      |            
|J. David Pierson         |  |     | 59 |                    |                   |  | 2005 |             |  | President and Chief Executive Officer(2)                                                                      
|Robert L. Tuchman        |  |     | 63 |                    |                   |  | 1991 |             |  | Senior Vice President, General Counsel, Secretary and Chairman
    of the Executive Committee of the Board.(3)
|Raymond A. Cardonne, Jr. |  |     | 39 |                    |                   |  | 1997 |             |  | Senior Vice President, Chief Financial Officer and Treasurer(4)                                               








|    |                                                                                                                                                                                                                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Each executive officers term of office is until the next
    organizational meeting of the Board (traditionally held
    immediately after the Annual Meeting of Stockholders of the
    Company) and until the election and qualification of his or her
    successor. However, the Board has the discretion to replace
    officers at any time.
|   
|(2) | Mr. Pierson joined the Company as its President and Chief
    Operating Officer on June 20, 2005 and was appointed its
    President and Chief Executive Officer on March 6, 2006.
    From 1996 to 2001, he served as                                                                                                                             

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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | President of Licensed Brands for Cole National, a leading
    optical retailer. During his tenure with Cole National, he led
    the expansion of vision care products and services from 650
    stores to more than 1,100 under the banners of Sears Optical,
    Target and BJs Wholesale Clubs. Through more than thirty
    years in retailing, Mr. Pierson has managed operations,
    merchandising, strategic planning and implementation in a
    variety of positions with Sears, Target Stores and Federated
    Department Stores. Most recently, from March 2001 to
    April 2004, he served as the Chairman, President and Chief
    Executive Officer of CPI Corporation (NYSE: CPY),
    which provides portrait photography services in over 1,000
    studios throughout the United States, Puerto Rico and Canada
    principally under license agreements with Sears. During the
    period after he left CPI Corporation and before joining Refac,
    he served as a consultant to several companies, including some
    in the retail optical business.
|   
|(3) | Mr. Tuchman, has been a director of the Company since 1991
    and is chairman of the boards executive committee. Since
    March 6, 2006, when J. David Pierson succeeded
    Mr. Tuchman as Chief Executive Officer, Mr. Tuchman
    has been serving as the Companys Senior Vice President,
    General Counsel and Secretary. Previously, he served as the
    Companys President from 1991 until June 2005, Chief
    Executive Officer from 1997 to March 6, 2006 and Chairman
    from 1997 until March 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|(4) | Mr. Cardonne joined the Company in 1997 and became Chief
    Financial Officer and Treasurer of the Company in
    August 2000. He served as Secretary of the Company from
    November 1998 until March 2006. Prior to joining the
    Company, from December 1994 through November 1997,
    Mr. Cardonne was a Vice President at Technology
    Management & Funding, L.P. From August 1993 to
    December 1994, he worked for NEPA Venture Funds, an
    early-stage venture capital firm, and the Lehigh Small Business
    Development Center. He previously worked at Ford
    Electronics & Refrigeration Corporation from
    January 1990 to July 1993.                                                                                                                                                                                                                                                                                                                                                                                                             

S-4







|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation

S-4







|         |                                                                                                    
|-------- | ---------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholders Matters

S-4







|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions

S-4


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|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accounting Fees and Services



|                   |  |      |         |  |      |   |         | 
|------------------ |  | ---- | ------- |  | ---- | - | ------- | 
|Description        |  | 2005 |         |  | 2004 |  
|                   |  |      |         |  |      |  
|Audit Fees         |  | $    | 175,000 |  |      | $ | 110,000 | 
|Audit related fees |  |      | 62,000  |  |      |   |        | 
|Tax fees           |  |      | 29,000  |  |      |   | 72,000  | 
|                   |  |      |         |  |      |  
|Total              |  | $    | 266,000 |  |      | $ | 182,000 | 
|                   |  |      |         |  |      |  

Audit Fees.


Audit Related Fees.


Tax Fees.




2-01 S-X.





PART IV







|         |                                           
|-------- | ------------------------------------------
|Item 15. | Exhibits and Financial Statement Schedules

(a)(1) Financial Statements.




(a)(3) Exhibits.




(b) Exhibits.




56



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##### Table of Contents






SIGNATURES






| |      
| | -----
| | Refac

|                      |  |     |  |                                                                                
|--------------------- |  | --- |  | -------------------------------------------------------------------------------
|Dated: March 31, 2006 |  | By: |  | /s/ J. David PiersonJ. David Pierson, President
    and Chief Executive Officer



|                      |  |                                                                                                                                                                |  |                                                                                                                        
|--------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------
|Dated: March 31, 2006 |  | By:                                                                                                                                                            |  | /s/ J. David Pierson      J.
    David Pierson, President and Chief Executive Officer (Principal
    Executive Officer)
|                     
|Dated: March 31, 2006 |  | /s/ Raymond A. Cardonne, Jr.      Raymond
    A. Cardonne, Jr., Senior Vice President, Chief Financial
    Officer and Treasurer (Principal Financial Officer)
|                     
|Dated: March 31, 2006 |  | /s/ Robert L. Tuchman      Robert
    L. Tuchman, Senior Vice President, General Counsel, Secretary
    and Director                                          
|                     
|Dated: March 31, 2006 |  | /s/ Eugene K. Bolton      Eugene
    K. Bolton, Director                                                                                                      
|                     
|Dated: March 31, 2006 |  | /s/ Jeffrey A. Cole      Jeffrey
    A. Cole, Director                                                                                                        
|                     
|Dated: March 31, 2006 |  | /s/ Dennison T. Veru      Dennison
    T. Veru, Director                                                                                                      
|Dated: March 31, 2006 |  | /s/ Clark A. Johnson      Clark
    A. Johnson, Chairman                                                                                                      
|                     
|Dated: March 31, 2006 |  | /s/ Mark N. Kaplan      Mark N.
    Kaplan, Director                                                                                                          

57



---



##### Table of Contents



|                      |  |                                                            |  | 
|--------------------- |  | ---------------------------------------------------------- |  | 
|                     
|Dated: March 31, 2006 |  | /s/ Joseph W. Marino      Joseph
    W. Marino, Director  
|                     
|Dated: March 31, 2006 |  | /s/ Melvin Meskin      Melvin
    Meskin, Director        
|                     
|Dated: March 31, 2006 |  | /s/ Mark S. Newman      Mark S.
    Newman, Director      
|                     
|Dated: March 31, 2006 |  | /s/ Jeffrey D. Serkes      Jeffrey
    D. Serkes, Director
|                     
|Dated: March 31, 2006 |  | /s/ David C. Stone      David
    C. Stone, Director      
|                     
|Dated: March 31, 2006 |  | /s/ Dean J. Yimoyines      Dean J.
    Yimoyines, Director

58



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##### Table of Contents






EXHIBIT INDEX


|        |    |         |  |                                                                                                                                                                                                                                                                                                                                                                
|------- | -- | ------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |        
|No.     |    | Exhibit
|        |    |        
|        | 3  | .1      |  | Restated Certificate of Incorporation of the Company.
    Incorporated by reference to Appendix C to the
    Companys Amendment No. 1 to Registration Statement on
    Form S-4, filed with the SEC on February 14, 2006, SEC
    file number 333-130328.                                                                                                     
|        | 3  | .2      |  | Amended and Restated By-laws of the Company. Incorporated by
    reference to Exhibit 3.1 to the Companys Current
    Report on Form 8-K filed with the SEC on March 6,
    2006, SEC file number 001-12776.                                                                                                                                                  
|        | 4  | .1      |  | Form of Warrant dated January 25, 2002, issued to
    CapitalSource Finance, LLC, for the purchase of up to
    11,800 shares of the Companys common stock,
    incorporated herein by reference to the Registrants
    Current Report on Form 8-K filed on February 11, 2002,
    Exhibit 3.6.                                                              
|        | 10 | .1      |  | Agreement and Plan of Merger, dated as of August 19, 2002,
    by and among Palisade Concentrated Equity Partnership, L.P.,
    Palisade Merger Corp. and Refac. Incorporated by reference to
    Exhibit 10.1 to the Companys Current Report on
    Form 8-K filed with the SEC on August 21, 2002, SEC
    file number 001-12776.                           
|        | 10 | .2      |  | Amendment No. 1 to the Agreement and Plan of Merger, dated
    as of October 21, 2002, by and among Palisade Concentrated
    Equity Partnership, L.P., Palisade Merger Corp. and Refac.
    Incorporated by reference to Exhibit 10.1 to the
    Companys Current Report on Form 8-K filed with the
    SEC on October 24, 2002, SEC file number 001-12776.  
|        | 10 | .3      |  | Amendment No. 2 to the Agreement and Plan of Merger, dated
    as of December 12, 2002, by and among Palisade Concentrated
    Equity Partnership, L.P., Palisade Merger Corp. and Refac.
    Incorporated by reference to Exhibit 10.1 to the
    Companys Current Report on Form 8-K filed with the
    SEC on December 16, 2002, SEC file number 001-12776.
|        | 10 | .4      |  | Amendment No. 3 to the Agreement and Plan of Merger, dated
    as of January 23, 2003, by and among Palisade Concentrated
    Equity Partnership, L.P., Palisade Merger Corp. and Refac.
    Incorporated by reference to Exhibit 10.1 to the
    Companys Current Report on Form 8-K filed with the
    SEC on January 24, 2003, SEC file number 001-12776.  
|        | 10 | .5      |  | Fifth Amended and Restated Employment Agreement between Robert
    L. Tuchman and Refac, dated as of November 7, 2003.
    Incorporated by reference to Exhibit 10 (a) to
    the Companys Quarterly Report on Form 10-Q filed with
    the SEC on November 12, 2003, SEC file number 001-12776.*                                                             
|        | 10 | .6      |  | Amended and Restated Employment Agreement between Raymond A.
    Cardonne, Jr. and Refac, dated as of November 7, 2003.
    Incorporated by reference to Exhibit 10 (b) to
    the Companys Quarterly Report on Form 10-Q filed with
    the SEC on November 12, 2004, SEC
    file number 001-12776.*                                                        
|        | 10 | .7      |  | 2003 Stock Incentive Plan. Incorporated by reference to
    Exhibit B to the Companys Proxy Statement for its
    2003 Annual Meeting of Stockholders, filed with the SEC on
    April 22, 2003, SEC file number 001-12776.*                                                                                                                                  
|        | 10 | .8      |  | Amendment No. 1 to 2003 Stock Incentive Plan. Incorporated
    by reference to Exhibit F to Amendment No. 1 to
    Registration Statement on Form S-4, filed on
    February 14, 2006, SEC file number 333-130328.*                                                                                                                                            
|        | 10 | .9      |  | 1998 Stock Incentive Plan. Incorporated by reference to
    Exhibit A to the Companys Proxy Statement for its
    1998 Annual Meeting of Stockholders, filed with the SEC on
    March 31, 1998, SEC file number 001-12776.*                                                                                                                                  
|        | 10 | .10     |  | First Amendment to the Refac Technology Development Corporation
    1998 Stock Incentive Plan, dated as of January 23, 2003.
    Incorporated by reference to Exhibit 10.6 to the
    Companys Current Report on Form 8-K filed with the
    SEC on January 24, 2003, SEC file number 001-12776.*                                                             
|        | 10 | .11     |  | 1990 Stock Option and Incentive Plan. Incorporated by reference
    to Exhibit A to the Companys Proxy Statement for its
    1990 Annual Meeting of Stockholders, filed with the SEC on
    April 23, 1990, SEC file number 0-7704.*                                                                                                                          
|        | 10 | .12     |  | Employment Agreement with Robert L. Tuchman, dated April 1,
    2005. Incorporated by reference to Exhibit 10.1 to the
    Companys Current Report on Form 8-K, filed with the
    SEC on April 6, 2005, SEC file number 001-12776.                                                                                                                           
|        | 10 | .13     |  | Employment Agreement with Raymond A. Cardonne, Jr., dated
    April 1, 2005. Incorporated by reference to
    Exhibit 10.2 to the Companys Current Report on
    Form 8-K, filed with the SEC on April 6, 2005, SEC
    file number 001-12776.                                                                                                                



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##### Table of Contents



|        |    |         |  |                                                                                                                                                                                                                                                                                                                                   
|------- | -- | ------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |        
|No.     |    | Exhibit
|        |    |        
|        | 10 | .14     |  | Amendment No. 1, dated March 30, 2006, to Employment
    Agreement with Raymond A. Cardonne, Jr., dated
    April 1, 2005.**                                                                                                                                                                                                      
|        | 10 | .15     |  | Stock Option Agreement with Robert L. Tuchman, dated
    April 1, 2005. Incorporated by reference to
    Exhibit 10.3 to the Companys Current Report on
    Form 8-K, filed with the SEC on April 6, 2005, SEC
    file number 001-12776.                                                                                        
|        | 10 | .16     |  | Stock Option Agreement with Raymond A. Cardonne, Jr., dated
    April 1, 2005. Incorporated by reference to
    Exhibit 10.4 to the Companys Current Report on
    Form 8-K, filed with the SEC on April 6, 2005, SEC
    file number 001-12776.                                                                                 
|        | 10 | .17     |  | Employment Agreement with J. David Pierson, dated June 20,
    2005. Incorporated by reference to Exhibit 10.1 to the
    Companys Current Report on Form 8-K, filed with the
    SEC on June 24, 2005, SEC file number 001-12776.                                                                                               
|        | 10 | .18     |  | Stock Option Agreement with J. David Pierson, dated
    June 20, 2005. Incorporated by reference to
    Exhibit 10.2 to the Companys Current Report on
    Form 8-K, filed with the SEC on June 24, 2005, SEC
    file number 001-12776.                                                                                         
|        | 10 | .19     |  | Consulting Agreement with Cole Limited, Inc., dated
    June 20, 2005. Incorporated by reference to
    Exhibit 10.3 to the Companys Current Report on
    Form 8-K, filed with the SEC on June 24, 2005, SEC
    file number 001-12776.                                                                                         
|        | 10 | .20     |  | Stock Option Agreement with Cole Limited, Inc., dated
    June 20, 2005. Incorporated by reference to
    Exhibit 10.4 to the Companys Current Report on
    Form 8-K, filed with the SEC on June 24, 2005, SEC
    file number 001-12776.                                                                                       
|        | 10 | .21     |  | Stock Purchase Agreement with Cole Limited, Inc., dated
    June 20, 2005. Incorporated by reference to
    Exhibit 10.5 to the Companys Current Report on
    Form 8-K, filed with the SEC on June 24, 2005, SEC
    file number 001-12776.                                                                                     
|        | 10 | .22     |  | Agreement and Plan of Merger, dated as of August 22, 2005,
    by and among Refac, OptiCare Merger Sub, Inc. and OptiCare
    Health Systems, Inc. Incorporated by reference to
    Exhibit 10.1 to the Companys Current Report on
    Form 8-K, filed with the SEC on August 23, 2005, SEC
    file number 001-12776.           
|        | 10 | .23     |  | Agreement and Plan of Merger, dated as of August 22, 2005,
    by and among Refac, USV Merger Sub, Inc. and U.S. Vision,
    Inc. Incorporated by reference to Exhibit 10.2 to the
    Companys Current Report on Form 8-K, filed with the
    SEC on August 23, 2005, SEC file number 001-12776.                                
|        | 10 | .24     |  | Amendment No. 1 to Merger Agreement, dated as of
    November 11, 2005, by and among Refac, OptiCare Merger Sub,
    Inc. and OptiCare Health Systems, Inc. Incorporated by reference
    to Exhibit 10.1 to the Companys Current Report on
    Form 8-K, filed with the SEC on November 15, 2005, SEC
    file number 001-12776.
|        | 10 | .25     |  | Amendment No. 1 to Merger Agreement, dated as of
    December 5, 2005, by and among Refac, U.S. Vision
    Merger Sub, Inc. and U.S. Vision, Inc. Incorporated by
    reference to Exhibit 10.1 to the Companys Current
    Report on Form 8-K, filed with the SEC on December 8,
    2005, SEC file number 001-12776.           
|        | 10 | .26     |  | Form of License/ Lease Agreement, by and between Sears
    Roebuck & Co. and U.S. Vision. Incorporated by
    reference to Amendment No. 1 to the U.S. Visions
    Form S-1 (Reg. No. 333-35819) filed with the SEC on
    October 29, 1997.                                                                                     
|        | 10 | .27     |  | Loan and Security Agreement between U.S. Vision and
    Commerce Bank, dated as of October 30, 2002.**                                                                                                                                                                                                                            
|        | 10 | .28     |  | Amendment No. 1, dated May 30, 2003, to the Loan and
    Security Agreement, dated as of October 30, 2002, between
    U.S. Vision and Commerce Bank.**                                                                                                                                                                           
|        | 10 | .29     |  | Amendment No. 2, dated April 5, 2004, to the Loan and
    Security Agreement, dated as of October 30, 2002, between
    U.S. Vision and Commerce Bank.**                                                                                                                                                                          
|        | 10 | .30     |  | Amendment No. 3, dated January 31, 2005, to the Loan
    and Security Agreement, dated as of October 30, 2002,
    between U.S. Vision and Commerce Bank.**                                                                                                                                                                       
|        | 10 | .31     |  | Amendment No. 4, dated August 25, 2005, to the Loan
    and Security Agreement, dated as of October 30, 2002,
    between U.S. Vision and Commerce Bank.**                                                                                                                                                                        
|        | 10 | .32     |  | Amendment No. 5, dated October 31, 2005, to the Loan
    and Security Agreement, dated as of October 30, 2002,
    between U.S. Vision and Commerce Bank.**                                                                                                                                                                       



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##### Table of Contents



|        |    |         |  |                                                                                                                                                                                                                                                                                                                                                                                                            
|------- | -- | ------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |        
|No.     |    | Exhibit
|        |    |        
|        | 10 | .33     |  | Licensed Department Agreement, dated as of February 1, 1995
    between J.C. Penney Corporation, Inc. and U.S. Vision.
    Incorporated by reference to Amendment No. 1 to
    U.S. Visions Form S-1 (Reg. No. 333-35819)
    filed with the SEC on October 29, 1997.                                                                                                                                     
|        | 10 | .34     |  | Amendment No. 1 to the Licensed Department Agreement, dated
    as of December 18, 1996, by and between J.C. Penney
    Corporation, Inc. and U.S. Vision. Incorporated by
    reference to Amendment No. 1 to U.S. Visions
    Form S-1 (Reg. No. 333-35819) filed with the SEC on
    October 29, 1997.                                                                                                 
|        | 10 | .35     |  | Amendment No. 2, dated April 13, 1998, to the Licensed
    Department Agreement, dated as of February 1, 1995, by and
    between J.C. Penney Corporation, Inc. and U.S. Vision.**                                                                                                                                                                                                                         
|        | 10 | .36     |  | Amendment No. 3, dated September 30, 2002, to the
    Licensed Department Agreement, dated as of February 1,
    1995, by and between J.C. Penney Corporation, Inc. and
    U.S. Vision.**                                                                                                                                                                                                                 
|        | 10 | .37     |  | Amendment No. 4, dated May 22, 2003, to the Licensed
    Department Agreement, dated as of February 1, 1995, by and
    between J.C. Penney Corporation, Inc. and U.S. Vision.**                                                                                                                                                                                                                           
|        | 10 | .38     |  | Amendment No. 5, dated September 2003, to the Licensed
    Department Agreement, dated as of February 1, 1995, by and
    between J.C. Penney Corporation, Inc. and U.S. Vision.**                                                                                                                                                                                                                         
|        | 10 | .39     |  | Participating Provider Agreement, dated as of June 1, 1997,
    between U.S. Vision, Inc. and Cole Vision Corporation.
    Incorporated by reference to Amendment No. 1 to
    U.S. Visions Form S-1 (Reg. No. 333-35819)
    filed with the SEC on October 29, 1997.                                                                                                                                     
|        | 10 | .40     |  | Amendment No. 2, dated as of October 30, 2002 to the
    Participating Provider Agreement, dated as of June 1, 1997,
    between U.S. Vision, Inc. and Cole Vision Corporation.**                                                                                                                                                                                                                          
|        | 10 | .41     |  | Amendment No. 3, dated as of December 19, 2003, to the
    Participating Provider Agreement, dated as of June 1, 1997,
    between U.S. Vision, Inc. and Cole Vision Corporation.**                                                                                                                                                                                                                        
|        | 10 | .42     |  | Amendment No. 4, dated as of February 6, 2004, to the
    Participating Provider Agreement, dated as of June 1, 1997,
    between U.S. Vision, Inc. and Cole Vision Corporation.**                                                                                                                                                                                                                         
|        | 10 | .43     |  | Amended and Restated 2002 Stock Incentive Plan incorporated
    herein by reference to Registrants Quarterly Report on
    Form 10-Q filed August 14, 2002, Exhibit 4.4.*                                                                                                                                                                                                                                 
|        | 10 | .44     |  | Vision Care Capitation Agreement between OptiCare Eye Health
    Centers, Inc. and Blue Cross & Blue Shield of
    Connecticut, Inc. (and its affiliates), dated October 23,
    1999. Incorporated by reference to OptiCares Registration
    Statement 333-78501, Exhibit 10.9.                                                                                                                         
|        | 10 | .45     |  | Eye Care Services Agreement between OptiCare Eye Health Centers,
    Inc. and Anthem Health Plans, Inc. (d/b/a Anthem Blue Cross and
    Blue Shield of Connecticut), effective November 1, 1998.
    Incorporated by reference to OptiCares Registration
    Statement 333-78501, Exhibit 10.10.                                                                                                         
|        | 10 | .46     |  | Contracting Provider Services Agreement, dated April 26,
    1996 and amendment thereto dated as of January 1, 1999,
    between Blue Cross and Blue Shield of Connecticut, Inc., and
    OptiCare Eye Health Centers, Inc. Incorporated by reference to
    OptiCares Registration Statement 333-78501,
    Exhibit 10.11.                                                                               
|        | 10 | .47     |  | Form of Employment Agreement between OptiCare and Dean J.
    Yimoyines, M.D., effective August 13, 1999,
    incorporated herein by reference to OptiCares Registration
    Statement 333-78501, Exhibit 10.11.*                                                                                                                                                                                         
|        | 10 | .48     |  | Lease Agreement, dated September 1, 1995, by and between
    Frenchs Mill Associates, as landlord, and OptiCare Eye
    Health Centers, Inc. as tenant, for premises located at 87
    Grandview Avenue, Waterbury, Connecticut. Incorporated by
    reference to OptiCares Registration
    Statement 333-78501, Exhibit 10.17.                                                                         
|        | 10 | .49     |  | Lease Agreement, dated September 30, 1997, by and between
    Frenchs Mill Associates II, LLP, as landlord, and
    OptiCare Eye Health Center, P.C., as tenant, for premises
    located at 160 Robbins Street, Waterbury, Connecticut (upper
    level). Incorporated by reference to OptiCares
    Registration Statement 333-78501, Exhibit 10.18.                                                   
|        | 10 | .50     |  | Lease Agreement, dated September 1, 1995 and Amendment to
    lease dated September 30, 1997, by and between
    Frenchs Mill Associates II, LLP, as landlord, and OptiCare
    Eye Health Center, P.C., as tenant, for premises located at
    160 Robbins Street, Waterbury, Connecticut (lower level).
    Incorporated by reference to OptiCares Registration
    Statement 333-78501, Exhibit 10.19.
|        | 10 | .51     |  | Second Amendment to Lease Agreement, dated September 30,
    1997, by and between Frenchs Mill Associates II, LLP,
    as landlord, and OptiCare Eye Health Center, Inc., as tenant,
    for premises located at 160 Robbins Street, Waterbury,
    Connecticut. Incorporated by reference to OptiCares
    Quarterly Report on Form 10-Q filed on August 12,
    2003, Exhibit 10.4.                    



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##### Table of Contents



|        |    |         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------- | -- | ------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |        
|No.     |    | Exhibit
|        |    |        
|        | 10 | .52     |  | Lease Agreement, dated August 1, 2002, by and between
    Harrold-Barker Investment Company, as landlord, and OptiCare
    Health Systems, Inc., as tenant, for premises located at 110 and
    112 Zebulon Court, Rocky Mount, North Carolina. Incorporated by
    reference to OptiCares Annual Report on Form 10-K
    filed on March 18, 2003, Exhibit 10.12.                                                                                                                                                                        
|        | 10 | .53     |  | Form of Health Services Organization Agreement between
    PrimeVision Health, Inc. and eye care providers, incorporated
    herein by reference to OptiCares Registration
    Statement 333-78501, Exhibit 10.21.                                                                                                                                                                                                                                                                                                                       
|        | 10 | .54     |  | Professional Services and Support Agreement, dated
    December 1, 1995, between OptiCare Eye Health Centers, Inc.
    and OptiCare P.C., a Connecticut professional corporation,
    incorporated herein by reference to OptiCares Registration
    Statement 333-78501, Exhibit 10.22.                                                                                                                                                                                                                                                 
|        | 10 | .55     |  | Amendment No. 1, dated January 12, 2005, to the
    Professional Services and Support Agreement dated
    December 1, 1995, incorporated herein by reference to
    OptiCares Annual Report on Form 10-K filed on
    April 1, 2005, Exhibit 10.10.                                                                                                                                                                                                                                                                                      
|        | 10 | .56     |  | Employment Agreement between OptiCare and Jason M. Harrold,
    effective July 1, 2000, incorporated herein by reference to
    OptiCares Quarterly Report on Form 10-Q filed on
    August 14, 2000, Exhibit 10.10.*                                                                                                                                                                                                                                                                                                                    
|        | 10 | .57     |  | OptiCare Directors and Officers
    Trust Agreement, dated November 7, 2001, between
    OptiCare and Norman S. Drubner, Esq., as Trustee,
    incorporated herein by reference to OptiCares Annual
    Report on Form 10-K filed on November 29, 2001,
    Exhibit 10.52.*                                                                                                                                                                                                                                                            
|        | 10 | .58     |  | Agreement for Consulting Services between Morris Anderson and
    Associates, Ltd. and OptiCare, dated April 16, 2001,
    incorporated herein by reference to the OptiCares Annual
    Report on Form 10-K filed on November 19, 2001,
    Exhibit 10.53.                                                                                                                                                                                                                                                                               
|        | 10 | .59     |  | Subordinated Pledge and Security Agreement, dated as of
    January 25, 2002, by OptiCare (including certain of its
    subsidiaries) as grantor, and Palisade Concentrated Equity
    Partnership, L.P., as secured party and agent for the other
    secured party (Linda Yimoyines), securing the senior secured
    subordinated notes made by OptiCare to the secured parties dated
    January 25, 2002, incorporated herein by reference to
    OptiCares Current Report on Form 8-K filed on
    February 11, 2002, Exhibit 10.6.
|        | 10 | .60     |  | Registration Rights Agreement, dated January 25, 2002,
    covering common stock held by Palisade, common stock issuable on
    conversion of the Series B Preferred Stock and exercise of
    the warrants issued to Palisade, Linda Yimoyines and
    CapitalSource Finance, L.L.C., incorporated herein by reference
    to OptiCares Current Report on Form 8-K filed on
    February 11, 2002, Exhibit 10.7.                                                                                                                        
|        | 10 | .61     |  | Amendment No. 1, dated May 12, 2003, to the
    Registration Rights Agreement dated January 25, 2002,
    incorporated herein by reference to OptiCares Quarterly
    Report on Form 10-Q filed on August 12, 2003,
    Exhibit 10.2.                                                                                                                                                                                                                                                                                                    
|        | 10 | .62     |  | Amendment No. 2, dated January 12, 2005, to the
    Registration Rights Agreement dated January 25, 2002.*                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 10 | .63     |  | Subordination Agreement, dated January 25, 2002, among
    Palisade Concentrated Equity Partnership, L.P., Linda Yimoyines,
    CapitalSource Finance, L.L.C. and OptiCare, incorporated herein
    by reference to OptiCares Current Report on Form 8-K
    filed on February 11, 2002, Exhibit 10.8.                                                                                                                                                                                                                                   
|        | 10 | .64     |  | Term Note B, dated November 14, 2003, by and between
    OptiCare, OptiCare Eye Health Centers, Inc., PrimeVision Health,
    Inc. (individually and collectively as borrower) and
    CapitalSource Finance, L.L.C. (as lender), incorporated herein
    by reference to OptiCares Current Report on Form 8-K
    filed on November 19, 2003, Exhibit 10.2.                                                                                                                                                                             
|        | 10 | .65     |  | Asset Purchase Agreement, dated as of August 1, 2002, by
    and among OptiCare, PrimeVision Health, Inc. and Optometric Eye
    Care Center, P.A., incorporated herein by reference to
    OptiCares Current Report on Form 8-K filed on
    August 27, 2002, Exhibit 2.                                                                                                                                                                                                                                                                
|        | 10 | .66     |  | Asset Purchase Agreement, dated as of February 7, 2003, by
    and among the Wise Optical Vision Group, Inc. and OptiCare
    Acquisition Corp., incorporated herein by reference to
    OptiCares Current Report on Form 8-K filed on
    February 10, 2003, Exhibit 2.                                                                                                                                                                                                                                                                 
|        | 10 | .67     |  | Joinder Agreement and First Amendment, dated as of
    February 7, 2003, to the Amended and Restated Revolving
    Credit, Term Loan and Security Agreement, originally dated as of
    January 25, 2003, by and between OptiCare, OptiCare Eye
    Health Centers, Inc., PrimeVision Health, Inc. and CapitalSource
    Finance, L.L.C., incorporated herein by reference to
    OptiCares Current Report on Form 8-K filed
    February 10, 2003, Exhibit 99.2.                                                                        



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##### Table of Contents



|        |    |         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------- | -- | ------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |        
|No.     |    | Exhibit
|        |    |        
|        | 10 | .68     |  | Second Amended and Restated Revolving Credit, Term Loan and
    Security Agreement, dated as of March 29, 2004, by and
    between OptiCare, OptiCare Eye Health Centers, Inc., PrimeVision
    Health, Inc. OptiCare Acquisition Corporation and CapitalSource
    Finance, L.L.C., incorporated herein by reference to
    OptiCares Annual Report on Form 10-K filed on
    March 30, 2004, Exhibit 10.44.                                      
|        | 10 | .69     |  | Waiver and First Amendment to Second Amended and Restated
    Revolving Credit, Term Loan and Security Agreement, dated as of
    August 16, 2004, by and between OptiCare, OptiCare Eye
    Health Centers, Inc., PrimeVision Health, Inc., OptiCare
    Acquisition Corporation and CapitalSource Finance LLC.,
    incorporated herein by reference to OptiCares Quarterly
    Report on Form 10-Q filed on November 15, 2004,
    Exhibit 10.1.
|        | 10 | .70     |  | Second Amendment to Second Amended and Restated Revolving
    Credit, Term Loan and Security Agreement, dated as of
    August 27, 2004, by and between OptiCare, OptiCare Eye
    Health Centers, Inc., PrimeVision Health, Inc., OptiCare
    Acquisition Corporation and CapitalSource Finance LLC.,
    incorporated herein by reference to OptiCares Current
    Report on Form 8-K filed on September 1, 2004,
    Exhibit 10.1.             
|        | 10 | .71     |  | Letter Agreement, dated as of August 27, 2004, by and
    between OptiCare, OptiCare Eye Health Centers, Inc., PrimeVision
    Health, Inc., OptiCare Acquisition Corporation, CapitalSource
    Finance LLC and Palisade Concentrated Equity Partnership, L.P.,
    incorporated herein by reference to OptiCares Current
    Report on Form 8-K filed on September 1, 2004,
    Exhibit 10.2.                                                    
|        | 10 | .72     |  | Third Amendment to Second Amended and Restated Revolving Credit,
    Term Loan and Security Agreement, dated as of January 12,
    2005, by and between OptiCare, OptiCare eye Health Centers,
    Inc., PrimeVision Health, Inc., OptiCare Acquisition Corporation
    and CapitalSource Finance LLC, incorporated herein by reference
    to OptiCares Annual Report on Form 10-K filed on
    April 1, 2005, Exhibit 10.50.                     
|        | 10 | .73     |  | Asset Purchase Agreement, dated as of January 12, 2005,
    between OptiCare Acquisition Corp., Wise Optical, LLC and AECC/
    Pearlman Buying Group, LLC, incorporated herein by reference to
    OptiCares Annual Report on Form 10-K filed on
    April 1, 2005, Exhibit 10.52.                                                                                                                                                                
|        | 10 | .74     |  | Transition Agreement, dated as of January 12, 2005 between
    Dr. Dean J. Yimoyines and OptiCare, incorporated herein by
    reference to OptiCares Annual Report on Form 10-K
    filed on April 1, 2005, Exhibit 10.53.                                                                                                                                                                                                                         
|        | 10 | .75     |  | Supply Agreement, dated as of January 12, 2005, by and
    among OptiCare Eye Health Centers, Inc., Wise Optical, LLC and
    AECC/ Pearlman Buying Group, LLC, incorporated herein by
    reference to OptiCares Annual Report on Form 10-K
    filed on April 1, 2005, Exhibit 10.54.                                                                                                                                                            
|        | 10 | .76     |  | Employment Agreement, dated as of January 12, 2005, by and
    between OptiCare P.C. and Dr. Dean J. Yimoyines,
    incorporated herein by reference to OptiCares Annual
    Report on Form 10-K filed on April 1, 2005,
    Exhibit 10.55.                                                                                                                                                                                                        
|        | 10 | .77     |  | Surrender of Lease Agreement, dated as of October 21, 2005,
    between Mack-Cali So. West Realty Associates L.L.C. and OptiCare
    Acquisition Corp.**                                                                                                                                                                                                                                                                                            
|        | 21 | .1      |  | Subsidiaries of the Registrant.**                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | 23 | .1      |  | Consent of Grant Thornton LLP.**                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | 31 | .1      |  | Rule 13a-15(e)/15(d)-15(e) Certification, Chief Executive
    Officer.**                                                                                                                                                                                                                                                                                                                                                                            
|        | 31 | .2      |  | Rule 13a-15(e)/15(d)-15(e) Certification, Chief Financial
    Officer.**                                                                                                                                                                                                                                                                                                                                                                            
|        | 32 | .1      |  | Section 1350 Certification, Chief Executive &
    Chief Financial Officers.**                                                                                                                                                                                                                                                                                                                                                                       






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| | - | --------------------------------
| | * | Management or compensatory plan.



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|** | Filed herewith