Conmed Healthcare Management, Inc. Announces 51% Revenue Increase to Record $9 Million for Second Quarter 2008

Highlights*

-- Second quarter 2008 revenues increased 51% to $8.99 million from $5.97 million in the year-ago period.

-- Second quarter 2008 gross profit increased 33% to $1.49 million from $1.12 million in the year-ago period.

-- New $18 million, five-year full-service agreement with Chesapeake, VA Sheriff's Office Jail expected to contribute $3.6 million annually, effective April 16, 2008.

-- New three-year, full-service contract, including the juvenile detention center, with Douglas County, Oregon for an approximate $2.3 million total value, effective May 1, 2008.

-- Subsequent to the quarter end, signed an expanded five-year, full-service contract, effective July 2, 2008, which continued our relationship with Charles County, Maryland, and is expected to generate approximately $8.8 million over the life of the contract.

-- Subsequent to the quarter end, finalized a contract with Pima County, Arizona, effective August 1, 2008, to deliver a broad range of medical, dental and behavioral health services at the Pima County Adult Detention Center over the next 23 months that is expected to generate over $19 million in revenue for Conmed during that period.

-- Subsequent to the quarter end, finalized a one-year contract with four one-year renewal periods with Caroline County, Maryland for approximately $359,000 per year or $1.8 million over the full five-year period, effective August 1, 2008.

-- Richard W. Turner, PhD, Conmed President and CEO, named Chairman of the Board, effective June 18, 2008.

Financial Results*

Net revenue for the three months ended June 30, 2008 increased $3.03 million, or 51%, to $8.99 million from $5.97 million in last year's comparable period. The higher revenue resulted from new contracts, the acquisition of EMDC in February 2008, and both expansion of services and price adjustments to several counties already customers of Conmed.

"We continue to generate robust top line growth through a combination of new contracts and extensions to existing contracts reflecting expansion of services as well as price adjustments and are positioned to deliver record revenue for the full fiscal year," commented Richard Turner, Chairman and Chief Executive Officer of Conmed Healthcare Management. "We are optimistic about our near term pipeline and, based on contracts now in hand, we expect revenues for the full year 2008 will be approximately $40 million which would be an increase of approximately 54% from the $26 million we reported for the full year 2007."

Dr. Turner concluded, "We made excellent progress during the first half of 2008 in moving forward with our objective to expand into new geographic areas, particularly in the southwest United States. Subsequent to the conclusion of our second quarter, we were awarded a twenty-three month contract with Pima County, Arizona Adult Detention Center worth approximately $19 million in revenues, making it one of the most significant contracts we have signed to date. The progress we have made in terms of increasing our recurring revenues and scaling through geographic and service expansion gives management increased confidence we are on the right course from a strategic standpoint and we are well positioned for future growth and continued success."

Total healthcare expenses for the period ending June 30, 2008 were $7.5 million compared to $4.9 million in the year-ago period. The increase reflects increased staffing to support new business as well as increases for out-of-facility hospitalization plus increased expenditures for pharmacy and radiology services. These increased expenses were partially offset by the reduction of paid overtime to staff in the quarter. Gross profit for the second quarter of 2008 was up 33% to $1.49 million, representing a 16.6% gross margin, compared to $1.12 million and 18.8%, respectively, in last year's same period. The gross margin decline was due primarily to higher out-of-facility hospitalization expenses which were incurred at a single location during the quarter. Hospitalization expenses are a more volatile element of our cost structure and we are currently taking steps to improve efficiency while continuing to maintain our high standard of patient care.

Total operating expenses were $2.0 million for the quarter ended June 30, 2008 compared to $1.8 million for the year-ago period. Operating expenses as a percentage of sales were 22.5% compared to 29.3% in the year-ago period. Selling, general and administrative expenses for the second quarter were $1.5 million or 16.6% of revenue compared to $1.2 million or 19.7% of revenue for the year-ago quarter. The increased expenditures were the result of the investment in additional management and administrative personnel required to support the Company's rapid growth as well as higher rent and other expenses related to the Company's relocation to its new headquarters at Hanover, Maryland in February 2008.

Conmed's operating loss was $534,000 in the second quarter compared to an operating loss of $627,000 in the second quarter last year. The net loss was $494,000 or $(0.04) per basic and fully diluted share compared to a loss of $375,000 last year, or $(0.03) per basic and fully diluted share.

For the second quarter of 2008, adjusted EBITDA** was $142,000. During the quarter, the Company recorded certain non-cash expenses for depreciation, amortization and stock based compensation which totaled $676,000.

The Company generated approximately $230,000 in positive operating cash flow in the quarter ended June 30, 2008, and had approximately $7.3 million in cash and cash equivalents as of June 30, 2008.

Net revenue for the six months ended June 30, 2008 increased $5.3 million, or 46%, to $16.8 million from $11.5 million in pro forma revenue for last year's comparable period. Total healthcare expenses for the six month period ending June 30, 2008 were $13.9 million compared to $9.4 million in the year-ago period, resulting in gross profit for the first six months of 2008 of $3.03 million, representing a 17.6% gross margin, compared to $2.1 million or 18.6% gross margin, respectively, in last year's same period.

Total operating expenses were $4.1 million, or 24.4% of revenue for the six months ended June 30, 2008 compared to $3.4 million, or 29.5% of revenue for the year-ago period. Conmed's operating loss was $1.2 million in the six months ended June 30, 2008 compared to an operating loss of $1.3 million in the same period last year. The net loss was $1.0 million or $(0.09) per basic and fully diluted share compared to a pro-forma loss of $685,000, or $(0.08) per basic and fully diluted share in the year ago period.

For the first six months of 2008, adjusted EBITDA** was $145,000. During the first six months, the Company recorded certain non-cash expenses for depreciation, amortization and stock based compensation which totaled $1,295,000.

Operating cash flows equaling approximately $668,000 were partially offset by investment in the EMDC acquisition and equipment and furniture purchases related to the office relocation.

Conference Call

Conmed will host a conference call today, Thursday, August 14, at 4:30 PM ET. Anyone interested in participating should call 800-762-8795 if calling within the United States or 480-629-9031 if calling internationally. A re-play will be available until August 21, 2008, which can be accessed by dialing 800-406-7325 if calling within the United States or 303-590-3030 if calling internationally. Please use passcode 3906675 to access the replay. The webcast will also be broadcast live over the internet and accessible at http://viavid.net/dce.aspx?sid=000053F5, and archived for 30 days.

About Conmed

Conmed has provided correctional healthcare services since 1984, beginning in the Sate of Maryland, and currently services detention centers and correctional facilities in thirty-two counties in six states, including Washington, Oregon, Kansas, Virginia, Arizona and Maryland. Conmed's services have expanded to include mental health, pharmacy and out-of-facility healthcare services.

Forward Looking Statements

This press release may contain, among other things, certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, (i) statements with respect to the company's plans, objectives, expectations and intentions; and (ii) other statements identified by words such as "may", "could", "would", "should", "believes", "expects", "anticipates", "estimates", "intends", "plans", "projects", "potentially" or similar expressions. These statements are based upon the current beliefs and expectations of the Company's management and are subject to significant risks and uncertainties including those contained in its public filings. Actual results may differ from those set forth in the forward-looking statements. These forward-looking statements involve certain risks and uncertainties that are subject to change based on various factors (many of which are beyond the Company's control including, without limitation, the Company's ability to increase revenue and to continue to obtain contract renewals and extensions.)

*All comparisons presented are based on pro-forma results. Pro-forma adjustments include consolidation of the Company and Conmed, Inc. for the full year plus adjustments to reflect the amortization of intangible assets and a pro-forma estimated tax expense for both the six month and full year periods.

**Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) and adjusted EBITDA are key indicators used by management to evaluate operating performance. While EBITDA and adjusted EBITDA are not intended to replace any presentation included in these consolidated financial statements under generally accepted accounting principles (GAAP) and should not be considered an alternative to operating performance or an alternative to cash flow as a measure of liquidity, Conmed believes this measure is useful to investors in assessing its capital expenditures and working capital requirements. This calculation may differ in method of calculation from similarly titled measures used by other companies. Adjusted EBITDA is defined as income from continuing operations before interest, taxes, depreciation and amortization adjusted for stock-based compensation, gains or losses on the sale of assets, impairment charges and other unusual or non-recurring transactional events. A reconciliation of EBITDA and Adjusted EBITDA to GAAP financial measures for the six and 12 months ended December 31, 2007 is included with this press release and with the Company's related Annual Report on Form 10-K.

CONMED HEALTHCARE MANAGEMENT, INC. CONSOLIDATED BALANCE SHEETS SUCCESSOR SUCCESSOR June 30, 2008 December 31, (unaudited) 2007 ASSETS CURRENT ASSETS Cash and cash equivalents $ 7,251,819 $ 7,136,720 Accounts receivable 1,780,606 1,622,424 Prepaid expenses 542,789 214,834 ------------- ------------- Total current assets 9,575,214 8,973,978 PROPERTY AND EQUIPMENT, NET 442,380 212,815 DEFERRED TAXES 90,000 90,000 OTHER ASSETS Service contracts acquired, net 2,105,000 2,699,000 Non-compete agreements, net 715,000 749,000 Goodwill 5,068,388 4,852,338 Deposits 13,698 58,698 ------------- ------------- Total other assets 7,902,086 8,359,036 ------------- ------------- $ 18,009,680 $ 17,635,829 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 997,100 $ 837,144 Accrued expenses 2,590,453 1,563,020 Taxes payable 5,000 5,000 Deferred revenue 26,247 353,075 Notes payable, current portion 73,784 7,798 ------------- ------------- Total current liabilities 3,692,584 2,766,037 NOTES PAYABLE, LONG-TERM 35,777 5,418 SHAREHOLDERS' EQUITY Preferred stock no par value; authorized 5,000,000 shares; issued and outstanding zero shares as of June 30, 2008 -- -- Common stock, $0.0001 par value, authorized 40,000,000 shares; issued and outstanding 12,024,222 shares as of June 30, 2008 1,202 1,194 Additional paid-in capital 36,365,126 35,901,874 Retained (deficit) (22,085,009) (21,038,694) ------------- ------------- Total shareholders' equity 14,281,319 14,864,374 ------------- ------------- $ 18,009,680 $ 17,635,829 ============= ============= See Notes to unaudited Financial Statements

CONMED HEALTHCARE MANAGEMENT, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) PREDECESSOR SUCCESSOR For the For the Period SUCCESSOR Period January 1, For the Six January 26, 2007 to Months Ended 2007 to June January 25 June 30, 2008 30, 2007 2007 Service contract revenue $ 16,831,113 $ 10,015,594 $ 1,504,565 HEALTHCARE EXPENSES: Salaries, wages and employee benefits 8,719,760 4,995,851 842,575 Medical expenses 4,659,923 2,680,219 439,206 Other operating expenses 487,704 411,685 45,552 ------------- ------------- -------------- Total healthcare expenses 13,867,387 8,087,755 1,327,333 ------------- ------------- -------------- Gross profit 2,963,726 1,927,839 177,232 Selling and administrative expenses 3,084,421 2,045,301 92,264 Depreciation and amortization 1,029,575 1,071,652 1,698 ------------- ------------- -------------- Total operating expenses 4,113,996 3,116,953 93,962 ------------- ------------- -------------- Operating income (loss) (1,150,270) (1,189,114) 83,270 INTEREST INCOME (EXPENSE) Interest income 107,150 143,943 287 Interest (expense) (3,194) (422) (93) ------------- ------------- -------------- Total interest income 103,956 143,521 194 ------------- ------------- -------------- Income (loss) before income taxes (1,046,314) (1,045,593) 83,464 Income tax benefit -- (291,000) -- ------------- ------------- -------------- Net income (loss) $ (1,046,314) $ (754,593) $ 83,464 ============= ============= ============== LOSS PER COMMON SHARE Basic and diluted $ (0.09) $ (0.09) ============= ============= WEIGHTED-AVERAGE SHARES OUTSTANDING Basic and diluted 12,006,848 8,389,615 ============= ============= See Notes to unaudited Financial Statements SUCCESSOR SUCCESSOR For the Three For the Three Months Ended Months Ended June 30, 2008 June 30, 2007 Service contract revenue $ 8,994,863 $ 5,969,220 HEALTHCARE EXPENSES: Salaries, wages and employee benefits 4,605,733 3,093,425 Medical expenses 2,643,335 1,505,682 Other operating expenses 254,269 246,619 ------------- -------------- Total healthcare expenses 7,503,337 4,845,726 ------------- -------------- Gross profit 1,491,526 1,123,494 Selling and administrative expenses 1,495,409 1,178,286 Depreciation and amortization 530,126 572,409 ------------- -------------- Total operating expenses 2,025,535 1,750,695 ------------- -------------- Operating income (loss) (534,009) (627,201) INTEREST INCOME (EXPENSE) Interest income 41,253 84,193 Interest (expense) (1,504) (244) ------------- -------------- Total interest income 39,749 83,949 ------------- -------------- Income (loss) before income taxes (494,260) (543,252) Income tax benefit -- (168,000) ------------- -------------- Net income (loss) $ (494,260) $ (375,252) ============= ============== LOSS PER COMMON SHARE Basic and diluted (0.04) (0.03) ============= ============== WEIGHTED-AVERAGE SHARES OUTSTANDING Basic and diluted 12,024,222 11,833,356 ============= ============== See Notes to unaudited Financial Statements

CONMED HEALTHCARE MANAGEMENT, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) SUCCESSOR PREDECESSOR SUCCESSOR For the For the For the Six Period Period Months January 26, January 1, Ended June 2007 2007 to 30, to June 30, January 25, 2008 2007 2007 CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $(1,046,314) $ (754,593) $ 83,464 Adjustments to reconcile net income to net cash provided by operating activities Depreciation 39,575 14,652 1,698 Amortization 990,000 1,057,000 -- Stock-based compensation 263,246 299,449 -- Loss on disposal of property 2,257 -- -- Deferred income taxes -- (376,000) -- Changes in working capital components Decrease (increase) in accounts receivable (158,182) (264,283) 197,327 (Increase) in claims against escrow -- (333,373) -- Decrease (increase) in prepaid expenses (327,955) (32,571) 30,687 Decrease in deposits 45,000 -- -- Increase in accounts payable 159,956 146,558 258,562 Increase (decrease) in accrued expenses 1,027,433 643,374 (469,320) (Decrease) in deferred revenue (326,828) (49,521) (29,155) ------------ ------------ ----------- Net cash provided by operating activities 668,188 350,692 73,263 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (271,397) (37,313) -- Asset Purchase from EMDC, P.C. (245,762) -- -- Acquisition of Conmed, Inc., net of cash acquired -- (7,675,097) -- ------------ ------------ ----------- Net cash used in investing activities (517,159) (7,712,410) -- CASH FLOWS FROM FINANCING ACTIVITIES Short-term borrowings -- 289,368 -- Payments on loans (35,930) (134,307) (594) Net proceeds from Private Placement -- 13,085,649 -- Proceeds from exercise of warrants -- 33,000 -- ------------ ------------ ----------- Net cash provided by (used in) financing activities (35,930) 13,273,710 (594) ------------ ------------ ----------- Net increase in cash and cash equivalents 115,099 5,911,992 72,669 CASH AND CASH EQUIVALENTS Beginning 7,136,720 662,305 122,269 ------------ ------------ ----------- Ending $ 7,251,819 $ 6,574,297 $ 194,938 ============ ============ ===========

CONMED HEALTHCARE MANAGEMENT, INC. PROFORMA STATEMENTS OF OPERATIONS (UNAUDITED) Six-Months Ended June 30, 2008 compared June 30, 2007 The following financial results below are derived from proforma unaudited financial statements for the six months ended June 30, 2008 prepared on the basis that the acquisition of Conmed was completed on December 31, 2006. Proforma adjustments include consolidation of the Company and Conmed, Inc. for the full six-month period plus an adjustment to reflect the amortization of intangible assets, which increased depreciation and amortization on the proforma unaudited financial statements by $184,000.

Six Months Ended Six Months Ended June 30, 2008 June 30, 2007 % of % of Amount Revenue Amount Revenue Service contract revenue $16,831,113 100.0% $11,520,159 100.0% HEALTHCARE EXPENSES: Salaries, wages and employee benefits 8,719,760 51.8% 5,838,464 50.7% Medical expenses 4,659,923 27.7% 3,079,426 26.7% Other operating expenses 487,704 2.9% 457,236 4.0% ------------ ------- ------------ ------- Total healthcare expenses 13,867,387 82.4% 9,375,126 81.4% ------------ ------- ------------ ------- Gross profit 2,963,726 17.6% 2,145,033 18.6% OPERATING EXPENSES: Selling, general & administrative expenses 3,084,421 18.3% 2,153,200 18.7% Depreciation and amortization 1,029,575 6.1% 1,249,350 10.8% ------------ ------- ------------ ------- Total operating expenses 4,113,996 24.4% 3,402,550 29.5% ------------ ------- ------------ ------- Operating loss (1,150,270) (6.8)% (1,257,517) (10.9)% Net interest income and (expense) 103,956 0.6% 143,714 1.2% ------------ ------- ------------ ------- Loss before income taxes (1,046,314) (6.2)% (1,113,803) (9.7)% Income tax (benefit) -- 0.0% (429,000) (3.7)% ------------ ------- ------------ ------- Net (loss) $(1,046,314) (6.2)% $ (684,803) (5.9)% ============ ======= ============ =======

CONMED HEALTHCARE MANAGEMENT, INC. RECONCILIATION OF PROFORMA GAAP NET LOSS FROM CONTINUING OPERATIONS TO EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (EBITDA) Six Months Ended Three Months Ended June 30, June 30, 2008 2007 2008 2007 Net loss $(1,046,314) $ (684,803) $(494,260) $(375,252) Income tax benefit -- (429,000) -- (168,000) Interest income (107,150) (144,229) (41,253) (84,193) Interest expense 3,194 515 1,504 244 Depreciation and amortization 1,029,575 1,249,350 530,126 572,409 Stock based compensation 263,247 299,449 143,192 110,459 Loss on Sale of Assets 2,257 -- 2,257 -- ------------ ----------- ---------- ---------- Earnings before interest, taxes, depreciation and amortization (EBITDA) $ 144,809 $ 291,282 $ 141,566 $ 55,667 ============ =========== ========== ==========

SOURCE: Conmed Healthcare Management, Inc.

Conmed Healthcare Management, Inc. Thomas W. Fry, 410-567-5529 Chief Financial Officer tfry@conmed-inc.com or Hayden Communications Peter Seltzberg, 646-415-8972 peter@haydenir.com or Brett Maas, 646-536-7331 brett@haydenir.com