UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
------------------------------
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 0-11914
CAPRIUS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 22-2457487
- ---------------------------------------- ---------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Parker Plaza, Fort Lee, NJ 07024
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(Address of principal executive offices)
(201) 592-8838
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
As of August 13, 1999, there were 13,525,518 shares of Common Stock, $.01 par
value, outstanding.
<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
Index
Page No.
--------
PART I - FINANCIAL INFORMATION
ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets - June 30, 1999 and
September 30, 1998 3
Consolidated Statements of Operations - for the
three and nine months ended June 30, 1999
and 1998 4
Consolidated Statements of Stockholders' Equity 5
Consolidated Statements of Cash Flows - for the
nine months ended June 30, 1999 and 1998 6
Notes to Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 10
PART II - OTHER INFORMATION 12
ITEM 1. LEGAL PROCEEDINGS 12
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
SIGNATURES 13
Exhibit Index
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<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, September 30,
1999 1998
--------------- --------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 198,226 $ 1,791,476
Accounts receivable, net of reserve for bad debts of $54,598 at
June 30, 1999 and $663,314 at September 30, 1998 311,931 2,899,282
Note receivable 50,000 -
Inventory 158,000 720,858
Other current assets 123,105 584,875
--------------- --------------
Total current assets 841,262 5,996,491
--------------- --------------
PROPERTY AND EQUIPMENT:
Medical equipment 359,098 2,145,674
Office furniture and equipment 92,356 251,199
Other equipment - 1,518,874
Leasehold improvements 950 1,153,576
--------------- --------------
452,404 5,069,323
Less: accumulated depreciation and amortization 120,065 1,824,946
--------------- --------------
Total property and equipment, at cost 332,339 3,244,377
--------------- --------------
Other Assets:
Goodwill, net of accumulated amortization of $36,009 at
June 30, 1999 and $2,357,703 at September 30, 1998 684,173 1,053,797
Other intangibles, net of accumulated amortization of $0
at June 30, 1999 and $371,698 at September 30, 1998 2,390,373 1,240,678
Other 9,314 32,037
--------------- --------------
Total other assets 3,083,860 2,326,512
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$ 4,257,461 $ 11,567,380
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 71,948 $ 810,990
Accrued expenses 317,478 964,922
Accrued compensation 564,282 388,748
Other current liabilities - 53,664
Current portion of long-term debt and capital lease obligations 713,594 915,608
--------------- --------------
Total current liabilities 1,667,302 3,133,932
--------------- --------------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, NET OF CURRENT PORTION 160,409 1,207,624
Stock Issuance Commitment 94,853 -
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value
Authorized - 1,000,000 shares
Issued - Series A, none; Series B, convertible,
27,000 shares at June 30, 1999 and September 30, 1998
Liquidation preference $2,700,000 2,700,000 2,700,000
Common stock, $.01 par value
Authorized - 50,000,000 shares
Issued and outstanding - 13,548,018 at June 30, 1999
and 7,369,040 September 30, 1998 135,480 73,690
Additional paid-in capital 64,778,855 63,561,672
Accumulated deficit (65,277,188) (59,107,288)
Treasury stock (22,500 common shares, at cost) (2,250) (2,250)
--------------- --------------
Total stockholders' equity 2,334,897 7,225,824
--------------- --------------
$ 4,257,461 $ 11,567,380
=============== ==============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
1999 1998 1999 1998
---------------------------- ---------------------------
<S> <C> <C> <C> <C>
REVENUES:
Net patient service revenues $ 436,915 $ 963,441 $ 2,510,206 $ 2,680,804
---------------------------- -----------------------------
Total revenues 436,915 963,441 2,510,206 2,680,804
---------------------------- -----------------------------
OPERATING EXPENSES:
Cost of service operations 308,719 999,143 2,167,320 2,482,643
Research and development - 880,768 496,480 2,280,408
Purchased research and development (see note 2) - - - 7,097,566
Selling, general and administrative 1,331,377 965,043 3,343,364 3,782,899
Provision for bad debt and collection costs 3,083 73,099 117,617 233,871
Loss (gain) on sale of imaging business - 8,075 12,670 (53,393)
Loss on sale of rehabilitation business 33,634 - 1,461,121 -
Loss on sale of Aurora Technology 2,096,057 - 2,096,057 -
---------------------------- -----------------------------
Total operating expenses 3,772,870 2,926,128 9,694,629 15,823,994
---------------------------- -----------------------------
Operating loss from continuing operations (3,335,955) (1,962,687) (7,184,423) (13,143,190)
Other income - - 9,000 3,050
Interest income 7,599 46,018 33,441 278,461
Interest expense (8,542) (60,940) (127,918) (142,852)
---------------------------- -----------------------------
Loss from continuing operations before equity in loss
of subsidiary and provision for income taxes (3,336,898) (1,977,609) (7,269,900) (13,004,531)
Equity in net loss of unconsolidated subsidiary - - - (67,358)
---------------------------- -----------------------------
Loss from continuing operations before provision
for income taxes (3,336,898) (1,977,609) (7,269,900) (13,071,889)
Provision for income tax expense - (98,177) - (98,177)
---------------------------- -----------------------------
Loss from continuing operations (3,336,898) (2,075,786) (7,269,900) (13,170,066)
Income on disposal of discontinued operations - - 1,100,000 -
---------------------------- -----------------------------
Net Loss $ (3,336,898) $ (2,075,786) $ (6,169,900) $(13,170,066)
============================ =============================
Income (loss) per basic and diluted common share:
Loss from continuing operations $(0.44) $(0.28) $(0.98) $(1.91)
Income on disposal of discontinued operations - - 0.15 -
---------------------------- -----------------------------
Net loss per share $(0.44) $(0.28) $(0.83) $(1.91)
============================ =============================
Weighted average number of common shares outstanding 7,572,743 7,361,197 7,437,442 6,909,447
============================ =============================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Preferred Stock Common Stock Treasury Stock
-------------------------------------------------------------------------------
Number Number $0.01 Number $0.01
of Shares Amount of Shares Par Value of Shares Par Value
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, SEPTEMBER 30, 1997 ................... 27,000 $ 2,700,000 4,374,763 $ 43,748 22,500 $ (2,250)
Issuance of common stock related to AMS merger -- -- 2,956,741 29,567 -- --
Conversion of note payable .................... -- -- 27,429 274 -- --
Exercise of stock options ..................... -- -- 10,107 101 -- --
Net loss ...................................... -- -- -- -- -- --
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BALANCE, SEPTEMBER 30, 1998 ................... 27,000 2,700,000 7,369,040 73,690 22,500 (2,250)
Issuance of common stock related to Opus merger -- -- 6,178,978 $ 61,790 -- --
Net loss ......................................
---------------------------------------------------------------------------------
BALANCE, JUNE 30, 1999 ........................ 27,000 $ 2,700,000 13,548,018 $ 135,480 22,500 $ (2,250)
=================================================================================
</TABLE>
<TABLE>
<CAPTION>
Additional Total
Paid-in Accumulated Stockholders'
Capital Deficit Equity
----------------------------------------------
<S> <C> <C> <C>
BALANCE, SEPTEMBER 30, 1997 ................... $ 56,170,271 $(41,588,585) $ 17,323,184
Issuance of common stock related to AMS merger 7,362,287 -- 7,391,854
Conversion of note payable .................... 20,725 -- 20,999
Exercise of stock options ..................... 8,389 -- 8,490
Net loss ...................................... -- (17,518,703) (17,518,703)
--------------------------------------------
BALANCE, SEPTEMBER 30, 1998 ................... 63,561,672 (59,107,288) 7,225,824
Issuance of common stock related to Opus merger 1,217,183 -- 1,278,973
Net loss ...................................... (6,169,900) (6,169,900)
--------------------------------------------
BALANCE, JUNE 30, 1999 ........................ $ 64,778,855 $(65,277,188) $ 2,334,897
============================================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended June 30,
1999 1998
------------------ -------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (6,169,900) $(13,170,066)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Equity in net loss of unconsolidated subsidiary - 67,358
Gain on disposal of discontinued operations (1,100,000) -
Gain on sale of imaging business (12,670) (61,468)
Loss on sale of rehabilitation business 1,461,121 -
Loss on sale of aurora technology 2,096,057 -
Purchased research and development - 7,097,566
Depreciation and amortization 717,230 784,124
Changes in assets and liabilities:
Decrease in restricted cash - 1,744,967
Accounts receivable, net 70,672 (207,662)
Inventories (2,780) (459,799)
Other current assets 66,235 (348,904)
Accounts payable and accrued expenses (158,881) (6,795)
------------ ------------
Net cash used in operating activities (3,032,916) (4,560,679)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of imaging business 12,670 61,468
Proceeds from sale of rehabilitation business 712,804 -
Proceeds for sale of aurora technology 952,367
Proceeds from disposal of discontinued operations 1,100,000 -
Cash used in AMS merger - (128,406)
Cash used in Opus merger (681,400) -
Advances to unconsolidated subsidiaries - (479,673)
Purchase of equipment, furniture and leasehold improvements (163,920) (925,907)
------------ ------------
Net cash provided by (used in) investing activities 1,932,521 (1,472,518)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 297,484 1,113,347
Repayment of long-term debt and capital lease obligations (790,339) (582,195)
------------ ------------
Net cash provided by (used in) financing activities (492,855) 531,152
------------ ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,593,250) (5,502,045)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,791,476 9,752,768
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 198,226 $ 4,250,723
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest during the period $ 44,115 $ 128,285
============ ============
Stock issuance commitments $ 94,853 $ -
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
The results of operations of Caprius, Inc. ("Caprius" or the "Company")
for the interim periods shown in this report are not necessarily indicative of
results to be expected for the fiscal year. In the opinion of management, the
information contained herein reflects all adjustments necessary to make the
results of operations for the interim periods a fair statement of such
operations. All such adjustments are of a normal recurring nature.
The accompanying financial statements do not contain all of the
disclosures required by generally accepted accounting principles and should be
read in conjunction with the financial statements and related notes included in
the Company's annual report on Form 10-K for the fiscal year ended September 30,
1998.
NOTE 2 - THE COMPANY
- --------------------
Caprius, Inc. was founded in 1983 and through June 1999 essentially
operated in the business of medical imaging systems and healthcare imaging and
rehabilitation services. On June 28, 1999, the Company acquired Opus Diagnostics
through a merger (see below) and began manufacturing and selling medical
diagnostic assays and kits. The Company continues to own and operate a
comprehensive imaging center located in Lauderhill, Florida.
The merger with Opus (the "Opus Merger") was accomplished through a
merger between Opus and Caprius' newly-formed wholly-owned subsidiary Caprius
Merger Sub Inc. ("Merger Sub"). Opus was recently formed to engage in the
business of manufacturing and selling medical diagnostic assays and kits.
Upon the Opus Merger, the Opus stockholders received an aggregate of 6,178,978
shares of Caprius' common stock, par value $.01 per share.
The Opus Merger was consummated coincident with the closing of an Asset
Purchase Agreement (the "Purchase Agreement") between Opus and Oxis Health
Products Inc., a Delaware corporation ("Oxis"). The purchase price paid by Opus
consisted of $500,000 in cash, a secured promissory note (the "Note") in the
principal amount of $588,000 payable on November 30, 1999, and a warrant
granting Oxis the right to acquire up to 10% equity interest in Opus (on a
pre-Merger basis) (the "Warrant"), exercisable after six months for a period of
five years. Upon the Opus Merger, the Warrant became exercisable for 617,898
shares of Caprius common Stock at an exercise price equal to 80% of the
average bid and asked prices for the Common Stock for the five trading days
immediately preceding December 28, 1999.
Opus produces and sells 14 diagnostic assays, controls and calibrators
for therapeutic drug monitoring which are used on the Abbott TDx instrument.
Pursuant to the Purchase Agreement, Opus acquired from Oxis the assets relating
to its reagent patent and trademark and distribution network for the therapeutic
drug monitoring assay business (the "TDM Business"). Additionally, pursuant to a
Services Agreement, Oxis is manufacturing the products of the TDM Business of
Opus for 15 months commencing July 1, 1999.
On April 27, 1999, pursuant to an Asset Purchase Agreement
between Caprius, Caprius Systems, Inc., a wholly owned subsidiary of Caprius
("Systems" and, together with Caprius, the "Sellers") and Pacific Republic
Capital Corp. ("Pacific"), the Sellers sold their Aurora breast scanner
technology ("Aurora Technology") related assets to Pacific for $854,490 in cash
and the assumption by Pacific of certain obligations associated with the
transferred assets. The assets and obligations transferred included all the
shares of Caprius' wholly owned subsidiary, Caprius Imaging Corp., various
patents relating to the Aurora technology and assets of Systems, including
hospital equipment contracts and equipment leases. The equipment debt of which
Caprius was relieved exceeded $1.1 million.
In March 1999, the Company transferred its interest in its
rehabilitation center to an unrelated company in exchange for $900,000, of
which $850,000 was paid as of June 30, 1999. In addition, the
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<PAGE>
acquiring group has assumed certain liabilities totaling approximately $400,000
and will be entitled to 10% of any financial recovery obtained from a pending
lawsuit by the Company against the former owner of the center (See Item I of
Part II of this Report). The transfer price of $900,000 was used in part to pay
a balance of approximately $360,000 to the former owner of the center, which was
the remaining amount due from the Company's acquisition of its interest in the
center.
In July 1998, the Company acquired the Strax Institute, a comprehensive
breast imaging center, located in Lauderhill, Florida. The Strax Institute is a
multi-modality breast care center that treats approximately 15,000 patients per
year offering x-ray mammography, ultrasound, stereotactic biopsy and bone
densitometry.
Effective November 10, 1997, the Company completed a merger with
Advanced Mammography Systems, Inc. ("AMS") whereby AMS merged into AMS Merger
Corp., a wholly owned subsidiary of Caprius, and became a wholly owned
subsidiary of Caprius (the "AMS Merger"). AMS was formed on July 2, 1992 as a
wholly owned subsidiary of Caprius to develop a dedicated breast MRI system,
and subsequently had issued securities reducing the Company's ownership
interest therein.
NOTE 3 - PREFERRED STOCK - SERIES B
- -----------------------------------
On August 18, 1997, the Company entered into various agreements with
General Electric Company ("GE") including an agreement whereby GE purchased
27,000 shares of newly issued Series B Convertible Redeemable Preferred Stock
(the "Series B Preferred Stock") for $2,700,000.
The Series B Preferred Stock consists of 27,000 shares, ranks senior to
any other shares of preferred stock which may be created and the Common Stock.
It has a liquidation value of $100.00 per share, plus accrued and unpaid
dividends, is non-voting except if the Company proposes an amendment to its
Certificate of Incorporation which would adversely affect the rights of the
holders of the Series B Preferred Stock, and is convertible into 1,597,930
shares of Common Stock, subject to customary anti-dilution provisions. No fixed
dividends are payable on the Series B Preferred Stock, except that if a dividend
is paid on the Common Stock, dividends would be paid on the shares of Series B
Preferred Stock as if they were converted into shares of Common Stock.
NOTE 4 - PATENT INFRINGEMENT SETTLEMENT
- ---------------------------------------
In December 1998, the Company received $1,100,000 from a major MRI
manufacturer to resolve outstanding patent issues unrelated to the patents
protecting the Company's Aurora technology.
NOTE 5 - RELATED PARTY TRANSACTION
- ----------------------------------
Upon the Opus Merger, four members of the Caprius Board of Directors
(the "Board") resigned, the number of directors was decreased to six persons,
and Messrs. George Aaron and Jonathan Joels, who were the sole stockholders of
Opus, were elected members of the Caprius Board. The Board elected Mr. Aaron
as President and Chief Executive Officer, Mr. Joels as Treasurer, Chief
Financial Officer and Secretary, and Elliott Koppel as Vice President - Sales
and Marketing. From 1992 to November 1997, Mr. Aaron had served on the Board of
Caprius.
Upon the Opus Merger, Caprius also entered into Severance Agreements
with Jack Nelson ("Nelson") and Enrique Levy ("Levy"). Mr. Nelson's employment
as the Chairman and Chief Executive Officer to Caprius was terminated, and he is
serving as a consultant to Caprius for a period of one year. Pursuant to his
agreement, Mr. Nelson received $45,000 in cash and will receive a $258,000
payment upon the earlier of December 28, 1999 or the consummation of a Business
Transaction (as defined therein), and he will receive 125,000 shares of Caprius
Common Stock plus accrued compensation.
Mr. Levy's employment as President and Chief Operating Officer of
Caprius was terminated and he is serving as a consultant to Caprius for a period
of one year. Pursuant to his agreement, Mr. Levy received $43,000 in cash and
will receive a $247,500 payment upon the earlier of December 28, 1999 or the
consummation of a Business Transaction (as defined therein), and he will receive
100,000 shares of Caprius Common Stock plus accrued compensation.
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<PAGE>
All of the above amounts relating to the severance of Messrs. Nelson
and Levy have been charged to compensation expense in the quarter ended June 30,
1999.
NOTE 6 - PRO FORMA INFORMATION
- ------------------------------
The following unaudited pro forma financial information sets forth the
results of the Company as if the sale of the MVA rehabilitation center, the sale
of the Aurora breast scanning technology and the Merger with Opus had occurred
as of October 1, 1998. The pro forma financial information does not purport to
be indicative of what would have occurred had the acquisition been made as of
October 1, 1998 or results that may occur in the future.
Nine Months Ended
June 30, 1999
----------------------
(000's omitted, except
per share amount)
Net revenues $2,361
Operating Expenses $3,326
Operating loss from continuing operations $ (965)
Loss from continuing operations $ (955)
Loss per common share $(0.07)
(This space intentionally left blank.)
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<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998
Due to the AMS Merger, in November 1997, the sale of the Rehabilitation
business in March 1999, the sale of the Company's Aurora Technology in April
1999, and the Opus Merger in June 1999, the results of operations for the three
months ended June 30, 1999 and 1998 are not necessarily indicative of the
results for future periods. The following discussion should be read in
conjunction with the attached notes thereto, and with the audited financial
statements and notes thereto for the fiscal year ended September 30, 1998.
Net patient service revenue totaled $436,915 for the three months ended
June 30, 1999 versus $963,441 for the three months ended June 30, 1998. Cost of
service operations totaled $308,719 for the three months ended June 30, 1999
versus $999,143 for the three months ended June 30, 1998. These decreases are
due to the sale of the Aurora Technology and the rehabilitation business
partially offset by the additional net patient revenue and operating expenses
for the Strax Center.
Purchased research and development related to the portion of the AMS
purchase price allocated to research and development projects in progress.
Upon the sale of the Aurora Technology the Company substantially reduced its
research and development activities. (See Note 2)
Selling, general and administrative expenses totaled $1,331,377 for the
three months ended June 30, 1999 versus $965,043 for the three months ended June
30, 1998. This increase reflects the settlement costs in the shareholder class
action plus certain severance payment to Caprius' former officers offset by the
reduction due to the sale of the Aurora Technology and the Company's efforts to
streamline costs.
NINE MONTHS ENDED JUNE 30, 1999 COMPARED TO NINE MONTHS ENDED JUNE 30, 1998
Due to the AMS Merger in November 1997, the sale of the Rehabilitation
business in March 1999, the sale of the Company's Aurora Technology in April
1999, and the Opus Merger in June 1999, the results of operations for the nine
months ended June 30, 1999 and 1998 are not necessarily indicative of the
results for future periods. The following discussion should be read in
conjunction with the attached notes thereto, and with the audited financial
statements and notes thereto for the fiscal year ended September 30, 1998.
Net patient service revenue totaled $2,510,206 for the nine months
ended June 30, 1999 versus $2,680,804 for the nine months ended June 30, 1998.
Cost of service operations totaled $2,167,320 for the nine months ended June 30,
1999 versus $2,482,643 for the nine months ended June 30, 1998. These decreases
are due to the sale of the Aurora Technology and the rehabilitation business
partially offset by the additional net patient revenue and operating expenses
for the Strax Center.
Purchased research and development related to the portion of the AMS
purchase price allocated to R&D projects in progress.
Selling, general and administrative expenses totaled $3,343,364 for the
nine months ended June 30, 1999 versus $3,782,899 for the nine months ended June
30, 1998. This decrease reflects the Company's efforts to streamline costs and
the sale of the Aurora Technology.
Equity in net loss of unconsolidated subsidiary reflects the Company's
share of losses in AMS prior to the AMS Merger in November 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company had available cash and cash equivalents of $198,226 at
June 30, 1999. The Company intends to pursue efforts to identify additional
funds through various funding options, including debt and equity
offerings, which could be more difficult due to the Company's recent delisting
from NASDAQ Small Cap System, commercial or other borrowings. However, there
can be no assurance that any funding initiative would be successful and any
equity placement could result in substantial dilution to current stockholders.
Consequently, the Company's viability could be threatened.
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<PAGE>
The significant cash flows used for investing activities for the nine
months ended June 30, 1999 consists primarily of $681,400 for the Opus Merger
offset by the proceeds from the sales of the rehabilitation business and the
Aurora Technology. Cash flows from financing activities include approximately
$297,484 of proceeds from financing of medical equipment, offset by principal
payments on equipment debt of $790,339. Cash used for operations amounted to
approximately $1,593,250.
Since February 1997, the Company has funded its operations principally
through the cash obtained from the MDI merger, the settlementof a patent
infringement and the sale of its rehabilitation and Aurora Technology
businesses.
INFLATION
To date, inflation has not had a material effect on the Company's
business. The Company believes that the effects of future inflation may be
minimized by controlling costs and increasing efficiency through an increase in
the volume of MRI examinations performed.
The Company is including the following cautionary statement in this
Form 10-Q to make applicable and take advantage of the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995 for any forward-looking
statements made by, or on behalf of, the Company. Forward-looking statements
include statements concerning plans, objectives, goals, strategies, future
events or performance and underlying assumptions and other statements which are
other than statements of historical facts. Certain statements contained herein
are forward-looking statements and accordingly involve risks and uncertainties
which could cause actual results or outcomes to differ materially from those
expressed in the forward-looking statements. The Company's expectations, beliefs
and projections are expressed in good faith and are believed by the Company to
have a reasonable basis, including without limitations, management's examination
of historical operating trends, data contained in the Company's records and
other data available from third parties, but there can be no assurance that
management's expectation, beliefs or projections will result or be achieved or
accomplished. In addition to other factors and matters discussed elsewhere
herein, the following are important factors that, in the view of the Company,
could cause actual results to differ materially from those discussed in the
forward-looking statements: technological advances by the Company's competitors,
changes in health care reform, including reimbursement programs, capital needs
to fund any delays or extensions of research programs, delays in product
development, lack of market acceptance of technology and the availability of
capital on terms satisfactory to the Company. The Company disclaims any
obligation to update any forward-looking statements to reflect events or
circumstances after the date hereof.
[This space intentionally left blank]
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<PAGE>
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-----------------
On January 7, 1998, the Company and Jack Nelson, who was the Company's
Chairman and Chief Executive Officer, were served with a complaint in connection
with a purported class action brought against them by Dorothy L. Lumsden in the
United States District Court of the District of Massachusetts. The complaint
contains claims for alleged violations of Sections 10(b) and 20(a) under the
Securities Exchange Act and common law. Ms. Lumsden purported to bring her
action "on behalf of herself and all other persons who purchased or otherwise
acquired the common stock of the Company during the period August 10, 1994
through and including December 12, 1997". On February 2, 1998, the Company and
Mr. Nelson were served with a second class action complaint naming them as
defendants in connection with another action brought in the United States
District Court for the District of Massachusetts. This action was brought by
Robert Curry and the complaint alleged the same purported class and contained
similar allegations and claims as the class action complaint discussed above.
On April 24, 1998, the District Court consolidated the two class actions claims
into one for pre-trial purposes. On January 7, 1999, the Company announced that
it has reached a preliminary settlement in the shareholder class action in
Federal Court in Boston. Under the terms of the settlement, Caprius made a cash
payment of $150,000 and will issue 325,000 shares of common stock to Plaintiffs.
Caprius' insurance carrier contributed $100,000 of the cash payment. In
addition, the settlement also stipulated that in the event Caprius sold all or
part of its business within 12 months an additional payment of $75,000 and
issuance of 100,000 additional shares would be made by Caprius to plaintiffs.
Consequently, on April 27, 1999, the additional payment was made and the
additional shares will be issued. For the quarter ended June 30, 1999, the
Company reported $175,795 as total settlement costs, which included $50,798 for
the market value of the shares to be issued.
On October 19, 1998, the Company filed a complaint in the Middlesex
Superior Court against Eric T. Shebar, M.D. ("Shebar"), the former Chief
Operating Officer and Medical Director for the Company's motor vehicle accident
rehabilitation ("MVA") business, and MVA Center for Rehabilitation, Inc. ("MVA,
Inc.") whereby the Company alleges breach of contract and certain
misrepresentations and seeks damages in an amount to be determined at trial. The
Company filed a preliminary injunction to reach and apply a secured promissory
note to MVA, Inc. against damages sought from Shebar and to enjoin against any
remedies under default of the Note. The ruling on the injunction was denied.
Consequently, the final Note payment of $347,000 was paid as part of the sale of
the MVA. Dr. Shebar instituted a counterclaim seeking damages under a
terminated employment agreement. The parties are currently in settlement
discussions, the amount of which is not expected to be material.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(c) The Company issued 6,178,978 shares of Common Stock and a warrant to
purchase 617,897 shares of Common Stock upon the Opus Merger. These
issuances were claimed exempt from the registration provisions of the
Securities Act of 1933 by reason of Section 4(2) thereof.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
27 Financial Data Schedule
(b) Reports of Form 8-K
Date of Report
--------------
4/27/99 Item 2. Asset Purchase Agreement between Caprius Inc.,
Caprius Systems Inc., and Pacific Republic Capital Corp. for
the sale of Caprius' Aurora breast scanner technology
related assets.
4/27/99 Item 5. Press Release, dated April 28, 1999 issued by
Caprius Inc. announcing the sale of its Aurora breast
scanner technology related assets to Pacific Republic
Capital Corp. 5/25/99 Item 7. Amendment of Item 7 of
Form 8-K of Caprius, Inc., as filed on March 11, 1999 and
April 27, 1999 6/28/99 Item 2. Acquisition by Caprius of
Opus Diagnostics, Inc. through a Merger between Opus and
Caprius' newly-formed wholly-owned subsidiary, Caprius
Merger Sub Inc. Asset Purchase Agreement between Opus and
Oxis Health Products Inc.
5/25/99 Item 7. Amendment of Item 7 of Form 8-K of Caprius, Inc.,
as filed on March 11, 1999 and April 27, 1999.
6/28/99 Item 2. Acquisition by Caprius of Opus Diagnostics, Inc.
through a Merger between Opus and Caprius' newly-formed
wholly-owned subsidiary, Caprius Merger Sub Inc. Asset
Purchase Agreement between Opus and Oxis Health Products
Inc.
-12-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Caprius, Inc.
-------------
(Registrant)
Date:August 19, 1999 /s/ George Aaron
-----------------------------------
George Aaron
President & Chief Executive Officer
Date:August 19, 1999 /s/ Steven J. James
-----------------------------------
Steven J. James
Controller
Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Caprius,
Inc. 10-Q for the period ended June 30, 1999, and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1999
<CASH> 198
<SECURITIES> 0
<RECEIVABLES> 367
<ALLOWANCES> (55)
<INVENTORY> 158
<CURRENT-ASSETS> 123
<PP&E> 452
<DEPRECIATION> (120)
<TOTAL-ASSETS> 4,257
<CURRENT-LIABILITIES> 1,667
<BONDS> 0
0
2,700
<COMMON> 135
<OTHER-SE> 2,334
<TOTAL-LIABILITY-AND-EQUITY> 4,257
<SALES> 436
<TOTAL-REVENUES> 436
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,773
<LOSS-PROVISION> (3,336)
<INTEREST-EXPENSE> 9
<INCOME-PRETAX> (3,337)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,337)
<EPS-BASIC> (0.44)
<EPS-DILUTED> (0.44)
</TABLE>
