UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark one)
[X] Quarterly Report under Section 13 or 15 (d) of the
Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Commission File Number: 0-11914
CAPRIUS, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-2457487
-------- -----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Parker Plaza, Fort Lee, NJ 07024
------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (201) 592-8838
--------------
Securities to be registered under Section 12 (b) of the Exchange Act:
None
Indicate by check mark whether the registrant (1) filed all reports
required to be filed under Section 13 or 15 (d) of the Exchange Act during the
past 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
----- ----
Indicate the number of shares outstanding of issuer's classes of common
equity, as of the latest practicable date.
Class Outstanding at April 27, 2000
Common Stock. Par value $0.01 15,700,517 shares
<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
INDEX
Page No.
PART I - FINANCIAL INFORMATION
ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets - March 31, 2000 and
September 30, 1999 ................................................ 3
Consolidated Statements of Operations - for the three and
six months ended March 31, 2000 and 1999 .......................... 4
Consolidated Statement of Stockholders' Equity .................... 5
Consolidated Statements of Cash Flows - for the six months
ended March 31, 2000 and 1999 ..................................... 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
ITEM 1. LEGAL PROCEEDINGS .................................................12
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS .........................13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ..................................13
SIGNATURES .................................................................14
EXHIBIT INDEX
27 Financial data Schedule ...........................................15
2
<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, 2000 September 30, 1999
-------------- ------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,391,081 $ 116,068
Accounts receivable, net
of reserve for bad debts
of $25,669 at March 31,
2000 and September 30,
1999 585,721 537,510
Inventories 303,524 210,983
Other current assets 36,332 91,723
------------- -------------
Total current assets 2,316,658 956,284
------------- -------------
PROPERTY AND EQUIPMENT:
Medical equipment 314,320 314,320
Office furniture and equipment 200,873 188,001
Leasehold improvements 950 950
------------- -------------
516,143 503,271
Less: accumulated depreciation 212,690 151,348
------------- -------------
Net property and equipment 303,453 351,923
------------- -------------
OTHER ASSETS:
Goodwill, net of accumulated
amortization of $62,976 at
March 31, 2000 and $45,006
at September 30, 1999 657,206 675,176
Other intangibles, net of
accumulated amortization
of $89,639 at March 31, 2000
and $29,880 at September
30, 1999 2,300,734 2,360,493
Other 22,645 9,314
------------- -------------
Total other assets 2,980,585 3,044,983
------------- -------------
TOTAL ASSETS $ 5,600,696 $ 4,353,190
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 443,463 $ 342,204
Accrued expenses 346,400 465,941
Accrued compensation 795,180 652,153
Current maturities of
long-term debt and capital
lease obligations 546,722 703,100
------------- -------------
Total current liabilities 2,131,765 2,163,398
LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATIONS, NET OF CURRENT
MATURITIES 137,655 180,623
------------- -------------
TOTAL LIABILITIES 2,269,420 2,344,021
------------- -------------
COMMITMENTS AND CONTINGENCIES - -
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value
Authorized - 1,000,000 shares
Issued and outstanding - Series A,
none; Series B, convertible,
27,000 shares at March 31,
2000 and September 30, 1999
Liquidation preference
$2,700,000 2,700,000 2,700,000
Common stock, $.01 par value
Authorized - 50,000,000 shares
Issued - 15,126,017 shares at
March 31, 2000 and 13,548,017
shares at September 30, 1999 151,260 135,480
Additional paid-in capital 66,387,130 64,778,855
Accumulated deficit (65,904,864) (65,602,916)
Treasury stock (22,500 common shares,
at cost) (2,250) (2,250)
------------- -------------
Total stockholders' equity 3,331,276 2,009,169
------------- -------------
$ 5,600,696 $ 4,353,190
============= =============
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
March 31, March 31, March 31, March 31,
2000 1999 2000 1999
------------ ------------ ------------ -----------
REVENUES:
Net patient
service revenues $ 377,532 $ 928,762 $ 810,780 $ 2,073,291
Net product sales 457,186 - 930,998 -
------------ ----------- ------------ -----------
Total revenues 834,718 928,762 1,741,778 2,073,291
------------ ----------- ------------ -----------
OPERATING EXPENSES:
Cost of operations 344,804 887,926 820,142 1,858,601
Selling, general
and administrative 502,604 1,142,589 1,167,776 2,011,987
Research and
development - 71,478 - 496,480
Provision for bad
debt and collection
costs 62 (8,486) 1,438 114,534
Loss on sale of
imaging business - - - 12,670
Loss on sale of
rehabilitation
business - 1,427,487 - 1,427,487
------------ ----------- ------------ -----------
Total operating
expenses 847,470 3,520,994 1,989,356 5,921,759
------------ ----------- ------------ -----------
Operating loss
from continuing
operations (12,752) (2,592,232) (247,578) (3,848,468)
Interest income 7,486 9,684 7,486 25,842
Interest expense (49,150) (60,454) (61,856) (119,376)
Other income - 9,000 - 9,000
------------ ----------- ------------ -----------
Loss from continuing
operations before
provision for income
taxes (54,416) (2,634,002) (301,948) (3,933,002)
Provision for income taxes - - - -
------------ ----------- ------------ -----------
Loss from continuing
operations (54,416) (2,634,002) (301,948) (3,933,002)
Income on disposal of
discontinued operation - - - 1,100,000
------------ ----------- ------------ -----------
Net loss $ (54,416) $(2,634,002) $ (301,948) $(2,833,002)
============ =========== ============ ===========
Income (loss) per basic and
diluted common share:
Loss from continuing
operations $(0.00) $(0.36) $(0.02) $(0.53)
Income on disposal of
discontinued operation - - - 0.15
------------ ----------- ------------ -----------
Net loss per share $(0.00) $(0.36) $(0.02) $(0.38)
============ =========== ============ ===========
Weighted average number of
common shares outstanding,
basic and diluted 13,619,539 7,369,040 13,572,271 7,369,040
============ =========== ============= ============
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Preferred Stock Common Stock
------------------------------------------------ Additional
Number Number $0.01 Paid-in
of Shares Amount of Shares Par Value Capital
--------------------------------------------------------------
BALANCE,
SEPTEMBER
30, 1999 27,000 $ 2,700,000 13,548,017 $ 135,480 $ 64,778,855
Issuance of
common stock
and warrants
for proceeds
from private
placement 1,353,000 13,530 1,339,470
Issuance of
common stock
in satisfaction
of accrued
liabilities 225,000 2,250 41,805
Fair value of
warrants issued
in connection
with bridge
fincnaing 227,000
Net loss
--------------------------------------------------------------
BALANCE,
MARCH 31, 2000 27,000 $ 2,700,000 15,126,017 $ 151,260 $ 66,387,130
==============================================================
Treasury Stock
------------------------- Total
Accumulated Number $0.01 Stockholders'
Deficit of Shares Par Value Equity
---------------------------------------------------------
BALANCE,
SEPTEMBER 30,
1999 $(65,602,916) 22,500 $ (2,250) $ 2,009,169
Issuance of
common stock and
warrants for
proceeds from
private placement 1,353,000
Issuance of common
stock in satisfaction
of accrued
liabilities 44,055
Fair value of
warrants issued
in connection
with bridge
financing 227,000
Net loss (301,948) (301,948)
---------------------------------------------------------
BALANCE,
MARCH 31, 2000 $(65,904,864) 22,500 $ (2,250) $ 3,331,276
=========================================================
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended March 31,
2000 1999
------------- -------------
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss $ (301,948) $ (2,833,002)
Adjustments to
reconcile net
loss to net
cash used in
operating
activities:
Depreciation
and amortization 139,070 678,401
Gain on disposal
of discontinued
operations - (1,100,000)
Loss on sale of
rehabilitation
business - 1,427,487
Gain on sale of
imaging business - (12,670)
Changes in operating
assets and
liabilities:
Accounts receivable,
net 1,789 113,272
Inventories (92,541) (536)
Other current assets 5,391 25,903
Other assets (13,331) -
Accounts payable and
accrued expenses 168,802 (275,348)
------------- -------------
Net cash used in
operating activities (92,768) (1,976,493)
------------- -------------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Proceeds from sale of
rehabilitation business - 266,438
Proceeds from sale of
imaging business - 12,670
Proceeds from disposal
of discontinued operations - 1,100,000
Purchase of equipment,
furniture and leasehold
improvements (12,873) (164,600)
------------- -------------
Net cash provided by
(used in) investing
activities (12,873) 1,214,508
------------- -------------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from stock issuance 1,353,000 -
Proceeds from issuance of debt 670,000 297,484
Repayment of debt and capital
lease obligations (642,346) (733,325)
------------- -------------
Net cash provided by
(used in) financing
activities 1,380,654 (435,841)
------------- -------------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 1,275,013 (1,197,826)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 116,068 1,791,476
------------- -------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 1,391,081 $ 593,650
============= =============
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid for interest
during the period $ 61,856 $ 12,727
============= =============
During the six months ended March 31, 2000, $44,055 of accrued expenses was
converted to common stock of the company.
The accompanying notes are an integral part of these consolidated financial
statements.
6
<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 10KSB for the fiscal year ended September
30, 1999.
NOTE 2 - THE COMPANY
- --------------------
Caprius, Inc. ("Caprius" or the "Company") was founded in 1983 and
through June 1999 essentially operated in the business of medical imaging
systems as well as healthcare imaging and rehabilitation services. On June 28,
1999, the Company acquired Opus Diagnostics Inc. ("Opus") and began
manufacturing and selling medical diagnostic assays. The Company continues to
own and operate a comprehensive imaging center located in Lauderhill, Florida.
Upon the merger (the "Opus Merger") between Opus and Caprius' newly
formed wholly-owned subsidiary Caprius Merger Sub Inc., the Opus stockholders
received an aggregate of 6,178,977 shares of Caprius Common Stock, par value
$.01 per share, which constituted approximately 45.6% of the outstanding shares
after the Merger.
The Opus Merger was consummated coincident with the closing of an Asset
Purchase Agreement (the "Oxis Purchase Agreement") between Opus and Oxis Health
Products Inc., a Delaware corporation ("Oxis"). The purchase price consisted of
$500,000 in cash, a secured promissory note (the "Oxis Note") in the principal
amount of $586,389 (as adjusted) 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. This note is secured by substantially all assets of Opus. 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. As of December 8, 1999, the principal sum due under the Oxis Note was paid
in full and under an Amended and Restated Warrant, a warrant for 617,898 shares
of Caprius Common Stock was issued, exercisable at $.0875 per share in
replacement of the Warrant.
George Aaron and Jonathan Joels formed Opus in 1999 for the purpose of
effecting the Opus Merger and the Oxis Purchase Agreement.
Opus produces and sells 14 diagnostic assays, calibrators and controls
for therapeutic drug monitoring which are used on the Abbott TDx(R) and
TDxFLx(R) instruments. Pursuant to the Oxis Purchase Agreement, Opus acquired
the assets relating to the Oxis 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 through September 30, 2000.
7
<PAGE>
On April 27, 1999, pursuant to an Asset Purchase Agreement among
Caprius, Caprius Systems, Inc., a wholly owned subsidiary of Caprius ("Systems"
and, together with Caprius, the "Sellers") and Pacific Republic Capital Corp.
("Pacific" the Buyer), the Sellers consummated the sale of their Aurora breast
scanner technology ("Aurora Technology") and 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. Caprius was relieved of an
equipment debt that exceeded $1.1 million.
In March 1999, the Company transferred its interest in its
rehabilitation center to an unrelated limited liability company in exchange for
$900,000, of which $850,000 was paid as of September 30, 1999. In addition, the
acquiring group assumed certain liabilities totaling approximately $400,000. The
cash received of $900,000 was used in part to pay a balance of approximately
$372,000 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 ("Strax"), a
comprehensive breast-imaging center, located in Lauderhill, Florida. Strax 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.
NOTE 3 - BRIDGE FINANCING
- -------------------------
Subsequent to the year ended September 30, 1999, the Company had
secured short term bridge financing in the aggregate of $670,000. The bridge
loan holders received interest on their loans together with warrants. These
funds were primarily used to pay the Oxis Note. In April 2000, all of the bridge
loans were repaid from the proceeds of the equity private placement.
NOTE 4 - CAPITAL TRANSACTIONS
- -----------------------------
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 initially 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 are paid on the shares of Series
B Preferred Stock as if they were converted into shares of Common Stock.
EQUITY PRIVATE PLACEMENT
- ------------------------
In March and April 2000, the Company completed an equity private
placement of $1,950,000 through the sale of 650,000 units at $3.00 per unit.
Each unit was comprised of three shares of Common Stock, four Series A Warrants
exercisable at $0.50 per share and are callable by the Company if the Common
Stock of the Company trades above $3.00 for 15 consecutive days, two Series B
Warrants exercisable at $0.75 per share and are callable by the Company if the
Common Stock trades above $5.00 for 15 consecutive days. All of the warrants are
exercisable for a period of five years.
8
<PAGE>
NOTE 5 - PATENT INFRINGEMENT SETTLEMENT
- ---------------------------------------
During the six months ended March 31, 1999, the Company received
$1,100,000 from a major MRI manufacturer to resolve outstanding patent issues
unrelated to the patents protecting its Aurora technology.
NOTE 6 - RELATED PARTY TRANSACTION
- ----------------------------------
The Company had an employment agreement with Jack Nelson (the "Nelson
Employment Agreement"), employing him as Chairman of the Board, Chief Executive
Officer and Treasurer. The Agreement was originally entered into on December 20,
1995, whereby Mr. Nelson was employed by both the Company and AMS. Effective
with the AMS Merger, Mr. Nelson became employed full-time by the Company. The
Nelson Employment Agreement included an aggregate base salary of $258,500, with
any additional increases in base salary thereafter being instituted by the Board
of Directors. Upon the Opus Merger, effective June 28, 1999, Caprius entered
into a Severance Agreement with Mr. Nelson terminating the Nelson Employment
Agreement, terminating all options and he ceased serving as the Chairman and
Chief Executive Officer. Pursuant to the Severance Agreement, Mr. Nelson is
serving as a consultant to Caprius for a period of one year. Mr. Nelson received
$45,734 in cash as payment of deferred compensation, 125,000 shares of Caprius
Common Stock, and was to have received a $258,500 payment upon the earlier of
December 28, 1999 or the consummation of a Business Transaction (as defined
therein). As of December 28, 1999, this severance obligation was converted into
a Note repayable on September 1, 2000 subject to mandatory repayment from the
proceeds of the sale of The Strax Institute, and if not repaid by March 1, 2000,
became secured by the assets of The Strax Institute. On April 4, 2000, the Note
to Mr. Nelson together with all outstanding interest thereon was paid in full.
Mr. Nelson resigned as a Director of the Company on April 4, 2000.
The Company had an employment agreement with Enrique Levy (the "Levy
Employment Agreement") employing him as President and Chief Operating Officer.
The Levy Employment Agreement included an aggregate base salary of $247,500 with
any additional increases in base salary thereafter being instituted by the Board
of Directors. Upon the Merger with Opus, effective June 28, 1999, Caprius
entered into a Severance Agreement with Mr. Levy terminating the Levy Employment
Agreement, terminating all options and he ceased serving as the President and
Chief Operating Officer. Pursuant to the Severance Agreement, Mr. Levy is
serving as a consultant to Caprius for a period of one year. Mr. Levy received
$43,789 as cash plus payment of deferred compensation, 100,000 shares of Caprius
Common Stock, and was to have received a $247,500 payment upon the earlier of
December 28, 1999 or the consummation of a Business Transaction (as defined
therein). As of December 28, 1999, this severance obligation was converted into
a Note repayable on September 1, 2000 subject to mandatory repayment from the
proceeds of the sale of the Strax Institute, and if not repaid by March 1, 2000,
became secured by the assets of The Strax Institute. On April 4, 2000, the Note
to Mr. Levy together with all outstanding interest thereon was paid in full. Mr.
Levy resigned as a Director of the Company on April 4, 2000.
9
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
Due to significant changes in the nature of operations of the Company
during the past two years, comparisons of results of operations between years
may not be meaningful.
The results of operations for the three months ended March 31, 2000 and
1999 are not necessarily indicative of 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, 1999.
Due to the sale of the rehabilitation business in March 1999 and the
Aurora Technology in April 1999, many of the categories in the statements of
operations for the three and six months ended March 31, 1999 will not be
comparable with the three and six months ended March 31, 2000.
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
Net patient service revenues totaled $377,532 for the three months
ended March 31, 2000 versus $928,762 for the three months ended March 31, 1999.
Cost of operations totaled $344,804 for the three months ended March 31, 2000
versus $887,926 for the three months ended March 31, 1999. The decreases from
1999 to 2000 are primarily due to the sale of the rehabilitation business and
the Aurora Technology, partially offset by the additional net patient revenues
and operating expenses for the Strax Institute.
Net product sales revenues for the three months ended March 31,2000
totaled $457,186. The cost of goods for the Opus business for this period was
$88,891 and is included in cost of operations. Due to the product mix and
production volumes, the cost of goods for the three month period to March 31,
2000 includes an additional credit from Opus' contract manufacturer. The Company
acquired Opus' therapeutic drug monitoring products in June 1999.
Selling, general and administrative expenses totaled $502,604 for the
three months ended March 31, 2000 versus $1,142,589 for the three months ended
March 31, 1999. This decrease reflects the sale of the rehabilitation business
and the Aurora Technology, a reduction in corporate overhead, as well as a shift
in business focus to the Opus Diagnostics product line of therapeutic drug
monitoring assays (TDM).
SIX MONTHS ENDED MARCH 31, 2000 COMPARED TO SIX MONTHS ENDED MARCH 31, 1999
Net patient service revenue totaled $810,780 for the six months ended
March 31, 2000 versus $2,073,291 for the six months ended March 31, 1999. Cost
of operations totaled $820,142 for the six months ended March 31, 2000 versus
$1,858,601 for the six months ended March 31, 1999. The decreases from 1999 to
2000 are primarily due to the sale of the rehabilitation business and the Aurora
Technology, partially offset by the additional net patient revenues and
operating expenses for the Strax Institute.
Net product sales revenues for the six months ended March 31, 2000
totaled $930,998. The cost of goods for the Opus business for this period was
$290,859 and is included in cost of operations. The Company acquired Opus'
therapeutic drug monitoring products in June 1999.
Selling, general and administrative expenses totaled $1,167,776 for the
six months ended March 31, 2000 versus $2,011,987 for the six months ended March
31, 1999. This decrease reflects the Company's efforts to streamline costs as
well as the change in the business mix of the Company.
10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
In March and April 2000 the Company completed an equity private
placement of $1,950,000 through the sale of 650,000 units at $3.00 per unit as
described in Note 4 to the Financial Statements. The Company intends to utilize
the funds for the repayements mentioned below and the balance for working
capital purposes to continue developing the business of Opus by adding new
distributors in territories currently not covered by existing distributors
and for the development of new diagnostic kits and the acquisition of
additional product lines. The Company is currently pursuing efforts to
identify additional funds through various funding options, including
banking facilities and equity offerings in order to provide capital
for future expansion. The Company is currently reviewing the possible
disposition of the Strax Institute. The ability to secure commercial or
other borrowings could be more difficult due to the Company's delisting from
NASDAQ. There can be no assurance that such funding initiatives will be
successful and any equity placement could result in substantial dilution
to current stockholders. Consequently, the Company's viability could be
threatened. Accordingly, the auditors' report on the September 30, 1999
financial statements contains an explanatory paragraph expressing
substantial doubt about the Company's ability to continue as a going
concern.
Cash flows from financing activities increased significantly from the
proceeds of the sale of Common Stock. There were no significant cash flows used
in investing activities for the three months ended March 31, 2000. Net cash used
in operations amounted to $92,768.
During the year ended September 30, 1999, the Company funded its
operations principally through the cash obtained from the sale of the Aurora
technology business. Since the fiscal year end, the Company retained an
investment banker and completed a series of short-term bridge loans aggregating
$670,000 through the issuance of loan notes due on April 17, 2000 and warrants.
These funds were primarily used to pay the Oxis Note. Upon the completion of the
equity private placement in April 2000, the Company paid off the Notes due to
Messers Nelson and Levy in the aggregate of $506,500 plus accrued interest,
repaid the short term bridge loans of $670,000, and paid $233,250 in accrued
compensation to two executive officers who purchased an aggregate of 50,000
$3.00 units in the equity private placement.
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 product sales
volume of the diagnostic kit business.
YEAR 2000 SYSTEMS
The Company had undertaken a review concerning the ability of its
internal information systems to handle date information and to function
appropriately from and after January 1, 2000. The total cost to address any
changes required as a result of the so-called "Year 2000 Problem" was not
material. In addition, the Company evaluated the impact of possible Year 2000
problems encountered by its suppliers and customers upon the Company and to date
there have not been any problems.
11
<PAGE>
FORWARD LOOKING STATEMENTS
The Company is including the following cautionary statement in this
Form 10-QSB 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 limitation, 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 new product
development, lack of market acceptance of new technology based products, changes
in governmental regulations, 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.
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-----------------
In Nicholas Kessler by and through his Guardian ad Litem, Saundra J.
Kessler and Saundra J. Kessler Plaintiffs vs. Caprius, Inc. formerly known as
Advanced Mammography Systems, Inc. Jack Nelson, an individual, Defendants. Case
No. SA CV 99-193 DOC (EE)(U.S.D.C. Central District of California), the
Plaintiffs, a mother and her minor son, presented eight claims for relief,
including claims for violation of the Securities Act of 1933, violation for
certain rules governing the sale of securities, for fraud, for negligent
misrepresentation, for negligence, for rescission on behalf of both Plaintiffs
and for breach of written contract. In March 1999, upon motion by the
Defendants, the Court dismissed with prejudice the claims for violation of the
Securities Act of 1933, violation for certain rules governing the sale of
securities, for fraud, for negligent misrepresentation. The Plaintiffs have
voluntarily dismissed their claims for rescission, leaving only the claims for
negligence on behalf of the son and for breach of written contract on behalf of
both Plaintiffs pending. In April 2000, the Defendants answered the Complaint,
denying the remaining allegations, and they brought claims against Saundra
Kessler and her former husband, Paul Kessler for fraud, negligent
misrepresentation, breach of written contract and for indemnity. Ms. Kessler
has answered the claims brought by the Company and Mr. Nelson, by denying
them, but Mr. Kessler has not yet done so.
The parties had attempted to settle the claims but have not been able
to achieve resolution. Due to the preliminary nature of this matter, the Company
is unable to express an opinion as to its possible outcome.
12
<PAGE>
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
- --------------------------------------------------
The Company sold 451,000 units in an equity private placement in
accordance with Section 4(2) of the Securities Act of 1933 (refer to Note 4 of
the Notes to Consolidated Financial Statements.)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) Exhibits
27 Financial Data Schedule
(b) Reports of Form 8-K
None
13
<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: May 15, 2000 /s/George Aaron
--------------------
George Aaron
President & Chief Executive Officer
Date: May 15, 2000 /s/Jonathan Joels
--------------------
Jonathan Joels
Chief Financial Officer
14
<PAGE>
EXHIBIT INDEX
Exhibit Description
------- -----------
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Caprius,
Inc. Form 10-QSB for the period ended March 31, 2000, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000722567
<NAME> CAPRIUS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> MAR-31-2000
<CASH> 1,391
<SECURITIES> 0
<RECEIVABLES> 586
<ALLOWANCES> (26)
<INVENTORY> 304
<CURRENT-ASSETS> 2,317
<PP&E> 516
<DEPRECIATION> 213
<TOTAL-ASSETS> 5,601
<CURRENT-LIABILITIES> 2,132
<BONDS> 0
0
2,700
<COMMON> 151
<OTHER-SE> 3,331
<TOTAL-LIABILITY-AND-EQUITY> 5,601
<SALES> 1,741
<TOTAL-REVENUES> 1,741
<CGS> 291
<TOTAL-COSTS> 291
<OTHER-EXPENSES> 1,989
<LOSS-PROVISION> (240)
<INTEREST-EXPENSE> 62
<INCOME-PRETAX> (302)
<INCOME-TAX> 0
<INCOME-CONTINUING> (302)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (302)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
