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 JUNE 30, 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 June 30, 2000
Common Stock. Par value $0.01 16,384,714 shares
<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
INDEX
Page No.
--------
PART I - FINANCIAL INFORMATION
ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets - June 30, 2000 and
September 30, 1999 3
Consolidated Statements of Operations - for the three
and nine months ended June 30, 2000 and 1999 4
Consolidated Statements of Stockholders' Equity - for
the nine months ended June 30, 2000 5
Consolidated Statements of Cash Flows - for the nine
months ended June 30, 2000 and 1999 6
Notes to Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 11
CONDITION AND RESULTS OF OPERATIONS
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 13
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)
<TABLE>
<CAPTION>
June 30, 2000 September 30, 1999
----------------- ------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 411,572 $ 116,068
Accounts receivable, net of reserve for bad debts
of $25,669 at June 30, 2000 and September 30, 1999 512,624 537,510
Inventories 247,902 210,983
Other current assets 24,510 91,723
-------------- --------------
Total current assets 1,196,608 956,284
-------------- --------------
PROPERTY AND EQUIPMENT:
Medical equipment 314,320 314,320
Office furniture and equipment 209,870 188,001
Leasehold improvements 950 950
-------------- --------------
525,140 503,271
Less: accumulated depreciation 242,776 151,348
-------------- --------------
Net property and equipment 282,364 351,923
-------------- --------------
OTHER ASSETS:
Goodwill, net of accumulated amortization of $118,461
at June 30, 2000 and $56,631 at September 30, 1999 1,531,721 1,593,551
Other intangibles, net of accumulated amortization of
$73,019 at June 30, 2000 and $18,255 at
September 30, 1999 1,387,354 1,442,118
Other 22,644 9,314
-------------- --------------
Total other assets 2,941,719 3,044,983
-------------- --------------
TOTAL ASSETS $ 4,420,691 $ 4,353,190
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 348,821 $ 342,204
Accrued expenses 307,780 465,941
Accrued compensation 77,564 652,153
Current maturities of long-term debt and capital
lease obligations 103,096 703,100
-------------- --------------
Total current liabilities 837,261 2,163,398
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, NET OF
CURRENT MATURITIES 111,941 180,623
-------------- --------------
TOTAL LIABILITIES 949,202 2,344,021
-------------- --------------
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value
Authorized - 1,000,000 shares
Issued and outstanding - Series A, none; Series B,
convertible, 27,000 shares at June 30, 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 - 16,384,714 shares at June 30, 2000
and 13,548,017 shares at September 30, 1999 163,847 135,480
Additional paid-in capital 67,068,068 64,778,855
Accumulated deficit (66,458,176) (65,602,916)
Treasury stock (22,500 common shares, at cost) (2,250) (2,250)
-------------- --------------
Total stockholders' equity 3,471,489 2,009,169
-------------- --------------
TOTAL LIABILITIES $ 4,420,691 $ 4,353,190
============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
3
<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
June 30, June 30,
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES:
Net patient service revenues $ 350,806 $ 436,915 $ 1,161,586 $ 2,510,206
Net product sales 464,760 - 1,395,758 -
------------- ------------- ------------- -------------
Total revenues 815,566 436,915 2,557,344 2,510,206
------------- ------------- ------------- -------------
OPERATING EXPENSES:
Cost of operations 398,139 308,719 1,218,281 2,167,320
Selling, general and administrative 741,440 1,331,377 1,909,216 3,343,364
Research and development - - - 496,480
Provision for bad debt and collection costs 4 3,083 1,442 117,617
Loss on sale of imaging business - - - 12,670
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 1,139,583 3,772,870 3,128,939 9,694,629
------------- ------------- ------------- -------------
Operating loss from continuing operations (324,017) (3,335,955) (571,595) (7,184,423)
Interest income 5,884 7,599 13,370 33,441
Interest expense (235,179) (8,542) (297,035) (127,918)
Other income - - - 9,000
------------- ------------- ------------- -------------
Loss from continuing operations before provision
for income taxes (553,312) (3,336,898) (855,260) (7,269,900)
Provision for income taxes - - - -
------------- ------------- ------------- -------------
Loss from continuing operations (553,312) (3,336,898) (855,260) (7,269,900)
Income on disposal of discontinued operation - - - 1,100,000
------------- ------------- ------------- -------------
Net loss $ (553,312) $ (3,336,898) $ (855,260) $ (6,169,900)
============= ============= ============= =============
Income (loss) per basic and diluted common share:
Loss from continuing operations $(0.04) $(0.44) $(0.06) $(0.98)
Income on disposal of discontinued operation - - - 0.15
------------- ------------- ------------- -------------
Net loss per share $(0.04) $(0.44) $(0.06) $(0.83)
============= ============= ============= =============
Weighted average number of common shares
outstanding, basic and diluted 15,726,185 7,572,743 14,302,650 7,437,442
============= ============= ============= =============
</TABLE>
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>
Preferred Stock Common Stock
------------------------------------------------- Additional
Number Number Paid-in
of Shares Amount of Shares Amount Capital
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE, SEPTEMBER 30, 1999 27,000 $ 2,700,000 13,548,017 $ 135,480 $64,778,85
Issuance of common stock and
warrants for proceeds from private
placement 1,950,000 19,500 1,930,500
Issuance of common stock in
satisfaction of accrued liabilities 225,000 2,250 41,805
Issuance of common stock in satisfaction
of accrued class action settlement 425,000 4,250 78,073
Issuance of common stock in exchange
for services 236,697 2,367 11,835
Fair value of warrants issued in
connection with bridge financing 227,000
Net loss
-------------------------------------------------------------
BALANCE, JUNE 30, 2000 27,000 $ 2,700,000 16,384,714 $ 163,847 $67,068,068
=============================================================
</TABLE>
<TABLE>
<CAPTION>
Treasury Stock
--------------------- Total
Accumulated Number Stockholders'
Deficit of Shares Amount Equity
------------------------------------------------
<S> <C> <C> <C> <C>
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 1,950,000
Issuance of common stock in
satisfaction of accrued liabilities 44,055
Issuance of common stock in satisfacti
of accrued class action settlement 82,323
Issuance of common stock in exchange
for services 14,202
Fair value of warrants issued in
connection with bridge financing 227,000
Net loss (855,260) (855,260)
-------------------------------------------------
BALANCE, JUNE 30, 2000 $(66,458,176) 22,500 $ (2,250) $ 3,471,489
=================================================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
5
<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended June 30,
2000 1999
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (855,260) $ (6,169,900)
Adjustments to reconcile net loss to net cash used in
operating activities:
Discount on Bridge Financing 227,000 -
Depreciation and amortization 208,022 717,230
Gain on disposal of discontinued operations - (1,100,000)
Loss on sale of Aurora Technology - 2,096,057
Loss on sale of rehabilitation business - 1,461,121
Loss on sale of imaging business - 12,670
Changes in operating assets and liabilities:
Accounts receivable, net 24,886 70,672
Inventories (36,919) (2,780)
Other current assets 17,213 53,565
Other assets (13,330) -
Accounts payable and accrued expenses (585,553) (158,881)
-------------- --------------
Net cash used in operating activities (1,013,941) (3,020,246)
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment received on note receivable 50,000 -
Proceeds from sale of rehabilitation business - 712,804
Proceeds from disposal of discontinued operations - 1,100,000
Proceeds from sale of Aurora Technology - 952,367
Cash used in Opus merger - (681,400)
Purchase of equipment, furniture and leasehold improvements (21,869) (163,920)
-------------- --------------
Net cash provided by (used in) investing activities 28,131 1,919,851
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 1,950,000 -
Proceeds from issuance of debt 670,000 297,484
Repayment of debt and capital lease obligations (1,338,686) (790,339)
-------------- --------------
Net cash provided by (used in) financing activities 1,281,314 (492,855)
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 295,504 (1,593,250)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 116,068 1,791,476
-------------- --------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 411,572 $ 198,226
============== ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest during the period $ 70,035 $ 44,115
============== ==============
</TABLE>
During the nine months ended June 30, 2000, $140,580 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 was 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. The operations
of Opus are classified under the TDM Business segment.
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. The operations of Strax are classified under the Imaging and
Rehabilitation Services business segment.
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. Prior to June 30, 2000, all of
the previously outstanding bridge loans were repaid from the proceeds of the
equity private placement, see Note 4.
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
------------------------
On April 27, 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 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 callable by the Company if the Common Stock trades above
8
<PAGE>
$5.00 for 15 consecutive days. All of the warrants are exercisable for a period
of five years. As part of the equity private placement, Shrikant Mehta, one of
the principal investors, and Sanjay Mody, a designee of Shrikant Mehta, were
appointed to the Company's Board of Directors.
NOTE 5 - PATENT INFRINGEMENT SETTLEMENT
---------------------------------------
In August 1996, the Company's Board of Directors adopted a formal plan
to discontinue its Imaging Systems business segment. The segment was accounted
for as a discontinued operation in accordance with APB 30; which among other
provisions, requires the plan of disposal to be carried out within one year. The
Company's estimated loss on disposal was less than anticipated resulting in
income in fiscal 1998 amount to approximately $107,000. In December 1998, the
Company received $1,100,000 from a major MRI manufacturer to resolve outstanding
patent issues related to the discontinued business segment, which is included in
income on disposal of discontinued operation for the nine months ended June 30,
1999.
NOTE 6 - RELATED PARTY TRANSACTIONS
-----------------------------------
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 was
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,
becoming 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 was
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,
becoming 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>
NOTE 7 - INDUSTRY SEGMENTS
--------------------------
The Company operations are classified into two business segments:
imaging and rehabilitation services and the therapeutic drug monitoring assay
business (the "TDM" Business).
The following table shows sales, operating loss from continuing
operations and other financial information by industry segment:
IMAGING AND
REHABILITATION TDM
SERVICES BUSINESS CONSOLIDATED
-------- -------- ------------
Three months ended June 30, 2000
--------------------------------
Sales $ 350,806 $ 464,760 $ 815,566
============= ============= ============
Loss from continuing operations $ (73,884) $ (479,428) $ ( 553,312)
============= ============= ============
Identifiable assets at June 30, 2000 $ 1, 158,175 $ 3,262,516 $ 4,420,691
============= ============= ============
Three months ended June 30, 1999
--------------------------------
Sales $ 436,915 $ - $ 436,915
============= ============= ============
Loss from continuing operations $ (3,336,898) $ - $(3,336,898)
============= ============= ============
Identifiable assets at June 30, 1999 $ 1,421,826 $ 2,835,635 $ 4,257,461
============= ============= ============
Nine months ended June 30, 2000
-------------------------------
Sales $ 1,161,586 $ 1,395,758 $ 2,557,344
============= ============= ============
Loss from continuing operations $ (155,120) $ (700,140) $ (855,260)
============= ============= ============
Nine months ended June 30, 1999
-------------------------------
Sales $ 2,510,206 $ - $ 2,510,206
============= ============= ============
Loss from continuing operations $ (7,269,900) $ - $(7,269,900)
============= ============= ============
10
<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 June 30, 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 nine months ended June 30, 1999 will not be
comparable with the three and nine months ended June 30, 2000.
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999
Net patient service revenues totaled $350,806 for the three months
ended June 30, 2000 versus $436,915 for the three months ended June 30, 1999.
Cost of operations totaled $398,139 for the three months ended June 30, 2000
versus $308,719 for the three months ended June 30, 1999.
Net product sales for the three months ended June 30, 2000 totaled
$464,760. The cost of goods for the Opus business for this period was $161,216
and is included in cost of operations. The Company acquired Opus' therapeutic
drug monitoring products in June 1999.
Selling, general and administrative expenses totaled $741,440 for the
three months ended June 30, 2000 versus $1,331,377 for the three months ended
June 30, 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).
NINE MONTHS ENDED JUNE 30, 2000 COMPARED TO NINE MONTHS ENDED JUNE 30, 1999
Net patient service revenues totaled $1,161,586 for the nine months
ended June 30, 2000 versus $2,510,206 for the nine months ended June 30, 1999.
Cost of operations totaled $1,218,281 for the nine months ended June 30, 2000
versus $2,167,320 for the nine months ended June 30, 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 service
revenues and operating expenses for the Strax Institute.
Net product sales for the nine months ended June 30, 2000 totaled
$1,395,758. The cost of goods for the Opus business for this period was $452,074
and is included in cost of operations. Due to the product mix and production
volumes, the cost of goods for the nine month period ended June 30, 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 $1,909,216 for
the nine months ended June 30, 2000 versus $3,343,364 for the nine months ended
June 30, 1999. This decrease reflects the Company's efforts to streamline costs
as well as the change in the business mix of the Company.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
On April 27, 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 utilized the funds for the
repayments mentioned below and is using 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 reviewing the possible disposition of the Strax
Institute. The Company continues to pursue additional capital through various
funding options, including banking facilities and equity offerings in order to
provide capital for future expansion. The ability to secure equity financing
could be more difficult due to the Company's Common Stock being traded on the
OTC Bulletin Board. 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
contained 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 nine months ended June 30, 2000. Net cash used
in operations for the nine months ended June 30, 2000 amounted to $963,942.
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
representing termination amounts due to them, repaid the short term bridge loans
of $670,000, and paid $233,250 in accrued compensation to two executive officers
who then subscribed for a total 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.
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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,
a change in the manufacturer for the Company's products, for 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 the case of 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), on August 8, 2000, the Plaintiffs and Defendants orally agreed to
enter into a settlement agreement whereby each party would grant the other a
full release with respect to all present and future claims related to this
matter. Upon execution and subsequent court approval of the settlement
agreement, the Company will issue 25,000 shares of its common stock and grant
warrants exercisable for three years at $.25 per share to purchase 60,000 shares
of its common stock to each of Sandra Kessler and Nicholas Kessler (through his
Guardian ad Litem).
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
--------------------------------------------------
The Company sold 650,000 units in an equity private placement in a
transaction claim exempt from the registration provisions of the Securities Act
of 1933 by reason of Section 4(2) thereof and regulation D thereunder. See 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
On April 28, 2000, the Company filed a Form 8-K reporting in Item 5 thereof
that it had completed a private placement offering in which it sold 650,000
units and received gross proceeds of $1,950,000.
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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 , 2000 /s/George Aaron
-- -----------------------------
George Aaron
President & Chief Executive Officer
Date: August , 2000 /s/Jonathan Joels
-- -----------------------------
Jonathan Joels
Chief Financial Officer
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