AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 25, 2000
Registration No. 333-___________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
CAPRIUS, INC.
(Name of Small Business Issuer in Its Charter)
----------------
DELAWARE 3845 22-2457487
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification Number)
organization) Code Number)
----------------
ONE PARKER PLAZA
FORT LEE, NEW JERSEY, 07024
(201) 592-8838
(Address and Telephone Number of Principal Executive Offices and
Principal Place of Business)
----------------
GEORGE AARON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ONE PARKER PLAZA
FORT LEE, NEW JERSEY, 07024
(201) 592-8838
(Name, Address and Telephone Number of Agent For Service)
----------------
Copies to:
BRUCE A. RICH, ESQ.
THELEN REID & PRIEST LLP
40 WEST 57TH STREET
NEW YORK, NEW YORK 10019
(212) 603-2000
----------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
from time to time after the effective date of this Registration
Statement as determined by market conditions and other factors.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.[ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.[ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.[ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.[ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================== ======================= ====================== ======================= =======================
TITLE OF EACH PROPOSED MAXIMUM PROPOSED MAXIMUM
CLASS OF SECURITIES AMOUNT TO OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED BE REGISTERED UNIT(1) PRICE(1) REGISTRATION FEE
------------------------------------- ----------------------- ---------------------- ----------------------- -----------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value 2,186,697 Shares $.31 $683,342 $180.40
------------------------------------- ----------------------- ---------------------- ----------------------- -----------------------
Common Stock, $.01 par value(2)(3) 2,600,000 Shares $.50 $1,300,000 $343.20
------------------------------------- ----------------------- ---------------------- ----------------------- -----------------------
Common Stock, $.01 par value(2)(4) 1,800,000 Shares $.75 $1,350,000 $356.40
------------------------------------- ----------------------- ---------------------- ----------------------- -----------------------
Common Stock, $.01 par value(2)(5) 538,500 Shares $1.00 $538,500 $142.16
------------------------------------- ----------------------- ---------------------- ----------------------- -----------------------
Common Stock, $.01 par value(2)(6) 330,000 Shares $.31 $103,125 $27.23
------------------------------------- ----------------------- ---------------------- ----------------------- -----------------------
Common Stock, $.01 par value(2)(7) 617,898 Shares $.088 $54,375 $14.35
------------------------------------- ----------------------- ---------------------- ----------------------- -----------------------
Total 8,073,095 Shares - $4,029,342 $1,063.74 (8)
===================================== ======================= ====================== ======================= =======================
</TABLE>
(1) Estimated solely for the purpose of computing amount of the registration
fee pursuant to Rule 457(c) promulgated under the Securities Act of 1933,
as amended, based on the average of the bid and asked prices on the OTC
Bulletin Board on July 21, 2000.
(2) In accordance with Rule 457(g), the registration fee for these shares is
calculated upon a price which represents the highest of (i) the price at
which the warrants or options may be exercised; (ii) the offering price of
securities of the same class included in this registration statement; or
(iii) the price of securities of the same class, as determined pursuant to
Rule 457(c).
(3) Represents shares of Common Stock underlying the Series A Warrants. $.50 is
the exercise price of the Series A Warrants.
(4) Represents shares of Common Stock underlying the Series B Warrants and
certain options. $.75 is the exercise price of the Series B Warrants, and
such options.
(5) Represents shares of Common Stock underlying options and warrants
exercisable at. $1.00 per share.
(6) Represents shares of Common Stock underlying warrants granted to certain
individuals in connection with a notes issued by the Registrant.
(8) Represents shares of Common Stock underlying warrants granted to certain
individuals in connection with a notes issued by the Registrant.
(7) Represents shares of Common Stock underlying warrants granted to Oxis
Health Products, Inc. in connection with a transaction with the Registrant.
(8) The sum of $1,063.74 has been paid in connection with the filing of this
initial registration statement.
THE REGISTRANT SHALL AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE AN AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>
PROSPECTUS
Subject to Completion, Dated July 25, 2000
8,073,095 SHARES OF COMMON STOCK
CAPRIUS, INC.
This prospectus relates to the resale by the selling stockholders
listed elsewhere in this prospectus of up to 8,073,077 shares of common stock of
Caprius, Inc. The selling stockholders may sell the stock from time to time at
the prevailing market price or in negotiated transactions. Of the shares
offered:
- 2,186,697 shares are presently outstanding, and
- 5,886,398 shares are issuable upon exercise of warrants
and options.
We will receive no proceeds from the sale of the shares by the selling
stockholders. However, we will receive proceeds in the amount of $3,308,566 upon
the exercise of warrants and options underlying the shares by the selling
stockholders.
Our common stock is traded on the over-the-counter electronic bulletin
board. Our trading symbol is CAPR. On July 21, 2000, the last bid price as
reported was $0.27.
The selling stockholders and any participating broker-dealers may be
deemed to be "underwriters" within the meaning of the Securities Act of 1933,
and any commissions or discounts given to any such broker-dealer may be regarded
as underwriting commissions or discounts under the Securities Act of 1933.
Brokers or dealers effecting transactions in the shares should confirm
the registration of these securities under the securities laws of the states in
which transactions occur or the existence of an exemption from registration.
AN INVESTMENT IN SHARES OF OUR COMMON STOCK INVOLVES A HIGH DEGREE OF
RISK. WE URGE YOU TO CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 5.
THE SECURITIES AND EXCHANGE COMMISSION (SEC) AND STATE SECURITIES
REGULATORS HAVE NOT APPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE AND SHOULD BE REPORTED IMMEDIATELY TO THE SEC BY CALLING 1-800-SEC-0330.
<PAGE>
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in
this prospectus. This summary does not contain all the information that you
should consider before investing in the common stock. You should carefully read
the entire prospectus, including "Risk Factors" and the Consolidated Financial
Statements, before making an investment decision.
THE COMPANY
Our Company was founded in 1983 and through June 1999 primarily
developed and operated medical imaging systems as well as healthcare imaging and
rehabilitation services. In March 1999, we sold the rehabilitation center and in
April 1999, we sold the imaging technology and related assets. On June 28, 1999,
we acquired Opus Diagnostics, Inc. (Opus) and began manufacturing and selling a
broad line of medical diagnostic assays for therapeutic drug monitoring (TDM).
We continue to own and operate the Strax Institute (Strax), a comprehensive
medical imaging center located in Lauderhill, Florida.
Upon our merger with Opus, which was consummated coincident with Opus
acquiring Oxis Health Products, Inc.'s TDM business, the Opus stockholders
received approximately 45.6% of our outstanding shares after the merger, and
George Aaron and Jonathan Joels, the management and sole stockholders of Opus,
were appointed senior executive officers and directors of our company.
Opus produces and sells 14 diagnostic assays, their calibrators and
controls for therapeutic drug monitoring which are used on the Abbott TDx(R) and
TDxFLx(R) instruments. Therapeutic drug monitoring is used to assess medication
efficacy and safety of a given therapeutic drug in human bodily fluids, usually
blood. The monitoring allows physicians to individualize therapeutic regimens
for optimal patient relief. Under the terms of the Oxis Health Products (Oxis)
asset purchase agreement, Opus acquired from Oxis the assets relating to its
know-how, patent, trademark and distribution network for the diagnostic assay
business. Additionally, pursuant to a services agreement, Oxis is manufacturing
the products of the therapeutic drug monitoring business of Opus through
September 30, 2000.
In July 1998, we acquired Strax as part of our strategy to utilize and
integrate our existing breast imaging technology with that of Strax and create
an installed base for this business. Strax specializes in comprehensive breast
care utilizing several imaging modalities. It performs imaging and diagnostic
services in-house, including patient screening, x-ray mammography, ultrasound
and stereotactic biopsies, as well as performing bone densitometry to monitor
osteoporosis. Strax services the local area in Lauderhill, Florida and treats
approximately 15,000 patients per year. In addition, Strax administers in-house
all transactions, medical records, scheduling, billing and collections, managed
care contracts, as well as accounting and bookkeeping for its business. We are
currently evaluating the strategic alternatives for the Strax Institute.
On April 27, 2000, we completed a private placement offering (April
Placement) in which we sold 650,000 units and received gross proceeds of
$1,950,000. We offered the units at a price of $3.00 per unit, with each unit
consisting of (i) three shares of common stock, $.01 par value, of the Company,
(ii) four redeemable Series A Warrants and (iii) two redeemable Series B
Warrants. Each Series A Warrant gives the holder the right to purchase one share
of common stock at a price of $.50 and is exercisable for five years. Each
Series B Warrant gives the holder the right to purchase one share of common
stock at a price of $.75 and is exercisable for five years. Approximately
$1,400,000 of the proceeds from the placement were used to repay outstanding
indebtedness and accrued liabilities, including accrued salaries, and the
balance is being used for working capital.
As part of the agreements with the principal investors in the April
Placement, Shrikant Mehta, one of the principal investors, and Sanjay Mody a
designee of the principal investors, were appointed to our Board of Directors.
Pursuant to the terms of the Placement, Mr. Mehta and Mr. Mody replaced Jack
Nelson and Enrique Levy as directors of the Company.
We were incorporated under Delaware law on June 3, 1983 under the name
Advanced NMR Systems, Inc. Effective November 10, 1997, we completed a merger
with Advanced Mammography Systems, Inc. (AMS), a partially-owned subsidiary,
whereby AMS became our wholly owned subsidiary. Upon our merger with AMS, we
2
<PAGE>
changed our name to Caprius, Inc. Our executive offices are at One Parker Plaza,
Fort Lee, New Jersey 07024, and our telephone number is (201) 592-8838.
3
<PAGE>
THE OFFERING
SECURITIES OFFERED BY SELLING
STOCKHOLDERS.................. 8,073,095 shares, includes 5,886,380 shares
subject to options and warrants.
COMMON STOCK TO BE OUTSTANDING
AFTER THE OFFERING............. 22,271,112 shares.
USE OF PROCEEDS................ We will receive no proceeds from the sale of
common stock by the selling stockholders.
We will receive $3,308,566 if all of the
warrants and options underlying the shares
included in this prospectus are exercised.
We will use these proceeds for general
corporate purposes.
OTC ELECTRONIC BULLETIN BOARD
SYMBOL......................... "CAPR"
RISK FACTORS
See "RISK FACTORS" for a discussion of certain factors that should be
considered in evaluating an investment in the common stock.
SUMMARY FINANCIAL AND OPERATING INFORMATION
The following selected financial information is derived from the
Consolidated Financial Statements appearing elsewhere in this Prospectus and
should be read in conjunction with Consolidated Financial Statements, including
the notes thereto, appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
ACTUAL PRO FORMA [1]
YEAR ENDED SEPTEMBER 30 YEAR ENDED SEPTEMBER 30
----------------------- -----------------------
Summary of Operations 1999 1998 1999 1998
--------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Net patient service revenues $2,882,818 $3,764,189 $1,654,921 $ 305,189
Net product sales 391,373 - 1,470,173 1,438,400
Total revenues 3,274,191 3,764,189 3,125,094 1,743,589
Income (loss) from continuing operations before
provision for income taxes (7,595,628) (17,527,956) 468,224 (1,625,852)
Income on disposal of discontinued operation 1,100,000 107,430 1,100,000 107,430
Net income (loss) (6,495,628) (17,518,703) 1,568,224 (1,518,422)
Income (loss) from continuing operations per share (0.85) (2.51) 0.03 (0.12)
Income on disposal of discontinued
operation per share 0.12 0.02 0.08 0.01
Net income (loss) per common share (basic and
diluted) (0.73) (2.49) 0.11 (0.11)
Weighted average common shares outstanding,
basic and diluted 8,971,411 7,025,802 13,525,517 13,204,779
</TABLE>
------------------------
1 The pro forma financial information sets forth the results of the Company
as if the merger with Opus and the dispositions of Aurora technology and
rehabilitation business had occurred as of October 1, 1997. 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, 1997 or results
that may occur in the future.
4
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA SIX
MONTHS ENDED
SIX MONTHS ENDED MARCH 31 MARCH 31, 1999
------------------------- --------------
Summary of Operations 2000 1999
--------------------- ---- ----
<S> <C> <C> <C>
Net patient service revenues $810,780 $2,073,291 $ 649,707
Net product sales 930,998 -- 735,087
Total revenues 1,741,778 2,073,291 1,384,794
Income (loss) from continuing operations before
provision for income taxes (301,948) (3,933,002) 281,235
Income on disposal of discontinued operation -- 1,100,000 1,100,000
Net income (loss) (301,948) (2,833,002) 1,381,235
Income (loss) per common share (basic and diluted):
Income (loss) from continuing operations per share (0.02) (0.53) 0.02
Income on disposal of discontinued operation -- 0.15 0.08
Net income (loss) per common share (0.02) (0.38) 0.10
Weighted average common shares outstanding,
Basic and diluted 13,572,271 7,346,540 13,525,517
</TABLE>
FINANCIAL POSITION
AS OF AS OF
MARCH 31, 2000 SEPTEMBER 30, 1999
-------------- --------------
Cash and cash equivalents $1,391,081 $116,068
Total assets 5,600,696 4,353,190
Working capital (deficit) 184,893 (1,207,114)
Long-term debt 137,655 180,623
Stockholders' equity 3,331,276 2,009,169
5
<PAGE>
RISK FACTORS
The shares of our common stock being offered for resale by the selling
stockholders are highly speculative in nature, involve a high degree of risk and
should be purchased only by persons who can afford to lose the entire sum
invested in the common stock. Before purchasing any of the shares of common
stock, you should carefully consider the following factors relating to our
business and prospects. If any of the following risks actually occurs, our
business, financial condition or operating results could be materially adversely
affected. In such case, the trading price of our common stock could decline, and
you may lose all or part of your investment.
WE HAVE A HISTORY OF LOSSES
To date we have been unable to generate revenue sufficient to be
profitable on a consistent basis. As a result, we have sustained substantial
losses which relate primarily to businesses that have been discontinued. We had
a net loss of $6,495,628, or $(0.73) per share, for the fiscal year ended
September 30, 1999 compared to a net loss of $17,518,703 for the fiscal year
ended September 30, 1998, or $(2.49) per share, and a net loss of $301,948 for
the six month period ended March 31, 2000, or $(.02) per share. There can be no
assurance that we will ever achieve the level of revenues needed to be
profitable in the future or, if profitability is achieved, that it will be
sustained.
OUR ACCOUNTANT'S REPORT RAISES DOUBT AS TO OUR ABILITY TO CONTINUE AS A GOING
CONCERN
The report of our independent accountants on our September 30, 1999
Consolidated Financial Statements contains an explanatory paragraph describing
conditions that raise substantial doubt about our ability to continue as a going
concern. Our independent accountants cited our history of substantial losses in
recent years, which raised substantial doubt as to our ability to continue as a
going concern. As shown in the financial statements, we incurred net losses of
$301,948 for the six month period ended March 31, 2000. Although we raised an
aggregate of $1,950,000 in the April Placement, a substantial portion of the net
proceeds were used to repay indebtedness and accrued liabilities. If we are
unable to continue as a going concern, your entire investment in us could be
lost.
RISK OF NEED FOR ADDITIONAL FINANCING
We expect to require additional working capital or other funds in the
future. There is no assurance that the Company will be successful in obtaining
additional funds, whether publicly or privately or through equity or debt, or
that the terms of the financing will not be dilutive to stockholders.
THE DISTRIBUTION OF THERAPEUTIC DRUG MONITORING KITS IS HIGHLY COMPETITIVE AND
WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY
We compete with numerous other companies, including several major
manufacturers and distributors, in the distribution and development of assays
for therapeutic drug monitoring. As a result, these entities may begin to
develop, manufacture, market and distribute systems which are substantially
similar or superior to our products. There may be an industry shift in major
type of testing system used or more sophisticated systems may be used to perform
therapeutic drug monitoring tests, forcing us to manufacture our product
differently. Further, other companies may enter this marketplace. No assurance
can be given that we will be able to successfully compete against these other
companies which may have substantially greater marketing and financial
resources.
Opus competes with a variety of companies, many of which are
considerably larger than Opus in the area of therapeutic drug monitoring. Among
its competitors are Abbott Laboratories and Roche Diagnostics, Inc. Opus
attempts to compete in its pricing and the performance of its kits. Both the
topirimate and teicoplanin kits do not experience competition as we enjoy
exclusivity on each.
RISK FACTORS RELATING TO THE STRAX INSTITUTE
Potential Adverse Impact from other Providers. The market for
mammography screening and diagnostic services is highly competitive. Strax
currently competes with other providers of similar services, including
6
<PAGE>
hospitals, private clinics and radiology physician groups. Strax competes with
many other local centers and medical facilities with medical imaging
capabilities. Many of our competitors have greater financial and other resources
than we do, or offer diagnostic services on higher level or different types of
equipment. We cannot assure you that we will be able to compete effectively
against the current or future competitors.
Dependence on Key Personnel. The success of Strax is dependent on the
efforts and abilities of its Radiologist, Dr. Stuart Kaplan and its Director,
Ms. Susan Flynn. If Strax were to lose the services of Dr. Kaplan or Ms. Flynn
before a qualified replacement could be obtained, its business could be
materially and adversely affected. Dr. Kaplan has submitted his resignation
effective July 31, 2000. His new employer has agreed to make Dr. Kaplan
available to Strax in order to perform similar services to those currently being
performed by Dr. Kaplan. Strax intends to enter into an agreement with Dr.
Kaplan's new employer. No assurance can be made that Strax will be able to enter
into such an agreement.
Potential Adverse Impact of Reliance on Governmental and Private
Reimbursement of Heath Care Costs. In most cases, the ability of patients or
health care providers to pay for the services which Strax provides depends on
governmental (federal or state) and private insurer reimbursement policies.
Consequently, those policies have a direct effect on the ability of patients and
health care providers to use and pay for Strax's services. As a result, any
significant adverse change in such reimbursement policies would likely adversely
affect Strax's business.
Potential Adverse Impact of Patient Collection Risks on Working
Capital. Strax operates primarily as a full-service medical provider.
Consequently Strax usually bills patients and third-party payers for its
services directly. Receipt of payment for services from patients covered by
private insurance is dependent in large part on Strax's timely and correct
claims form submission in accordance with varying requirements of different
insurance companies.
Potential Adverse Impact of Government Regulation on Growth and
Provision of Services. The provision of Strax's services are subject to a number
of different laws, rules and regulations. Strax believes that it is currently in
material compliance with all such applicable laws, rules and regulations. The
sanctions for failure to comply with such laws, rules or regulations could be
denial of the right to conduct business, significant fines and/or criminal
penalties. Additionally, a change in such laws, rules or regulations could
adversely affect Strax's business.
Potential Adverse Impact of Technological Change on Existing
Equipment. Strax's services require the use of state-of-the-art medical
equipment that is subject to rapid technological advances. The development of
new technologies or refinements of existing technologies may make Strax's
existing equipment obsolete or cause a reduction in the value of, or reduce the
need for, Strax's equipment, unless such equipment can be upgraded to maintain
its state-of-the-art character.
Ability To Attract Customers. Strax's ability to attract medical
imaging customers depends on many factors, including its ability to contract
with health care providers and payers and to attract referrals from physicians
representing various medical specialties, the type and quality of equipment, and
the quality and timeliness of test results. Referrals may depend on the
existence of a contractual relationship between Strax and a patient's insurance
carrier or between Strax and a health care provider (such as a managed care
provider, hospital or clinic). The loss of one or a few large customers could
have a material adverse effect on Strax's business. Approximately 47% of Strax's
revenues are related to patients participating in the Medicare program. If Strax
were to be disqualified from participation in the Medicare program, the
resulting loss in revenues would have a material adverse impact on Strax's
business.
Potential Unavailability and Inadequacy of Professional Liability
Insurance Coverage. The health care industry has been experiencing increasing
difficulty in maintaining professional liability insurance coverage at previous
levels. There is no assurance that Strax will be able to renew its existing
professional liability policy at affordable rates or obtain new professional
liability insurance covering existing or contemplated operations and markets.
There is also no assurance that the amount of Strax's policy is sufficient to
fully insure against claims which may be made against Strax.
7
<PAGE>
WE MAY NOT BE ABLE TO PROTECT OUR KNOW-HOW, PATENTS AND PROPRIETARY
TECHNOLOGY, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS
Our ability to compete successfully will depend in part on our ability
to protect our proprietary rights and to operate without infringing on the
proprietary right of others, both in the United States and abroad. The patent
positions of medical technology companies generally involve complex legal and
factual questions. We have no patent protection, except for our patent
protection in various countries around the world on the topirimate and
teicoplanin assays. The topiramate patent was issued in the United States in
September 1999. We will continue to file for patent protection within the United
States and abroad with respect to patents for new assays where economic
protection for the test is needed and such patents can be obtained. We may also
apply in the future for patent protection for uses, processes, products and
systems that we develop. There can be no assurance that any patent that we apply
for will be issued, or that any patents issued will not be challenged,
invalidated or circumvented, or that the rights granted thereunder will provide
any competitive advantage. We may incur substantial costs in defending any
patent or license infringement suits or in asserting any patent or license
rights, including those granted by third parties, the expenditure of which we
might not be able to afford. An adverse determination could subject us to
significant liabilities to third parties, require us to seek licenses from or
pay royalties to third parties or require us to develop appropriate alternative
technology. There can be no assurance that any such licenses would be available
on acceptable terms or at all, or that we could develop alternate technology at
an acceptable price or at all. Any of these events could have a material adverse
effect on our business and profitability.
WE MAY NOT BE ABLE TO DEVELOP NEW PRODUCTS THAT ACHIEVE MARKET ACCEPTANCE
Our future growth and profitability depend in part on our ability to
respond to technological changes and successfully develop and market new
products that achieve significant market acceptance. This industry has been
historically marked by very rapid technological change and the frequent
introductions of new products. There is no assurance that we will be able to
develop new products that will realize broad market acceptance.
THE NATURE OF OUR BUSINESS EXPOSES US TO PROFESSIONAL AND PRODUCT LIABILITY
CLAIMS, WHICH COULD MATERIALLY ADVERSELY IMPACT OUR BUSINESS AND PROFITABILITY
The malfunction or misuse of our diagnostic kits may result in
incorrect interpretation of serum levels to physicians' patients, thereby
subjecting the Company to possible liability. Although our insurance coverage is
in amounts and deductibles customary in the industry, there can be no assurance
that such insurance will be sufficient to cover any potential liability. We are
seeking insurance to cover our overseas sales. Further, as the result of either
adverse claim experience or insurance industry trends, we may in the future have
difficulty in obtaining product liability insurance or be forced to pay very
high premiums, and there can be no assurance that insurance coverage will
continue to be available on commercially reasonable terms or at all. In
addition, there can be no assurance that insurance will adequately cover any
product liability claim against us. A successful product liability or other
claim with respect to uninsured liabilities or in excess of insured liabilities
could have a material adverse effect on our business, financial condition and
operations. We currently have no overseas liability insurance, but are currently
seeking such liability coverage. Any overseas product liability claim could have
a material adverse effect on our business, financial condition and operations.
WE ARE SUBJECT TO GOVERNMENT REGULATIONS
In the United States, our products and manufacturing practices are
subject to regulation by the Food and Drug Administration (FDA) and by state
regulatory agencies. The TDM kits and assays must receive FDA clearance before
they may be sold. There are similar requirements in certain foreign countries.
The regulatory process can be extremely time consuming and expensive. Currently
all of our products are FDA approved, with the exception of the antibacterial
assay used to test the medication Teicoplanin, as the medication has not been
approved for sale in the United States. The use of Teicoplanin and our product
used to test this medication have been approved for use in foreign countries.
The revenues for patient services delivered by Strax are subject to
changes in governmental regulations that could affect the amount by which
Medicare will pay as reimbursement for services. This in turn could also affect
the amounts that third party payers, including private insurance companies,
would be willing to pay for services.
8
<PAGE>
The premises of Strax are also subject to annual MQSA inspection and
certification as governed by the FDA. This review includes the equipment and
technician performance, record-keeping and medical analysis, as well as
personnel qualifications.
THE LOSS OF CERTAIN MEMBERS OF OUR MANAGEMENT TEAM COULD ADVERSELY AFFECT OUR
BUSINESS
Our success is highly dependent on the continued efforts of George
Aaron, Chairman, President and Chief Executive Officer, and Jonathan Joels,
Chief Financial Officer, Treasurer and Secretary. Competition for these highly
skilled individuals is intense, and there can be no assurance that we will be
successful in attracting and retaining key personnel in the future. Our failure
to do so could adversely effect our business and financial condition. We do not
carry any "key-man" insurance on the lives of any of our officers or employees.
DEPENDENCE ON OUR THIRD PARTY SUPPLIERS AND MANUFACTURERS FOR THE PRODUCTION OF
OUR THERAPEUTIC DRUG MONITORING KITS
We do not manufacture our diagnostic kits and are dependent upon third
party suppliers and manufacturers for the production of these kits. Although we
currently have a contract with Oxis as our primary supplier, our contract ends
in September 2000 and we have yet to determine whether Oxis will continue to
manufacture for us or whether we will use other suppliers for our kits in the
future. There can be no assurance that we will come to agreement with suppliers
capable of delivering adequate quantities of components within a reasonable
period of time, on acceptable terms or at all. Although it is unlikely because
of the number of suppliers and manufacturers of assays for therapeutic drug
monitoring, the unavailability of adequate quantities, the inability to develop
alternative sources, a reduction or interruption in supply of materials needed
for the production of our TDM kits could have a material adverse effect on our
ability to market our products.
DEPENDENCE ON PRINCIPAL CUSTOMERS
For the fiscal year ended September 30, 1999 two customers accounted
for approximately 33% of Opus' TDM business total sales and approximately 4% of
our total revenues. For the six months ended March 31, 2000, these two customers
accounted for approximately 30% of Opus' total sales and approximately 16% of
our total revenues. We cannot make any assurances that we will continue to make
significant sales in the future to either of these customers. The loss of either
customer would have a material adverse effect on our operating results and
financial condition.
CONTROL BY MANAGEMENT
The executive officers and directors beneficially own approximately
56% of the outstanding shares of Common Stock, including shares underlying
options and warrants held by them. There are agreements among the principal
stockholders to vote their shares for the other's designee in election for
directors through March 2003. Accordingly, our principal stockholders will
exercise control of our Company, including the control over the election of
directors and the appointment of officers. See "PRINCIPAL STOCKHOLDERS."
THERE IS ONLY A VOLATILE LIMITED MARKET FOR OUR COMMON STOCK
Recent history relating to the market prices of public companies
indicates that, from time to time, there may be periods of extreme volatility in
the market price of our securities because of factors unrelated to the operating
performance of, or announcements concerning, the issuers of the affected stock.
Our common stock is not actively traded, and the bid and asked prices for our
common stock have fluctuated significantly. In the past two fiscal years, the
common stock traded from a high of $2.00 to a low of $0.06 per share. See
"MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS." General
market price declines, market volatility, especially for low priced securities,
or factors related to the general economy or to us in the future could adversely
affect the price of the common stock.
9
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WE HAVE A SUBSTANTIAL AMOUNT OF STOCK THAT WILL BECOME AVAILABLE FOR RESALE
UNDER RULE 144
All of the shares registered for sale on behalf of the selling
stockholders are "restricted securities" as that term is defined in rule 144
under the Securities Act. We have filed this registration statement to register
these restricted shares for sale into the public market by the selling
stockholders. These restricted securities, if sold in the market all at once or
at about the same time could depress the market price during the period the
registration statement remains effective and also could affect our ability to
raise equity capital. Any outstanding shares not sold by the selling
stockholders pursuant to this prospectus will remain as "restricted shares" in
the hands of the holder, except for those held by non-affiliates for a period of
two years, calculated pursuant to rule 144.
WE HAVE NEVER PAID DIVIDENDS AND WE DO NOT ANTICIPATE PAYING DIVIDENDS IN THE
FUTURE
We do not believe that we will pay any dividends on our common stock
in the future. We have never declared any cash dividends on our common stock,
and if we were to become profitable, it would be expected that all of such
earnings would be retained to support our business.
SHARES ELIGIBLE FOR FUTURE SALE COULD NEGATIVELY AFFECT YOUR INVESTMENT IN US
At June 30, 2000, we had an aggregate of 9,146,818 shares of common
stock reserved for the conversion of Series B Preferred Stock and options and
warrants.
WE ARE SUBJECT TO PENNY STOCK REGULATIONS AND RESTRICTIONS
The Securities and Exchange Commission has adopted regulations which
generally define Penny Stocks to be an equity security that has a market price
less than $5.00 per share or an exercise price of less than $5.00 per share,
subject to certain exemptions. As of June 30, 2000, the closing bid and asked
prices for our common stock were $.30 and $.375 per share and therefore, it is
designated a "Penny Stock." As a Penny Stock, our common stock may become
subject to Rule 15g-9 under the Securities Exchange Act of 1934, as amended, or
the Penny Stock Rule. This rule imposes additional sales practice requirements
on broker-dealers that sell such securities to persons other than established
customers and "accredited investors" (generally, individuals with a net worth in
excess of $1,000,000 or annual incomes exceeding $200,000, or $300,000 together
with their spouses). For transactions covered by Rule 15g-9, a broker-dealer
must make a special suitability determination for the purchaser and have
received the purchaser's written consent to the transaction prior to sale. As a
result, this rule may affect the ability of broker-dealers to sell our
securities and may affect the ability of purchasers to sell any of our
securities in the secondary market.
For any transaction involving a penny stock, unless exempt, the rules
require delivery, prior to any transaction in a penny stock, of a disclosure
schedule prepared by the SEC relating to the penny stock market. Disclosure is
also required to be made about sales commissions payable to both the
broker-dealer and the registered representative and current quotations for the
securities. Finally, monthly statements are required to be sent disclosing
recent price information for the penny stock held in the account and information
on the limited market in penny stock.
There can be no assurance that our common stock will qualify for
exemption from the penny stock restrictions. In any event, even if our common
stock were exempt from the Penny Stock restrictions, we would remain subject to
Section 15(b)(6) of the Securities Exchange Act of 1934, as amended, which gives
the SEC the authority to restrict any person from participating in a
distribution of penny stock, if the SEC finds that such a restriction would be
in the public interest.
POSSIBLE ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF OUR CHARTER
Certain provisions of our Certificate of Incorporation and of Delaware
law could discourage potential acquisition proposals and could make it more
difficult for a third party to acquire or discourage a third party from
attempting to acquire control of us. These provisions could diminish the
opportunities for a stockholder to participate in tender offers, including
tender offers at a price above the then current market value of the common
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stock. These provisions could also inhibit fluctuations in the market price of
the common stock that could result from takeover attempts. Our Board of
Directors, without further stockholder approval, may issue preferred stock that
could have the effect of delaying or preventing a change in control. The
issuance of preferred stock could also adversely affect the voting power of the
holders of common stock, including the loss of voting control to others.
Currently we have 27,000 shares of Series B Preferred Stock
outstanding. It ranks senior to any other shares of preferred stock which may be
created and our common stock. It may be converted into common stock upon a
change of control event and could adversely effect any proposed change in
control. For a further description of the Series B Preferred Stock, see
"DESCRIPTION OF SECURITIES."
USE OF PROCEEDS
We will not receive any portion of the proceeds from the sale of
common stock by the selling stockholders. We may receive proceeds of up to
$3,308,566 if all the warrants and options underlying some of the shares sold
are exercised. Management currently anticipates that any such proceeds will be
utilized for working capital and other general corporate purposes.
We will bear the expenses of the registration of the shares. We
anticipate that these expenses will be approximately $60,000.
DIVIDEND POLICY
We have never declared dividends or paid cash dividends. We intend to
retain and use any future earnings for the development and expansion of our
business and do not anticipate paying any cash dividends in the foreseeable
future.
MARKET FOR THE COMPANY'S
COMMON STOCK AND RELATED STOCKHOLDER MATTERS
PRINCIPAL MARKET AND MARKET PRICES
----------------------------------
Our common stock has traded in the over-the-counter market on the OTC
Electronic Bulletin Board (OTCBB) under the symbol CAPR since June 8, 1999 when
it was delisted from the Nasdaq Small Cap System. The following table sets forth
for the indicated periods the high and low bid prices of the common stock for
the two fiscal years ended September 30, 1999 and for the period from October 1,
1999 through July 11, 2000 as reported on the Nasdaq Small Cap Market (through
June 7, 1999) and the OTCBB (from June 8, 1999). These prices are based on
quotations between dealers, and do not reflect retail mark-up, mark-down or
commissions, and may not necessarily represent actual transactions.
--------------- -------------------- -------------------------------------------
FISCAL PERIOD FISCAL YEAR ENDING FISCAL YEAR ENDING FISCAL YEAR ENDED
9/30/00 9/30/99 9/30/98
--------------- -------------------- --------------------- ---------------------
High Low High Low High Low
--------------- --------- ---------- ---------- ---------- --------- -----------
First Quarter $1.125 $0.094 $1.0625 $0.2500 $2.380 $1.272
--------------- --------- ---------- ---------- ---------- --------- -----------
Second Quarter 0.875 0.250 0.4375 0.0625 1.709 0.896
--------------- --------- ---------- ---------- ---------- --------- -----------
Third Quarter 0.875 0.250 2.0000 0.1250 1.542 1.042
--------------- --------- ---------- ---------- ---------- --------- -----------
Fourth Quarter *0.453 *0.250 0.3125 0.1250 1.729 1.063
--------------- --------- ---------- ---------- ---------- --------- -----------
* To July 21, 2000
APPROXIMATE NUMBER OF HOLDERS OF OUR COMMON STOCK
-------------------------------------------------
On June 30, 2000, there were approximately 1,964 stockholders of
record of our common stock. Since a substantial amount of the shares are held in
nominee name for beneficial owners, we believe that there are a substantial
number of additional beneficial owners.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our
Consolidated Financial Statements and the notes thereto and the other financial
information appearing elsewhere in this prospectus. In addition to historical
information contained herein, the following discussion and other parts of this
prospectus contain certain forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those discussed
in the forward-looking statements due to factors discussed under "Risk Factors",
as well as factors discussed elsewhere in this prospectus. The cautionary
statements made in this Prospectus should be read as being applicable to all
related forward-looking statements wherever they appear in this Prospectus.
GENERAL
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.
COMPARISON OF THE SIX MONTHS ENDED
MARCH 31, 2000 AND MARCH 31, 1999
RESULTS OF OPERATIONS
The results of operations for the six 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 imaging technology in April 1999, and the acquisition of the Oxis
diagnostic operations in June 1999, many of the categories in the statements of
operations for the six months ended March 31, 1999 will not be comparable with
the six months ended March 31, 2000.
FISCAL YEAR ENDED SEPTEMBER 30, 1999 TO FISCAL YEAR ENDED SEPTEMBER 30, 1998
Net patient service revenue totaled $2,883,000 for the year ended
September 30, 1999 versus $3,764,000 for the year ended September 30, 1998. Cost
of service operations totaled $1,973,000 for the year ended September 30, 1999
versus $ 3,616,000 for the year ended September 30, 1998. The decreases from
1998 to 1999 are due to the sale of the Aurora technology and the rehabilitation
business, partially offset by the additional net patient revenues and operating
expenses for the Strax Institute.
Included in revenues for the year ended September 30, 1999 are
$391,000 of net sales revenues for Opus' therapeutic drug monitoring assays for
the period commencing July 1, 1999. The cost of goods for the Opus business for
this period was $107,000 and is included in cost of operations.
Selling, general and administrative expenses totaled $4,482,000 for
the year ended September 30, 1999 versus $5,166,000 for the year ended September
30, 1998. This decrease reflects the sale of Aurora Technology and the
rehabilitation business as well as a shift in business focus to the Opus
Diagnostics product line of therapeutic drug monitoring assays.
Loss on sale of the rehabilitation business of $1,461,000 reflects the
accounting for the disposition of the rehabilitation center to Medical
Diagnostics and Rehabilitation, LLC.
Loss on the sale of the Aurora Technology of $2,096,000 reflects the
loss on the sale of the Aurora Technology to Pacific Republic Capital Corp.
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In 1998, Research and development reflects the change in the
accounting treatment of Advanced Mammography Systems, Inc. (AMS) from equity to
consolidation accounting. Purchased research and development reflects the
portion of the AMS purchase price allocated to research and development projects
in process.
Write down of intangibles in 1998, in the amount of $1,900,000,
reflects the reduction in goodwill related to our Rehabilitation Services
business based on a review of undiscounted future cash flows.
SIX MONTHS ENDED MARCH 31, 2000 COMPARED TO SIX MONTHS ENDED MARCH 31, 1999
Net patient service revenue totaled $811,000 for the six months ended
March 31, 2000 versus $2,073,000 for the six months ended March 31, 1999. Cost
of operations totaled $820,000 for the six months ended March 31, 2000 versus
$1,859,000 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 $931,000. The cost of goods for the Opus business for this period was
$291,000 and is included in cost of operations.
Selling, general and administrative expenses totaled $1,168,000 for
the six months ended March 31, 2000 versus $2,012,000 for the six months ended
March 31, 1999. This decrease reflects our efforts to streamline costs as well
as the change in our business mix.
LIQUIDITY AND CAPITAL RESOURCES
In March and April 2000, we 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 H(3) to the Financial Statements. We utilized the net funds for the
repayments mentioned below and the balance is being used 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. We are 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. We are also currently reviewing
the possible disposition of the Strax Institute. The ability to secure
commercial or other borrowings has been more difficult due to our June 1999
delisting from the NASDAQ Small Cap System. 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, our viability could
be threatened. Accordingly, the auditors' report on the 1999 financial
statements contains an explanatory paragraph expressing substantial doubt about
our ability to continue as a going concern.
Cash flows from financing activities increased significantly from the
proceeds of the sale of our 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 $93,000.
During the year ended September 30, 1999, we funded our operations
principally through the cash obtained from the sale of the Aurora technology
business. Since the fiscal year end, we 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 a note issued in connection with the Oxis transaction.
Upon the completion of the April Placement, we paid off the Notes due to Messrs.
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 $233,000 in accrued compensation to two executive officers who had
purchased an aggregate of 50,000 $3.00 units in the April Placement.
INFLATION
To date, inflation has not had a material effect on our business. We
believe that the effects of future inflation may be minimized by controlling
costs and increasing efficiency through product sales volume of the diagnostic
kit business.
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YEAR 2000 SYSTEMS
We have undertaken a review concerning the ability of our 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,
we evaluated the impact of possible Year 2000 problems encountered by our
suppliers and customers and to date there have not been any problems.
BUSINESS
BACKGROUND
We began operations in 1983 and through June 1999 primarily developed
and operated medical imaging systems as well as healthcare imaging and
rehabilitation services. In March 1999, we sold the rehabilitation center, and
in April 1999, we sold the imaging technology and related assets. On June 28,
1999, we acquired Opus Diagnostics Inc. (Opus) by merger and began manufacturing
and selling medical diagnostic assays for therapeutic drug monitoring. We
continue to own and operate a comprehensive imaging center located in
Lauderhill, Florida.
The merger with Opus was consummated coincident with the closing of an
asset purchase agreement between Opus and Oxis Health Products Inc. (Oxis) for
the purchase of 14 medical diagnostic assays for therapeutic drug monitoring.
The purchase price for the Oxis assets consisted of $500,000 in cash, a secured
promissory 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), exercisable after six months
for a period of five years. Upon the merger between the Company and Opus, the
warrant granted to Oxis became exercisable for 617,898 shares of our common
stock at an exercise price of $.0875 per share. Additionally, pursuant to a
services agreement, Oxis is manufacturing the TDM products through September 30,
2000.
In April 1999, pursuant to an asset purchase agreement among our
Company, Caprius Systems, Inc., our wholly owned subsidiary and Pacific Republic
Capital Corp. (Pacific), we consummated the sale of our Aurora breast scanner
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 Imaging
Corp., various patents relating to the Aurora breast scanner technology and
assets of Caprius Systems, Inc., including hospital equipment contracts and
equipment leases. The equipment debt of which we were relieved exceeded $1.1
million. The Aurora technology required extensive capital for its development
and marketing, and we did not have access to additional capital so management
decided to focus on less capital intensive activities.
In March 1999, we transferred our interest in our rehabilitation
center to an unrelated limited liability company in exchange for $900,000. In
addition, the acquiring group assumed certain liabilities totaling approximately
$400,000 and was entitled to 10% of any financial recovery obtained from a
lawsuit by us against the former owner of the center. However, no financial
recovery was obtained on this litigation. The transfer price 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 our acquisition of our
interest in the center.
In July 1998, we acquired The Strax Institute, 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.
THERAPEUTIC DRUG MONITORING
Therapeutic drug monitoring (TDM) is a tool to assess medication
efficacy and safety of a given therapeutic drug in human body fluids, usually
blood. This is critical for drugs that have a narrow range between therapeutic
and toxic doses, such as digoxin and theophylene. Diagnostic kits that monitor
serum levels to detect specific amounts of the therapeutic changes in the blood
permit physicians to individualize therapeutic regimens for optimal patient
benefit. The TDM kits we sell generally are prescribed by physicians for their
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patients and then used in hospitals and labs. TDM combines the knowledge of
pharmaceuticals, pharmacotherapy, pharmacokinetics and pharmacodynamics. TDM
first became a part of clinical practice in the 1960s with the publication of
initial pharmacokinetic studies linking it to patient outcomes.
Besides providing a method to continually evaluate effective
therapeutic regimens, periodic evaluations of blood serum concentrations can
help to identify problems with medication compliance. This is of particular
importance in patients taking drugs for chronic conditions. With the trend
towards promoting outpatient therapy and self-treatment, physicians need an
independent evaluation of treatment. This is of particular importance with young
children who do not readily accept the importance of medication. Later in
adolescence, compliance is affected, among other issues, by a wish to
demonstrate independence or even denial of a disease. Elderly patients are also
in need of compliance evaluation.
Opus Diagnostics sells a comprehensive line of assays for TDM,
consisting of 14 assays, their calibrators and controls. The line of products
includes two proprietary and exclusive tests; one to monitor toparimate, a drug
developed by Johnson & Johnson, and the other teicoplanin, developed by Aventis.
Our TDM products are sold under the trademark INNOFLUOR(R), which was
acquired from Oxis. These products are designed to test the following
medications:
ANTI-ASTHMATIC
--------------
Theophylline
ANTIARRHYTHMIC ASSAYS
---------------------
Digoxin
Digitoxin
Quinidine
ANTIEPILEPTIC ASSAYS
--------------------
Carbamazepine
Phenobarbital
Phenytoin
Topiramate
Valproic Acid
ANTIBACTERIAL ASSAYS
--------------------
Amikacin
Gentamicin
Teicoplanin
Tobramycin
Vancomycin
We determined that in order to remain cost efficient and to optimize
the return on the use of our assets, we would contract our Research &
Development to third parties. This strategy of using outside contractors extends
also to manufacturing. Since there are numerous companies in the business of OEM
manufacturing, it is our intention to utilize this capacity for the manufacture
of its products. This will eliminate the need to invest capital and will also
permit us to maintain a low head count. Currently, all our manufacturing
services have been contracted to Oxis International under a manufacturing
contract due to expire on September 30, 2000. We have evaluated alternative
sources of manufacture. We do not intend, at this stage, to manufacture our
goods in house unless volume or other considerations would make it necessary to
do so.
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We regard the TDM line as a marketing platform based on which we
expect to add further assays that would complement the existing line. Management
has initiated discussions with major drug companies to develop tests to monitor
serum levels of certain of their drugs. Another methodology to monitor these
drugs is performed by high-pressure liquid chromatograph (HPLC), a slower and
more capital-intensive procedure than the procedure used for our tests.
We intend to expand our product portfolio and, where appropriate, to
patent any intellectual properties, as we have in the past.
THE STRAX INSTITUTE BUSINESS
The Strax Institute (Strax) was founded in 1979 to provide
comprehensive breast care for patients. In July 1998, we acquired Strax, as part
of our strategy to utilize and integrate our existing breast imaging technology
with that of Strax and create an installed base for this business. Strax
specializes in comprehensive breast care utilizing several imaging modalities.
It specializes in comprehensive breast care utilizing several imaging modalities
and a high level of hands-on patient care. Strax performs all imaging and
diagnostic services in-house, including x-ray mammography, screening ultrasound,
ultrasound, stereotactic biopsies, as well as performing bone densitometry to
monitor osteoporosis. In addition, Strax administers in-house all patient
screening, scheduling, billing and collections, managed care contracts,
transcriptions, medical records and accounting and bookkeeping for its business.
The Strax Institute is located in Lauderhill, Florida and treats
approximately 15,000 patients per year. It is open from 9:00 AM to 5:00 PM, five
days a week, with extended hours one Wednesday evening each month and one
Saturday morning each month to enhance patient convenience and increase the
utilization of Strax' medical equipment.
Strax specializes in comprehensive breast care utilizing three
state-of-the-art Mammography Imaging Modalities (two Lorad units and one General
Electric unit) and two Ultrasound Imaging Units, one of which is equipped with a
color doppler (General Electric and Diasonics). For diagnostic purposes Strax is
equipped with a Fisher Stereotactic Biopsy Unit. With the addition of a Halogic
bond Densitometry Table, Strax is identified as a Specialized Women's Imaging
Center. The Infocure Computer System (previously known as the Radman) allows
Strax the convenience of an interactive database and electronic filing to all
third party payers.
The healthcare market in which The Strax Institute operates is
beneficial for the services offered. Within its geographical area are a high
percentage of elderly female patients, a substantial number of whom are repeat
patients. This geographical area has a growing population base.
The opportunities available to increase volume and profitability at
Strax are designed around programs and initiatives to expand patient volume and
particularly to increase the revenues obtained per patient. The purchase of a
new ultrasound unit equipped with color dopler allows the Strax Institute to
offer "stroke prevention" imaging and bundle this procedure together with the
annual mammogram and bone densitometry tests directed to the same patient.
We are currently evaluating the strategic alternatives for the Strax
Institute.
GOVERNMENT REGULATION
---------------------
Government regulation in the United States and certain foreign
countries is a significant factor in our diagnostic business. In the United
States, our products and our manufacturing practices are subject to regulation
by the FDA pursuant to the Federal Food, Drug and Cosmetic Act, and by other
state regulatory agencies. Under the Act, our TDM kits and assays, including
those we are developing, must receive FDA clearance before they may be sold, or
be exempted from the need to obtain such clearance. The FDA regulatory process
may delay the marketing of these products for lengthy periods and impose
substantial additional costs. Moreover, FDA marketing clearance regulations
depend heavily on administrative interpretation, and there can be no assurance
that interpretations made by the FDA or other regulatory bodies, with possible
retroactive effect, will not adversely affect us. There can be no assurance that
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<PAGE>
we will be able to obtain clearance of any of our future products or any
expanded uses of current or future products in a timely manner or at all. Once
obtained, FDA clearances are subject to maintaining certain manufacturing and
product performance criteria, and if the FDA believes that we are not in
compliance with applicable requirements, it can institute proceedings to detain
or seize our products, require a recall, suspend production, distribution,
marketing and sales, enjoin future violations and assess civil and criminal
penalties against us and our directors, officers or employees. The FDA may also
suspend or withdraw market approval for our products or require us to repair,
replace or refund the cost of any product that we manufacture or distribute.
FDA regulations also require the companies which manufacture our
diagnostic kits to adhere to certain "Good Manufacturing Practices" regulations,
which include validation testing, quality control and documentation procedures.
Their compliance with applicable regulatory requirements is subject to periodic
inspections by the FDA.
Currently all of our products are FDA approved, with the exception of
the antibacterial assay used to test the medication Teicoplanin, as the
medication has not been approved for sale in the United States. The use of
Teicoplanin and our product used to test this medication have been approved for
use in foreign countries.
Although we believe that our products and procedures , with the
exception of our product that tests Teicoplanin, are currently in material
compliance with all relevant FDA requirements, the failure to obtain the
required regulatory clearances or to comply with applicable regulations would
have a material adverse effect on our business, results of operations or
profitability.
Sales of TDM diagnostic kits outside the United States that are
manufactured within the United States are subject to United States export
requirements, and all of our products sold abroad are subject to applicable
foreign regulatory requirements. Legal restrictions on the sale of our product
vary from country to country. The time and requirements to obtain approval by a
foreign country may differ substantially from those required for FDA clearance.
There can be no assurance that we will be able to obtain regulatory approvals or
clearances for our products in foreign countries.
The federal government and the State of Florida regulate various
aspects of the medical imaging business. Failure to comply with these laws and
regulations could have an adverse impact on the Company's ability to receive
reimbursement for its services from government agencies and could also result in
civil and criminal penalties against the Company and its management.
Reimbursement for mammography is undergoing change as third-party
payers, such as Medicare, health maintenance organizations and other health
insurance carriers, increase efforts to control the cost, utilization and
delivery of healthcare services.
The mammography business is subject to state insurance laws governing
the presentation and payment of insurance claims for medical imaging services to
patients with health insurance. Strax believes that it is in material compliance
with such laws.
The operation of Strax is subject to various licensure requirements.
Strax has to comply with federal certification requirements, such as the federal
certification requirement to provide mammography examinations and is also
subject to federal and state regulations relating to testing standards,
personnel accreditation and compliance with government reimbursement programs.
PATENTS AND TRADEMARKS
----------------------
The topiramate patent was issued in the US in September 1999. We will
continue to file for patent protection within the United States and abroad with
respect to patents for new tests where economic protection for the test is
needed and such patents can be obtained. We also hold a trademark for Innofluor
for our diagnostic line.
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MARKETING
---------
Our diagnostic products are sold worldwide under the trademark
INNOFLUOR(R). Within the United States they are marketed primarily by direct
sales efforts. Internationally, exclusive and non-exclusive distributors, with
specific geographic territories, represent Opus Diagnostics in 15 countries,
including England, Germany, France, Spain, and Japan. Over the past year we have
increased the number of exclusive and non-exclusive international distributors
from 12 to 21. Approximately 65% of the sales are international, primarily in
Europe and Japan. Other marketing and sales activities include exhibiting at
major domestic and international exhibits and symposiums. According to the
Medical & Healthcare Marketplace (11th Edition), the therapeutic drug monitoring
market is $417 million. Opus market penetration is less than 1%.
Strax' marketing is directed to the referring physicians community and
to the public in its Lauderhill, Florida area. Its marketing efforts are
accomplished in-house. Various means of communications using the local media,
advertising material, medical seminars and health fairs are being used as well
as instituting corporate programs for female employees of local businesses.
Strax has a significant amount of repeat business.
MATERIALS
---------
The supply of most of the raw materials used in the production of
assays for our diagnostic kits are readily available from various vendors. We
see no problems in obtaining these materials in the foreseeable future.
PRODUCT WARRANTY
----------------
We offer a limited warranty that all of our TDM products sold will be
free from defects in material and workmanship at the time of the sales
transaction.
COMPETITION
-----------
We compete with numerous other companies, including several major
manufacturers and distributors, in the distribution and development of assays
for therapeutic drug monitoring. Among our competitors are Abbott Laboratories
and Roche Diagnostics, Inc. As a result, these entities may begin to develop,
manufacture, market and distribute systems which are substantially similar or
superior to our products. There maybe also be an industry shift in major type of
testing system used or more sophisticated systems may be used to perform
therapeutic drug monitoring tests, forcing us to manufacture our product
differently. Further, other companies may enter this marketplace. Opus attempts
to compete in its pricing and the performance of its kits. Both the Topirimate
and Teicoplanin kits do not experience competition as we enjoy exclusivity on
each. No assurance can be given that we will be able to successfully compete
against these other companies which may have substantially greater marketing and
financial resources.
The Strax Institute competes with many other local medical centers and
facilities with medical imaging capabilities. Many of our competitors have
greater financial and other resources than we do allowing them to advertise more
widely and to obtain the latest equipment. We cannot assure you that we will be
able to compete effectively against the current or future competitors.
PROPERTIES
----------
We lease 2,758 square feet of office space in Fort Lee, New Jersey for
sales and administrative personnel under a lease that expires in June 2005, at a
base monthly rental of approximately $6,665.
We lease 8,400 square feet for our comprehensive breast-imaging center
in Lauderhill, Florida under a lease that expires in January 2004, at a current
monthly base rental payment of $ 9,527.
18
<PAGE>
EMPLOYEES
---------
As of May 31, 2000, the Strax Institute had a staff of 20 full-time
employees, including one physician and one senior manager, and also three
part-time employees.
As of May 31, 2000, our diagnostic business had six full-time
employees, including three executive officers.
None of the Company's employees is represented by labor organizations
and the Company is not aware of any activities seeking such organization. The
Company considers its relations with employees to be good.
LITIGATION
----------
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 us 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, we are
unable to express an opinion as to its possible outcome.
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND OTHER SIGNIFICANT EMPLOYEES
-------------------------------------------------------------
As of June 30, 2000, the directors and executive officers of the
Company were:
Director
Name Age Position Since
---- --- -------- -------
George Aaron 48 Chairman of the Board,
President and Chief Executive 1999
Officer
Jonathan Joels 43 Chief Financial Officer,
Treasurer, Secretary and
Director 1999
Elliott Koppel 55 VP Sales and Marketing --
Shrikant Mehta 56 Director 2000
Sanjay Mody (1) (2) 41 Director 2000
Robert Spira, MD (1) (2) 51 Director 1994
Sol Triebwasser, Ph.D.
(1)(2) 77 Director 1990
------------------------
(1) Member of the Audit Committee
(2) Member of the Compensation/Option Committee
19
<PAGE>
The principal occupations and brief summary of the background of each
director and executive officer during the past five years is as follows:
GEORGE AARON. Mr. Aaron has been Chairman of the Board, President and
------------
CEO of the Company since June 1999. He also served as a Director on the Board of
the Company from 1992 until 1996. From 1992 to 1998, Mr. Aaron was the
co-Founder and CEO of Portman Pharmaceuticals, Inc. and in 1994 co-founded CBD
Technologies, Inc. of which he remains a Director. Mr. Aaron also serves on the
Board of Directors of Peptor Limited which had acquired Portman Pharmaceuticals.
From 1983 to 1988, Mr. Aaron was the Founder and CEO of Technogenetics Inc. (a
diagnostic company). Prior to 1983, Mr. Aaron was Founder and Partner in the
Portman Group, Inc. and headed international business development at Schering
Plough. Mr. Aaron is a graduate of the University of Maryland.
JONATHAN JOELS. Mr. Joels has been CFO, Treasurer and Secretary of the
--------------
Company since June 1999. From 1992 to 1998, Mr. Joels was the co-founder and CFO
of Portman Pharmaceuticals, Inc. and in 1994 co-founded CBD Technologies, Inc.
Mr. Joels' previous experience included serving as a principal in Portman Group,
Inc., CFO of London & Leeds Corp. and Chartered Accountant positions with both
Ernst & Young and Hacker Young between 1977 and 1981. Mr. Joels qualified and
was admitted as a Chartered Accountant to the Institute of Chartered Accountants
in England and Wales in 1981 and holds a BA Honors Degree in Accountancy (1977)
from the City of London.
SHRIKANT MEHTA. Mr. Mehta was appointed to the Board of Directors in
--------------
June 2000. He has been President and CEO of Combine International, Inc., a
wholesale manufacturer of fine jewelry since 1979. He has also served on the
Board of Directors of various private companies. Mr. Mehta has a BS in
Electrical Engineering from Case Institute of Technology and an MS in Electrical
Engineering from Wayne State University.
SANJAY MODY. Mr. Mody was appointed to the Board of Directors in June
-----------
2000. Currently he is the President of a private company involved with website
and portal development, WebPulse Consulting, Inc., a position he has held since
October 1999. He is also a director of another public company, Distinctive
Devices, Inc., a position he has held since March 2000. From July 1996 to
February 2000 he served as a Vice President of Investment Advisory at Laidlaw
Global Securities, Inc. From 1995 to 1996 he was a Financial Advisor at Morgan
Stanley Dean Witter.
ELLIOTT KOPPEL. Mr. Koppel has been VP of Marketing and Sales of the
--------------
Company since June 1999. From 1996 to June 1999 he served as CEO of ELK
Enterprises, a consulting and advertising company for the Medical Device
industry. From 1993 to 1996, he was VP Sales and Marketing for Clark
Laboratories Inc. From 1992 to 1993, Mr. Koppel was Director of the Immunology
Business Unit at Schiapparelli BioSystems. From 1990 to 1992, he was VP of Sales
and Marketing at Enzo BioChem. From 1986 to 1990, Mr. Koppel was VP of Clinical
Sciences, Inc. Between 1974 and 1986 he held the positions of Sales
Representative, Regional Manager, and International Marketing Manager at Warner
Lambert Diagnostics. Prior to 1974 Mr. Koppel was Sales Representative and
Product Manager with Ortho Diagnostics. Mr. Koppel has BS in Commerce from Rider
University.
ROBERT SPIRA, M.D., F.A.C.P. Dr. Spira was Vice Chairman of the
---------------------------
Company from February 1994 to June 1999. Since October 1992, he has been the
Director of the Department of Gastroenterology at St. Michael's Medical Center
in Newark, New Jersey, and for more than five years prior thereto, he served as
Chief of Gastrointestinal Endoscopy at St. Michael's Medical Center. Dr. Spira
is a graduate of New York University Medical School, a past president of both
the New Jersey Society for Gastrointestinal Endoscopy and the New Jersey Society
of Gastroenterology.
SOL TRIEBWASSER, PH.D. Until 1996, Dr. Triebwasser was Director of
---------------------
Technical Journals and Professional Relations for the IBM Corporation in
Yorktown Heights New York and currently a Research Staff member emeritus. Since
receiving his Ph.D. in physics from Columbia in 1952, he had managed various
projects in device research and applications at IBM. Dr. Triebwasser is a fellow
of the Institute for Electrical and Electronic Engineers, the American Physical
Society and the American Association for the Advancement of Science.
Messrs. Aaron and Joels are brothers-in-law, and Mr. Mehta is the
uncle of Mr. Mody.
20
<PAGE>
The Board of Directors met, either in person or telephonically, nine
times in fiscal 1999. Each of the directors attended or participated in 75% or
more of the meetings.
The Board of Directors has standing Audit and Compensation Committees.
The Audit Committee reviews with the Company's independent accountants
the scope and timing of the accountants' audit services and any other services
they are asked to perform, their report on the Company's financial statements
following completion of their audit and the Company's policies and procedures
with respect to internal accounting and financial controls. In addition, the
Audit Committee reviews the independence of the independent public accountants
and makes annual recommendations to the Board of Directors for the appointment
of independent public accountants for the ensuing year. The Audit Committee met
twice during fiscal 1999.
The Compensation Committee reviews and recommends to the Board of
Directors the compensation and benefits of all officers of the Company, reviews
general policy matters relating to compensation and benefits of employees of the
Company and administers the Company's Stock Option Plans. The
Compensation/Option Committee met twice during fiscal 1999.
We separately agreed to give the principal investors in the April
Placement, who collectively purchased 451,000 of the units, the right to
designate two members of the Board of Directors, one of whom also shall be
appointed to the Compensation Committee of the Board of Directors; provided,
however, these designees are reasonably acceptable to the current Board of
Directors. In June 2000, the designees, Mr. Shrikant Mehta and Mr. Sanjay Mody,
were added to the Board of Directors to fill vacancies created by the prior
resignations of Messrs. Nelson and Levy. At each meeting of stockholders for the
election of directors held at any time prior to March 27, 2003, we shall include
the two designees of the principal investors or their substitutes on the
management slate of directors, subject to certain conditions.
The principal investors, including Messrs. Mehta and Mody, in the
April Placement separately agreed to vote all of their shares of common stock,
which they beneficially own as of the applicable record date, for Messrs. Joels
and Aaron, both current directors, at each meeting of stockholders or in any
consent in lieu of a meeting of stockholders with respect to the election of
directors held at any time prior to March 27, 2003. Messrs. Joels and Aaron
reciprocally agreed to vote all of their shares of common stock, which they
beneficially own as of the applicable record date, for the investors' designees,
at each meeting of stockholders or in any consent in lieu of a meeting of
stockholders with respect to the election of directors held at any time prior to
March 27, 2003.
DIRECTOR COMPENSATION
Directors who are employees of the Company are not paid any fees or
additional compensation for services as members of the Company's Board of
Directors or any committee thereof. Although non-employee directors do not
receive Board fees, they are entitled to options to purchase shares of the
Company's common stock. Prior to the new fiscal year beginning on October 1,
1999, each person who became a member of the Board was granted options to
purchase 15,000 shares of common stock at the then fair market price.
Thereafter, a director was granted options to purchase 10,000 shares annually if
that person had been a director of the Company for more than six months. In
October 1999, the non-employee directors were given the right to receive (i)
options for 50,000 shares of common stock or (ii) options for 25,000 shares of
common stock and $5,000, which options would be exercisable for five years and
at the market price at time of grant. We are currently reviewing our policies
regarding the granting of options to directors and intend to have new policies
in place shortly. Pursuant to the 1993 Directors Stock Option Plan for
Non-Employee Directors (the "1993 Directors Plan"), which was amended in
December 1997, the number of shares available under the 1993 Directors Plan has
been increased to 200,000 shares. On October 14, 1999, the Company granted to
each Robert Spira and Sol Triebwasser under the 1993 Directors Plan options for
25,000 shares of common stock, a third of which will exercisable each year,
beginning a year after the grant date, at $0.25 per share, for a period of ten
years from the date of grant.
21
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Compensation Committee are Robert Spira
and Sol Triebwasser, neither of whom is an executive officer or employee of the
Company or its subsidiaries. The Compensation Committee met during Fiscal 1999
to review executive compensation and obtained approval from the Board of
Directors for changes to executive compensation.
SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning all cash
and non-cash compensation awarded to, earned by or paid to our Company's Chief
Executive Officer and one other executive officer with total compensation in
excess of $100,000 during the fiscal years ended September 30, 1999, 1998 and
1997:
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- ----------------------
Awards Payouts
Securities
Other Restrict Underlying
Name and Annual Stock Options LTIP All Other
Principal Salary Bonus Compensation Award(s) SARs Payouts compensation
Position Year ($) ($) ($) ($) (#) ($) ($)
------------ ---------- --------- -------- ---------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
George 1999(1) 41,306 -0- -0- -0- -0- -0- 3,000(2)
Aaron
President
/CEO
------------ ---------- --------- -------- ---------- -------- -------- -------- -----------
</TABLE>
(1) Mr. Aaron was appointed by the Board effective June 28, 1999, as President
and CEO.
(2) Paid to Mr. Aaron for the purpose of reimbursing him for transportation and
other expenses
Upon our merger with Opus, we entered into Severance and Consulting
Agreements with Jack Nelson and Enrique Levy, who were Chairman/Chief Executive
Officer and President/Chief Operating Officer, respectively, and directors, and
terminated their employment and commenced consulting arrangements for a period
of one year. Pursuant to his agreement, Mr. Nelson received $45,734 in cash as
payment of deferred compensation, 125,000 shares of 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 in his severance agreement).
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. 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 on April 4, 2000.
Pursuant to his severance agreement, Mr. Levy received $43,789 in cash
plus payment of deferred compensation, 100,000 shares of 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 in his severance agreement).
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 on April 4, 2000.
EMPLOYMENT AGREEMENTS
As of June 30, 2000, we do not have any outstanding employment
agreements with any of our employees. However, we intend to enter into
employment agreements with Mr. Aaron and Mr. Joels, employing them as President
and CEO and as Treasurer and Chief Financial Officer, respectively, for a term
ending September 30, 2003, at annual base salaries of $160,000 and $112,000,
respectively with an additional $1,000 per month and $750 per month,
respectively, for automobile expenses. In addition, it is contemplated that each
would receive bonuses based upon certain milestones yet to be determined, and
would be eligible for discretionary bonuses as determined by the Compensation
Committee. Under the contemplated employment agreements, should the termination
22
<PAGE>
of Mr. Aaron and Mr. Joels result from a change in control of the Company, as
defined in their respective employment agreements, the termination payment for
the individual terminated would be 2.99 times his annual base salary over the
shorter of the past three years or the time accrued under his current employment
agreement.
We do not have any annuity, retirement, pension or deferred
compensation plan or other arrangement under which any executive officers are
entitled to participate without similar participation by other employees.
OPTION GRANTS
The following table sets forth certain information regarding grants of
stock options made during the fiscal year ended September 30, 1999 to the named
executive officers.
<TABLE>
<CAPTION>
OPTIONS GRANTED IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE AT
INDIVIDUAL GRANTS ASSUMED ANNUAL RATES OF STOCK
APPRECIATION FOR OPTION TERM
(2)
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE OR
OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED FISCAL YEAR (1) ($/SHARE) DATE 5% ($) 10% ($)
---- ------------ --------------- ------------ ------------ ------ -------
<S> <C> <C> <C> <C>
Aaron -0- -0- -0- -0- - -
</TABLE>
------------------------
(1) Based on an aggregate of the options granted by the Company to employees in
the fiscal year ended September 30, 1999.
(2) Amounts represent hypothetical gains that could achieved for the respective
options if exercised at the end of the option term. These gains are based
on assumed rates of stock appreciation of 5% and 10% compounded annually
from the date the respective options were granted to their expiration date
and are not intended to forecast possible future appreciation, if any, in
the price of the common stock. The gains show are net of the option
exercise price, but do not include deductions for taxes or other expenses
associated with the exercise of the options or the sale of the underlying
shares.
STOCK OPTION PLAN
During 1993, the Company adopted a new employee stock option plan. The
employee stock option plan provides for the granting of options to purchase not
more than 1,000,000 shares of common stock. The options issued under the plan
may be incentive or nonqualified options. The exercise price for any incentive
options cannot be less than fair market value of the stock on the date of the
grant, while the exercise price for nonqualified options will be determined by
the option committee.
On October 14, 1999, the Company granted to each Mr. Aaron and Mr.
Joels under the employee stock option plan options for 100,000 shares of common
stock, 25% of which will be exercisable each year, beginning in one year after
the grant date, at $0.15 per share for a period of ten years from the date of
grant. In addition, in October 14, 1999, the Company granted Mr. Koppel options
for 150,000 shares of common stock, 25% of which will be exercisable each year,
beginning in one year after the grant date, at $0.15 per share for a period of
ten years from the date of grant.
23
<PAGE>
The following table provides information on the value of unexercised
stock options owned by the executive officers named in the Summary Compensation
Table as of September 30, 1999. No options were exercised in the fiscal year
ended September 30, 1999.
NUMBER OF UNEXERCISED OPTIONS AT VALUE OF UNEXERCISED IN-THE-MONEY
SEPTEMBER 30, 1999 OPTIONS AT SEPTEMBER 30, 1999(1)
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
Aaron -0- -0- -0- -0-
-----------------------
(1) Fair market value of the common stock on the last trading date of the
fiscal year ended September 30, 1999, less the applicable exercise prices,
multiplied by the number of shares underlying the options.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In March 2000, Messrs. Aaron, Joels and Koppel loaned us $25,000,
$25,000 and $20,000, respectively, in order to facilitate shipment of sales
products from Oxis. These loans were repayable at the earlier of 90 days or upon
the closing of a securities placement, and bore interest at the rate of 12% per
annum, payable on maturity. In addition, for each $1.00 principal amount loaned,
we granted a warrant to purchase .55 shares of common stock at an exercise price
of $1.00 per share exercisable for five years. These loans were repaid in April
2000, and we granted to the three persons warrants to purchase an aggregate of
38,500 shares of common stock.
In consideration of their participation in the April Placement, we
separately agreed to give the principal investors (including Mr. Mehta, who
subsequently became a director) in the placement preemptive rights for a period
of three years with respect to their interest in our Company, such that, to the
extent of their current interest in our Company, these principal investors each
have the right to participate in any sale, for cash, by us of our common stock
or shares of preferred stock or other securities that are exercisable for,
convertible into or exchangeable for shares of our common stock in a private
placement transaction we may enter into pursuant to the exemption from
registration under Regulation D of the Securities Act of 1933, subject to
certain exceptions.
We also agreed to provide these principal investors with most
favorable investors rights, such that if any greater rights are received by the
holders of the next rounds of equity financing by us occurring within one year
after the date of purchase, subject to certain exceptions, we would put the
principal investors in the same position as the holders of any subsequent
investments. Furthermore, in the event that any subsequent investment is at a
price per share of less than the equivalent of $0.722 per share of our common
stock (i.e., less than $0.722 per share of equity security, (including exercise
price, if any) exercisable for or convertible into one share of our common
stock), then we would issue to Mr. Mehta, without additional consideration, the
number of shares of common stock that he would have received if he had made his
investment in the April Placement on the terms of any subsequent investment
within the year.
Additionally, in consideration for his participation in the April
Placement, we separately agreed to grant Mr. Mehta options to purchase 500,000
shares of our common stock, exercisable at $1.00 per share for a period of three
years. Mr. Mody, who subsequently became a director, received an option to
purchase 500,000 shares of our common stock, exercisable at $1.00 per share for
a period of three years, in connection with his services in procuring investors
for the April Private Placement.
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of June 30, 2000
concerning (i) persons known to us to be the beneficial owners of more than 5%
of the Company's common stock, (ii) the ownership interest of each of our
directors and executive officers listed in the compensation table and (iii) by
all directors and executive officers as a group.
24
<PAGE>
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)
NAME STATUS SHARES PERCENTAGE
---- ------ ------ ----------
<S> <C> <C> <C>
George Aaron Chairman, President, CEO
and Director 3,398,889 (2) 20.5%
Jonathan Joels Treasurer, CFO and Director 3,283,239 (3) 19.9%
Shirkant Mehta Director 4,100,000 (4) 21.9%
Sanjay Mody Director 500,000 (5) 3.0%
Robert Spira Director 14,000 (6) *
Sol Triebwasser Director 17,500 (7) *
All executive officers
and directors as a group
(7 persons) 11,339,628 (8) 56%
</TABLE>
------------------------
* Less than one percent (1%).
(1) Includes voting and investment power, except where otherwise noted. The
number of shares beneficially owned includes shares each beneficial owner
and the group has the right to acquire within 60 days of June 30, 2000
pursuant to stock options, warrants and convertible securities.
(2) Includes (i) 7,050 shares in retirement accounts, (ii) 193,750 shares
subject to warrants, (iii) 960,000 shares as trustee for his children (iv)
100 shares jointly owned with his wife and (v) 18,500 shares underlying
options presently exercisable and excludes 100,000 shares underlying
options, which are currently not exercisable.
(3) Includes (i) 960,000 shares as trustee for his children and (ii) 133,750
shares subject to warrants and excludes 100,000 shares underlying options,
which are currently not exercisable.
(4) Includes (i) 2,400,000 shares subject to warrants and (ii) 500,000 shares
subject to options.
(5) Includes 500,000 shares subject to options.
(6) Includes 14,000 shares underlying options presently exercisable granted
under the 1993 Directors Plan and excludes 1,500 shares underlying options
granted under the 1993 Directors Plan, which are currently not exercisable.
(7) Includes 17,000 shares underlying options presently exercisable granted the
1993 Directors Plan and excludes 1,500 shares underlying options granted
under the 1993 Directors Plan, which are currently not exercisable.
(8) Includes (i) 2,738,500 shares subject to warrants and (ii) 1,049,500 shares
subject to options.
DESCRIPTION OF SECURITIES
COMMON STOCK
Our certificate of incorporation authorizes us to issue 50,000,000
shares of common stock, $.01 par value, of which 16,384,714 shares were issued
and outstanding as of June 30, 2000.
The holders of common stock are entitled to one vote for each share
held of record on all matters to be voted by stockholders. There is no
cumulative voting with respect to the election of directors with the result that
the holders of more than 50% of the shares of common stock voted for the
election of directors can elect all of the directors.
The holders of shares of common stock are entitled to dividends when
and as declared by the Board of Directors from funds legally available
therefore, and, upon liquidation are entitled to share pro rata in any
distribution to holders of common stock. No dividends have ever been declared by
25
<PAGE>
the Board of Directors on the common stock. See "DIVIDEND POLICY." All of the
outstanding shares of common stock are, and all shares sold hereunder will be,
when issued upon payment therefor, duly authorized, validly issued, fully paid
and non-assessable.
PREFERRED STOCK
The certificate of incorporation authorizes us to issue 1,000,000
shares of Preferred Stock, par value $.01 per share, issuable from time to time
in one or more series, having such designation, rights, preferences, powers,
restrictions and limitations as may be fixed by the Board of Directors. As of
June 30, 2000, 27,000 shares of Series B Preferred Stock were outstanding. The
Series B Preferred Stock 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 are paid on the shares of Series B Preferred Stock as if they were
converted into shares of Common Stock. The Series B Preferred Stock is
convertible for ten years from the date of purchase, August 18, 1997, and
subject to mandatory conversion upon a change of control or the expiration of
the 10-year period.
SELLING STOCKHOLDERS
The selling stockholders are comprised of: (i) persons who own an
aggregate of 5,850,000 shares of common stock and common stock underlying
warrants which were purchased the April Placement, (ii) Shrikant Mehta, a holder
of options to purchase an aggregate of 500,000 shares of common stock at
exercise price of $1.00, (iii) Sanjay Mody, a holder of options to purchase an
aggregate of 500,000 shares of common stock at exercise price of $0.75, (iv) a
company which was issued 236,697 shares for providing us with financial
consulting services (vi) 617,898 shares of common stock underlying a warrant
which were issued to Oxis Health Products, Inc. in connection with a transaction
consummated with the Company (vi) persons who were granted an aggregate of
330,000 warrants in connection with their purchase of promissory notes issued by
the Company and (vii) George Aaron, Jonathan Joels and Elliot Koppel who were
granted an aggregate of 38,500 warrants in connection with their purchase of
promissory notes issued by the Company. None of the selling stockholders has
held any position or office or had any material relationship with the Company or
any of its predecessors or affiliates within three years of the date of this
Prospectus, except for George Aaron, Jonathan Joels, Elliot Koppel, Shrikant
Mehta and Sanjay Mody. Mr. Aaron has been Chairman of the Board, President and
CEO of our company since June 1999, and also had served as a director on our
board of directors from 1992 until 1996. Mr. Joels has served as a director,
CFO, Treasurer and Secretary since June 1999. Mr. Koppel has been Vice President
of Sales and Marketing since June 1999. Mr. Mehta and Mr. Mody were appointed to
the board of directors in May 2000.
The following table sets forth, as of June 30, 2000 and upon
completion of this offering, information with regard to the beneficial ownership
of our common stock by each of the selling stockholders.
The information included below is based upon information provided by
the selling stockholders. Because the selling stockholders may offer all, some
or none of their common stock, no definitive estimate as to the number of shares
thereof that will be held by the selling stockholders after such offering can be
provided and the following table has been prepared on the assumption that all
shares of common stock offered under this Prospectus will be sold.
26
<PAGE>
<TABLE>
<CAPTION>
SHARES PERCENT AMOUNT PERCENT
BENEFICIALLY BENEFICIALLY BENEFICIALLY BENEFICIALLY
OWNED PRIOR OWNED BEFORE SHARES TO BE OWNED AFTER OWNED AFTER
NAME(1) TO OFFERING OFFERING OFFERED OFFERING(2) OFFERING
------- ----------- -------- ------- ----------- --------
<S> <C> <C> <C> <C> <C>
Bela Mehta 153,000 (3) * 153,000 0 -
Roger Parsons 306,000 (4) 1.8% 306,000 0 -
Shan Mehta 153,000 (5) * 153,000 0 -
Robert J. Wueste 153,000 (6) * 153,000 0 -
Baiju Mehta 450,000 (7) 2.7% 450,000 0 -
Prakesh Parikh 90,000 (8) * 90,000 0 -
Steven J. Lamberg 90,000 (9) * 90,000 0 -
Jay Harrison 90,000 (10) * 90,000 0 -
Linden Nelson 315,000 (11) 1.9% 315,000 0 -
Helen Kohn 118,348 * 118,348 0 -
Ronit Sucoff 118,349 * 118,349 0 -
Dr. Roberto Bianchi 55,000 (12) * 55,000 0 -
Kurt Kilstock 137,500 (13) * 137,500 0 -
Chicago Investments, Inc. 68,750 (14) * 68,750 0 -
Harto Family Partnership, 68,750 (15) * 68,750 0 -
L.P.
Oxis Health Products, Inc. 617,898 (16) 3.6% 617,898 0 -
Shrikant Mehta 4,100,000 (17) 21.9% 4,100,000 0 -
Sanjay Mody 500,000 (18) 3.0% 500,000 0 -
George Aaron 3,398,889 (19) 20.5% 283,750 3,115,139 14.0%
Jonathan Joels 3,283,239 (20) 19.9% 193,750 3,089,489 14.3%
Elliot Koppel 26,000 (21) * 11,000 15,000 *
</TABLE>
* Less than one percent (1%).
(1) Unless otherwise indicated in the footnotes to this table, the persons
and entities named in the table have sole voting and sole investment
power with respect to all shares beneficially owned, subject to
community property laws where applicable.
(2) Assumes the sale of all shares offered hereby.
(3) Includes 102,000 shares subject to warrants.
(4) Includes 204,000 shares subject to warrants.
(5) Includes 102,000 shares subject to warrants.
(6) Includes 102,000 shares subject to warrants
(7) Includes 300,000 shares subject to warrants.
(8) Includes 60,000 shares subject to warrants.
(9) Includes 60,000 shares subject to warrants.
(10) Includes 60,000 shares subject to warrants.
(11) Includes 210,000 shares subject to warrants.
27
<PAGE>
(12) Includes 55,000 shares subject to warrants.
(13) Includes 137,500 shares subject to warrants.
(14) Includes 68,750 shares subject to warrants.
(15) Includes 68,750 shares subject to warrants.
(16) Includes 617,898 shares subject to warrants.
(17) Includes (i) 2,400,000 shares subject to warrants and (ii) 500,000
shares subject to options.
(18) Includes 500,000 shares subject to options.
(19) Includes (i) 7,050 shares in retirement accounts, (ii) 193,750 shares
subject to warrants, (iii) 960,000 shares as trustee for his children
(iv) 100 shares jointly owned with his wife and (v) 18,500 shares
underlying options presently exercisable and excludes 100,000 shares
underlying options, which are currently not exercisable.
(20) Includes (i) 960,000 shares as trustee for his children and (ii) 133,750
shares subject to warrants and excludes 100,000 shares underlying
options, which are currently not exercisable.
(21) Includes (i) 11,000 shares subject to warrants.
Under the terms of the Stock Purchase Agreement for the April
Placement, the Company is obligated to file this Registration Statement and to
cause it to become effective by September 20, 2000. In the event this
Registration Statement is not declared effective by September 20, 2000, the
number of warrants granted to the participants in the April Placement shall be
increased by two percent (2%), effective as of September 20, 2000 and by an
additional two percent (2%) on each 30 day period thereafter, until such time
that the number of warrants should equal 112% of the original number of warrants
granted to the participants of the April Placement. Under the terms of the April
Placement, the Company agreed to keep the Registration Statement effective for a
period of nine months.
PLAN OF DISTRIBUTION
The selling stockholders have advised the Company that, prior to the
date of this Prospectus, they have not made any agreement or arrangement with
any underwriters, brokers or dealers regarding the distribution and resale of
the shares. If the Company is notified by a selling stockholder that any
material arrangement has been entered into with an underwriter for the sale of
the shares, a supplemental prospectus will be filed to disclose such of the
following information as the Company believes appropriate: (i) the name of the
participating underwriter; (ii) the number of the shares involved; (iii) the
price at which these shares are sold, the commissions paid or discounts or
concessions allowed to such underwriter; and (iv) other facts material to the
transaction.
The Company expects that the selling stockholders will sell their
shares covered by this Prospectus through customary brokerage channels, either
through broker-dealers acting as agents or brokers for the seller, or through
broker-dealers acting as principals, who may then resell the shares in the
over-the-counter market, or at private sale or otherwise, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. The selling stockholders may effect such
transactions by selling the shares to or through broker-dealers, and such
broker-dealers may receive compensation in the form of concessions or
commissions from the selling stockholders and/or the purchasers of the shares
for whom they may act as agent (which compensation may be in excess of customary
commissions). The selling stockholders and any broker-dealers that participate
with the selling stockholders in the distribution of shares may be deemed to be
underwriters and commissions received by them and any profit on the resale of
shares positioned by them might be deemed to be underwriting discounts and
commissions under the Securities Act. There can be no assurance that any of the
selling stockholders will sell any or all of the shares offered by them
hereunder.
28
<PAGE>
Sales of the shares on the OTC Electronic Bulletin Board or other
trading system may be by means of one or more of the following: (i) a block
trade in which a broker or dealer will attempt to sell the shares as agent, but
may position and resell a portion of the block as principal to facilitate the
transaction; (ii) purchases by a dealer as principal and resale by such dealer
for its account pursuant to this prospectus; and (iii) ordinary brokerage
transactions and transactions in which the broker solicits purchasers. In
effecting sales, brokers or dealers engaged by the selling stockholders may
arrange for other brokers or dealers to participate.
The selling stockholders are not restricted as to the price or prices
at which they may sell their shares. Sales of such shares at less than market
prices may depress the market price of the Company's common stock. Moreover, the
selling stockholders are not restricted as to the number of shares which may be
sold at any one time.
Pursuant to the Stock Purchase Agreement for the April Placement and
other agreements with the selling stockholders, granting them certain demand and
"piggy-back" registration rights, the Company agreed to pay all of the expenses
incident to the offer and sale of the shares to the public by the selling
stockholders other than commissions and discounts of underwriters, dealers or
agents. The Company and the selling stockholders have agreed to indemnify each
other and certain persons, including broker-dealers or others, against certain
liabilities in connection with the offering of the shares or warrants, including
liabilities arising under the Securities Act.
The Company has advised the selling stockholders that the
anti-manipulative rules under the Exchange Act, including Regulation M, may
apply to sales in the market of the shares offered hereby and has furnished the
selling stockholders with a copy of such rules. The Company has also advised the
selling stockholders of the requirement for the delivery of this prospectus in
connection with resales of the shares offered hereby.
LEGAL MATTERS
Thelen Reid & Priest LLP, New York will pass upon the validity of the
common stock being offered hereby for the Company.
EXPERTS
The consolidated financial statements included in the Prospectus
constituting part of this Registration Statement have been audited by BDO
Seidman LLP, independent certified public accountants to the extent and for the
periods set forth in their report (which contains an explanatory paragraph
regarding the Company's ability to continue as a going concern) appearing
elsewhere herein, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
AVAILABLE INFORMATION
We have filed with the Securities and Exchange Commission (SEC) a
registration statement on Form SB-2 under the Securities Act of 1933 with
respect to the common stock offered hereby. This Prospectus, which constitutes
part of the registration statement, does not contain all of the information set
forth in the registration statement and the exhibits and schedule thereto,
certain parts of which are omitted in accordance with the rules and regulations
of the SEC. For further information regarding our common stock, and us please
review the registration statement, including exhibits, schedules and reports
filed as a part thereof. Statements in this Prospectus as to the contents of any
contract or other document filed as an exhibit to the registration statement,
set forth the material terms of such contract or other document but are not
necessarily complete, and in each instance reference is made to the copy of such
document filed as an exhibit to the registration statement, each such statement
being qualified in all respects by such reference. The registration statement,
including the exhibits and schedules thereto, may be inspected without charge at
the principal office of the public reference facilities maintained by the
Securities and Exchange Commission at Room 1024 at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549; or at its offices at Northwest Atrium
Center, 500 West Madison Street, 14th Floor, Chicago, IL 60661; or Seven World
Trade Center, 13th Floor, New York, NY 10048. Copies of this material can also
be obtained at prescribed rates by writing to the Public Reference Section of
the SEC at its principal office at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The SEC maintains a Web site (http://www.sec.gov) that
29
<PAGE>
contains reports, proxy statements and other information regarding registrants
that file electronically with the SEC, including the Company. Our common stock
is quoted on the OTC Electronic Bulletin Board.
30
<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
I N D E X
Independent Auditors' Report F-2
Consolidated Balance Sheets F-3
Consolidated Statements of Operations F-4
Consolidated Statements of Stockholders' Equity F-5
Consolidated Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-7
Unaudited Pro Forma Condensed Consolidated Financial Information F-20
Unaudited Pro Forma Condensed Consolidated Statement of Operations F-21
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Caprius, Inc.
We have audited the accompanying consolidated balance sheets of
Caprius, Inc. (formerly Advanced NMR Systems, Inc.) and subsidiaries as of
September 30, 1999 and 1998, and the related consolidated statements of
operations, stockholders' equity, and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Caprius, Inc. and subsidiaries at September 30, 1999 and 1998, and the results
of their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. However, the Company has incurred
substantial losses in recent years, and at September 30, 1999 has a working
capital deficit of approximately $1.2 million. These factors raise substantial
doubt about the Company's ability to continue as a going concern. Management's
plans in regard to this matter are described in Note A. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
/s/BDO Seidman, LLP
-----------------------------
BDO Seidman, LLP
Boston, Massachusetts
December 7, 1999
F-2
<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, 1999 September 30, 1998 March 31, 2000
-------------------- -------------------- ---------------
(unaudited)
ASSETS
CURRENT ASSETS:
<S> <C> <C> <C>
Cash and cash equivalents $ 116,068 $ 1,791,476 $ 1,391,081
Accounts receivable, net of reserve for bad
debts 537,510 2,899,282 585,721
of $25,669, $663,314 and $25,669
Inventories 210,983 720,858 303,524
Other current assets 91,723 584,875 36,332
--------------- --------------- ------------
Total current assets 956,284 5,996,491 2,316,658
--------------- --------------- ------------
PROPERTY AND EQUIPMENT:
Medical equipment 314,320 2,145,674 314,320
Office furniture and equipment 188,001 251,199 200,873
Other equipment - 1,518,874 -
Leasehold improvements 950 1,153,576 950
--------------- --------------- ------------
503,271 5,059,323 516,143
Less: accumulated depreciation 151,348 1,824,946 212,690
--------------- --------------- ------------
Net property and equipment 351,923 3,244,377 303,453
--------------- --------------- ------------
OTHER ASSETS:
Goodwill, net of accumulated amortization of 1,593,551 1,053,797 1,552,331
$56,631, $2,357,703 and $97,851
Other intangibles, net of accumulated
amortization of $18,255, $371,698 and $54,764 1,442,118 1,240,678 1,405,609
Other 9,314 32,037 22,645
--------------- --------------- ------------
Total other assets 3,044,983 2,326,512 2,980,585
--------------- --------------- ------------
TOTAL ASSETS $ 4,353,190 $ 11,657,380 $ 5,600,696
=============== =============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 342,204 $ 810,990 $ 443,463
Accrued expenses 465,941 964,922 346,400
Accrued compensation 652,153 388,748 795,180
Other current liabilities - 53.664 -
Current maturities of long-term debt and
capital lease obligations 703,100 915,608 546,722
--------------- --------------- ------------
Total current liabilities 2,163,398 3,133,932 2,131,765
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS,
NET OF CURRENT MATURITIES: 180,623 1,207,624 137,655
--------------- --------------- ------------
TOTAL LIABILITIES: 2,344,021 4,341,556 2,269,420
--------------- --------------- ------------
COMMITMENTS AND CONTINGENCIES: - - -
STOCKHOLDERS' EQUITY:
Preferred stock, 4.01 par value
Authorized - 1,000,000 shares Issued and outstanding -
Series A, none; Series B, convertible, 27,000 shares
at September 30, 1999, September 30, 1998 and
March 31, 2000, 2,700,000 2,700,000 2,700,000
Liquidation preference $2,700,000
Common stock, $.01 par value
Authorized - 50,000,000 shares Issued - 13,548,017
shares at September
30, 1999, 7,369,040 shares at September 30, 1998
and 135,480 73,690 151,260
15,126,017 shares at March 31, 2000
Additional paid-in capital 64,778,855 63,561,672 66,387,130
Accumulated deficit (65,602,916) (59,107,288) (65,904,864)
Treasury stock (22,500 common shares, at cost) (2,250) (2,250) (2,250)
--------------- --------------- -------------
Total stockholders' equity 2,009,169 7,225,824 3,331,276
--------------- --------------- ------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 4,353,190 $ 11,567,380 $ 5,600,696
=============== =============== ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-3
<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Year Ended For the Six Months Ended
September 30, March 31,
1999 1998 2000 1999
-------------- ------------- ----------- -----------
(unaudited) (unaudited)
Revenues:
<S> <C> <C> <C> <C>
Net patient service revenues $ 2,882,818 $ 3,764,189 $ 810,780 $ 2,073,291
Net product sales 391,373 - 930,998 -
--------------- -------------- ------------ ------------
Total revenues 3,274,191 3,764,189 1,741,778 2,073,291
--------------- -------------- ------------ ------------
Operating Expenses:
Cost of operations 2,079,613 3,616,331 820,142 1,858,601
Selling, general and administrative 4,482,038 5,166,042 1,167,776 2,011,987
Research and development 496,480 2,950,578 - 496,480
Purchased research and development - 7,097,566 - -
Provision for bad debts and collection
costs 149,297 340,426 1,438 114,534
Loss on sale of imaging business 12,670 265,791 - 12,670
Loss on sale of rehabilitation business 1,461,121 - - 1,427,487
Loss on sale of Aurora Technology 2,096,057 - - -
Write down of intangibles - 1,900,000 - -
--------------- -------------- ------------ ------------
Total operating expenses 10,772,276 21,336,734 1,989,356 5,921,759
--------------- -------------- ------------ ------------
Operating loss from continuing
operations (7,503,085) (17,572,545) (247,578) (3,848,468)
Interest income 33,939 328,235 7,486 25,842
Interest expense (135,482) (219,338) (61,856) (119,376)
Other income 9,000 3,050 - 9,000
--------------- -------------- ------------ ------------
Loss from continuing operations before
equity in net loss of unconsolidated
subsidiary (7,595,628) (17,460,598) (301,948) (3,933,002)
Equity in net loss of unconsolidated
subsidiary - (67,358) - -
--------------- -------------- ------------ ------------
Loss from continuing operations before
provision for income taxes (7,595,628) (17,527,956) (301,948) (3,933,002)
Provision for income taxes - (98,177) - -
--------------- -------------- ------------ ------------
Loss from continuing operations (7,595,628) (17,626,133) (301,948) (3,933,002)
Income on disposal of discontinued operation 1,100,000 107,430 - 1,100,000
--------------- -------------- ------------ ------------
Net loss $ (6,495,628) $(17,518,703) $ (301,948) $(2,833,002)
=============== ============== ============ ============
Income (loss) per basic and diluted common share:
Loss from continuing operations $ (0.85) $ (2.51) $ (0.02) $ (0.53)
Income on disposal of discontinued
operation 0.12 0.02 - 0.15
--------------- -------------- ------------ ------------
Net loss per share $ (0.73) $ (2.49) $ (0.02) $ (0.38)
=============== ============== ============ ============
Weighted average number of common shares
outstanding, basic and diluted 8,971,411 7,025,802 13,572,271 7,346,540
=============== ============== ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-4
<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Preferred Stock Common Stock Treasury Stock
------------------- --------------------- ------------------
Number of Number of Additional Accumulated Number of
Shares Amount Shares Amount Paid-in Capital Deficit Shares Amount
-------- ---------- ------------ ---------- ---------------- -------------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, SEPTEMBER 30, 1997 27,000 $2,700,000 4,374,763 $43,748 $56,170,271 $(41,588,585) 22,500 $(2,250)
Issuance of common stock related to
AMS merger - - 2,956,741 29,567 7,362,287 - - -
Conversion of note payable - - 27,429 274 20,725 - - -
Exercise of stock options - - 10,107 101 8,389 - - -
Net loss - - - - - (17,518,703) - -
-------- ---------- ------------ ---------- ---------------- -------------- --------- --------
BALANCE, SEPTEMBER 30, 1998 27,000 2,700,000 7,369,040 73,690 63,561,672 (59,107,288) 22,500 (2,250)
Issuance of common stock related to
Opus merger - - 6,178,977 61,790 1,217,183 - - -
Net loss - - - - - (6,495,628) - -
-------- ---------- ------------ ---------- ---------------- -------------- --------- --------
BALANCE, SEPTEMBER 30, 1999 27,000 2,700,000 13,548,017 135,480 64,778,855 (65,602,916) 22,500 (2,250)
Issuance of common stock and warrants
for proceeds from private placement
(unaudited) - - 1,353,000 13,530 1,339,470 - - -
Issuance of common stock in
satisfaction of accrued liabilities
(unaudited) - - 225,000 2,250 41,805 - - -
Fair value of warrants issued in
connection with bridge financing
(unaudited) - - - - 227,000 - - -
Net loss for the six months ended
March 31, 2000 (unaudited) - - - - - (301,948) - -
-------- ---------- ------------ ---------- ---------------- -------------- --------- --------
BALANCE MARCH 31, 2000 (UNAUDITED) 27,000 $2,700,000 15,126,017 $151,260 $66,387,130 $(65,904,864) 22,500 $(2,250)
======== ========== ============ ========== ================ ============== ========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-5
<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Year Ended For the Six Months Ended
September 30, March 31,
1999 1998 2000 1999
--------------- --------------- ---------------- --------------
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C> <C>
Net loss $ (6,495,628) $ (17,518,703) $ (301,948) $ 2,833,002
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation and amortization 787,389 2,352,068 139,070 678,401
Equity in net loss of unconsolidated
subsidiary - 67,358 - -
Gain on disposal of discontinued
operations (1,100,000) - - (1,100,000)
Loss on sale of Aurora Technology 2,096,057 - - -
Loss on sale of rehabilitation
business 1,461,121 - - 1,427,487
Gain on sale of imaging business (12,670) - - (12,670)
Purchased research and development - 7,097,566 - -
Changes in operating assets and
liabilities:
Accounts receivable, net (204,907) (207,425) 1,789 113,272
Inventories (213,763) 87,976 (95,541) (536)
Other current assets 147,617 (293,435) 5,391 25,903
Other assets - - (13,331) -
Accounts payable and accrued
expenses 252,856 36,156 168,802 (275,348)
--------------- --------------- ---------------- --------------
Net cash used in operating
activities (3,281,928) (8,378,439) (92,768) (1,976,493)
--------------- --------------- ---------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of rehabilitation
business 762,804 - - 266,438
Proceeds from sale of equipment 13,693 - - -
Proceeds from sale of imaging business 12,670 - - 12,670
Proceeds from disposal of discontinued
operations 1,100,000 - - 1,100,000
Proceeds from sale of Aurora Technology 952,367 - - -
Cash used in Opus merger (522,940) - - -
Cash used in AMS merger - (128,406) - -
Advances to unconsolidated subsidiaries - (479,673) - -
Purchase of equipment, furniture and
leasehold improvements (12,803) (1,981,001) (12,873) (164,600)
--------------- --------------- ---------------- --------------
Net cash provided by (used in)
investing activities 2,305,791 (2,589,080) (12,873) 1,214,508
--------------- --------------- ---------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options - 8,490 - -
Proceeds from stock issuance - - 1,353,000 -
Proceeds from issuance of debt 140,216 2,105,921 670,000 297,484
Repayment of debt and capital lease
obligations (839,487) (853,151) (642,346) (733,325)
--------------- --------------- ---------------- --------------
Net cash provided by (used in)
financing activities (699,271) 1,261,260 1,380,654 (435,841)
--------------- --------------- ---------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (1,675,408) (9,706,259) 1,275,013 (1,197,826)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD 1,791,476 11,497,735 116,068 1,791,476
--------------- --------------- ---------------- --------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $116,068 $1,791,476 $1,391,081 $593,650
=============== =============== ================ ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for interest during the period $ 38,112 $ 203,876 $ 61,856 $ 12,727
=============== =============== ================ ==============
Common stock issued in Opus merger $ 1,278,973 $ - $ - $ -
=============== =============== ================ ==============
Additions to capital leases $ 215,676 $ - $ - $ -
=============== =============== ================ ==============
Common stock issued in exchange for
accrued liabilities $ - $ - $ 44,055 $ -
=============== =============== ================ ==============
Common stock issued in AMS merger $ - $ 7,391,854 $ - $ -
=============== =============== ================ ==============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-6
<PAGE>
(NOTE A) - Business and Basis of Presentation
---------------------------------------------
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.
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.
In August 1997, the Company and General Electric Company ("GE")
entered into a Purchase Agreement (the "GE Purchase Agreement") whereby GE
purchased all inventory, equipment and other assets, and assumed liabilities
F-7
<PAGE>
relating to the Company's high field MRI systems and InstaScan business, in
exchange for $2,432,580 in cash and the purchase by GE of $2.7 million stated
value of a newly issued class of Series B Convertible Redeemable Preferred
Stock. The Company and GE entered into a Settlement and Release Agreement
terminating and releasing their prior obligations to each other.
Effective November 10, 1997, the Company completed a merger (the "AMS
Merger") with Advanced Mammography Systems, Inc. ("AMS"), whereby AMS merged
into AMS Merger Corp., a wholly owned subsidiary of the Company, and became a
wholly owned subsidiary. Upon the AMS Merger, the Company changed its name to
Caprius, Inc. AMS was originally formed on July 2, 1992 as a wholly owned
subsidiary of Caprius to develop a dedicated breast MRI system and at the time
of the AMS Merger, the Company owned approximately 14% of the outstanding AMS
stock.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. However, the Company has incurred
substantial losses in recent years which raises substantial doubt about its
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty. The
Company had available cash and cash equivalents of $116,068 and $1,391,081 at
September 30, 1999 and March 31, 2000, respectively. The Company intends to
utilize the funds 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. The
Company also intends to pursue efforts to identify additional funds through
various funding options including bridge loans, banking facilities and equity
offerings. 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.
(NOTE B) - Summary of Significant Accounting Policies
-----------------------------------------------------
[1] Principles of consolidation
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All significant intercompany balances
and transactions have been eliminated in consolidation.
[2] Revenue recognition
The breast imaging and rehabilitation services businesses recognize
revenue as services are provided to patients. Reimbursements for services
provided to patients covered by Blue Cross/Blue Shield, Medicare, Medicaid,
HMO's and other contracted insurance programs are generally less than rates
charged by the Company. Differences between gross charges and estimated
third-party payments are recorded as contractual allowances in determining net
patient service revenue during the period that the services are provided.
Revenue from the sale of a comprehensive line of assays for
therapeutic drug monitoring is recognized when the products are shipped to the
customer.
[3] Cash equivalents
The Company considers all highly liquid debt instruments purchased
with a maturity of three months or less to be cash equivalents.
[4] Inventories
Inventories are accounted for at the lower of cost or market using the
first-in, first-out ("FIFO") method.
[5] Equipment, furniture and leasehold improvements
F-8
<PAGE>
Equipment, furniture and leasehold improvements are recorded at cost.
Depreciation and amortization are computed by the straight-line method over the
estimated lives of the applicable assets, or term of the lease, if applicable.
Assets are written off when they become fully depreciated.
Equipment under capital lease is stated at the lower of the fair
market value or the net present value of the minimum lease payments at the
inception of the lease. Capitalized lease equipment is amortized over the
shorter of the term of the lease or the estimated useful life.
Asset Classification Useful Lives
-------------------- ------------
Medical and other equipment 5-8 years
Office furniture and equipment 3-5 years
Other equipment 5 years
Leasehold improvements Term of lease
[6] Goodwill and other intangibles
At September 30, 1999, goodwill is related to the Opus Diagnostics
business and to The Strax Institute. At September 30, 1998, goodwill is related
to the company's rehabilitation services business and its breast care center.
Goodwill and other intangibles are amortized over their estimated useful lives.
The Company periodically reviews the carrying amount of goodwill and other
intangibles to determine whether an impairment has been incurred based on
undiscounted future cash flows. Other intangibles include trademarks, technical
know how and distributor agreements. Goodwill and other intangibles are being
amortized over twenty years.
[7] Net loss per share
Net loss per share is computed in accordance with Statement of
Financial Standards No. 128, "Earning Per Share" ("SFAS No. 128"). SFAS No. 128
requires the presentation of both basic and diluted earnings per share.
Basic net loss per common share was computed using the weighted
average common shares outstanding during the period. Outstanding warrants and
options had an anti-dilutive effect and were therefore excluded from the
computation of diluted net loss per common share.
[8] Income taxes
The Company utilizes the liability method of accounting for income
taxes, as set forth in Statement of Financial Accounting Standards No. 109.
"Accounting for Income Taxes". Under this method, deferred tax liabilities and
assets are recognized for the expected tax consequences of temporary differences
between the carrying amount and the tax basis of assets and liabilities.
[9] Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
[10] Recent pronouncements
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income." ("SFAS No. 130") established standards for reporting and
display of comprehensive income, its components, and accumulated balances.
Comprehensive income is defined to include all changes in equity except those
resulting from investments by owners and distributions to owners. Among other
disclosures, SFAS No. 130 requires that all items that are required to be
recognized under current accounting standards as components of comprehensive
income be reported in a financial statement that is displayed with the same
prominence as other financial statements.
F-9
<PAGE>
The new standard was effective for financial statements for periods
beginning after December 15, 1997 and required comparative information for
earlier years to be restated. The adoption of this standard had no effect on the
Company's financial condition or results of operations.
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133 and 137. (SFAS No. 133), "Accounting for Derivative Instruments and Hedging
Activities" and (SFAS No. 137) "Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133".
SFAS No. 133 and SFAS No. 137 require companies to recognize all derivative
contracts as either assets or liabilities in the balance sheet and to measure
them at fair value. If certain conditions are met, a derivative may be
specifically designated as a hedge, the objective of which is to match the
timing of gain or loss recognition on the hedging derivative with the
recognition of (i) the changes in the fair value of the hedged asset or
liability that are attributable to the hedge risk or (ii) the earnings effect of
the hedged forecasted transaction. For a derivative not designated as a hedging
instrument, the gain or loss is recognized in income in the period of change.
These statements are effective for all fiscal quarters of fiscal years beginning
after June 15, 2000. The Company has no derivatives and does not expect the
pronouncement to materially effect future financial statements and disclosures.
[11] Unaudited Information
The financial statements include the unaudited consolidated balance
sheet as of March 31, 2000 and the related consolidated statements of
operations, changes in stockholders equity and cash flows for the six months
ended March 31, 2000 and 1999. This unaudited information has been prepared by
the Company on the same basis as the audited financial statements and, in
management's opinion, reflects all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation of the financial
information, in accordance with generally accepted accounting principles, for
the periods presented. Results for interim periods are not necessarily
indicative of the results to be expected for the entire year.
[12] Industry Segments
The Company adopted Statement of Financial Accounting Standards No.
131, "Disclosure about Segments of an Enterprise and Related Information" ("SFAS
No. 131"), which supercedes SFAS No. 14, "Financial Reporting for Segments of a
Business Enterprise". SFAS No. 131 establishes standards for the way that public
enterprises report information about operating segments in annual financial
statements and requires reporting of selected information about operating
segments in interim financial statements issued to the public. It also
establishes standards for disclosures regarding products and services,
geographic areas, and major customers. SFAS No. 131 defines operating segments
as components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance (see Note L).
[13] Concentration of Credit Risk and Significant Customers
Statement of Financial Accounting Standards No. 105, "Disclosure of
Information About Financial Instruments with Off-Balance-Sheet Risk and
Financial Instruments with Concentrations of Credit Risk," requires disclosure
of any significant off-balance-sheet and credit risk concentrations. Although
collateral is not required, the Company periodically reviews its accounts
receivable and provides estimated reserves for potential credit losses.
(NOTE C) - Acquisitions (See also Note K)
-----------------------------------------
On July 1, 1998, the Company acquired substantially all of the assets
and business of the Gertrude and Philip Strax Breast Diagnostic Institute in
Lauderhill, Florida, a comprehensive breast imaging center. As consideration for
the acquisition, the Company paid $600,000 in cash. The acquisition was
accounted for under the purchase method of accounting and the cost in excess of
net assets of approximately $450,000 is being amortized over 20 years.
F-10
<PAGE>
Effective June 28, 1999, the Company merged with Opus Diagnostics Inc.
coincident with the closing of the asset purchase agreement between Opus and
Oxis Health Products, Inc. As consideration related to the purchase, the Company
paid $500,000 in cash, issued a secured promissory note in the amount of
$586,389 and a warrant for up to 10% equity interest in Opus. The Company issued
6,178,977 shares of the Company's common stock to the shareholders of Opus
Diagnostics Inc., related to the merger of the companies. The asset purchase
agreement was accounted for under the purchase method of accounting. Costs in
excess of net assets of approximately $930,000 are being amortized over 20
years. Other intangibles in the sum of $1,442,118 and $1,405,609, which include
assets relating to the Oxis reagent patent and trademark and distribution
network for the TDM business, are included in the Balance Sheet as of September
30, 1999 and March 31, 2000, respectively.
The consolidated statements of operations and cash flow for the year
ended September 30, 1999 includes the results of operations and cash flows of
Strax for the entire year and Opus for the period June 29, 1999 to September 30,
1999.
The consolidated statements of operations and cash flow for the year
ended September 30, 1998 includes the results of operations and cash flows of
Strax for the period July 2, 1998 to September 30, 1998.
(NOTE D) - Inventory
--------------------
At September 30, 1999, inventory represents completed medical
diagnostic assays. At September 30, 1998 inventory represented materials used to
manufacture the Aurora system.
(NOTE E) - Long-term Debt and Capital Lease Obligations
-------------------------------------------------------
Long-term debt and capital lease obligations at September 30, 1999 and
1998 consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30, MARCH 31,
1999 1998 2000
---- ---- ----
<S> <C> <C> <C>
Notes payable to major supplier of medical diagnostic assays.
Principal repayment due November 30, 1999. $ 588,460 $ - $ -
Notes payable to various leasing companies, secured by the
respective medical equipment, interest rates ranging from
10.0% - 12.7%, Monthly payments of principal and interest
ranging from $1,107 to $3,621, maturities ranging from
November 2000 to July 2004. 295,263 1,542,046 241,378
Note payable to former minority owner of rehabilitation
business, interest at 12%, quarterly principal payments of
$137,500 plus interest through October 1998 with a balloon
payment of $200,000, collateralized by certain assets of the
rehabilitation business. - 337,500 -
Note payable to a hospital for leasehold improvements,
interest at 11%. Monthly payments of principal and interest
of $4,685 payable through August 2005. - 243,686 -
Bridge financing notes payable, interest at 11%. These notes
were repaid in full in April 2000. - - 442,999
------------ ------------- -----------
Total long-term debt and capital lease obligations 883,723 2,123,232 684,377
Less: current maturities 703,100 915,608 546,722
------------ ------------- -----------
$ 180,623 $ 1,207,624 $ 137,655
============ ============= ===========
</TABLE>
Future minimum debt payments for the next five years are as follows:
F-11
<PAGE>
Fiscal Year
2000 $703,100
2001 106,844
2002 51,893
2003 11,944
2004 9,942
--------
$883,723
(NOTE F) - Income Taxes
-----------------------
At September 30, 1999, the Company had a deferred tax asset totaling
approximately $17,680,000 due to net operating loss carryovers. A valuation
allowance has been established for the full amount of this asset due to
uncertainty as to the realization of the benefit.
At September 30, 1999 and September 30, 1998, the Company had
available net operating loss carryforwards for tax purposes, expiring through
2015 of approximately $52,000,000 and $30,000,000 respectively. The Internal
Revenue Code contains provisions which may limit the net operating loss carry
forward available for use in any given year if significant changes in ownership
interest of the Company occur.
The following table reconciles the tax provision per the accompanying
statements of operations with the expected provision obtained by applying
statutory tax rates to the loss from continuing operations:
Year Ended September 30,
1999 1998
---- ----
Loss from continuing operations: $(7,595,628) $ (17,527,956)
Income on disposal of discontinued operations 1,100,000 107,430
Loss attributable to AMS
prior to merger - 67,358
Loss attributable to Aurora
Systems prior to sale 9,918 -
------------ --------------
$(6,485,710) $ (17,353,168)
============ ==============
Expected tax (benefit) at 34% $(2,586,000) $ (5,900,077)
Adjustment due to
increase in valuation reserve 2,586,000 3,600,000
Non-deductible purchased - 2,300,077
R&D Costs
Other - (98,177)
------------ --------------
Tax benefit (expense) per
financial statements $ - $ (98,177)
============ ==============
F-12
<PAGE>
(NOTE G) - Commitments and Contingencies
----------------------------------------
[1] Operating leases
The Company leases facilities and equipment under non-cancelable
operating leases expiring at various dates through fiscal 2005. Facility leases
require the Company to pay certain insurance, maintenance and real estate taxes.
Rental expenses totaled approximately $197,412 and $528,000 for the years ended
September 30, 1999 and 1998. Rent expense for the six months ended March 31,
2000 and 1999 was $84,323 and $116,821, respectively.
Future basic rental commitments under operating leases are as follows.
Fiscal Year Amount
--------------------------------------
2000 161,798
2001 201,172
2002 203,701
2003 207,412
2004 211,235
Thereafter 172,565
-------------
Total $ 1,157,883
=============
[2] Legal proceedings
On January 7, 1998, the Company and Jack Nelson, the Company's former
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 for common law fraud. 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 had 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 agreed to 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 year ended September 30, 1999, the
Company reported $207,323 as total settlement costs, which included $82,323 for
the market value of the shares to be issued.
On October 19, 1998, the Company filed a complaint 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 sought 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 upon 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. The new Caprius management
negotiated a settlement agreement between the Company and Eric T. Shebar, M.D.
that was entered into on December 27, 1999, wherein the Company agreed to pay
$60,000 immediately and a further $20,000 over the next two years. Upon the
F-13
<PAGE>
initial payment, the Company was released from all claims and actions relating
to this matter.
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 us 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.
(NOTE H) - Capital Transactions
-------------------------------
[1] Preferred Stock - Class 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,
commencing on August 18, 1998, or earlier upon a change of control as defined.
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.
[2] Warrants
--------
At September 30, 1998, in connection with various transactions
including the acquisition of Strax and the AMS Merger, the Company had
outstanding warrants to purchase 996,987 shares of the Company's common stock at
exercise prices ranging from $4.20 to $106.30 per share and have a weighted
average exercise price of $16.83. The warrants expire at various dates from
January 31, 2000 to May 31, 2001.
At September 30, 1999, in connection with the Opus Diagnostics Inc.
merger, the Company issued a warrant to purchase 617,898 shares of the company's
common stock at an exercise price of $.0875. The warrant expires on June 28,
2004.
[3] Equity Private Placement
------------------------
F-14
<PAGE>
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.
[4] Stock options
-------------
The Company has an Incentive and Nonqualified Stock Option Plan which
provides for the granting of options to purchase not more than 100,000 shares of
common stock. Exercise prices for any incentive options are at prices not less
than the fair market value at the date of grant, while exercise prices for
nonqualified options may be at any price in excess of $.01. When fair market
value at the date of issuance is in excess of the option exercise price, the
excess is recorded as compensation expense. The total number of shares
authorized for grant under this plan were reached during 1993 and no additional
options can be granted. During fiscal 1997 and 1998 certain options were
canceled and replaced with options exercisable at the then fair market value.
Stock option transactions under the above plan for the past two fiscal
periods are as follows:
Weighted Average
Number of Option Price Exercise Price
Shares Per Share Per Share
------ --------- ---------
Balance, September 30, 1997 4,500 $5.00 - $31.30 $16.69
Repriced Options:
Original (2,000) 31.30 31.30
Repriced 2,000 0.84 0.84
Cancelled in 1998 (2,500) 5.00 5.00
------- ---- ----
Balance, September 30, 1998 2,000 0.84 0.84
Cancelled in 1999 (2,000) 0.84 0.84
------- ---- ----
Balance, September 30, 1999 and
March 31, 2000 0 - -
= = =
During 1993, the Company adopted a new employee stock option plan and
a stock option plan for non-employee directors. The employee stock option plan
provides for the granting of options to purchase not more than 1,000,000 shares
of common stock. The options issued under the plan may be incentive or
nonqualified options. The exercise price for any incentive options cannot be
less than the fair market value of the stock on the date of the grant, while the
exercise price for nonqualified options will be determined by the option
committee. The Directors' stock option plan provides for the granting of options
to purchase not more than 200,000 shares of common stock. The exercise price for
shares granted under the Directors' plan cannot be less than the fair market
value of the stock on the date of the grant. Both plans expire May 25, 2003.
During 1998 certain options were cancelled and replaced with options
exercisable at the then fair market value. Stock option transactions under the
1993 plans are as follows:
Weighted Average
Number of Option Price Exercise Price
Shares Per Share Per Share
--------- ------------ -----------------
Balance, September 30, 1997 181,767 $2.80 - $52.50 $4.69
Granted in 1998 576,510 $0.84 - $1.46 1.25
Granted pursuant to AMS Merger 454,000 $0.84 - $20.00 3.76
Exercised in 1998 ( 10,107) $0.84 0.84
F-15
<PAGE>
Weighted Average
Number of Option Price Exercise Price
Shares Per Share Per Share
--------- ------------ -----------------
Repriced Options:
Original (182,141) $5.00 - $8.00 1.26
Repriced 182,141 $0.84 0.84
Cancelled in 1998 (292,849) $0.84- $42.50 6.22
--------- ------------- ----
Balance, September 30, 1998 909,321 $0.84- $33.80 2.62
Cancelled in 1999 (762,685) $0.84- $25.60 2.48
--------- ------------- ----
Balance, September 30, 1999 146,636 $0.84- $25.60 4.40
Granted in 2000 640,000 $0.15- $0.19 0.15
Cancelled in 2000 (41,136) $0.84- $25.60 9.87
-------- ------------- ----
Balance, March 31, 2000 745,500 $0.15- $25.60 $0.53
======= ============= =====
Stock option transactions not covered under the option plans in the
fiscal years 1999, 1998 and the six months ended March 31, 2000 are as follows:
Weighted Average
Number of Option Price Exercise Price
Shares Per Share Per Share
--------- ------------ ----------------
Balance, September 30, 1997 81,032 $7.90 - $20.10 $ 8.45
Repriced Options:
Original (6,000) $5.00 5.00
Repriced 6,000 $0.84 0.84
Cancelled in 1998 (4,000) $14.10 14.10
------- ------ -----
Balance, September 30, 1998
and 1999 77,032 $0.84 - $20.10 7.83
Granted in 2000 50,000 $0.10 - $1.00 0.84
Cancelled in 2000 (31,000) $0.84 - $5.00 4.20
-------- ------------- ----
Balance, March 31, 2000 96,032 $0.10 - $20.10 $1.23
========= ============== =====
Exercise Range
Number of of Price Per Weighted Average
Options exercisable at Shares Share Price Per Share
----------------------------- ------------ ----------------- -------------------
September 30, 1998 650,424 $0.84 - $33.80 $3.88
September 30, 1999 226,827 $0.10 - $25.60 $5.35
March 31, 2000 179,866 $0.10 - $25.60 $4.15
As of September 30, 1998, September 30, 1999 and March 31, 2000, the
Company had 290,679, 1,055,364 and 1,102,325 plan and non-plan shares,
respectively, available for future grants.
The Company has adopted the disclosure-only provisions of SFAS No.
123, "Accounting or Stock-Based Compensation", but applies Accounting Principles
Board Opinion No. 25 and related interpretations in accounting for its plans.
There was no compensation expense recognized in fiscal 1999, 1998 or for the six
months ended March 31, 2000. If the Company had elected to recognize
compensation cost for the plans based on the fair value at the grant date for
awards under the plans, consistent with the method prescribed by SFAS No. 123,
net loss per share would have been changed to the pro forma amounts indicated
below:
F-16
<PAGE>
Year Ended September 30, Six Months Ended March 31,
1999 1998 2000 1999
---- ---- ---- ----
Net loss:
As reported $(6,495,628) $(17,518,703) $(301,948) $(2,833,002)
Pro forma $(6,495,945) $(17,600,935) $(308,565) $(2,833,161)
Net loss per share:
As reported $(.73) $(2.49) $(.02) $(.38)
Pro forma $(.73) $(2.51) $(.02) $(.38)
The fair value of the Company's stock options used to compute pro
forma net loss and net loss per share disclosures is the estimated present value
at grant date using the Black-Scholes option-pricing model with the following
weighted average assumptions for 1999 and 1998: dividend yield of 0%; expected
volatility of 0.50; risk free interest rates of 5.59%-7.78%; and an expected
holding period of 10 years.
The Company did not grant options during fiscal year 1999. The
weighted-average grant-date fair value of options granted was $0.44 per share
for the year ended September 30, 1998.
During fiscal 1998, the stockholders of the Company approved a reverse
1 for 10 stock split and an increase of shares authorized under the 1993 plans
to 1,200,000 shares on a post-reverse stock split basis. All share and option
amounts have been restated to reflect the stock split. On January 1, 1998, all
190,141 of the then outstanding employee stock options were repriced to the
current market price, using the existing exercise durations.
(NOTE I) - Unconsolidated Subsidiary (AMS):
------------------------------------------
On November 10, 1997, the shareholders of Caprius and AMS agreed to
merge, and AMS became a wholly-owned subsidiary of the Company (see Note A).
In connection with the acquisition of AMS, the Company recorded a
charge to account for purchased research and development. The valuation of
purchased research and development, for which management is primarily
responsible, represents the estimated fair value at the date of acquisition
related to in-process projects. As of the date of acquisition, the in-process
projects had not yet reached technological feasibility and had no alternative
future uses. Accordingly, the value attributable to these projects was
immediately expensed at acquisition. If the projects are not successful or
completed in a timely manner, the Company may not realize the financial benefits
expected for these projects.
The income approach was used to establish the fair values of the
purchased research and development. This approach established the fair value of
an asset by estimating the after-tax cash flows attributable to the in-process
project over its useful life and then discounting these after-tax cash flows
back to a present value. The discount rate used to arrive at a present value as
of the date of acquisition was based on the time value of money and medical
technology investment risk factors. For the AMS purchased research and
development programs, a risk-adjusted discount rate of 30% was utilized to
discount the projected cash flows. The Company believes that the estimated
purchased research and development amounts so determined represent the fair
value at the date of acquisition and do not exceed the amount a third party
would pay for the projects. Purchased research and development costs associated
with the acquisition totaled $7,097,566 for the year ended September 30, 1998.
The following unaudited pro forma financial information sets for the
results of the Company as if the AMS merger had occurred October 1, 1997. 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, 1997 or results
that may occur in the future. The pro forma information does not include the
expense for the purchased research and development costs.
F-17
<PAGE>
Year ended September 30, 1998
(000's)
Net revenues $ 3,764
Operating expenses (15,005)
Operating loss from continuing operations (11,241)
Net loss (11,395)
Net loss per common share (1.55)
(NOTE J) - Disposals and Discontinued Operation
-----------------------------------------------
Disposals
---------
During fiscal 1999 and 1998, the Company sold certain businesses and
technology which were part of the Company's imaging and rehabilitation services
business segment. In April 1999, the Company consummated the sale of its Aurora
Technology and related assets. The Company incurred a loss on the sale of
$2,096,057, which is included in the accompanying consolidated statements of
operations for the year ended September 30, 1999.
In March 1999, the Company transferred its interest in its
rehabilitation center to an unrelated limited liability company in exchange for
$900,000. In conjunction with the transfer of its interest in the rehabilitation
center, the Company incurred a loss on the sale of $1,461,121, which is included
in the accompanying consolidated statements of operations for the year ended
September 30, 1999. During the year ended September 30, 1998, the Company
recorded an impairment loss of $1,900,000 related to the write-down of goodwill
associated with the rehabilitation center.
Discontinued Operation
----------------------
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 amounting to approximately $107,000. In December 1998, the
Company received $1,100,00 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 year ended September 30,
1999.
(NOTE K) -Pro Forma Information
-------------------------------
The following unaudited pro forma financial information sets forth the
results of the Company as if the merger with Opus and the disposition of Aurora
technology and rehabilitation business had occurred as of October 1, 1997. The
pro forma financial information does not purport to be indicative of what would
have occurred had the acquisition or sales been made as of October 1, 1997 or
results that may occur in the future.
<TABLE>
<CAPTION>
Year ended September 30, 6 Months ended
1999 1998 March 31, 1999
---- ---- --------------
<S> <C> <C> <C>
Net revenues $ 3,125,094 $ 1,743,589 $ 1,384,794
Operating expenses 2,621,952 3,488,853 1,103,559
Operating income (loss) from continuing operations 503,142 (1,745,264) 281,235
Income (loss) from continuing operations 468,224 (1,625,852) 281,235
Income (loss) per common share from continuing operations 0.03 (0.12) 0.02
</TABLE>
F-18
<PAGE>
(NOTE L) - 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 income (loss) from continuing
operations and other financial information by industry segment:
<TABLE>
<CAPTION>
Imaging and
Rehabilitation TDM
Services Business Consolidated
-------- -------- ------------
<S> <C> <C> <C>
September 30, 1999
Sales $ 2,882,818 $ 391,373 $ 3,274,191
=============== ============== ===============
Income (loss) from continuing operations $ (7,805,759) $ 210,131 $ (7,595,628)
=============== ============== ===============
Capital Expenditures $ 12,803 $ - $ 12,803
=============== ============== ===============
Depreciation and Amortization $ 636,074 $ 151,315 $ 787,389
=============== ============== ===============
Identifiable assets at September 30, 1999 $ 1,370,279 $ 2,982,911 $ 4,353,190
=============== ============== ===============
September 30, 1998
Sales $ 3,764,189 $ - $ 3,764,189
=============== ============== ===============
Income (loss) from continuing operations $ (17,626,133) $ - $ (17,626,133)
=============== ============== ===============
Capital Expenditures $ 1,981,001 $ - $ 1,981,001
=============== ============== ===============
Depreciation and Amortization $ 2,352,068 $ - $ 2,352,068
=============== ============== ===============
Identifiable assets at September 30, 1998 $ 11,567,380 $ - $ 11,567,380
=============== ============== ===============
March 31, 2000
Sales $ 810,780 $ 930,998 $ 1,741,778
=============== ============== ===============
Income (loss) from continuing operations $ (81,234) $ (220,714) $ (301,948)
=============== ============== ===============
Capital Expenditures $ 8,477 $ 4,396 $ 12,873
=============== ============== ===============
Depreciation and Amortization $ 78,348 $ 60,722 $ 139,070
=============== ============== ===============
Identifiable assets at March 31, 2000 $ 1,255,098 $ 4,345,598 $ 5,600,696
=============== ============== ===============
</TABLE>
F-19
<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
PRO FORMA INFORMATION
The Pro Form Condensed Consolidated Statement of Operations for the
fiscal year ended September 30, 1999 assumes that the dispositions and
acquisitions discussed in Items (a) and (b) occurred on October 1, 1998 and is
based on the operations of the Company for the year ended September 30, 1999.
The unaudited pro forma condensed consolidated financial statement of
operations has been prepared by the Company based upon assumptions deemed proper
by it. The unaudited pro forma condensed consolidated statement of operations is
not necessarily indicative of the future financial position or results of
operations or actual results that would have occurred had the transactions been
in effect as of the dates presented.
The unaudited pro forma condensed consolidated statement of operations
should be read in conjunction with the Company's historical financial statements
and related notes.
F-20
<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Twelve months ended September 30, 1999
---------------------------------------------------------------------
Historical Pro-Forma
Caprius, ---------------------------------------------------------
Inc. Dispositions(a) Sub-Total Acquisitions(b) Total
---------------------------------------------------------------------
Revenues:
<S> <C> <C> <C> <C> <C>
Net patient service revenues $ 2,882,818 $(1,227,897) $ 1,654,921 $ - $ 1,654,921
Net product sales 391,373 - 391,373 (b) 1,078,800 1,470,173
------------ ------------ ------------- ------------- --------------
Total revenues 3,274,191 (1,227,897) 2,046,294 1,078,800 3,125,094
------------ ------------ ------------- ------------- --------------
Operating Expenses:
Cost of operations 2,079,613 (984,715) 1,094,898 (b) 647,280 1,742,178
Selling, general and administrative 4,482,038 (3,825,018) 657,020 (b)(d)170,984 828,004
Research and development 496,480 (496,480) - - -
Purchased research and development - - - - -
Provision for bad debts and
collection costs 149,297 (97,527) 51,770 - 51,770
Loss on sale of imaging business 12,670 (12,670) - - -
Loss on sale of rehabilitation
business 1,461,121 (1,461,121) - - -
Loss on sale of Aurora Technology 2,096,057 (2,096,057) - - -
Write down of intangibles - - - - -
------------ ------------ ------------- ------------- --------------
Total operating expenses 10,777,276 8,973,588 1,803,688 818,264 2,621,952
------------ ------------ ------------- ------------- --------------
Operating income (loss) from
continuing operations (7,503,085) 7,745,691 242,606 260,536 503,142
Interest income 33,939 (33,939) - - -
Interest expense (135,482) 100,564 (34,918) - (34,918)
Other income 9,000 (9,000) - - -
------------ ------------ ------------- ------------- --------------
Income (loss) from continuing
operations before equity in net
loss of unconsolidated subsidiary (7,595,628) 7,803,316 207,688 260,536 468,224
Equity in net loss of
unconsolidated subsidiary - - - - -
------------ ------------ ------------- ------------- --------------
Income (loss) from continuing
operations before provision for
income taxes (7,595,628) 7,803,316 207,688 260,536 468,224
Provision for income taxes - - - - -
------------ ------------ ------------- ------------- --------------
Income (loss) from continuing
operations $(7,595,628) $ 7,803,316 $ 207,688 $ 260,536 $ 468,224
============ ============ ============= ============= ==============
Income (loss) per basic and diluted
common share:
Income (loss) from continuing
operations $ (0.85) $ 0.03
============ ==============
Weighted average number of common
shares outstanding, basic and
diluted 8,971,411 (c) 4,554,106 13,525,517
============ ============== ==============
</TABLE>
(a) To reflect the dispositions of Aurora technology and rehabilitation
business as if they occurred as of October 1, 1998.
(b) To reflect the merger with Opus as if it occurred as of October 1, 1998.
Pro forma adjustments reflect historical revenues, costs of operations and
selling, general and administrative expenses of $1,078,800, $647,280 and
$81,345, respectively for the period October 1, 1998 through June 28, 1999,
the date of acquisition.
(c) To adjust weighted average shares for 6,178,977 common shares issued in
connection with Opus acquisition to reflect shares as if they were
outstanding for the entire period.
Adjustment for 9 months = 4,554,106
=========
(d) To reflect amortization of goodwill and other intangibles over 20 years
resulting from purchase accounting adjustments from the acquisition as if
the transaction occurred on October 1, 1998.
Goodwill $ 930,000
Other Intangibles 1,460,373
----------
2,390,373
/ 20 years
----------
Annual amortization $ 119,519
==========
Adjustment for 9 months $ 89,639
==========
F-21
<PAGE>
NO DEALER, SALESPERSON OR OTHER
PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS 8,073,095
OTHER THAN THOSE CONTAINED IN THIS SHARES OF
PROSPECTUS IN CONNECTION WITH THE OFFERING COMMON STOCK
MADE BY THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE SELLING
STOCKHOLDERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A CAPRIUS, INC.
SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THOSE SPECIFICALLY
OFFERED HEREBY OR AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF
THESE SECURITIES IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. EXCEPT WHERE
OTHERWISE INDICATED, THIS PROSPECTUS SPEAKS
AS OF THE EFFECTIVE DATE OF THE
REGISTRATION STATEMENT. NEITHER THE PROSPECTUS
DELIVERY OF THIS PROSPECTUS NOR ANY SALE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THERE HAS BEEN
NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF.
TABLE OF CONTENTS
Page
----
PROSPECTUS SUMMARY.................. 2
RISK FACTORS........................ 5
USE OF PROCEEDS..................... 9
DIVIDEND POLICY..................... 9 July __, 2000
MARKET FOR THE COMPANY'S
COMMON STOCK AND RELATED
STOCKHOLDER MATTERS............... 9
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF
OPERATIONS........................ 9
BUSINESS............................ 12
CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS.............. 21
PRINCIPAL STOCKHOLDERS.............. 22
DESCRIPTION OF SECURITIES........... 23
SELLING STOCKHOLDERS................ 23
PLAN OF DISTRIBUTION................ 24
LEGAL MATTERS....................... 25
EXPERTS............................. 25
AVAILABLE INFORMATION............... 25
INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS........................F-1
PRO FORMA INFORMATION..............F-20
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The only statue, charter provision, by-law, contract, or other
arrangement under which any controlling person, director or officers of the
Registrant is insured or indemnified in any manner against any liability which
he may incur in his capacity as such, is as follows:
Our certificate of incorporation limits the liability of our directors
and officers to the maximum extent permitted by Delaware law. Delaware law
provides that directors of a corporation will not be personally liable for
monetary damages for breach of their fiduciary duties as directors, except
liability for: (i) breach of the directors' duty of loyalty; (ii) acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of the law, (iii) the unlawful payment of a dividend or unlawful stock
purchase or redemption, and (iv) any transaction from which the director derives
an improper personal benefit. Delaware law does not permit a corporation to
eliminate a director's duty of care, and this provision of our Certificate of
Incorporation has no effect on the availability of equitable remedies, such as
injunction or rescission, based upon a director's breach of the duty of care.
The effect of the foregoing is to require us to indemnify our officers
and directors for any claim arising against such persons in their official
capacities if such person acted in good faith and in a manner that he or she
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES MAY BE PERMITTED TO OUR
DIRECTORS, OFFICERS AND CONTROLLING PERSONS PURSUANT TO THE FOREGOING
PROVISIONS, OR OTHERWISE, WE HAVE BEEN ADVISED THAT IN THE OPINION OF THE
SECURITIES AND EXCHANGE COMMISSION SUCH INDEMNIFICATION IS AGAINST PUBLIC POLICY
AND IS, THEREFORE, UNENFORCEABLE.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses of this offering in connection with the
issuance and distribution of the securities being registered, all of which are
to be paid by the Registrant, are as follows:
Registration Fee........................................ $1,049
Legal Fees and Expenses................................. 30,000
Accounting Fees and Expenses............................ 20,000
Printing................................................ 2,500
Miscellaneous Expenses.................................. 6,451
----------
Total.............................................. $60,000
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
SERIES B PREFERRED STOCK
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 sale was conducted under
Regulation D, Rule 506 of the Securities Act of 1933.
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 the $100.00 per share, plus accrued and
II-1
<PAGE>
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.
ISSUANCES TO FORMER DIRECTORS.
Upon our merger with Opus, we entered into Severance and Consulting
Agreements with Jack Nelson and Enrique Levy, who were Chairman/Chief Executive
Officer and President/Chief Operating Officer, respectively, and directors, and
terminated their employment and commenced consulting arrangements for a period
of one year. Pursuant to their agreements, Mr. Nelson and Mr. Levy received
$45,734 and $43,789, respectively, in cash as payment of deferred compensation,
125,000 and 100,000 shares of common stock, respectively, and were to have
received $258,500 and $247,000 payments, respectively, upon the earlier of
December 28, 1999 or the consummation of a Business Transaction (as defined in
their severance agreement). As of December 28, 1999, these severance obligations
were converted into a notes repayable on September 1, 2000 subject to mandatory
repayment from the proceeds of the sale of the Strax, and if not repaid by March
1, 2000, became secured by the assets of the Strax. On April 4, 2000, the notes
to Messrs. Nelson and Levy together with all outstanding interest thereon was
paid in full and both resigned as a directors. The offering of the 225,000
shares of common stock to Messrs. Nelson and Levy was conducted under Regulation
D, Rule 506 of the Securities Act of 1933.
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
Financing"). The bridge loan holders consisting of four persons, received
interest on their loans together with warrants to purchase a total of 330,000
shares of common stock at an exercise price of $0.20 per share. The warrants are
exercisable for a period of five years. These funds were primarily used to pay a
promissory note due Oxis. In April 2000, all of the bridge loans were repaid
from the proceeds of the equity private placement. KSH Investment Group, Inc.
(KSH) in acting as a financial adviser to the Company with respect to the bridge
loan received 236,697 shares of common stock for its services. The offering of
warrants and issuance of shares to KSH in connection with the Bridge Financing
was conducted under Regulation D, Rule 506 of the Securities Act of 1933.
EMPLOYEE BRIDGE FINANCING.
In March 2000, Messrs. Aaron, Joels and Koppel loaned the $25,000,
$25,000 and $20,000, respectively, in order to facilitate shipment of sales
products from Oxis (the "Employee Bridge Financing") . These loans were
repayable at the earlier of 90 days or upon the closing of a securities
placement, and bore interest at the rate of 12% per annum, payable on maturity.
In addition, for each $1.00 principal amount loaned, the Company granted to each
of Messrs. Aaron, Joels and Koppel a warrant to purchase .55 shares of common
stock at an exercise price of $1.00 per share exercisable for five years. These
loans were repaid in April 2000, and the Company granted to the three persons
warrants to purchase an aggregate of 38,500 shares of common stock. The offering
of these warrants to Messrs. Aaron, Joels and Koppel in the Employee Bridge
Financing was conducted under Regulation D, Rule 506 of the Securities Act of
1933.
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 to
12 persons. 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. The offering was conducted
under Regulation D, Rule 506 of the Securities Act of 1933.
II-2
<PAGE>
ITEM 27. EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
2.1 Agreement and Plan of Merger, dated January 20, 1997, by and
among Registrant, Medial Diagnostics, Inc. ("Strax"), Strax
Acquisition Corporation and US Diagnostic Inc. (incorporated by
reference to Exhibit 1 to Registrant's Form 8-K filed January 23,
1997).
2.2 Agreement and Plan of Merger, dated as of June 23, 1997,
among Registrant, ANMR/AMS Merger Corp. and Advanced Mammography
Systems, Inc. ("AMS") (incorporated by reference to Annex A to
the Joint Proxy Statement Prospectus that formed part of
Registrant's Registration Statement of Form S-4 filed on October
9, 1997 ("Registrant's Form S-4")).
2.3 Agreement and Plan of Merger dated as of June 28, 1999 among
Registrant, Caprius Merger Sub, Opus Diagnostics Inc. ("Opus"),
George Aaron and Jonathan Joels (incorporated by reference to
Exhibit 2.1 to Registrant's Form 8-K, filed July 1, 1999 (the
"July 1999 Form 8-K")).
2.4 Agreement and Plan of Merger among Opus, Aaron, Joels,
Caprius and Merger Sub dated as of June 28, 1999. (incorporated
by reference to Exhibit 2.2 to the July 1999 Form 8-K).
2.5 Asset Purchase Agreement among Opus, Oxis and Oxis
International Inc. (solely for the purposes of Article 10
thereof) dated as of June 28, 1999 (incorporated by reference to
Exhibit 2.4 to the July 1999 Form 8-K).
3.1 Certificate of Incorporation of Registrant. (incorporated by
reference to Exhibit 3 filed with Registrant's Registration
Statement on Form S-2, and amendments thereto, declared effective
August 18, 1993 (File No. 2084785 ("Registrant's Form S-2")).
3.2 Amendment to Certificate of Incorporation of Registrant
filed November 5, 1993 (incorporated by reference to Exhibit 3.2
to Registrant's Form S-4).
3.3 Amendment to Certificate of Incorporation of Registrant,
filed August 31, 1995, (incorporated by reference to Exhibit 3.1
to Registrant's Form 8-K for an event of August 31, 1995 (the
"August 1995 Form 8-K")).
3.4 Amendment to Certificate of Incorporation of Registrant,
filed September 21, 1995 (incorporated by reference to Exhibit
3.1 to Registrant's Annual Report on Form 10-K for the nine
months ended September 30, 1995 (the "ANMR 1995 Form 10-K")).
3.5 Certificate of Designation of Series A Preferred Stock of
the Registrant (incorporated by reference to the Registrant's
Form 8-K, filed on March 31, 1996.
3.6 Certificate of Designation of Series B Convertible
Redeemable Preferred Stock of Registrant (incorporated by
reference to Exhibit 3.1 to Registrant's Form 8-K, filed
September 2, 1997).
3.7 Certificate of Merger, filed on June 28, 1999 with the
Secretary of State of the State of Delaware. (Incorporated by
reference to Exhibit 3.1 of Form 8-K dated June 28, 1999).
3.8 Amended and Restated By-laws of Registrant (incorporated by
reference to Exhibit 3.4 to Registrant's Form S-4).
II-3
<PAGE>
4.1.1 Form of Warrant Agreement between Registrant and American
Stock Transfer & Trust Company, as Warrant Agent (incorporated by
reference to Exhibit 4 to Registrant's August 1995 Form 8-K).
4.1.2 Form of Warrant Certificate (incorporated by reference to
Annex B to the Registrant's Joint Proxy Statement, dated August
31, 1995).
4.2 Specimen Certificate for Common Stock, par value $.01 per
share, of Registrant (incorporated by reference to Exhibit 4.2 to
Registrant's Form S-4).
4.3.1 Form of Supplemental Agreement relating to Registrant's
assumption of obligations under the Warrant Agreement between
First Albany Corporation and Janney Montgomery Scott, Inc.
(incorporated by reference to Exhibit 4.3.1 to Registrant's Form
S-4).
4.3.2 Form of Supplemental Agreement relating to Registrant's
assumption Obligations under the Warrant Agreement between Strax
and Jacob by reference to Exhibit 4.3.2 to Registrant's Form
S-4).
4.4 Form of Warrant Certificate, dated as of March 6, 1994,
issued to Dominick & Dominick Incorporated (incorporated by
reference to Exhibit 4.4 to Registrant's Form S-4).
4.5 Warrant issued to Oxis Health Products, Inc. (incorporated
by reference to Exhibit 10.2 to Registrant's July 1999 Form 8-K).
4.6* Form of Warrant regarding Registrant's Bridge Financing in
December 1999.
4.7* Form of Warrant issued to certain employees in connection
with the Registrant's Employee Bridge Financing in March 2000.
4.8 Form of Series A Warrant from the Registrant's April 2000
private placement of Units (the "April Private Placement").
(incorporated by reference to Exhibit 10.2 to Registrant's Form
8-K, filed April 28, 2000 (the "April 2000 Form 8-K")).
4.9 Form of Series B Warrant from the April Private Placement.
(incorporated by reference to Exhibit 10.3 to Registrant's April
2000 Form 8-K).
5* Opinion of Thelen Reid & Priest LLP.
10.1 Registrant's 1983 Incentive and Non-Qualified Stock Option
Plan, Amended and Restated as of February 1, 1988, and form of
incentive stock option (incorporated by reference to Exhibit 10.4
to Registrant's Form S-2).
10.2 Registrant's 1993 Employee Stock Option Plan (incorporated
by reference to Exhibit A of the Proxy Statement for Registrant's
1993 Annual Meeting of Stockholders).
10.3 Registrant's 1993 Directors Stock Option Plan for
Non-Employee Directors (incorporated by reference to Exhibit B of
the Proxy Statement for Registrant's 1993 Annual Meeting of
Stockholders).
10.4.1 Registration Rights Agreement, dated August 18, 1997,
between Registrant and General Electric Company ("GE")
(incorporated by reference to Exhibit 10.2 to Registrant's Form
8-K, filed September 2, 1997).
10.4.2 Stockholders Agreement, dated August 18, 1997, between
Registrant and GE (incorporated by reference to Exhibit 10.3 to
the Registrant's Form 8-K, filed September 2, 1997).
II-4
<PAGE>
10.4.3 Settlement and Release Agreement, dated August 18, 1997,
between the Registrant and GE (incorporated by reference to
Exhibit 10.4 to the Registrant's Form 8-K, filed September 2,
1997).
10.4.4 License Agreement, dated August 18, 1997, between Registrant
and GE (incorporated by reference to Exhibit 10.4 to the
Registrant's Form 8-K, filed September 2, 1997).
10.5.1 Employment Agreement between Registrant and Jack Nelson
dated as of December 6, 1993 (incorporated by reference to
Exhibit 10.5 filed with the ANMR 1994 Form 10-K).
10.5.2 Severance and Consulting Agreement dated as of June 28, 1999
between Registrant and Nelson (incorporated by reference to
Exhibit 10.4 to the Registrant's July 1999 Form 8-K).
10.5.3 Form of Secured Promissory Note, dated as of December 28,
1999, from Registrant to Nelson. (incorporated by reference to
Exhibit 10.16.1 to Registrant's September 1999 Form 10-KSB).
10.6.1 Employment Agreement among Registrant, Advanced Mammography
Systems, Inc. ("AMS") and Enrique Levy dated September 17, 1995
(incorporated by reference to Exhibit 10.6 to Registrants ANMR
September 1995 Form 10-K)
10.6.2 Severance and Consulting Agreement between Registrant and
Levy, dated as of June 28, 1999 (incorporated by reference to
Exhibit 10.5 to the Registrant's July 1999 Form 8-K).
10.6.3 Form of Secured Promissory Note, dated as of December 28,
1999, from Registrant to Enrique Levy. (incorporated by reference
to Exhibit 10.16.2 to Registrant's September 1999 Form 10-KSB).
10.6.4 Form of Security Agreement, dated as of December 28, 1999,
by Registrant to Enrique Levy as Agent. (incorporated by
reference to Exhibit 10.16.3 to Registrant's September 1999 Form
10-KSB).
10.7 Lease Agreement between Registrant and John T. Spinelli,
dated May 5, 1991 (incorporated by reference to Exhibit 10.9
filed with Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995).
10.8.1 Key Employment Agreement between MVA Rehabilitation
Associates and Eric T. Shebar, M.D. dated as of January 31, 1995
(incorporated by reference to Exhibit 10(b) to Strax's Form 8-K
filed on February 15, 1995 (File No. 0-19736)).
10.8.2 Settlement Agreement, General Release and Covenant Not to
Sue ("Agreement") between MVA Rehabilitation Associates, Strax
Rehab Inc. Middlesex MRI Center and Eric T. Shebar, M.D., dated
December 27, 1999. (incorporated by reference to Exhibit 10.14 to
Registrant's Form 10-KSB filed on January 20, 2000 for the year
ending September 31, 1999 (the "September 1999 Form 10-KSB")).
10.9 Amended and Restated Agreement of Partnership of MVA
Rehabilitation Associates (incorporated by reference to Exhibit
10(a) to Strax's Form 8-K filed on February 15, 1995).
10.10 Interest Transfer Agreement by and among Middlesex MRI
Center Inc. ("Middlesex") and Strax Rehab Inc. and Medical
Diagnostics and Rehabilitation, LLC ("MDR") the sole general
partners of MVA Rehabilitation Associates ("MVA") for the
transfer of Middlesex and MDR's partnership interests in
MVA.(incorporated by Reference to Exhibit 2.1 to Registrant's
Form 8-K dated March 11, 1999).
II-5
<PAGE>
10.11 Asset Purchase Agreement between Registrant and Pacific
Republic Capital Corp. for the sale of Aurora breast scanner
technology related assets (incorporated by reference to Exhibit
2.1 to the Registrant's Form 8-K dated April 27, 1999).
10.12.1 Asset Purchase Agreement dated as of June 28, 1999, among
Opus, Oxis Health Products, Inc. and Oxis International, Inc.
(incorporated by reference to Exhibit 2.2 to Registrant's July
1999 Form 8-K).
10.12.2 Secured Promissory Note of Opus issued to Oxis Health
Products, Inc. in the initial principal amount of $565,000
(incorporated by reference to Exhibit 10.1 to Registrant's July
1999 Form 8-K).
10.12.3 Services Agreement, dated as of June 30, 1999, between Opus
and Oxis Health Products, Inc. (incorporated by reference to
Exhibit 10.3 to Registrant's July 1999 Form 8-K).
10.13 Promissory Notes issued for bridge loan in the aggregate
amount of $600,000 (November 1999 and December 1999).
(incorporated by reference to Exhibit 10.15 to Registrant's
September 1999 Form 10-KSB).
10.14.1 Form of Stock Purchase Agreement regarding the April Private
Placement. (incorporated by reference to Exhibit 10.1 to
Registrant's April 2000 Form 8-K).
10.14.2 Letter Agreement, dated March 27, 2000, between the Company
and certain purchasers. (incorporated by reference to Exhibit
10.4 to Registrant's April 2000 Form 8-K).
10.14.3 Letter Agreement, dated March 29, 2000, between the Company
and certain purchasers. (incorporated by reference to Exhibit
10.5 to Registrant's April 2000 Form 8-K).
10.15* Form of Subscription Agreement regarding Registrant's
December 1999 Bridge Financing.
10.16** Form of Option granted to Sanjay Mody with respect to the
April Private Placement.
10.17** Form of Option granted to Shrikant Mehta with respect to the
April Private Placement.
21* List of Company's subsidiaries.
23.1* Consent of BDO Seidman, LLP, independent public accountants
for Company.
23.2* Consent of Thelen Reid & Priest LLP (included as part of
Exhibit 5).
24 Power of Attorney (included in the signature page on p.
II-7).
27 Financial Data Schedule
------------------------
* Filed herewith.
** To be filed by amendment.
ITEM 28. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
II-6
<PAGE>
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act").
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of a
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the change in volume and price represents no more than a 20 percent
change in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) to include any additional or changed material information with
respect to the plan of distribution.
(2) that, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof.
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the Act may
be permitted to directors, officers and controlling persons of the Registrant
pursuant to the provisions of its Certificate of Incorporation, By-Laws, the
General Corporation Law of the State of Delaware or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer of controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-7
<PAGE>
SIGNATURES
IN ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL
OF THE REQUIREMENTS FOR FILING ON FORM SB-2 AND AUTHORIZED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN FORT LEE, NEW JERSEY, ON THE 6TH DAY OF JULY, 2000.
CAPRIUS, INC.
BY: /s/ George Aaron
------------------------------------
George Aaron
President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE
APPEARS BELOW UNDER THE HEADING "SIGNATURE" CONSTITUTES AND APPOINTS GEORGE
AARON AND JONATHAN JOELS, OR EITHER OF THEM, HIS TRUE AND LAWFUL
ATTORNEY-IN-FACT AND AGENT WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION,
FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN ANY AND ALL CAPACITIES TO SIGN ANY
OR ALL AMENDMENTS TO THIS REGISTRATION STATEMENT, AND TO FILE THE SAME, WITH ALL
EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE
SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND
AGENTS, EACH ACTING ALONE, FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND
EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE IN AND ABOUT THE
PREMISES, AS FULLY FOR ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN
PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND
AGENTS, EACH ACTING ALONE, OR HIS SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY DO OR
CAUSE TO BE DONE BY VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ George Aaron Chairman of the Board July 6, 2000
--------------------------------- and President
George Aaron
/s/ Jonathan Joels Director and Chief July 6, 2000
--------------------------------- Financial Officer
Jonathan Joels
/s/ Shirkant Mehta Director July 6, 2000
---------------------------------
Shirkant Mehta
/s/ Sanjay Mody Director July 6, 2000
---------------------------------
Sanjay Mody
/s/ Robert Spira Director July 6, 2000
---------------------------------
Robert Spira
/s/ Sol Triebwasser Director July 6, 2000
---------------------------------
Sol Triebwasser
II-8
