UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark one)
X Annual Report Pursuant to Section 13 or 15 (d) of the
----- Securities Exchange Act of 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2000
-----
Transition Report Pursuant to Section 13 or 15 (d) of
----- the of the Securities Exchange Act of 1934
Commission File Number: 0-11914
CAPRIUS, INC.
(Name of Small Business Issuer in its charter)
Delaware 22-2457487
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Parker Plaza, Fort Lee, NJ 07024
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (201) 592-8838
Securities to be registered under Section 12 (b) of the Exchange Act:
None
Securities to be registered under Section 12 (g) of the Exchange Act:
Common Stock, par value $ .01 per Share
Warrants for purchase of Common Stock
-------------------------------------
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed under
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
shorter period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of the Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB [X].
Revenues for the fiscal year ended September 30, 2000: $3,398,582
The aggregate market value of the voting stock held by non-affiliates of
the Registrant computed by reference to the price at which the stock was sold,
or the average bid and ask prices of such stock as of December 15, 2000:
$ 1,693,732
The number of shares outstanding of Registrant's Common Stock, $ .01 par
value, outstanding on December 15, 2000: 16,412,214 shares
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Documents Incorporated by Reference: None
Transitional Small Business Disclosure Format: Yes No X
--- ---
<PAGE>
INDEX
Page No.
PART I
Item 1. Business 3
Item 2. Properties 7
Item 3. Legal Proceedings 7
Item 4. Submission of Matters to a Vote of Securities Holders 7
PART II
Item 5. Market for Common Equity and Related Stockholder Matters 8
Item 6. Management's Discussion and Analysis of Financial Conditions and 9
Results of Operations
Item 7. Financial Statements 11
Item 8. Changes In and Disagreements with Accountants on Accounting and 11
Financial Disclosure
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; 12
Compliance with Section 16 (a) of the Exchange Act.
Item 10. Executive Compensation 15
Item 11. Security Ownership of Certain Beneficial Owners and Management 16
Item 12. Certain Relationships and Related Transactions 18
Item 13. Exhibits and Reports on Form 8-K 20
SIGNATURES 25
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PART I
------
ITEM I. DESCRIPTION OF BUSINESS
GENERAL
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 June 1999 merger (the "Opus Merger") between Opus and Caprius'
merger subsidiary, the Opus stockholders received an aggregate of 6,178,977
shares of Caprius Common Stock, par value $.01 per share, which then 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. ("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
Oxis "Warrant"), exercisable after six months for a period of five years. Upon
the Opus Merger, the Warrant became exercisable for 617,898 shares of Caprius
Common Stock at an exercise price equal to 80% of the average bid and asked
prices for the Common Stock for the five trading days immediately preceding
December 28, 1999. As of December 8, 1999, the principal sum due under the Oxis
Note was paid in full, and an Amended and Restated Oxis Warrant for 617,898
shares of Caprius Common Stock exercisable at $.0875 per share was issued. On
November 10, 2000, Oxis exercised the Warrant.
George Aaron and Jonathan Joels formed Opus in 1999 for the purpose of
effecting the Opus Merger and the Oxis Purchase Agreement, and upon the Opus
Merger they became executive officers and directors.
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 ("TDM") 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 TDM Business of Opus through December
31, 2000.
On April 27, 2000, Caprius completed a private placement offering (April
Placement) in which it sold 650,000 units and received gross proceeds of
$1,950,000. Caprius 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 was used to repay outstanding
indebtedness and accrued liabilities, including accrued salaries, and the
balance is being used for working capital.
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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 the 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.
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 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 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 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 performs approximately 25,000 procedures
per year comprising of x-ray mammography, ultrasound, stereotactic biopsy and
bone densitometry.
THERAPEUTIC DRUG MONITORING BUSINESS
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 sold by Opus generally are prescribed by physicians for their
patients and then used in hospitals and labs. TDM combines the knowledge of
pharmaceuticals, pharmacotherapy, pharmacokinetics and pharmacodynamics.
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
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proprietary and exclusive tests; one to monitor Topiramate, 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
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Theophylline
ANTIARRHYTHMIC ASSAYS
---------------------
Digoxin
Digitoxin
Quinidine
ANTIEPILEPTIC ASSAYS
--------------------
Carbamazepine
Phenobarbital
Phenytoin
Topiramate
Valproic Acid
ANTIBACTERIAL ASSAYS
--------------------
Amikacin
Gentamicin
Teicoplanin
Tobramycin
Vancomycin
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, Roche Diagnostics, Inc. and Sigma, Inc.
Opus attempts to compete in its pricing of its kits. Both the Topiramate and
Teicoplanin kits do not experience competition as the Company enjoys exclusivity
on each.
The Company determined that in order to remain cost efficient and to
optimize the return on the use of its assets, it will contract its 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 the Company's intention to utilize this capacity for the
manufacture of its products. This will eliminate the need to invest capital and
will also permit the Company to maintain a low head count. Currently, all of the
Company's manufacturing services have been contracted to Oxis International
under a manufacturing contract which expired on September 30, 2000. The Company
and Oxis International agreed to extend this contract until December 31,2000.
The Company is currently negotiating a manufacturing agreement with another
party. The Company does not intend, at this stage, to manufacture its goods in
house unless volume or other considerations would make it necessary to do so.
The Company intends to expand its product portfolio utilizing the TDM line
as a marketing platform. In anticipation of new products that would require FDA
regulatory approval, the Company consults with a law firm specializing in health
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care regulatory affairs and, where appropriate, the Company will patent any
intellectual properties as they have in the past. Management has initiated
discussions with several major drug companies to develop tests to monitor serum
levels of certain of their drugs, and on November 13, 2000, Opus entered into a
Development and License Agreement with Novartis Pharma AG, effective October 15,
2000, to develop and market internationally an assay to monitor Certican(TM).
Certican(TM) is a Novartis drug candidate and is presently in the Phase III
clinical trial process, as required by the FDA. When cleared by the FDA,
Certican(TM) will be used initially to treat renal transplant patients. The Opus
test to measure Certican is expected to be used regularly to monitor blood
levels of the drug, guiding physicians as to correct dosage and patient
compliance.
Opus entered into an exclusive distribution agreement with Polymedco, Inc.
to market the INNOFLUOR(R) products within the United States. Internationally,
Opus distributes its products through distributors in 17 countries. There is an
ongoing program to expand the distribution channels of the Company, with special
emphasis on the international market. Approximately 60% of the sales are
international. All sales, including international, are invoiced in U.S. dollars.
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 performs more
than 25,000 procedures annually. 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 doppler 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. The
Company is currently evaluating the strategic alternatives for the Strax
Institute.
EMPLOYEES
As of December 15, 2000, the Company's breast imaging business had a staff
of 17 full-time employees, including 1 senior manager, plus 2 part-time
employees.
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As of December 15, 2000, the diagnostic business had 7 full-time employees,
including 3 senior managers.
None of the Company's employees are 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.
ITEM 2. PROPERTIES
The Company leases 2,758 square feet of office space in Fort Lee, New
Jersey for sales and administrative personnel pursuant to a lease that expired
on June 30, 2000 at a base monthly rental of approximately $6,665.
The Company leases 8,400 square feet for its comprehensive breast-imaging
center in Lauderhill, Florida, pursuant to a lease with current monthly base
rental payment of $ 9,527. The lease expires on January 31, 2004.
ITEM 3. LEGAL PROCEEDINGS
In the case of Nicholas Kessler by and through his Guardian ad Litem,
Saundra J. Kessler and Saundra J. Kessler Plaintiffs vs. Caprius, Inc. formerly
known as Advanced Mammography Systems, Inc., Jack Nelson, an individual,
Defendants, Case No. SA CV 99-193 DOC (EE)(U.S.D.C. Central District of
California), as of August 1, 2000, the Plaintiffs and Defendants entered into a
Settlement Agreement and mutual release of all claims whereby each party would
grant the other a full release with respect to all present and future claims
related to this matter. On September 11, 2000, the court approved of the
Settlement Agreement and the Company issued 25,000 shares of its Common Stock
and granted warrants exercisable for three years at $.25 per share to purchase
60,000 shares of its Common Stock to each of Sandra Kessler and Nicholas Kessler
(through his Guardian ad Litem), and the mutual releases became effective.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Common Stock has traded on the OTC Bulletin Board under the symbol CAPR
since June 8, 1999, upon the delisting of the Company's Common Stock from the
NASDAQ Small Cap Market. From November 10, 1997, upon the Merger with AMS, until
the close of business on June 7, 1999, the Common Stock traded on the NASDAQ
Small Cap Market under the symbol "CAPR". Trading in the Warrants (NASDAQ:
CAPRW) commenced on August 31, 1995, after the closing of the merger with
Medical Diagnostics, Inc. Prior to the AMS Merger, the Warrants traded under the
symbol "ANMRW". The Warrants are now listed on the OTC Bulletin Board under the
symbol CAPRW.
The following table sets forth, for the calendar quarters indicated, the
reported high and low bid quotations per share of the Common Stock as reported
on the NASDAQ Small Cap Market and OTCBB. Such quotations reflect inter-dealer
prices, without retail mark-up, markdown or commission, and may not necessarily
represent actual transactions. There is no quoted public market for the trading
of the Company's Warrants.
Common Stock High Low
---- ---
2000 (year ended September 30, 2000)
Fourth Quarter $0.4531 $ 0.2188
Third Quarter 0.8750 0.2500
Second Quarter 1.1250 0.0938
First Quarter 0.1562 0.0625
1999 (year ended September 30, 1999)
Fourth Quarter $0.3125 $ 0.1250
Third Quarter 2.0000 0.1250
Second Quarter 0.4375 0.0625
First Quarter 1.0625 0.2500
The Company has paid no dividends on its shares of Common Stock since its
inception in July 1983 nor does the Company expect to declare any dividends on
its Common Stock in the foreseeable future.
On September 30, 2000, there were approximately 1,650 holders of record of
the Common Stock. Since a large number of shares of Common Stock are held in
street or nominee name, it is believed that there are a substantial number of
additional beneficial owners of the Company's Common Stock.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with the audited
consolidated financial statements and notes thereto for the years ended
September 30, 2000 and 1999.
GENERAL
Due to significant changes in the nature of operations of the Company in
June 1999, comparisons of results of operations between the past two years may
not be meaningful.
RESULTS OF OPERATIONS
Fiscal Year Ended September 30, 2000 Compared to Fiscal Year Ended September 30,
1999
Net patient service revenue at Strax totaled $1,479,000 for the year ended
September 30, 2000 ("Fiscal 2000") versus $2,883,000 for the year ended
September 30, 1999 ("Fiscal 1999"). Cost of service operations totaled $965,000
for Fiscal 2000 versus $1,973,000 for Fiscal 1999. The decreases from Fiscal
1999 to Fiscal 2000 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 Fiscal 2000 are $1,920,000 of net sales revenues
for Opus therapeutic drug monitoring assays versus $391,000 for Fiscal 1999. The
cost of operations for the Opus business for Fiscal 2000 was $620,000 versus
$107,000 for the prior year. The Company acquired Opus' therapeutic drug
monitoring products in June 1999 and therefore the results for the Fiscal 1999
reflect only a three-month period.
Included in interest expense for Fiscal 2000 is the sum of $227,000. This
represents a non-cash charge for the discount on the Bridge Loans which were
issued and repaid during Fiscal 2000.
During Fiscal 2000, the Company paid Notes together with all outstanding
interest to Messrs. Nelson and Levy who resigned as Officers in 1999 and
Directors in 2000.
Selling, general and administrative expenses totaled $2,628,000 for Fiscal
2000 versus $4,482,000 for Fiscal 1999. 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
(TDM).
Research and development expenses totaled $16,000 for Fiscal 2000 versus
$496,000 for fiscal 1999. This decrease reflects the sale of the Aurora
Technology that took place in April1999.
Loss on sale of the rehabilitation business of $1,461,000 in Fiscal 1999
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 in Fiscal 1999
reflects the loss on the sale of the Aurora Technology to Pacific Republic
Capital Corp.
The operating loss from continuing operations totaled $833,000 for Fiscal
2000 versus $7,503,000 for Fiscal 1999. This decrease reflects the shift in
business operations from the Aurora Technology to the TDM product line.
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LIQUIDITY AND CAPITAL RESOURCES
In March and April 2000, the Company completed an equity private placement
of $1,950,000 through the sale of 650,000 units at $3.00 per unit as described
in Note H-3 to the Financial Statements. The Company 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. The Company is currently reviewing the possible disposition of the Strax
Institute. The Company continues to pursue efforts to identify additional funds
through various funding options, including banking facilities and equity
offerings in order to provide capital for future expansion. The ability to
secure commercial or other borrowings has been more difficult due to the
Company's 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, the Company's viability could be threatened. Accordingly, the
auditors' report on the 2000 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 Common Stock. There were no significant cash flows used
in investing activities for Fiscal 2000. Net cash used in operations for the
year ended Fiscal 2000 amounted to $1,038,610.
During Fiscal 1999, the Company funded its operations principally through
the cash obtained from the sale of the Aurora technology business. Since Fiscal
2000, the Company retained an investment banker and completed a series of
short-term bridge loans aggregating $670,000 through the issuance of loan notes
due on April 17, 2000 and warrants. These funds were primarily used to pay a
note issued in connection with the Oxis transaction. Upon the completion of the
April Placement, the Company 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 the Company's business.
The Company believes that the effects of future inflation may be minimized by
controlling costs and increasing efficiency through product sales volume of the
diagnostic kit business.
YEAR 2000 SYSTEMS
The Company had undertaken a review concerning the ability of its internal
information systems to handle date information and to function appropriately
from and after January 1, 2000. The total cost to address any changes required
as a result of the so-called "Year 2000 Problem" was not material. In addition,
the Company has evaluated the impact of possible Year 2000 problems encountered
by its suppliers and customers upon the Company and to date there have not been
any problems.
FORWARD LOOKING STATEMENTS
The Company is including the following cautionary statement in this Annual
Report of Form 10-KSB to make applicable and take advantage of the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995 for any
forward-looking statements made by, or on behalf of, the Company.
Forward-looking statements include statements concerning plans, objectives,
goals, strategies, future events or performance and underlying assumptions and
other statements which are other than statements of historical facts. Certain
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statements contained herein are forward-looking statements and accordingly
involve risks and uncertainties which could cause actual results or outcomes to
differ materially from those expressed in the forward-looking statements. The
Company's expectations, beliefs and projections are expressed in good faith and
are believed by the Company to have a reasonable basis, including without
limitation, management's examination of historical operating trends, data
contained in the Company's records and other data available from third parties,
but there can be no assurance that management's expectation, beliefs or
projections will result or be achieved or accomplished. In addition to other
factors and matters discussed elsewhere herein, the following are important
factors that, in the view of the Company, could cause actual results to differ
materially from those discussed in the forward-looking statements: technological
advances by the Company's competitors, changes in health care reform, including
reimbursement programs, capital needs to fund any delays or extensions of
development programs, delays in new product development, lack of market
acceptance of new technology based products, changes in governmental
regulations, and availability of capital on terms satisfactory to the Company.
The Company disclaims any obligation to update any forward-looking statements to
reflect events or circumstances after the date hereof.
ITEM 7. FINANCIAL STATEMENTS
PAGE
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS NUMBER
------------------------------------------ ------
Independent Auditors' Report F-2
Consolidated Balance Sheets at September 30, 2000 and 1999 F-3
Consolidated Statements of Operations for the years ended
September 30, 2000 and 1999 F-4
Consolidated Statements of Stockholders' Equity for years
ended September 30, 2000 and 1999 F-5
Consolidated Statements of Cash Flows for the years ended
September 30, 2000 and 1999 F-6
Notes to Consolidated Financial Statements F-7 to F-17
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
NONE
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16 (A) OF THE EXCHANGE ACT
DIRECTORS AND EXECUTIVE OFFICERS
--------------------------------
As of December 15, 2000, the directors and executive officers of the
Company were:
Name Age Position
---- --- --------
George Aaron 48 Chairman of the Board,
President & Chief Executive Officer
Jonathan Joels 44 Chief Financial Officer, Treasurer,
Secretary & Director
Elliott Koppel 56 VP Sales & Marketing
Shrikant Mehta 56 Director
Sanjay Mody (1)(2) 41 Director
Robert Spira, MD (1)(2) 51 Director
Sol Triebwasser, Ph.D. (1)(2) 78 Director
--------------------
(1) Member of the Audit Committee
(2) Member of the Compensation/Option Committee
The principal occupations and brief summary of the background of each
Director and executive officer of Caprius 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
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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.
Mr. Aaron and Mr. Joels are brothers-in-law, and Mr. Mehta is the uncle of
Mr. Mody.
The Board of Directors met, either in person or telephonically, seven times
in fiscal 2000. Each of the Directors attended or participated in 75% or more of
the meetings.
The Board of Directors has standing Audit and Compensation/Option
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
13
<PAGE>
of independent public accountants for the ensuing year. The Audit Committee met
twice during fiscal 2000.
The Compensation/Option 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 2000.
COMPENSATION OF DIRECTORS
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. The Company is currently reviewing our
policies regarding the granting of options to directors and intends 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.
COMPLIANCE WITH SECTION 16 (A)
------------------------------
Based solely in its review of copies of Forms 3 and 4 received by it or
representations from certain reporting persons, the Company believes that,
during the fiscal year ended September 30, 2000, there was compliance with
Section 16 (a) filing requirements applicable to its officers, directors and 10%
stockholders.
14
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth the aggregate cash compensation paid by the
Company to (i) its Chief Executive Officer and (ii) its most highly compensated
officers whose cash compensation exceeded $100,000 for services performed during
the year ended September 30, 2000.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------- ----------------------
Awards Payouts
------ -------
Securities
Other Restricted Underlying
Name and Annual Stock Options LTIP All Other
Principal Salary Bonus Compensation Award(s) SARs Payouts Compensation
Position Year ($) ($) ($) ($) (#) ($) ($)
--------------- --------- ---------- -------- ----------- ---------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
George 2000 160,000 -0- -0- -0- 118,500 -0- -0-
Aaron 1999 (1) 41,306
President/CEO
--------------- --------- ---------- -------- ----------- ---------- ----------- --------- -----------
Jonathan Joels 2000 112,000 -0- -0- -0- 100,000 -0- -0-
CFO 1999 (2) 28,844
--------------- --------- ---------- -------- ----------- ---------- ----------- --------- -----------
</TABLE>
(1) Mr. Aaron was appointed by the Board effective June 28, 1999 as President
and CEO.
(2) Mr. Joels was appointed by the Board effective June 28, 1999 as CFO,
Treasurer and Secretary.
As of September 30,2000, the Company does not have any outstanding
employment agreements with any of our employees. However, the Company intends 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 $750 per month,
respectively, for automobile expenses. In addition, it is contemplated that each
would receive bonuses based upon certain milestones yet to be determined, and
would be eligible for discretionary bonuses as determined by the Compensation
Committee. Under the contemplated employment agreements, should the termination
of Mr. Aaron and Mr. Joels result from a change in control of the Company, as
defined in their respective employment agreements, the termination payment for
the individual terminated would be 2.99 times his annual base salary over the
shorter of the past three years or the time accrued under his current employment
agreement.
During Fiscal 2000, the Company paid Notes together with all outstanding
interest to Messrs. Nelson and Levy who resigned as Officers in 1999 and
Directors in 2000.
The Company does not have any annuity, retirement, pension or deferred
compensation plan or other arrangements under which any executive officers are
entitled to participate without similar participation by other employees.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential Realized
Value at
Individual Assumed Annual
Grants Rates of Stock Alternative to
Price Appreciation (f) and (g)
for Option Term Grant Date Value
(a) (b) (c) (d) (e) (f) (g) (h)
% of
Number of Total
Name Securities Options/
Underlying SARS Exercise Grant
Options/ Granted to on Base Expiration Date
SARs Employee(s) Price Date 5% ($) 10% ($) Present
Granted(#) in Fiscal ($/Sh) Value $
Year
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
George Aaron -0- -0- -0- -0- -0- -0- -0-
-------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
FISCAL YEAR END OPTION VALUE
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT SEPT. 30, 2000 AT SEPT. 30, 2000
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE ($)
---- ------------------------- ---------------
George Aaron 0 $-0-
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Compensation/Option Committee are Robert
Spira, M.D., F.A.C.P., and Sol Triebwasser, Ph.D. and Sanjay Mody, none of who
is an executive officer or employee of the company or its subsidiaries. The
Compensation Committee met during Fiscal 2000 to review executive compensation
and obtained approval from the Board of Directors for changes to executive
compensation.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 15, 2000, certain
information regarding the beneficial ownership of Common Stock by (i) each
person who is known by the Company to own beneficially more than five percent of
the outstanding Common Stock, (ii) each director and executive officer of the
Company, and (iii) all directors and executive officers as a group:
16
<PAGE>
Amount and Nature Percentage of
Name of Position with of Beneficial Common
Beneficial Owner Company Ownership (1) Stock
--------------------------------------------------------------------------------
George Aaron Chairman of the 3,398,889(2) 19.4%
Board; Chief
Executive Officer;
President
Jonathan Joels Director; Chief 3,283,239(3) 19.2%
Financial Officer;
Treasurer;
Secretary
Elliott Koppel VP Sales & 311,000(4) *
Marketing
Shrikant Mehta Director 4,100,000(5) 7.3%
Sanjay Mody Director 500,000 (6) *
Robert Spira, M.D. Director 39,000 (7) *
Sol Triebwasser, Ph.D. Director 42,500 (8) *
All executive officers and 11,700,628(9) 45.9%
Directors as a group (7
persons)
---------------------------
* 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 September 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) 11,000 shares subject to warrants and (ii) 300,000 shares
subject to options.
5. Includes (i) 2,400,000 shares subject to warrants and (ii) 500,000 shares
subject to options.
6. Includes 500,000 shares subject to options.
7. Includes 39,000 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.
8. Includes 42,500 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.
9. Includes (i) 2,749,500 shares subject to warrants and (ii) 1,399,500 shares
subject to options.
17
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In March 2000, Messrs. Aaron, Joels and Koppel loaned $25,000, $25,000 and
$20,000, respectively to the Company 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,
the Company 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 Caprius 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, the Company
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 the Company, such that, to the
extent of their current interest in the Company, these principal investors each
have the right to participate in any sale, for cash, by the Company of Common
Stock or shares of preferred stock or other securities that are exercisable for,
convertible into or exchangeable for shares of Common Stock in a private
placement transaction the Company may enter into pursuant to the exemption from
registration under Regulation D of the Securities Act of 1933, subject to
certain exceptions.
The Company 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 the Company occurring within
one year after the date of purchase, subject to certain exceptions, the Company
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
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 Common
Stock), then the Company 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, the Company separately agreed to grant Mr. Mehta options to purchase
500,000 shares of 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 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.
Upon the Opus merger, the Company entered into Severance and Consulting
Agreements (the "Severance Agreement") 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 Severance
Agreement, Mr. Nelson received $45,734 in cash as payment of deferred
compensation and 125,000 shares of Common Stock in Fiscal 1999, 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).
On 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.
18
<PAGE>
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).
On 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, and Mr.
Levy resigned as a director.
19
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits, including those incorporated by reference.
Exhibit No. Description
---------- -----------
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).
20
<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).
4.10* Form of Warrant issued to each of Sandra Kessler and Nicholas
Kessler, by and through his Guardian ad litem (collectively the
"Claimants"), in connection with the Settlement Agreement among
the Registrant, the Claimants and others in August 2000.
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).
21
<PAGE>
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).
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).
10.7.1 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)).
10.7.2 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")].
22
<PAGE>
10.8 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).
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 [incorporated by reference to Exhibit 10.15
to Registrant's Registration Statement on Form SB-2, File No.
333-02222(the "2000 Form SB-2")].
23
<PAGE>
10.16 Form of Option granted to Sanjay Mody with respect to the April
Private Placement (incorporated by reference to Exhibit 10.16 to
Registrant's 2000 Form SB-2)
10.17 Form of Option granted to Shrikant Mehta with respect to the
April Private Placement (incorporated by reference to Exhibit
10.17 to Registrant's 2000 Form SB-2).
10.18 Form of Settlement Agreement between the Registrant and the
Claimants dated August 8, 2000 (incorporated by reference to
Exhibit 10.17 to Registrant's 2000 Form SB-2).
21* List of Company's subsidiaries.
23.1* Consent of BDO Seidman, LLP, independent public accountants.
27* Financial Data Schedule
------------------------
* Filed herewith
(b) Reports on Form 8-K:
None
24
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on the 16th day of
January 2001.
CAPRIUS, INC.
By: /s/ Jonathan Joels
-----------------------------------
Jonathan Joels, CFO,
Treasurer & Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934 this report
has been signed by the following persons in the capacities and on the dates
indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ George Aaron Chairman of the Board, Jan. 16, 2001
------------------------ President & CEO
George Aaron
/s/ George Aaron Director, CFO, Treasurer Jan. 16, 2001
------------------------ & Secretary
Jonathan Joels
/s/ Sanjay Mody Director Jan. 16, 2001
------------------------
Sanjay Mody
/s/ Robert Spira Director Jan. 16, 2001
------------------------
Robert Spira, M.D., F.A.C.P.
/s/ Sol Triebwasser Director Jan. 16, 2000
------------------------
Sol Triebwasser, Ph.D.
25
<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 to F-17
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 and subsidiaries as of September 30, 2000 and 1999, 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, 2000 and 1999, 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 which raises 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
November 10, 2000
F-2
<PAGE>
CAPRIUS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, 2000 September 30, 1999
------------------ ------------------
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 349,998 $ 116,068
Accounts receivable, net of reserve for bad debts of
$26,000 at September 30, 2000 and September 30, 1999 503,922 537,510
Inventories 283,683 210,983
Other current assets 8,661 91,723
---------------- ----------------
Total current assets 1,146,264 956,284
---------------- ----------------
PROPERTY AND EQUIPMENT:
Medical equipment 317,718 314,320
Office furniture and equipment 217,583 188,001
Leasehold improvements 950 950
---------------- ----------------
536,251 503,271
Less: accumulated depreciation 275,299 151,348
---------------- ----------------
Net property and equipment 260,952 351,923
---------------- ----------------
OTHER ASSETS:
Goodwill, net of accumulated amortization of $139,071
at September 30, 2000 and $56,631 at September 30, 1999 1,511,111 1,593,551
Other intangibles, net of accumulated amortization of
$91,273 at September 30, 2000 and $18,255 at
September 30, 1999 1,369,100 1,442,118
Other 22,644 9,314
---------------- ----------------
Total other assets 2,902,855 3,044,983
---------------- ----------------
TOTAL ASSETS $ 4,310,071 $ 4,353,190
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 403,681 $ 342,204
Accrued expenses 460,152 465,941
Accrued compensation 35,861 652,153
Current maturities of long-term debt and capital
lease obligations 105,174 703,100
---------------- ----------------
Total current liabilities 1,004,868 2,163,398
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS,
NET OF CURRENT MATURITIES 84,070 180,623
---------------- ----------------
TOTAL LIABILITIES 1,088,938 2,344,021
---------------- ----------------
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value
Authorized - 1,000,000 shares
Issued and outstanding - Series A, none; Series B,
convertible, 27,000 shares at September 30, 2000
and September 30, 1999.
Liquidation preference $2,700,000 2,700,000 2,700,000
Common stock, $.01 par value
Authorized - 50,000,000 shares
Issued - 16,434,714 shares at September 30, 2000
and 13,548,017 shares at September 30, 1999 164,347 135,480
Additional paid-in capital 67,081,568 64,778,855
Accumulated deficit (66,722,532) (65,602,916)
Treasury stock (22,500 common shares, at cost) (2,250) (2,250)
---------------- ----------------
Total stockholders' equity 3,221,133 2,009,169
---------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 4,310,071 $ 4,353,190
================ ================
</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>
Years ended September 30,
---------------------------------
2000 1999
-------------- -------------
REVENUES:
<S> <C> <C>
Net patient service revenues $ 1,478,875 $ 2,882,818
Net product sales 1,919,707 391,373
-------------- -------------
Total revenues 3,398,582 3,274,191
-------------- -------------
OPERATING EXPENSES:
Cost of service operations 965,290 1,972,777
Cost of product sales 620,432 106,836
Selling, general and administrative 2,627,935 4,482,038
Research and development 15,563 496,480
Provision for bad debts and collection costs 2,062 149,297
Loss on sale of imaging business - 12,670
Loss on sale of rehabilitation business - 1,461,121
Loss on sale of Aurora Technology - 2,096,057
-------------- -------------
Total operating expenses 4,231,282 10,777,276
-------------- -------------
Operating loss from continuing operations (832,700) (7,503,085)
Interest income 17,749 33,939
Interest expense (304,665) (135,482)
Other income - 9,000
-------------- -------------
Loss from continuing operations (1,119,616) (7,595,628)
Income on disposal of discontinued operation - 1,100,000
-------------- -------------
Net loss $ (1,119,616) $ (6,495,628)
============== =============
Income (loss) per basic and diluted common share:
Loss from continuing operations $(0.08) $(0.85)
Income on disposal of discontinued operation - 0.12
-------------- -------------
Net loss per share $(0.08) $(0.73)
============== =============
Weighted average number of common shares outstanding,
basic and diluted 14,907,896 8,971,411
============== =============
</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
----------------------------------------- Additional ------------------- Total
Number Number $0.01 Paid-in Accumulated Number $0.01 Stockholders'
of Shares Amount of Shares Par Value Capital Deficit of Shares Par Value Equity
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, SEPTEMBER 30, 1998 27,000 $2,700,000 7,369,040 $ 73,690 $63,561,672 $(59,107,288) 22,500 $(2,250) $ 7,225,824
Issuance of common stock
related to Opus merger - - 6,178,977 61,790 1,217,183 - - - 1,278,973
Net loss - - - - - (6,495,628) - - (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) 2,009,169
Issuance of common stock and
warrants for proceeds from private
placement - - 1,950,000 19,500 1,930,500 - - - 1,950,000
Issuance of common stock in
satisfaction of accrued liabilities - - 225,000 2,250 41,805 - - - 44,055
Issuance of common stock in
connection with class action - - 425,000 4,250 78,073 - - - 82,323
Issuance of common stock in
connection with KSH Investment
Group agreement - - 236,697 2,367 11,835 - - - 14,202
Issuance of common stock in
connection with legal settlement - - 50,000 500 13,500 - - - 14,000
Fair value of warrants issued in
connection with bridge financing - - - - 227,000 - - - 227,000
Net loss - - - - - (1,119,616) - - (1,119,616)
--------------------------------------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 2000 27,000 $2,700,000 16,434,714 $ 164,347 $67,081,568 $(66,722,532) 22,500 $(2,250) $3,221,133
==================================================================================================
</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>
Year Ended September 30,
2000 1999
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Loss $ (1,119,616) $ (6,495,628)
Adjustments to reconcile net loss to net cash used in
operating activities:
Discount on Bridge Financing 227,000 -
Depreciation and amortization 279,409 787,389
Gain on disposal of discontinued operations - (1,100,000)
Loss on sale of Aurora Technology - 2,096,057
Loss on sale of rehabilitation business - 1,461,121
Gain on sale of imaging business - (12,670)
Changes in operating assets and liabilities:
Accounts receivable, net 33,588 (204,907)
Inventories (72,700) (213,763)
Other assets 19,732 147,617
Accounts payable and accrued expenses (406,023) 252,856
-------------- --------------
Net cash used in operating activities (1,038,610) (3,281,928)
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment received on note receivable 50,000 -
Proceeds from sale of rehabilitation business - 762,804
Proceeds from sale of equipment - 13,693
Proceeds from sale of imaging business - 12,670
Proceeds from disposal of discontinued operations - 1,100,000
Proceeds from sale of Aurora Technology - 952,367
Cash used in Opus merger - (522,940)
Purchase of equipment, furniture and leasehold improvements (32,981) (12,803)
-------------- --------------
Net cash provided by investing activities 17,019 2,305,791
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 1,950,000 -
Proceeds from issuance of debt 670,000 140,216
Repayment of debt and capital lease obligations (1,364,479) (839,487)
-------------- --------------
Net cash provided by (used in) financing activities 1,255,521 (699,271)
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 233,930 (1,675,408)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 116,068 1,791,476
-------------- --------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 349,998 $ 116,068
============== ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest during the period $ 77,665 $ 38,112
============== ==============
Common stock issued in Opus merger $ - $ 1,278,973
============== ==============
Additions to capital leases $ - $ 215,676
============== ==============
</TABLE>
During the year ended September 30, 2000, $154,580 of accrued expenses was
converted to common stock of the company.
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. On November 10, 2000 Oxis exercised 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 December 31, 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, with the balance paid in
fiscal year 2000. 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 provides various services, including
x-ray mammography, ultrasound, stereotactic biopsy and bone densitometry.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. 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 $349,998 at September 30, 2000. 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
F-7
<PAGE>
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 center recognizes 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
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.
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 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, 2000 and September 30, 1999, Goodwill results from the
excess of cost over the fair value of net assets acquired related to the Opus
Diagnostics business and to The Strax Institute. Other intangibles include
trademarks, technical know how and distributor agreements. Goodwill and other
intangibles are amortized on a straight-line basis over twenty years. 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.
F-8
<PAGE>
[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
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.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements", which provides guidance on the recognition, presentation and
disclosure of revenue in financial statements. The Company's current revenue
recognition policies and practices are materially consistent with this
statement. SAB101 is required to be implemented no later than the fourth quarter
of fiscal year 2001.
[11] 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 K).
F-9
<PAGE>
[12] 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.
The Company currently buys all of its' medical diagnostic assays from one
supplier. A change in suppliers could cause a delay in manufacturing and a
possible loss of sales, which would adversely affect operating results.
(NOTE C) - Acquisitions (See also NOTE J)
-----------------------------------------
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 $1,369,100 and $1,442,118, which include
assets relating to the Oxis reagent patent and trademark and distribution
network for the TDM business, are included in the accompanying consolidated
balance sheets as of September 30, 2000 and 1999, respectively.
The consolidated statements of operations and cash flows for the year ended
September 30, 2000 includes the results of operations and cash flows of Opus for
the entire year.
The consolidated statements of operations and cash flows for the year ended
September 30, 1999 includes the results of operations and cash flows of Opus for
the period June 28, 1999 to September 30, 1999.
(NOTE D) - Inventory
--------------------
At September 30, 2000 and 1999 inventory represents completed medical
diagnostic assays.
(NOTE E) - Long-term Debt and Capital Lease Obligations
-------------------------------------------------------
Long-term debt and capital lease obligations at September 30, 2000 and 1999
consisted of the following:
SEPTEMBER 30, SEPTEMBER 30,
2000 1999
---- ----
Notes payable to major supplier of medical
diagnostic assays. Notes were repaid in Fiscal
year 2000. $ - $ 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. 189,244 295,263
---------- ----------
Total long-term debt and capital lease obligations 189,244 883,723
Less: current maturities 105,174 703,100
---------- ----------
$ 84,070 $ 180,623
========== ==========
F-10
<PAGE>
Future minimum debt payments for the next five years are as follows:
Fiscal Year
2001 $113,002
2002 65,490
2003 24,799
2004 11,611
--------
Total minimum lease payments 214,902
Less amount representing interest (25,658)
--------
Present value of capital lease obligations $189,244
========
Included in property and equipment is leased equipment having a net book
value at September 30, 2000 and 1999 of approximately $191,000 and $282,000,
respectively.
(NOTE F) - Income Taxes
-----------------------
At September 30, 2000, the Company had a deferred tax asset totaling
approximately $17,972,000 due primarily 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, 2000 the Company had available net operating loss
carryforwards for tax purposes, expiring through 2020 of approximately
$52,860,000. 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,
2000 1999
---- ----
Loss from continuing operations: $(1,119,616) $(7,595,628)
Income on disposal of discontinued - 1,100,000
operations
Loss attributable to Aurora
Systems prior to sale - 9,918
----------- -----------
$(1,119,616) $(6,485,710)
=========== ===========
Expected tax (benefit) at 34% $( 380,669) $(2,205,141)
Adjustment due to
increase in valuation reserve 380,669 2,205,141
----------- -----------
Tax benefit (expense) per
financial statements $ - $ -
=========== ===========
(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 $183,000 and $197,000 for the years ended
September 30, 2000 and 1999, respectively.
Future basic rental commitments under operating leases are as follows.
F-11
<PAGE>
Fiscal Year Amount
------------------------------------------------------
2001 $ 200,097
2002 203,701
2003 207,412
2004 122,874
2005 51,988
----------
Total $ 786,072
==========
[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.
Upon the sale of its Aurora Technology in April 1999, the additional payment was
made. 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. During the year ended September 30, 2000, the Company
issued 425,000 shares of common stock to the plaintiffs, thereby completing the
settlement.
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 initial
payment, the Company was released from all claims and actions relating to this
matter. As of September 30, 2000 and 1999, the Company had a liability of
$20,000 and $80,000, respectively, included in accrued expenses in the
accompanying consolidated balance sheets 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. As of August 1, 2000, the Plaintiffs and
Defendants entered into a settlement agreement and mutual release of all claims
whereby each party would grant the other a full release with respect to all
present and future claims related to this matter. On September 11, 2000, the
court approved of the Settlement Agreement and the Company issued 25,000 shares
of its common stock and granted warrants exercisable for three years at $0.25
per share to purchase 60,000 shares of its common stock to each of Sandra
F-12
<PAGE>
Kessler and Nicholas Kessler (through his Guardian ad Litem), and the mutual
releases became effective. For the year ended September 30, 2000, the Company
recorded $14,000 for settlement costs, representing the market value of the
shares issued. The market value of the warrants issued was not recorded as it
was immaterial to the financial statements.
(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
--------
Prior to fiscal year 1999, the Company issued warrants in connection with
the AMS Merger. As of September 30, 2000, the Company had outstanding warrants
to purchase 101,500 shares of common stock at exercise prices ranging from $6.25
to $25.00, with a weighted average exercise price of $10.41. These warrants
expire at various dates through May 2001.
During fiscal year 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 was fully exercised in
November 2000.
In connection with various bridge financing agreements entered into during
fiscal year 2000, the Company issued warrants to purchase 368,500 shares of
common stock at exercise prices ranging from $0.20 to $1.00, with a weighted
average exercise price of $0.28. These warrants expire at various dates through
March 2005. Warrants to purchase 68,750 shares at $0.20 per share were exercised
in October 2000.
In connection with the equity placement completed during fiscal year 2000,
the Company issued 2,600,000 Series A warrants and 1,300,000 Series B warrants.
These warrants are to purchase shares of common stock at prices ranging from
$0.50 to $0.75, with a weighted average exercise price of $0.58. These warrants
expire in March 2005.
In connection with a legal settlement entered into during fiscal year 2000,
the Company issued warrants to purchase 120,000 shares of common stock at $0.25.
The market value of the warrants issued was not recorded as it was immaterial to
the financial statements. These warrants expire in August 2003.
[3] Equity Private Placement
------------------------
On April 27, 2000, the Company completed an equity private placement of
$1,950,000 through the sale of 650,000 units at $3.00 per unit. Each unit was
comprised of three shares of Common Stock, four Series A Warrants exercisable at
$0.50 per share and 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. In addition, the Company issued options
to two individuals who assisted with the financing. One individual received
options to purchase 500,000 shares of common stock at $0.75 through June 2005.
Another individual received options to purchase 500,000 shares of common stock
at $1.00 through June 2005.
F-13
<PAGE>
[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. There were no options outstanding
under this plan as of September 30, 2000 and 1999, respectively.
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.
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, 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 660,000 $0.15- $ 0.19 0.15
Cancelled in 2000 (41,136) $0.84- $25.60 9.87
--------- ------------- -----
Balance, September 30, 2000 765,500 $0.15- $ 5.00 $0.52
========= ============= =====
Stock option transactions not covered under the option plans in the fiscal
years 1999 and 2000 are as follows:
Weighted Average
Number of Option Price Exercise Price
Shares Per Share Per Share
------ --------- ---------
Balance, September 30, 1998 and 1999 77,032 $0.84- $20.10 $7.83
Granted in 2000 1,050,000 $0.10- $ 1.00 0.83
Cancelled in 2000 (31,000) $0.84- $ 5.00 4.20
--------- ------------- -----
Balance, September 30, 2000 1,096,032 $0.10- $20.10 $1.23
========= ============= =====
Range of Weighted
Options exercisable Number of Price Per Average Price
at September 30, 2000 Shares Share Per Share
---------------------------------- ------------ --------------- --------------
Plan shares 136,835 $0.19- $ 5.00 $2.14
Non-plan shares 1,051,031 $0.10- $20.10 $1.28
F-14
<PAGE>
The following table summarizes information about stock options outstanding at
September 30, 2000:
Outstanding Options
-----------------------------------------
Weighted-
Number Average Weighted-
Range of Outstanding at Remaining Average
Exercise September 30, Contractual Exercise
Prices 2000 Life (years) Price
-------------------------------------------------------------
$0.10 - $0.19 710,000 8.4 $ 0.15
0.75 - 1.00 1,017,000 4.5 0.87
2.93 78,000 5.9 2.93
5.00 - 7.90 45,089 1.9 7.22
15.80 - 20.10 11,443 2.0 17.46
-------------------------------------------------------------
$0.10 - $20.10 1,861,532 5.9 $ 0.94
=============================================================
Exercisable Options
-----------------------------------------
Weighted-
Number Average Weighted-
Range of Outstanding at Remaining Average
Exercise September 30, Contractual Exercise
Prices 2000 Life (years) Price
-------------------------------------------------------------
$0.10 - $0.19 47,334 3.9 $ 0.17
0.75 - 1.00 1,006,000 4.5 0.87
2.93 78,000 5.9 2.93
5.00 - 7.90 45,089 1.9 7.22
15.80 - 20.10 11,443 2.0 17.46
-------------------------------------------------------------
$0.10 - $20.10 1,187,866 4.4 $ 1.38
=============================================================
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 or 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:
Year Ended September 30,
2000 1999
---- ----
Net loss:
As reported $(1,119,616) $(6,495,628)
Pro forma $(1,124,539) $(6,495,945)
Net loss per share:
As reported $(0.08) $(0.73)
Pro forma $(0.08) $(0.73)
F-15
<PAGE>
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 2000: dividend yield of 0%; expected volatility of 0.80;
risk free interest rates of 5.59%-7.78%; and an expected holding period of 10
years.
The weighted-average grant-date fair value of options granted was $0.18 per
share for the year ended September 30, 2000. The Company did not grant options
during fiscal year 1999.
(NOTE I) - Disposals and Discontinued Operations
------------------------------------------------
Disposals
---------
During fiscal 1999, 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.
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 $1,100,000 from a major MRI manufacturer to resolve outstanding
patent issues related to the discontinued business segment, which is included in
income on disposal of discontinued operation for the year ended September 30,
1999.
(NOTE J) -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, 1998. The
pro forma financial information does not purport to be indicative of what would
have occurred had the acquisition or sale been made as of October 1, 1998 or
results that may occur in the future.
Year ended
September 30,1999
-----------------
Net revenues $ 3,125,094
Operating expenses 2,621,952
Operating income from continuing operations 503,142
Income from continuing operations 468,224
Income per common share from
continuing operations 0.03
F-16
<PAGE>
(NOTE K) - 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, 2000
Sales $ 1,478,875 $ 1,919,707 $ 3,398,582
=============== ============= ==============
Income (loss) from continuing operations $ (244,935) $ (874,681) $ (1,119,616)
=============== ============= ==============
Capital Expenditures $ 12,343 $ 20,638 $ 32,981
=============== ============= ==============
Depreciation and Amortization $ 155,867 $ 123,542 $ 279,409
=============== ============= ==============
Identifiable assets at September 30, 2000 $ 1,077,002 $ 3,233,069 $ 4,310,071
=============== ============= ==============
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
=============== ============= ==============
</TABLE>
Geographic Information
----------------------
The following table shows revenues by geographic location for the year
ended September 30, 2000. Revenues are attributed to countries based on location
of customer.
United States $2,254,030
Europe 1,008,498
Japan 136,054
----------
Total $3,398,582
==========
F-17
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT
-------
21 Subsidiaries of the Registrant
23.1 Independent Auditors' Consent
27 Financial Data Schedule
