UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark one)
[X] Quarterly Report under Section 13 or 15 (d) of the
Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002
[ ] Transition Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
Commission File Number: 0-11914
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CAPRIUS, INC.
-------------
(Exact name of small business issuer as specified in its charter)
Delaware 22-2457487
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Parker Plaza, Fort Lee, NJ 07024
------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (201) 592-8838
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N/A
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(Former name, former address, and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) filed all reports
required to be filed under Section 13 or 15(d) of the Exchange Act during the
past 12 months (or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes X No
--- ---
State the number of shares outstanding of issuer's classes of common
equity, as of the latest practicable date.
Class Outstanding at June 30, 2002
Common Stock. Par value $0.01 17,098,862 shares
CAPRIUS, INC. AND SUBSIDIARIES
INDEX
Page No.
--------
PART I - FINANCIAL INFORMATION
ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets - June 30, 2002 and
September 30, 2001 3
Consolidated Statements of Operations - for the
three months and nine months ended June 30, 2002 and 2001 4
Consolidated Statement of Stockholders' Equity -
for the nine months ended June 30, 2002 5
Consolidated Statements of Cash Flows - for the
nine months ended June 30, 2002 and 2001 6
Notes to Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
SIGNATURES 13
2
CAPRIUS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
June 30, 2002 September 30, 2001
------------- -------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 149,314 $ 89,776
Accounts receivable, net of reserve for bad debts of $26,000 at
June 30, 2002 and September 30, 2001 474,463 578,808
Inventories 313,373 396,430
Other current assets 2,542 5,324
Note receivable 245,000 -
---------- ----------
Total current assets 1,184,692 1,070,338
---------- ----------
PROPERTY AND EQUIPMENT:
Medical equipment 341,140 341,140
Office furniture and equipment 220,290 220,290
Leasehold improvements 950 950
---------- ----------
562,380 562,380
Less: accumulated depreciation 481,487 408,354
---------- ----------
Net property and equipment 80,893 154,026
---------- ----------
OTHER ASSETS:
Deferred acquisition costs 106,395 -
Goodwill, net of accumulated amortization of $283,341 at
June 30, 2002 and $221,511 at September 30, 2001 866,841 928,671
Other intangibles, net of accumulated amortization of $219,056 at
June 30, 2002 and $164,292 at September 30, 2001 1,241,317 1,296,081
Other 22,794 22,794
---------- ----------
Total other assets 2,237,347 2,247,546
---------- ----------
TOTAL ASSETS $3,502,932 $3,471,910
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable, net of unamortized discount of $5,000 at
September 30, 2001 $ 550,000 $ 295,000
Accounts payable 269,876 291,460
Accrued expenses 274,388 248,660
Accrued compensation 85,560 72,760
Current maturities of long-term debt and capital lease obligations 12,107 46,636
---------- ----------
Total current liabilities 1,191,931 954,516
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, net of current maturities 25,702 35,032
---------- ----------
TOTAL LIABILITIES 1,217,633 989,548
---------- ----------
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value
Authorized - 1,000,000 shares
Issued and outstanding - Series A, none; Series B, convertible,
27,000 shares at June 30, 2002 and September 30, 2001.
Liquidation preference $2,700,000 2,700,000 2,700,000
Common stock, $.01 par value
Authorized - 50,000,000 shares
Issued - 17,121,362 shares at June 30, 2002
and September 30, 2001 171,214 171,214
Additional paid-in capital 67,154,517 67,154,517
Accumulated deficit (67,738,182) (67,541,119)
Treasury stock (22,500 common shares, at cost) (2,250) (2,250)
---------- ----------
Total stockholders' equity 2,285,299 2,482,362
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,502,932 $3,471,910
========== ==========
The accompanying notes are an integral part of these
consolidated financial statements.
3
CAPRIUS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
For the Three Months Ended For the Nine Months Ended
June 30, June 30,
2002 2001 2002 2001
---------- ---------- ----------- -----------
REVENUES:
Net patient service revenues $ 401,228 $ 393,534 $ 1,231,066 $ 1,151,511
Net product sales 513,436 520,952 1,590,880 1,447,287
---------- ---------- ----------- ------------
Total revenues 914,664 914,486 2,821,946 2,598,798
---------- ---------- ----------- ------------
OPERATING EXPENSES:
Cost of service operations 268,047 273,991 855,515 811,182
Cost of product sales 148,111 192,553 423,555 503,065
Selling, general and administrative 561,457 503,915 1,533,118 1,361,368
Research and development 32,779 45,433 118,826 127,527
Provision for bad debt and collection
costs 27,745 2,320 50,396 14,896
----------- ---------- ----------- ------------
Total operating expenses 1,038,139 1,018,212 2,981,410 2,818,038
---------- ---------- ----------- ------------
Operating loss (123,475) (103,726) (159,464) (219,240)
Interest income 1,260 645 1,947 3,977
Interest expense (11,796) (16,162) (39,546) (30,569)
---------- ---------- ----------- -----------
Net loss $ (134,011) $ (119,243) $ (197,063) $ (245,832)
========== ========== =========== ===========
Net loss per basic and diluted common share $(0.01) $(0.01) $(0.01) $(0.01)
========== ========== =========== ===========
Weighted average number of common shares
outstanding, basic and diluted 17,098,862 17,098,862 17,098,862 17,039,004
========== ========== =========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
4
CAPRIUS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Nine Months Ended June 30, 2002
(Unaudited)
Preferred Stock Common Stock $0.01 Par Value
-----------------------------------------------------------------
Number Number
of Shares Amount of Shares Amount
-----------------------------------------------------------------
BALANCE, SEPTEMBER 30, 2001 27,000 $ 2,700,000 17,121,362 $ 171,214
Net loss - - - -
----------------------------------------------------------------
BALANCE, JUNE 30, 2002 27,000 $ 2,700,000 17,121,362 $ 171,214
================================================================
Treasury Stock $0.01 Par Value
Additional -------------------------------- Total
Paid-in Accumulated Number Stockholders'
Capital Deficit of Shares Amount Equity
------------------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 2001 $ 67,154,517 $(67,541,119) 22,500 $ (2,250) $ 2,482,362
Net loss - (197,063) - - (197,063)
------------------------------------------------------------------------------
BALANCE, JUNE 30, 2002 $ 67,154,517 $(67,738,182) 22,500 $ (2,250) $ 2,285,299
==============================================================================
The accompanying notes are an integral part of these
consolidated financial statements.
5
CAPRIUS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended June 30,
2002 2001
------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (197,063) $ (245,832)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Amortization of discount on bridge financing 5,000 4,000
Depreciation and amortization 189,727 217,256
Changes in operating assets and liabilities:
Accounts receivable, net 104,345 (31,040)
Inventories 83,057 (180,621)
Other current assets 2,782 3,237
Accounts payable and accrued expenses 16,944 (304,295)
---------- ----------
Net cash provided by (used in) operating activities 204,792 (537,295)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Deferred acquisition costs (106,395) -
Loans to MCM (245,000) -
Purchase of equipment, furniture and leasehold improvements - (26,129)
---------- ----------
Net cash used in investing activities (351,395) (26,129)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock - 67,816
Proceeds from issuance of debt and warrants 250,000 300,000
Repayment of debt and capital lease obligations (43,859) (82,226)
---------- ----------
Net cash provided by financing activities 206,141 285,590
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 59,538 (277,834)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 89,776 349,998
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 149,314 $ 72,164
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest during the period $ 39,545 $ 26,569
========== ==========
The accompanying notes are an integral part of these
consolidated financial statements.
6
CAPRIUS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 - BASIS OF PRESENTATION
------------------------------
The results of operations of Caprius, Inc. ("Caprius" or the "Company")
for the interim periods shown in this report are not necessarily indicative of
results to be expected for the fiscal year. In the opinion of management, the
information contained herein reflects all adjustments necessary to make the
results of operations for the interim periods a fair statement of such
operations. All such adjustments are of a normal recurring nature.
The accompanying consolidated financial statements do not contain all of
the disclosures required by accounting principles generally accepted in the
United States of America and should be read in conjunction with the financial
statements and related notes included in the Company's annual report on
form 10-KSB for the fiscal year ended September 30, 2001.
NOTE 2 - THE COMPANY
--------------------
Caprius, Inc. 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 breast-imaging
center located in Lauderhill, Florida.
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") at which time George Aaron and Jonathan Joels became
executive officers, directors, and principal stockholders of the Company. The
purchase price consisted of $500,000 in cash, a secured promissory note (the
"Oxis Note") in the principal amount of $586,389 which was repaid as of
December 8, 1999, and a warrant granting Oxis the right to acquire 617,898
shares of the Company's Common Stock. Additionally, pursuant to a Services
Agreement, Oxis had manufactured the products of the TDM Business of Opus
through December 31, 2000. After December 31, 2000, the Company transferred its
production to third party manufacturers.
Opus currently 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. The test kits are used for in
vitro testing; i.e. the tests are performed outside of the body.
Effective July 4, 2002, Opus entered into an Exclusive License Agreement
with Dainippon Pharmaceuticals Co., Ltd. ("Dainippon") of Osaka, Japan, whereby
Opus will develop a diagnostic test to monitor blood levels of Zonisamide, an
anti-epileptic drug, on a worldwide basis excluding Japan. Zonisamide, a drug
developed by Dainippon, has been available in Japan since 1989 under the trade
name of Excegran(R). Since April 2000, Elan Pharmaceuticals, Dainippon's
exclusive licensee for Zonisamide in the U.S. and Europe, have marketed
Zonisamide under the trademark of Zonegran(R) which is indicated as adjunctive
therapy in the treatment of partial seizures in adults with epilepsy.
Pursuant to the Development and License Agreement of October 15, 2000
between Opus and Novartis Pharma AG. ("Novartis"), Opus continues their work to
develop a diagnostic assay to monitor Novartis' new drug candidate,
Certican(TM). This drug is presently in the Phase III clinical trial process, as
required by the FDA. When cleared by the FDA, it is anticipated Certican(TM)
7
will be used initially to treat renal transplant patients. Under the Agreement
with Novartis, Opus will market the assay internationally. There are
approximately 25,000 renal transplants annually that take place in the U.S.
alone with approximately the same number outside the U.S.
The diagnostic tests that Opus will develop to measure both of these drugs
are expected to be used regularly to monitor blood levels of the drugs, guiding
physicians as to correct dosage and patient compliance.
In June 2002, the Company signed a Letter of Intent to enter into an
agreement whereby it has the right to acquire 51% of the outstanding stock on a
fully diluted basis of MCM Environmental Technologies Inc. ("MCM"), a private
U.S. Company engaged in the medical infectious waste disposal business.
Concurrent with the signing of the Letter of Intent, Caprius provided MCM with a
loan totaling $245,000. Should a definitive agreement be consummated, the loan
will convert into MCM equity. Subject to Board approval and execution of a
definitive agreement, including customary conditions and the satisfactory
outcome of due diligence by the Company, the transaction is expected to close by
the end of August.
NOTE 3 - DEBT FINANCING
-----------------------
During the three months ended June 30, 2002, the Company obtained a
short-term loan in the principal amount of $250,000, with interest at prime plus
3% per annum and due on September 30, 2003 (the "Company Loan"). Officers and
employees of the Company as well as related family members provided more than a
majority of the principal amount of the Company Loan. For each $1.00 principal
amount loaned, the lender is to receive a warrant to purchase one share of the
Company's Common Stock, exercisable after 6 months at $0.09 per share for a
period of five years. The fair market value of the warrant on the date of grant
was not recorded as it was immaterial to the Consolidated Financial Statements.
In the event that the Company pursues the investment in MCM in accordance with
the Letter of Intent with MCM (see Note 2 to the Notes to the Consolidated
Financial Statements herein), then the Company Loan will automatically convert
into equity of the Company on the same terms as any new equity raised for the
investment. The proceeds of the Company Loan were used to fund a loan to MCM of
up to $250,000, of which $245,000 had been advanced as of June 30, 2002.
NOTE 4 - INDUSTRY SEGMENTS
--------------------------
The Company operations are classified into two business segments: imaging
services (previously categorized as Imaging and Rehabilitation Services) and the
therapeutic drug monitoring assay business (the "TDM Business").
The following table shows sales, net loss and other unaudited financial
information by industry segment:
IMAGING TDM
SERVICES BUSINESS CONSOLIDATED
-------- -------- ------------
Three Months ended June 30, 2002
--------------------------------
Revenues $ 401,228 $ 513,436 $ 914,664
Net loss $ (32,098) $ (101,913) $ (134,011)
Three months ended June 30, 2001
--------------------------------
Revenues $ 393,534 $ 520,952 $ 914,486
Net loss $ (64,539) $ (54,704) $ (119,243)
8
Nine months ended June 30,2002
------------------------------
Revenues $1,231,066 $ 1,590,880 $ 2,821,946
Net loss $ (57,379) $ (139,684) $ (197,063)
Identifiable assets $ 334,106 $ 3,168,826 $ 3,502,932
Nine months ended June 30, 2001
-------------------------------
Revenues $1,151,511 $ 1,447,287 $ 2,598,798
Net loss $ (68,353) $ (177,479) $ (245,832)
Identifiable assets $ 977,508 $ 3,072,026 $ 4,049,534
NOTE 5 - LITIGATION
-------------------
In June 2002, a former executive officer and director of the Company
commenced two legal proceedings against the Company and George Aaron and
Jonathan Joels, executive officers, directors and principal stockholders of the
Company. The two complaints (refer to Part II, Item 1 for further explanation)
allege that the individual defendants made alleged misrepresentations to the
plaintiff upon their acquisition of a controlling interest in the Company in
1999 and thereafter made other alleged misrepresentations and took other actions
as to the plaintiff to the supposed detriment of the plaintiff and the Company.
One action was brought in state court in New Jersey and the other was brought as
a derivative action in federal court in New Jersey. The counts in the complaints
are for breach of contract, breach of fiduciary duty and misrepresentation. No
amount of damages was specified in either action. The defendants plan to
vigorously contest the allegations in the complaints.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The results of operations for the three months and nine months ended
June 30, 2002 and 2001 are not necessarily indicative of results for future
periods. The following discussion should be read in conjunction with the
attached notes thereto, and with the audited consolidated financial statements
and notes thereto for the fiscal year ended September 30, 2001.
THREE MONTHS ENDED JUNE 30, 2002 COMPARED TO THREE MONTHS ENDED JUNE 30, 2001
-----------------------------------------------------------------------------
Included in revenues for three months ended June 30, 2002 are $513,436 of
net product sales revenues for Opus' therapeutic drug monitoring assays versus
$520,952 for the three months ended June 30, 2001. The cost of product sales for
the Opus business for the three months ended June 30, 2002 was $148,111 versus
$192,553 for the three months ended June 30, 2001. The cost of product sales
decreased during the three months ending June 30, 2002 versus the three months
ending June 30, 2001 as a result of the Company's lower manufacturing costs.
Net patient service revenues at Strax totaled $401,228 for the three
months ended June 30, 2002 versus $393,534 for the three months ended June 30,
2001. This increase resulted from higher patient billings. The cost of service
operations totaling $268,047 for the three months ending June 30, 2002
approximated those of the corresponding prior period ending June 30, 2001 which
totaled $273,991.
9
Selling, general and administrative expenses totaled $561,457 for the
three months ended June 30, 2002 versus $503,915 for the three months ended
June 30, 2001. The increase in expenses is a result of higher professional fees
as well as the costs associated with the Stockholders Meeting for which there
was no equivalent cost in the prior year.
Research and development expenses totaled $32,779 for the three months
ended June 30, 2002 versus $45,433 for the three months ended June 30, 2001. The
costs related to the Company's on-going projects for the development of new
therapeutic drug monitoring tests reflect lower costs during the third quarter
of 2002.
NINE MONTHS ENDED JUNE 30, 2002 COMPARED TO NINE MONTHS ENDED JUNE 30, 2001
---------------------------------------------------------------------------
Net product sales revenues totaled $1,590,880 for the nine months ended
June 30, 2002 versus $1,447,287 for the nine months ended June 30, 2001. The
increase in net sales revenues for the nine months ending June 30, 2002 versus
the nine months ending June 30, 2001 resulted from an increase in overseas sales
and higher sales of the Company's innovative products. The cost of product sales
for the Opus business for the nine months ended June 30, 2002 was $423,555
versus $ 503,065 for the nine months ended June 30, 2001 reflects lower
manufacturing costs.
Net patient service revenues totaled $1,231,066 for the nine months ended
June 30, 2002, versus $1,151,511 for the nine months ended June 30, 2001. This
increase resulted from higher patient billings. Cost of service operations
totaled $855,515 for the nine months ended June 30, 2002 versus $ 811,182 for
the nine months ended June 30, 2001. The increase in cost of service operations
was consistent with the increase in billings.
Selling, general and administrative expenses totaled $1,533,118 for the
nine months ended June 30, 2002 versus $1,361,368 for the nine months ended
June 30, 2001. The increase in expenses is a result of higher professional fees
as well as the costs associated the Stockholders Meeting for which there was no
equivalent cost in the prior year.
Research and development expenses totaled $118,826 for the nine months
ended June 30, 2002 versus $127,527 for the nine months ended June 30, 2001.
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended June 30, 2002, the Company obtained the
Company Loan in the principal amount of $250,000, with interest at prime plus
3% per annum and due on September 30, 2003 (see Note 3 to the Notes to the
Consolidated Financial Statements herein). In the event that the Company pursues
the investment in MCM in accordance with the Letter of Intent with MCM (see
Note 2 to the Notes to the Consolidated Financial Statements herein), then the
Company Loan will automatically convert into equity of the Company on the same
terms as any new equity raised for the investment. The proceeds of the Company
Loan were used to fund a loan to MCM (the "MCM Loan") of up to $250,000, of
which $245,000 had been advanced as of June 30, 2002. The MCM Loan is secured by
MCM's intellectual properties, bears interest at the rate of prime plus 2% per
annum, and is due on June 10, 2003, subject to conversion to equity of MCM upon
the consummation of the Company's investment in MCM.
During February and March 2001, the Company completed a short term bridge
loan of $300,000 through the issuance of loan notes due on February 28, 2002
together with warrants, the proceeds of which were used principally for working
capital and purchase of raw materials previously owned by Oxis, the previous
manufacturer and owner of the Opus products. The $300,000 bridge loan notes are
10
secured by the assets of Strax and were due for repayment on February 28, 2002.
The bridge loan holders agreed to extend the repayment date to September 30,
2002 and will continue to receive interest at the rate of 11%.
The Company continues in its efforts to secure the sale of the Strax
Institute.
In the event the Company proceeds with the MCM transaction, the Company
intends to raise the balance of the required funds through issuance of equity in
Caprius. In addition, the Company may also attempt to secure loans for the new
business. In view of the current market conditions and the Company's low stock
price, the Company has found it difficult at this time to obtain additional
equity funding from outside sources. However, the Company will continue its
efforts to seek additional funds through funding options, including banking
facilities, government-funded grants and private equity offerings in order to
provide capital for future expansion. There can be no assurance that such
funding initiatives will be successful, and in light of the current low market
price any equity placement would result in substantial dilution to current
stockholders. Consequently, the Company's viability could be threatened. In
addition, the Company has incurred substantial losses in recent years.
Accordingly, the auditors' report on the 2001 financial statements contains an
explanatory paragraph expressing substantial doubt about our ability to continue
as a going concern.
Net cash provided by operations for the nine months ended June 30, 2002
was $204,792. Net cash used in investing activities for the nine months ended
June 30, 2002 was $351,395.
FORWARD LOOKING STATEMENTS
The Company is including the following cautionary statement in this
Quarterly Report of Form 10-QSB to make applicable and take advantage of the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995
for any forward-looking statements made by, or on behalf of, the Company.
Forward-looking statements include statements concerning plans, objectives,
goals, strategies, future events or performance and underlying assumptions and
other statements which are other than statements of historical facts. Certain
statements contained herein are forward-looking statements and accordingly
involve risks and uncertainties which could cause actual results or outcomes to
differ materially from those expressed in the forward-looking statements. The
Company's expectations, beliefs and projections are expressed in good faith and
are believed by the Company to have a reasonable basis, including without
limitation, management's examination of historical operating trends, data
contained in the Company's records and other data available from third parties,
but there can be no assurance that management's expectation, beliefs or
projections will result or be achieved or accomplished. In addition to other
factors and matters discussed elsewhere herein, the following are important
factors that, in the view of the Company, could cause actual results to differ
materially from those discussed in the forward-looking statements: technological
advances by the Company's competitors, changes in health care reform, including
reimbursement programs, capital needs to fund any delays or extensions of
development programs, delays in new product development, delays in obtaining
regulatory clearance for new 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.
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-----------------
On June 25, 2002, Jack Nelson, a former executive officer and director of
the Company, filed two legal proceedings involving the Company, and George Aaron
and Jonathan Joels, current executive officers and directors of the Company. The
first proceeding was instituted in the Superior Court of New Jersey, Bergen
County, by Nelson against the Company, Aaron and Joels alleging breach of
contract of a June 1999 Consulting Agreement entered into simultaneously with
the Company's June 1999 merger of Opus Diagnostics, misrepresentations by Aaron
and Joels in connection with the merger transaction and vicarious liability by
the Company based upon the actions of Aaron and Joels, and seeking an
unspecified amount of damages. The second proceeding was instituted in the
United States District Court, District of New Jersey, purportedly as a
11
derivative action by Nelson on behalf of the Company, against Aaron and Joels,
seeking an unspecified amount of damages and alleging that certain actions by
them in connection with the merger transaction and also as officers of the
Company were violative of the federal Racketeer Influenced and Corrupt
Organizations Act (RICO), and also constituted breaches of their fiduciary
duties as officers and directors.
The defendants have not yet answered nor moved with respect to either
complaint. They have until September 10, 2002 to answer. The defendants plan to
vigorously contest the allegations in the complaints.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
On June 26, 2002, the Company held a Special in lieu of Annual Meeting of
Stockholders (the "Meeting"). The stockholders voted upon a slate of directors
and the ratification of the adoption of the 2002 Stock Option Plan (the "Option
Plan"). The following sets forth the votes cast by stockholders on the two
items:
Election of Directors Vote For Withheld
-------- --------
George Aaron 13,324,433 55,162
Jonathan Joels 13,324,744 55,301
Shrikant Mehta 13,324,773 55,272
Sanjay Mody 13,324,744 55,301
Sol Triebwasser 13,324,733 55,272
Ratification of the Option Plan
For 9,177,313
Against 107,994
Broker No Vote 4,075,768
Abstain 18,970
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
10.1 Promissory Note dated June 10, 2002 from MCM Environmental
Technologies, Inc. to the Company in the principal amount of
$250,000.
99. Section 906 Certification
(b) Reports on Form 8-K
None
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Caprius, Inc.
-------------
(Registrant)
Date: August 14, 2002 /s/George Aaron
---------------------------------------
George Aaron
President & Chief Executive Officer
Date: August 14, 2002 /s/Jonathan Joels
---------------------------------------
Jonathan Joels
Chief Financial Officer
13