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 DECEMBER 31, 2001
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Commission File Number: 0-11914
-------
CAPRIUS, INC.
-------------
(Exact name of small business issuer as specified in its charter)
Delaware 22-2457487
-------- -----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Parker Plaza, Fort Lee, NJ 07024
------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (201) 592-8838
--------------
N/A
----------------------------------------------------------------
(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 January 31, 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 - December 31, 2001 and September 30, 2001 3
Consolidated Statements of Operations - for the three months ended 4
December 31, 2001 and December 31, 2000
Consolidated Statement of Stockholders' Equity -for the three months 5
ended December 31, 2001
Consolidated Statements of Cash Flows - for the three months ended 6
December 31, 2001 and December 31, 2000
Notes to Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 8
CONDITION AND RESULTS OF OPERATIONS
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 10
SIGNATURES 11
2
CAPRIUS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
December 31, 2001 September 30, 2001
-------------------- -------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 181,473 $ 89,776
Accounts receivable, net of reserve for bad debts of $26,000 at
December 31, 2001 and September 30, 2001 527,461 578,808
Inventories 362,388 396,430
Other current assets 5,324 5,324
-------------------- -------------------
Total current assets 1,076,646 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 438,475 408,354
-------------------- -------------------
Net property and equipment 123,905 154,026
-------------------- -------------------
OTHER ASSETS:
Goodwill, net of accumulated amortization of $742,121 at
December 31, 2001 and $721,511 at September 30, 2001 908,061 928,671
Other intangibles, net of accumulated amortization of $182,547 at
December 31, 2001 and $164,292 at September 30, 2001 1,277,826 1,296,081
Other 794 22,794
-------------------- -------------------
Total other assets 2,186,681 2,247,546
-------------------- -------------------
TOTAL ASSETS $ 3,387,232 $ 3,471,910
==================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable, net of unamortized discount of $2,000 at
December 31, 2001 and $5,000 at September 30, 2001 $ 298,000 $ 295,000
Accounts payable 281,024 291,460
Accrued expenses 217,087 248,660
Accrued compensation 113,373 72,760
Current maturities of long-term debt and capital lease obligations 28,482 46,636
-------------------- -------------------
Total current liabilities 937,966 954,516
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, net of current maturities 32,095 35,032
-------------------- -------------------
TOTAL LIABILITIES 970,061 989,548
-------------------- -------------------
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 December 31, 2001 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 December 31, 2001
and September 30, 2001 171,214 171,214
Additional paid-in capital 67,154,517 67,154,517
Accumulated deficit (67,606,310) (67,541,119)
Treasury stock (22,500 common shares, at cost) (2,250) (2,250)
-------------------- -------------------
Total stockholders' equity 2,417,171 2,482,362
-------------------- -------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,387,232 $ 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 December 31,
2001 2000
---------------------- -----------------------
REVENUES:
Net patient service revenues $ 442,418 $ 412,341
Net product sales 475,353 386,614
---------------------- -----------------------
Total revenues 917,771 798,955
---------------------- -----------------------
OPERATING EXPENSES:
Cost of operations 227,019 208,290
Cost of product sales 122,768 140,188
Selling, general and administrative 567,473 520,468
Research and development 41,790 20,800
Provision for bad debt and collection costs 9,549 8,299
---------------------- -----------------------
Total operating expenses 968,599 898,045
---------------------- -----------------------
Operating loss (50,828) (99,090)
Interest income 398 2,985
Interest expense (14,761) (5,052)
---------------------- -----------------------
Net loss $ (65,191) $ (101,157)
====================== =======================
Net loss per basic and diluted common share $ (0.00) $ (0.01)
====================== =======================
Weighted average number of common shares outstanding,
basic and diluted 17,098,862 16,921,240
====================== =======================
The accompanying notes are an integral part of these consolidated
financial statements.
4
CAPRIUS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(unaudited)
Preferred Stock Common Stock $0.01 Par Value Additional
-------------------------------------------------------------------
Number Number Paid-in Accumulated
of Shares Amount of Shares Amount Capital Deficit
---------------------------------------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 2001 27,000 $ 2,700,000 17,121,362 $ 171,214 $ 67,154,517 $(67,541,119)
Net loss - - - - - (65,191)
---------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2001 27,000 $ 2,700,000 17,121,362 $ 171,214 $ 67,154,517 $(67,606,310)
===================================================================================================
Treasury Stock $0.01 Par Value Total
--------------------------------
Number Stockholders'
of Shares Amount Equity
-------------------------------------------------
BALANCE, SEPTEMBER 30, 2001 22,500 $ (2,250) $ 2,482,362
Net loss - - (65,191)
-------------------------------------------------
BALANCE, DECEMBER 31, 2001 22,500 $ (2,250) $ 2,417,171
=================================================
The accompanying notes are an
integral part of these consolidated financial statements.
5
CAPRIUS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended December 31,
2001 2000
------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (65,191) $ (101,157)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Amortization of discount on bridge financing 3,000 -
Depreciation and amortization 68,986 72,328
Changes in operating assets and liabilities:
Accounts receivable, net 51,347 62,638
Inventories 34,042 (112,427)
Other assets 22,000 455
Accounts payable and accrued expenses (1,396) (234,065)
------------------ ------------------
Net cash provided by (used in) operating activities 112,788 (312,228)
------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment, furniture and leasehold improvements - (5,403)
------------------ ------------------
Net cash used in investing activities - (5,403)
------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock - 67,816
Repayment of debt and capital lease obligations (21,091) (19,963)
------------------ ------------------
Net cash provided by (used in) financing activities (21,091) 47,853
------------------ ------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 91,697 (269,778)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 89,776 349,998
------------------ ------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 181,473 $ 80,220
================== ==================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest during the period $ 14,761 $ 5,052
================== ==================
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, meaning the tests are performed outside of the body.
Effective October 15, 2000, Opus entered into a Development and License
Agreement with Novartis Pharma AG 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, it is anticipated 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. 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.
7
NOTE 3 - 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, net loss and other unaudited financial
information by industry segment:
IMAGING AND
REHABILITATION TDM
SERVICES BUSINESS CONSOLIDATED
Three months ended December 31, 2001
Revenues $ 442,418 $ 475,353 $ 917,771
========= ========= =========
Net income (loss) $ 1,437 $ (66,628) $ (65,191)
========= ========= =========
Identifiable assets at December 31, 2001 $ 456,468 $2,930,764 $3,387,232
========= ========= =========
Three months ended December 31, 2000
Revenues $ 412,341 $ 386,614 $ 798,955
========= ========= =========
Net loss $ (3,814) $ (97,343) $(101,157)
========= ========= =========
Identifiable assets at December 31, 2000 $ 1,055,542 $2,967,160 $4,022,702
========= ========= =========
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 2001 COMPARED TO THREE MONTHS ENDED
DECEMBER 31, 2000
RESULTS OF OPERATIONS
Included in revenues for three months ended December 31, 2001 are
$475,353 of net product sales revenues for Opus therapeutic drug monitoring
assays versus $386,614 for three months ended December 31, 2000. The cost of
product sales for the Opus business for the three months ended December 31, 2001
was $122,768 versus $140,188 for the three months ended December 31, 2000. The
increase in net sales revenues for the three months ending December 31, 2001
versus the three months ending December 31, 2000 is a result from both an
increase in overseas sales as well as from higher sales of the Company's
exclusive products. The cost of product sales decreased during the three months
ending December 31, 2001 versus the three months ending December 31, 2000 as a
result of the Company's change of manufacturer for its exclusive products.
Net patient service revenues at Strax totaled $442,418 for the three
months ended December 31, 2001 versus $412,341 for the three months ended
December 31, 2000. This increase was due to a change in amounts billed for
patient services. Cost of service operations totaled $227,019 for the three
months ended December 31, 2001 versus $208,290 for the three months ending
December 31, 2000.
Selling, general and administrative expenses totaled $567,473 for the
three months ended December 31, 2001 versus $520,468 for the three months ended
December 31, 2000. This change in expenses includes certain categories of costs
that increased by an amount greater than the average inflationary rate due to
prevailing market conditions.
Research and development expenses totaled $41,790 for the three months
ended December 31, 2001 versus $20,800 for the three months ended December 31,
2000. This increase reflects the Company's increasing expenditures on the
projects under development for new therapeutic drug monitoring tests.
8
LIQUIDITY AND CAPITAL RESOURCES
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.
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 for the year ended September
30, 2001. The Company utilized the net funds for the payment of certain
liabilities and the balance was 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
continues to evaluate the possible sale of Strax. The $300,000 short-term bridge
loan notes are secured by the assets of Strax and are due for repayment on
February 28, 2002. The Company is in discussions with its bridge loan holders to
extend the repayment date. The Company continues to pursue efforts to identify
additional funds through various funding options, including banking facilities,
government-funded grants and equity offerings in order to provide capital for
future expansion. The ability to secure equity financing 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 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. 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 three months ended December 31,
2001 was $112,788. There were no significant cash flows used in investing
activities for the three months ended December 31, 2001.
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.
9
PART II: OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
None
(b) Reports on Form 8-K
None
10
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: February 14, 2002 /s/ George Aaron
------------------------
George Aaron
President & Chief Executive Officer
Date: February 14, 2002 /s/ Jonathan Joels
------------------------
Jonathan Joels
Chief Financial Officer
11