Edgar Filing: CAPRIUS INC

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 15, 2005
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CAPRIUS, INC.
(Name of Small Business Issuer in Its Charter)
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DELAWARE 3845 22-2457487
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation Industrial Classification Identification
or organization) Code Number) Number)
----------------
ONE PARKER PLAZA
FORT LEE, NEW JERSEY 07024
(201) 592-8838
(Address and Telephone Number of Principal Executive Offices and
Principal Place of Business)
----------------
GEORGE AARON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ONE PARKER PLAZA
FORT LEE, NEW JERSEY 07024
(201) 592-8838
(Name, Address and Telephone Number of Agent For Service)
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Copies to:
BRUCE A. RICH, ESQ.
THELEN REID & PRIEST LLP
875 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 603-2000
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APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: from time to time after the
effective date of this Registration Statement as determined by market conditions
and other factors.
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering.[_]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering.[_]
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering.[_]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box.[_]

CALCULATION OF REGISTRATION FEE
====================================================================================================================================
TITLE OF EACH PROPOSED MAXIMUM PROPOSED MAXIMUM
CLASS OF SECURITIES AMOUNT TO OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED BE REGISTERED SHARE (1) PRICE (1) REGISTRATION FEE
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Common Stock, $.01 par value 2,872,566 shs. $4.80 $13,788,317 $1,622.88
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Common Stock, $.01 par value(3) 620,689 shs. $5.60 $3,475,858 $409.11
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Common Stock, $.01 par value(3)(4) 80,000 shs. $5.60 $448,000 $52.73
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Common Stock, $.01 par value(3)(5) 240,504 shs. $5.60 $1,346,822 $158.52
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Total 3,813,759 shs. - - $1,692.66*
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(1) Estimated solely for the purpose of computing amount of the registration fee pursuant to Rule 457(c) promulgated under the
Securities Act of 1933, as amended, based on the average of the bid and asked prices on the OTC Bulletin Board on March 15,
2005. The stock prices were multiplied by 20 to give effect to the proposed 1-for-20 reverse stock split.
(2) In accordance with Rule 457(g), the registration fee for these shares is calculated upon a price which represents the
highest of (i) the price at which the warrants or options may be exercised; (ii) the offering price of securities of the
same class included in this registration statement; or (iii) the price of securities of the same class, as determined
pursuant to Rule 457(c).
(3) Represents shares of Common Stock underlying Dealer Warrants. The exercise is $5.60 per share.
(4) Represents shares of Common Stock underlying and options granted to certain individuals.

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*Total less $550.58 paid as the filing fee on Registration No. 333-118869, initially filed by Caprius, Inc. on September 8,
2004, and withdrawn on March 7, 2005 pursuant to Rule 457(p) of the Securities Act of 1933.

The registrant shall amend this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file an amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this registration statement shall become
effective on such date as the commission, acting pursuant to said Section 8(a),
may determine.

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PROSPECTUS

Subject to Completion, Dated April 15, 2005

3,813,759 shares of Common Stock

ALL SHARE INFORMATION IN THIS PROSPECTUS, GIVES EFFECT TO A 1-FOR-20 REVERSE
STOCK SPLIT OF OUR COMMON STOCK THAT WAS EFFECTIVE ON APRIL 5, 2005, AND IS
CALCULATED ON A POST-SPLIT BASIS.

CAPRIUS, INC.

This prospectus relates to the resale by the selling stockholders
listed elsewhere in this prospectus of up to 3,813,759 shares of our common
stock. The selling stockholders may sell their shares from time to time at the
prevailing market price or in negotiated transactions. Of the shares offered:

- 2,872,566 shares are presently outstanding, and

- 941,193 shares are issuable upon exercise of warrants and options.

We will receive no proceeds from the sale of the shares by the selling
stockholders. However, we will receive proceeds in the amount of $4,442,945
assuming the exercise of all of the warrants and options held by the selling
stockholders, subject to certain of the warrants being exercised under a
"cashless exercise" right.

Our common stock is traded on the over-the-counter electronic bulletin
board. Our trading symbol is CAPS. On April 11, 2005, the last bid price as
reported was $3.65.

The selling stockholders, and any participating broker-dealers may be
deemed to be "underwriters" within the meaning of the Securities Act of 1933,
and any commissions or discounts given to any such broker-dealer may be regarded
as underwriting commissions or discounts under the Securities Act. The selling
stockholders have informed us that they do not have any agreement or
understanding, directly or indirectly, with any person to distribute their
common stock.

Brokers or dealers effecting transaction in the shares should confirm
the registration of these securities under the securities laws of the states in
which transactions occur or the existence of our exemption from registration.

AN INVESTMENT IN SHARES OF OUR COMMON STOCK INVOLVES A HIGH DEGREE OF
RISK. WE URGE YOU TO CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 4.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

April 15, 2005

PROSPECTUS SUMMARY

This summary highlights selected information contained elsewhere in
this prospectus. This summary does not contain all the information that you
should consider before investing in the common stock. You should carefully read
the entire prospectus, including "Risk Factors" and the Consolidated Financial
Statements, before making an investment decision.

THE COMPANY

BACKGROUND

Caprius, Inc. is engaged in the infectious medical waste disposal
business. In the first quarter of Fiscal 2003, we acquired a majority interest
in M.C.M. Environmental Technologies, Inc. ("MCM"), which develops, markets and
sells the SteriMed and SteriMed Junior compact units (together, the "SteriMed
Systems") that simultaneously shred and disinfect Regulated Medical Waste. The
SteriMed Systems are sold in both the domestic and international markets.

Our principal business office is located at One Parker Plaza, Fort Lee,
New Jersey 07024, and our telephone number at that address is (201) 592-8838.

In this prospectus, "Caprius," the "Company," "we," "us" and "our"
refer to Caprius, Inc. and, unless the context otherwise indicates, our
subsidiary MCM.

HISTORY

In June 1999, we acquired Opus Diagnostics Inc. ("Opus") and began
manufacturing and selling medical diagnostic assays constituting the Therapeutic
Drug Monitoring Business ("TDM"). In October 2002, we sold the assets of the TDM
business to Seradyn, Inc., an unrelated company. We were founded in 1983 and
through June 1999 essentially operated in the business of seeking to develop
specialized medical imaging systems, as well as operating the Strax Institute
("Strax"), a comprehensive breast imaging center. The Strax Institute was sold
in September 2003 to an unrelated company.

ACQUISITION OF M.C.M. ENVIRONMENTAL TECHNOLOGIES, INC.

In December 2002, the Company closed the acquisition of our initial
investment of 57.53% of the capital stock of MCM for a purchase price of $2.4
million. MCM wholly-owns MCM Environmental Technologies Ltd., an Israeli
corporation, which initially developed the SteriMed Systems. Upon closing, our
designees were elected to three of the five seats on MCM's Board of Directors,
with George Aaron, President and CEO, and Jonathan Joels, CFO, filling two
seats. Additionally, as part of the transaction, certain debt of MCM to its
existing stockholders and to certain third parties was converted to equity in
MCM or restructured. Pursuant to its Letter of Intent with MCM, Caprius had
provided MCM with loans totaling $565,000, which loans were repaid upon closing
by a reduction in the cash portion of the purchase price. As part of the
Stockholders Agreement dated December 17, 2002, there were certain provisions
relating to performance adjustments for the twenty four month period post
closing. As a consequence, the Company's ownership interest increased by 5% in
the fiscal year 2004.

STERIMED SYSTEMS

We developed and market worldwide the SteriMed and SteriMed Junior
compact units that simultaneously shred and disinfect Regulated Medical Waste
("RMW"), reducing its volume up to 90%, and rendering it harmless for disposal
as ordinary waste. The SteriMed Systems are patented, environmentally-friendly,
on-site disinfecting and disposal units that can process regulated clinical
waste, including sharps, dialysis filters, pads, bandages, plastic tubing and
even glass, in a 12 minute cycle. The units, comparable in size to a
washer-dryer, simultaneously shred, grind, mix and disinfect the waste with the
proprietary Ster-Cid solution. After treatment, the material may be discarded as
conventional solid waste, in accordance with appropriate regulatory
requirements.

The SteriMed Systems enable generators of RMW, such as clinics and
hospitals, to significantly reduce cost for treatment and disposal of RMW,
eliminate the potential liability associated with the regulated "cradle to
grave" tracking system involved in the transport of RMW, and treat in-house RMW
on-site in an effective, safe and easy manner. As the technology for
disinfection is chemical based, within the definitions used in the industry, it
is considered as an alternative treatment technology.

The SteriMed Systems are comprised of two different sized units, and
the required Ster-Cid disinfectant solution that can be utilized with both
units. The larger SteriMed can treat up to 18.5 gallons (70 liters) of medical
waste per cycle. The smaller version, the SteriMed Junior, can treat 4 gallons
(15 liters) per cycle.

Ster-Cid is our proprietary disinfectant solution used in the SteriMed
Systems. Ster-Cid is approximately 90% biodegradable and is registered with the
U.S. Environmental Protection Agency ("U.S. EPA") in accordance with the Federal
Insecticide, Fungicide, Rodenticide Act of 1972 ("FIFRA"). During the SteriMed
disinfecting cycle, the concentration of Ster-Cid is approximately 0.5% of the
total volume of liquids. The Ster-Cid disinfectant in conjunction with the
SteriMed Systems has been tested in independent laboratories. Results show that
disinfection levels specified in the U.S. EPA guidance document, "Report on
State and Territorial Association on Alternate Treatment Technologies", are met.
Furthermore, it is accepted by Publicly Owned Treatment Works ("POTW") allowing
for its discharge into the sewer system.

Both SteriMed units are safe and easy to operate requiring only a half
day of training. Once the cycle commences, the system is locked, water and
Ster-Cid are automatically released into the treatment chamber. The shredding,
grinding and mixing of the waste is then initiated exposing all surfaces of the
medical waste to the chemical solution during the 12 minute processing cycle. At
the end of each cycle, the disinfected waste is ready for disposal as regular
solid waste.

In the United States, the initial focus of marketing the SteriMed
Systems has been to the medium-term to larger chains of dialysis clinics on a
lease or sales basis. In addition, we are also pursuing other potential users,
including laboratories, plasma phoresis centers, blood banks, surgical centers
and hospitals.

Internationally, we continue to market our SteriMed Systems both
directly and indirectly through distributors. Our distributors are trained by us
to enable them to take on the responsibility for the installation and
maintenance that are required for the SteriMed Systems.

RECENT DEVELOPMENTS

PREFERRED STOCK PLACEMENT

On February 15, 2005, we sold to several investors (i) 45,000 shares of
newly-created Series C Mandatory Convertible Preferred Stock ("Series C
Preferred Stock"), (ii) Series A Warrants to purchase an aggregate of 465,517
shares of our common stock at an exercise price of $5.60 per share, for a period
of five years, and (iii) Series B Warrants to purchase an aggregate of 155,172
shares of our common stock at an exercise price of $2.90 per share, for a period
of five years exercisable after nine months, subject to a termination condition
defined under Warrant B, Section 18, for an aggregate purchase price of $4.5
million. The placement proceeds were utilized for the expansion of MCM's
infectious medical waste disposal business, for repayment of $2,168,100 of debt
and for our general working capital purposes. As conditions to the placement,
(i) holders of 8% Senior Secured Convertible Promissory Notes in an aggregate
principal amount of $1.5 million, issued by us during the third quarter of
fiscal 2004, converted their notes and all interest accrued thereon into 15,953
shares of Series C Preferred Stock, (ii) holders of short-term bridge loan notes
in an aggregate of $500,000, issued by us during the second quarter of fiscal
2004, converted all of their notes into 5,000 shares of Series C Preferred Stock
and the interest accrued thereon was paid in cash, (iii) holders of loans made
to us in the aggregate amount of $145,923 exchanged 50% of their loans for 728
shares of Series C Preferred Stock , with the remaining 50% of the loans and the
interest accrued thereon paid in cash, and (iv) we agreed to effect a 1:20
reverse split of our common stock on a post-placement basis in order to have
sufficient authorized but unissued shares of our common stock to accommodate the
placement, as well as future issuances.

1 FOR 20 REVERSE STOCK SPLIT

On April 5, 2005, we effected a 1-for-20 reverse stock split of our
common stock. Upon the reverse split, the 66,681 outstanding shares of Series C
Preferred Stock automatically converted into 2,299,345 shares of our common
stock. As a result of the reverse split, we will have outstanding 3,321,673
shares of common stock. In addition, we will reserve 1,020,804 shares for
conversion of the Series B Preferred Stock and the exercise of options and
warrants, and will have 45,656,392 authorized but unissued shares which may be
issued in connection with acquisitions or subsequent financings. The reverse
split will not change the number of authorized shares of common stock and
preferred stock.

SALE OF STRAX INSTITUTE

Effective September 30, 2003, we completed the sale of the Strax
Institute for a purchase price of $412,000. Half of the purchase price was paid
on closing and the balance is payable in installments evidenced by a note
secured by the accounts receivables of Strax Institute, Inc. During the first
quarter of fiscal year 2005, the parties agreed to settle the net outstanding
balance with a payment of $66,000, which was paid in two equal installments in
December 2004 and January 2005.

THE OFFERING

SECURITIES OFFERED BY SELLING
STOCKHOLDERS ........................... 3,813,759 shares, includes 941,193
shares subject to options and
warrants.
COMMON STOCK TO BE OUTSTANDING
AFTER THE OFFERING...................... 4,262,866 shares, assuming the
selling stockholders exercise all
their options and warrants.

USE OF PROCEEDS......................... We will receive no proceeds from
the sale of common stock by the
selling stockholders. However, we
will receive $4,442,945 if all of
the warrants and options for
underlying shares included in this
prospectus are exercised. We will
use these proceeds for general
corporate purposes.

OTC ELECTRONIC BULLETIN BOARD SYMBOL.... "CAPS"

RISK FACTORS

See "RISK FACTORS" for a discussion of certain factors that should be
considered in evaluating an investment in the common stock.

SUMMARY FINANCIAL AND OPERATING INFORMATION

The following selected financial information is derived from the
Consolidated Financial Statements appearing elsewhere in this Prospectus and
should be read in conjunction with the Consolidated Financial Statements,
including the notes thereto, appearing elsewhere in this Prospectus.

YEAR ENDED SEPTEMBER 30 THREE MONTHS ENDED
DECEMBER 31
(UNAUDITED)
Summary of Operations 2004 2003 2004 2003
--------------------- ---- ---- ---- ----

Total revenues $ 885,461 $ 600,579 $ 262,659 $ 289,733
Loss from continuing operations (3,249,963) (4,052,867) (797,072) (629,251)
Income from operations of discontinued TDM
business segment (including gain on disposal
of $3,214,189 in October 2002) - 3,287,587 - -
Loss from operations of discontinued Strax
Business (including gain on disposal of
$125,658 at September 30, 2003) (105,806) (18,830) - (28,425)
Loss applicable to minority interest - 459,906 - -
Net loss (3,355,769) (324,204) (797,072) (657,676)
Loss from continuing operations per share (3.18) (3.52) (0.78) (0.61)
Income (loss) from discontinued
operation per share (0.10) 3.20 - (0.03)
Net loss per common share (basic and
diluted) (3.28) (0.32) (0.78) (0.64)
Weighted average common shares outstanding,
basic and diluted 1,022,328 1,020,116 1,022,328 1,022,328

Unaudited
AS OF AS OF
Statement of Financial Position DECEMBER 31, 2004 SEPTEMBER 30, 2004

Cash and cash equivalents $ 19,146 $ 27,583
Total assets 2,206,890 2,413,352
Working capital deficit (2,981,099) (2,330,190)
Long-term debt - -
Stockholders'deficiency (1,696,258) (899,186)

RISK FACTORS

The shares of our common stock being offered for resale by the selling
stockholders are highly speculative in nature, involve a high degree of risk and
should be purchased only by persons who can afford to lose the entire amount
invested in the common stock. Before purchasing any of the shares of common
stock, you should carefully consider the following factors relating to our
business and prospects. If any of the following risks actually occurs, our
business, financial condition or operating results could be materially adversely
affected. In such case, the trading price of our common stock could decline, and
you may lose all or part of your investment.

BUSINESS RISKS

WE HAVE A HISTORY OF LOSSES

To date, we have been unable to generate revenue sufficient to be
profitable. We had a net loss of $3,355,769, or $(3.28) per share, for the
fiscal year ended September 30, 2004, compared to a net loss of $324,204, or
$(0.32) per share, for the fiscal year ended September 30, 2003, and a net loss
of $797,072, or $(0.78) per share, for the three month period ended December 31,
2004. We can expect to incur losses for the immediate foreseeable future. There
can be no assurance that we will achieve the level of revenues needed to be
profitable in the future or, if profitability is achieved, that it will be
sustained. Due to these losses, we have a continuing need for additional
capital.

RISK OF NEED FOR ADDITIONAL FINANCING

We raised gross proceeds of $1.5 million in a placement of convertible
secured notes in the third quarter of fiscal 2004 and gross proceeds of $4.5
million in a placement of Series C Preferred Stock and warrants in the second
quarter of fiscal 2005. The net proceeds from these placements should fulfill
our capital needs through March 31, 2006 based upon our present business plan.
However, we expect to require additional working capital or other funds in the
near future should we need to modify our business plan. These funds are required
to support our marketing efforts, obtaining additional regulatory approvals both
domestically and overseas as well as for manufacturing purposes. In the event we
are unable to achieve any market penetration in the near term, secure regulatory
approvals or build inventory available for immediate delivery, our ability to
secure additional funding could be severely jeopardized. No assurance can be
given that we will be successful in obtaining additional funds, whether publicly
or privately or through equity or debt. Any such financing could be highly
dilutive to stockholders.

OUR LACK OF OPERATING HISTORY MAKES EVALUATION OF OUR BUSINESS DIFFICULT.

The MCM business, our primary business, is at an early stage of
commercialization and there is no meaningful historical financial or other
information available upon which you can base your evaluation of this business
and its prospects. We acquired the MCM business in December 2002 and have
generated insubstantial revenues to date from it.

In addition, our early stage of commercialization means that we have
less insight into how market and technology trends may affect our business. This
includes our ability to attract and convince customers to switch from their
current method of dealing with the disposal of their medical waste to a new
technology and to adjust their current in-house system to adapt to our SteriMed
Systems. As a consequence, the revenue and income potential of our business is
unproven. Further, we cannot estimate the expenses for operating the business.
If we are incorrect in our estimates, it could be detrimental to our business.

WE EXPECT OUR MANUFACTURING AND MARKETING DEVELOPMENT WORK FOR OUR MCM BUSINESS
TO CONTINUE FOR SOME TIME, AND OUR MANUFACTURING AND MARKETING MAY NOT SUCCEED
OR MAY BE SIGNIFICANTLY DELAYED.

At present, the SteriMed is manufactured at our own facility in Israel.
The SteriMed Junior had been manufactured by a third party manufacturer in
Israel. While we expect our manufacturing and product development work to
continue in Israel, due to the limited capacity as well as the high costs of
transportation from Israel, we are seeking alternative

manufacturing and assembly capacity for the SteriMed Junior unit with
manufacturers in North America. As we receive interest from these manufacturers,
we will then undertake a detailed analysis to ensure that they are sufficiently
qualified to manufacture our unit and that their costs are acceptable to us. If
we fail to effectively manufacture or cause the manufacture of or fail to
develop a market for our SteriMed Systems, we will likely be unable to recover
the losses we will have incurred in attempting to produce and market these
products and technologies and may be unable to make sales or become profitable.
As a result, the market price of our securities may decline, causing you to lose
some or all of your investment.

DEPENDENCE ON OUR THIRD PARTY COMPONENT SUPPLIERS

We are dependent on third party suppliers for the components of our
SteriMed and SteriMed Junior units and also for the Ster-Cid disinfectant. At
present there are no supply contracts in place and our requirements are
fulfilled against purchase orders. There can be no assurances that we will have
adequate supplies of materials. Although we believe that the required components
are readily available and can be provided by other suppliers, delays may be
incurred in establishing relationships or in awaiting for quality control
assurance with other manufacturers for substitute components.

WE ARE SUBJECT TO EXTENSIVE GOVERNMENTAL REGULATION WITH WHICH IT IS FREQUENTLY
DIFFICULT, EXPENSIVE AND TIME-CONSUMING TO COMPLY.

The medical waste management industry is subject to extensive U.S. EPA,
state and local laws and regulations relating to the collection, packaging,
labeling, handling, documentation, reporting, treatment and disposal of
regulated medical waste. The use of the Ster-Cid disinfectant in the SteriMed
Systems is registered with the U.S. EPA under FIFRA, however, the SteriMed
Systems are not subject to U.S. EPA registration. Our business requires us to
comply with these extensive laws and regulations and also to obtain permits,
authorizations, approvals, certificates or other types of governmental
permission from all states and some local jurisdictions where we sell or lease
the SteriMed Systems. The SteriMed has been cleared for marketing in 46 states
and the SteriMed Junior in 40 states. It is our objective to obtain approvals
from the remaining states. The Ster-Cid has been registered in 49 states. Our
ability to obtain such approvals in the remaining states and the timing and cost
to do so, if successful, cannot be easily determined nor can the receipt of
ultimate approval be assumed.

In markets outside the U.S., our ability to market the SteriMed Systems
is governed by the regulations of the specific country. In foreign countries we
primarily market through distributors, on which we rely to obtain the necessary
regulatory approvals to permit the SteriMed Systems to be marketed in that
country. We are therefore dependent on the distributors to process these
applications where required. In many of these countries we have no direct
control or involvement in the approval process, and therefore we cannot estimate
when our product will be available in that market.

We believe that we currently comply in all material respects with all
applicable laws, regulations and permitting requirements. State and local
regulations change often, however, and new regulations are frequently adopted.
Changes in the applicable regulations could require us to obtain new approvals
or permits, to change the way in which we operate or to make changes to our
SteriMed Systems. We might be unable to obtain the new approvals or permits that
we require, and the cost of compliance with new or changed regulations could be
significant. In the event we are not in compliance, we can be subject to fines
and administrative, civil or criminal sanctions or suspension of our business.

The approvals or permits that we require in foreign countries may be
difficult and time-consuming to obtain. They may also contain conditions or
restrictions that limit our ability to operate efficiently, and they may not be
issued as quickly as we need (or at all). If we cannot obtain the approval or
permits that we need when we need them, or if they contain unfavorable
conditions, it could substantially impair our ability to sell the SteriMed
Systems in certain jurisdictions or to import the system into the United States.

WE MAY NOT BE ABLE TO EFFECTIVELY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS AND
PROPRIETARY TECHNOLOGY, WHICH COULD HAVE A MATERIAL AFFECT ON OUR BUSINESS AND
MAKE IT EASIER FOR OUR COMPETITORS TO DUPLICATE OUR PRODUCTS.

We regard certain aspects of our products, processes, services and
technology as proprietary, and we have trademarks and patents for certain
aspects of the SteriMed Systems. Our ability to compete successfully will depend
in part on our ability to protect our proprietary rights and to operate without
infringing on the proprietary right of others, both in the United States and
abroad. Our proprietary rights to Ster-Cid relate to an exclusive worldwide
license that we had obtained from a third party manufacturer in Europe to
purchase the Ster-Cid disinfectant. The patent positions of medical waste
technology companies generally involve complex legal and factual questions.
While patents are important to our business, the regulatory approvals are more
critical in permitting us to market our products. We may also apply in the
future for patent protection for uses, processes, products and systems that we
develop. There can be no assurance that any future patent for which we apply
will be issued, or that any existing patents issued will not be challenged,
invalidated or circumvented, or that the rights granted thereunder will provide
any competitive advantage, or that third parties will not infringe or
misappropriate our proprietary rights or that third parties will not
independently develop similar products, services and technology. We may incur
substantial costs in defending any patent or license infringement suits or in
asserting any patent or license rights, including those granted by third
parties, the expenditure of which we might not be able to afford. An adverse
determination could subject us to significant liabilities to third parties,
require us to seek licenses from or pay royalties to third parties or require us
to develop appropriate alternative technology. There can be no assurance that
any such licenses would be available on acceptable terms or at all, or that we
could develop alternate technology at an acceptable price or at all. Any of
these events could have a material adverse effect on our business and
profitability.

We may have to resort to litigation to enforce our intellectual
property rights, protect our trade secrets, determine the validity and scope of
the proprietary rights of others, or defend ourselves from claims of
infringement, invalidity or unenforceability. Litigation may be expensive and
divert resources even if we win. This could adversely affect our business,
financial condition and operating results such that it could cause us to reduce
or cease operations.

WE MAY NOT BE ABLE TO DEVELOP NEW PRODUCTS THAT ACHIEVE MARKET ACCEPTANCE

Our future growth and profitability depend in part on our ability to
respond to technological changes and successfully develop and market new
products that achieve significant market acceptance. This industry has been
historically marked by very rapid technological change and the frequent
introductions of new products. There is no assurance that we will be able to
develop new products that will realize broad market acceptance.

THE NATURE OF OUR BUSINESS EXPOSES US TO PROFESSIONAL AND PRODUCT LIABILITY
CLAIMS, WHICH COULD MATERIALLY ADVERSELY IMPACT OUR BUSINESS AND PROFITABILITY

The malfunction or misuse of our SteriMed Systems may result in damage
to property or persons, as well as violation of various health and safety
regulations, thereby subjecting us to possible liability. Although our insurance
coverage is in amounts and deductibles customary in the industry, there can be
no assurance that such insurance will be sufficient to cover any potential
liability. We currently retain a claims made $2 million worldwide product
liability insurance policy. Further, in the event of either adverse claim
experience or insurance industry trends, we may in the future have difficulty in
obtaining product liability insurance or be forced to pay very high premiums,
and there can be no assurance that insurance coverage will continue to be
available on commercially reasonable terms or at all. In addition, there can be
no assurance that insurance will adequately cover any product liability claim
against us. A successful product liability, environmental or other claim with
respect to uninsured liabilities or in excess of insured liabilities could have
a material adverse effect on our business, financial condition and operations.
To date, no claims have been made against us. We believe that our insurance
coverage is adequate to cover any claims made, and we review our insurance
requirement with our insurance broker on an annual basis.

OTHER PARTIES MAY ASSERT THAT OUR TECHNOLOGY INFRINGES ON THEIR INTELLECTUAL
PROPERTY RIGHTS, WHICH COULD DIVERT MANAGEMENT TIME AND RESOURCES AND POSSIBLY
FORCE US TO REDESIGN OUR PRODUCTS.

Developing products based upon new technologies can result in
litigation based on allegations of patent and other intellectual property
infringement. While no infringement claims have been made or threatened against
us, we cannot assure you that third parties will not assert infringement claims
against us in the future, that assertions by such parties will not result in
costly litigation, or that they will not prevail in any such litigation. In
addition, we cannot assure you that we will be able to license any valid and
infringed patents from third parties on commercially reasonable terms or,
alternatively, be able to redesign products on a cost-effective basis to avoid
infringement. Any infringement claim or other litigation against or by us could
have a material adverse effect on us and could cause us to reduce or cease
operations, and even if we are successful in a litigation to defend such claim,
there may be adverse effects due to the significant expenses related to
defending the litigation.

THE LOSS OF CERTAIN MEMBERS OF OUR MANAGEMENT TEAM COULD ADVERSELY AFFECT OUR
BUSINESS.

Our success is highly dependent on the continued efforts of George
Aaron, Chairman, President and Chief Executive Officer, and Jonathan Joels,
Chief Financial Officer, Treasurer and Secretary, who are our key management
persons. Should operations expand, we will need to hire persons with a variety
of skills and competition for these skilled individuals could be intense.
Neither Mr. Aaron nor Mr. Joels plan to retire or leave us in the near future.
However, there can be no assurance that we will be successful in attracting
and/or retaining key personnel in the future. Our failure to do so could
adversely affect our business and financial condition. We do not have employment
agreements with or carry any "key-man" insurance on the lives of any of our
officers or employees.

DEFENSE OF LITIGATION AND EFFECT OF NEGATIVE OUTCOME

We have been involved in defending two litigations, a Class Action and
a Federal Derivative Action, in which Jack Nelson, a former officer and director
of the Company has directly or indirectly made claims alleging
misrepresentations, mismanagement or other misconduct by us or certain of our
officers and directors. A third litigation, a State Court Action instituted by
Mr. Nelson, was settled in September 2003.

In May 2004 and confirmed in July 2004, in a decision separate from the
decision in the Federal Derivative Action, the Court granted the defendants'
motion and dismissed the Class Action. The initial plaintiff was a relative of
the wife of the plaintiff in both the Federal Derivative Action and the State
Court Action. The plaintiff did not file a notice of appeal during the statutory
time period.

In May 2004, the Court in the Federal Derivative Action granted the
motion made by us and Messrs. Aaron and Joels for judgment on the pleadings
based upon the pre-suit demand requirement and dismissed the plaintiff's
complaint without prejudice, but denied defendants' motion for judgment on the
pleadings based upon the Private Securities Litigation Reform Act. The Court
also granted the plaintiff's cross-motion to file an amended complaint to add
allegations of insider trading. On September 30, 2004, our Board of Directors
received a letter from Mr. Nelson's attorney making a demand that we institute a
derivative action substantially similar to the contents of the complaint that
had been filed in the Federal Derivative Action. In late December 2004, a Board
committee responded to the letter, stating that the committee had determined
that there was no basis for us to institute the derivative action. There has
been no further communication from Mr. Nelson's attorney.

No damages were specified in these cases. However, the cost of
defending these litigations has been material to us and any continued or new
litigations and any monetary judgment against us could have a material adverse
effect on our financial condition and continuation of operations. In addition,
claims by the defendant officers and directors for indemnification,
notwithstanding our having directors and officers insurance covering securities
act claims in the Class Action, could be material.

DEPENDENCE ON PRINCIPAL CUSTOMERS

Two principal customers, Euromedic and Lysmed, which are foreign
distributors in Central and Eastern Europe, accounted for approximately 72% of
our revenues from our SteriMed business for fiscal year 2004. These two
customers together with Advanced Washroom and a major US dialysis company
accounted for approximately 88% of our revenues in the three months ended
December 31, 2004. We are presently working on the expansion of our sales, both
internationally and domestically. In fiscal year 2005, we received our first
significant order for the SteriMed Junior from a major US dialysis company. The
loss of any one of our principal customers would have a significant adverse
impact to our business.

COMPETITION

There are numerous methods of handling and disposing of RMW, of which
our technology is one of the available systems. We are not aware of any
competitive product that is similar to the SteriMed Systems with respect to its
design and compactness. We believe that our SteriMed Systems, due to their
ability to be used on site, competitive costing and ease of use, offer a
significant advantage over RMW systems offered by our competitors. We realize,
however, there can be no assurance that a different or new technology may not
supplant us in the market. Further, we cannot guarantee that in the event that
we are successful in the deployment of our systems in the marketplace, the
predominant companies in the field, which have substantially greater resources
and market visibility than us, will not try to develop similar systems.

CONTROL BY A LEAD INVESTOR

An investor group beneficially owns approximately 50.12% of the
outstanding common stock, including all shares and underlying warrants currently
held by them. Accordingly, they could exercise a significant voting block in the
election of directors and other matters to be acted upon by stockholders.

MARKET RISKS

THERE IS ONLY A VOLATILE LIMITED MARKET FOR OUR COMMON STOCK

Recent history relating to the market prices of public companies
indicates that, from time to time, there may be periods of extreme volatility in
the market price of our securities because of factors unrelated to the operating
performance of, or announcements concerning, the issuers of the affected stock,
and especially for stock traded on the OTC Bulletin Board. Our common stock is
not actively traded, and the bid and asked prices for our common stock have
fluctuated significantly. Since January 1, 2003, the common stock traded on the
OTC Bulletin Board from a high of $6.80 to a low of $1.00 per share. See "MARKET
FOR OUR COMMON STOCK." General market price declines, market volatility,
especially for low priced securities, or factors related to the general economy
or to us in the future could adversely affect the price of the common stock.
With the low price of our common stock, any securities placement by us would be
very dilutive to existing stockholders, thereby limiting the nature of future
equity placements.

THE NUMBER OF SHARES BEING REGISTERED FOR SALE IS SIGNIFICANT IN RELATION TO OUR
TRADING VOLUME

All of the shares registered for sale on behalf of the selling
stockholders are "restricted securities" as that term is defined in Rule 144
under the Securities Act. At April 5, 2005, we had 3,322,798 outstanding shares
of common stock and an aggregate of 1,020,804 shares of common stock reserved
for the conversion of Series B Preferred Stock and the exercise of options and
warrants. Of the 4,343,602 shares, an aggregate of 3,813,759 shares have been
included in this prospectus. We have filed this registration statement to
register these restricted shares for sale into the public market by the selling
stockholders. These restricted securities, if sold in the market all at once or
at about the same time, could depress the market price during the period the
registration statement remains effective and also could affect our ability to
raise equity capital. Any outstanding shares not sold by the selling
stockholders pursuant to this prospectus will remain as "restricted shares" in
the hands of the holder, except for those held by non-affiliates for a period of
two years, calculated pursuant to Rule 144.

WE HAVE NEVER PAID DIVIDENDS AND WE DO NOT ANTICIPATE PAYING DIVIDENDS IN THE
FUTURE

We do not believe that we will pay any cash dividends on our common
stock in the future. We have never declared any cash dividends on our common
stock, and if we were to become profitable, it would be expected that all of
such earnings would be retained to support our business. Since we have no plan
to pay cash dividends, an investor would only realize income from his investment
in our shares if there is a rise in the market price of our common stock, which
is uncertain and unpredictable.

SHARES ELIGIBLE FOR FUTURE SALE COULD NEGATIVELY AFFECT YOUR INVESTMENT IN US

The fact that we are seeking additional capital through the sale of our
securities, including shares of our preferred stock, which include granting
certain registration rights to the investors, could negatively impact us. At
April 5, 2005, we had 45,625,483 shares of common stock and 973,000 shares of
preferred stock which our Board of Directors could issue without any approval of
existing holders. The issuance of these shares, as well as the issuance of any
new shares, and any attempts to resell them could depress the market for the
shares being registered under this prospectus.

WE ARE SUBJECT TO PENNY STOCK REGULATIONS AND RESTRICTIONS

The Securities and Exchange Commission has adopted regulations which
generally define Penny Stocks to be an equity security that has a market price
less than $5.00 per share or an exercise price of less than $5.00 per share,
subject to certain exemptions. As of April 5, 2005, the closing bid and asked
prices for our common stock were $4.20 and $4.80 per share and therefore, it is
designated a "Penny Stock." As a Penny Stock, our common stock may become
subject to Rule 15g-9 under the Securities Exchange Act of 1934, as amended
("Exchange Act"), or the Penny Stock Rule. This rule imposes additional sales
practice requirements on broker-dealers that sell such securities to persons
other than established customers and "accredited investors" (generally,
individuals with a net worth in excess of $1,000,000 or annual incomes exceeding
$200,000, or $300,000 together with their spouses). For transactions covered by
Rule 15g-9, a broker-dealer must make a special suitability determination for
the purchaser and have received the purchaser's written consent to the
transaction prior to sale. As a result, this rule may affect the ability of
broker-dealers to sell our securities and may affect the ability of purchasers
to sell any of our securities in the secondary market.

For any transaction involving a penny stock, unless exempt, the rules
require delivery, prior to any transaction in a penny stock, of a disclosure
schedule prepared by the Securities and Exchange Commission ("SEC") relating to
the penny stock market. Disclosure is also required to be made about sales
commissions payable to both the broker-dealer and the registered representative
and current quotations for the securities. Finally, monthly statements are
required to be sent disclosing recent price information for the penny stock held
in the account and information on the limited market in penny stock.

There can be no assurance that our common stock will qualify for
exemption from the penny stock restrictions. In any event, even if our common
stock were exempt from the Penny Stock restrictions, we would remain subject to
Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to
restrict any person from participating in a distribution of penny stock, if the
SEC finds that such a restriction would be in the public interest.

CERTAIN PROVISIONS OF OUR CHARTER COULD DISCOURAGE POTENTIAL ACQUISITION
PROPOSALS OR CHANGE IN CONTROL

Certain provisions of our Certificate of Incorporation and of Delaware
law could discourage potential acquisition proposals and could make it more
difficult for a third party to acquire or discourage a third party from
attempting to acquire control of us. These provisions could diminish the
opportunities for a stockholder to participate in tender offers, including
tender offers at a price above the then current market value of the common
stock. Our Board of Directors, without further stockholder approval, may issue
preferred stock that would contain provisions that could have the effect of
delaying or preventing a change in control or which may prevent or frustrate any
attempt by stockholders to replace or remove the current management. The
issuance of additional shares of preferred stock could also adversely affect the

voting power of the holders of common stock, including the loss of voting
control to others.

FORWARD LOOKING STATEMENTS

Information included or incorporated by reference in this prospectus
may contain forward-looking statements. This information may involve known and
unknown risks, uncertainties and other factors which may cause our actual
results, performance or achievements to be materially different from the future
results, performance or achievements expressed or implied by any forward-looking
statements. Forward-looking statements, which involve assumptions and describe
our future plans, strategies and expectations, are generally identifiable by use
of the words "may," "should," "expect," "anticipate," "estimate," "believe,"
"intend" or "project" or the negative of these words or other variations on
these words or comparable terminology.

This prospectus contains forward-looking statements, including
statements regarding, among other things, (a) our projected sales and
profitability, (b) our technology, (c) our manufacturing, (d) the regulation to
which we are subject, (e) anticipated trends in our industry and (f) our needs
for working capital. These statements may be found under "Management's
Discussion and Analysis or Plan of Operations" and "Business," as well as in
this prospectus generally. Actual events or results may differ materially from
those discussed in forward-looking statements as a result of various factors,
including, without limitation, the risks outlined under "Risk Factors" and
matters described in this prospectus generally. In light of these risks and
uncertainties, there can be no assurance that the forward-looking statements
contained in this prospectus will in fact occur.

USE OF PROCEEDS

We will not receive any portion of the proceeds from the sale of common
stock by the selling stockholders. We may receive proceeds of up to $4,442,945
if all the warrants and options underlying some of the shares sold are exercised
and no cashless-exercise procedure is used. Management currently anticipates
that any such proceeds will be utilized for working capital and other general
corporate purposes. We cannot estimate how many, if any, warrants and options
may be exercised as a result of this offering.

We are obligated to bear the expenses of the registration of the
shares. We anticipate that these expenses will be approximately $75,000.

DIVIDEND POLICY

We have never declared dividends or paid cash dividends. We intend to
retain and use any future earnings for the development and expansion of our
business and do not anticipate paying any cash dividends in the foreseeable
future. Moreover, covenants in the convertible promissory notes prevent us from
paying any dividends on our common stock while those notes are outstanding.

MARKET FOR OUR COMMON STOCK

PRINCIPAL MARKET AND MARKET PRICES

Our common stock has traded in the over-the-counter market on the OTC
Electronic Bulletin Board (OTCBB) under the symbol CAPS. Prior to the April 5,
2005 reverse split, our trading symbol was CAPR. The following table sets forth
for the indicated periods the high and low bid prices of the common stock for
the two fiscal years ended September 30, 2004, and for the period from October
1, 2004 through April 5, 2005 as reported on the OTCBB. These prices are based
on quotations between dealers, and do not reflect retail mark-up, mark-down or
commissions, and may not necessarily represent actual transactions.

---------------------------------------------------------------------------------------
FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDING ENDED ENDED
FISCAL PERIOD 9/30/05 9/30/04 9/30/03
---------------------------------------------------------------------------------------
High Low High Low High Low
---------------------------------------------------------------------------------------

First Quarter $3.80 $2.20 $5.00 $2.20 $3.00 $1.40
---------------------------------------------------------------------------------------
Second Quarter 6.80 2.60 5.00 1.00 2.60 1.60
---------------------------------------------------------------------------------------
Third Quarter* 5.00 3.20 4.40 1.00 2.60 2.00
---------------------------------------------------------------------------------------
Fourth Quarter - - 5.00 2.20 6.20 2.00
---------------------------------------------------------------------------------------
Reflects Reverse Stock Split 1:20
*Reflects prices through April 11, 2005

APPROXIMATE NUMBER OF HOLDERS OF OUR COMMON STOCK

On February 28, 2005, there were approximately 1,300 stockholders of
record of our capital stock. Since a substantial amount of the shares are held
in nominee name for beneficial owners, we believe that there are a substantial
number of additional beneficial owners.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our
Consolidated Financial Statements and the notes thereto and the other financial
information appearing elsewhere in this prospectus. In addition to historical
information contained herein, the following discussion and other parts of this
prospectus contain certain forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those discussed
in the forward-looking statements due to factors discussed under "Risk Factors",
as well as factors discussed elsewhere in this prospectus. The cautionary
statements made in this prospectus should be read as being applicable to all
related forward-looking statements wherever they appear in this prospectus.

RESULTS OF OPERATIONS

Our continuing operations are classified as the infectious medical
waste business. In the year ended September 30, 2002, our operations were
classified into two business segments: imaging services (Strax) and the
therapeutic drug monitoring assay business (TDM Business). We completed the sale
of our imaging business (Strax) effective as of September 30, 2003, as well as
the sale of our TDM business segment effective October 9, 2002. As a result, our
consolidated balance sheet for the 2004 and 2003 fiscal years have been restated
to reflect the Strax business and the TDM business as discontinued operations.
These changes in our business operations make it difficult to compare our prior
financial results by period.

FISCAL YEAR ENDED SEPTEMBER 30, 2004 COMPARED TO FISCAL YEAR ENDED
------------------------------------------------------------------
SEPTEMBER 30, 2003
------------------

Revenues generated for fiscal year ended 2004 ("Fiscal 2004") were
primarily generated by MCM product sales and rental revenues which totaled
$835,461 for Fiscal 2004 as compared with $550,579 for the fiscal year ended
2003 ("Fiscal 2003"). Sales for Fiscal 2004 increased over Fiscal 2003 with the
delivery of the SteriMed Junior as well as the SteriMed in international
markets. For Fiscal 2004, two customers accounted for approximately 72% of the
consolidated total revenue. Accounts receivable due from these customers as of
September 30, 2004 amounted to $45,267. For Fiscal 2003, one customer accounted
for approximately 30% of the consolidated total revenue. Accounts receivable due
from this customer as of September 30, 2003 amounted to $47,000. Consulting
income in connection with the sale of the TDM business generated $50,000 in both
Fiscal 2004 and Fiscal 2003.

Cost of product sales and leased equipment amounted to $618,944 or
69.9% of total revenues versus $357,708 or 59.6% of total revenues for the year
ended September 30, 2004 and 2003, respectively. We have not advanced to a level
of sales for us to absorb fully the fixed costs related to our revenues

Selling, general and administrative expenses totaled $3,020,212 for
Fiscal 2004 versus $4,155,660 for Fiscal 2003. This reflects substantial
decreases in certain professional fees primarily in connection with litigation

defense costs and insurance fees for the previous fiscal year's purchase of tail
insurance for policies that were not renewed with the same insurer as well as
performance based compensation to employees (none in 2004).

Research and Development costs increased to $283,697 in Fiscal 2004
versus $122,116 in Fiscal 2003 reflecting additional activities performed in the
development of the Company's SteriMed units.

Interest expense increased to $212,571 in Fiscal 2004 versus $17,962 in
Fiscal 2003. This increase reflects the interest expense, financing costs and
amortization relating to loan financings that took place in Fiscal 2004.

The operating loss from operations totaled $3,249,963 for Fiscal 2004
versus $4,052,867 for Fiscal 2003. This decrease primarily reflects the cost
savings benefits derived under managements' initiatives to control expenses, an
increase in revenues, and the elimination of certain one time costs in
connection with the acquisition of the MCM Business in Fiscal 2003. A
significant portion of the loss from continuing operations in Fiscal 2003 was
offset by the gain on sale of approximately $3.2 million from the sale of the
TDM business.

THREE MONTHS ENDED DECEMBER 31, 2004 COMPARED TO THREE MONTHS ENDED
-------------------------------------------------------------------
DECEMBER 31, 2003
-----------------

Revenues generated from MCM product sales totaled $236,908 for the
three months ended December 31, 2004 as compared to $258,884 for the three
months ended December 31, 2003. Revenues generated from MCM rentals totaled
$5,326 as compared to $18,349 for the comparable periods. Consulting and royalty
income in connection with the sale of the TDM Business totaled $20,425 as
compared to $12,500 for the three months ended December 31, 2003.

Cost of product sales and leased equipment amounted to $161,794 or
61.6% of total revenues versus $204,719 or 70.7% of total revenues for the three
month period ended December 31, 2004 and 2003, respectively. We have not
advanced to a level of sales for us to absorb fully the fixed costs related to
our revenues

Selling, general and administrative expenses totaled $672,278 for the
three months ended December 31, 2004 versus $674,236 for the three months ended
December 31, 2003.

Research and Development expenses increased to $76,580 from $39,595 in
the three months ended December 31, 2004 and compared to the same period in
2003. This reflects our increase in development activities in preparation for
the production scale-up of the SteriMed Junior.

Interest expense, net totaled $149,079 for the three months ended
December 31, 2004 versus $434 for the three months ended December 31, 2003. The
majority of the interest expense incurred during the three month period ended
December 31, 2004 related to interest fees and amortization in connection with
the secured convertible notes and bridge financing, which occurred in Fiscal
2004.

The operating loss from operations amounted to $647,993 and $628,817
for the three month periods ended December 31, 2004 and 2003, respectively.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2004, our cash and cash equivalents position
approximated $19,100 versus $27,600 at September 30, 2004. As further discussed
below, on February 15, 2005 we received net proceeds of approximately $4 million
from the sale of Series C Preferred Stock and warrants, and approximately $2.1
million of indebtedness was converted into or exchanged for Series C Preferred
Stock. At March 31, 2005 our cash and cash equivalents position approximated
$2,700,000.

Prior to the completion of this financing, we had suffered from a
shortage of capital resources that hampered operations. This resulted in
management spending a lot of time pursuing adequate financing to fund our
operations.

During the second quarter of fiscal 2004, we raised $500,000 through a
short-term bridge loan, issuing notes due on July 31, 2005, and granting
warrants to purchase 16,666 shares of our common stock exercisable at $5.00 per
share for a period of five years. The funds were utilized primarily for general
working capital. The majority of these funds were provided by our management.
The notes bore interest at a rate of 11% per annum and were secured by a first
lien on any royalties received by Opus Diagnostics Inc. from Seradyn, Inc. in
accordance with their Royalty Agreement. These loans were repaid on February 15,
2005 as part of the preferred stock placement

During the third quarter of fiscal year 2004 we raised $1.5 million,
prior to fees and expenses, through the issuance of 8% Senior Secured
Convertible Promissory Notes, repayable, together with interest, from April 27,
2005 to June 10, 2005, subject to prepayment or conversion by the investors into
shares of our common stock at a conversion price of $3.00 per share. As part of
the conversion right privilege, we, recognized a discount on debt of
approximately $200,000 and a corresponding increase to paid in capital. These
loan were repaid on February 15, 2005 as part of the preferred stock placement.

During the three month period ended December 31, 2004, we received as
advances the principal amount of approximately $138,800 through short-term
related party loans. The terms of the loans are identical to the terms of the
$100,000 8% Senior Secured Convertible Promissory Note outlined below. These
funds were utilized for general working capital purposes. These loans were
repaid on February 15, 2005 as part of the preferred stock placement.

On February 2, 2005, we raised $100,000 through the issuance of 8%
Senior Secured Convertible Promissory Notes, repayable, together with interest
to April 3, 2005, subject to prepayment in the event of an equity financing in
excess of $2 Million, or conversion by the investors into shares of our common
stock at a conversion price of $3.00 per share. The lender also received
warrants to purchase 5,000 shares of our common stock exercisable at $5.60 per
share for a period of five years. The funds were utilized for general working
capital. On February 17, 2005 we repaid this loan together with interest.

On February 15, 2005, we closed on a $4.5 million preferred stock
equity financing before financing related fees and expenses of approximately
$450,000, issuing (i) 45,000 shares of Series C Mandatory Convertible Preferred
Stock, (ii) Series A Warrants to purchase an aggregate of 465,517 shares of
common stock at an exercise price of $5.60 per share for a period of five years,
and (iii) Series B Warrants to purchase an aggregate of 155,172 shares of common
stock at an exercise price of $2.90 per share for a period of five years
exercisable after nine months, subject to a termination condition.
Simultaneously, we converted the short-term secured debt outstanding in the
aggregate of $2 million, together with $72,962 of unsecured indebtedness, into
21,681 shares of Series C Mandatory Convertible Preferred Stock.

We will continue to evaluate additional funding options including
equipment financing, banking facilities, loans, government-funded grants and
private and public equity offerings. We may also require funds for future
acquisitions that would complement our existing business. Some of these
financings may result in substantial dilution to current equity holders.

CONTRACTUAL OBLIGATIONS

THE FOLLOWING TABLE SETS FORTH OUR CONTRACTUAL OBLIGATIONS AS OF DECEMBER 31,
2004

TOTAL LESS THAN 1-3 YEARS MORE THAN
----- --------- --------- ---------
1 YEAR 5 YEARS
------ -------

Long Term Debt Obligations*............. $ - $ - - -
Capital Lease Obligations............... - - - -
Operating Lease Obligations............. $ 53,120 $ 53,120 - -

* Short Term Debt Obligations in the aggregate amount of $2 million were repaid
pursuant to the February 15, 2005 preferred stock placement.

CONTINGENT OBLIGATIONS

Our principal contractual commitments include payments under operating
leases.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements requires management to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues, expenses and related disclosures. On an on-going basis, management
evaluates our estimates and assumptions, including but not limited to those
related to revenue recognition and the impairment of long-lived assets, goodwill
and other intangible assets. Management bases its estimates on historical
experience and various other assumptions that it believes to be reasonable under
the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates
under different assumptions or conditions.

1. Revenue recognition

The infectious medical waste business recognizes revenues from either
the sale or rental of our SteriMed Systems. Revenues for sales are recognized at
the time that the unit is shipped to the customer. Rental revenues are
recognized based upon either services provided for each month of activity or
evenly over the year in the event that a fixed rental agreement is in place.

2. Goodwill and other intangibles

Goodwill and other intangibles associated with the MCM acquisition will
be subject to an annual assessment for impairment by applying a fair-value based
test. The valuation will be based upon estimates of future income of the
reporting unit and estimates of the market value of the unit.

RECENT ACCOUNTING PRONOUNCEMENTS

On December 31, 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure." SFAS No. 148 amends SFAS
No. 123, Accounting for Stock-Based Compensation, to provide alternative methods
of transition to SFAS No. 123's fair value method of accounting for stock-based
employee compensation in the event companies adopt SFAS No. 123 and account for
stock options under the fair value method. SFAS No. 148 also amends the
disclosure provisions of SFAS 123 and APB Opinion No. 28, Interim Financial
Reporting (APB 28), to require disclosure in the summary of significant
accounting policies of the effects of an entity's accounting policy with respect
to stock-based employee compensation on reported net income and earnings per
share in annual and interim financial statements. While the Statement does not
amend SFAS No. 123 to require companies to account for employee stock options
using the fair value method, the disclosure provisions of SFAS No. 148 are
applicable to all companies with stock-based employee compensation, regardless
of whether they account for that compensation using the fair value method of
SFAS No. 123 or the intrinsic value method of APB Opinion No. 25 Accounting for
Stock Issued to Employees (APB 25).

In January 2003, the FASB issued Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51."
FIN 46 requires certain variable interest entities to be consolidated by the
primary beneficiary of the entity if the equity investors in the entity do not
have the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional financial support from other parties. FIN 46 is effective for all new
variable interest entities created or acquired after January 31, 2003. For
variable interest entities created or acquired prior to February 1, 2003, the
provisions of FIN 46 must be applied for the first interim or annual period
beginning after December 15, 2003. In December 2003, the FASB issued
Interpretation No. 46(R) ("FIN 46R") which revised certain provisions of FIN 46.
Publicly reporting entities that are small business issuers must apply FIN 46R
to all entities subject to FIN 46R no later than the end of the first reporting
period that ends after December 15, 2004 (as of December 31, 2004, for a
calendar year enterprise) The effective date includes those entities to which
FIN 46 had previously been applied. However, prior to the application of FIN
46R, a public entity that is a small business issuer shall apply FIN 46 or FIN

46R to those entities that are considered special-purpose entities no later than
as of the end of the first reporting period that ends after December 15, 2003
(as of December 31, 2003 for a calendar year). We do not have any entities that
require disclosure or new consolidation as a result of adopting the provisions
of FIN 46.

In May 2003, the FASB issued SFAS 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." This Statement amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under FASB
Statement No. 133, Accounting for Derivative Instruments and Hedging Activities.
The changes in this Statement improve financial reporting by requiring that
contracts with comparable characteristics be accounted for similarly. This
Statement is effective for contracts entered into or modified after June 30,
2003. The adoption of SFAS 149 did not have a material effect on our
consolidated financial position, results of operations, or cash flows.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity." SFAS
No. 150 is the first phase of the FASB's project on liabilities and equity. SFAS
No. 150 provides guidance on how an entity classifies and measures certain
financial instruments with characteristics of both liabilities and equity. Many
of these instruments were previously classified as equity. For example, if an
employer's issuance of its shares to a key employee requires the employer to
redeem the shares upon the employee's death, then those shares must be
classified as a liability, not as equity. For publicly-held companies, SFAS No.
150 is effective for financial instruments entered into or modified after May
31, 2003. SFAS No. 150 requires companies to record the cumulative effect of
financial instruments existing at the adoption date. The adoption of SFAS 150
did not have a significant effect on our operations, consolidated financial
position or cash flows.

In December 2003, a revision of SFAS 132 "Employers' Disclosures about
Pensions and Other Postretirement Benefits" was issued, revising disclosures
about pension loans and other post retirements benefits plans and requiring
additional disclosures about the assets, obligations, cash flows, and net
periodic benefit cost of defined benefit pension plans and other defined benefit
postretirement plans. The Company expects that the adoption of the new statement
will not have a significant impact on its financial statements.

In November 2004, the FASB issued SFAS No. 151 "Inventory Costs, an
amendment of ARB No. 43, Chapter 4." The amendments made by Statement 151
clarify that abnormal amounts of idle facility expense, freight, handling costs,
and wasted materials (spoilage) should be recognized as current-period charges
and require the allocation of fixed production overheads to inventory based on
the normal capacity of the production facilities. The guidance is effective for
inventory costs incurred during fiscal years beginning after June 15, 2005.
Earlier application is permitted for inventory costs incurred during fiscal
years beginning after November 23, 2004. The Company is in the process of
evaluating whether the adoption of SFAS 151 will have a significant impact on
the Company's overall results of operations or financial position.

In December 2004, the FASB issued SFAS No.153, "Exchanges of
Nonmonetary Assets, an amendment of APB Opinion No. 29, Accounting for
Nonmonetary Transactions." The amendments made by Statement 153 are based on the
principle that exchanges of nonmonetary assets should be measured based on the
fair value of the assets exchanged. Further, the amendments eliminate the narrow
exception for nonmonetary exchanges of similar productive assets and replace it
with a broader exception for exchanges of nonmonetary assets that do not have
commercial substance. Previously, Opinion 29 required that the accounting for an
exchange of a productive asset for a similar productive asset or an equivalent
interest in the same or similar productive asset should be based on the recorded
amount of the asset relinquished. Opinion 29 provided an exception to its basic
measurement principle (fair value) for exchanges of similar productive assets.
The Board believes that exception required that some nonmonetary exchanges,
although commercially substantive, be recorded on a carryover basis. By focusing
the exception on exchanges that lack commercial substance, the Board believes
this Statement produces financial reporting that more faithfully represents the
economics of the transactions. The Statement is effective for nonmonetary asset
exchanges occurring in fiscal periods beginning after June 15, 2005. Earlier
application is permitted for nonmonetary asset exchanges occurring in fiscal
periods beginning after the date of issuance. The provisions of this Statement
shall be applied prospectively. The Company has evaluated the impact of the
adoption of SFAS 153, and does not believe the impact will be significant to the
Company's overall results of operations or financial position.

In December 2004, the FASB issued SFAS No.123 (revised 2004),
"Share-Based Payment" Statement 123(R) will provide investors and other users of
financial statements with more complete financial information by requiring that
the compensation cost relating to share-based payment transactions be recognized
in financial statements. That cost will be measured based on the fair value of
the equity or liability instruments issued. Statement 123(R) covers a wide range
of share-based compensation arrangements including share options, restricted
share plans, performance-based awards, share appreciation rights, and employee
share purchase plans. Statement 123(R) replaces FASB Statement No. 123,
Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25,
Accounting for Stock Issued to Employees. Statement 123, as originally issued in
1995, established as preferable a fair-value-based method of accounting for
share-based payment transactions with employees. However, that Statement
permitted entities the option of continuing to apply the guidance in Opinion 25,
as long as the footnotes to financial statements disclosed what net income would
have been had the preferable fair-value-based method been used. Public entities
that are small business issuers will be required to apply Statement 123(R) as of
the first interim or annual reporting period that begins after December 15,
2005. The Company has evaluated the impact of the adoption of SFAS 123(R), and
does not believe the impact will be significant to the Company's overall results
of operations or financial position.

INFLATION

To date, inflation has not had a material effect on our business. We
believe that the effects of future inflation may be minimized by controlling
costs and increasing our manufacturing efficiency through the increase of our
product sales.

BUSINESS

BACKGROUND

Caprius, Inc. is engaged in the infectious medical waste disposal
business. In the first quarter of Fiscal 2003, we acquired a majority interest
in M.C.M. Environmental Technologies, Inc. which develops, markets and sells the
SteriMed and SteriMed Junior compact units that simultaneously shred and
disinfect Regulated Medical Waste. The SteriMed Systems are sold in both the
domestic and international markets.

Caprius, Inc. was founded in 1983 and through June 1999 essentially
operated in the business of developing specialized medical imaging systems, as
well as operating the Strax Institute, a comprehensive breast imaging center. In
June 1999, we acquired Opus and began manufacturing and selling medical
diagnostic assays constituting the TDM Business. In October 2002, we sold the
TDM business to Seradyn, Inc. The Strax Institute was sold in September 2003.

BACKGROUND OF THE REGULATED MEDICAL WASTE INDUSTRY IN THE UNITED STATES

In 1988, the Federal Government passed the Medical Waste Tracking Act
("MWTA"). This act defined medical waste and the types of medical waste that
were to be regulated. In addition to defining categories of medical waste, the
law mandated that generators of Regulated Medical Waste ("RMW") be responsible
for and adhere to strict guidelines and procedures when disposing of RMW. The
mandates included a "cradle to grave" responsibility for any RMW produced by a

facility, the necessity to track the disposal of RMW and defined standards for
segregating, packaging, labeling and transporting of RMW.

The MWTA led to the development of individual state laws regulating how
RMW is to be disposed of. As a result of these laws, it became necessary for
medical waste generating facilities to institute new procedures and processes
for transporting medical waste from the facility to an offsite treatment and
disposal center, or obtain their own on-site system for treatment and disposal
acceptable to the regulators. By 1999, Health Care Without Harm, a coalition of
240 member organizations, estimated that 250,000 tons of RMW was produced
annually.

The other major impact on the RMW market was the adoption of the Clean
Air Amendments of 1997. This act dramatically reduced or eliminated the type of
emissions that are permitted from the incineration of RMW. Due to this,
generators of RMW, which were incinerating their waste, were forced into costly
upgrades of their incinerators or to find other methods of disposal. Hospital
incinerators decreased from 6,200 in 1988 to 115 in 2003 (Mackinac Chapter,
Sierra Club Newsletter Aug-Oct 2003).

Most generators of RMW use waste management firms to transport, treat
and dispose of their waste. Due to the legislative and other market factors, the
costs for this type of service have been increasing at a dramatic pace. At the
same time, many medical waste generators are coming under increasing pressure to
reduce expenses as a result of the decreasing percentage of reimbursement from
Medicare and other third party providers. Additionally, the added liability of
RMW generators as a result of the "cradle to grave" manifest requirement has
made it more attractive to use medical waste management methods that do not
require manifest systems. The combination of these pressures is forcing medical
waste generators to seek innovative methods for their waste disposal. MCM
believes these factors create a demand for an onsite RMW treatment option. MCM
has identified and is working with specific segments and niches within the RMW
market on which it feels it might capitalize. The specifics of these will be
discussed in the Marketing section.

BACKGROUND OF THE REGULATED MEDICAL WASTE INDUSTRY OUTSIDE OF THE UNITED STATES

The industrialized countries of the European Union and Japan are
implementing medical waste laws that are or will be similar to US regulations.
In 1994, the European Commission implemented a directive where member states had
to adhere to the provisions of the United Nations Economic Commission for Europe
("UNECE") European Agreement on the International Carriage of Dangerous Goods by
Road. This requires that clinical or medical waste would be packed, marked,
labeled and documented according to defined specifications. Regulations and cost
factors have prompted European RMW generators to seek alternative medical waste
disposal options. MCM recognizes an excellent opportunity for SteriMed sales in
Europe, and is working with regulators, potential joint venture partners and
distributors.

Throughout the less industrialized and third world countries, the
disposal of hospital waste is coming under increasing scrutiny and regulations.
Many countries are in the process of updating and enforcing regulations
regarding the disposal of RMW. MCM is attempting to establish relationships
worldwide directly or through distributors, in many of these countries.

THE MCM STERIMED SYSTEMS

The SteriMed Systems are patented, environmentally friendly, on-site
disinfecting and disposal units that can process regulated clinical waste,
including sharps, dialysis filters, pads, bandages, plastic tubing and even
glass, in a 12 minute cycle. The units simultaneously shred, grind, mix and
disinfect the waste with the proprietary Ster-Cid) solution. After treatment,
the material may be discarded as unrecognizable conventional solid waste, in
accordance with appropriate regulatory requirements. The resultant treated waste
is as low as 10% of the original volume.

As the technology for disinfection is chemical based, within the
definitions used in the industry, it is considered as an alternative treatment
technology.

The SteriMed System is comprised of two different sized units and the
required Ster-Cid disinfectant solution which is utilized with both. The larger
SteriMed unit can treat up to 20 gallons (75 liters) of medical waste per cycle.
The smaller version, SteriMed Junior, can treat 4 gallons (15 liters) per cycle.

We have the worldwide exclusive rights for the manufacture, use and
sale of the Ster-Cid proprietary disinfectant used in the SteriMed Systems. The
Ster-Cid is currently manufactured solely for us by the licensor. In the event
that the licensor is unable to manufacture the Ster-Cid, we have the right to
have Ster-Cid manufactured by an alternative manufacturer. Ster-Cid is
approximately 90% biodegradable. Ster-Cid is considered a pesticide by the U.S.
EPA and, in compliance with FIFRA; it is registered with the U.S. EPA. The
process of registering a pesticide under FIFRA involves submission of an
application package to the U.S. EPA. The EPA's review of this application
includes assessment of the hazards to human health and the environment that may
be posed by the pesticide. This process can take up to a year or more to
complete. MCM had assigned an agent experienced with the FIFRA registration
process to carry out this process for Ster-Cid. This process was completed in
September 1999 at which time the Ster-Cid was assigned a FIFRA Registration
number. On an annual basis, MCM is required to report to the U.S. EPA the
quantities of Ster-Cid sold and projections for the upcoming year.

During the SteriMed disinfecting cycle, the concentration of Ster-Cid
is approximately 0.5% of the total volume of liquids. The Ster-Cid disinfectant
has been tested in independent laboratories and shown to meet U.S. EPA
guidelines for disinfection. Furthermore, it is accepted by POTW, allowing for
its discharge into the sewer system.

Both the SteriMed and SteriMed Junior are safe and easy to operate,
involving 1/2 day of training provided by our technical support staff to
operators as designated by the end-user. The operator is trained to handle the
daily and weekly responsibilities for the routine preparation, maintenance, and
minor troubleshooting of the SteriMed Systems. Daily maintenance includes
filling the system with the Ster-Cid, removal and replacement of the filter
bags, and disposing of the filter bag as black bag waste.

The trained operator places the red bag waste containing RMW into the
SteriMed receiver chamber and activates the start button. The water and Ster-Cid
are then automatically released into the treatment chamber. The shredding,
grinding and mixing of the waste is then initiated to expose all surfaces of the
medical waste to the chemical solution during the 12 minute processing cycle. At
the end of each specified number of cycles, trained operator then puts the
residue into a regular black bag, ready for disposal as regular solid waste.

Both SteriMed and the SteriMed Junior are equipped with an integrated
monitoring system, including a PLC display, which indicates each of the system's
functions to guide the operator through its operations. Access to the PLC
program is secured, accessible only by MCM's technicians to prevent operators
from overriding the treatment process. Relevant information concerning treatment
parameters may be electronically forwarded, at the end of each treatment cycle,
to a designated printer at any location within the facility. In addition, the
system is capable, at the option of the facility, to have the treatment
parameters for all cycles in a day forwarded to MCM's maintenance center.

REGULATIONS AND REGULATORY COMPLIANCE FOR ALTERNATIVE MEDICAL WASTE TREATMENT
TECHNOLOGIES IN THE UNITED STATES

Our use of the Ster-Cid disinfectant in the SteriMed Systems is
registered by the U.S. EPA under FIFRA. The Ster-Cid disinfectant is considered
a pesticide, and is registered under FIFRA Number 71814. FIFRA gives the federal
government control over the distribution, sale and use of pesticides. All
pesticides used in the U.S. must be registered (licensed) by the U.S. EPA under
FIFRA. Registration of pesticides is to seek assurance that they will be
properly labeled, and if used in accordance with label specifications, will not
cause unreasonable harm to the environment.

The SteriMed Systems are regulated at the state level by the individual
states' Environmental, Conservation, Natural Resources, or Health Department.
Each state has its own specific approval requirements. Generally, most states
require an application for registration or approval be submitted along with back
up information, including but not limited to operating manuals, service manuals,
and procedures. Additionally, many states require contingency

and safety plans be submitted, and that efficacy testing be performed. MCM has
demonstrated through efficacy testing that it can inactivate the 4Log10
concentration of Bacillus atrophaeus (formerly Bacillus subtilis) spores. This
meets or exceeds most state regulatory requirements.

The SteriMed has been cleared for marketing in 46 states and the
SteriMed Junior in 40 states. The Ster-Cid disinfectant has been registered in
49 states. We are currently seeking approvals from the remaining states.

Local and county level authorities generally require that discharge
permits be obtained from POTW's by all facilities that discharge a substantial
amount of liquids or specifically regulated substances to the sewer system. The
SteriMed Systems process effluent has been characterized and found to be within
the lower range of the general discharge limits set forth by the National
Pollutant Discharge Elimination System (NPDES) Permitting Program, which are
used to establish POTW discharge limits.

These approvals allow the SteriMed Systems effluent to be discharged to
a municipal sewer and the treated disinfected waste to be disposed of in a
municipal landfill.

The process used by the SteriMed Systems, unlike many other waste
medical disposal technologies, is not subject to the Clean Air Act Amendments of
1990 because there is no incineration or generation of toxic fumes in the
process. It is also not subject to the Hazardous Materials Transportation
Authorization Act of 1994 as there is no transportation of hazardous waste
involved.

REGULATIONS AND REGULATORY COMPLIANCE FOR ALTERNATIVE MEDICAL WASTE TREATMENT
TECHNOLOGIES OUTSIDE OF THE UNITED STATES

CE Mark compliancy is an expected requirement for equipment sold in the
European Union ("EU"). The SteriMed Systems are CE Mark compliant. In order to
meet the specific regulatory requirements of the individual members of the EU,
MCM will undertake further efficacy testing where necessary in order to
demonstrate that the SteriMed Systems conform to all the standards in the
specific EU member country. Outside of the EU, we are required to review and
meet whatever the specific standards a country may impose. In countries where we
have distributors, they are required to obtain the necessary regulatory
approvals on our behalf at their expense.

COMPETITION

RMW has routinely been treated and disposed of by of incineration. Due
to the pollution generated by medical waste incinerators, novel technologies
have been developed for the disposal of RMW. Some of the issues confronting
these technologies are: energy requirements, space requirements, unpleasant
odor, radiation exposure, excessive heat, volume capacity and reduction, steam
and vapor containment, and chemical pollution. The use of the SteriMed Systems
eliminates concern about these issues: space and energy requirements are
minimal, there are no odors, radiation, steam, vapor or heat generated, solid
waste volume is reduced by up to 90% and the disinfecting chemical is 94%
biodegradable. The following are the various competitive technologies:

Autoclave (steam under pressure): Autoclaves and retort systems are the
most common alternative method to incineration used to treat medical waste.
Autoclaves are widely accepted because they have historically been used to
sterilize medical instruments. However, there are drawbacks as autoclaves may
have limitations on the type of waste they can treat, the ability to achieve
volume reduction, and odor problems.

Microwave Technology: Microwave technology is a process of disinfection
that exposes material to moist heat and steam generated by microwave energy. The
waves of microwave energy operate at a very high frequency of around 2.45
billion times per second. This generates the heat needed to change water to
steam and carry out the disinfection process at a temperature between 95 and 100
degrees centigrade. Use of this technology requires that proper precautions be
taken to exclude the treatment of hazardous material so that toxic emissions do
not occur. Also offensive odors may be generated around the unit. The capital
cost is relatively high.

Thermal Processes: Thermal processes are dry heat processes and do not
use water or steam, but forced convection, circulating heated air around the
waste or using radiant heaters. Companies have developed both large and small

dry-heat systems, operating at temperatures between 350oF-700oF. Use of dry heat
requires longer treatment times.

High Heat Thermal Processes: High heat thermal processes operate at or
above incineration temperatures, from 1,000oF to 15,000oF. Pyrolysis, which does
not include combustion or burning, contains chemical reactions that create
gaseous and residual waste products. The emissions are lower than that created
by incineration, but the pyrolysis demands heat generation by resistance heating
such as with bio-oxidation, induction heating, natural gas or a combination of
plasma, resistance hearing and superheated steam.

Radiation: Electron beam technology creates ionized radiation, damaging
cells of microorganisms. Workers must be protected with shields and remain in
areas secured from the radiation.

Chemical Technologies: Disinfecting chemical agents that integrate
shredding and mixing to ensure adequate exposure are used by a variety of
competitors. Chlorine based chemicals, using sodium hypochlorite and chlorine
dioxide, are somewhat controversial as to their environmental effects and their
impact on wastewater. Non-chloride technologies are varied and include peracetic
acid, ozone gas, lime based dry powder, acid and metal catalysts as well as
alkaline hydrolysis technology used for tissue and animal waste.

Among the competitors are Stericycle, Inc., Steris Corporation,
Sanitec, Inc. Positive Impact Waste Solutions, Inc., Waste Processing Solutions
Company, Global Environmental Technologies, LLC, and Waste Reduction, Inc.

COMPETITIVE FEATURES OF THE STERIMED SYSTEMS

Seizing the opportunity afforded by the regulatory changes and pricing
pressures in the healthcare industry, we are positioning our products as viable
alternatives to the traditional medical waste disposal methods. The SteriMed
Systems seek to offer medical waste generators a true on-site option that is
less risky, less expensive, and more environmentally friendly than the
alternatives. The main competitive advantages of the SteriMed Systems are:

Safety
------
a) No need to pack containers of medical waste
b) No need to transport infectious waste through facilities with
patients
c) No need to ship infectious medical waste on public roads
d) Environmentally sound approach for disinfection - uses
biodegradable chemicals; does not release smoke, odor, steam
or other emissions to the air; removes the need for
incineration
e) Noise level during cycle is approx. 70.1dB(A), regarded below
levels of noise safety concerns by most government regulations

Labor
-----
a) Reduce the exposure to infectious waste by limiting the time an
employee handles, stores and packs the waste
b) No need to administer and track waste that is shipped from the
facility
c) Ease of use
d) Employee can continue to perform regular functions while the
SteriMed treatment cycle is their operational

Convenience
-----------
a) Easily installed requiring only electricity, water and sewage
outlet. No special ventilation or lighting required.
b) Can fit through regular doorway.
c) Limited training required for operators.
d) Due to size, units can be strategically placed in a health
care facility near high waste generation sites (e.g. floor of
operating room, infectious disease ward)

Cost Saving
-----------
a) Less labor time
b) No transportation costs to incineration site
c) Our preferred business model is to rent the SteriMed
Systems to U.S. facilities generating the infectious
clinical waste. This model obviates the need for capital
investment by users, and should also reduce previous operating
expenses in disposing of medical waste.

Compliant with Federal and States regulations
---------------------------------------------
Enable infectious medical waste generating facilities to
replace existing systems while meeting federal, state and
local environmental as well as health regulations.

These features are intended to make the use of the SteriMed Systems
a very attractive solution to health care organizations, especially those that
are forced to reconsider their current medical waste management programs because
of federal and state regulations or because of pressures to reduce operating
costs.

MARKETING STRATEGY

We have designed and are implementing a marketing program which
maximizes the uniqueness and strengths of the SteriMed Systems while
enhancing our customers' cash flow and minimizing their financial restraints.
Our sales focus is to those sites which best fit the capabilities and
requirements of our systems. These include those sites generating approximately
2,000 to 12,000 pounds of RMW per month and are able to provide a room with a
minimum of 75 square feet with proper plumbing and electricity for the storage
and operation of the machine. Within the United States these facilities include
dialysis centers, surgical centers, plasma phoresis centers, blood banks,
commercial laboratories (both research and clinical), large physician group
practices and specific sites within hospitals.

Many of these facilities are owned by national or international
corporations operating many facilities. By focusing our sales efforts to these
corporations we will be able to have multiple machine placements within the same
organization. This offers many advantages to the customer and to us. Not only
will we be able to maximize our selling efforts, we will also be able to
compound our warranty and service effectiveness. This strategy should enable us
to maximize resources and quickly obtain market penetration. We are presently
working with a number of these customers in the implementation of this strategy
and in fiscal year 2005, we received our first significant order in the US for
the SteriMed Junior from a major dialysis company.

We do not have the depth of marketing or financial capacity that many
of our competitors have and thus are reliant upon generating interest in our
products by virtue of our technical advantages. This aspect is emphasized in our
limited budget allocated for marketing.

Our business marketing models in the U.S. are either lease or purchase
of the SteriMed Systems. The basic lease terms are a single monthly fee which
will include the cost of the SteriMed, disposables and service for the life of
the lease. Lease terms are usually five years. In the rest of the world, only
the purchase option is available. Leasing is not available outside of the US
because of the potential difficulty in monitoring and collecting monthly leasing
fees. Our distributors, however, are free to sell or lease the SteriMed Systems
in their respective markets. Regulatory approvals are required prior to
marketing in any country, whether the business is conducted by us or our
distributors.

To maximize and augment our sales efforts in the U.S., we have been
actively recruiting distributors. Ideally, we are seeking local and regional
distributors who will have the exclusive right to sell the SteriMed Systems and
related products with their prescribed geographical area. In order to gain
exclusivity, the distributor must commit to minimum annual purchases. The
distributor is obligated to work within the guidelines and regulatory approvals
set up and maintained by us. We have three distributors, and we are in
negotiations with two possible distributors.

Internationally, we have distribution agreements in the following
countries: Argentina, Australia, Brazil, Columbia, Costa Rica, Cyprus, Greece,
Japan, Mexico, Paraguay, Poland, Scandinavia (Norway, Sweden, Finland and

Iceland), Singapore, Taiwan, Tunisia and Uruguay. In each of the countries, it
is the distributors' responsibility to obtain, at their own expense, all
regulatory approvals which will be registered in the name of MCM.

MANUFACTURING

We recognize that to be successful, we need to manufacture units that
are;

1) Robust
2) Reliable
3) Reproducible in their activity

Presently, we manufacture the SteriMed at our facility in Moshav
Moledet, Israel. Our current inventory of the SteriMed Junior was manufactured
by a third party manufacturer in Israel. We are actively seeking alternative
locations in North America for the manufacture of our SteriMed Junior. This
includes subassembly manufacturers which will enable us to complete the final
assembly at our own facilities if this proves to be the most cost effective
solution. We anticipate that we would be able to complete the final assembly of
the SteriMed Junior in our own facilities in the U.S. By the time we will need
larger scale manufacturing capacity, we believe we will have located and
qualified an alternative manufacturing location to fulfill these requirements
and at costs acceptable to us.

Approximately half of the SteriMed Systems' components are commercially
available from third party suppliers. The remaining components are either
generic with modification or customized specifically for the SteriMed. We
presently have depots for parts and supplies located in Ridgefield, NJ and
Moledet, Israel.

MAINTENANCE AND CUSTOMER SERVICE MODEL

Critical to the successful use of the SteriMed Systems is the proper
training of the personnel carrying out the installation, operation and service
of the equipment. The Company provides our customers with a warranty covering
parts and labor for one year. Thereafter, we offer an extended warranty program.
Our technical service staff assists clients in the installation of units and the
training of their staff and on-site operators. This training program is strongly
geared to safety and maintenance to assure ongoing safe and smooth operation of
the unit. After installation and training, operation of the unit is monitored by
our technical staff to assure proper performance. Our technical staff is on call
to assist in fixing problems or perform repairs. Our goal is to minimize
problems through ongoing training and strict adherence to maintenance schedules.
Our Customer Service staff is available to help with any questions or issues our
customers might have.

PROPRIETARY RIGHTS

There exist various medical waste treatment technologies that can be
combined and employed in different ways, making trademarks and patents very
important pieces of intellectual property to possess in the medical waste
treatment industry.

MCM acquired and/or applied for trademarks and patents for our SteriMed
and Ster-Cid products as indicated in the following tables. The validation for
patents is extended to fifteen years, provided an annual fee (on renewal dates)
is paid in the respective country.

SteriMed Systems has an International Class 10 Trademark for Israel,
United States, Canada, Japan, Australia, Mexico, Russia, Hungary, Poland, and
for Community Trademark ("CTM" - European).

MCM STERIMED - INTERNATIONAL CLASS 10 TRADEMARK:
-----------------------------------------------

-------------------------------------------------------------------------------------------------
APPLICATION APPLICATION TRADEMARK RENEWAL
FILE NO. COUNTRY NO. DATE NO. DATE
-------------------------------------------------------------------------------------------------

99200 Israel 113,697 7/20/1997 113,697 07/20/2007
-------------------------------------------------------------------------------------------------
99207 U.S.A. 75/904,419 01/28/2000 2,724,738 10/20/2013
-------------------------------------------------------------------------------------------------

MCM STERIMED - INTERNATIONAL CLASS 10 TRADEMARK: (CONT'D)
---------------------------------------------------------

99208 Canada 1035659 11/12/1999 TMA 596,538 12/04/2018
-------------------------------------------------------------------------------------------------
99209 CTM(European) 1380146 11/11/1999 1380146 11/11/2009
-------------------------------------------------------------------------------------------------
99210 Japan 11-103145 11/12/1999 4462258 03/23/2011
-------------------------------------------------------------------------------------------------
99211 Australia 813208 11/09/1999 813208 11/09/2009
-------------------------------------------------------------------------------------------------
99212 Mexico 472508 02/23/2001 701862 02/23/2011
-------------------------------------------------------------------------------------------------
99214 Russia 99719243 11/18/1999 209618 11/18/2009
-------------------------------------------------------------------------------------------------
99216 Hungary m-9905278 11/10/1999 165158 11/10/2009
-------------------------------------------------------------------------------------------------
99218 Poland Z-209695 11/10/1999 148086 11/10/2009

-------------------------------------------------------------------------------------------------

The Ster-Cid disinfectant has an International Class 5 Trademark for
Israel, United States, Canada, Japan, Australia, Mexico, Russia, Hungary,
Poland, and CTM.

MCM STER-CID INTERNATIONAL CLASS 5 TRADEMARK:
--------------------------------------------

99200 Israel 131893 11/01/1999 131893 11/01/2006
-------------------------------------------------------------------------------------------------
99201 U.S.A. 75/904,150 01/29/2000 2,713,884 05/06/2013
-------------------------------------------------------------------------------------------------
99202 Canada 1035658 11/12/1999 TMA 596,329 12/03/2018
-------------------------------------------------------------------------------------------------
99203 CTM(European) 1380195 11/11/1999 1380195 11/11/2009
-------------------------------------------------------------------------------------------------
99204 Japan 11-103144 11/12/1999 4562185 04/19/2007
-------------------------------------------------------------------------------------------------
99205 Australia 813207 11/09/1999 813207 11/09/2009
-------------------------------------------------------------------------------------------------
99206 Mexico 412940 02/23/2001 656603 02/25/2010
-------------------------------------------------------------------------------------------------
99213 Russia 99719294 11/18/1999 200276 11/17/2009
-------------------------------------------------------------------------------------------------
99215 Hungary M-9905279 11/10/1999 164682 11/10/2009
-------------------------------------------------------------------------------------------------
99217 Poland Z-209696 11/10/1999 145760 11/10/2009
-------------------------------------------------------------------------------------------------

The SteriMed has patents in Australia, Japan, United States, Canada,
Europe and South Africa. Additionally, there are patent applications pending in
the United States (provisional), Australia, Brazil, Mexico, Russia, Canada,
China, India, and Patent Corporation Treaty ("PCT").

MCM STERIMED PATENTS:
--------------------

--------------------------------------------------------------------------------------------------------
APPLICATION
FILE NO. COUNTRY APPLICATION NO. DATE PATENT NO. PATENT DATE VALID UNTIL
--------------------------------------------------------------------------------------------------------

9346 Israel 108,311 01/10/1994 108,311 12/23/1999 01/10/2014
--------------------------------------------------------------------------------------------------------
9452 Australia 10096/95 01/09/1995 684,323 04/2/1998 01/09/2015
--------------------------------------------------------------------------------------------------------
9453 Japan 7-011844 01/23/1995 3058401 04/21/2000 01/27/2015
--------------------------------------------------------------------------------------------------------
9454 U.S.A. 08/369,533 01/05/1995 5,620,654 04/15/1997 04/15/2014
--------------------------------------------------------------------------------------------------------
9456 Canada 2,139,689 01/06/1995 2,139,689 10/5/1999 01/06/2015
--------------------------------------------------------------------------------------------------------
9455 Europe 95630001.6 01/05/1995 EP0662346 03/28/2001 01/05/2015
--------------------------------------------------------------------------------------------------------

MCM STERIMED PCT INTERNATIONAL PHASE PATENTS:
--------------------------------------------

-----------------------------------------------------------------------------------------------------------------
APPLICATION
FILE NO. COUNTRY APPLICATION NO. DATE PATENT NO. PATENT DATE VALID UNTIL
-----------------------------------------------------------------------------------------------------------------

PCT PCT/IL02/00093 02/04/2002 WO2002/062479 A1 08/15/2002 09/05/2005
-----------------------------------------------------------------------------------------------------------------
2337 Australia 2002230065 02/04/2002 Pending* Pending 02/04/2022
-----------------------------------------------------------------------------------------------------------------
2338 Brazil 200300398 07/31/2003 Pending* Pending 02/04/2022
-----------------------------------------------------------------------------------------------------------------
2339 Mexico PA/a/2003/006946 08/04/2003 Pending* Pending 02/04/2022
-----------------------------------------------------------------------------------------------------------------
2340 Russia 2003127023 09/04/2003 Pending* Pending 02/04/2022
-----------------------------------------------------------------------------------------------------------------
2341 So. Africa 2003/5602 07/21/2003 2003/5602 09/23/2003 02/04/2022
-----------------------------------------------------------------------------------------------------------------
2342 Canada 2437219 08/01/2003 Pending* Pending 02/04/2022
-----------------------------------------------------------------------------------------------------------------
2343 China 02806986.2 09/22/2003 Pending* Pending 02/04/2022
-----------------------------------------------------------------------------------------------------------------
2344 India 01389/chenp/03 09/02/2003 Pending* Pending 02/04/2022
-----------------------------------------------------------------------------------------------------------------
2373 USA 09/824,685 04/04/2001 6494391 12/17/2002 04/04/2021
-----------------------------------------------------------------------------------------------------------------
2313/354 Europe 02711185.5 09/05/2003 P210477PCT/EP Pending 02/04/2022
--------------------------------------------------------------------------------------------------=--------------

*Applied for as a temporary patent until the PCT takes effect.

We maintain, in-house, a system that tracks all expiration dates for
our trademarks and patents. This internal tracking system alerts us when renewal
submissions are required.

STRAX INSTITUTE BUSINESS

For several years prior to September 30, 2003, we operated Strax, a
comprehensive breast imaging center located in Lauderhill, Florida. Strax was a
multi-modality breast care center performing approximately 20,000 procedures
annually comprising of x-ray mammography, ultrasound, stereotactic biopsy and
bone densitometry. As of September 30, 2003, we sold Strax for $412,000. Fifty
percent (50%) of the purchase price was paid on closing and the balance is
payable in installments evidenced by a note secured by the accounts receivables
of Strax Institute, Inc. During the first quarter of fiscal year 2005, the
parties agreed to settle the net outstanding balance in a lump sum payment of
$66,000, which was paid in two equal installments in December 2004 and January
2005. Additionally, two of our executive officers are restricted for a period of
five years from competing in the mammography and bone densitometry business in
the States of Florida and New Jersey.

THERAPEUTIC DRUG MONITORING BUSINESS

From June to October 9, 2002, our subsidiary Opus was engaged in the
development, distribution and sale of diagnostic assays, controls and
calibrators for therapeutic drug monitoring ("TDM"), which were sold under the
trademark Innofluor in kit form for use on the Abbott TDx and TDxFLx
instruments. Opus received and accepted an unsolicited offer from Seradyn to
purchase the assets of its TDM Business for $6 million plus future royalties.
Seradyn had been a contract manufacturer of the Opus TDM kits. Under a two year
Consulting Agreement ending on October 8, 2004, Opus consulted Seradyn with
ongoing projects for an annual fee of $50,000. The purchased assets included
three diagnostic assays still in development, for which Opus will receive
royalty payments upon the commercialization of any of these assays based upon
varying percentages of net sales for up to ten years from closing. We have been
informed that one of the assays under development for a new drug for
anti-rejection in transplantation has been completed. The drug has already
received approval in certain countries where the assay test kit to monitor the
drug is already being sold. Caprius, Opus and its three executive officers
entered into non-compete agreements with Seradyn restricting them for five years
from competing in the TDM business.

EMPLOYEES

As of April 11, 2005, we employed fifteen full time employees,
including three senior managers, of which five employees are located at our
facility in Israel.

None of our employees is represented by any labor organization and we
are not aware of any activities seeking such organization. We consider our
relations with employees to be good.

As the level of our activities grow, additional personnel may be
required.

PROPERTIES

We lease 2,758 square feet of office space in Fort Lee, New Jersey for
executive and administrative personnel pursuant to a lease that expires on
September 30, 2005 at a base monthly rental of approximately $6,665, plus
escalation. We also lease approximately 1,500 square feet of space in
Ridgefield, NJ for warehousing and assembly at a monthly cost of $1,850. This
lease expires on July 31, 2005 and is subject to a 5% increment yearly. We are
currently looking to combine these two locations so that we will have a site for
the demonstration of the Sterimed System to prospective customers.

In Israel, we lease 2,300 square feet of industrial space at a monthly
cost of approximately $865 and the lease expires on March 31, 2006.

LITIGATION

In June 2002, Jack Nelson, a former Caprius executive officer and
director, commenced two legal proceedings against us and George Aaron and
Jonathan Joels, executive officers, directors and principal stockholders. The
two complaints alleged that the individual defendants made misrepresentations to
the plaintiff upon their acquisition of a controlling interest in the Company in
1999 and thereafter made other alleged misrepresentations and engaged in
mismanagement and other misconduct and took other actions as to the plaintiff to
the supposed detriment of the plaintiff and Caprius. One action was brought in
Superior Court of New Jersey, Bergen County ("State Court Action"), and the
other was brought as a derivative action in Federal District Court in New Jersey
("Federal Derivative Action"). In September 2003, we resolved the State Court
Action by making an Offer of Judgment which was accepted by the plaintiff. Under
the terms of the Offer of Judgment, which was made without any admission or
finding of liability on part of the defendants, we paid $125,000 to the
plaintiff and the action was discontinued. The cost associated with the Offer of
Judgment was recorded in the selling, general and administrative expenses within
the consolidated statement of operations for the year ended September 30, 2003.

On May 3, 2004, the Court in the Federal Derivative Action granted the
motion made by us and Messrs. Aaron and Joels for judgment on the pleadings
based upon the pre-suit demand requirement and dismissed the plaintiff's
complaint without prejudice, but denied defendants' motion for judgment on the
pleadings based upon the Private Securities Litigation Reform Act. The Court
also granted the plaintiff's cross-motion to file an amended complaint to add
allegations of insider trading.

In September 2002, we were served with a complaint naming us and our
principal officers and directors in the Federal District Court of New Jersey as
a purported class action (the "Class Action"). The allegations in the complaint
cover the period between February 14, 2000 and June 20, 2002. The initial
plaintiff is a relative of the wife of the plaintiff in the State Court Action
and Federal Derivative Action. The allegations in the purported Class Action
were substantially similar to those in the other two Actions. The complaint
sought an unspecified amount of monetary damages, as well as the removal of the
defendant officers as shareholders.

On May 3, 2004, in a decision separate from the decision in the Federal
Derivative Action, the Court granted the defendants' motion and dismissed the
Class Action. The federal securities claims asserted by the plaintiffs were
dismissed with prejudice, and having dismissed all federal law claims, the Court
declined to exercise jurisdiction over the remaining state law claims and
dismissed those claims without prejudice. On May 14, 2004, the plaintiffs filed
a motion for reconsideration, which defendants opposed and subsequently this
motion for reargument was denied. The plaintiff did not file a notice of appeal
during the statutory time period.

On September 30, 2004, our Board received a letter written from Mr.
Nelson's attorney making a demand that we institute a derivative action
substantially similar to the allegations presented in the Federal Derivative
Action. A draft complaint was included with the letter. In December 2004, an
Independent Committee of the Board responded to the letter within the stipulated
90 day period that Mr. Nelson had requested, stating that the Independent
Committee determined that there was no basis for the Company to institute the
derivative action as demanded. There has been no further communication from Mr.
Nelson's attorney.

The independent directors have authorized us to advance the legal
expenses of Messrs. Aaron and Joels in these litigations with respect to claims
against them in their corporate capacities, subject to review of the legal bills
and compliance with applicable law, and Messrs. Aaron and Joels will repay us in
the event it was determined that they were not entitled to be indemnified as to
the claim for which the advance was made.

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

As of April 5, 2005, our directors and executive officers were:

Director
Name Age Position Since
---- --- -------- -----

George Aaron 52 Chairman of the Board, President 1999
and Chief Executive Officer
Jonathan Joels 48 Chief Financial Officer, Vice 1999
President, Treasurer, Secretary
and Director
Elliott Koppel 61 VP Sales and Marketing --
Sol Triebwasser, Ph.D. (1)(2) 83 Director 1984
Jeffrey L. Hymes, M.D. (1)(2) 52 Director 2004

--------------------
(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 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 DeveloGen AG, who recently merged with Peptor Ltd. (the
company that 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.

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.

JEFFREY L. HYMES, M.D. Dr. Hymes has been a Director of the Company
since May 2004. In 1998 Dr. Hymes co-founded National Nephrology Associates
(NNA), a privately held dialysis company, and until its acquisition by Renal
Care Group in April 2004 he had served as NNA's President and Chief Medical
Officer. Prior to that time, Dr. Hymes was a co-founder of REN Corporation, a
publicly traded dialysis company that was sold to GAMBRO in 1995. Dr. Hymes is
currently the President of Nephrology Associates, P.C., Nashville, TN, a
19-physician nephrology practice. Dr. Hymes is a graduate of Yale College and
received his MD degree from the Albert Einstein College of Medicine of Yeshiva
University.

SOL TRIEBWASSER, PH.D. Dr. Triebwasser has been a Director of the
Company's since 1984. Until his retirement in 1996, Dr. Triebwasser was Director
of Technical Journals and Professional Relations for the IBM Corporation in
Yorktown Heights New York, which he joined after receiving his Ph.D. in physics
from Columbia in 1952. He had managed various projects in device research and
applications at IBM, where he is currently a Research Staff member emeritus. Dr.
Triebwasser is a fellow of the Institute for Electrical and Electronic
Engineers, the American Physical Society and the American Association for the
Advancement of Science.

Messrs. Aaron and Joels are brothers-in-law.

The Board of Directors met, either in person or telephonically, six
times in fiscal 2004. Each of the directors attended or participated in at least
75% of the meetings. As part of the terms of the $4.5 million preferred stock
equity financing we agreed to appoint a further independent director. As of this
date no one has been selected.

BOARD COMMITTEES

The Board of Directors has standing Audit and Compensation Committees.

The Audit Committee reviews with our independent accountants the scope
and timing of the accountants' audit services and any other services they are
asked to perform, their report on our financial statements following completion
of their audit and our policies and procedures with respect to internal
accounting and financial controls. In addition, the Audit Committee reviews the
independence of the independent public accountants and makes annual
recommendations to the Board of Directors for the appointment of independent
public accountants for the ensuing year. The Audit Committee was involved in the
selection of new auditors for the 2004 fiscal year. The Compensation Committee
reviews and recommends to the Board of Directors the compensation and benefits
of all our officers, reviews general policy matters relating to compensation and
benefits of employees of the Company and administers our Stock Option Plans.

The Board of Directors appoints other committees as needed.

DIRECTOR COMPENSATION

Directors who are also employees are not paid any fees or additional
compensation for services as members of our Board of Directors or any committee
thereof. In October 2002, Dr. Triebwasser was granted options under our 2002
Stock Option Plan to purchase 5,000 shares of common stock at a price of $3.00
per share vesting over two years. Additionally, the board approved that
effective October 2002, the non-employee director's fee would be $20,000 per
annum. In May 2004, the Board resolved that any new non-employee Board members
would be entitled to an annual fee of $5,000 and 3,750 options under our 2002
Stock Option plan. Upon his appointment to the Board, Dr. Jeffrey Hymes received
the non-employees director fee of $5,000, payable quarterly, and was granted
options to purchase 3,750 shares of common stock exercisable at $4.00 per share,
vesting one third on the grant date and the balance vesting over a two year
period in equal installments.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth certain information concerning all cash
and non-cash compensation awarded to, earned by or paid to our Chief Executive
Officer and other executive officers with total compensation in excess of
$100,000 during the three fiscal years ended September 30, 2004:

Annual Compensation Long Term Compensation
------------------- ----------------------
Awards Payouts
Restricted Securities
Name and Other Annual Stock Underlying LTIP All Other
Principal Salary Bonus Compensation Award(s) Options SARs Payouts compensation
Position Year ($) ($) ($) ($) (#) ($) ($)
---------------- --------- ----------- ----------- -------------- ---------- -------------- --------- --------------

George Aaron 2004 240,000 -0- -0- -0- -0- -0- -0-
President/CEO 2003 240,000 160,000 -0- -0- 15,000 -0- -0-
2002 160,000 -0- -0- -0- -0- -0- -0-
---------------- --------- ----------- ----------- -------------- ---------- -------------- --------- --------------
Jonathan Joels 2004 176,000 -0- -0- -0- -0- -0- -0-
CFO 2003 176,000 112,000 -0- -0- 15,000 -0- -0-
2002 112,000 -0- -0- -0- -0- -0- -0-
---------------- --------- ----------- ----------- -------------- ---------- -------------- --------- --------------
Elliott Koppel 2004 92,000 -0- -0- -0- -0- -0- -0-
2003 92,000 28,000 -0- -0- 5,000 -0- -0-
---------------- --------- ----------- ----------- -------------- ---------- -------------- --------- --------------

We do not have any written employment agreements with any of our
executive officers. Mr. Aaron, Mr. Joels and Mr. Koppel have been paid annual
base salaries of $240,000, $176,000, and $92,000 respectively and we lease
automobiles for Messrs. Aaron and Joels in amounts not to exceed $1,000 and $750
per month, respectively, and also pays their automobile operating expenses. Mr.
Koppel is reimbursed $700 per month for automobile expenses excluding insurance.
Messrs. Aaron, Joels and Koppel are reimbursed for other expenses incurred by
them on behalf of the Company in accordance with Company policies. In October
2002, Messrs. Aaron, Joels and Koppel were paid performance related bonuses of
$160,000, $112,000 and $28,000.

We do 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. As of
September 30, 2004, under our 401(k) plan we did not make any matching
contribution.

STOCK OPTIONS

The following tables set forth contain certain information concerning
the grant of stock options and the number and value of securities underlying
exercisable and unexercisable stock options as of the fiscal year ended
September 30, 2004 by the executive officers listed in the Summary Compensation
Table above.

Individual
Grants

(a) (b) (c) (d) (e)

Name Number of Securities % of Total Options/ Exercise on Base Expiration
Underlying Options/ SARS Granted to Price ($/sh) Date
SARs Granted (#) Employee(s)
in Fiscal Year
------------------------------------------------------------------------------------------------------------------

George Aaron -0- -0- -0- -
Jonathan Joels -0- -0- -0- -
Elliott Koppel -0- -0- -0- -
------------------------------------------------------------------------------------------------------------------

FISCAL YEAR END OPTION VALUE

VALUE OF UNEXERCISED
NUMBER OF SECURITIES UNDERLYING IN-THE-MONEY OPTIONS
UNEXERCISED OPTIONS AT SEPT. 30, AT SEPT. 30, 2003
NAME 2004 EXERCISABLE/UNEXERCISABLE EXERCISABLE ($)
---- ------------------------------ ---------------

George Aaron 15,000/5,000 $-0-
Jonathan Joels 15,000/5,000 $-0-
Elliott Koppel 18,333/1,666 $-0-

Due to the pending expiration of both the 1993 Employee Stock Option
Plan and 1993 Non-Employee Stock Option Plan, in May 2002 our Board of Directors
adopted the 2002 Stock Option Plan ("2002 Plan") which was ratified at our
stockholder meeting of June 26, 2002. The 2002 Plan covers 75,000 shares of
Common Stock reserved for issuance pursuant to the exercise of options granted
thereunder. Under the 2002 Plan, options may be awarded to both employees and
directors. These options may be qualified or not qualified pursuant to the
regulations of the Internal Revenue Code.

During October 2002, we granted a total of 48,050 options to our
officers, directors, and employees under the 2002 Plan for an aggregate of
48,050 shares of Common Stock. Of these, 15,000 options each were granted to
Messrs. Aaron and Joels, 5,000 to Mr. Koppel and 5,000 to Dr. Triebwasser. All
of these options were priced at $3.00 per share, vested one third on the grant
date and the balance vests over a two year period in equal installments. During
May 2004, 3,750 options priced at $4.00 were granted to Dr. Jeffrey Hymes. These
options vested one third on the grant date with the balance vesting over a two
year period in equal installments. All of these options expire 10 years after
the date of grant and were granted at fair market value or higher at time of
grant.

During 1993, we adopted a 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 50,000 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
10,000 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 expired May 25, 2003.

SECURITY OWNERSHIP

The following table sets forth, as of February 28,2005, certain
information regarding the beneficial ownership of our common stock by (i) each
person who is known by us to own beneficially more than five percent of the
outstanding common stock, (ii) each of our directors and executive officers, and
(iii) all directors and executive officers as a group:

Amount and Nature of Percentage of
Name of Beneficial Ownership Securities
Beneficial Owner* Position with Company of Common Stock (1) ***
-----------------------------------------------------------------------------------------------

Special Situations Private Holder of over five 1,344,826(2) 37.03%
Equity Fund, L.P. percent
153 E. 53rd Street
55th Floor
New York, NY 10022

Special Situations Fund III, Holder of over five 448,275(3) 13.09%
L.P. percent
153 E. 53rd Street
55th Floor
New York, NY 10022

Shrikant Mehta Holder of over five 245,894(4) 7.33%
Combine International percent
354 Indusco Court
Troy, Michigan 48083

George Aaron Chairman of the Board; 260,887(5) 7.79%
Chief Executive
Officer; President

Jonathan Joels Director; Chief 255,226(6) 7.62%
Financial Officer; Vice
President; Treasurer;
Secretary

Elliott Koppel VP Sales & Marketing 54,197(7) 1.62%

Sol Triebwasser, Ph.D. Director 5,545(8) **

Jeffrey L. Hymes, M.D. Director 1,250(9) **

All executive officers and 577,105(10) 17.24%
Directors as a group (5
persons)

--------------
* Address of all holders except Special Situations Private Equity Fund, L.P., Special Situations
Fund III, L.P. and Mr. Mehta is c/o Caprius Inc., One Parker Plaza, Fort Lee, NJ 07024
** Less than one percent (1%)
*** Does not include the Series B Preferred Stock, as it is non-voting except on matters directly
related to such series.

(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 February 28, 2005 pursuant to stock options, warrants and convertible
securities.

(2) Includes 310,344 shares underlying warrants presently exercisable and excludes 103,448
shares underlying warrants which are currently not exercisable. Special Situations
Private Equity Fund, L.P. disclaims beneficial ownership of the shares and warrants
held by Special Situations Fund III L.P.

(3) Includes 103,448 shares underlying warrants presently exercisable and excludes 34,482
shares underlying warrants which are currently not exercisable. Special Situations
Fund III L.P. disclaims beneficial ownership of the shares and warrants held by Special
Situations Private Equity Fund, L.P.

(4) Includes 10,000 shares underlying warrants presently exercisable and 25,000 shares
underlying options presently exercisable.

(5) Includes (i) 353 shares in retirement accounts, (ii) 9,075 shares underlying warrants
presently exercisable, (iii) 5 shares jointly owned with his wife and (iv) 20,000 shares
underlying options presently exercisable.

(6) Includes (i) 48,000 shares as trustee for his children, (ii) 8,618 shares underlying
warrants presently exercisable, (iii) 875 shares underlying warrants owned by his wife
for which he disclaims beneficial ownership, (iv) 20,000 shares underlying options
presently exercisable and (v) 17,241 shares in a retirement account.

(7) Includes (i) 4,644 shares underlying warrants and (ii) 20,000 shares underlying options
presently exercisable.

(8) Includes 5,475 shares underlying options presently exercisable.

(9) Includes 1,250 shares underlying options presently exercisable and
excludes 2,500 shares underlying options which are currently not
exercisable.

(10) Includes (i) 22,337 shares underlying warrants and (ii) 66,725 shares
underlying options presently exercisable.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

As a condition to the February 2005 preferred stock placement, we
exchanged fifty percent (50%) of outstanding unsecured loans together with
accrued interest provided by executive officers, Messrs. Aaron, Joels and
Koppel, in the amount of $64,000, $62,357 and $19,566 respectively, into 320,
311 and 97 shares of Series C Preferred Stock, respectively, and repaid the
remaining 50% in cash. Upon the Reverse Split, these shares of Series C
Preferred Stock converted into an aggregate of 25,103 shares of our common
stock. The unsecured loans had been made during the first two quarters of fiscal
year 2005, and had terms identical to those of the $100,000 8% Senior Secured
Convertible Promissory Note outlined above in "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

During the second quarter of fiscal 2004, we authorized short-term
bridge loans for an aggregate of $500,000 through the issuance of loan notes due
on July 31, 2005. The funds were utilized primarily for working capital. These
funds were provided by Mr. Aaron ($150,000), Mr. Joels ($150,000), Mr. Koppel
($65,000), Mr. Joels' brother ($85,000) and others. The loan notes bore interest
at a rate of 11% per annum and were secured by a first lien on the royalties due
to Opus from Seradyn, in accordance with their Royalty Agreement. For every
sixty dollars ($60.00) loaned, the lender received two warrants to purchase one
share of our common stock, exercisable at $5.00 per share for a period of five
years. The exercise price was in excess of the then market price. Pursuant to
the preferred stock placement, these notes were exchanged for 5,000 shares of
Series C Preferred Stock, and the security interest was released. Upon the
Reverse Split, these shares of Series C Preferred Stock converted into 172,414
shares of our common stock.

During Fiscal 2003, MCM conducted business with The P.O.M. Group, Inc.
("POM") located in Michigan. MCM was introduced to POM by Shrikant Mehta, who
was a Caprius director from April 2000 to February 2004 and who beneficially
owns approximately 7.33% of our common stock. Mr. Mehta is also a principal
shareholder in POM. POM has significantly assisted MCM in the design,
manufacture and longevity of certain key components of the MCM SteriMed Systems.
As of April 5, 2005 all monies due to P.O.M for design work, purchased
components and disposables, have been paid in full and we no longer require any
further services.

The independent directors have authorized the Company to advance the
legal expenses of Messrs. Aaron and Joels in the litigations described in
"Business-Litigation," subject to review of the legal bills and in compliance
with applicable regulations and laws, with respect to claims made against them
in their corporate capacities. Each of them undertook to repay his advances in
the event it was determined that he was not entitled to be indemnified as to the
claim for which he received the advances. No determination of advances has been
made for fiscal year ended September 30, 2004.

We believe that each of the above referenced transactions was made on
terms no less favorable to us than could have been obtained from an unaffiliated
third party. Furthermore, any future transactions or loans between us and our
officers, directors, principal stockholders or affiliates will be on terms no
less favorable to us than could be obtained from an unaffiliated third party,
and will be approved by a majority of disinterested directors.

DESCRIPTION OF SECURITIES

COMMON STOCK

We are authorized to issue 50,000,000 shares of common stock, $0.01 par
value, of which 3,321,673 shares were issued and outstanding as of April 5,
2005.

The holders of common stock are entitled to one vote for each share
held of record on all matters to be voted by stockholders. There is no
cumulative voting with respect to the election of directors with the result that
the holders of more than 50% of the shares of common stock and other voting
shares voted for the election of directors can elect all of the directors.

The holders of shares of common stock are entitled to dividends when
and as declared by the Board of Directors from funds legally available
therefore, and, upon liquidation are entitled to share pro rata in any
distribution to holders of common stock, subject to the right of holders of
outstanding preferred stock. No dividends have ever been declared by the Board
of Directors on the common stock. See "Dividend Policy." Holders of our common
stock have no preemptive rights. There are no conversion rights or redemption or
sinking fund provisions with respect to our common stock. All of the outstanding
shares of common stock are, and all shares sold hereunder will be, when issued
upon payment therefore, duly authorized, validly issued, fully paid and
non-assessable.

PREFERRED STOCK

We are authorized to issue 1,000,000 shares of preferred stock, par
value $.01 per share, of which 27,000 shares of Series B Preferred Stock were
outstanding at February 28, 2005. The Series B Preferred Stock ranks senior to
any other shares of preferred stock which may be created and the common stock.
It has a liquidation value of $100.00 per share, plus accrued and unpaid
dividends, is non-voting except if the Company proposes an amendment to its
Certificate of Incorporation which would adversely affect the rights of the
holders of the Series B Preferred Stock, and is convertible into 1,159,793
shares of our common stock, subject to customary anti-dilution provisions. No
fixed dividends are payable on the Series B Preferred Stock, except that if a
dividend is paid on the common stock, dividends are paid on the shares of Series
B Preferred Stock as if they were converted into shares of common stock. The
Series B Preferred Stock is convertible for ten years from the date of purchase,
August 18, 1997, and subject to mandatory conversion upon a change of control or
the expiration of the 10-year period.

On February 15, 2005, we filed a Certificate of Designations
authorizing the Series C Mandatory Convertible Preferred Stock, consisting of
75,000 shares at a stated value of $100 per share. Pursuant to the preferred
stock placement, we issued 66,681 shares of the Series C Preferred Stock, which
automatically convert into shares of common stock at a price of $2.90 per share,
subject to anti-dilution provisions, upon the effectiveness of a 1-for-20
reverse stock split. The holders of these shares of Series C Preferred Stock do
not have any right of conversion. All 66,681 outstanding shares of the Series C
Preferred Stock were converted into 2,299,345 shares of common stock upon the
reverse split.

We may issue the remaining authorized preferred stock in one or more
series having the rights, privileges, and limitations, including voting rights,
conversion rights, liquidation preferences, dividend rights and redemption
rights, as may, from time to time, be determined by the Board of Directors.
Preferred stock may be issued in the future in connection with acquisitions,
financings, or other matters, as the Board of Directors deems appropriate. In
the event that we determine to issue any shares of preferred stock, a
certificate of designation containing the rights, privileges and limitations of
this series of preferred stock will be filed with the Secretary of State of the
State of Delaware. The effect of this preferred stock designation power is that
our Board of Directors alone, subject to Federal securities laws, applicable
blue sky laws, and Delaware law, may be able to authorize the issuance of
preferred stock which could have the effect of delaying, deferring, or
preventing a change in control without further action by our stockholders, and
may adversely affect the voting and other rights of the holders of our common
stock.

TRANSFER AGENT

American Stock Transfer and Trust Company, New York, New York, is the
transfer agent for our common stock.

SELLING STOCKHOLDERS

The selling stockholders are comprised of: (i) persons who beneficially
own an aggregate of 2,299,345 shares of common stock received upon conversion of
the shares of Series C Preferred Stock, (ii) Laidlaw & Co. (UK) Ltd. ("Laidlaw")
(formerly Sands), the selected dealer for the Series C Preferred Stock and

previous note placements, and its designees who beneficially own 151,250 shares
of common stock issuable upon exercise of certain dealer warrants, (iii)
investors in the Series C Preferred Stock placement, who received warrants to
purchase up to 620,689 shares of common stock, (iv) our executive officers, two
of whom also are directors and (v) persons who participated in prior placements
of our securities other than the Series C Preferred Stock placement or the
conversion or exchange of notes or indebtedness for Series C Preferred Stock.
None of the selling stockholders has held any position or office or had any
material relationship with us or any of our predecessors or affiliates within
three years of the date of this prospectus, except for George Aaron, Jonathan
Joels, Elliott Koppel and Beverly Tkaczenko. Mr. Aaron has been Chairman of the
Board, President and CEO since June 1999, and also had served as a director on
our board of directors from 1992 until 1996. Mr. Joels has served as a director,
CFO, Treasurer and Secretary since June 1999. Debra Joels is the wife of
Jonathan Joels. Mr. Koppel has been Vice President of Sales and Marketing since
June 1999. Ms. Tkaczenko has been our Director of Corporate Communications since
June 1998 and an employee since October 1995.

The following table sets forth, as of April 5, 2005 and upon completion
of this offering, information with regard to the beneficial ownership of our
common stock by each of the selling stockholders. The term "Selling Stockholder"
includes the stockholders listed below and their respective transferees,
assignees, pledges, donees and other successors.

Because the selling stockholders may offer all, some or none of their
common stock, no definitive estimate as to the number of shares thereof that
will be held by the selling stockholders after such offering can be provided and
the following table has been prepared on the assumption that all shares of
common stock offered under this prospectus will be sold.

SHARES PERCENT AMOUNT PERCENT
BENEFICIALLY BENEFICIALLY SHARES BENEFICIALLY BENEFICIALLY
OWNED PRIOR TO OWNED BEFORE TO BE OWNED AFTER OWNED AFTER
NAME(1) OFFERING(2) OFFERING OFFERED OFFERING(3) OFFERING

George Aaron 260,887(4) 7.79% 260,887 - *
Diana Anderson 2,000(5) * 2,000 - *
Avenue Asset Partners 18,310 * 18,310 - *
William Bartholomay 18,344 * 18,344 - *
Roberto Bianchi 21,407(6) * 21,407 - *
Bonanza Trust 29,250(5) * 29,250 - *
Carcap Co. LLC 9,172 * 9,172 - *
Chicago Investments Inc. 18,344 * 18,344 - *
Marc A. Cohen 9,172 * 9,172 - *
Robert Cohen 24,137(7) * 24,137 - *
James F. Corman 9,137 * 9,137 - *
Diauthus LLC 12,500(5) * 12,500 - *
FCC Ltd. 18,310 * 18,310 - *
Fiserv Sec. A/C/F Harvey Kohn SEP IRA 18,344 * 18,344 - *
Fiserv Sec. A/C/F Cary Sucoff Con IRA 12,172 * 12,172 - *
Jeff Glassman 9,172 * 9,172 - *
Stanley Goldberg Rev Trust U/A 12/17/93 9,172 * 9,172 - *
Stanley Goldberg Ttee Lynn Intrater 24,137(7) * 24,137 - *
John J. Harte Ttee/John J. Harte MPP u/a 18,344 * 18,344 - *
10/24/01
Debra Joels 875(8) * 875 - *
Jonathan Joels 255,226(9) 7.62% 255,226 - *
Nicholas Joels 32,144(10) * 32,144 - *
Kanter Family Foundation 18,344 * 18,344 - *
Katie & Adam Bridge Partners LP 9,172 * 9,172 - *
Kurt Kilstock 5,000(11) * 5,000 - *
Helen Kohn 27,500(5) * 27,500 - *

Elliott Koppel 54,197(12) 1.62% 54,197 - *
KWG Trust 16,750(5) * 16,750 - *
Laidlaw & Co. (UK) Ltd. 5,000(13) 2.35% 5,000 - *
Little Bear Investments LLC 9,653(14) * 9,653 - *
Frayda Mason 9,000(5) * 9,000 - *
Shrikant Mehta 245,894(15) 7.33% 245,894 - *
Roger Miller 36,724 1.11% 36,724 - *
Sanjay Mody 25,000(16) * 25,000 - *
John Pappajohn 73,034 2.20% 73,034 - *
Wolf Prensky 12,068(17) * 12,068 - *
Zachary Prensky 50,688(18) 1.52% 50,688 - *
Deborah Steinberger Raz and Amir Raz Jtwros 7,344 * 7,344 - *
Deborah Steinberger Raz 1,675(19) * 1,675 - *
David Roush 24,137(7) * 24,137 - *
Alan Rubin 48,274(20) 1.45% 48,274 - *
Sands Brothers Venture Capital LLC 18,344 * 18,344 - *
Sands Brothers Venture Capital LLC II 18,344 * 18,344 - *
Sands Brothers Venture Capital LLC III 110,206 3.32% 110,206 - *
Sands Brothers Venture Capital LLC IV 27,551 * 27,551 - *
Special Situations Fund III, L.P. 482,757(21) 13.95% 482,757 - *
Special Situations Private Equity Fund, L.P. 1,448,274(22) 38.77% 1,448,274 - *
Lisa Sucoff 13,000(5) * 13,000 - *
Ronit Sucoff 27,500(5) * 27,500 - *
Maryellen Spedale 1,250(5) * 1,250 - *
Jonathan Steinberger 8,844(23) * 8,844 - *
Ruth Steinberger and Michel Steinberger 44,150(24) 1.33% 44,150 - *
Ruth Steinberger 3,000(25) * 3,000 - *
Howard Sterling 7,500(5) * 7,500 - *
Trude Taylor 36,655 1.10% 36,655 - *
Beverly Tkaczenko 8,100(26) * 8,100 - *
Valkyrie Leasing LLC 48,274(20) 1.45% 48,274 - *

* Less than one percent (1%).

1. Unless otherwise indicated in the footnotes to this table, the persons
and entities named in the table have sole voting and sole investment
power with respect to all shares beneficially owned, subject to
community property laws where applicable. Beneficial ownership
includes shares of common stock underlying warrants or options,
regardless of when exercisable. Ownership is calculated based upon
3,321,673 shares outstanding as of April 5, 2005.

2. Beneficial ownership includes all shares a holder owns directly or may
acquire through exercisable or non-exercisable purchase rights.

3. Assumes the sale of all shares offered hereby.

4. Includes (i) 9,075 shares issuable upon exercise of warrants at
exercise prices ranging from $1.60 to $5.60 per share and (ii) 20,000
shares issuable upon exercise of options.

5. Consists of a portion of 146,250 shares issuable upon exercise of
warrants (initially granted as two dealer warrants) at an exercise
price of $5.60 per share.

6. Consists of 4,166 shares issuable upon exercise of warrants at
exercise prices ranging from $1.60 to $5.00 per share.

7. Includes 6,896 shares issuable upon exercise of warrants at exercise
prices ranging from $2.90 to $5.60 per share.

8. Consists of 875 shares issuable upon exercise of warrants at an
exercise price of $1.60 per share. She is the wife of Jonathan Joels,
however, she disclaims that Mr. Joels has any beneficial interest in
her shares.

9. Includes (i) 8,618 shares issuable upon exercise of warrants at
exercise prices ranging from of $1.80 to $5.60 per share and (ii)
20,000 shares issuable upon exercise of options. This does not include
875 shares underlying warrants beneficially owned by Mr. Joels' wife.
Mr. Joels disclaims any beneficial interest in such shares.

10. Includes 2,834 shares issuable upon exercise of warrants at an
exercise price of $5.00 per share.

11. Consists of 5,000 shares issuable upon exercise of warrants at an
exercise price of $1.80 per share. Mr. Kilstock, the father-in-law of
Messrs. Aaron and Joels, maintains that neither of them has any
beneficial ownership in his holdings.

12. Includes (i) 4,644 shares issuable upon exercise of warrants at
exercise prices ranging from of $1.60 to $5.60 per share and (ii)
20,000 shares issuable upon exercise of options.

13. Consists of 5,000 shares issuable upon exercise of warrants at an
exercise price of $5.60 per share.

14. Includes 2,757 shares issuable upon exercise of warrants at exercise
prices ranging from $2.90 to $5.60 per share.

15. Includes (i) 10,000 shares issuable upon exercise of warrants at an
exercise price of $1.60 per share and (ii) 25,000 shares issuable upon
exercise of options at an exercise price of $3.00 per share.

16. Consists of 25,000 shares issuable upon exercise of options at an
exercise price of $3.00 per share.

17. Includes 3,448 shares issuable upon exercise of warrants at exercise
prices ranging from $2.90 to $5.60 per share.

18. Includes 14,482 shares issuable upon exercise of warrants at exercise
prices ranging from $2.90 to $5.60 per share.

19. Includes 1,500 shares issuable upon exercise of warrants at an
exercise price of $1.80 per share. Does not include 5,000 shares owned
jointly with her husband.

20. Includes 13,792 shares issuable upon exercise of warrants at exercise
prices ranging from $2.90 to $5.60 per share.

21. Includes 137,930 shares issuable upon exercise of warrants at exercise
prices ranging from $2.90 to $5.60 per share.

22. Includes 413,792 shares issuable upon exercise of warrants at exercise
prices ranging from $2.90 to $5.60 per share.

23. Includes 1,500 shares issuable upon exercise of warrants at an
exercise price of $1.80 per share.

24. Does not include shares separately owned by Ruth Steinberger.

25. Consists of 3,000 shares issuable upon exercise of warrants at an
exercise price of $1.80 per share.

26. Includes (i) 250 shares issuable upon exercise of warrants at an
exercise price of $1.80 per share and (ii) 7,800 shares issuable upon
exercise of options at an exercise price of $3.00 per share.

Laidlaw (formerly Sands) had been retained by us to act as a selected
dealer for the February 2005 Series C Preferred Stock placement, as well as for
the April 2004 convertible promissory notes placement, and a February 2005
bridge loan. As part of its compensation in these placements, we granted dealer
warrants to Laidlaw. Laidlaw has transferred a portion of these warrants to
certain designees. Certain affiliates of Laidlaw (then Sands) participated in
the April 2004 placement.

All selling stockholders who are natural persons have dispositive power
with respect to the shares that they are selling. With regard to selling
stockholders which are not natural persons, the persons with dispositive power
as to their shares are: Avenue Asset Partners (George Parry, Partner), Bonanza
Trust (Jeff Zaluda, Trustee for Agent), Carcap Co. LLC (Richard Carney, Managing
Partner), Chicago Investments Inc. (Joshua S. Kanter, President), Diauthus LLC
(Jeff Zaluda, Trustee for Agent), FCC Ltd. (Yacov Reizman, CEO), Kanter Family
Foundation (Joel S. Kanter, President), Katie & Adam Bridge Partners LP (Steven
Sands, General Partner), KWG Trust (Jeff Zaluda, Trustee for Agent), Laidlaw
(Robert Bonaventura, President), Little Bear Investments LLC (Jeffrey Mann,
Manager), Sands Bros. Venture Capital LLC, II, III, and IV (Steven Sands, Member
Manager), Special Situations Fund III, L.P., Special Situations Private Equity
Fund, L.P. (David M. Greenhouse, General Partner) and Valkyrie Leasing LLC
(Charles Simonyi, President).

Under the terms of the Registration Rights Agreements entered into as
part of the Series C Preferred Stock placement and the corresponding conversion
of promissory notes into Series C Preferred Stock, we are obligated to file this
registration statement by April 16, 2005 and to cause it to become effective by
June 15, 2005, subject to certain adjustments. In the event this registration
statement is not filed by April 16, 2005 or not declared effective by June 15,
2005, we are obligated to make pro rata cash payments to each of the investors
in the placement and each of the note holders, as liquidated damages, in an
amount equal to 1.5% of the aggregate amount invested by such investor under the
Purchase Agreement or invested by such note holder for his note for each 30 day
period thereafter, until such time that the registration statement is filed or
declared effective, as the case may be. Under the terms of the Registration
Rights Agreements, we have agreed to keep the registration statement effective
until all the shares from the preferred stock placement have been sold or such
shares may be sold without the volume restrictions under Rule 144(k) of the
Securities Act.

Under the terms of the Registration Rights Agreement entered into as
part of the April 2004 placement of the convertible promissory notes, which were
converted into Series C Preferred Stock as a condition of the Series C Preferred
Stock placement, in September 2004 we filed a registration statement covering
the shares of common stock underlying the notes, but such registration statement
was never declared effective. We withdrew the prior registration statement and
the noteholders agreed to waive the penalties for failing to cause such
registration statement to be declared effective.

Pursuant to the February 2005 Series C Preferred Stock placement,
George Aaron and Jonathan Joels each agreed to "lock-up" his shares of common
stock for a period of two years, from February 15, 2005, with no sales in the
first year and sales of up to 12,500 shares may be made non-cumulatively each
quarter in the second year.

We are subject to various registration rights agreements with the other
selling stockholders under which we have certain obligations to include their
shares of common stock in this prospectus.

PLAN OF DISTRIBUTION

The selling stockholders of our common stock and any of their pledgees,
assignees and successors-in-interest may, from time to time, sell any or all of
their shares of common stock on the OTC Bulletin Board, market or trading
facility on which the shares are traded or in private transactions. These sales
may be at fixed or negotiated prices. The selling stockholders may use any one
or more of the following methods when selling shares:

o ordinary brokerage transactions and transactions in which
the broker-dealer solicits purchasers;

o block trades in which the broker-dealer will attempt to sell
the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction;

o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;

o an exchange distribution in accordance with the rules of the
applicable exchange;

o privately negotiated transactions;

o settlement of short sales entered into after the date of
this prospectus;

o broker-dealers may agree with the selling stockholders to
sell a specified number of such shares at a stipulated price
per share;

o a combination of any such methods of sale; and

o any other method permitted pursuant to applicable law.

The selling stockholders may also sell shares under Rule 144 under the
ecurities Act, if available, rather than under this prospectus.

Broker-dealers engaged by the selling stockholders may arrange for
other broker-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the selling stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
Brokers or dealers effecting transactions in the shares should confirm the
registration of these securities under the securities laws of the states in
which transactions occur or the existence of an exemption from registration.

The selling stockholders may from time to time pledge or grant a
security interest in some or all of the shares of common stock owned by them
and, if they default in the performance of their secured obligations, the ledge
or secured parties may offer and sell the shares of common stock from time to
time under this prospectus, or under an amendment to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act amending the list
of selling stockholders to include the pledgee, transferee or other successors
in interest as selling stockholders under this prospectus.

The selling stockholders and any broker-dealers or agents that are
involved in selling the shares will be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. The selling stockholders have
informed us that they do not have any agreement or understanding, directly or
indirectly, with any person to distribute the common stock.

We are required to pay certain fees and expenses incurred by us
incident to the registration of the shares. We have agreed to indemnify the
selling stockholders against certain losses, claims, damages and liabilities,
including liabilities under the Securities Act.

LEGAL MATTERS

Thelen Reid & Priest LLP, New York, New York will pass upon the
validity of the common stock being offered hereby .

EXPERTS

Included in the Prospectus constituting part of this Registration
Statement are consolidated financial statements for fiscal 2003, which have been
audited by BDO Seidman, LLP, an independent registered public accounting firm,

and consolidated financial statements for fiscal 2004, which have been audited
by Marcum & Kliegman LLP, an independent registered public accounting firm, to
the extent and for the periods set forth in their respective reports appearing
elsewhere herein, and are included in reliance upon such reports given upon the
authority of such firms as experts in accounting and auditing. In March 2004,
BDO Seidman, LLP ceased serving as our accountants.

AVAILABLE INFORMATION

We have filed with the SEC a registration statement on Form SB-2 under
the Securities Act with respect to the common stock offered hereby. This
prospectus, which constitutes part of the registration statement, does not
contain all of the information set forth in the registration statement and the
exhibits and schedule thereto, certain parts of which are omitted in accordance
with the rules and regulations of the SEC. For further information regarding our
common stock and us please review the registration statement, including
exhibits, schedules and reports filed as a part thereof. Statements in this
prospectus as to the contents of any contract or other document filed as an
exhibit to the registration statement, set forth the material terms of such
contract or other document but are not necessarily complete, and in each
instance reference is made to the copy of such document filed as an exhibit to
the registration statement, each such statement being qualified in all respects
by such reference.

We are also subject to the informational requirements of the Exchange
Act which requires us to file reports, proxy statements and other information
with the SEC. Such reports, proxy statements and other information along with
the registration statement, including the exhibits and schedules thereto, may be
inspected at public reference facilities of the SEC at Judiciary Plaza, 450
Fifth Street N.W., Washington D.C. 20549. Copies of such material can be
obtained from the Public Reference Section of the SEC at Judiciary Plaza, 450
Fifth Street N.W., Washington, D.C. 20549 at prescribed rates. Because we file
documents electronically with the SEC, you may also obtain this information by
visiting the SEC's Internet website at http://www.sec.gov.

CAPRIUS, INC. AND SUBSIDIARIES

I N D E X

-------------------------------------------------------------------------------
PAGE
------------------------------------------------------------------------------
Report of Independent Registered Public Accounting Firm F-2
-------------------------------------------------------------------------------
Report of Independent Registered Public Accounting Firm F-3
-------------------------------------------------------------------------------
Consolidated Balance Sheet as of December 31, 2004 (Unaudited), F-4-F-5
and September 30, 2004
-------------------------------------------------------------------------------
Consolidated Statements of Operations for the years ended F-6
September 30, 2004 and 2003, and for the three months ended
December 31, 2004 and 2003 (Unaudited)
-------------------------------------------------------------------------------
Consolidated Statements of Stockholders' Equity (Deficiency) for F-7
the years ended September 30, 2004 and 2003, and December 31,
2004 (Unaudited)
--------------------------------------------------------------------------------
Consolidated Statements of Cash Flows for the years ended F-8
September 30, 2004 and 2003, and for the three months ended
December 31, 2004 and 2003 (Unaudited
-------------------------------------------------------------------------------
Notes to the Consolidated Financial Statements. F-9-F-29
-------------------------------------------------------------------------------

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
Caprius, Inc.

We have audited the accompanying consolidated balance sheet of Caprius, Inc. and
Subsidiaries (the "Company") as of September 30, 2004, and the related
consolidated statements of operations, stockholders' deficiency, and cash flows
for the year 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 audit.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Caprius, Inc. and
Subsidiaries as of September 30, 2004, and the results of their operations and
their cash flows for the year then ended in conformity with accounting
principles generally accepted in the United States of America.

Marcum & Kliegman LLP
New York, New York
November 16, 2004, except for Note M(1)
which is as of December 1, 2004, Note M(2)
which is as of February 2, 2005, Note M(4)
and Note M(5) which are as of February 15, 2005
and Note M(6) which is as of April 5, 2005.

F-2

REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
Caprius, Inc.

We have audited the accompanying consolidated statements of operations,
stockholders' equity, and cash flows of Caprius, Inc. and subsidiaries for the
year ended September 30, 2003. 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 audit.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the results of operations of Caprius,
Inc. and subsidiaries and their cash flows for the year ended September 30, 2003
in conformity with accounting principles generally accepted in the United States
of America.

The accompanying consolidated financial statements have been prepared
assuming that the Company and its subsidiaries will continue as a going concern.
The Company and its subsidiaries have suffered recurring losses from operations.
Furthermore, the Company and its principal officers and directors are defendants
in certain legal proceedings whereby the plaintiffs are seeking unspecified
monetary damages as well as the removal of the defendant officers as
shareholders of the Company. The consolidated financial statements do not
include any adjustments that might result from the outcome of these
uncertainties. These matters raise substantial doubt about the Company's ability
to continue as a going concern.

/s/ BDO Seidman, LLP

Boston, Massachusetts
November 14, 2003, except with respect
to the matter discussed in paragraph 6
of Note M as to which the date is
April 5, 2005

F-3

CONSOLIDATED BALANCE SHEETS

December 31, September 30,
2004 2004
------------ -------------
(Unaudited)
ASSETS

CURRENT ASSETS:
Cash and cash equivalents $ 19,146 $ 27,583

Accounts receivable, net of reserve for bad debts of $5,163, at
December 31, 2004, and September 30, 2004, respectively 57,828 73,483
Inventories, net 754,685 710,518
Due from sale of Strax 33,000 66,000
Deferred financing cost, net of accumulated
amortization of $102,333 and $63,958 at
December 31, 2004 and September 30, 2004, respectively 51,167 89,542
Other current assets 6,223 15,222
------------ -------------
Total current assets 922,049 982,348
------------ -------------
PROPERTY AND EQUIPMENT:
Office furniture and equipment 167,221 166,019
Equipment for lease 76,666 142,843
Leasehold improvements 19,536 19,302
------------ -------------
263,423 328,164
Less: accumulated depreciation 203,839 192,750
------------ -------------
Net property and equipment 59,584 135,414
------------ -------------
OTHER ASSETS:
Goodwill 737,010 737,010
Intangible assets net of accumulated amortization of $565,083
and $494,750 at December 31, 2004 and September 30, 2004,
respectively 474,917 545,250
Other 13,330 13,330
------------ -------------
Total other assets 1,225,257 1,295,590
------------ -------------
TOTAL ASSETS $ 2,206,890 $ 2,413,352
=========== ===========

F-4

December 31, September 30,
2004 2004
LIABILITIES AND STOCKHOLDERS' DEFICIENCY ---------------------------
(Unaudited)

CURRENT LIABILITIES:

Secured convertible notes, net of unamortized
discount of $100,000 and $150,000 at December
31, 2004 and September 30, 2004 $ 1,400,000 $ 1,350,000
Notes payable - related party, net of unamortized
discount of $10,653 and $15,220 at December
31, 2004 and September 30, 2004 628,140 484,780
Accounts payable 1,146,729 915,116
Accrued expenses 438,202 376,650
Accrued compensation 290,077 185,992
----------- -----------
Total current liabilities 3,903,148 3,312,538
=========== ===========

STOCKHOLDERS' DEFICIENCY :
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, 2004,
September 30, 2004 Liquidation preference $2,700,000 2,700,000 2,700,000
Common stock, $0.01 par value
Authorized - 50,000,000 shares
Issued 1,023,453 shares at December 31, 2004 and
September 30, 2004 10,234 10,234
Additional paid-in capital 68,031,615 68,031,615
Accumulated deficit (72,435,857) (71,638,785)
Treasury stock (1,125 common shares, at cost) (2,250) (2,250)
----------- -----------
Total stockholders' deficiency (1,696,258) (899,186)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 2,206,890 $ 2,413,352
=========== ===========

The accompanying notes are an integral part of these consolidated financial statements

F-5

CAPRIUS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months
Ended
Years Ended September 30, December 31,
2004 2003 2004 2003
--------------------------- ----------------------------
REVENUES: (Unaudited)

Product sales $ 766,119 $ 501,879 $ 236,908 $ 258,884
Equipment rental income 69,342 48,700 5,326 18,349
Consulting and royalty fees 50,000 50,000 20,425 12,500
----------- ----------- ----------- -----------
Total revenues 885,461 600,579 262,659 289,733
----------- ----------- ----------- -----------

OPERATING EXPENSES:
Cost of product sales and equipment rental income 618,944 357,708 161,794 204,719
Research and development 283,697 122,116 76,580 39,595
Selling, general and administrative 3,020,212 4,155,660 672,278 674,236
----------- ----------- ----------- -----------
Total operating expenses 3,922,853 4,635,484 910,652 918,550
----------- ----------- ----------- -----------

Operating loss (3,037,392) (4,034,905) (647,993) (628,817)
----------- ----------- ----------- -----------
Interest expense, net (212,571) (17,962) (149,079) (434)
----------- ----------- ----------- -----------
Loss from continuing operations (3,249,963) (4,052,867) (797,072) (629,251)

Income from operations of discontinued TDM business
segment (including gain on disposal of $3,214,189
in October 2002)
-- 3,287,587 -- --
Loss from operations of discontinued Strax business
segment (including gain on disposal of $125,658
at September 30, 2003)
(105,806) (18,830) -- (28,425)
----------- ----------- ----------- -----------
Loss before minority interest (3,355,769) (784,110) (797,072) (657,676)

Loss applicable to minority interest -- 459,906 -- --
----------- ----------- ----------- -----------
Net loss $(3,355,769) $ (324,204) $ (797,072) $ (657,676)

Net income (loss) per basic and diluted common share
Continuing operations $ (3.18) $ (3.52) $ (0.78) $ (0.61)
Discontinued operations (0.10) 3.20 -- (0.03)
----------- ----------- ----------- -----------
Net loss per basic and diluted common share $ (3.28) $ (0.32) $ (0.78) $ (0.64)
=========== =========== =========== ==========
Weighted average number of common shares outstanding,
basic and diluted
1,022,328 1,020,116 1,022,328 1,022,328
=========== =========== =========== ==========

The accompanying notes are an integral part of these consolidated financial statements.

F-6

CAPRIUS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY(DEFICIENCY)

Series B Convertible
Preferred Stock Common Stock
------------------------ ------------------------
Additional
Number of Number of Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit
----------------------------------------------------------------------------------------------

BALANCE, SEPTEMBER 30, 2002 27,000 $2,700,000 1,020,953 $ 10,209 $ 67,773,240 $ (67,958,812)

Exercise of options - - 2,500 25 2,475 -

Net loss - - - - - (324,204)
----------------------------------------------------------------------------------------------

BALANCE, SEPTEMBER 30, 2003 27,000 2,700,000 1,023,453 10,234 67,775,715 (68,283,016)

Fair Value of warrants issued in
connection with bridge financing - - - - 27,400 -

Fair value of warrants issued in
connection with secured
convertible notes - - - - 28,500 -

Beneficial conversion feature in
connection with secured convertible
notes - - - - 200,000 -

Net loss - - - - - (3,355,769)
----------------------------------------------------------------------------------------------

BALANCE, SEPTEMBER 30, 2004 27,000 2,700,000 1,023,453 10,234 68,031,615 (71,638,785)

Net loss (unaudited) - - - - - (797,072)
----------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2004
(unaudited) 27,000 $2,700,000 1,023,453 $ 10,234 $ 68,031,615 $ (72,435,857)
==============================================================================================

Treasury Stock
------------------------
Total
Number of Stockholders'
Shares Amount Equity(Deficiency)
-----------------------------------------

BALANCE, SEPTEMBER 30, 2002 1,125 $ (2,250) $ 2,522,387

Exercise of options - - 2,500

Net loss - - (324,204)
-----------------------------------------

BALANCE, SEPTEMBER 30, 2003 1,125 (2,250) 2,200,683

Fair Value of warrants issued in
connection with bridge financing - - 27,400

Fair value of warrants issued in
connection with secured
convertible notes - - 28,500

Beneficial conversion feature in
connection with secured convertible
notes - - 200,000

Net loss - - (3,355,769)
----------------------------------------

BALANCE, SEPTEMBER 30, 2004 1,125 (2,250) (899,186)

Net loss (unaudited) - - (797,072)
----------------------------------------
BALANCE, DECEMBER 31, 2004
(unaudited) 1,125 $ (2,250) $ (1,696,258)
========================================

The accompanying notes are an integral part of these consolidated financial statements.

F-7

CAPRIUS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended September 30, Three Months Ended December 31,
------------------------ -------------------------------
2004 2003 2004 2003
(Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (3,355,769) $ (324,204) $ (797,072) $ (657,676)
Adjustments to reconcile net loss to
net cash used in operating activities:
Minority interest in loss of MCM - (459,906) - -
Gain on sale of TDM business - (3,214,189) - -
Gain on sale of Strax business - (125,658) - -
Bad debt expense 77,381 - - -
Amortization of debt discount 73,617 30,962 54,567 -
Amortization of deferred financing cost 63,958 - 38,375 -
Depreciation and amortization 350,181 271,164 81,422 62,328
Write-off of other receivable 101,992 - - -
Changes in operating assets and liabilities:
Accounts receivable, net 6,177 (272,363) 15,654 39,280
Inventories 109,966 (603,012) 22,011 2,432
Other assets (38,580) (58,338) 8,999 (105,408)
Accounts payable and accrued expenses (231,286) (303,512) 397,250 (205,461)
------------- ------------ ------------ -------------
Net cash used in operating activities (2,842,363) (5,059,056) (178,794) (864,505)
------------- ------------ ------------ -------------

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from sale of TDM business - 6,000,000 - -
Proceeds from sale of Strax business 268,629 - 33,000 213,190
Acquisition of property and equipment (48,502) - (1,436) (1,886)
Acquisition of MCM, net of cash acquired
(including loans to MCM) - (88,875) - -
------------- ------------ ------------ -------------
Net cash provided by investing activities 220,127 5,911,125 31,564 211,304
------------- ------------ ------------ -------------

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of common stock - 2,500 - -
Proceeds from issuance of notes payable 500,000 - 138,793 -
Proceeds from issuance of secured convertible 1,500,000 - - -
notes
Financing fees in connection with convertible (125,000) - - -
notes
Repayment of debt and capital lease obligations - (585,032) - -
------------- ------------ ------------ -------------

Net cash provided by (used in) financing 1,875,000 (582,532) 138,793 -
activities
------------- ------------ ------------ -------------

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (747,236) 269,537 (8,437) (653,201)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 774,819 505,282 27,583 774,819
------------- ------------ ------------ -------------

CASH AND CASH EQUIVALENTS, END OF PERIOD $ 27,583 $ 774,819 $ 19,146 $ 121,618
============= ============ ============ =============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid for interest during the period $ 25,697 $ 29,270 $ - $ 115
============= ============ ============ =============

NON CASH TRANSACTIONS:

Sale of Strax Business Segment in exchange for Note
Receivable $ - $ 412,000 $ - $ -
============= ============ ============ =============
Issuance of warrants attached with debt issuance $ 55,900 $ - $ - $ -
============= ============ ============ =============
Beneficial conversion feature in connection with
debt issuance $ 200,000 $ - $ - $ -
============= ============ ============ =============
Transfer of net book value of certain equipment
leases to inventory for sale $ - $ - $ 66,177 $ -
============= ============ ============ =============

The accompanying notes are an integral part of these consolidated financial statements.

F-8

CAPRIUS, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMEMENTS
(Information for the Three Month Periods ended December 31, 2004 and 2003 is
unaudited)

(NOTE A) - Business and Basis of Presentation
---------------------------------------------

Caprius, Inc. and Subsidiaries ("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 constituting the Therapeutic
Drug Monitoring ("TDM") Business. After the close of the 2002 fiscal year, the
Company made major changes in its business through the sale of the TDM Business
and the purchase of a majority interest in M.C.M. Environmental Technologies,
Inc. ("MCM"). Until the end of 2003 fiscal year, the Company continued to own
and operate a comprehensive imaging center located in Lauderhill, Florida. On
September 30, 2003, the Company completed the sale of the Strax Institute
("Strax") to Eastern Medical Technologies. The sale consisted of the business of
the Strax Institute comprehensive breast imaging center located in Lauderhill,
Florida.

The Company has business operations located in Israel. Although the
region is considered to be economically stable, it is always possible that
unanticipated events in foreign countries could disrupt the Company's
operations.

During the fiscal year ended September 30, 2004, and September 30, 2003
the Company's operations were the medical waste business. As discussed in Notes
I & K, the Company disposed of its TDM business in October, 2002 and Strax
effective September 30, 2003. Operations related to the TDM business and Strax
have been reclassified to discontinued operations for the years ended September
30, 2004 and 2003.

Unaudited Interim Information

The accompanying consolidated financial statements for the three months
ended December 31, 2004 and 2003 are unaudited; however, in the opinion of
management all adjustments (consisting solely of normal recurring adjustments)
necessary to a fair presentation of the consolidated financial statements for
these interim periods have been made. The results of the interim period are not
necessarily indicative of the results to be obtained for a full fiscal year.

(NOTE B) - Summary of Significant Accounting Policies
-----------------------------------------------------

[1] Principles of Consolidation

The consolidated financial statements include the accounts of the
Company and its wholly or majority owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.

[2] Revenue Recognition

The breast imaging center (sold in fiscal 2003) recognized revenue as
services were provided to patients. Reimbursements for services provided to
patients covered by Blue Cross/Blue Shield, Medicare, Medicaid, HMOs and other
contracted insurance programs are generally less than rates charged by the
Company. Differences between gross charges and estimated third-party payments
were 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 (sold in
fiscal 2003) was recognized when the products were shipped to the customer.

F-9

Revenues from the MCM medical waste business are recognized when
SteriMed units are sold or rented to customers. Units under rental programs are
billed on a monthly basis. Any disposables or additional services, including
training and maintenance, are billed when shipped or provided. EITF Issue No.
00-21 Accounting for Revenue Arrangements with Multiple Deliverables" was
effective for the Company beginning July 1, 2003, and did not have a material
effect on the Company's results of operations.

[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] Allowance for Doubtful Accounts:

The Company recognizes an allowance for doubtful accounts to ensure
that accounts receivable are not overstated due to uncollectibility. Bad debt
reserves are maintained for all customers based on a variety of factors,
including the length of time the receivables are past due, significant one-time
events and historical experience. An additional reserve for individual accounts
is recorded when the Company becomes aware of a customer's inability to meet its
financial obligation, such as in the case of bankruptcy filings or deterioration
in the customer's operating results or financial position. If the circumstances
related to customers change, estimates of the recoverability of receivables
would be further adjusted.

[5] Product Warranties

The estimated future warranty obligations related to the product sales
are provided by charges to operations in the period in which the related revenue
is recognized. The basic warranty covers parts and labor for one year,
thereafter extended warranties are available. These charges were deemed to be
immaterial in each of the years ended September 30, 2004 and 2003 and three
months ended December 31, 2004 and 2003 (Unaudited).

[6] Shipping and Handling Costs

The Company includes shipping and handling costs in the statement of
operations as part of cost of sales. These costs were deemed immaterial for the
years ended September 30, 2004 and 2003 and December 31, 2004 and 2003
(Unaudited).

[7] Inventories

Inventories are accounted for at the lower of cost or market using the
first-in, first-out ("FIFO") method. The Company's policy is to reserve or
write-off surplus or obsolete inventory. Inventory is comprised of materials,
labor and manufacturing overhead costs.

[8] 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.
Expenditures for maintenance and repairs that do not improve or extend the life
of the expected assets are expensed to operations, while expenditures for major
upgrades to existing assets are capitalized.

F-10

Asset Classification Useful Lives
-------------------- ------------
Office furniture and equipment 3-5 years
Leasehold improvements Term of Lease
Equipment for lease 5 years

[9] Impairment of Long-Lived Assets

In accordance with Statement of Financial Accounting Standards ("SFAS")
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," the
Company and its subsidiaries review the carrying values of their long-lived
assets (other than goodwill) for possible impairment whenever events or changes
in circumstances indicate that the carrying amounts of the assets may not be
recoverable. Any long-lived assets held for disposal are reported at the lower
of their carrying amounts or fair values less costs to sell.

[10] Goodwill and Other Intangibles

The Company has adopted the provisions of SFAS No. 141, "Business
Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS
No. 141 is effective as to any business combination occurring after June 30,
2001 and certain transition provisions that affect accounting for business
combinations prior to June 30, 2001 are effective as of the date SFAS No. 142 is
applied in its entirety. Goodwill relating to acquisitions completed subsequent
to June 30, 2001 is not amortized and is subject to impairment testing. In
addition, effective January 1, 2002, the Company will no longer be required to
amortize goodwill and certain other intangibles assets relating to acquisitions
completed prior to July 1, 2001.

SFAS No. 142 provides, among other things, that goodwill and intangible
assets with indeterminate lives shall not be amortized. Goodwill shall be
assigned to a reporting unit and annually tested for impairment. Intangible
assets with determinate lives shall be amortized over their estimated useful
lives, with the useful lives reassessed continuously, and shall be assessed for
impairment under the provisions of SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". Goodwill is
also assessed for impairment on an interim basis when events and circumstances
warrant. The Company assesses whether an impairment loss should be recognized
and measured by comparing the fair value of the "reporting unit" to the carrying
value, including goodwill. If the carrying value exceeds fair value, then the
Company will compare the implied fair value of the goodwill (as defined in SFAS
No. 142) to the carrying amount of the goodwill. If the carrying amount of the
goodwill exceeds the implied fair value, then the goodwill will be adjusted to
the implied fair value. At September 30, 2004, goodwill results from the excess
of cost over the fair value of net assets acquired related to the MCM business.

[11] Net Loss Per Share

Net loss per share is computed in accordance with SFAS 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.
Diluted loss per share reflects the potential dilution that could occur through
the effect of common shares issuable upon the exercise of stock options,
warrants and convertible securities. For the year ended September 30, 2004,
potential common shares amount to 859,223 shares, as compared to 342,745 for the
year ended September 30, 2003 and have not been included in the computation of
diluted loss per share since the effect would be antidilutive. For the periods
ended December 31, 2004 and 2003, potential common shares amount to 844,910 and

F-11

342,743 respectively, and have not been included in the computation of diluted
loss per share since the effect would be antidilutive.

[12] Income Taxes

The Company provides for federal and state income taxes currently
payable, as well as for those deferred because of timing differences between
reporting income and expenses for financial statement purposes versus tax
purposes. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the carrying amount of assets
and liabilities for financial reporting purposes and the amounts used for income
tax purposes. Deferred tax assets and liabilities are measured using the enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recoverable or settled. The effect of a
change in tax rates is recognized as income or expense in the period of the
change. A valuation allowance is established, when necessary, to reduce deferred
income tax assets to the amount that is more likely than not to be realized.

[13] Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America, 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.

[14] Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, notes and accounts
receivable, accounts payable and accrued expenses are reasonable estimates of
their fair values because of the short-term nature of those instruments. The
Company estimates that the carrying values of debt approximate fair value as the
notes bear interest at current market rates.

[15] Reclassifications

Certain reclassifications have been made to prior period amounts to
conform to the current year presentation.

[16] Foreign Currency

The Company follows the provisions of SFAS No. 52, "Foreign Currency
Translation." The functional currency of the Company's foreign subsidiary is the
U.S. dollar. All foreign currency asset and liability amounts are re-measured
into U.S. dollars at end-of-period exchange rates, except for certain assets,
which are measured at historical rates. Foreign currency income and expense are
re-measured at average exchange rates in effect during the year, except for
expenses related to balance sheet amounts re-measured at historical exchange
rates. Exchange gains and losses arising from re-measurement of foreign
currency-denominated monetary assets and liabilities are included in operations
in the period in which they occur. Exchange gains and losses included in the
accompanying consolidated statements of operations are $280 and $24,267 for the
years ended September 30, 2004 and 2003 and $9,202 and $1,551 for the three
months ended December 31, 2004 and 2003 (Unaudited).

[17] Recent Accounting Pronouncements

In January 2003, the Financial Accounting Standards Board ("FASB")
issued Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest
Entities, an Interpretation of ARB No. 51." FIN 46 requires certain variable

F-12

interest entities to be consolidated by the primary beneficiary of the entity if
the equity investors in the entity do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional financial support from other
parties. FIN 46 is effective for all new variable interest entities created or
acquired after January 31, 2003. For variable interest entities created or
acquired prior to February 1, 2003, the provisions of FIN 46 must be applied for
the first interim or annual period beginning after December 15, 2003. In
December 2003, the FASB issued Interpretation No. 46(R) ("FIN 46R") which
revised certain provisions of FIN 46. Publicly reporting entities that are small
business issuers must apply FIN 46R to all entities subject to FIN 46R no later
than the end of the first reporting period that ends after December 15, 2004 (as
of December 31, 2004, for a calendar year enterprise) The effective date
includes those entities to which FIN 46 had previously been applied. However,
prior to the application of FIN 46R, a public entity that is a small business
issuer shall apply FIN 46 or FIN 46R to those entities that are considered
special-purpose entities no later than as of the end of the first reporting
period that ends after December 15, 2003. The Company does not have any entities
that require disclosure or new consolidation as a result of adopting the
provisions of FIN 46R.

In November 2002, the Emerging Issues Task Force (EITF) reached
consensus on Issue No. 00-21, Revenue Arrangements with Multiple Deliverables.
Revenue arrangements with multiple deliverables include arrangements which
provide for the delivery or performance of multiple products, services and/or
rights to use assets where performance may occur at different points in time or
over different periods of time. EITF Issue No. 00-21 was effective for the
Company beginning July 1, 2003, and did not have a material effect on the
Company's results of operations.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity". SFAS
No. 150 is the first phase of the FASB's project on liabilities and equity. SFAS
No. 150 provides guidance on how an entity classifies and measures certain
financial instruments with characteristics of both liabilities and equity. Many
of these instruments were previously classified as equity. For example, if an
employer's issuance of its shares to a key employee requires the employer to
redeem the shares upon the employee's death, then those shares must be
classified as a liability, not as equity. For publicly-held companies, SFAS No.
150 is effective for financial instruments entered into or modified after May
31, 2003. SFAS No. 150 requires companies to record the cumulative effect of
financial instruments existing at the adoption date. The Company does not
believe the adoption of SFAS 150 will have a significant effect on the Company's
operations, financial position or cash flows.

In November 2004, the FASB issued SFAS No. 151 "Inventory Costs, an
amendment of ARB No. 43, Chapter 4. The amendments made by Statement 151 clarify
that abnormal amounts of idle facility expense, freight, handling costs, and
wasted materials (spoilage) should be recognized as current-period charges and
require the allocation of fixed production overheads to inventory based on the
normal capacity of the production facilities. The guidance is effective for
inventory costs incurred during fiscal years beginning after June 15, 2005.
Earlier application is permitted for inventory costs incurred during fiscal
years beginning after November 23, 2004. The Company is in the process of
evaluating whether the adoption of SFAS 151 will have a significant impact on
the Company's overall results of operations or financial position.

F-13

[18] Stock-Based Compensation

The Company accounts for stock-based compensation under the intrinsic
value method in accordance with the provisions of APB Opinion No. 25,
"Accounting for Stock Issued to Employees" and related interpretations.

In December 2002 the Financial Accounting Standards Board (FASB) issued
SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and
Disclosure." SFAS No. 148, which amends SFAS No. 123, requires the measurement
of the fair value of stock options or warrants to be included in the statement
of operations or disclosed in the notes to financial statements. The Company has
determined that it will account for its stock-based compensation under the
Accounting Principles Board (APB) No. 25 and elect the disclosure-only
alternative under SFAS No. 148. The Company has computed the pro forma
disclosures under SFAS No. 148 for options and warrants granted using the
Black-Scholes option-pricing model for the years ended September 30, 2004 and
2003. The assumptions used during the years ended September 30, 2004 and 2003
were as follows:

F-14

------------------------------------------------- ------------------------------
SEPTEMBER 30,
------------------------------------------------- ---------------- -------------
2004 2003
---- ----
------------------------------------------------- ---------------- -------------

Risk free interest rate 4.00 - 5.00% 5.00%
------------------------------------------------- ---------------- -------------
Expected dividend yield -- --
------------------------------------------------- ---------------- -------------
Expected lives 10 years 10 years
------------------------------------------------- ---------------- -------------
Expected volatility 29 - 80% 80%
------------------------------------------------- ---------------- -------------
Weighted average value of grants per share $1.80 $2.00
------------------------------------------------- ---------------- -------------
Weighted average remaining contractual 7.3 5.9
life of options outstanding (years)
------------------------------------------------- ---------------- -------------

The pro forma effect of applying FAS No. 148 would be as follows:

------------------------------------------------------------------- ---------------------------
THREE MONTHS ENDED FOR THE YEARS ENDED
------------------------------------------------------------------- ---------------------------
DECEMBER 31, SEPTEMBER 30,
(UNAUDITED)
-----------------------------------------------------------------------------------------------
2004 2003 2004 2003
-----------------------------------------------------------------------------------------------

Net Loss, as reported $(797,072) $(657,676) $(3,355,769) $(324,204)
-----------------------------------------------------------------------------------------------
Add: Stock-based employee
compensation included in
reported loss - - - -
-----------------------------------------------------------------------------------------------
Less: Stock-based employee
compensation as determined under
fair value based method for all
awards. (818) (13,687) (56,371) (112,544)
-----------------------------------------------------------------------------------------------
Pro forma net loss $(797,890) $(671,363) $(3,412,140) $(436,748)
========== ========== ============ ==========
-----------------------------------------------------------------------------------------------
Net Loss per share:
-----------------------------------------------------------------------------------------------
Basic and diluted - as reported $(0.78) $(0.64) $ (3.28) $ (0.32)
-----------------------------------------------------------------------------------------------
Basic and diluted - pro forma $(0.78) $(0.66) $ (3.33) $ (0.43)
-----------------------------------------------------------------------------------------------

[19] Concentration of Credit Risk and Significant Customers

SFAS 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.

Financial instruments which potentially expose the Company to
concentration of credit risk, are mainly comprised of trade accounts receivable.
Management believes its credit policies are prudent and reflect normal industry
terms and business risk. The Company does not anticipate non-performance by the
counter parties and, accordingly, does not require collateral. The Company
maintains reserves for potential credit losses and historically such losses, in
the aggregate, have not exceeded management's expectations. The Company
purchases a substantial amount of its inventory products from one principal
supplier. If in the future the supplier were to cease to supply these inventory
products, management believes there are alternative vendors available to meet
its inventory requirements. For the year ended September 30, 2004, two customers
accounted for approximately 56% and 16% of the consolidated total revenue,
respectively. Accounts receivable due from these customers as of September 30,
2004 was $45,267 and $0. For the year ended September 30, 2003, one customer
accounted for approximately 30% of the consolidated total revenue.

F-15

For the three months ended December 31, 2004,(Unaudited) revenue from
four customers was approximately $91,000, $56,000, $42,000 and $41,000 which
represented approximately 88% of the total revenue. At December 31, 2004
accounts receivable from these customers were approximately $0, $45,267, $0 and
$0 respectively. For the three months ended December 31, 2003, (Unaudited)
revenue from two customers was approximately $121,000 (2004-$56,000) and
$124,000 (2004-$41,000), which represented approximately 85% of the total
revenue.

The Company maintains cash deposits with financial institutions, which
from time to time may exceed federally insured limits. The Company has not
experienced any losses and believes it is not exposed to any significant credit
risk from cash. At September 30, 2004, and December 31, 2004 (Unaudited) the
Company did not have cash balances on deposit that exceeded the federally
insured limits.

[20] Intangible Assets

Intangible assets consisted of technology, customer relationships and
permits, and are amortized on a straight-line basis over their estimated useful
lives of three to five years. The carrying value of intangible assets will be
reviewed annually by the Company to ensure that impairments are recognized when
the future operating cash flows expected to be derived from such intangible
assets are less than carrying value. Total amortization expense related to the
other intangible assets for each of the years ended September 30, 2004 and 2003
were approximately $281,300 and $213,417, respectively.

-------------------- ---------------- ------------------ -----------------------------------------
DECEMBER 31,2004
ACCUMULATED SEPTEMBER 30,2004 (UNAUDITED)
-------------------- ---------------- ------------------ -----------------------------------------
ASSET TYPE COST AMORTIZATION NET BOOK VALUE NET BOOK VALUE
-------------------- ---------------- ------------------ -----------------------------------------

Technology $550,000 $320,833 $229,167 $183,333
-------------------- ---------------- ------------------ -----------------------------------------
Patents 290,000 103,917 186,083 120,000
-------------------- ---------------- ------------------ -----------------------------------------
Customer
Relationships 200,000 70,000 130,000 171,584
-------------------- ---------------- ------------------ -----------------------------------------
$1,040,000 $494,750 $545,250 $474,917
========== ======== ======== ========
-------------------------- ---------------- ------------------ ---------------------- ------------

Expected amortization over the next four years is as follows:

FISCAL PERIOD AMORTIZATION

2005 281,333
2006 143,834
2007 98,000
2008 22,083
--------
$545,250
========

(NOTE C) -Inventories

Inventories consist of the following, net of reserves of approximately
$34,200 as of September 30, 2004 and December 31, 2004 (Unaudited):

-------------------------------------------------------------------
December 31, 2004 September 30, 2004
-------------------------------------------------------------------
(Unaudited)
-------------------------------------------------------------------

Raw Materials $315,523 $273,942
-------------------------------------------------------------------
Finished Goods 439,162 436,576
------- -------
-------------------------------------------------------------------
$754,685 $710,518
======== ========
-------------------------------------------------------------------

F-16

(NOTE D) - Notes Payable and Line of Credit
-------------------------------------------

During the third quarter of fiscal 2004, the Company raised an
aggregate of $1.5 million through the issuance of 8% Senior Secured Convertible
Promissory Notes ("the Notes"), prior to underwriting fees and expenses. The
proceeds were used for general working capital. The Company granted a security
interest in substantially all of the assets of the Company. The Notes mature in
one year and can be converted into shares of common stock at the election of the
investor at any time using a conversion price of $4.00 per share. If certain
conditions are not met as of September 30, 2004, then the conversion price shall
be reduced to $3.00 per share. The beneficial conversion feature of the Notes,
amounted to $200,000 and as such the amount shall be treated as a discount to
debt and a corresponding increase to paid in capital. This amount shall be
amortized over the life of the loan. Amortization for the year ended September
30, 2004 amounted to $50,000, and that amount is included in interest expense,
net in the consolidated statement of operations. The financing was arranged
through Sands Brothers International Ltd. ("Sands") which has been retained by
the Company to act as selected dealer for the sale and issuance of the Notes.
Based upon the funds raised, Sands received a six percent fee and an expense
allowance of one percent of the gross proceeds and warrants were valued at
$28,500 using the Black Scholes Model to purchase 71,250 shares of the Company's
common stock at an exercise price of $5.60 per share for a period of five years.
The total fees for the offering were $125,000. The debt issuance costs are being
amortized over the term of the loan. Amortization for the year ended September
30, 2004 amounted to $63,958, and that amount is included in interest expense,
net in the consolidated statement of operations. Amortization for the three
month period ended December 31, 2004 amounted to $38,375 and that amount is
included in interest expense, net in the consolidated statement of operations.
On February 15, the Company closed on a $4.5 million preferred stock equity
financing (see Note M) As a condition of this financing, the holders of the
Notes amended and converted their Notes together with accrued interest, into an
aggregate of 15,953 shares of Series C Mandatory Convertible Preferred Stock.

Notes Payable - Related Party

During the three month period ended December 31, 2004,(Unaudited) the
Company was advanced the principal amount of approximately $138,790 through
short term loans until additional equity funding was secured. The terms of the
loans are identical to the terms of the $100,000 8% Senior Secured Convertible
Promissory Note outlined in Note M(2). The allocated fair value of the warrants
associated with this advance is deemed to be immaterial. These short-term loans
were provided by executive officers, Messrs. Aaron, Joels, and Koppel who
advanced approximately $64,000, 62,350 and $12,440, respectively. These funds
were utilized for general working capital purposes. As a condition of this
financing, the holders of the Notes exchanged 50% of their indebtedness for 694
shares of Series C Mandatory Convertible Preferred Stock and were paid the
balance of their notes inclusive of interest from the net proceeds of the $4.5
million preferred stock equity financing of February 15, 2005 (see Note M) and
the security interest was terminated.

During the second quarter of fiscal 2004, the Company authorized a
short-term bridge loan for an aggregate of $500,000 through the issuance of loan
notes due on July 31, 2005. The funds were utilized primarily for general
working capital. The majority of the funds were provided by management of the
Company. The loan notes bear interest at a rate of 11% per annum and are secured
by a first lien on any royalties received by Opus Diagnostics Inc. from Seradyn,
Inc. in accordance with their Royalty Agreement. For every sixty dollars

F-17

($60.00) loaned, the lender received two warrants to purchase one share of
Common Stock, exercisable at $5.00 per share for a period of five years. The
warrants were valued at $27,400 using the Black Scholes Model and such amount
was treated as a discount to debt and a corresponding increase to paid in
capital. The discount is being amortized over the life of the loan. For the year
ended September 30, 2004, the Company recorded an additional interest expense
related to this discount of approximately $12,200, and that amount is included
in interest expense, net in the consolidated statement of operations. For the
three month period ended December 31, 2004, (Unaudited) the Company recorded an
additional interest expense related to this discount of approximately $4,600,
and that amount is included in interest expense, net in the consolidated
statement of operations. On February 15, 2005 the Company closed on a $4.5
million preferred stock equity financing (see Note M). As a condition of this
financing the holders of the Notes converted their notes, into an aggregate of
5,000 shares of Series C Mandatory Convertible Preferred Stock and the security
interest was terminated.

Line of Credit - Related Party

During 2002, the Company entered into a $500,000 line of credit
agreement with Mr. Mehta, a board member of the Company that was to expire on
March 2004. Borrowings under the line were to bear interest at 11% per annum. In
connection with this agreement, the Company issued warrants to purchase 25,000
shares of the Company's common stock at an exercise price of $2.20. The warrants
were exercisable immediately and were to expire in September 2007. These
warrants were determined to have a market value of $41,350 which is being
amortized over the term of the related debt agreement. In February 2004, Mr.
Mehta and the Company were unable to reach mutually satisfactory terms for the
underlying provisions of the loan, and therefore Mr. Mehta relinquished his
offer for the line of credit and the warrants granted to him were cancelled.

(NOTE E) - Employee Benefits
----------------------------

The Company sponsors a Qualified Retirement Plan under section 401(k)
of the Internal Revenue Code. Caprius employees become eligible for
participation after completing 3 months of service and attaining the age of
twenty-one. For the years ended September 30, 2004 and 2003 and December 31,
2004 (Unaudited) the Company has not adopted a matching option to the plan.

(NOTE F) - Income Taxes
-----------------------

At September 30, 2004, the Company had a deferred tax asset totaling
approximately $13,560,000, due primarily to net operating loss carryovers. A
valuation allowance was recorded in 2004 for the full amount of this asset due
to uncertainty as to the realization of the benefit. The change in the valuation
allowance in 2004 increased by approximately $970,000.

The Company files its tax return on a consolidated basis, US tax rules
prohibit the consolidation of its foreign subsidiary. The Company's Israeli
subsidiary had carried forward losses for tax purposes in the amount of
approximately $7,000,000. The Company recorded a full valuation allowance for
the carry forward loses.

At September 30, 2004 the Company had available net operating loss
carryforwards for tax purposes, expiring from 2008 through 2024 of approximately
$40.6 million. The Internal Revenue Code contains provisions which will limit
the net operating loss carry forward available for use in any given year if
significant changes in ownership interest of the Company occur.

F-18

(NOTE G) - Commitments and Contingencies
----------------------------------------

[1] Operating leases

The Company leases facilities 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. Lease
expense for all operating leases totaled approximately $122,843 and $105,300 for
the years ended September 30, 2004 and 2003, respectively, and was recorded as
part of selling, general and administrative expenses within the consolidated
statement of operations. Future minimum rental commitments under operating
leases are as follows:

Fiscal Year Amount
----------- ------

2005 46,650
-------
Total $46,650
=======

[2] Legal proceedings

In June 2002, Jack Nelson, a former Caprius executive officer and
director, commenced two legal proceedings against us and George Aaron and
Jonathan Joels, executive officers, directors and principal stockholders. The
two complaints alleged that the individual defendants made misrepresentations to
the plaintiff upon their acquisition of a controlling interest in the Company in
1999 and thereafter made other alleged misrepresentations and engaged in
mismanagement and other misconduct and took other actions as to the plaintiff to
the supposed detriment of the plaintiff and Caprius. One action was brought in
Superior Court of New Jersey, Bergen County ("State Court Action"), and the
other was brought as a derivative action in Federal District Court in New Jersey
("Federal Derivative Action"). In September 2003, we resolved the State Court
Action by making an Offer of Judgment which was accepted by the plaintiff. Under
the terms of the Offer of Judgment, which was made without any admission or
finding of liability on part of the defendants, we paid $125,000 to the
plaintiff and the action was discontinued. The cost associated with the Offer of
Judgment was recorded in selling, general and administrative expenses within the
consolidated statement of operations for the year ended September 30, 2003.

F-19

On September 30, 2004, our Board received a letter written from Mr.
Nelson's attorney making a demand that we institute a derivative action
substantially similar to the allegations presented in the Federal Derivative
Action. A draft complaint was included with the letter. An Independent Committee
of the Board responded to the letter within the stipulated 90 day period that
Mr. Nelson had requested, stating that the Independent Committee determined that
there was no basis for the Company to institute the derivative action as
demanded. There has been no further communication from Mr. Nelson's attorney.

In September 2002, BDC Corp., d/b/a BDC Consulting Corp., brought an
action against us and Mr. Aaron in the Circuit Court for the Seventeenth
Judicial Circuit, Broward County, Florida seeking an unspecified amount of
damages arising from the defendants' alleged tortious interference with a series
of agreements between the plaintiff and third party MCM pursuant to which the
plaintiff had intended to purchase MCM. Although we believed there was no merit
to the plaintiff's claim, in October 2003, in order to avoid a lengthy and
expensive litigation, we and Mr. Aaron settled the action for the sum of $83,000
recorded in selling, general and administrative expenses within the consolidated
statement of operations for the year ended September 30, 2003. The purchaser of
Strax is an entity controlled by the same person who is a principal in BDC Corp.
Under our Purchase Agreement for the purchase of the majority interest in MCM,
MCM, its subsidiaries and certain pre-existing shareholders of MCM have certain
obligations to indemnify us with respect to damages, losses, liabilities, costs
and expenses arising out of any claim or controversy in respect to the BDC
complaint. This indemnification has been satisfied by the indemnifying
shareholders either through the required payment of monies or by additional
shares being allocated to the Company.

(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 convertible into 57,989shares of
Common Stock, subject to customary anti-dilution provisions. No fixed dividends
are payable on the Series B Preferred Stock, except that if a dividend is paid
on the Common Stock, dividends are paid on the shares of Series B Preferred
Stock as if they were converted into shares of Common Stock.

F-20

[2] Warrants
--------

During the third quarter of Fiscal 2004, the Company raised an
aggregate of $1.5 million through the issuance of 8% Senior Secured Convertible
Promissory Notes. The financing was arranged through Sands Brothers
International Ltd. who was retained by the Company to act as selected dealer for
the sale and issuance of the Notes. Based upon the funds raised, Sands received
warrants valued at $28,500 using the Black Scholes Model to purchase
71,250 shares of the Company's common stock at an exercise price of $5.60 per
share for a period of five years. These warrants expire at various dates through
June 2009.

During the second quarter of Fiscal 2004, the Company authorized a
short term bridge loan for an aggregate of $500,000 through the issuance of
related party notes due on July 31, 2005. For every sixty dollars ($60.00)
loaned, the lender received 2 warrants to purchase one share of Common Stock,
exercisable at $5.00 per share for a period of five years. These warrants expire
in January 2009. The fair value allocated to these warrants based upon the Black
Scholes Model was approximately $27,400. This loan discount shall be amortized
over the life of the short term bridge loan.

In connection with various bridge financing agreements entered into
during fiscal year 2000, the Company issued warrants to purchase 18,425shares of
common stock at exercise prices ranging from $4.00 to $20.00. As of September
30, 2004, there were warrants outstanding to purchase 13,062 shares of common
stock at an exercise price of $4.00 per share. These warrants expire at various
dates through March 2005.

In connection with the equity placement completed during fiscal year
2000, the Company issued 130,000 Series A warrants and 65,000 Series B warrants.
As of September 30, 2004, there were Series A and B warrants outstanding to
purchase 32,040 shares of common stock at exercise prices ranging from $10.00 to
$15.00, with a weighted average exercise price of $11.60.

In connection with MCM financing entered into during 2002, the Company
issued warrants to purchase 12,500 shares of common stock at $1.80. The market
value of the warrants issued was valued at $6,700, which is being amortized over
the life of the related debt. These warrants expire in September 2007.

In connection with bridge financing entered into during 2001, the
Company issued warrants to purchase 15,000 shares of common stock at $1.60. The
market value of the warrants issued was valued at $12,000 which was amortized
over the term of the related debt. These warrants expire in February 2006.

[3] Equity Private Placement
------------------------

On April 27, 2000, the Company completed an equity private placement of
$1,950,000 through the sale of 32,500 units at $60.00 per unit. Each unit was
comprised of three shares of Common Stock, four Series A Warrants exercisable at
$10.00 per share and are callable by the Company if the Common Stock of the
Company trades above $60.00 for 15 consecutive days, two Series B Warrants
exercisable at $15.00 per share and are callable by the Company if the Common
Stock trades above $100.00 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 25,000 shares of common stock at $15.00 through June 2005.
Another individual received options to purchase 25,000 shares of common stock at
$20.00 through June 2005.

F-21

[4] Stock options
-------------

During 2002, the Company adopted a stock option plan for both employees
and non-employee directors. The employee and non-employee Directors stock option
plan provides for the granting of options to purchase not more than 75,000
shares of common stock. The options issued under the plan may be incentive or
nonqualified options. The exercise price for any options will be determined by
the option committee. The plan expires May 15, 2012. During October 2002, the
Company granted a total of 48,050 options to officers, directors, and employees
under the 2002 plan. During May 2004, 3,750 options priced at $4.00 were granted
to a director of the Company. These options vested one third on the grant date
with the balance vesting over a two year period in equal installments. All of
these options expire 10 years after the date of grant and were granted at fair
market value or higher at time of grant. All options are exercisable at $3.00
per share vesting one third immediately and the balance equally over a two year
period. As of September 30, 2004, there were 51,800 options outstanding under
the 2002 plan, exercisable at prices from $3.00 to $4.00 per share.

During 1993, the Company adopted a 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 50,000 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 10,000 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.

Stock option transactions under the 2002 plan are as follows:

Weighted
Average
Number of Option Price Exercise Price
Shares Per Share Per Share
------ --------- ---------

Balance, September 30, 2002 2,500 $1.00 $1.00

Granted in 2003 48,050 $3.00 $3.00

Exercised in 2003 (2,500) $ 1.00 $1.00
------- ------ -------

Balance, September 30, 2003 48,050 $3.00 $3.00

Granted in 2004 3,750 $4.00 $4.00
----- ----- -----

Balance, September 30, 2004 51,800 $3.00 - $4.00 $3.00
=========================== ====== ============= =========

Balance December 31, 2004 (Unaudited) 51,800 $3.00 - $4.00 $3.00
===================================== ====== ============= =========

F-22

Stock option transactions under the 1993 plan are as follows:

Weighted
Average
Number of Option Price Exercise Price
Shares Per Share Per Share
------ --------- ---------

Balance, September 30, 2002 37,225 $ 3.00 - $ 100.00 $5.20

Cancelled in 2003 (750) $ 16.80 - $ 58.60 $28.00
------ ------------------ ------

Balance, September 30, 2003 36,475 $ 3.00 - $ 100.00 $4.80

Cancelled in 2004 (125) $ 58.60 - 100.00 $83.40
------ ------------------ ------

Balance, September 30, 2004 36,350 $ 3.00 - $100.00 $4.60

Cancelled in 2005 (1250) $3.00 $3.00
------ ----------------- ------

Balance December 31, 2004 (Unaudited) 35,100 $3.00 - $100.00 $4.60
===================================== ====== ================= ======

Stock option transactions not covered under the years 2002 and 1993 option plans
in the fiscal years 2003 and 2004 are as follows:

Weighted
Average
Number of Option Price Exercise Price
Shares Per Share Per Share
------ --------- ---------

Balance, September 30, 2002 52,693 $2.00- 402.00 $17.80

Granted in 2003 50,000 $3.00 $3.00

Cancelled in 2003 (65) $324.00 $324.00
---- ------- -------

Balance, September 30, 2003 102,628 $2.00 - $402.00 $10.40

Cancelled in 2004 (50,064) $15.00-316.00 $ 1.80
-------- ------------- ------
Balance, September 30, 2004 52,564 $2.00 - $402.00 $ 3.40
=========================== ======== =============== =======

Balance December 31, 2004 (Unaudited) 52,564 $2.00-$402.00 $ 3.40
===================================== ======== ============= ======

F-23

The following table summarizes information about stock options outstanding at
September 30, 2004 and December 31, 2004,(Unaudited) respectively:

Outstanding Options
---------------------------------------------
Weighted-
Number Average Weighted-
Range of Outstanding Remaining Average
Exercise Contractual Exercise
Prices Life (years) Price
------------------------------------------------------------------------------------------

$2.00 - $5.00 140,050 7.33 $ 3.20
58.60 450 1.67 58.60
100.00 150 1.00 100.00
402.00 64 .60 402.00
------------------------------------------------------------------------------------------

$2.00 - $402.00 at 09/30/04 140,714 7.3 $ 3.60
=============== ============ ======= === ========
$2.00 - $402.00 at 12/31/04(Unaudited) 139,464 7.3 $ 3.60
=============== ====================== ======= === ========

---------------------------------------------
Exercisable Options
---------------------------------------------
Weighted-
Number Average Weighted-
Range of Outstanding Remaining Average
Exercise Contractual Exercise
Prices Life (years) Price
--------------------------------------------------------------------------------------------

$2.00-$5.00 104,866 7.00 $3.20
58.60 450 1.67 58.60
100.00 150 1.00 100.00

402.00 64 .60 402.00
------------------------------------------------------------------------------------------

$2.00- $402.00 at 09/30/04 105,531 6.95 $3.80
============== ============ =========== ==== =======
$2.00 - $402.00 at 12/31/04(Unaudited) 104,281 6.95 $3.80
=============== ====================== =========== ==== =======

Range of Weighted
Exercise Average
Number of Price Per Exercise Price
Options exercisable Shares Share Per Share
--------------------

Plan shares 69,633 $ 3.00- $100.00 $3.80
Non-plan shares 35,897 $ 2.00 - $402.00 $3.60
------ ---------------- -----
Options Exercisable at 9/30/04 105,531 $ 2.00 - $402.00 $3.80
------- ---------------- -----

Plan shares 68,383 $3.00-$100.00 $3.80
Non-plan shares 35,897 $2.00- 402.00 $3.60
------ ------------- -----
Options Exercisable at 12/31/04 (Unaudited) 104,281 $2.00-$402.00 $3.80
======= ============= -----

F-24

(NOTE I) - Disposal of TDM business segment
-------------------------------------------

Effective October 9, 2002, the Company completed the sale of the assets and
certain liabilities of its TDM business segment for $6,000,000. Pursuant to a
Consulting Agreement, Opus will consult with Seradyn on ongoing projects for a
$50,000 annual fee for a two-year period. The sold assets included three
diagnostic assays still in development, for which Opus will receive royalty
payments upon the commercialization of any of these assays based upon varying
percentages of net sales. Caprius, Opus and its three executive officers entered
into non-compete agreements with Seradyn restricting them for five years from
competing in the TDM business. The sale of the TDM business has been reflected
as discontinued operations in the accompanying consolidated financial
statements. Revenues from discontinued operations, which have been excluded from
income from continuing operations in the accompanying consolidated statements of
operations for fiscal year 2003, is shown below. The effects of the discontinued
operations on net loss and per share data are reflected within the accompanying
consolidated statements of operations.

A summary of operations of the TDM business segment for the year ended September
30, 2003 is as follows:

Revenues $96,698
Operating Expenses 23,300
-------
Income from Operations $73,398
=======

(NOTE J) - Acquisition of majority interest in MCM Environmental Technologies,
Inc.
------------------------------------------------------------------------------

On December 17, 2002, the Company completed the acquisition of 57.53% of
the capital stock of MCM Environmental Technologies ("MCM"). The Company
acquired its interest for a purchase price of $2.4 million. MCM is engaged in
the medical infectious waste business. Upon closing, Caprius designees were
elected to three of the five seats on MCM's Board of Directors, with George
Aaron, President and CEO, and Jonathan Joels, CFO, filling two seats. At the
time of the acquisition of MCM, the Company's outstanding loans to MCM
aggregated $565,000 which were paid by reducing the cash portion of the purchase
price. As part of Stockholders Agreement dated December 17, 2002, there were
certain provisions relating to performance adjustments for the twenty four month
period post closing. As a consequence, the Company's ownership interest
increased by 5% in the fiscal year 2004. For a six month period that commenced
on July 17, 2004 and ends on January 17, 2005, pursuant to a Stockholders
Agreement, the stockholders of MCM (other than the Company) shall have the right
to put all of their MCM shares to MCM, and MCM shall have the right to call all
of such shares, not currently owned by us. In accordance with the Stockholder's
agreement dated December 17, 2002, the party who first exercises its put or call
rights is required to accompany its notice of put or call with its proposal for
the price of the stock interest in MCM to be sold or purchased, as applicable.
The recipient is then required to give notice to the exercising party of its
proposed price for such interest. The parties shall then negotiate and agree
upon an agreed price. At our option, we may pay the purchase price for the
remaining MCM shares in cash or in shares of our common stock. Neither party
gave notice of its put or call. The acquisition was financed through proceeds
from the sale of the TDM business. Additionally, as part of the transaction,
certain debt of MCM to its existing stockholders and to certain third parties
was converted to equity or restructured. Legal and other costs incurred in 2002
directly related to the acquisition totaled $189,463. These costs were allocated
to the purchase price of MCM during the year ended September 30, 2003. The

F-25

acquisition was accounted for using the purchase method of accounting under
which the purchase price will be allocated to the assets acquired and
liabilities assumed based on their estimated fair values.

A summary of the acquisition of MCM Environmental Technologies:

Current Assets $ 2,313,851
Net PP&E 215,558
Liabilities (1,446,513)
------------
Net Tangible Assets $1,082,896
============

Net Tangible Assets (57.53% Interest) $ 622,990
Goodwill & Intangible Assets 1,777,010
------------
Total Acquisition Cost $ 2,400,000
============

Pro forma combined results of operations of the Company and the MCM
business acquired in December 2002 for the periods ended September 30, 2003,
assuming that the transaction had occurred on October 1, 2002 and after giving
effect to certain pro forma adjustments are as follows:

2003
----
Revenues $ 841,471
------------
Operating Expenses 4,821,892
------------
Interest expense (17,962)
------------
Loss from continuing operations ($3,998,193)
============

(NOTE K) - Sale of Strax

Effective September 30, 2003, the Company sold its comprehensive breast
imaging business, to Eastern Medical Technologies, Inc., a Delaware corporation
("EMT"), pursuant to a Stock Purchase Agreement dated September 30, 2003 (the
"Purchase Agreement") among Registrant, EMT and the other parties thereto. The
purchase price was $412,000 and may be subject to adjustment based upon the
amount of accounts receivable outstanding as of the date of closing. 50% of the
purchase price, which had been held in escrow, was paid on closing and the
balance is payable in installments commencing January 1, 2004 and ending
December 31, 2004, evidenced by a note secured by the accounts receivables of
Strax Institute, Inc. In addition, Registrant is required to provide certain
specified transitional services for up to 180 days pursuant to a Management
Services Agreement. During the first quarter of fiscal year 2005, the parties
agreed to settle the net outstanding balance in a lump sum payment of $66,000
which was paid in two equal installments in December 2004 and January 2005.

The sale of the Strax business has been reflected as discontinued
operations in the accompanying consolidated financial statements. Revenues from
discontinued operations, which have been excluded from income from continuing
operations in the accompanying consolidated statements of operations for fiscal
year 2003 as shown below. The effects of the discontinued operations on net loss
and per share data are reflected within the accompanying consolidated statements
of operations.

A summary of operations of the Strax business segment for the years ended
September 30, 2004 and 2003 are as follows:

F-26

2004 2003
---- ----
Revenues - $1,559,669
Operating Expenses 28,425 1,704,157
Other Expense 77,381 -
----------- -----------
Loss from operations $ (105,806) $(144,488)
=========== ===========

(NOTE L) -Geographic Information
--------------------------------

The Company does not have reportable operating Segments as defined in the
Statements of Financial Accounting No.131 "Disclosures about Segments of an
Enterprise and related information" The method for attributing revenues to
individual customers is based as to the destination to which finished goods are
shipped.

The Company operates facilities in the United States of America and Israel.
The following is a summary of information by area for the years ended September
30, 2004 and 2003, and for the three months ended December 31, 2004 and 2003
(Unaudited).

------------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED THREE MONTHS ENDED
------------------------------------------------------------------------------------------------------------
SEPTEMBER 30, SEPTEMBER 30, DECEMBER DECEMBER 31,
2004 2003 31,2004 2003
---- ---- -------- ----
(UNAUDITED) (UNAUDITED)
------------------------------------------------------------------------------------------------------------
Net Revenues:
------------------------------------------------------------------------------------------------------------

Israel $ 766,119 $ 501,879 $ 195,250 $ 258,884
------------------------------------------------------------------------------------------------------------
United States 119,342 98,700 67,409 30,849
------------ ------------ ----------- -----------
------------------------------------------------------------------------------------------------------------
Revenues as reported in the accompanying $ 885,461 $ 600,579 $ 262,659 $ 289,733
financial statements ============ ============ =========== ===========

------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------
Loss from continuing operations:
------------------------------------------------------------------------------------------------------------
Israel $ (414,890) $ (232,662) $ (84,123) $ (75,780)
------------------------------------------------------------------------------------------------------------
United States (2,835,073) (3,820,205) (712,949) (553,471)

Loss from continuing operations as reported $(3,249,963) $(4,052,867) $ (797,072) $ (629,251)
in the accompanying financial statements ============ ============= =========== ============

------------------------------------------------------------------------------------------------------------
September 30, 2004 December 31, 2004
(Unaudited)
------------------------------------------------------------------------------------------------------------
Identifiable Assets:
------------------------------------------------------------------------------------------------------------

Israel $ 561,151 $ 508,030
------------------------------------------------------------------------------------------------------------
United States 1,852,201 1,698,860
----------- -----------
------------------------------------------------------------------------------------------------------------
Total Assets as reported in the $2,413,352 $2,206,890
accompanying financial statements =========== ===========
------------------------------------------------------------------------------------------------------------

F-27

(NOTE M)-SUBSEQUENT EVENTS
--------------------------

(1) On December 1, 2004 an agreement was reached between the Company and
the minority ownership of an MCM subsidiary. The minority is being repaid their
initial investment of $20,000, by way of a credit towards the site installation
expense of SteriMed units, they are purchasing for their dialysis centers. This
subsidiary was dissolved on February 9, 2005 and the minority interest is now
reflected in accrued expenses within the consolidated balance sheet.

(2) On February 2, 2005, the Company raised $100,000 through the issuance
of 8% Senior Secured Convertible Promissory Notes, repayable, together with
interest to April 3, 2005, subject to prepayment in the event of an equity
financing in excess of $2 Million, or conversion by the investors into shares of
our common stock at a conversion price of $3.00 per share. The lenders also
received warrants to purchase 5,000 shares of our common stock exercisable at
$5.60 per share for a period of five years. In the event that the loan is not
repaid as of the due date, then the lender shall receive a further 1,250
warrants per month, up to an aggregate, including the initial 5,000 warrants, of
15,000 warrants. The funds are being utilized for general working capital. On
February 17, 2005 the Company repaid this loan together with interest.

(3) During the period from October 1, 2004 thorough November 16, 2004, the
Company was advanced the principal amount of approximately $46,500 through short
term loans until additional equity funding is secured. The terms of the loans
are identical to the terms of the $100,000 8% Senior Secured Convertible
Promissory Note outlined above. These short-term loans were provided by
executive officers, Messrs. Aaron, and Joels, who advanced approximately $32,000
and $14,500, respectively. These funds are being utilized for general working
capital purposes. As a condition of the February 15, 2005 stock equity
financing, Messrs Aaron and Joels exchanged 50% of their indebtedness for Series
C Mandatory Convertible Preferred Stock and were paid the balance inclusive of
interest.

(4) During the period from November 17, 2004 thorough February 15, 2004,
the Company was advanced the principal amount of approximately $99,500 through
short term loans until additional equity funding is secured. The terms of the
loans are identical to the terms of the $100,000 8% Senior Secured Convertible
Promissory Note outlined above. These short-term loans were provided by
executive officers, Messrs. Aaron, Joels, and Koppel who advanced approximately
$32,000 $48,000, and $19,500 respectively. These funds are being utilized for
general working capital purposes. As a condition of the February 15, 2005 stock
equity financing, Messrs Aaron, Joels and Koppel exchanged 50% of their
indebtedness for Series C Mandatory Convertible Preferred Stock and were paid
the balance inclusive of interest.

(5) On February 15, 2005, the Company closed on a $4.5 million
preferred stock equity financing before financing related fees and expenses of
approximately $450,000. The Company issued 45,000 shares of Series C Mandatory
Convertible Preferred Stock at a stated value of $100 per share. The Company
also issued Series A Warrants to purchase an aggregate of 465,517 shares of
common stock at an exercise price of $5.60 per share for a period of five years.
In addition, the Company issued Series B Warrants to purchase an aggregate of
155,172 shares of common stock at an exercise price of $2.90 per share for a
period of five years exercisable after nine months, subject to a termination
condition defined under Warrant B, Section 18. Simultaneously, the Company
converted the short-term secured debt outstanding in the aggregate of $2
million, together with $72,962 of unsecured indebtedness, into 21,681 shares of
Series C Mandatory Convertible Preferred Stock. As part of the condition for
raising the equity financing, holders of a majority of the outstanding shares
irrevocably undertook to effect a 1:20 reverse stock split of any outstanding
shares of common stock. At the time that the reverse split becomes effective,
all of the preferred stock issued to the new equity investors and the debt
holders who converted their debt will automatically convert into common shares
at a conversion price of $2.90 per share and/or 2,299,345 shares of the

F-28

Company's common stock (post reverse split), subject to adjustment in certain
circumstances. The Company also agreed to increase the number of independent
directors by one additional director.

(6) On April 5, 2005 the Company effected a 1-for-20 reverse stock split of
its common stock. At this time, the 66,681 outstanding shares of Series C
Preferred Stock automatically converted into 2,299,345 shares of the Company's
common stock. As a result of the reverse split, the Company has outstanding
3,321,673 shares of common stock. The reverse split did not change the number of
authorized shares of common stock and preferred stock. All share and per share
information in the accompanying financial statements has been restated to
reflect the 1 for 20 reverse stock split.

F-29

-------------------------------------------------------- -----------------------

NO DEALER, SALESPERSON OR OTHER PERSON HAS
BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY 3,813,759
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS SHARES OF
PROSPECTUS IN CONNECTION WITH THE OFFERING MADE BY COMMON STOCK
THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE
SELLING STOCKHOLDERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THOSE
SPECIFICALLY OFFERED HEREBY OR AN OFFER TO SELL OR A CAPRIUS, INC.
SOLICITATION OF AN OFFER TO BUY ANY OF THESE
SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
EXCEPT WHERE OTHERWISE INDICATED, THIS PROSPECTUS
SPEAKS AS OF THE EFFECTIVE DATE OF THE REGISTRATION
STATEMENT. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE
IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
PROSPECTUS
TABLE OF CONTENTS
Page
----

PROSPECTUS SUMMARY...............................1
THE COMPANY......................................1
RECENT DEVELOPMENTS..............................2
THE OFFERING.....................................3
RISK FACTORS.....................................3
SUMMARY FINANCIAL AND OPERATING INFORMATION......3
RISK FACTORS.....................................5
FORWARD LOOKING STATEMENTS......................11
USE OF PROCEEDS.................................11
DIVIDEND POLICY.................................11 _________, 2005
MARKET FOR OUR COMMON STOCK.....................11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.................................12
BUSINESS........................................17
MANAGEMENT......................................27
SECURITY OWNERSHIP..............................30
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 32
DESCRIPTION OF SECURITIES.......................32
SELLING STOCKHOLDERS............................33
PLAN OF DISTRIBUTION............................37
LEGAL MATTERS...................................38
EXPERTS.........................................38
AVAILABLE INFORMATION...........................39
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS.....F-1

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The only statue, charter provision, by-law, contract, or other arrangement
under which any controlling person, director or officers of the Registrant is
insured or indemnified in any manner against any liability which he may incur in
his capacity as such, is as follows:

Our certificate of incorporation limits the liability of our directors and
officers to the maximum extent permitted by Delaware law. Delaware law provides
that directors of a corporation will not be personally liable for monetary
damages for breach of their fiduciary duties as directors, except liability for:
(i) breach of the directors' duty of loyalty; (ii) acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of the law,
(iii) the unlawful payment of a dividend or unlawful stock purchase or
redemption, and (iv) any transaction from which the director derives an improper
personal benefit. Delaware law does not permit a corporation to eliminate a
director's duty of care, and this provision of our Certificate of Incorporation
has no effect on the availability of equitable remedies, such as injunction or
rescission, based upon a director's breach of the duty of care.

The effect of the foregoing is to require us to indemnify our officers and
directors for any claim arising against such persons in their official
capacities if such person acted in good faith and in a manner that he or she
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.

Insofar as indemnification for liabilities may be permitted to our
directors, officers and controlling persons pursuant to the foregoing
provisions, or otherwise, we have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
and is, therefore, unenforceable.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The estimated expenses of this offering in connection with the issuance and
distribution of the securities being registered, all of which are to be paid by
the Registrant, are as follows:

Registration Fee.............................. $ 1,693
Legal Fees and Expenses....................... 40,000
Accounting Fees and Expenses.................. 25,000
Printing...................................... 2,500
Miscellaneous Expenses........................ 5,807
-------
Total.................................... $75,000
=======

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.

On April 5, 2005, the Company effected a 1-20 reverse split of the
outstanding shares of its common stock. Upon the reverse split, the outstanding
shares of Series C Preferred Stock were converted into 2,299,345 shares of post
split common stock. The issuance of common stock upon the reverse stock split
and the conversion of the Series C Preferred Stock was claimed exempt from the
registration provisions of the Securities Act by reason of Section 3(a)(9)
thereof.

On February 15, 2005, the Company closed on a $4.5 million preferred stock
placement before financing related fees and expenses of approximately $450,000.
The Company issued (i) 45,000 shares of Series C Preferred Stock at a stated
value of $100 per share, (ii) Series A Warrants to purchase an aggregate of
465,517 shares of common stock at an exercise price of $5.60 per share for a
period of five years, and (iii) Series B Warrants to purchase an aggregate of
155,172 shares of common stock at an exercise price of $2.90 per share for a
period of five years exercisable after nine months, subject to a termination
condition defined under Warrant B, Section 18. Simultaneously, the Company
converted the short-term secured debt outstanding in the aggregate of $2
million, together with $72,962 of unsecured indebtedness, into 21,681 shares of
Series C Preferred Stock. The non-cash component of the Placement Agent's Fee
consisted of warrants for the purchase of 75,000 shares of common stock at an
exercise price of $5.60 per share. The placement was claimed exempt from the
registration provisions of the Security Act by reason of Section 4(2) of the
Securities Act and Regulation D, Rule 506 thereunder based upon representations

II-1

made by the purchasers. In addition, restrictive legends were placed on the
certificates for the Series C Preferred Stock and related warrants.

On February 2, 2005, the Company raised $100,000 in a bridge financing to
one lender through the issuance of an 8% Senior Secured Convertible Promissory
Note, repayable together with interest on April 3, 2005, subject to prepayment
in the event of an equity financing in excess of $2 million, or conversion into
shares of our common stock at a conversion price of $3.00 per share. The lender
also received warrants to purchase 5,000 shares of our common stock
exercisable at $5.60 per share for a period of five years. The offering of this
note and the warrants in this bridge financing was conducted under Regulation D,
Rule 506 of the Securities Act. On February 17, 2005 the Company repaid this
loan together with interest.

During the first two quarters of fiscal year 2005, executive officers,
Messrs. Aaron, Joels and Koppel, advanced to the Company the principal amounts
of approximately $64,000, $62,500 and $19,500, respectively, through short term
loans. As a condition of the Series C Preferred Stock placement, 50% of these
loans were exchanged for 728 shares of Series C Preferred Stock, with the
remaining 50% of the loans and the interest accrued thereon paid in cash. The
exchange of these loans for Series C Preferred Stock was conducted under
Regulation D, Rule 506 of the Securities Act.

During third quarter fiscal 2004, the Company sold an aggregate of $1.5
million of 8% Senior Secured Convertible Promissory Notes ("the Notes"), prior
to fees and expenses. The Company granted a security interest in substantially
all of the assets of the Company. The Notes mature in one year and can be
converted into shares of common stock at the election of the investor at any
time using a conversion price of $4.00 per share. If certain conditions are not
met as of September 30, 2004, then the conversion price shall be reduced to
$3.00 per share. Sands Brothers International Ltd. ("Sands") acted as selected
dealer for the sale and issuance of the Notes. Based upon the funds raised,
Sands received a six percent fee and an expense allowance of one percent of the
gross proceeds and warrants to purchase 71,250 shares of the Company's common
stock at an exercise price of $5.60 per share for a period of five years. Each
Note purchaser entered into a Purchase Agreement in which he represented, among
other things, as to his status as an "accredited investor" under Regulation D
and his awareness of the restrictions on resale or other transfer of the Notes
and the underlying shares of Common Stock. The placement claimed exemption from
the registration provisions of the Securities Act of 1933 by reason of Section
4(2) thereof and Rule 144 thereunder. In February 2005 the Notes were converted
into Series C Preferred Stock in a transaction claimed exempt from the
Securities Act by reason of Section 3(a)(9) thereunder.

During the second quarter of fiscal year 2004, the Company authorized
short-term bridge loans for an aggregate of $500,000 through the issuance of
loan notes due on July 31, 2005. These funds were provided by Mr. Aaron
($150,000), Mr. Joels ($150,000), Mr. Koppel ($65,000), Mr. Joels's brother
($85,000) and others. The loan notes bore interest at a rate of 11% per annum
and were secured by a first lien on the royalties due to a subsidiary in
accordance with a royalty agreement. For every sixty dollars ($60.00) loaned,
the lender received two warrants to purchase one share of the Company's common
stock, exercisable at $5.00 per share for a period of five years. As a condition
to the Series C Preferred Stock placement, these notes were exchanged for 5,000
shares of Series C Preferred Stock. The exchange of the notes for Series C
Preferred Stock was conducted under Regulation D, Rule 506 of the Securities
Act.

During June 2002, the Company completed a short-term loan aggregating
$250,000 through loan notes due on September 30, 2003. Included as part of this
short-term loan were executive officers, Messrs. Joels and Koppel who
contributed $10,000 and $15,000 respectively, employees of the Company as well
as related family members. These funds were used principally to fund the loan to
M.C.M. Environmental Technologies, Inc. ("MCM") pursuant to the letter of
intent, in connection with the Company's purchase of a majority interest in MCM.
For each $20.00 principal amount loaned, the lender received a warrant to
purchase one share of the Company's Common Stock, exercisable after 6 months at
$1.80 per share for a period of five years. On October 10, 2002, the Company
repaid these loans, plus accrued interest at the prime rate plus 3%. The
offering of these notes and warrants to Messrs. Joels and Koppel in this
financing was conducted under Regulation D, Rule 506 of the Securities Act of
1933.

ITEM 27. EXHIBITS.

EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
-----------------------------

All references to Registrant's Forms 8-K, 10-K, 10-QSB and 10-KSB include
reference to File No. 0-11914.

II-2

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 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")).

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. 033-40201) ("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, filed October 9, 1997(File No. 333-37481)).

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 Designations, Preferences and Rights of Series C
Mandatory Convertible Preferred Stock (incorporated by reference to
Exhibit 3.1 to Registrant's Form 8-K, filed for an event of February
15, 2005 (the "February 2005 Form 8-K")).

3.8 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).

3.9 Certificate of Amendment to Certificate of Incorporation, Filed April
1, 2005 (incorporated by reference to Exhibit 3.1 to Registrant's Form
8-K, filed April 5, 2005 (the "April 2005 Form 8-K").

3.10 Amended and Restated By-laws of Registrant (incorporated by reference
to Exhibit 3.4 to Registrant's Form S-4).

4.1 Form of Warrant issued to certain employees in connection with
Registrant's Bridge Financing in March 2000 (incorporated by reference
to Exhibit 4.7 to Registrant's July 2000 Form SB-2, filed July 26,
2000 (File No. 333-42222)).

4.2 Form of Series A Warrant from 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")).

4.3 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).

4.4 Form of Common Stock Purchase Warrants for up to 300,000 shares of
Common Stock, expiring February 28, 2006 (incorporated by Reference to
Exhibit 10.3 to the Registrant's Form 10-QSB for the fiscal quarter
ended March 31, 2001).

II-3

4.5 Form of 2005 Series A Warrant (granted February 15, 2005)
(incorporated by reference to Exhibit 4.1 to Registrant's February
2005 Form 8-K).

4.6 Form of 2005 Series B Warrant (granted February 15, 2005)
(incorporated by reference to Exhibit 4.2 to Registrant's February
2005 Form 8-K).

4.7 Form of Dealer Warrant (granted February 15, 2005) (incorporated by
reference to Exhibit 4.3 to Registrant's February 2005 Form 8-K).

4.8 Form of Lock-Up Agreement with George Aaron and Jonathan Joels
(incorporated by reference to Exhibit 4.4 to Registrant's February
2005 Form 8-K).

5* Opinion of Thelen Reid & Priest LLP.

10.1.1 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 (the "September 1997 Form 8-K")).

10.1.2 Stockholders Agreement, dated August 18, 1997, between Registrant and
GE (incorporated by reference to Exhibit 10.3 to Registrant's
September 1997 Form 8-K).

10.1.3 Settlement and Release Agreement, dated August 18, 1997, between the
Registrant and GE (incorporated by reference to Exhibit 10.4 to
Registrant's September 1997 Form 8-K).

10.1.4 License Agreement, dated August 18, 1997, between Registrant and GE
(incorporated by reference to Exhibit 10.4 to Registrant's September
1997 Form 8-K).

10.2.1 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).

10.2.2 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).

10.2.3 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).

10.2.4 Form of Option Agreement 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).

10.3.1 Purchase and Sale Agreement, dated as of October 9, 2002, Among
Registrant, Opus and Seradyn, Inc. ("Seradyn") (incorporated by
reference to Exhibit 10.1 to Registrant's Form 8-K for an event of
October 9, 2002 (the "October 2002 Form 8-K")).

10.3.2 Royalty Agreement, dated as of October 9, 2002, between Opus and
Seradyn (incorporated by reference to Exhibit 10.2 to Registrant's
October 2002 Form 8-K).

10.3.3 Non-compete Agreement, dated as of October 9, 2002, between Opus and
(incorporated by reference to Exhibit 10.3 to Registrant's October
2002 Form 8-K).

10.3.4 Consulting Agreement, dated as of October 9, 2002, between Opus and
Seradyn (incorporated by reference to Exhibit 10.4 to Registrant's
October 2002 Form 8-K).

10.4.1 Stock Purchase Agreement, dated December 17, 2002, among Registrant,
M.C.M. Technologies, Ltd. and M.C.M. Environmental Technologies,
Inc.(incorporated by reference to Exhibit 10.1 to Registrant's Form
8-K for an event of December 17, 2002 (the "December 2002 Form 8-K").

II-4

10.4.2 Stockholders Agreement, dated December 17, 2002, among M.C.M.
Technologies, Inc. and the holders of its outstanding capital stock
(incorporated by reference to Exhibit 10.2 to Registrant's December
2002 Form 8-K). 10.4.3 Form of Unsecured Promissory Notes, issued for
the short-term Loan (incorporated by reference to Exhibit 10.13.3 to
Registrant's September 2002 Form 10-KSB.)

10.4.4 Form of Subscription Agreement relating to the short-term Loan
(incorporated by reference to Exhibit 10.13.4 to Registrant's
September 2002 Form 10-KSB).

10.4.5 Form of Common Stock Purchase Warrant relating to the short-term Loan
(incorporated by reference to Exhibit 10.13.5 to Registrant's
September 2002 Form 10-KSB).

10.5 Form of Common Stock Warrant relating to Line of Credit (incorporated
by reference to Exhibit 10.14 to Registrant's September 2002 Form
10-KSB).

10.6.1 Stock Purchase Agreement, among Registrant, Strax Institute Inc. and
Eastern Medical Technologies, Inc. dated as of September 30, 2003
(incorporated by reference to Exhibit 10.1 to Registrant's Form 8-K
for an event of October 9, 2003 (the "October 2003 Form 8-K")).

10.6.2 Non-negotiable Promissory Note of Eastern Medical Technologies, Inc.
to Registrant, dated September 30, 2003 (incorporated by reference to
Exhibit 10.2 to Registrant's October 2003 Form 8-K).

10.6.3 Security Agreement among Eastern Medical Technologies, Inc., Strax
Institute, Inc., and Registrant, dated as of September 30, 2003
(incorporated by reference to Exhibit 10.3 to Registrant's October
2003 Form 8-K).

10.6.4 Management Services Agreement between Registrant and Strax Institute
Inc., dated as of September 30, 2003 (incorporated by reference to
Exhibit 10.4 to Registrant's October 2003 Form 8-K).

10.6.5 Settlement Letter among BDC Corp. d/b/a/ BDC Consulting Corp,
Registrant and George Aaron, dated as of September 30, 2003
(incorporated by reference to Exhibit 10.5 to Registrant's October
2003 Form 8-K).

10.7.1 Securities Purchase Agreement, among Registrant and investors dated as
of April 26, 2004 (incorporated by reference to Exhibit 10.1 to
Registrant's Form 8-K for an event of April 27, 2004 (the "April 2004
Form 8-K")).

10.7.2 Form of 8% Senior Secured Convertible Promissory Note (incorporated by
reference to Exhibit 10.2 to Registrant's April 2004 Form 8-K).

10.7.3 Security and Pledge Agreement by the Registrant in favor of CAP Agent
Associates, LLC, dated April 26, 2004 (incorporated by reference to
Exhibit 10.3 to Registrant's April 2004 Form 8-K).

10.7.4 Registration Rights Agreement, dated April 26, 2004, between
Registrant and the purchasers of the Notes, and Sands Brothers
International Ltd. ("SBIL") (incorporated by reference to Exhibit 10.4
to Registrant's April 2004 Form 8-K).

10.7.5 Dealer Agreement, dated April 12, 2004, between Registrant and SBIL
(incorporated by reference to Exhibit 10.5 to Registrant's April 2004
Form 8-K).

10.7.6 Common Stock Purchase Warrant Agreement, dated April 26, 2004, between
Registrant and SBIL (incorporated by reference to Exhibit 10.6 to
Registrant's April 2004 Form 8-K).

10.8.1 Form of Secured Promissory Note issued for the short-term Bridge Loans
(incorporated by reference to Exhibit 10.11.1 Registrant's Form 10-KSB
for fiscal year ended September 30, 2003 (the "2003 Form 10-KSB")).

II-5

10.8.2 Form of Common Stock Purchase Warrant relating to the short-term
Bridge Loans (incorporated by reference to Exhibit 10.11.2 to
Registrant's 2003 Form 10-KSB).

10.8.3 Form of Guaranty and Security Agreement relating to the short-term
Bridge Loans (incorporated by reference to Exhibit 10.11.3 to
Registrant's 2003 Form 10-KSB).

10.9 License and Manufacturing Agreement between M.C.M. Environmental
Technologies Inc. and CID Lines, dated November 26, 2002 (incorporated
by reference to Exhibit 10.14 to Amendment No. 1 to Registrant's
September 2004 Form SB-2, filed November 5, 2004 (File No. 333-118869)
("November 2004 Form SB-2/A-1")).

10.10 Distribution Agreement between M.C.M. Environmental Technologies, LTD
and Euromedic Group, dated November 1, 2002 (incorporated by reference
to Exhibit 10.15 to Registrant's November 2004 Form SB-2/A-1).

10.11 Distribution Agreement between M.C.M. Environmental Technologies, LTD
and Lysmed, L.L.C., dated January 12, 2001 (incorporated by reference
to Exhibit 10.16 to Registrant's November 2004 Form SB-2/A-1).

10.12.1 Purchase Agreement for the sale of 45,000 shares of Series C Mandatory
Convertible Preferred Stock and Series A and Series B warrants
(incorporated by reference to Exhibit 10.1 to Registrant's February
2005 Form 8-K).

10.12.2 Registration Rights Agreement, dated February 15, 2005, by and among
the Registrant and investors (incorporated by reference to Exhibit
10.2 to Registrant's February 2005 Form 8-K).

10.12.3 Amendment and Conversion Agreement, dated February 15, 2005, by and
among the Registrant and note holders (incorporated by reference to
Exhibit 10.3 to Registrant's February 2005 Form 8-K).

10.12.4 Exchange Agreement, dated February 15, 2005, by and among the
Registrant and certain lenders (incorporated by reference to Exhibit
10.4 to Registrant's February 2005 Form 8-K).

10.12.5 Registration Rights Agreement, dated February 15, 2005, by and among
the Registrant and note holders (incorporated by reference to Exhibit
10.5 to Registrant's February 2005 Form 8-K).

10.13.1 Financial Advisory Agreement, dated January 11, 2005, between the
Registrant and Laidlaw & Company (UK) Ltd. (incorporated by reference
to Exhibit 10.6.1 to Registrant's February 2005 Form 8-K).

10.13.2 Amendment to Financial Advisory Agreement, dated February 9, 2005
(incorporated by reference to Exhibit 10.6.2 to Registrant's February
2005 Form 8-K).

14 Letter on change in certifying accountant from BDO Seidman, LLP,
addressed to the Securities and Exchange Commission, dated March 19,
2004 (incorporated by reference to Exhibit 16.1 to Registrant's Form
8-K filed for an event of March 15, 2004).

23.1* Consent of BDO Seidman, LLP

23.2* Consent of Marcum & Kliegman LLP

* Filed herewith

ITEM 28. UNDERTAKINGS

The undersigned Registrant hereby undertakes:

(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:

II-6

(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act").

(ii) to reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of a prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
change in volume and price represents no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.

(iii) to include any additional or changed material information with
respect to the plan of distribution.

(2) that, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at the time shall be deemed to be the initial bona fide offering
thereof.

(3) to remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.

Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the provisions of its Certificate of Incorporation, By-Laws, the
General Corporation Law of the State of Delaware or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer of controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

II-7

POWER OF ATTORNEY

Each director and/or officer of the registrant whose signature appears
below hereby appoints George Aaron Agent as his attorney-in-fact to sign in his
name and behalf, in any and all capacities stated below, and to file with the
Securities and Exchange Commission, any and all amendments, including
post-effective amendments, to this registration statement.

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Fort Lee, New Jersey, on the 15th day of April, 2005.

Caprius, Inc.

By: /s/Jonathan Joels
-------------------------------
Jonathan Joels
Chief Financial Officer

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by or on behalf of the following
persons in the capacities indicated on the 15th day of April, 2005.

SIGNATURE TITLE
--------- -----

/s/ George Aaron Chairman of the Board and
---------------------- President
George Aaron

/s/ Jonathan Joels Director, Chief Financial
---------------------- Officer and Chief
Jonathan Joels Accounting Officer

/s/ Sol Triebwasser Director
----------------------
Sol Triebwasser, Ph.D.

/s/ Jeffrey L. Hymes Director
----------------------
Jeffrey L. Hymes, MD

II-8