UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark one)
[X] Quarterly Report under Section 13 or 15 (d) of the
Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File Number: 0-11914
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CAPRIUS, INC.
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(Exact name of small business issuer as specified in its charter)
Delaware 22-2457487
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Parker Plaza, Fort Lee, NJ 07024
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (201) 592-8838
N/A
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(Former name, former address, and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) filed all reports
required to be filed under Section 13 or 15 (d) of the Exchange Act during the
past 12 months (or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes [X] No __
State the number of shares outstanding of issuer's classes of common
equity, as of the latest practicable date.
Class Outstanding at March 31, 2002
Common Stock. Par value $0.01 17,098,862 shares
CAPRIUS, INC. AND SUBSIDIARIES
INDEX
Page No.
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PART I - FINANCIAL INFORMATION
ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets - March 31, 2002 and September 30, 2001 3
Consolidated Statements of Operations - for the three months
and six months ended March 31, 2002 and 2001
Consolidated Statement of Stockholders' Equity - for the six months 5
ended March 31, 2002
Consolidated Statements of Cash Flows - for the six months ended 6
March 31, 2002 and 2001
Notes to Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 9
CONDITION AND RESULTS OF OPERATIONS
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 11
SIGNATURES 12
2
CAPRIUS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, 2002 September 30, 2001
----------------- -------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 46,169 $ 89,776
Accounts receivable, net of reserve for bad debts of $26,000
at March 31, 2002 and September 30, 2001 640,654 578,808
Inventories 327,479 396,430
Other current assets 1,623 5,324
----------------- ----------------
Total current assets 1,015,925 1,070,338
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PROPERTY AND EQUIPMENT:
Medical equipment 341,140 341,140
Office furniture and equipment 220,290 220,290
Leasehold improvements 950 950
----------------- ----------------
562,380 562,380
Less: accumulated depreciation 461,246 408,354
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Net property and equipment 101,134 154,026
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OTHER ASSETS:
Goodwill, net of accumulated amortization of $262,731 at
March 31, 2002 and $221,511 at September 30, 2001 887,451 928,671
Other intangibles, net of accumulated amortization of $200,801
at March 31, 2002 and $164,292 at September 30, 2001 1,259,572 1,296,081
Other 22,794 22,794
----------------- ----------------
Total other assets 2,169,817 2,247,546
----------------- ----------------
TOTAL ASSETS $ 3,286,876 $ 3,471,910
================= ================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable, net of unamortized discount of $5,000 at
September 30, 2001 $ 300,000 $ 295,000
Accounts payable 252,877 291,460
Accrued expenses 205,087 248,660
Accrued compensation 62,015 72,760
Current maturities of long-term debt and capital lease obligations 18,599 46,636
----------------- ----------------
Total current liabilities 838,578 954,516
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, net of current maturities 28,988 35,032
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TOTAL LIABILITIES 867,566 989,548
----------------- ----------------
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value
Authorized - 1,000,000 shares
Issued and outstanding - Series A, none; Series B,
convertible, 27,000 shares at March 31, 2002 and
September 30, 2001.
Liquidation preference $2,700,000 2,700,000 2,700,000
Common stock, $.01 par value
Authorized - 50,000,000 shares
Issued - 17,121,362 shares at March 31, 2002
and September 30, 2001 171,214 171,214
Additional paid-in capital 67,154,517 67,154,517
Accumulated deficit (67,604,171) (67,541,119)
Treasury stock (22,500 common shares, at cost) (2,250) (2,250)
----------------- ----------------
Total stockholders' equity 2,419,310 2,482,362
----------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,286,876 $ 3,471,910
================= ================
The accompanying notes are an integral part of these
consolidated financial statements.
3
CAPRIUS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
March 31, 2002 March 31, 2001 March 31, 2002 March 31, 2001
-------------- --------------- -------------- ---------------
REVENUES:
Net patient service revenues $ 387,420 $ 345,636 $ 829,838 $ 757,977
Net product sales 602,091 539,721 1,077,444 926,335
-------------- -------------- -------------- ---------------
Total revenues 989,511 885,357 1,907,282 1,684,312
-------------- -------------- -------------- ---------------
OPERATING EXPENSES:
Cost of service operations 205,518 191,488 432,537 399,778
Cost of product sales 152,676 170,324 275,444 310,512
Selling, general and administrative 559,119 474,397 1,126,592 994,865
Research and development 44,257 61,294 86,047 82,094
Provision for bad debt and collection costs 13,102 4,277 22,651 12,576
-------------- -------------- -------------- ---------------
Total operating expenses 974,672 901,780 1,943,271 1,799,825
-------------- -------------- -------------- ---------------
Operating income (loss) 14,839 (16,423) (35,989) (115,513)
Interest income 289 347 687 3,332
Interest expense (12,989) (9,355) (27,750) (14,407)
-------------- --------------- -------------- ---------------
Net income (loss) $ 2,139 $ (25,431) $ (63,052) $ (126,588)
============== ============== ============== ===============
Net income (loss) per basic and diluted
common share $0.00 $(0.00) $(0.00) $(0.01)
============== ============== ============== ===============
Weighted average number of common shares
outstanding, basic and diluted 17,098,862 17,098,862 17,098,862 17,009,075
============== ============== ============== ===============
The accompanying notes are an integral part of these
consolidated financial statements.
4
CAPRIUS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
Preferred Stock Common Stock $0.01 Par Value Additional
Number Number Paid-in Accumulated
of Shares Amount of Shares Amount Capital Deficit
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BALANCE, SEPTEMBER 30, 2001 27,000 $2,700,000 17,121,362 $ 171,214 $ 67,154,517 $(67,541,119)
Net loss -- -- -- -- -- (63,052)
BALANCE, MARCH 31, 2002 27,000 $2,700,000 17,121,362 $ 171,214 $ 67,154,517 $(67,604,171)
(TABLE CONT'D)
Treasury Stock $0.01 Par Value Total
Number Stockholders'
of Shares Amount Equity
------------------------------------------------
BALANCE, SEPTEMBER 30, 2001 22,500 $ (2,250) $ 2,482,362
Net loss -- -- (63,052)
BALANCE, MARCH 31, 2002 22,500 $ (2,250) $ 2,419,310
The accompanying notes are an integral part of these
consolidated financial statements.
5
CAPRIUS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended March 31,
2002 2001
-------------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (63,052) $ (126,588)
Adjustments to reconcile net loss to net cash used in
operating activities:
Amortization of discount on bridge Financing 5,000 1,000
Depreciation and amortization 130,621 144,100
Changes in operating assets and liabilities:
Accounts receivable, net (61,846) (34,808)
Inventories 68,951 (134,318)
Other current assets 3,701 (7,953)
Accounts payable and accrued expenses (92,901) (369,314)
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Net cash used in operating activities (9,526) (527,881)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment, furniture and leasehold improvements - (12,385)
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Net cash used in investing activities - (12,385)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock - 67,816
Proceeds from issuance of debt and warrants - 300,000
Repayment of debt and capital lease obligations (34,081) (56,897)
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Net cash provided by (used in) financing activities (34,081) 310,919
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NET DECREASE IN CASH AND CASH EQUIVALENTS (43,607) (229,347)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 89,776 349,998
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 46,169 $ 120,651
============== ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest during the period $ 27,751 $ 13,407
============== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
6
CAPRIUS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 - BASIS OF PRESENTATION
------------------------------
The results of operations of Caprius, Inc. ("Caprius" or the "Company")
for the interim periods shown in this report are not necessarily indicative of
results to be expected for the fiscal year. In the opinion of management, the
information contained herein reflects all adjustments necessary to make the
results of operations for the interim periods a fair statement of such
operations. All such adjustments are of a normal recurring nature.
The accompanying consolidated financial statements do not contain all
of the disclosures required by accounting principles generally accepted in the
United States of America and should be read in conjunction with the financial
statements and related notes included in the Company's annual report on form
10-KSB for the fiscal year ended September 30, 2001.
NOTE 2 - THE COMPANY
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Caprius, Inc. was founded in 1983 and through June 1999 essentially
operated in the business of medical imaging systems as well as healthcare
imaging and rehabilitation services. On June 28, 1999, the Company acquired Opus
Diagnostics Inc. ("Opus") and began manufacturing and selling medical diagnostic
assays. The Company continues to own and operate a comprehensive breast-imaging
center located in Lauderhill, Florida.
The Opus Merger was consummated coincident with the closing of an Asset
Purchase Agreement (the "Oxis Purchase Agreement") between Opus and Oxis Health
Products Inc. ("Oxis") at which time George Aaron and Jonathan Joels became
executive officers, directors, and principal stockholders of the Company. The
purchase price consisted of $500,000 in cash, a secured promissory note (the
"Oxis Note") in the principal amount of $586,389 which was repaid as of December
8, 1999, and a warrant granting Oxis the right to acquire 617,898 shares of the
Company's Common Stock. Additionally, pursuant to a Services Agreement, Oxis had
manufactured the products of the TDM Business of Opus through December 31, 2000.
After December 31, 2000, the Company transferred its production to third party
manufacturers.
Opus currently produces and sells 14 diagnostic assays, their
calibrators and controls for therapeutic drug monitoring which are used on the
Abbott TDx(R) and TDxFLx(R) instruments. Therapeutic drug monitoring ("TDM") is
used to assess medication efficacy and safety of a given therapeutic drug in
human bodily fluids, usually blood. The monitoring allows physicians to
individualize therapeutic regimens for optimal patient relief. The test kits are
used for in vitro testing; i.e. the tests are performed outside of the body.
Effective October 15, 2000, Opus entered into a Development and License
Agreement with Novartis Pharma AG to develop and market internationally an assay
to monitor Certican(TM). Certican(TM) is a Novartis drug candidate and is
presently in the Phase III clinical trial process, as required by the FDA. When
cleared by the FDA, it is anticipated Certican(TM) will be used initially to
treat renal transplant patients. The Opus test to measure Certican is expected
to be used regularly to monitor blood levels of the drug, guiding physicians as
to correct dosage and patient compliance. There are approximately 25,000 renal
transplants annually that take place in the U.S. alone with approximately the
same number outside the U.S.
7
NOTE 3 - INDUSTRY SEGMENTS
--------------------------
The Company operations are classified into two business segments:
imaging services (previously categorized as Imaging and Rehabilitation Services)
and the therapeutic drug monitoring assay business (the "TDM Business").
The following table shows sales, net income and other unaudited
financial information by industry segment:
IMAGING TDM
SERVICES BUSINESS CONSOLIDATED
---------- ---------- ------------
Three Months ended March 31, 2002
---------------------------------
Revenues $ 387,420 $ 602,091 $ 989,511
Net income (loss) $ (26,718) $ 28,857 $ 2,139
Three months ended March 31, 2001
---------------------------------
Revenues $ 345,636 $ 539,721 $ 885,357
Net income (loss) $ (58,913) $ 33,482 $ (25,431)
Six months ended March 31, 2002
-------------------------------
Revenues $ 829,838 $1,077,444 $1,907,282
Net loss $ (25,281) $ (37,771) $ (63,052)
Identifiable assets $ 346,557 $2,940,319 $3,286,876
Six months ended March 31, 2001
-------------------------------
Revenues $ 757,977 $ 926,335 $1,684,312
Net loss $ (62,727) $ (63,861) $ (126,588)
Identifiable assets $1,042,130 $3,083,958 $4,126,088
8
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The results of operations for the three months and six months ended
March 31, 2002 and 2001 are not necessarily indicative of results for future
periods. The following discussion should be read in conjunction with the
attached notes thereto, and with the audited consolidated financial statements
and notes thereto for the fiscal year ended September 30, 2001.
THREE MONTHS ENDED MARCH 31, 2002 COMPARED TO THREE MONTHS ENDED MARCH 31, 2001
-------------------------------------------------------------------------------
Included in revenues for three months ended March 31, 2002 are $602,091
of net product sales revenues for Opus' therapeutic drug monitoring assays
versus $539,721 for the three months ended March 31, 2001. The cost of product
sales for the Opus business for the three months ended March 31, 2002 was
$152,676 versus $170,324 for the three months ended March 31, 2001. The increase
in net sales revenues for the three months ending March 31, 2002 versus the
three months ending March 31, 2001 resulted from both an increase in overseas
sales and higher sales of the Company's generic products. The cost of product
sales decreased during the three months ending March 31, 2002 versus the three
months ending March 31, 2001 as a result of the Company's change of manufacturer
for its products.
Net patient service revenues at Strax totaled $387,420 for the three
months ended March 31, 2002 versus $345,636 for the three months ended March 31,
2001. This increase resulted from higher patient billings. Cost of service
operations totaled $205,518 for the three months ended March 31, 2002 versus
$191,488 for the three months ending March 31, 2001.
Selling, general and administrative expenses totaled $559,119 for the
three months ended March 31, 2002 versus $474,397 for the three months ended
March 31, 2001. The increase in expenses includes certain categories of costs
that increased by an amount greater than the average inflationary rate due to
prevailing market conditions.
Research and development expenses totaled $44,257 for the three months
ended March 31, 2002 versus $61,294 for the three months ended March 31, 2001.
The costs related to the Company's on-going projects for the development of new
therapeutic drug monitoring tests reflect lower costs during the second quarter
of 2002.
SIX MONTHS ENDED MARCH 31, 2002 COMPARED TO SIX MONTHS ENDED MARCH 31, 2001
---------------------------------------------------------------------------
Net product sales revenues totaled $1,077,444 for the six months ended
March 31, 2002 versus $926,335 for the six months ended March 31, 2001. The
increase in net sales revenues for the six months ending March 31, 2002 versus
the six months ending March 31, 2001 resulted from both an increase in overseas
sales and higher sales of the Company's generic products. The cost of product
sales for the Opus business for the six months ended March 31, 2002 was $275,444
versus $310,512 for the six months ended March 31, 2001.
Net patient service revenues totaled $829,838 for the six months ended
March 31, 2002 versus $757,977 for the six months ended March 31, 2001. This
increase resulted from higher patient billings. Cost of service operations
totaled $432,537 for the six months ended March 31, 2002 versus $399,778 for the
six months ended March 31, 2001.
Selling, general and administrative expenses totaled $1,126,592 for
the six months ended March 31, 2002 versus $994,865 for the six months ended
March 31, 2001. The increase in expenses includes certain categories of costs
that increased by an amount greater than the average inflationary rate due to
prevailing market conditions.
9
Research and development expenses totaled $86,047 for the six months
ended March 31, 2002 versus $82,094 for the six months ended March 31, 2001.
LIQUIDITY AND CAPITAL RESOURCES
During February and March 2001, the Company completed a short term
bridge loan of $300,000 through the issuance of loan notes due on February 28,
2002 together with warrants, the proceeds of which were used principally for
working capital and purchase of raw materials previously owned by Oxis, the
previous manufacturer and owner of the Opus products.
In March and April 2000, the Company completed an equity private
placement of $1,950,000 through the sale of 650,000 units at $3.00 per unit as
described in Note H-3 to the Financial Statements for the year ended September
30, 2001. The Company utilized the net funds for the payment of certain
liabilities and the balance was used for working capital purposes to continue
developing the business of Opus by adding new distributors in territories
currently not covered by existing distributors and for the development of new
diagnostic kits and the acquisition of additional product lines. The Company
continues in its efforts to secure the sale of Strax. The $300,000 short-term
bridge loan notes are secured by the assets of Strax and were due for repayment
on February 28, 2002. The bridge loan holders agreed to extend the repayment
date to June 30, 2002. In view of the current market conditions and the
Company's low stock price, the Company has found it difficult at this time to
secure additional funding. However, should the market conditions change, the
Company will continue its efforts to seek additional funds through funding
options, including banking facilities, government-funded grants and equity
offerings in order to provide capital for future expansion. There can be no
assurance that such funding initiatives will be successful, and in light of the
current low market price any equity placement would result in substantial
dilution to current stockholders. Consequently, the Company's viability could be
threatened. Accordingly, the auditors' report on the 2001 financial statements
contains an explanatory paragraph expressing substantial doubt about our ability
to continue as a going concern.
Net cash used in operations for the six months ended March 31, 2002 was
$9,526. There were no cash flows used in investing activities for the six months
ended March 31, 2002.
FORWARD LOOKING STATEMENTS
The Company is including the following cautionary statement in this
Quarterly Report of Form 10-QSB to make applicable and take advantage of the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995
for any forward-looking statements made by, or on behalf of, the Company.
Forward-looking statements include statements concerning plans, objectives,
goals, strategies, future events or performance and underlying assumptions and
other statements which are other than statements of historical facts. Certain
statements contained herein are forward-looking statements and accordingly
involve risks and uncertainties which could cause actual results or outcomes to
differ materially from those expressed in the forward-looking statements. The
Company's expectations, beliefs and projections are expressed in good faith and
are believed by the Company to have a reasonable basis, including without
limitation, management's examination of historical operating trends, data
contained in the Company's records and other data available from third parties,
but there can be no assurance that management's expectation, beliefs or
projections will result or be achieved or accomplished. In addition to other
factors and matters discussed elsewhere herein, the following are important
factors that, in the view of the Company, could cause actual results to differ
materially from those discussed in the forward-looking statements: technological
advances by the Company's competitors, changes in health care reform, including
reimbursement programs, capital needs to fund any delays or extensions of
development programs, delays in new product development, delays in obtaining
regulatory clearance for new products, changes in governmental regulations, and
availability of capital on terms satisfactory to the Company. The Company
disclaims any obligation to update any forward-looking statements to reflect
events or circumstances after the date hereof.
10
PART II: OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
None
(b) Reports on Form 8-K
None
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Caprius, Inc.
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(Registrant)
Date: May 14, 2002 /s/George Aaron
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George Aaron
President & Chief Executive
Officer
Date: May 14, 2002 /s/Jonathan Joels
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Jonathan Joels
Chief Financial Officer
12