================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT (AMENDED)
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): December 17, 2002
CAPRIUS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 0-11914 22-2457487
-------- ----------------- ----------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
One Parker Plaza, Fort Lee, New Jersey 07024
--------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code - (201) 592-8838
--------------
================================================================================
On January 3, 2003, Caprius, Inc. (the "Company") filed a Form 8-K to
report it completed its acquisition of 33,191 shares of Series A Preferred Stock
of MCM Environmental Technologies, Inc., a Delaware corporation ("MCM"),
representing 57.53% of the voting stock of MCM. In response to parts (a) and (b)
of Item 7 of such Form 8-K, the Company stated that it would file the required
financial information by amendment. This Form 8-K/A is filed to provide the
required financial information.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
---------------------------------
(a) Financial Statements of Business Acquired The following financial
statements of MCM are filed as part of this current report on
Form 8-K/A:
o Consolidated Financial Statements as of and for the years
ended December 31, 2001 and 2000 (audited)
o Condensed Interim Consolidated Financial Statements as of
September 30, 2002 including the three and nine month
periods ended September 30, 2002 and 2001 (unaudited)
(b) Pro forma financial information
o Unaudited Pro Forma Combined Condensed Statement of
Operations for the year ended September 30, 2002
2
SIGNATURE
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.
By: /s/ Jonathan Joels
------------------
Name: Jonathan Joels
Title: Treasurer and CFO
Dated: March 03, 2003
3
--------------------------------------
M.C.M. ENVIRONMENTAL TECHNOLOGIES INC.
--------------------------------------
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2001
-----------------------
--------------------------------------
M.C.M. ENVIRONMENTAL TECHNOLOGIES INC.
--------------------------------------
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2001
CONTENTS
PAGE
----
AUDITORS' REPORT 2
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statements of Changes in Shareholders' Deficiency 5
Consolidated Statements of Cash Flows 6
Notes to the Consolidated Financial Statements 7-14
# # # # # #
This is a copy of the audit report previously issued by Arthur Andersen LLP
issued in connection with the audit of M.C.M. Environmental Technologies, Inc.
for the years ended December 31, 2001 and 2000. This audit report has not been
reissued by Arthur Andersen LLP in connection with this filing on Form 8-K/A, as
Arthur Andersen LP ceased providing audit services as of August 31, 2002.
________________________________________________________________________________
AUDITORS' REPORT TO THE SHAREHOLDERS
OF
M.C.M. ENVIRONMENTAL TECHNOLOGIES INC.
We have audited the accompanying consolidated balance sheets of M.C.M.
ENVIRONMENTAL TECHNOLOGIES INC. (the "Company") as of December 31, 2001 and
2000, and the related consolidated statements of operations, changes in
shareholders' deficiency and cash flows for the years then ended. These
financial statements are the responsibility of the Company's Board of Directors
and management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards, including those prescribed under the Auditors' Regulations (Auditor's
Mode of Performance), 1973. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by the Board of Directors and management, as well as evaluating
the overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
December 31, 2001 and 2000, and the results of its operations, changes in
shareholders' deficiency and its cash flows for the years then ended, in
conformity with generally accepted accounting principles in the United States.
Without qualifying our opinion, we draw attention to Note 1C regarding the
Company's dependence on financing from external sources to fund its activities.
LUBOSHITA-KASIERER
ARTHUR ANDERSEN
Haifa, February 24, 2002
2
M.C.M. ENVIRONMENTAL TECHNOLOGIES INC.
CONSOLIDATED BALANCE SHEETS
IN U.S. DOLLARS
DECEMBER 31
---------------------------
NOTE 2001 2000
---- ---- ----
CURRENT ASSETS
Cash and cash equivalents $ 191,437 $ 339,761
Receivables and prepayments (3) 52,357 125,187
Inventories (4) 345,700 623,656
----------- -----------
589,484 1,088,604
----------- -----------
FIXED ASSETS
Cost (5) 207,030 101,102
Less - accumulated depreciation 62,130 41,014
----------- -----------
144,909 60,088
----------- -----------
LEASE COSTS - 11,364
----------- -----------
734,403 1,160,056
=========== ===========
CURRENT LIABILITIES
Current maturities of convertible debentures (9) 2,335,588 -
Trade payables 488,496 368,148
Other payables and accrued expenses (6) 359,826 324,655
----------- -----------
3,183,910 692,803
----------- -----------
LONG-TERM LIABILITIES
Loan from shareholder (7) 699,708 753,978
Accrued severance pay (8) 57,708 73,709
----------- -----------
757,416 827,687
----------- -----------
CONVERTIBLE DEBENTURES (9) - 1,468,781
----------- -----------
COMMITMENTS (10) -
SHAREHOLDERS' DEFICIENCY
Share capital (11) 755 755
Share premium 2,737,164 2,737,164
Accumulated deficit (5,944,842) (5,567,134)
----------- -----------
(3,206,923 (1,829,215)
----------- -----------
$ 734,403 $1,160,056
=========== ==========
The notes to the financial statements form an integral part thereof.
3
M.C.M. ENVIRONMENTAL TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
IN U.S. DOLLARS
FOR THE YEAR ENDED
DECEMBER 31
---------------------------
NOTE 2001 2000
---- ---- ----
REVENUES (12) $ 650,342 $ 758,200
COST OF REVENUES (13) 760,574 811,754
------------ ------------
Gross loss (110,232) (53,554)
------------ ------------
RESEARCH AND DEVELOPMENT COSTS (14) 345,616 584,375
MARKETING AND SELLING EXPENSES (15) 414,202 455,983
GENERAL AND ADMINISTRATIVE EXPENSES (16) 485,136 468,173
------------ ------------
1,244,954 1,508,531
------------ ------------
Operating loss (1,355,186) (1,562,085)
FINANCING EXPENSES, NET 22,522 136,810
------------ ------------
Net loss $(1,377,708) $(1,698,895)
============ ============
The notes to the financial statements form an integral part thereof.
4
M.C.M. ENVIRONMENTAL TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS' DEFICIENCY
IN U.S. DOLLARS
SHARED CAPITAL
-------------------- RECEIPTS
ON
PREFERRED ORDINARY SHARE ACCOUNT ACCUMULATED
SHARES SHARES PREMIUM OF SHARES DEFICIT TOTAL
--------- -------- ------- --------- ----------- -----
Balance as of January 1, 2000 21 340 $ 723,263 $ 375,000 $(2,868,239) $(1,769,615)
Issuance of shares(*) 376 - 1,845,919 (375,000) - 1,471,295
Issuance of shares to service
providers - 18 167,982 - - 169,000
Net loss - - - - (1,698,895) (1,698,895)
----- ----- ---------- ---------- ------------ -------------
Balance as of
December 31, 2000 397 359 2,737,164 - (4,567,134) (1,829,215)
Net loss - - - - (1,377,708) (1,377,708)
----- ----- ---------- ---------- ------------ -------------
Balance as of September 30, 2002 397 358 $2,737,164 $ - $(5,944,842) $ (3,206,923)
===== ===== ========== ========== ============ =============
(*) Net of issuance expenses of $18,817.
The notes to the financial statements form an integral part thereof.
5
M.C.M. ENVIRONMENTAL TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
IN U.S. DOLLARS
DECEMBER 31
-------------------
2001 2000
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $(1,377,708) $(1,698,895)
Adjustments to reconcile net loss to net cash
used in operating activities (see below). 493,921 446,316
------------ ------------
Net cash used in operating activities (883,787) (1,252,579)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (4,537) (9,613)
------------ ------------
Net cash used in investing activities (4,537) (9,613)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Receipts on account of shares - 1,846,183
Receipts from issuance of shares - (375,000)
Proceeds from convertible debentures 740,000 -
Short-term bank credit, net - (11,376)
------------ ------------
Net cash provided by financing activities 740,000 1,459,447
------------ ------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (148,324) 197,255
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 339,761 142,506
------------ ------------
CASH AND CASH EQUIVALENTS AT
END OF YEAR 191,437 339,761
============ ============
ADJUSTMENTS TO RECONCILE NET LOSS
TO NET CASH USED IN OPERATING ACTIVITIES
Revenues and expenses not affecting operating cash
flows:
Depreciation 21,116 20,628
Issuance of shares in consideration for services provided - 168,000
Linkage differences on loan from shareholder (54,270) 20,781
Provision for severance pay (16,001) (534)
Accrued interest on convertible debentures 88,132 65,311
------------ ------------
38,977,132 274,186
------------ ------------
Changes in operating assets and liabilities:
Decrease (increase) in receivables and prepayments 72,830 (45,4920
Decrease in inventories 176,556 278,471
Increase (decrease) in payables and accrued expenses 194,194 (50,178)
Decrease in advances from customers - (10,671)
Decrease in deferred costs 11,364 -
------------ ------------
454,944 172,130
------------ ------------
493,921 446,316
============ ============
NON CASH TRANSACTIONS
Conversion of liabilities into convertible debentures $ 38,675 $ -
============ ============
The notes to the financial statements form an integral part thereof.
6
M.C.M. ENVIRONMENTAL TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
IN U.S. DOLLARS
NOTE 1 - GENERAL
A. M.C.M. Environmental Technologies Inc. (the "Company"), a
Corporation registered in the state of Delaware (U.S), was
established and commenced operations in March 2001. All of the
shareholders of M.C.M. Ltd. transferred their holdings in M.C.M.
Ltd. to the Company in consideration for the same proportional
number of shares of the Company. The transfer was approved as a
tax exempt transaction pursuant to section 104 of the Israeli
Income Tax Ordinance, subject to certain conditions.
Comparative data for the year ended December 31, 2000 in these
financial statements present the financial position and results
of operations of the Company as if M.C.M. Ltd. had been a wholly
- owned subsidiary of the Company since inception.
B. In September 2001, an agreement was signed between the Company,
National Nephrology Associates Inc. ("NNA"), a Delaware
Corporation and SteriMed Renal Inc. ("SRI"), a Delaware
Corporation. According to the agreement, the Company will invest
$80,000 in SRI for 80% of its share capital and NNA will invest
$20,000 for 20% of SRI's share capital. According to the
agreement NNA agreed to lease 5 SteriMed and 65 SteriMed Junior
Systems from SRI for a five year period in consideration for a
per-treatment fee.
C. The Company has not generated sufficient revenues from its
operations to fund its activities and therefore its continuing
operations are dependent on financing from external sources,
including shareholders (see Note 9D). Although the Company
believes that based on its current contracts and potential
business the Company will obtain sufficient financing to fund its
activities, there is no assurance that the Company will obtain
the necessary financing.
7
M.C.M. ENVIRONMENTAL TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
IN U.S. DOLLARS
NOTE 2 - ACCOUNTING POLICIES (CONT.)
The significant accounting policies followed in the preparation
of these financial statements, on a consistent basis are as
follows:
A. BASIS OF PRESENTATION
The financial statements of the Company have been prepared in
U.S. dollars, as the Company's revenues are determined
principally in U.S. dollars and its primary source of financing
is received in U.S. dollars. Thus, the functional currency of the
Company is the U.S. dollars.
Transactions and balances originally denominated in U.S. dollars
are presented at their original amounts. Transactions and
balances in other currencies are remeasured into U.S. dollars in
accordance with principles identical to those prescribed in
Statement No. 52 of the Financial Accounting Standards Board of
the United States (FASB). Accordingly, items have been remeasured
as follows:
- Monetary items - at the current exchange rate at balance
sheet date.
- Nonmonetary items - at historical exchange rates.
- Income and expenditure items - at average exchange rates
(excluding depreciation and other items deriving from
nonmonetary items).
Exchange gains and losses from the aforementioned remeasurement
are reflected in the statement of operations.
B. CASH AND CASH EQUIVALENTS
All highly liquid investments are considered as cash equivalents
if the investments mature within three months from the date of
acquisition.
8
M.C.M. ENVIRONMENTAL TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
IN U.S. DOLLARS
C. INVENTORIES
Inventories are valued at the lower of cost or market. Cost is
determined as follows:
Raw materials Weighted average method.
Work in process - Average production costs including raw
Finished goods - materials, labor and overhead.
D. FIXED ASSETS
Fixed assets are stated at cost. Depreciation is computed by the
straight-line method over the estimated useful lives of the
assets.
E. RESEARCH AND DEVELOPMENT COSTS
Research and development costs are charged to operations as
incurred.
F. LINKED BALANCES
Balances in currencies other then the U.S. dollar are stated at
the exchange rate at balance sheet date. The representative
exchange rate-at December 31, 2001 - U.S. $ 1 - NIS 4.416 (2000 -
NIS 4.041). Balances linked to the Consumer Price Index ("CPI")
are based on the appropriate index for each linked asset or
liability. In the year of account the CPI increased by 1.4% (for
the year ended December 31, 2000, there was no change in CPI).
G. REVENUE RECOGNITION
Revenues from the sales of products are recognized upon shipment.
NOTE 3 - RECEIVABLES AND PREPAYMENTS
DECEMBER 31
-------------------
2001 2000
---- ----
Trade receivables $ 42,907 $ 51,710
Government departments 6,628 64,137
Others 2,822 9,340
--------- ---------
$ 52,357 $125,187
========= =========
9
M.C.M. ENVIRONMENTAL TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
IN U.S. DOLLARS
NOTE 4 - INVENTORIES
DECEMBER 31
-------------------
2001 2000
---- ----
Raw materials $ 189,900 $230,903
Work in process - 82,243
Finished goods 155,800 310,500
--------- ---------
345,700 623,656
--------- ---------
$ 345,700 $623,656
========= =========
10
M.C.M. ENVIRONMENTAL TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
IN U.S. DOLLARS
NOTE 5 - FIXED ASSETS
OFFICE
FURNITURE
COMPUTER EQUIPMENT LEASEHOLD AND
EQUIPMENT FOR LEASE IMPROVEMENTS EQUIPMENT TOTAL
--------- --------- ------------ ---------- -----
COST
As of January 1, 2001 $56,956 $ - $17,090 $27,056 $101,102
Additions 2,370 101,400 332 1,835 105,937
-------- --------- -------- -------- ---------
As of December 31, 2001 59,326 101,400 17,422 28,891 207,031
ACCUMULATED DEPRECIATION
As of January 1, 2001 34,804 - 2,068 4,142 41,014
Provision 16,889 - 1,718 2,509 21,116
-------- --------- -------- -------- ---------
As of December 31, 2001 51,693 - 3,786 6,651 62,130
-------- --------- -------- -------- ---------
NET BOOK VALUE
As of December 31, 2001 $ 7,633 $101,400 $13,636 $22,240 $144,909
======== ========= ======== ======== =========
Annual depreciation rates 25%-33% 15% 10% 6%-15%
-------- --------- -------- --------
NOTE 6 - OTHER PAYABLES AND ACCRUED EXPENSES
DECEMBER 31
-------------------
2001 2000
---- ----
Salaries and related expenses (*) $ 232,931 $195,066
Advances from customers 55,243 65,365
Accrued expenses 70,265 64,224
1,387 -
--------- ---------
$ 359,826 $324,655
========= =========
(*) Includes accrued vacation pay $ 41,080 $ 43,275
========= =========
NOTE 7 - LOAN FROM SHAREHOLDER
A long-term loan from a shareholder is linked to the CPI and bears no
interest. The loan shall be repaid when the Company's revenues exceed
$1.5 million for a six month period, and only 5% of such revenues may
be remitted to the shareholder for the repayment of the loan.
11
M.C.M. ENVIRONMENTAL TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
IN U.S. DOLLARS
NOTE 8 - ACCRUED SEVERANCE PAY
The Company's liability for severance pay to employees is covered by
deposits with insurance companies in respect of managers' insurance
and by the liability in the balance sheet. As the amounts deposited
with the insurance companies are not under the Company's control or
management, such deposits and the respective liability are not
reflected in the balance sheet.
NOTE 9 - CONVERTIBLE DEBENTURES
A. Convertible debentures amounting to $875,000 are convertible into
103 Preferred A shares of the Company, upon the occurrence of
certain events, including the sale of the shares of the Company
by the shareholders. The debentures bear interest of 7% per
annum. Through December 31, 2001 no debentures have been
converted.
B. Convertible debentures amounting to $500,000 will be repaid with
no interest in four equal quarterly installments commencing March
31, 2002, and ending December 31, 2002.
C. In 2001, the Company issued convertible debentures to certain
shareholders, a service provider and one of the Company's
employees, for an aggregate amount of $778,675. The debentures
will be converted into Preferred A shares automatically after a
minimum subsequent equity investment of $1 million. The
conversion price will be equivalent to 65% of the price per share
as determined in the aforementioned equity investment. If not
converted the debentures will be repaid with interest of 8% per
annum. In the event of a merger or acquisition of the Company's
shares or assets, the Company will redeem the debentures at twice
the principle amount of the debentures, not including interest.
Through December 31, 2001 no debentures have been repaid or
converted.
D. Subsequent to the balance sheet date, in February 2002, the
Company issued convertible debentures to certain shareholders for
an aggregate amount of $220,000. The convertible debentures will
be in the same terms of the convertible debentures described in
9C above.
E. The convertible debentures include accrued interest of $181,913
at December 31, 2001 (2000 - $93,781).
12
M.C.M. ENVIRONMENTAL TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
IN U.S. DOLLARS
NOTE 10 - COMMITMENTS
A. The Company is obligated to pay royalties to the Office of the
Chief Scientist of the Government of Israel in respect of
Government participation in research and development expenses,
calculated at the rate of 3%-3.5% of sales of the products
developed with the Government's participation up to the dollar
amount of such participation. The balance of the royalty
obligation at December 31, 2001, is approximately $452,000.
In respect with the establishment of the Company (see Note IA),
M.C.M. Ltd. received an, approval from the Chief Scientist to
transfer its production rights to the Company, subject to certain
conditions. According to the approval, M.C.M. Ltd. will be
obligated to pay royalties based on the sales of the Company,
ranging from 100% to 300% of the royalty obligation mentioned
above.
B. The Company has leased premises from a related party. The rent
expenses is $1,500 per month.
C. M.C.M. Ltd. has provided floating liens on all of its assets as
collateral for the Company's convertible debentures.
NOTE 11 - SHARE CAPITAL
A. The share capital as of December 2001 and December 2000 is
composed of shares of NIS 1 par value as follow: Authorized -
1,806 Ordinary shares, 2,176 Preferred A shares; Issued and paid
up - 1,098 Ordinary shares, 1,624 Preferred A shares.
B. The Preferred A shares entitle the holders to rights identical to
those of the Ordinary shares, except that the Preferred shares
have preference in liquidation and full participation rights, a
preference in future dividend distributions and anti dilution
rights. The Preferred A shares are convertible into Ordinary
shares on one-to-one basis.
C. The Company has decided to reserve 47 Ordinary shares for
issuance to employees. The shares have not yet been issued.
13
M.C.M. ENVIRONMENTAL TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
IN U.S. DOLLARS
D. During 2000, the Company issued 76 Ordinary shares in
consideration for their par value to marketing service providers.
The issuance of the shares was recorded at their fair value, and
ccordingly, the Company recorded marketing and selling expenses
of $168,000.
NOTE 12 - REVENUES
In 2001, 44% of the Company's sales were to one customer (2000 - 60%)
NOTE 13 - COST OF REVENUES
For the year ended
FOR THE YEAR ENDED
DECEMBER 31
-------------------
2001 2000
---- ----
Salaries and related expenses $ 136,515 $109,761
Materials and subcontractors 211,634 324,889
Other 175,472 140,112
--------- ---------
523,621 574,762
Decrease in work in process and finish
goods inventories $ 236,953 $236,992
========= =========
$ 760,574 $811,754
========= =========
NOTE 14 - RESEARCH AND DEVELOPMENT COSTS
FOR THE YEAR ENDED
DECEMBER 31
-------------------
2001 2000
---- ----
Salaries and related expenses $ 130,689 $222,387
Materials and subcontractors 97,918 146,558
Professional fees 95,031 63,821
Other 21,978 151,609
--------- ---------
$ 345,616 $584,375
========= =========
14
M.C.M. ENVIRONMENTAL TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
IN U.S. DOLLARS
NOTE 15 - MARKETING AND SELLING EXPENSES
FOR THE YEAR ENDED
DECEMBER 31
-------------------
2001 2000
---- ----
Salaries and related expenses $ 114,174 $130,548
Marketing consultant 75,568 226,158
Travel 78,427 56,951
Other (*) 146,033 42,326
--------- --------
$ 414,202 $455,983
========= ========
(*) Includes royalties to the Chief Scientist $ 18,807 $ 19,842
========= ========
NOTE 16 - GENERAL AND ADMINISTRATIVE EXPENSES
FOR THE YEAR ENDED
DECEMBER 31
-------------------
2001 2000
---- ----
Salaries and related expenses $ 243,014 $217,911
Legal and economic consultants 113,101 162,379
Travel 7,793 15,392
Other 121,228 72,491
--------- ---------
$ 485,136 $468,173
========= =========
15
M.C.M. ENVIRONMENTAL TECHNOLOGIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
IN U.S. DOLLARS
NOTE 17 - TAXES ON INCOME
A. The M.C.M Ltd is subject to the Income Tax Law (Inflationary
Adjustments), 1985. M.C.M. Ltd. has been provided with a status
of an "approved enterprise", under the alternative benefits
track, in accordance with the Law for the Encouragement of
Capital Investments, 1959. A principal benefit arising from the
program is a full tax exemption on undistributed income for a
period of ten years. Should M.C.M. Ltd. pay dividends from income
earned during the tax exemption period, it will be liable to
10%-25% tax on that income (the rate is dependent on the
shareholdings rate of the non-Israeli investors). Due to the
accumulated losses of M.C.M Ltd., the benefit period has not yet
commenced.
B. M.C.M. Ltd. has carry forward losses for tax purposes of
approximately $5.5 million at December 31, 2001. M.C.M. Inc. has
carry forward losses for tax purposes of approximately $30,000 at
December 31, 2001.
C. M.C.M. Ltd. has not received final tax assessments since
incorporation.
# # # # # #
16
--------------------------------------
M.C.M. ENVIRONMENTAL TECHNOLOGIES INC.
--------------------------------------
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2002
(UNAUDITED)
--------------------------------------
M.C.M. ENVIRONMENTAL TECHNOLOGIES INC.
--------------------------------------
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2002
C O N T E N T S
PAGE
----
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Balance Sheets 2
Consolidated Statements of Operations 3
Consolidated Statements of Changes in Shareholders' Deficiency 4
Consolidated Statements of Cash Flows 5
Notes to the Consolidated Financial Statements 6-7
*
# # # # # #
2
M.C.M. ENVIRONMENTAL TECHNOLOGIES
CONSOLIDATED BALANCE SHEETS
IN U.S. DOLLARS
SEPTEMBER 30
--------------------------
2002 2001
---- ----
(UNAUDITED) (UNAUDITED)
CURRENT ASSETS
Cash and cash equivalents $ 92,710 $ 59,489
Other receivables and prepayments 78,836 56,859
Inventories 393,800 485,800
----------- -----------
565,346 602,148
----------- -----------
FIXED ASSETS
Cost 219,476 107,138
Less - accumulated depreciation 82,385 56,850
----------- -----------
137,091 50,288
----------- -----------
LEASE DEPOSIT - 11,364
----------- -----------
$ 702,437 $ 663,800
=========== ===========
CURRENT LIABILITIES
Convertible debentures 3,090,277
Trade payables 511,377 377,886
Other payables and accrued expenses 429,442 479,254
----------- -----------
4,031,096 857,140
----------- -----------
LONG-TERM LIABILITIES
Loan from shareholder 675,515 711,602
Accrued severance pay, net 58,744 85,713
----------- -----------
734,259 797,315
----------- -----------
CONVERTIBLE DEBENTURES - 1,928,161
----------- -----------
MINORITY INTEREST 20,000 -
----------- -----------
SHAREHOLDERS' DEFICIENCY
Share capital 755 755
Share premium 2,737,164 2,737,164
Accumulated deficit (6,820,837) (5,656,735)
----------- -----------
(4,082,918) (2,918,816)
----------- -----------
$ 702,437 $ 663,800
=========== ===========
The accompanying notes are an integral part of the financial statements.
3
M.C.M. ENVIRONMENTAL TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
IN U.S. DOLLARS
FOR THE NINE MONTHS ENDED FOR THE THREE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------------- --------------------------
2002 2001 2002 2001
---- ---- ---- ----
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
REVENUES $ 358,384 $ 520,777 $ 103,146 $ 53,801
COST OF REVENUES
Gross loss 372,369 650,524 142,615 107,466
---------- ------------ ---------- ----------
(13,985) (129,747) (39,469) (53,665)
---------- ------------ ---------- ----------
RESEARCH AND DEVELOPMENT
EXPENSES 78,505 262,719 33,867 72,778
MARKETING AND SELLING EXPENSES 337,748 302,794 115,562 97,194
GENERAL AND ADMINISTRATIVE
EXPENSES 360,608 388,414 147,878 138,607
---------- ------------ ---------- ----------
776,861 953,927 297,307 308,579
---------- ------------ ---------- ----------
Operating loss (790,846) (1,083,674) (336,776) (362,244)
FINANCING INCOME (EXPENSES), NET (85,149) (5,927) (36,213) 5,772
---------- ------------ ---------- ----------
Net loss $(875,995) $(1,089,601) $(372,989) $(356,472)
========== ============ ========== ==========
The accompanying notes are an integral part of the financial statements.
4
M.C.M. ENVIRONMENTAL TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS' DEFICIENCY
IN U.S. DOLLARS EXCEPT FOR NUMBER OF SHARES
(unaudited)
SHARE CAPITAL
NUMBER -------------------
OF PREFERRED ORDINARY SHARE ACCUMULATED
SHARES SHARES SHARES PREMIUM DEFICIT TOTAL
------ --------- -------- ------- ----------- -----
Balance as of January 1, 2002 2,722 397 358 $2,737,164 $(5,944,842) $(3,206,923)
Net loss - - - - (875,995) (875,995)
----- ----- ----- ---------- ------------ ------------
Balance as of September 30, 2002 2,722 397 358 2,737,164 (6,820,837) (4,082,918)
===== ===== ===== ========== ============ ============
Balance as of January 1, 2001 2,722 397 358 2,737,164 (4,567,134) (1,829,215)
Net loss - - - - (1,089,601) (1,089,601)
----- ----- ----- ---------- ------------ ------------
Balance as of September 30, 2001 2,722 397 358 2,737,164 (5,656,735) (2,918,816)
===== ===== ===== ========== ============ ============
Balance as of July 1, 2002 2,722 397 358 2,737,164 (6,447,848) (3,709,929)
Net loss - - - - (372,989) (372,989)
----- ----- ----- ---------- ------------ ------------
Balance as of September 30, 2002 2,722 397 358 2,737,164 (6,820,837) (4,082,918)
===== ===== ===== ========== ============ ============
Balance as of July 1, 2001 2,722 397 358 2,737,164 (5,300,263) (2,562,344)
Net loss - - - - (356,472) (356,472)
----- ----- ----- ---------- ------------ ------------
Balance as of September 30, 2001 2,722 397 358 $2,737,164 $(5,656,735) $(2,918,816)
===== ===== ===== ========== ============ ============
The accompanying notes are an integral part of the financial statements.
5
M.C.M. ENVIRONMENTAL TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
IN U.S. DOLLARS
FOR THE NINE MONTHS TO
SEPTEMBER 30
-----------------------------
2002 2001
----------- -----------
(UNAUDITED) (UNAUDITED)
----------- -----------
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (875,995) (1,089,601)
Adjustments to reconcile net loss to net cash used in
operating activities (see below). 140,343 415,365
----------- -----------
Net cash used in operating activities (836,786) (674,236)
------------------------------------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (12,446) (6,036)
----------- -----------
Net cash used in investing activities (12,446) (6,036)
------------------------------------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Receipts from minority interest 20,000 0
Proceeds from convertible debentures 629,362 400,000
----------- -----------
Net cash provided by financing activities 649,362 400,000
----------------------------------------- ----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (98,736) (280,272)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 191,446 339,761
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD 92,710 59,489
=========== ===========
ADJUSTMENTS TO RECONCILE NET LOSS
TO NET CASH USED IN OPERATING ACTIVITIES
Revenues and expenses not affecting operating cash flows:
---------------------------------------------------------
Depreciation 20,255 15,840
Linkage differences on loan from shareholder (24,193) (42,398)
Provision for severance pay 1,036 12,004
Accrued interest on convertible debentures 125,327 59,830
----------- -----------
122,425 45,276
----------- -----------
Changes in operating assets and liabilities:
--------------------------------------------
Decrease (increase) in receivables and prepayments (26,479) 68,322
Decrease in inventories (48,100) 137,856
Increase in payables and accrued expenses (836) 172,894
Decrease (increase) in advances from customers 93,333 8,983
----------- -----------
17,918 370,089
----------- -----------
140,343 413,365
=========== ===========
NON CASH TRANSACTIONS
Conversion of liabilities into convertible debentures 58,062 0
=========== ===========
The accompanying notes are an integral part of the financial statements.
6
M.C.M. ENVIRONMENTAL TECHNOLOGIES, INC.
NOTES TO THE CONDENSED INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
In U.S. dollars
(unaudited)
NOTE 1 - GENERAL
A. The accompanying financial statements have been prepared in a
condensed format as of September 30, 2002, and for the nine
months and three months then ended in accordance with generally
accepted accounting principles in the United States (U.S. GAAP)
relating to the preparation of financial statements for interim
periods. Operating results for the nine months ended September
30, 2002, are not necessarily indicative of the results that may
be expected for the year ended December 31, 2002. These
statements should be read in conjunction with the Company's
annual financial statements and accompanying notes as December
31, 2001. The interim financial statements reflect all
adjustments which are, in the opinion of management, necessary
for a fair presentation. All such adjustments were of a normal
recurring nature.
B. Comparative data for the nine months ended September, 2001 in
these financial statements present the financial position and
results of operations of the Company as if M.C.M Ltd. has been a
wholly-owned subsidiary of the Company since inception.
C. The Company has not generated sufficient revenues from its
operations to fund its activities and therefore its continuing
operations are dependent on financing from external sources,
including shareholders. Although the Company believes that based
on its current contracts and potential business, the Company will
obtain sufficient financing to fund its activities; there is no
assurance that the Company will obtain the necessary financing.
D. As part of an investor proposal to the Company in May 2002, the
Company received a loan of $545,000 (out of which $200,000 was
received subsequent to balance sheets date) from the investor.
The loan is repayable upon the earlier of ("Maturity date"): (1)
twelve months after grant date (2) an investment in equity or
debt in the Company (3) upon acceleration after an event of
default or (4) six months after grant date if the proposed
acquisition is not completed as a result of the inability to
complete certain conditions to the closing.
7
NOTE 1 - GENERAL
D. (Cont.)
Prior to maturity date, the loan shall bear interest of Prime
plus 2% per annum. Following the Maturity date the loan shall
bear interest of Prime plus 6%. Upon completion of the
acquisition, the loan and accrued interest will be converted and
credited to the investor as part of the acquisition price.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed in the preparation of
these financial statements are identical to those applied in the
preparation of the latest annual financial statements.
NOTE 3 - FINANCIAL STATEMENTS IN U.S. DOLLARS
The financial statements of the Company have been prepared in U.S.
dollars, as the Company's revenues are determined principally in U.S.
dollars and its primary source of financing is received in U.S.
dollars. Thus, the functional currency of the Company is the U.S.
dollars.
The exchange rate of the U.S. dollar as of balance sheet date was $1 =
NIS 4.871 (December 31, 2001 - NIS 4.416). The changes in the exchange
rate of the U.S. dollar are as follows:
INCREASE (DECREASE)
IN THE EXCHANGE RATE
OF U.S. DOLLAR
%
--------------------
For the nine months ended:
September 30, 2002 10.3
September 30, 2001 0.8
For the three months ended:
September 30, 2002 2.1
September 30, 2001 0.5
For the year ended December 31, 2001 9.3
#####
8
Unaudited Pro Forma Combined Condensed Statement of Operations
The following unaudited pro forma combined condensed statement of
operations gives effect to the acquisition of MCM Environmental Technologies,
Inc. ("MCM") by Caprius, Inc. (the "Company") using the purchase method of
accounting, as required by Statement of Financial Accounting Standard No. 141,
"Business Combinations." Under this method of accounting, the Company will
allocate the purchase price to the fair value of assets acquired, including
identified intangible assets and goodwill. The purchase price allocation is
subject to revision when the Company obtains additional information regarding
asset valuation. On December 17, 2002, the Company acquired 33,191 shares of
Series A Preferred Stock of MCM, representing 57.53% of the voting stock of MCM,
for a purchase price of $2.4 million. 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. The unaudited pro forma
combined condensed statement of operations is based on the historical financial
statements and the accompanying notes of MCM which are included with this
filing. The unaudited pro forma combined statement of operations assumes the
acquisition took place on October 1, 2001. The unaudited pro forma information
is presented for illustration purposes only in accordance with the assumptions
set forth below. This information is not necessarily indicative of the operating
results that would have occurred if the acquisition had been consummated on the
date indicated nor is it necessarily indicative of future operating results of
the combined companies. The unaudited pro forma combined condensed financial
information does not reflect any adjustments to conform accounting practices or
to reflect any cost savings or other synergies anticipated as a result of the
acquisition or any acquisition related expenses. The unaudited pro forma
combined condensed balance sheet as of December 31, 2002 is not included in this
filing on Form 8-K/A, as the transaction occurred on December 17, 2002. The
transaction is reflected in the Consolidated Balance Sheet included in the
Company's previously filed December 31, 2002 Form 10-Q.
PF-1
Unaudited Pro Forma Combined Condensed Statement of Operations
For the year ended September 30, 2002
(Unaudited)
Proforma
Caprius MCM Adjustments Total
------------ ------------ ----------- ------------
REVENUES:
Net patient service revenues $ 1,549,794 $ - $ - $ 1,549,794
Product sales and rental revenues - 487,949 - 487,949
------------ ------------ ------------ ------------
Total revenues 1,549,794 487,949 - 2,037,743
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Cost of patient service revenues 1,169,491 - - 1,169,491
Cost of product sales and rental revenue - 482,419 482,419
Research and development - 161,402 161,402
Selling, general and administrative 498,030 906,486 1,404,516
Goodwill impairment 67,356 - 67,356
Provision for bad debt and collection costs 66,638 - 66,638
------------ ------------ ------------ ------------
Total operating expenses 1,801,515 1,550,307 - 3,351,822
------------ ------------ ------------ ------------
Operating loss (251,721) (1,062,358) - (1,314,079)
Interest and other income (expense) (10,619) (101,744) 149,039(a) 36,676
------------ ------------ ------------ ------------
Loss from continuing operations before minority
interest (262,340) (1,164,102) 149,039 (1,277,403)
Loss applicable to minority interest - - 431,097(b) 431,097
------------ ------------ ------------ ------------
Loss from continuing operations (262,340) (1,164,102) 580,136 (846,306)
Loss from operations of discontinued TDM segment (155,353) - (155,353)
------------ ------------ ------------ ------------
Net loss $ (417,693) $ (1,164,102) $ 580,136 $ (1,001,659)
============ ============ ============ ============
Net loss per basic and diluted common share:
Continuing operations $ (0.01) $ - $ - $ (0.05)
Discontinued operations (0.01) - - (0.01)
------------ ------------ ------------ ------------
Net loss per basic and diluted common share $ (0.02) $ - $ - $ (0.06)
============ ============ ============ ============
Weighted average number of common shares used in
computing earnings per share 17,171,140 - - 17,171,140
============ ============ ============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
PF-2
1. Basis of Pro Forma Presentation
The unaudited pro forma combined condensed statement of operations of the
Company has been prepared on the basis of assumptions relating to the allocation
of consideration paid to the acquired assets and liabilities of MCM. The actual
allocation of the amount of the consideration may differ from that reflected in
these unaudited pro forma combined statement of operations after a third party
valuation and other procedures have been completed. Below are tables of the
estimated purchase price allocations for MCM:
Cash consideration at closing $1,835,000
Loans previously advanced 565,000
----------
Total purchase price $2,400,000
==========
Goodwill and other intangible assets $1,777,010
Net tangible assets 622,990
----------
Total acquisition cost $2,400,000
==========
2. Pro Forma Adjustments
(a) Reflects the elimination of interest accrued on shareholders
loans that were converted to equity upon the consummation of the
acquisition.
(b) Reflects the allocation of loss to minority interest. This amount
represents 42.47% of the net loss for MCM held by minority
interest holders, after the affect of other pro forma
adjustments.
PF-3