UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-KSB


(Mark one)
           X   Annual Report Pursuant to Section 13 or 15 (d) of the Securities
         ----- Exchange Act of 1934
               FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2002
               Transition Report Pursuant to Section 13 or 15 (d) of the of the
         ----- Securities Exchange Act of 1934

                         Commission File Number: 0-11914
                                  CAPRIUS, INC.
                 (Name of Small Business Issuer in its charter)

           Delaware                                         22-2457487
(State or other jurisdiction of                          (I.R.S. Employer
 incorporation or organization)                         Identification No.)

                      One Parker Plaza, Fort Lee, NJ 07024
                      ------------------------------------
               (Address of principal executive offices) (Zip Code)

                    Issuer's telephone number: (201) 592-8838
                                               --------------

      Securities to be registered under Section 12 (b) of the Exchange Act:
                                      None

     Securities to be registered under Section 12 (g) of the Exchange Act:
                     Common Stock, par value $ .01 per share
                     ---------------------------------------
                                (Title of Class)

     Check whether the issuer (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
                                                                   ---       ---

     Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of the Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB [X].

     Revenues for the fiscal year ended September 30, 2002: $1,549,794

     The aggregate market value of the voting stock held by non-affiliates of
the Registrant computed by reference to the price at which the stock was sold,
or the average bid and ask prices of such stock as of December 31, 2002:
$803,595

     The number of shares outstanding of Registrant's Common Stock, $.01 par
value, outstanding on December 31, 2002: 20,396,562 shares


================================================================================
                    Documents Incorporated by Reference: None
             Transitional Small Business Disclosure Format: Yes No X


<PAGE>


                                      INDEX



                                                                        Page No.
                                                                        --------

PART I
Item 1.   Description of Business                                            3
Item 2.   Description of Properties                                         11
Item 3.   Legal Proceedings                                                 11
Item 4    Submission of Matters to a Vote of Security Holders               12


PART II
Item 5.   Market for Common Equity and Related Stockholder Matters          12
Item 6.   Management's Discussion and Analysis or Plan of Operations        12
Item 7.   Financial Statements                                              17
Item 8.   Changes In and Disagreements with Accountants on Accounting       17
          and Financial Disclosure


PART III
Item  9.  Directors, Executive Officers, Promoters and Control Persons;     18
          Compliance with Section 16(a) of the Exchange Act.
Item 10.  Executive Compensation                                            20
Item 11.  Security Ownership of Certain Beneficial Owners and               22
          Management and Related Stockholder Matters
Item 12.  Certain Relationships and Related Transactions                    23
Item 13.  Exhibits and Reports on Form 8-K                                  24
Item 14.  Controls and Procedures                                           28


SIGNATURES                                                                  32


                                       2
<PAGE>


                                     PART I
                                     ------

ITEM I.  DESCRIPTION OF BUSINESS


GENERAL

         Caprius, Inc. ("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. The Company continues to own and operate a
comprehensive imaging center located in Lauderhill, Florida. 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").

         The Opus acquisition 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 through
December 31, 2000. On October 9, 2002, Opus sold the assets of the TDM Business
to Seradyn, Inc., a Delaware corporation ("Seradyn"), pursuant to a Purchase and
Sale Agreement among Opus, Caprius, and Seradyn for a purchase price of
$6,000,000, subject to adjustment, and entered into a Royalty Agreement and a
Consulting Agreement.

         On December 17, 2002, the Company closed the acquisition of 57.53% of
the capital stock of MCM, which is engaged in the medical infectious waste
disposal business, for a purchase price of $2.4 million. 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. 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.

         On June 12, 2002, the Company and MCM had signed a Letter of Intent to
enter into an agreement whereby the Company would have the right to acquire 51%
of the outstanding stock on a fully diluted basis of MCM. Concurrent with the
signing of the Letter of Intent, Caprius provided MCM with a loan totaling
$245,000. The Company obtained the monies to make the loan to MCM through funds
provided by a short-term loan from officers and employees of the Company as well
as related family members in the amount of $250,000. 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. For a six
month period commencing 19 months and ending 25 months from December 17, 2002,
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, at a price based upon a pre-set
determination calculated at such time. At the Company's option, the purchase
price for the remaining MCM shares may be paid in cash or the Company's common
stock.

         On September 25, 2002, warrant holders representing 3,297,700 shares of
Common Stock took the opportunity to exercise their warrants in the Company's
warrant price reduction program. The Company had offered warrant holders of
4,319,750 shares of Common Stock the opportunity to exercise their warrants at a
reduced exercise price for a period of 14 days during September 2002. The
purpose of this program was to give the Company a quick and inexpensive means to
obtain funds for short-term working capital requirements. The reduced exercise
price for each of the outstanding warrants was equal to 20% of its present
exercise price, but not less than $0.11 per share. As a result, the Company
raised an aggregate of $409,668 and also substantially reduced the number of its
outstanding warrants.

         In July 1998, the Company acquired The Strax Institute ("Strax"), a
comprehensive breast imaging center, located in Lauderhill, Florida. Strax is a


                                       3
<PAGE>

multi-modality breast care center that performs approximately 24,000 procedures
per year comprising of x-ray mammography, ultrasound, stereotactic biopsy and
bone densitometry. The Company continues to evaluate the possible sale of Strax.


THERAPEUTIC DRUG MONITORING BUSINESS

         Prior to October 9, 2002, 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(R) in kit form for use on the Abbott TDx and TDxFLx instruments. Opus
received and accepted an unsolicited offer from Seradyn to purchase its TDM
Business. Seradyn had been a contract manufacturer of the Opus TDM kits.
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 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. 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.

MCM ENVIRONMENTAL TECHNOLOGIES INC.

DESCRIPTION OF MCM ENVIRONMENTAL TECHNOLOGIES INC. (MCM) BUSINESS

BACKGROUND OF THE REGULATED MEDICAL WASTE INDUSTRY

         UNITED STATES

         In response to environmental issues including medical waste washing-up
along the eastern coast of the United States, the federal government adopted the
Medical Waste Tracking Act ("MWTA") in 1988. The MWTA defined medical waste and
those wastes to be regulated, - establishing a "cradle to grave" tracking system
mandating a waste generator initiated tracking form; required management
standards for segregation, packaging, labeling and marking, as well as storage
of the medical waste. MWTA introduced record keeping requirements and penalties
that could be imposed for mismanagement. The MWTA, a two-year demonstration
program that has since expired, triggered the development and implementation of
state regulations concerning medical waste, many of which incorporate parts of
the MWTA. The state legislatures promulgated their own laws and regulations to
define regulated medical waste ("RMW") and to establish guidelines for its
treatment and disposal. Oversight of the legislation is often the responsibility
of a state environmental protection and/or health agency.

         Therefore, it became more critical in the disposal of medical waste to
have adequate means to either transport from the facility and destroy it off
site, or to obtain systems to destroy the waste on site.

         The US medical waste disposal market has been estimated to be $1.7
billion annually with an annual growth rate of 10% (Frost and Sullivan, 1998).
According to an Environmental Protection Agency ("EPA") report in 1994,
approximately 500,000 tons of biohazardous waste was generated in the US.
Hospitals, which comprise only 2% of the total number of waste generators,
produce about 71% of biohazardous waste, with the remainder generated by
clinics, laboratories and other alternative site facilities. To remove the waste
about 80% of the hospitals use waste management firms which both transport and
treat the waste; 8% use on site incinerators and 11% use other onsite technology
coupled with waste haulers which transport the residual to landfills.

         The medical waste disposal market has changed dramatically over the
past several years. The passage of the Clean Air Act Amendments of 1997, has
forced hospitals either to refit their incinerators with expensive pollution
control devices or close them (final implementation date was September 2002).
The environmental problem generated by the medical waste incinerators is that
hydrogen chloride and heavy metals were being emitted into the atmosphere.
Concurrently, medical waste haulers are also subject to increased regulatory
oversight from the US Department of Transportation. The consolidation of the
medical waste industry to one large provider and several small local/regional


                                       4
<PAGE>


players has contributed to increased disposal costs for the producers of medical
waste. In addition, medical waste generators are coming under increasing
pressures to reduce expenses as a result of decreasing reimbursement from
managed care companies and Medicare. The combination of these pressures is
forcing medical waste generators to reconsider their current waste disposal
methods. The Company believes these factors provide MCM with an excellent
marketing opportunity.

         EUROPE

         Members of the European Union are implementing laws to mirror the US
regulations on medical waste disposal. 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. Drivers are also required to be trained as
to check and monitor waste upon collection. MCM is considering the opportunity
in Europe as part of its marketing strategy as the SteriMed(R) system is CE Mark
compliant.

THE MCM STERIMED(R) SYSTEM

         The proprietary MCM SteriMed(R) system treats contaminated waste of all
kinds including syringes, dialysis filters and kits, scalpels, cloth, test
tubes, organic materials, and other hazardous bio-medical waste. A dedicated
closed system designed for on-site simultaneous shredding and chemical
treatment, the SteriMed(R) units destroys biomedical waste into tiny pieces
reducing its volume by approximately 90%, and exposes it to a disinfecting
solution called Ster-Cid(R). The diluted chemical solution, which is 94%
biodegradable, is separated from the solid waste and goes into the sewage
system. The now solid waste product can be disposed at a landfill as ordinary
waste. The SteriMed(R) system's chemical process kills biological contaminants.
The SteriMed(R) system is designed to process approximately 750 pounds of
medical waste per day. Through a highly controlled process, approximately 9 gal
(35 liters) of water and 175 ml of Ster-Cid(R) are 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 processing cycle. At the end of each cycle, a valve in the treatment
chamber automatically opens, allowing the entire contents to be released into
the centrifuge or separator, which separates the solid from the liquid
components. The centrifuge traps the solids in a filter sack and discharges the
liquids into the sewage system. The dimensions of the SteriMed(R) unit are
height-50 inches, width-48 inches, depth-27 1/2 inches, and the weight is 1,044
pounds.

         To meet the needs of smaller facilities, MCM developed the
SteriMed-Junior(R), This system provides the same functionality but due to its
more compact size and smaller capacity, it is marketable to dialysis centers,
clinics and physicians' offices. The SteriMed-Junior(R), similar in its basic
capabilities to the larger SteriMed(R), is designed to be the most
cost-effective medical waste treatment system available today for smaller
facilities. The SteriMed-Junior(R) can process a large variety of medical waste;
chemically treating approximately 150 pounds per day of bagged waste. The
dimensions of the SteriMed-Junior(R) are height- 42 inches, width-33
inches-depth-20 inches and the weight is 645 pounds.

         MCM has received applicable state and federal regulatory approvals, as
described below.

REGULATORY ISSUES IN THE UNITED STATES

         The U.S. Environmental Protection Agency has federal jurisdiction over
medical waste treatment technologies that claim to reduce the infectivity of the
waste (i.e. that claim any microbiological activity) by use of a chemical.
Specifically, this jurisdiction applies to the Federal Insecticide, Fungicide
and Rodencide Act of 1972 ("FIFRA").

         States have differing requirements for processing, treating and
disposing medical waste. As a result, approval process and review methods for
Alternative Technologies are different and varies from state to state and may be
handled by contrasting departments. In addition, states require that the
chemicals are registered. To date, 49 states have finalized the registration
process of the chemicals (Ster-Cid(R)), of which 43 states allow the marketing
of the SteriMed(R). To date, the SteriMed-Junior(R) has been approved for use in
37 states. Approvals are pending in the other states.


                                       5
<PAGE>


         On the local and county level, many local authorities (especially in
urban areas) require that discharge permits will be obtained from Publicly Owned
Treatment Works ("POTW") by all facilities discharging substantial amount of
liquids to the sewer system. Usually General Discharge Permits are obtained by
health facilities, such as hospitals, as part of their License to Operate. The
effluent discharge of the SteriMed(R) systems has been characterized and found
to be within the lower range of the general requirements as set by the National
Pollutant Discharge Elimination System (NPDES) Permitting Program used as the
basis by states to establish their discharge limits.

         These approvals allow medical waste treated by the MCM technology to be
considered as disinfected. The residual waste is permitted to be placed in
normal municipal waste.

         Medical waste treated by MCM technology allows for it to be later
disposed as regular municipal "black Bag" waste. To be permitted to do this, MCM
had to demonstrate that it could reduce the level of the Bacillus subtilis
spores by a 6Log10, or by one-millionth (0.000001).

         The SteriMed(R) process, unlike other waste medical disposal
technologies, does not have to contend with the Clean Air Act Amendments of 1990
(since there is no incineration or generation of toxic fumes), and the Hazardous
Materials Transportation Authorization Act of 1994 (as there is no
transportation of hazardous waste).

         COMPETITION

         Medical waste had routinely been disposed through incineration. Due to
the pollution generated by medical waste incinerators, novel technologies have
been developed for the disposal of medical waste. Some of the issues confronting
these are energy requirements, space requirements, unpleasant odor, radiation
exposure, excessive heat, volume capacity and reduction, steam and vapor
containment, and chemical pollution. The following are the various technologies
and the competitors.

         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 essentially a steam-based
low-heat thermal process as disinfection occurs through the action of moist heat
/steam and microwaves. This is usually achieved at temperatures in the range of
95-100oC or 203-212oF ,2450 MHz and wavelength 12.24. Competitors have developed
both large and small units. These systems tend to have high capital costs.
Processing of metal objects in some systems may cause problems such as fire.

         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


                                       6
<PAGE>


dioxide, are somewhat controversial as to their environmental effects and its
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 of MCM are Stericycle, Inc. Steris Corporation,
Mark-Costello Co., and Sanitec, Inc.

MCM'S STRATEGY

         Seizing the opportunity afforded by the regulatory changes and pricing
pressures in the healthcare industry, MCM is positioning its products as viable
alternatives to the traditional medical waste disposal methods. The SteriMed(R)
system seeks 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 advantages of the SteriMed(R) System are:

         Improves Safety:
         ----------------
         Renders infectious waste benign
         Reduces pathogens to meet or exceed federal, state and local standards
         Minimizes exposure of patients, visitors, and staff by reduced handling
         and transportation
         Eliminates storage at site of medical waste generator
         Processes automatically so operator does not come in contact with
         contaminated waste

         Reduces Costs:
         --------------
         Costs are typically substantially lower per pound of medical waste
         compared to other systems

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

         Environmentally friendly
         ------------------------
         Uses chemicals which are approximately 94% biodegradable
         Produces no smoke, smell, steams, or any other emissions into the air
         Reduces waste volume by approximately 90%
         Low energy consumption

         Handles large volumes quickly
         -----------------------------
         Takes approximately 15 minutes per cycle
         Can handle over 200 tons of waste per year

         Easy to install, operate and maintain
         -------------------------------------
         Requires only one operator and once the cycle has started, the operator
         can walk away
         Requires small operating floor space due to its compact size
         No special ventilation or lighting
         Generates very low noise

         These features are intended to make the SteriMed(R) System 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.


MARKET SIZE

         Estimated US Facilities and Annual Biomedical Waste Generated


                                       7
<PAGE>

<TABLE>
<CAPTION>

-------------------------------------- --------------------- -------------------------- -----------------------
                                                              ANNUAL BIOMEDICAL WASTE   % OF TOTAL BIOMEDICAL
            FACILITY TYPE                  NUMBER OF US          GENERATED (TONS)               WASTE
                                            FACILITIES
-------------------------------------- --------------------- -------------------------- -----------------------
<S>                                                 <C>                        <C>                       <C>
Hospitals                                             7,000                    360,000                   71.4%
-------------------------------------- --------------------- -------------------------- -----------------------
Physicians offices                                  180,000                     35,200                    7.0%
-------------------------------------- --------------------- -------------------------- -----------------------
Nursing homes                                        18,800                     29,700                    5.9%
-------------------------------------- --------------------- -------------------------- -----------------------
Clinics (Outpatient)                                 41,300                     26,300                    5.2%
-------------------------------------- --------------------- -------------------------- -----------------------
Laboratories                                          7,200                     25,900                    5.1%
-------------------------------------- --------------------- -------------------------- -----------------------
Dentist's offices                                    98,000                      8,700                    1.7%
-------------------------------------- --------------------- -------------------------- -----------------------
Free standing blood banks                               900                      4,900                    1.0%
-------------------------------------- --------------------- -------------------------- -----------------------
Veterinarians                                        38,000                      4,600                    0.9%
-------------------------------------- --------------------- -------------------------- -----------------------
Corrections                                           4,300                      3,300                    0.7%
-------------------------------------- --------------------- -------------------------- -----------------------
Health units in industry                            221,700                      1,400                    0.3%
-------------------------------------- --------------------- -------------------------- -----------------------
Fire and Rescue                                       7,200                      1,600                    0.3%
-------------------------------------- --------------------- -------------------------- -----------------------
Residential Care                                     23,900                      1,400                    0.3%
-------------------------------------- --------------------- -------------------------- -----------------------
Funeral homes                                        21,000                        900                    0.2%
-------------------------------------- --------------------- -------------------------- -----------------------
Police                                               13,100                       <100                   <0.1%
-------------------------------------- --------------------- -------------------------- -----------------------
TOTAL                                               682,400                    503,900                    100%
-------------------------------------- --------------------- -------------------------- -----------------------
<FN>
Source: 1994 US EPA, Medical Waste Incinerators - Background Information for
Proposed Guidelines: Industry Profile for New and Existing Facilities
</FN>
</TABLE>

THE HOSPITAL MARKET

         Because of their sheer size and limited number of facilities in
comparison to the numbers by other user categories, hospitals are a very
important market for MCM. At present, hospitals have had three options for the
disposal of their biomedical waste: to outsource to a waste management company;
to process it on-site using an incinerator or to process it on-site using other
alternative technology. The following chart depicts the estimated distribution
of methods used by US hospitals.

<TABLE>
<CAPTION>

--------------------------      ----------       ------------       ------------
                                                   ON-SITE            ON-SITE
                                OUTSOURCE        INCINERATION       ALTERNATIVE
--------------------------      ----------       ------------       ------------
<S>                             <C>              <C>                <C>
PERCENTAGE OF HOSPITALS
UTILIZING DISPOSAL METHOD           80%              8.4%              11.6%
--------------------------      ----------       ------------       ------------
<FN>
  SOURCE:  TVA, 1998; Medical Data International
</FN>
</TABLE>

OUTSOURCED  - WASTE MANAGEMENT COMPANIES

         A majority of healthcare facilities contract with third-party waste
management companies for the removal of their solid waste for disposal. The 80%
figure, however, reflects hospitals that contract with these third-party waste
management companies for both the removal and the treatment / disposal of their
medical waste. This is a changing industry. Recently, the top four waste
management companies have consolidated into two. This consolidation is expected
to increase prices. Presently, the regulators are adding new restrictions to
transport medical waste across state lines, which are likely to increase the
costs to hospitals.

ON-SITE - INCINERATION

         Hospitals with on-site incinerators have been impacted by new
Environmental Protection Agency emissions standards requiring the reduction of
the release of dioxin, mercury and other potentially carcinogenic materials into
the atmosphere. These hospitals will have to either retrofit their existing
incinerators at a projected cost of $300,000 - $400,000 along with legal fees
and other permit requirements (Healthcare Purchasing News, August 1997, Vol. 21,
No. 8) or shut down their incinerators and dispose of their waste through other
methods. The following is an estimate of the number of incinerators and those


                                       8
<PAGE>


projected to close:

<TABLE>
<CAPTION>
  --------   -------------------   -----------------   --------------------
  TYPE       # OF FACILITIES       BURNING LBS./HOUR   % ESTIMATED TO CLOSE
  --------   -------------------   -----------------   --------------------
<S>          <C>                   <C>                 <C>
  Small            1,100                 <200                 93-100%
  --------   -------------------   -----------------   --------------------
  Medium            690                 200-500               60-95%
  --------   -------------------   -----------------   --------------------
  Large             460                  >500                   35%
  --------   -------------------   -----------------   --------------------
<FN>
     Source: Health Care Hazardous Material Management, 1997
</FN>
</TABLE>

         Because of the high cost of complying with the new regulations, the EPA
estimates that of the approximately 1,100 small (burning less then 200 pounds
per hour), 690 medium (burning 200 to 500 pounds per hour) and 460 large
(burning more than 500 pounds per hour) medical waste incinerators in operation
in May 1996, approximately 93-100% of the small incinerators, 60-95% of the
medium incinerators and up to 35% of the large incinerators will close as a
result of the new regulations in addition to the rise in prices.

MANUFACTURING

         MCM recognizes that to be successful, it needs to manufacture units
that are;
              1) Robust
              2) Reliable
              3) Reproducible in its activity

         Presently, the SteriMed(R) is manufactured at MCM's facilities in
Moshav Moledet, Israel. The SteriMed-Junior(R) is being manufactured at Shalev
Metal Works, Kiryat Bialik, Israel. Shalev Metal Works is not affiliated with
MCM. The Company is actively seeking extra capacity for manufacturing. The
inability to find such manufacturers will constrain MCM's growth potential.

MAINTENANCE AND CUSTOMER SERVICE MODEL

         Critical to the successful use of the unit is proper installation and
training of the account's operators. MCM is developing a team that will be able
to provide that service and a system that will be able to provide professional
after sale customer care.

INTELLECTUAL PROPERTY
PATENTS ISSUED AND PENDING

         MCM has filed patents on its system in the major countries. The
following is a listing of the patents issued to date by country:

<TABLE>
<CAPTION>
   ------------------------    --------------    -------------
   Country                     Patent Number     Patent Date
   ------------------------    --------------    -------------
<S>                            <C>               <C>
   Israel                      108311            12.31.1999
   ------------------------    --------------    -------------
   Japan                       3058401           04.21.2000
   ------------------------    --------------    -------------
   United States               5,620654          05.15.1997
   ------------------------    --------------    -------------
   Australia                   684,323           04.02.1998
   ------------------------    --------------    -------------
   European Union (EU)         0662346           03.28.2001
   ------------------------    --------------    -------------
   Canada                      2,139,689         10.05.1999
   ------------------------    --------------    -------------
</TABLE>


         The following is a listing of pending patent applications:

<TABLE>
<CAPTION>
         ----------------------------------------------------------------------
         Country     Application no.      Application Date     Remarks
         ----------------------------------------------------------------------
<S>                  <C>                  <C>                  <C>
         U.S.A       60/265,870           02/05/2001           Provisional
         ----------------------------------------------------------------------
         U.S.A       09/824,685           04/04/2001           Non-provisional


                                  9
<PAGE>


         ----------------------------------------------------------------------
         PCT         PCT/IL02/00093       02/04/2002
         ----------------------------------------------------------------------
</TABLE>


TRADEMARKS

         The MCM trademarks of SteriMed(R), Ster-Cid(R) and SteriMed(R) have
been registered with the appropriate authorities.


STRAX INSTITUTE BUSINESS

         The Strax Institute ("Strax") was founded in 1979 to provide
comprehensive breast care for patients. In July 1998, the Company acquired
Strax, as part of its strategy to utilize and integrate the breast imaging
technology that was developed at the time by Caprius, with that of Strax and
create an installed base for this business. In April 1999, the Company sold the
assets of the breast imaging technology and the original strategy to use Strax
as its platform was no longer valid.

          Strax specializes in comprehensive breast care utilizing several
imaging modalities and a high level of hands-on patient care. Strax performs all
imaging and diagnostic services in-house, including x-ray mammography, screening
ultrasound, ultrasound, stereotactic biopsies, as well as performing bone
densitometry to monitor osteoporosis. In addition, Strax administers in-house
all patient screening, scheduling, billing and collections, managed care
contracts, transcriptions, medical records and accounting and bookkeeping for
its business.

         Strax is located in Lauderhill, Florida and performs approximately
24,000 procedures annually. Strax specializes in comprehensive breast care
utilizing three Mammography Imaging Modalities (two Lorad units and one General
Electric unit) and two Ultrasound Imaging Units, one of which is equipped with a
color doppler (General Electric and Diasonics). For diagnostic purposes Strax is
equipped with a Fisher Stereotactic Biopsy Unit. With the addition of a Halogic
Bone Densitometry Table, Strax is identified as a Specialized Women's Imaging
Center. The Infocure Computer System (previously known as the Radman) allows
Strax the convenience of an interactive database and electronic filing to all
third party payers.

         The healthcare market in which The Strax Institute operates is
beneficial for the services offered. Within its geographical area are a high
percentage of elderly female patients, a substantial number of whom are repeat
patients.

         The opportunities available to increase volume and profitability at
Strax are designed around programs and initiatives to expand patient volume and
particularly to increase the revenues obtained per patient. The purchase of an
ultrasound unit equipped with color doppler allows Strax to offer "stroke
prevention" imaging and bundle this procedure together with the annual mammogram
and bone densitometry tests directed to the same patient. However, the sale of
the Company's breast imaging technology and competition in the geographic area
from centers offering additional modalities at a single location has had a
negative impact on the value of Strax. These factors make it more difficult for
Strax to compete on an ongoing basis without significant investment by the
Company. In addition, there are inherent risks due to Strax' dependence on a
number of key personnel as well as to changes in Medicare and provider payer
reimbursement rates for the medical services provided by Strax. Consequently,
the Company continues to evaluate the possible sale of Strax.


EMPLOYEES

         As of December 31, 2002, the breast imaging business had a staff of 17
full-time employees, including 1 senior manager, plus 2 part-time employees at
its breast imaging center and the Company employed 7 full time employees,
including 3 senior managers, at its New Jersey corporate headquarters.

         MCM currently employs 9 full time and 2 part time employees at its
facility in Israel.


                                       10
<PAGE>


         None of the Company's or MCM's employees are represented by labor
organizations and the Company is not aware of any activities seeking such
organization. The Company considers its relations with employees to be good.


ITEM 2.  PROPERTIES

         The Company leases 2,758 square feet of office space in Fort Lee, New
Jersey for executive and administrative personnel pursuant to a lease that
expires on June 30, 2005 at a base monthly rental of approximately $6,665 plus
escalation.

         The Company leases 8,400 square feet for its comprehensive
breast-imaging center in Lauderhill, Florida, pursuant to a lease with annual
step increases. The current monthly base rental payment is $10,411. The lease
expires on January 31, 2004.

         MCM leases 2,300 square feet of industrial space in Israel at a monthly
cost of approximately $1,000. The current lease expired on December 31, 2002 and
MCM is in negotiation to extend the lease for a further year.

         The Company believes the premises leased are adequate for its current
and near term requirements.


ITEM 3.  LEGAL PROCEEDINGS

         In June 2002, Jack Nelson, a former executive officer and director of
the Company, commenced two legal proceedings against the Company and George
Aaron and Jonathan Joels, executive officers, directors and principal
stockholders of the Company. The two complaints allege that the individual
defendants made alleged misrepresentations to the plaintiff upon their
acquisition of a controlling interest in the Company in 1999 and thereafter made
other alleged misrepresentations and took other actions as to the plaintiff to
the supposed detriment of the plaintiff and the Company. One action was brought
in Superior Court of New Jersey, Bergen County, and the other was brought as a
derivative action in Federal District Court in New Jersey. The counts in the
complaints are for breach of contract, breach of fiduciary duty and
misrepresentation. The complaint in the Federal Court also alleges that certain
actions by the defendants in connection with the 1999 acquisition transaction
and also as Company officers violated the Federal Racketeer Influenced and
Corrupt Organizations Act (RICO). No amount of damages was specified in either
action. The Company has answered plaintiff's complaint, denying liability and
asserting affirmative defenses. The parties are currently engaged in written
discovery. No depositions have been taken.

         In September 2002, the Company was served with a complaint naming the
Company and its principal officers and directors in the Federal District Court
of New Jersey as a purported class action. The allegations in the complaint
cover the period between February 14, 2000 and June 20, 2002. The plaintiff is a
relative of the wife of the plaintiff in the previously disclosed direct and
derivative actions against the defendants. The allegations in the purported
class action are substantially similar to those in the other two actions. The
complaint seeks an unspecified amount of monetary damages, as well as the
removal of the defendant officers as shareholders of the Company. No answer has
yet been filed to this complaint as the parties agreed to extend the Company's
time to answer the complaint.

         The independent directors have authorized the Company to advance the
legal expenses of Messrs. Aaron and Joels in these litigations, subject to
review of the legal bills and compliance with applicable law.

         In September 2002, BDC Corp., d/b/a BDC Consulting Corp., brought an
action against the Company 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 planned to purchase MCM. See Item I of this report
for information regarding the Company's investment in MCM. The Company believes
there is no merit to the plaintiff's claim. On January 6, 2003, the Company
answered the complaint. The parties have entered into discussions in an effort
to resolve this litigation. Under the Company's Purchase Agreement with MCM,
MCM, its subsidiaries and certain pre-existing shareholders of MCM have certain
obligations to indemnify the Company with respect to damages, losses,
liabilities, costs and expenses arising out of any claim or controversy in
respect of this proceeding.


                                       11
<PAGE>


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         None.



                                     PART II
                                     -------

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         The Common Stock has traded on the OTC Bulletin Board under the symbol
CAPR since June 8, 1999, upon the delisting of the Company's Common Stock from
the NASDAQ Small Cap Market. As of September 30, 2002, the publicly traded
warrants had expired and the market terminated upon their expiration.

         The following table sets forth, for the calendar quarters indicated,
the reported high and low bid quotations per share of the Common Stock as
reported on the OTCBB. Such quotations reflect inter-dealer prices, without
retail mark-up, markdown or commission, and may not necessarily represent actual
transactions.

<TABLE>
<CAPTION>
         Common Stock                                 High              Low
                                                      ----              ---

         2002   (year ended September 30, 2002)

                <S>                                   <C>               <C>
                Fourth Quarter                        $0.14             0.05
                Third Quarter                          0.10             0.06
                Second Quarter                         0.08             0.04
                First Quarter                          0.09             0.04


         2001   (year ended September 30, 2001)

                Fourth Quarter                        $0.09            $0.05
                Third Quarter                          0.13             0.06
                Second Quarter                         0.20             0.06
                First Quarter                          0.28             0.13
</TABLE>

         The Company has paid no dividends on its shares of Common Stock since
its inception in July 1983 nor does the Company expect to declare any dividends
on its Common Stock in the foreseeable future.

         On September 30, 2002, there were approximately 1,600 holders of record
of the Common Stock. Since a large number of shares of Common Stock are held in
street or nominee name, it is believed that there are a substantial number of
additional beneficial owners of the Company's Common Stock.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION OR PLAN OF OPERATIONS

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

         The following discussion should be read in conjunction with the audited
consolidated financial statements and notes thereto for the years ended
September 30, 2002 and 2001.


                                       12
<PAGE>


RESULTS OF OPERATIONS

         As more fully described in Note J to the consolidated financial
statements, the Company completed the sale of its TDM business segment effective
October 9, 2002. As a result, the Company's consolidated balance sheet as of
fiscal year end 2002 and consolidated statements of operations for the fiscal
years ended 2002 and 2001 have been restated to reflect the TDM business as
discontinued operations.

Fiscal Year Ended September 30, 2002 Compared to Fiscal Year Ended September 30,
2001

         Net patient service revenue at Strax totaled $1,549,794 for the fiscal
year ended September 30, 2002 versus $1,502,602 for the year ended September 30,
2001. Cost of service operations totaled $1,169,491 for Fiscal 2002 versus
$1,077,230 for Fiscal 2001. The increases from Fiscal 2002 to Fiscal 2001
reflects the continuing efforts at Strax to change its mix of procedures at a
time when reimbursement rates are being heavily negotiated by the healthcare
providers and expenses continue to rise.

         Selling, general and administrative expenses totaled $498,030 for
Fiscal 2002 versus $509,805 for Fiscal 2001.

         Based on current market conditions and an analysis of projected
undiscounted future cash flows calculated, the Company has determined that the
carrying amount of certain long-lived assets of the Strax Institute may not be
recoverable. The resultant impairment of long-lived assets has necessitated a
final write-down of $67,356 of goodwill of the Strax Institute.

         The operating loss from operations totaled $251,721 for Fiscal 2002
versus $607,956 for Fiscal 2001. This decrease represents the write-down of
goodwill for the Strax Institute of $500,000 in Fiscal 2001 versus $67,356 in
Fiscal 2002.


LIQUIDITY AND CAPITAL RESOURCES

         Prior to October 2002, the Company had been experiencing liquidity
problems that had hindered its growth. Management had undertaken various efforts
to raise capital, but due to market conditions and the Company's financial
situation, was not able to secure substantial outside capital. Consequently, the
Company was primarily reliant upon the officers, directors, employees of the
Company and their families for its working capital needs.

         During October 2002, the Company's subsidiary, Opus, sold the assets of
its TDM Business to Seradyn. The purchase price was $6,000,000, subject to
adjustment on a dollar for dollar basis to the extent the net asset value of the
purchased assets as shown on a post-closing proforma asset statement is greater
the $420,000 or less than $380,000. The Company has received a further payment
of $54,970 from Seradyn as a post closing payment adjustment. $600,000 of the
purchase price was deposited into an escrow account to be held for indemnity
claims, of which $300,000 would be released after one year. The Company used the
net cash proceeds to pay down debts and liabilities, repayment of the short-term
loan and, in December 2002, used $1,835,000 as part of the MCM purchase price.
The balance of the funds is being used for general working capital purposes.

         During September 2002, warrant holders representing 3,297,700 shares of
Common Stock took the opportunity to exercise their warrants in the Company's
warrant price reduction program. The Company had offered warrant holders of
4,319,750 shares of Common Stock, the opportunity to exercise such warrants at a
reduced exercise price for a period of 14 days during September 2002. The
reduced exercise price for each of the outstanding warrants was equal to 20% of
its present exercise price, but not less than $0.11 per share. As a result, the
Company raised an aggregate of $409,668 and also substantially reduced the
number of its outstanding warrants. The Company used the proceeds for general
working capital purposes.

         Also during September 2002, the Company entered into a short-term line
of credit arrangement with one of its board members, Shrikant Mehta, whereby Mr.
Mehta agreed to extend a $500,000 line of credit to the Company for up to 18
months. This line of credit will be utilized for working capital needs as


                                       13
<PAGE>


determined by the Company and agreed with by Mr. Mehta. Interest will be paid at
a rate of 11% per annum on monies drawn down. In return for the provision of the
short-term line of credit, Mr. Mehta was granted warrants to purchase 500,000
shares of Common Stock, exercisable at $0.11 per share for a period of five
years. The Company has not drawn down on this line of credit.

         During June 2002, the Company obtained a short-term loan in the
principal amount of $250,000, with interest at prime plus 3% per annum and due
on September 30, 2003 (see Note D to the Notes to the Consolidated Financial
Statements herein). The proceeds of the short-term loan were used to fund an
initial loan to MCM (the "MCM Loan") of up to $250,000. Subsequent to the
initial loan to MCM, further funds were advanced to MCM in September, October
and December 2002 in the amounts of $100,000, $200,000 and $15,000 respectively.
The MCM Loan, together with subsequent fundings, was secured by MCM's
intellectual properties, bore interest at the rate of prime plus 2% per annum,
and was to be due on June 10, 2003, subject to conversion to equity of MCM upon
the consummation of the Company's investment in MCM. On October 10, 2002, the
holders of the short-term loan were repaid an aggregate of $250,000 plus accrued
interest. For each $1.00 principal amount loaned, the lender received a warrant
to purchase one share of the Company's Common Stock, exercisable after six
months at $0.09 per share for a period of five years.

         The Company will continue its efforts to seek additional funds through
funding options, including banking facilities, equipment financing,
government-funded grants and private equity offerings in order to provide
capital for future expansion. There can be no assurance that such funding
initiatives will be successful, and if successful, will not be dilutive to
existing stockholders.

         During February and March 2001, the Company completed a short term
bridge loan of $300,000 through the issuance of loan notes due on February 28,
2002 together with warrants, the proceeds of which were used principally for
working capital and purchase of raw materials previously owned by Oxis, the
previous manufacturer and owner of the Opus products. The $300,000 bridge loan
notes were 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 October
31, 2002 and continued to receive interest at the rate of 11%. On October 10,
2002, the Company repaid the bridge loan holders in an aggregate of $300,000
plus accrued interest.

         The Company continues in its efforts to secure the sale of the Strax
Institute.

         Net cash provided by operations for Fiscal 2002 amounted to $341,937.
Net cash flows used in investing activities for Fiscal 2002 amounted to $539,463
representing the Company's loan and additional funds to MCM as well as related
acquisition costs. Cash flows from financing activities in Fiscal 2002 increased
from Fiscal 2001 due to the proceeds from the exercise of warrants in the
Company's warrant price reduction program. Subsequent to the sale of the Opus
TDM Business and the Company's investment in MCM, the Company has sufficient
funds to meet its working capital needs for at least the next twelve months.


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 the Company's 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 breast-imaging center recognizes revenue as services are
                 provided to patients. Reimbursements for services provided to
                 patients covered by Blue Cross/Blue Shield, Medicare, Medicaid,


                                       14
<PAGE>


                 HMO's and other contracted insurance programs are generally
                 less than rates charged by the Company. Differences between
                 gross charges and estimated third-party payments are recorded
                 as contractual allowances in determining net patient service
                 revenue during the period that the services are provided.

         2.   Goodwill and other intangibles

                 At September 30, 2001, goodwill results from the excess of
                 cost over the fair value of net assets acquired related to the
                 Opus Diagnostics business and to the Strax Institute. Other
                 intangibles include trademarks, technical know how and
                 distributor agreements. Goodwill and other intangibles are
                 amortized on a straight-line basis over twenty years. The
                 Company periodically reviews the carrying amount of goodwill
                 and other intangibles to determine whether an impairment has
                 been incurred based on undiscounted future cash flows.

                 Based on current market conditions and an analysis of
                 projected undiscounted future cash flows calculated in
                 accordance with the provisions of SFAS 121, the Company has
                 determined that the carrying amount of certain long-lived
                 assets of the Strax Institute may not be recoverable. The
                 resultant impairment of long-lived assets has necessitated a
                 write-down of $67,356 of goodwill of the Strax Institute in
                 2002 and $500,000 in 2001.

RECENT ACCOUNTING PRONOUNCEMENTS

         In June 2001, the Financial Accounting Standards Board finalized FASB
Statements No. 141, Business Combinations ("SFAS 141"), and No. 142, Goodwill
and Other Intangible Assets ("SFAS 142"). SFAS 141 requires the use of the
purchase method of accounting and prohibits the use of the pooling-of-interests
method of accounting for business combinations initiated after June 30, 2001.
SFAS 141 also requires that the Company recognize acquired intangible assets
apart from goodwill if the acquired intangible assets meet certain criteria.
SFAS 141 applies to all business combinations initiated after June 30, 2001 and
for purchase business combinations completed on or after July 1, 2001. It also
requires, upon adoption of SFAS 142, that the Company reclassify the carrying
amounts of intangible assets and goodwill based on the criteria in SFAS 141.

         SFAS 142 requires, among other things, that companies no longer
amortize goodwill, but instead test goodwill for impairment at least annually.
In addition, SFAS 142 requires that the Company identify reporting units for the
purposes of assessing potential future impairments of goodwill, reassess the
useful lives of other existing recognized intangible assets, and cease
amortization of intangible assets with an indefinite useful life. An intangible
asset with an indefinite useful life should be tested for impairment in
accordance with the guidance in SFAS 142. SFAS 142 is required to be applied in
fiscal years beginning after December 15, 2001 to all goodwill and other
intangible assets recognized at that date, regardless of when those assets were
initially recognized. The Company will adopt SFAS in the first quarter of
fiscal 2003.

         In October 2001, the FASB issued SFAS 144, "Accounting for the
Impairment of Disposal of Long-Lived Assets," which addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
This Statement supersedes SFAS 121, "Accounting for the Impairment of Long-Lived
Assets to be Disposed Of," and APB Opinion No. 30, "Reporting the Results of
Operations -Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions for
the Disposal of a Segment of a Business." SFAS 144 becomes effective for the
fiscal years beginning after December 15, 2001. The Company will adopt SFAS 144
in the first quarter of fiscal 2003 and is currently reviewing the effects of
adopting SFAS 144 on its financial position and results of operations.

         In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
Statements SFAS Nos. 4, 44 and 64, Amendment of FASB Statement No. 13 and
Technical Corrections". SFAS No. 145 rescinds Statement No. 4, "Reporting Gains
and Losses from Extinguishments of Debt" and an amendment of that Statement,
FASB Statement No. 64, "Extinguishments of Debt Made to Satisfy Sinking-Fund
Requirements". SFAS No. 145 also rescinds FASB Statement No. 44, "Accounting for
Intangible Assets of Motor Carriers". SFAS No. 145 amends FASB Statement No. 13,
"Accounting for Leases". to eliminate an inconsistency between the required


                                       15
<PAGE>


accounting for sale-leaseback transactions and the required accounting for
certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. SFAS No. 145 also amends other existing
authoritative pronouncements to make various technical corrections, clarify
meanings, or describe their applicability under changed conditions. The
provision of SFAS No.145 related to the rescission of Statement No. 4 shall be
applied in fiscal years beginning after May 15, 2002. The provisions of SFAS No.
145 related to Statement No. 13 should be for transactions occurring after May
15, 2002. Early application of the provisions of this Statement is encouraged.
The Company does not expect that the adoption of SFAS No. 145 will have a
significant impact on its consolidated results of operations, financial position
or cash flows.

         In June 2002, the FASB issued SFAS No. 146 "Accounting for Costs
Associated with Exit or Disposal Activities." This statement superseded EITF
No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity". Under this statement, a liability or a cost
associated with a disposal or exit activity is recognized at fair value when the
liability is incurred rather than at the date of an entity's commitment to an
exit plan as required under EITF 94-3. The provision of this statement is
effective for exit or disposal activities that are initiated after December 31,
2002, with early adoption permitted. The Company is currently evaluating the
effect that the adoption of SFAS No. 146 will have on its consolidated financial
position and results of operations.

FORWARD LOOKING STATEMENTS

         The Company is including the following cautionary statement in this
Annual Report of Form 10-KSB 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, changes to regulatory requirements relating to
environmental approvals for the treatment of infectious medical waste, capital
needs to fund any delays or extensions of development programs, delays in the
manufacture of new and existing products by the Company or third party
contractors, the loss of any key employees, the outcome of existing litigations,
delays in obtaining federal, state or local regulatory clearance for new
installations and operations, changes in governmental regulations, the location
of the MCM business in Israel, 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.


                                       16
<PAGE>


ITEM 7.  FINANCIAL STATEMENTS

                                                                        PAGE
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS                             NUMBER
------------------------------------------                             ------

Independent Auditors' Report                                             F-2

Consolidated Balance Sheets at September 30, 2002 and 2001               F-3

Consolidated Statements of Operations for the years ended
September 30, 2002 and 2001                                              F-4

Consolidated Statements of Stockholders' Equity for years ended
September 30, 2002 and 2001                                              F-5

Consolidated Statements of Cash Flows for the years ended
September 30, 2002 and 2001                                              F-6

Notes to Consolidated Financial Statements                           F-7 to F-18


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         None


                                       17
<PAGE>


                                    PART III
                                    --------


ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16 (A) OF THE EXCHANGE ACT

DIRECTORS AND EXECUTIVE OFFICERS
--------------------------------

         As of December 31, 2002, the directors and executive officers of the
Company were:


<TABLE>
<CAPTION>
Name                              Age      Position
----                              ---      --------

<S>                               <C>      <C>
George Aaron                      50       Chairman of the Board,
                                           President and Chief Executive Officer

Jonathan Joels                    46       Chief Financial Officer, Treasurer,
                                           Secretary and Director

Elliott Koppel                    58       VP Sales and Marketing

Shrikant Mehta                    58       Director

Sanjay Mody (1)(2)                43       Director

Sol Triebwasser, Ph.D. (1)(2)     80       Director
-------------------
<FN>
(1) Member of the Audit Committee
(2) Member of the Compensation/Option Committee
</FN>
</TABLE>

         The principal occupations and brief summary of the background of each
Director and executive officer of Caprius 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. From 1992 to 1998, Mr. Aaron was the
co-founder and CEO of a drug discovery company, Portman Pharmaceuticals, Inc.,
and currently serves on the Board of Directors of Peptor Limited, the company
that acquired Portman Pharmaceuticals. Mr. Aaron was also a co-founder of the
bioseparation/agtech company, CBD Technologies, Inc., of which he remains a
Director. From 1983 to 1988, Mr. Aaron was the founder and CEO of a diagnostic
company, Technogenetics, Inc., that he took public and which was later acquired.
Prior to 1983, Mr. Aaron was founder and is a Partner in the Portman Group, Inc.
and headed international business development at Schering-Plough Corporation.
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. Mr. Joels was also a co-founder of CBD
Technologies, Inc. Mr. Joels' experience includes serving as a principal in
Portman Group, Inc.; CFO of London & Leeds Corp., a subsidiary of a large UK
multinational public company; and as a Chartered Accountant, holding positions
with both Ernst & Young and Hacker Young between 1977 and 1981. Mr. Joels
qualified and was admitted to the Institute of Chartered Accountant in England


                                       18
<PAGE>


and Wales in 1981 and holds a BA Honors Degree in Accountancy (1977) from the
City of London School of Business Studies.

         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 holds a BS in Commerce from
Rider University.

         SHRIKANT MEHTA. Mr. Mehta has been President and CEO of Combine
International, Inc., a wholesale manufacturer of fine jewelry since 1974. He has
also served on the Board of Directors of Distinctive Devices, Inc (OTCBB: DDVS)
and of various private corporations. He was a director of Real Time Access
Inc.which in April 2002 filed for reorganization under Chapter 11 of the Federal
Bankruptcy law. He holds a BS in Electrical Engineering from Case Institute of
Technology and an MS in Electrical Engineering from Wayne State University.

         SANJAY MODY. Mr. Mody serves as President, CEO and Treasurer of
Distinctive Devices, Inc. (OTCBB: DDVS) since May 2001 and a director thereof
since March 2000. Since March 2000, he has been an active investor in several
technology companies. From July 1996 to February 2000, he served as a Vice
President of Investment Advisory at Laidlaw Global Securities, Inc. From 1995 to
1996, Mr. Mody was a financial Advisor at Morgan Stanley Dean Witter. He was a
director of Real Time Access Inc.which in April 2002 filed for reorganization
under Chapter 11 of the Federal Bankruptcy law.

         SOL TRIEBWASSER, PH.D. Dr. Sol Triebwasser was Director of Technical
Journals and Professional Relations for the IBM Corporation in Yorktown Heights,
New York until 1996. He is currently a Research Staff member emeritus at IBM.
Since receiving his Ph.D. in physics from Columbia University in 1952, he had
managed various projects in device research and applications at IBM. 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.

         Mr. Aaron and Mr. Joels are brothers-in-law, and Mr. Mehta is the uncle
of Mr. Mody.

         The Board of Directors met seven times in fiscal 2002. Each of the
Directors attended at least 75% of the meetings.

         The Board of Directors has standing Audit and Compensation/Option
Committees.

         The Audit Committee reviews with the Company's independent public
accountants the scope and timing of the accountants' audit services and any
other services they are asked to perform, their report on the Company's
financial statements following completion of their audit and the Company's
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. In May 2002, the Board of Directors and the Audit Committee approved and
adopted the Board of Directors'Audit Committee Charter.

         The Compensation/Option Committee reviews and recommends to the Board
of Directors the compensation and benefits of all officers of the Company,
reviews general policy matters relating to compensation and benefits of
employees of the Company and administers the Company's Stock Option Plans.


                                       19
<PAGE>


COMPENSATION OF DIRECTORS

         In October 2002, Messrs. Mehta and Mody were each granted options
outside of the Company's Stock Option Plan to purchase 500,000 shares of Common
Stock at a price of $ 0.15 per share vesting over two years, and Dr. Triebwasser
was granted Options under the Company's 2002 Stock Option Plan to purchase
100,000 shares of Common Stock at a price of $0.15 per share vesting over two
years. Effective October 2002, the non-employee director's fee is $20,000 per
annum.

         See "Certain Relationships and Related Transactions" for information
regarding a consulting agreement with Mr. Mehta.

COMPLIANCE WITH SECTION 16(a)
-----------------------------

         Based solely in its review of copies of Forms 3 and 4 received by it or
representations from certain reporting persons, the Company believes that,
during the fiscal year ended September 30, 2002, there was compliance with
Section 16(a) filing requirements applicable to its officers, directors and 10%
stockholders.


ITEM 10. EXECUTIVE COMPENSATION

         The following table sets forth the aggregate cash compensation paid by
the Company to (i) its Chief Executive Officer and (ii) its most highly
compensated officers whose cash compensation exceeded $100,000 for services
performed during the year ended September 30, 2002.

<TABLE>
<CAPTION>
                         ANNUAL COMPENSATION                               LONG TERM COMPENSATION
                         -------------------                               ----------------------

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

------------------ ----- ---------- -------- ------------        ------------ -------------   ----------- -------------
<S>                <C>     <C>        <C>     <C>                 <C>          <C>               <C>       <C>
George Aaron       2002    160,000     -0-        -0-                 -0-           -0-            -0-          -0-
President/CEO      2001    160,000     -0-        -0-                 -0-           -0-            -0-          -0-

------------------ ----- ---------- -------- ------------        ------------ -------------   ----------- -------------
Jonathan Joels     2002    112,000     -0-        -0-                 -0-           -0-            -0-          -0-
CFO                2001    112,000     -0-        -0-                 -0-           -0-            -0-          -0-

------------------ ----- ---------- -------- ------------        ------------ -------------   ----------- -------------
</TABLE>


         As of September 30, 2002, the Company does not have any written
employment agreements with any of its executive officers. Mr. Aaron and
Mr. Joels have been paid annual base salaries of $160,000 and $112,000,
respectively and the Company leases 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. They are reimbursed for other expenses
incurred by them on behalf of the Company in accordance with Company policies.
In October 2002, the annual base salaries of Mr. Aaron and Mr. Joels were
increased to $240,000 and $176,000, respectively, and they were paid a
performance-related bonus of $160,000 and $112,000, respectively.

         The Company does 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, 2002, under the Company's 401 (k) plan there was no matching
contribution by the Company.


                                       20
<PAGE>


<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR

                                                                                 Potential Realized
                                                                                  Value at Assumed
                                      Individual                                Annual Rates of Stock    Alternative to (f) and (g)
                                        Grants                                  Price Appreciation for        Grant Date Value
                                                                                     Option Term


          (a)                (b)         (c)          (d)            (e)         (f)           (g)                 (h)
                                         % of
                          Number of     Total
                         Securities    Options/     Exercise                                                     Grant
                         Underlying      SARS       on Base       Expiration                                     Date
          Name            Options/    Granted to     Price           Date        5%($)        10%($)             Present
                            SARs      Employee(s)    ($/Sh)                                                     Value $
                         Granted (#)  in Fiscal
                                        Year

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

         <S>             <C>          <C>           <C>           <C>            <C>          <C>        <C>
         George Aaron        -0-            -0-      -0-               -0-        -0-            -0-      -0-

         Jonathan Joels      -0-            -0-      -0-               -0-        -0-            -0-      -0-

         ---------------------------------------------------------------------------------------------------------------------------
</TABLE>


<TABLE>
<CAPTION>
                                      FISCAL YEAR END OPTION VALUE

                                     NUMBER OF SECURITIES             VALUE OF UNEXERCISED
                                    UNDERLYING UNEXERCISED            IN-THE-MONEY OPTIONS
                                   OPTIONS AT SEPT. 30, 2002            AT SEPT. 30, 2002
         NAME                      EXERCISABLE/UNEXERCISABLE             EXERCISABLE ($)
         ----                      -------------------------             ---------------

         <S>                       <C>                                <C>
         George Aaron                   50,000 /50,000                        $-0-

         Jonathan Joels                 50,000 /50,000                        $-0-
</TABLE>


STOCK OPTION PLAN

         Due to the pending expiration of both the 1993 Employee Stock Option
Plan and 1993 Non-Employee Stock Option Plan, in May 2003 the Company adopted
the 2002 Stock Option Plan ("2002 Plan") which was ratified at the Company's
Stockholder meeting of June 26, 2002. The 2002 Plan covers 1,500,000 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 Codes. During October 2002, the Company
granted a total of 961,000 options to officers, directors, and employees under
the 2002 Plan for an aggregate of 961,000 shares of Common Stock. Of these,
300,000 options each were granted to Messrs. Aaron and Joels, 100,000 to Mr.
Koppel and 100,000 to Dr. Triebwasser. All of these options were priced at
$0.15, vested one third on the grant date and the balance vests over a two year
period in equal installments.


                                       21
<PAGE>


COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         The members of the Company's Compensation/Option Committee are Sol
Triebwasser, Ph.D. and Sanjay Mody, neither is an executive officer or employee
of the Company or its subsidiaries.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS

         The following table sets forth, as of September 30, 2002, certain
information regarding the beneficial ownership of Common Stock by (i) each
person who is known by the Company to own beneficially more than five percent of
the outstanding Common Stock, (ii) each director and executive officer of the
Company, and (iii) all directors and executive officers as a group:

<TABLE>
<CAPTION>
                                                                     Amount and Nature        Percentage of
Name of                                  Position with               of Beneficial            Common
Beneficial Owner                         Company                     Ownership (1)            Stock
--------------------------------------   ------------------------    -------------------      --------------

<S>                                      <C>                         <C>                      <C>
George Aaron                             Chairman of the              3,598,589(2)            16.6%
                                         Board; Chief Executive
                                         Officer;
                                         President

Jonathan Joels                           Director; Chief              3,510,739(3)            16.1%
                                         Financial Officer;
                                         Treasurer;
                                         Secretary

Elliott Koppel                           VP Sales & Marketing           349,233(4)              *


Shrikant Mehta                           Director                     4,466,667(5)            17.7%

Sanjay Mody                              Director                       666,667(6)              *

Sol Triebwasser, Ph.D.                   Director                        78,233(7)              *

All executive officers and                                           12,670,128(8)            50.4%
Directors as a group (6 persons)
-------------------
<FN>
* Less than one percent (1%).

1.       Includes voting and investment power, except where otherwise noted. The
         number of shares beneficially owned includes shares each beneficial


                                       22
<PAGE>


         owner and the group has the right to acquire within 60 days of
         September 30, 2001 pursuant to stock options, warrants and convertible
         securities.

2.       Includes (i) 7,050 shares in retirement accounts, (ii) 17,500 shares
         underlying warrants presently exercisable, (iii) (iv) 100 shares
         jointly owned with his wife and (v) 200,000 shares underlying options
         presently exercisable, and excludes 200,000 shares underlying options
         which are currently not exercisable.

3.       Includes (i) 960,000 shares as trustee for his children, (ii) 10,000
         shares underlying warrants presently exercisable, (iii) 17,500 shares
         underlying warrants owned by his wife for which he disclaims beneficial
         ownership, (iv) 200,000 shares underlying options presently
         exercisable, and excludes 200,000 shares underlying options which are
         currently not exercisable.

4.       Includes (i) 30,000 shares underlying warrants and (ii) 233,333 shares
         underlying options presently exercisable, and excludes 166,667 shares
         underlying options which are not currently exercisable.

5.       Includes (i) 700,000 shares underlying warrants presently exercisable
         and (ii) 666,667 shares subject to options presently exercisable, and
         excludes 333,333 shares underlying options which are not currently
         exercisable.

6.       Includes 666,667 shares underlying options presently exercisable, and
         excludes 333,333 shares underlying options which are not currently
         exercisable.

7.       Includes 76,833 shares underlying options presently exercisable and
         excludes 66,667 shares underlying options which are currently not
         exercisable.

8.       Includes (i) 775,000 shares underlying warrants and (ii) 2,043,500
         shares underlying options presently exercisable.
</FN>
</TABLE>


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         During September 2002, the Company entered into a short-term line of
credit arrangement with one of its board members, Mr. Mehta, whereby Mr. Mehta
agreed to extend a $500,000 line of credit to the Company for up to 18 months.
This line of credit will be utilized for working capital needs as determined by
the company and agreed with by Mr. Mehta. Interest will be paid at a rate of 11%
per annum on monies drawn down. In return for the provision of the short-term
line of credit, Mr. Mehta was granted warrants to purchase 500,000 shares of
Common Stock exercisable at $0.11 per share for a period of five years. The
Company has not drawn down on this line of credit. Additionally, Mr. Mehta has
also agreed with the Company to provide consulting services for an initial
period of one year in connection with the MCM business, specifically relating to
the areas of financing and manufacturing. Mr. Mehta will receive an annual fee
of $100,000 commencing on the closing date of the investment in MCM. The Company
will review this arrangement on an annual basis.

         During September 2002, warrant holders representing 3,297,700 shares of
Common Stock took the opportunity to exercise their warrants in the Company's
warrant price reduction program. The reduced exercise price for each of the
outstanding warrants was equal to 20% of its present exercise price, but not
less than $0.11 per share. Included as part of this warrant price reduction
program were Messrs. Aaron, Joels, Koppel and Mehta, executive officers and/or
directors, who exercised 193,750, 133,750, 11,000 and 2,400,000 warrants
respectively.

         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
MCM pursuant to the letter of intent. For each $1.00 principal amount loaned,
the lender received a warrant to purchase one share of the Company's Common
Stock, exercisable after 6 months at $0.09 per share for a period of five years.
On October 10, 2002, the Company repaid these loans, plus accrued interest at
the prime rate plus 3%.


                                       23
<PAGE>


         During February and March 2001, the Company completed a short-term
bridge loan aggregating $300,000 through secured loan notes due on February 28,
2002. Included as part of this bridge loan, Messrs. Mehta, Aaron, Koppel and the
spouse of Mr. Joels contributed $200,000, $17,500, $15,000 and $17,500
respectively. These funds were used principally for working capital and to
purchase raw materials previously owned by Oxis, the previous manufacturer and
owner of the Opus TDM products. The loan notes bore interest at a rate of 11%
per annum and were secured by the assets of the Strax Institute. For each $1.00
principal amount loaned, the lender received a warrant to purchase one share of
Common Stock, exercisable at $0.08 per share for a period of five years. On
October 10, 2002, the Company repaid the bridge loan holders in an aggregate of
$300,000 plus accrued interest.

         Separately, and in consideration of their participation in a placement
in April 2000 (the "April Placement") Placement, the Company agreed to give the
principal investors (including Mr. Mehta, who subsequently became a director) in
the placement preemptive rights for a period of three years with respect to
their interest in the Company, such that, to the extent of their current
interest in the Company, these principal investors each have the right to
participate in any sale, for cash, by the Company of Common Stock or shares of
preferred stock or other securities that are exercisable for, convertible into
or exchangeable for shares of Common Stock in a private placement transaction,
subject to certain exceptions.

         The Company also agreed to provide these principal investors with most
favorable investors rights, such that if any greater rights are received by the
holders of the next rounds of equity financing by the Company occurring within
one year after the date of purchase, subject to certain exceptions, the Company
would put the principal investors in the same position as the holders of any
subsequent investments. Furthermore, in the event that any subsequent investment
is at a price per share of less than the equivalent of $0.722 per share of
Common Stock (i.e., less than $0.722 per share of equity security, (including
exercise price, if any) exercisable for or convertible into one share of Common
Stock), then the Company would issue to Mr. Mehta, without additional
consideration, the number of shares of Common Stock that he would have received
if he had made his investment in the April Placement on the terms of any
subsequent investment within the year. There was no subsequent investment within
the year.

         Additionally, in consideration for his participation in the April
Placement, the Company separately agreed to grant Mr. Mehta options to purchase
500,000 shares of Common Stock, exercisable at $1.00 per share for a period of
three years. Mr. Mody, who subsequently became a director, received an option to
purchase 500,000 shares of Common Stock, exercisable at $1.00 per share for a
period of three years, in connection with his services in procuring investors
for the April Placement.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits, including those incorporated by reference.

Exhibit No.   Description
-----------   -----------

2.1           Agreement and Plan of  Merger, dated January 20, 1997, by and
              among Registrant, Medical 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 23, 1997, among
              Registrant, ANMR/AMS Merger Corp. and Advanced Mammography
              Systems, Inc. ("AMS") (incorporated by reference to Annex A to the
              Joint Proxy Statement Prospectus that formed part of Registrant's
              Registration Statement of Form S-4 filed on October 9, 1997
              ("Registrant's Form S-4")).

2.3           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")).


                                       24
<PAGE>


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. 2084785 ("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).

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
              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 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).

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

4.1.1         Form of Warrant Agreement between Registrant and American Stock
              Transfer & Trust Company, as Warrant Agent (incorporated by
              reference to Exhibit 4 to Registrant's August 1995 Form 8-K).

4.1.2         Form of Warrant Certificate (incorporated by reference to Annex B
              to Registrant's Joint Proxy Statement, dated August 31, 1995).

4.2           Specimen Certificate for Common Stock, par value $.01 per share,
              of Registrant (incorporated by reference to Exhibit 4.2 to
              Registrant's Form S-4).

4.3.1         Form of Supplemental Agreement relating to
              Registrant's assumption of obligations under the Warrant Agreement
              between First Albany Corporation and Janney Montgomery Scott, Inc.
              (incorporated by reference to Exhibit 4.3.1 to Registrant's
              Form S-4).

4.3.2         Form of Supplemental Agreement relating to Registrant's assumption
              Obligations under the Warrant Agreement between Strax and Jacob by
              reference to Exhibit 4.3.2 to Registrant's Form S-4).

4.4           Warrant issued to Oxis Health Products, Inc. (incorporated by
              reference to Exhibit 10.2 to Registrant's July 1999 Form 8-K).

4.5           Form of  Warrant regarding Registrant's Bridge Financing in
              December 1999 (incorporated by reference to Exhibit 4.6 to
              Registrant's July 2000 Form SB-2).

4.6           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).


                                       25
<PAGE>


4.7           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")).

4.8           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).

4.9           Form of Warrant issued to each of Sandra Kessler and Nicholas
              Kessler, by and through his Guardian ad litem (incorporated by
              reference to Exhibit 4.10 to Registrant's September 2000
              Form 10-KSB).

4.10          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).

10.1.1        1993 Employee Stock Option Plan (incorporated by reference to
              Exhibit A of the Proxy Statement for Registrant's 1993 Annual
              Meeting of Stockholders).

10.1.2        1993 Directors Stock Option Plan for Non-Employee Directors
              (incorporated by reference to Exhibit B of the Proxy Statement for
              Registrant's 1993 Annual Meeting of Stockholders).

10.2          2002 Stock Option Plan (incorporated by reference to Appendix A of
              the Proxy Statement for Registrant's 2002 Annual Meeting of
              Stockholders).

10.3.1        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).

10.3.2        Stockholders Agreement, dated August 18, 1997, between Registrant
              and GE (incorporated by reference to Exhibit 10.3 to Registrant's
              Form 8-K, filed September 2, 1997).

10.3.3        Settlement and Release Agreement, dated August 18, 1997, between
              the Registrant and GE (incorporated by reference to Exhibit 10.4
              to Registrant's Form 8-K, filed September 2, 1997).

10.3.4        License Agreement, dated August 18, 1997, between Registrant and
              GE (incorporated by reference to Exhibit 10.4 to the Registrant's
              Form 8-K, filed September 2, 1997).

10.4.1        Severance and Consulting Agreement dated as of June 28, 1999
              between Registrant and Jack Nelson (incorporated by reference to
              Exhibit 10.4 to Registrant's July 1999 Form 8-K).

10.4.2        Form of Secured Promissory Note, dated as of December 28, 1999,
              from Registrant to Nelson (incorporated by reference to
              Exhibit 10.16.1 to Registrant's September 1999 Form 10-KSB).

10.4.3        Letter of Non-disparagement dated January 14, 2000 between
              Registrant and Jack Nelson (incorporated by reference to
              Exhibit 10.4.3 to Registrant's September 2001 Form 10-KSB).

10.4.4        Letter Agreement dated April 4, 2000 between Registrant and Nelson
              relating to terms and conditions of payment as outlined in
              Severance and Consulting Agreement dated as of June 28, 1999
              (incorporated by reference to Exhibit 10.4.4 to Registrant's
              September 2001 Form 10-KSB).

10.5.1        Severance and Consulting Agreement between Registrant and Enrique
              Levy, dated as of June 28, 1999 (incorporated by reference to
              Exhibit 10.5 to Registrant's July 1999 Form 8-K).


                                       26
<PAGE>


10.5.2        Form of Secured Promissory Note, dated as of December 28, 1999,
              from Registrant to Levy (incorporated by reference to Exhibit
              10.16.2 to Registrant's September 1999 Form 10-KSB).

10.5.3        Form of Security Agreement, dated as of December 28, 1999, by
              Registrant to Levy as Agent (incorporated by reference to
              Exhibit 10.16.3 to Registrant's September 1999 Form 10-KSB).

10.5.4        Letter of Non-disparagement dated January 14, 2000 between
              Registrant and Levy (incorporated by reference to Exhibit 10.5.4
              to Registrant's September 2001 Form 10-KSB).

10.5.5        Letter Agreement dated April 4, 2000 between Registrant and Levy
              relating to terms and conditions of payment as outlined in
              Severance and Consulting Agreement dated as of June 28,
              1999(incorporated by reference to Exhibit 10.5.5 to Registrant's
              September 2001 Form 10-KSB).

10.6.1        Asset Purchase Agreement dated as of June 28, 1999, among Opus,
              Oxis Health Products, Inc. and Oxis International, Inc.
              (incorporated by reference to Exhibit 2.2 to Registrant's July
              1999 Form 8-K).

10.6.2        Secured Promissory Note of Opus issued to Oxis Health Products,
              Inc. in the initial principal amount of $565,000 (incorporated by
              reference to Exhibit 10.1 to Registrant's July 1999 Form 8-K).

10.6.3        Services Agreement, dated as of June 30, 1999, between Opus and
              Oxis Health Products, Inc. (incorporated by reference to
              Exhibit 10.3 to Registrant's July 1999 Form 8-K).

10.7.1        Promissory Notes issued for bridge loan in the aggregate amount of
              $600,000 (November 1999 and December 1999) (incorporated by
              reference to Exhibit 10.15 to Registrant's September 1999
              Form 10-KSB).

10.7.2        Form of Subscription Agreement regarding Registrant's December
              1999 Bridge Financing (incorporated by reference to Exhibit 10.15
              to Registrant's Registration Statement on Form SB-2, File
              No. 333-02222(the "2000 Form SB-2")).

10.8.1        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).

10.8.2        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).

10.8.3        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).

10.8.4        Form of Option Agreement granted to Sanjay Mody with respect to
              the April Private Placement (incorporated by reference to
              Exhibit 10.16 to Registrant's 2000 Form SB-2)

10.8.5        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).

10.9          Form of Settlement Agreement between the Registrant and the
              Claimants dated August 8, 2000 (incorporated by reference to
              Exhibit 10.17 to Registrant's 2000 Form SB-2).

10.10         Form of Secured Promissory Notes, issued for bridge loan in the
              aggregate amount of $300,000 (February 2001 and March 2001)
              (incorporated by reference to Exhibit 10.1 to Registrant's
              Form 10-QSB for the fiscal quarter ended March 31, 2001).


                                       27
<PAGE>


10.11         Form of Security Agreement, dated February 28, 2001 by Registrant
              to Elliott Koppel as agent (incorporated by reference to
              Exhibit 10.2 to Registrant's Form 10-QSB for the fiscal quarter
              ended March 31, 2001).

10.12.1       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")).

10.12.2       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).

10.12.3       Noncompete 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).

10.12.4       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 8K).

10.13.1       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").

10.13.2       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 8K).

10.13.3*      Form of Unsecured Promissory Notes, issued for the short-term
              Loan.

10.13.4*      Form of Subscription Agreement relating to the short-term Loan.

10.13.5*      Form of Common Stock Purchase Warrant relating to the short-term
              Loan.

10.14*        Form of Common Stock Warrant relating to Line of Credit.

21*           List of Company's subsidiaries.

23.1*         Consent of BDO Seidman, LLP, independent certified public
              accountants.

99.1*         Certification by Registrant's Principal Executive Officer pursuant
              to Section 906 of the Sarbanes-Oxley Act of 2002.

99.2*         Certification by Registrant's Principal Financial Officer pursuant
              to Section 906 of the Sarbanes-Oxley Act of 2002.
-------------------
*  Filed herewith

(b) Reports on Form 8-K:

         None

ITEM 14.   CONTROLS & PROCEDURES

           The Company's principal executive officer and principal financial
officer, based on their evaluation of the Company's disclosure controls and
procedures (as defined in Rules 13a-14 (c) and 15d-14 (c) of the Securities
Exchange Act of 1934) as of September 30, 2002 have concluded that the Company's
disclosure controls and procedures are adequate and effective to ensure that
material information relating to the Company and its consolidated subsidiary is


                                       28
<PAGE>


recorded, processed, summarized and reported within the time periods specified
by the SEC's rules and forms, particularly during the period in which this
annual report has been prepared.

           The Company's principal executive officer and principal financial
officer have concluded that there were no significant changes in the Company's
internal controls or in other factors that could significantly affect these
controls subsequent to September 30, 2002, the date of their most recent
evaluation of such controls, and that there were no significant deficiencies or
material weaknesses in the Company's internal controls.


                                       29
<PAGE>


                                  CERTIFICATION


I, George Aaron, certify that:

     1.   I have reviewed this annual report on Form 10-KSB of Caprius, Inc.

     2.   Based on my knowledge, this annual report does not contain any untrue
          statement of a material fact or omit to state a material fact
          necessary to make the statements made, in light of the circumstances
          under which such statements were made, not misleading with respect to
          the period covered by this annual report.

     3.   Based on my knowledge, the financial statements, and other financial
          information included in this annual report, fairly present in all
          material respects the financial condition, results of operations and
          cash flows of the registrant as of, and for, the periods presented in
          this annual report.

     4.   The registrant's other certifying officer and I are responsible for
          establishing and maintaining disclosure controls and procedures (as
          defined in Exchange Act Rules 13a-14 and 15 d-14) for the registrant
          and have:
          a)   Designed such disclosure controls and procedures to ensure that
               material information relating to the registrant, including its
               consolidated subsidiary, is make known to us by others within
               those entities, particularly during the period in which this
               annual report is being prepared;
          b)   Evaluated the effectiveness of the registrant's disclosure
               controls and procedures as of a date within 90 days prior to the
               filing date of this annual report (the "Evaluation Date"); and
          c)   Presented in this annual report our conclusions about the
               effectiveness of the disclosure controls and procedures based on
               our evaluation as of the Evaluation Date.

     5.   The registrant's other certifying officer and I have disclosed, based
          on our most recent evaluation, to the registrant's auditors and the
          audit committee of registrant's board of directors:
          a)   All significant deficiencies in the design or operation of
               internal controls which could adversely affect the registrant's
               ability to record, process, summarize and report financial data
               and have identified for the registrant's s auditors any material
               weaknesses in internal controls, and
          b)   Any fraud, whether or not material, that involves management or
               other employees who have a significant role in the registrant's
               internal controls.

     6.   The registrant's other certifying officer and I have indicated in this
          annual report whether there were significant changes in internal
          controls or in other factors that could significantly affect internal
          controls subsequent to the date of our most recent evaluation
          including any corrective actions with regard to significant
          deficiencies and material weaknesses.


Date:  January 13, 2003                  /s/George Aaron
                                         George Aaron
                                         President and CEO


                                       30
<PAGE>


                                  CERTIFICATION



I, Jonathan Joels, certify that:

     1.   I have reviewed this annual report on Form 10-KSB of Caprius, Inc.

     2.   Based on my knowledge, this annual report does not contain any untrue
          statement of a material fact or omit to state a material fact
          necessary to make the statements made, in light of the circumstances
          under which such statements were made, not misleading with respect to
          the period covered by this annual report.

     3.   Based on my knowledge, the financial statements, and other financial
          information included in this annual report, fairly present in all
          material respects the financial condition, results of operations and
          cash flows of the registrant as of, and for, the periods presented in
          this annual report.

     4.   The registrant's other certifying officer and I are responsible for
          establishing and maintaining disclosure controls and procedures (as
          defined in Exchange Act Rules 13a-14 and 15 d-14) for the registrant
          and have:
          a)   Designed such disclosure controls and procedures to ensure that
               material information relating to the registrant, including its
               consolidated subsidiary, is make known to us by others within
               those entities, particularly during the period in which this
               annual report is being prepared;
          b)   Evaluated the effectiveness of the registrant's disclosure
               controls and procedures as of a date within 90 days prior to the
               filing date of this annual report (the "Evaluation Date"); and
          c)   Presented in this annual report our conclusions about the
               effectiveness of the disclosure controls and procedures based on
               our evaluation as of the Evaluation Date.

     5.   The registrant's other certifying officer and I have disclosed, based
          on our most recent evaluation, to the registrant's auditors and the
          audit committee of registrant's board of directors:
          a)   All significant deficiencies in the design or operation of
               internal controls which could adversely affect the registrant's
               ability to record, process, summarize and report financial data
               and have identified for the registrant's s auditors any material
               weaknesses in internal controls, and
          b)   Any fraud, whether or not material, that involves management or
               other employees who have a significant role in the registrant's
               internal controls.

     6.   The registrant's other certifying officer and I have indicated in this
          annual report whether there were significant changes in internal
          controls or in other factors that could significantly affect internal
          controls subsequent to the date of our most recent evaluation
          including any corrective actions with regard to significant
          deficiencies and material weaknesses.


Date:  January 13, 2003                  /s/Jonathan Joels
                                         Jonathan Joels
                                         Treasurer and CFO


                                       31
<PAGE>


                                   SIGNATURES
                                   ----------


Pursuant to the requirements of the Section 13 or 15(d) 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 on the 14th day of
January 2003.


CAPRIUS, INC.

By:  /s/Jonathan Joels
     Jonathan Joels, CFO and
     Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934 this report
has been signed by the following persons in the capacities and on the dates
indicated.


  SIGNATURE                        TITLE                              DATE
  ---------                        -----                              ----


  /s/George Aaron             Chairman of the Board,             Jan. 13, 2003
--------------------------    President and CEO
George Aaron


  /s/Jonathan Joels           Director, CFO and Treasurer        Jan. 13, 2003
--------------------------
Jonathan Joels


/s/Shrikant Mehta             Director                           Jan. 13, 2003
--------------------------
Shrikant Mehta


  /s/Sanjay Mody             Director                            Jan. 13, 2003
--------------------------
Sanjay Mody


  /s/Sol Triebwasser          Director                           Jan. 13, 2003
--------------------------
  Sol Triebwasser, Ph.D.


                                       32
<PAGE>


                         CAPRIUS, INC. AND SUBSIDIARIES

                                    I N D E X


Independent Auditors' Report                                                 F-2

Consolidated Balance Sheets                                                  F-3

Consolidated Statements of Operations                                        F-4

Consolidated Statements of Stockholders' Equity                              F-5

Consolidated Statements of Cash Flows                                        F-6

Notes to Consolidated Financial Statements                           F-7 to F-18


                                      F-1
<PAGE>


                          INDEPENDENT AUDITORS' REPORT


The Board of Directors and Stockholders
Caprius, Inc.

     We have audited the accompanying consolidated balance sheets of Caprius,
Inc. and subsidiaries as of September 30, 2002 and 2001, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the years 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 audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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 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 Caprius,
Inc. and subsidiaries at September 30, 2002 and 2001, and the results of their
operations and their cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.


                                            /s/ BDO Seidman, LLP
                                            --------------------
                                            BDO Seidman, LLP

Boston, Massachusetts
November 15, 2002, except for Note J,
which is dated December 17, 2002


                                      F-2
<PAGE>


                         CAPRIUS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                September 30, 2002     September 30, 2001
                                                                ------------------     ------------------
<S>                                                             <C>                    <C>
ASSETS

CURRENT ASSETS:
   Cash and cash equivalents                                    $          505,282     $           89,776
   Accounts receivable, net of reserve for bad debts
     of $13,000 and $26,000 at September 30, 2002
     and September 30, 2001                                                141,731                578,808
   Inventories                                                                 -                  396,430
   Other current assets                                                      6,948                  5,324
   Net assets of TDM business segment                                    2,511,147                      -
                                                                ------------------     ------------------
       Total current assets                                              3,165,108              1,070,338
                                                                ------------------     ------------------
PROPERTY AND EQUIPMENT:
   Medical equipment                                                       314,318                341,140
   Office furniture and equipment                                          193,469                220,290
   Leasehold improvements                                                      950                    950
                                                                ------------------     ------------------
                                                                           508,737                562,380
   Less: accumulated depreciation                                          478,136                408,354
                                                                ------------------     ------------------
       Net property and equipment                                           30,601                154,026
                                                                ------------------     ------------------
OTHER ASSETS:
   Goodwill, net of accumulated amortization of $116,886
     at September 30, 2001                                                     -                  928,671
   Other intangibles, net of accumulated amortization of
     $164,292 at September 30, 2001                                            -                1,296,081
   Note receivable                                                         350,000                    -
   Deferred financing cost, net of accumulated amortization
     of $2,301                                                              39,049                    -
   Deferred acquisition costs                                              189,463
   Other                                                                    22,794                 22,794
                                                                ------------------     ------------------
       Total other assets                                                  601,306              2,247,546
                                                                ------------------     ------------------
TOTAL ASSETS                                                    $        3,797,015     $        3,471,910
                                                                ==================     ==================
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Notes payable, net of unamortized discount of $5,000 at
     September 30, 2001                                         $          546,650     $          295,000
   Accounts payable                                                        408,841                291,460
   Accrued expenses                                                        198,087                248,660
   Accrued compensation                                                     86,018                 72,760
   Current maturities of long-term debt and capital lease
     obligations                                                            12,806                 46,636
                                                                ------------------     ------------------
       Total current liabilities                                         1,252,402                954,516

LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, net of current
  maturities                                                                22,226                 35,032
                                                                ------------------     ------------------
TOTAL LIABILITIES                                                        1,274,628                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 September 30, 2002
      and September 30, 2001.
      Liquidation preference $2,700,000                                  2,700,000              2,700,000
   Common stock, $.01 par value
      Authorized - 50,000,000 shares
      Issued - 20,419,062 shares at September 30, 2002
      and 17,121,362 shares at September 30, 2001                          204,191                171,214
   Additional paid-in capital                                           67,579,258             67,154,517
   Accumulated deficit                                                 (67,958,812)           (67,541,119)
   Treasury stock (22,500 common shares, at cost)                           (2,250)                (2,250)
                                                                ------------------     ------------------
       Total stockholders' equity                                        2,522,387              2,482,362
                                                                ------------------     ------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                      $        3,797,015     $        3,471,910
                                                                ==================     ==================


         The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>


                                       F-3
<PAGE>


                         CAPRIUS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                                        Years Ended September 30,
                                                                -----------------------------------------
                                                                       2002                   2001
                                                                ------------------     ------------------
<S>                                                             <C>                    <C>
REVENUES:
   Net patient service revenues                                 $        1,549,794     $        1,502,602
                                                                ------------------     ------------------
       Total revenues                                                    1,549,794              1,502,602
                                                                ------------------     ------------------
OPERATING EXPENSES:
   Cost of operations                                                    1,169,491              1,077,230
   Selling, general and administrative                                     498,030                509,805
   Goodwill impairment                                                      67,356                500,000
   Provision for bad debt and collection costs                              66,638                 23,523
                                                                ------------------     ------------------
       Total operating expenses                                          1,801,515              2,110,558
                                                                ------------------     ------------------
       Operating loss                                                     (251,721)              (607,956)

Interest expense                                                           (10,619)               (19,496)
                                                                ------------------     ------------------

   Loss from continuing operations                                        (262,340)              (627,452)
   Loss from operations of discontinued
   TDM business segment                                                   (155,353)              (191,135)
                                                                ------------------     ------------------
   Net loss                                                     $         (417,693)    $         (818,587)
                                                                ==================     ==================

Net loss per basic and diluted common share:
   Continuing operations                                        $            (0.01)    $            (0.04)
   Discontinued operations                                                   (0.01)                 (0.01)
                                                                ------------------     ------------------

   Net loss per basic and diluted common share                  $            (0.02)    $            (0.05)
                                                                ==================     ==================

Weighted average number of common shares outstanding,
   basic and diluted                                                    17,171,140             17,054,092
                                                                ==================     ==================


         The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>


                                       F-4


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


<TABLE>
<CAPTION>
                                                      Common Stock                                  Treasury Stock
                              Preferred Stock        $0.01 Par Value                                $0.01 Par Value
                           ---------------------   -------------------  Additional                 ------------------     Total
                            Number                  Number               Paid-in      Accumulated   Number             Stockholders'
                           of Shares    Amount     of Shares    Amount   Capital        Deficit    of Shares   Amount     Equity
                           ---------------------------------------------------------------------------------------------------------
<S>                           <C>     <C>          <C>        <C>       <C>          <C>              <C>     <C>       <C>
BALANCE, SEPTEMBER 30, 2000   27,000  $2,700,000   16,434,71  $164,347  $67,081,568  $(66,722,532)    22,500  $(2,250)  $3,221,133

Exercise of warrants issued
in connection with bridge
financing                        -           -        68,750       688       13,062           -          -        -         13,750

Exercise of warrants issued
in connection with Oxis
Agreement                        -           -       617,898     6,179       47,887           -          -        -         54,066

Fair value of warrants issued
in connection with bridge
financing                        -           -           -         -         12,000           -          -        -         12,000

Net loss                         -           -           -         -            -        (818,587)       -        -       (818,587)
                           ---------------------------------------------------------------------------------------------------------

BALANCE, SEPTEMBER 30, 2001   27,000   2,700,000  17,121,362   171,214   67,154,517   (67,541,119)    22,500   (2,250)   2,482,362

Fair value of warrants issued
in connection MCM financing      -           -           -         -          6,700           -          -        -          6,700

Fair value of warrants issued
in connection with line of
credit agreement                 -           -           -         -         41,350           -          -        -         41,350

Exercise of warrants issued
in connection with bridge
financing                        -           -        38,500       385        7,315           -          -        -          7,700

Exercise of Series A warrants    -           -     2,172,800    21,728      217,280           -          -        -        239,008

Exercise of Series B warrants    -           -     1,086,400    10,864      152,096           -          -        -        162,960

Net loss                         -           -           -         -            -        (417,693)       -        -       (417,693)
                           ---------------------------------------------------------------------------------------------------------

BALANCE, SEPTEMBER 30, 2002   27,000  $2,700,000  20,419,062  $204,191  $67,579,258  $(67,958,812)    22,500  $(2,250)  $2,522,387
                           =========================================================================================================


                           The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>


                                       F-5

<PAGE>


                         CAPRIUS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                        Years Ended September 30,
                                                                -----------------------------------------
                                                                       2002                   2001
                                                                ------------------     ------------------
<S>                                                             <C>                    <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

   Net Loss                                                     $         (417,693)    $         (818,587)
   Adjustments to reconcile net loss to net cash provided by
      (used in) operating activities:
      Amortization of financing discounts                                   10,651                  7,000
      Depreciation and amortization                                        243,961                288,514
      Impairment of Goodwill                                                67,356                500,000
      Changes in operating assets and liabilities:
         Accounts receivable, net                                          123,560                (74,886)
         Inventories                                                        71,338               (112,747)
         Other current assets                                               (1,624)                 3,187
         Accounts payable and accrued expenses                             244,388               (232,748)
                                                                ------------------     ------------------
            Net cash provided by (used in) operating activities            341,937               (440,267)
                                                                ------------------     ------------------

CASH FLOWS FROM INVESTING ACTIVITIES:

   Deferred acquisition costs                                             (189,463)                   -
   Loans to MCM                                                           (350,000)                   -
   Purchase of equipment, furniture and leasehold improvements                 -                  (26,129)
                                                                ------------------     ------------------
            Net cash used in investing activities                         (539,463)               (26,129)
                                                                ------------------     ------------------

CASH FLOWS FROM FINANCING ACTIVITIES:

   Proceeds from issuance of common stock                                  409,668                 13,750
   Proceeds from issuance of debt and warrants                             250,000                300,000
   Repayment of debt and capital lease obligations                         (46,636)              (107,576)
                                                                ------------------     ------------------
            Net cash provided by financing activities                      613,032                206,174
                                                                ------------------     ------------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                       415,506               (260,222)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                89,776                349,998
                                                                ------------------     ------------------

CASH AND CASH EQUIVALENTS, END OF YEAR                          $          505,282     $           89,776
                                                                ==================     ==================

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

   Cash paid for interest during the period                     $           55,119     $           45,108
                                                                ==================     ==================


   During the year ended September 30, 2001, $54,066 of accrued expenses were offset against proceeds
   receivable upon the exercise of warrants to purchase 617,898 shares of common stock of the Company.


         The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>


                                       F-6
<PAGE>


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

     Caprius, Inc. ("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 (the "TDM Business"). Subsequent to September
30, 2002, the Company completed the sale of the assets and certain liabilities
of its TDM business segment and made an investment in MCM, (see Note J). In July
1998, the Company acquired The Strax Institute ("Strax"), a comprehensive breast
imaging center, located in Lauderhill, Florida. Strax is a multi-modality breast
care center that provides various services, including x-ray mammography,
ultrasound, stereotactic biopsy and bone densitometry. The Company continues to
own and operate Strax.


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

     [1]  Principles of consolidation

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

     [2]  Revenue recognition

     The breast imaging center recognizes revenue as services are 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 are 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 is recognized when the products are shipped to the customer.

     [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]  Inventories

     Inventories are accounted for at the lower of cost or market using the
first-in, first-out ("FIFO") method.

     [5]  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.

     Equipment under capital lease is stated at the lower of the fair market
value or the net present value of the minimum lease payments at the inception of
the lease. Capitalized lease equipment is amortized over the term of the lease
or the estimated useful life.

<TABLE>
<CAPTION>
     Asset Classification                           Useful Lives
     --------------------                           ------------
<S>                                                 <C>
     Medical equipment                              5-8 years
     Office furniture and equipment                 3-5 years
     Leasehold improvements                         Term of lease
</TABLE>


                                      F-7
<PAGE>


     [6]  Goodwill and other intangibles

     At September 30, 2001, goodwill results from the excess of cost over the
fair value of net assets acquired related to the Opus Diagnostics business and
to The Strax Institute. Other intangibles include trademarks, technical know how
and distributor agreements. Goodwill and other intangibles are amortized on a
straight-line basis over twenty years. The Company periodically reviews the
carrying amount of goodwill and other intangibles to determine whether an
impairment has been incurred based on undiscounted future cash flows.

     Based on current market conditions and an analysis of projected
undiscounted future cash flows calculated in accordance with the provisions of
SFAS 121, the Company has determined that the carrying amount of certain
long-lived assets of the Strax Institute may not be recoverable. The resultant
impairment of long-lived assets has necessitated a write-down of $67,356 of
goodwill of the Strax Institute in 2002 and $500,000 in 2001.

     [7]  Net loss per share

     Net loss per share is computed in accordance with Statement of Financial
Standards 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. Outstanding warrants and options
had an anti-dilutive effect and were therefore excluded from the computation of
diluted net loss per common share.

     [8]  Income taxes

     The Company utilizes the liability method of accounting for income taxes,
as set forth in Statement of Financial Accounting Standards No. 109. "Accounting
for Income Taxes". Under this method, deferred tax liabilities and assets are
recognized for the expected tax consequences of temporary differences between
the carrying amount and the tax basis of assets and liabilities.

     [9]  Use of Estimates

     The preparation of financial statements in conformity with generally
accepted accounting principles 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.

     [10] 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 notes payable, current maturities
of long-term debt and long-term debt approximate fair value as the notes and
loans bear interest at current market rates.

     [11] Recent pronouncements

     In June 2001, the Financial Accounting Standards Board finalized FASB
Statements No. 141, Business Combinations ("SFAS 141"), and No. 142, Goodwill
and Other Intangible Assets ("SFAS 142"). SFAS 141 requires the use of the
purchase method of accounting and prohibits the use of the pooling-of-interests
method of accounting for business combinations initiated after June 30, 2001.
SFAS 141 also requires that the Company recognize acquired intangible assets
apart from goodwill if the acquired intangible assets meet certain criteria.
SFAS 141 applies to all business combinations initiated after June 30, 2001 and
for purchase business combinations completed on or after July 1, 2001. It also
requires, upon adoption of SFAS 142, that the Company reclassify the carrying
amounts of intangible assets and goodwill based on the criteria in SFAS 141.

     SFAS 142 requires, among other things, that companies no longer amortize
goodwill, but instead test goodwill for impairment at least annually. In
addition, SFAS 142 requires that the Company identify reporting units for the
purposes of assessing potential future impairments of goodwill, reassess the
useful lives of other existing recognized intangible assets, and cease
amortization of intangible assets with an indefinite useful life. An intangible
asset with an indefinite useful life should be tested for impairment in
accordance with the guidance in SFAS 142. SFAS 142 is required to be applied in
fiscal years beginning after December 15, 2001 to all goodwill and other


                                      F-8
<PAGE>


intangible assets recognized at that date, regardless of when those assets were
initially recognized. The Company will adopt SFAS 142 in the first quarter of
fiscal 2003.

     In October 2001, the FASB issued SFAS 144, "Accounting for the Impairment
or Disposal of Long-Lived assets," which addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. This Statement
supersedes SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," and APB Opinion No. 30, "Reporting the
Results of Operations--Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions for the Disposal of a Segment of a Business." SFAS 144 becomes
effective for the fiscal years beginning after December 15, 2001. The Company
will adopt SFAS 144 in the first quarter of fiscal 2003 and is currently
reviewing the effects of adopting SFAS 144 on its financial position and results
of operations.

     In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
SFAS Nos. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical
Corrections". SFAS No. 145 rescinds Statement No. 4, "Reporting Gains and Losses
from Extinguishments of Debt" and an amendment of that Statement, FASB Statement
No. 64, "Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements".
SFAS No. 145 also rescinds FASB Statement No. 44, "Accounting for Intangible
Assets of Motor Carriers". SFAS No. 145 amends FASB Statement No. 13,
"Accounting for Leases" to eliminate an inconsistency between the required
accounting for sale-leaseback transactions and the required accounting for
certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. SFAS No. 145 also amends other existing
authoritative pronouncements to make various technical corrections, clarify
meanings, or describe their applicability under changed conditions. The
provision of SFAS No.145 related to the rescission of Statement No. 4 shall be
applied in fiscal years beginning after May 15, 2002. The provisions of SFAS No.
145 related to Statement No. 13 should be for transactions occurring after May
15, 2002. Early application of the provisions of this Statement is encouraged.
The Company does not expect that the adoption of SFAS No. 145 will have a
significant impact on its consolidated results of operations, financial position
or cash flows.

     In June 2002, the FASB issued SFAS No. 146 "Accounting for Costs Associated
with Exit or Disposal Activities." This statement superseded EITF No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity". Under this statement, a liability or a cost associated
with a disposal or exit activity is recognized at fair value when the liability
is incurred rather than at the date of an entity's commitment to an exit plan as
required under EITF 94-3. The provision of this statement is effective for exit
or disposal activities that are initiated after December 31, 2002, with early
adoption permitted. The Company is currently evaluating the effect that the
adoption of SFAS No. 146 will have on its consolidated financial position and
results of operations.

     [12] Concentration of Credit Risk and Significant Customers

     Statement of Financial Accounting Standards 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. For the year ended
September 30, 2001, two customers accounted for 14% and 12% of total revenue.
There were no significant customers during fiscal year 2002.


                                      F-9
<PAGE>


(NOTE C) - Inventory
--------------------

     Inventories consist of the following:

<TABLE>
<CAPTION>
                               SEPTEMBER 30,   SEPTEMBER 30,
                                   2002            2001
                                   ----            ----
<S>                              <C>             <C>
          Raw Materials          $       -       $ 166,340

          Finished goods                 -         230,090
                                 ---------       ---------
                                 $       -       $ 396,430
                                 =========       =========
</TABLE>


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

Bridge loan Financing
---------------------

     During 2001, the Company completed a short term bridge loan of $300,000,
through the issuance of loan notes bearing interest at 11% together with
warrants to purchase common stock of the Company. Of the total proceeds,
$250,000 of loans were from various officers and directors of the Company. The
$300,000 bridge loan notes were due for repayment on February 28, 2002, which
was extended to October 31, 2002. On October 10, 2002, the Company repaid the
bridge loan holders the $300,000 plus accrued interest. The fair value of
warrants issued in connection with the bridge loan amounting to $12,000 was
reflected as a discount to the face value of the bridge loan. The notes were
collateralized by substantially all assets of the Company.

MCM Financing
-------------

     During 2002, the Company obtained a short-term loan in the principal amount
of $250,000, with interest at prime (4.25% at September 30, 2002) plus 3% per
annum and due on September 30, 2003 (the "Company Loan"). All $250,000 of the
loan proceeds were from officers and employees of the Company as well as related
family members. For each $1.00 principal amount loaned, the lender received a
warrant to purchase one share of the Company's Common Stock, exercisable after 6
months at $0.09 per share for a period of five years. The fair market value of
the warrant on the date of grant was determined to be $6,700, which is being
amortized over the term of the related debt. The proceeds of the Company Loan
together with an additional $100,000 of working capital were used to fund a loan
to MCM totaling $350,000 as of September 30, 2002. The $350,000 loan to MCM is
at prime plus 2% per annum and was converted to equity upon the acquisition of
the interest in MCM in December 2002. The Company loan plus accrued interest was
repaid from the proceeds of the Opus sale in October 2002.

Line of Credit
--------------

     During 2002, the Company entered into a $500,000 line of credit agreement
with a shareholder of the Company that expires on March 12, 2004. Borrowings
under the line bear interest at 11%. There were no borrowings outstanding under
the line at September 30, 2002.

     In connection with the agreement, the Company issued to the shareholder
warrants to purchase 500,000 shares of the Company's common stock at an exercise
price of $0.11. The warrant is exercisable immediately and expires 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.


                                      F-10
<PAGE>


(NOTE E) - Capital Lease Obligations
------------------------------------

     Capital lease obligations at September 30, 2002 and 2001 consisted of the
following:

<TABLE>
<CAPTION>
                                                              SEPTEMBER 30,    SEPTEMBER 30,
                                                                  2002             2001
                                                                  ----             ----
<S>                                                             <C>              <C>
Various capital leases, secured by the respective medical
equipment, interest rates ranging from 10.0% - 12.7%,
monthly payments of principal and interest ranging from
$1,720 to $3,700, maturities ranging from November 2002 to
October 2004.                                                   $ 35,032         $ 81,668

Less:  current maturities                                         12,806           46,636
                                                                --------         --------
                                                                $ 22,226         $ 35,032
                                                                ========         ========
</TABLE>


     Future lease payments under capital leases are as follows:

<TABLE>
<CAPTION>
                             Fiscal Year
<S>                                                          <C>
                             2003                             19,472

                             2004                             19,472

                             2005                              6,490
                                                             -------

          Total minimum lease payments                        45,434

          Less amount representing interest                   10,402
                                                             -------
          Present value of capital lease obligations         $35,032
                                                             =======
</TABLE>


     Included in property and equipment is leased equipment having a net book
value at September 30, 2002 and 2001 of approximately $21,500 and $101,000,
respectively.


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

     At September 30, 2002 and 2001, the Company had a deferred tax asset
totaling approximately $18,192,000 and $18,042,000 respectively, due primarily
to net operating loss carryovers. A valuation allowance was recorded in 2002 and
2001 for the full amount of this asset due to uncertainty as to the realization
of the benefit.

     At September 30, 2002 the Company had available net operating loss
carryforwards for tax purposes, expiring through 2022 of approximately
$53,233,000. 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.

     The following table reconciles the tax provision per the accompanying
consolidated statements of operations with the expected provision obtained by
applying statutory tax rates to the loss from continuing operations:

<TABLE>
<CAPTION>
                                                      Year Ended September 30,
                                                        2002           2001
                                                        ----           ----
<S>                                                  <C>            <C>
          Loss from continuing operations:           $ (256,689)    $ (818,587)
                                                     ==========     ==========
          Expected tax (benefit) at 34%              $ ( 87,274)    $ (278,320)

          Adjustment due to
            increase in valuation reserve                87,274        278,320
                                                     ----------     ----------
          Tax benefit (expense) per
            financial statements                     $    -         $    -
                                                     ==========     ==========
</TABLE>


                                      F-11
<PAGE>


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

     [1]  Operating leases

     The Company leases facilities and equipment 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 $215,000 and $208,000 for
the years ended September 30, 2002 and 2001, respectively.


     Future minimum rental commitments under operating leases are as follows:


<TABLE>
<CAPTION>
                Fiscal Year                Amount
          ----------------------------------------------
<S>                                       <C>
                    2003                  215,000

                    2004                   95,000

                    2005                   42,000
                                        ---------
                   Total                $ 352,000
                                        =========
</TABLE>


     [2]  Legal proceedings

     On October 19, 1998, the Company filed a complaint against Eric T. Shebar,
M.D. ("Shebar"), the former Chief Operating Officer and Medical Director for the
Company's motor vehicle accident rehabilitation ("MVA") business, and MVA Center
for Rehabilitation, Inc. ("MVA, Inc.") whereby the Company alleged breach of
contract and certain misrepresentations and sought damages in an amount to be
determined at trial. The Company filed a preliminary injunction to reach and
apply a secured promissory note to MVA, Inc. against damages sought from Shebar
and to enjoin against any remedies upon default of the Note. The ruling on the
injunction was denied. Consequently, the final Note payment of $347,000 was paid
as part of the sale of the MVA. The new Caprius management negotiated a
settlement agreement between the Company and Eric T. Shebar, M.D. that was
entered into on December 27, 1999, wherein the Company agreed to pay $60,000
immediately and a further $20,000 over the next two years. Upon the initial
payment, the Company was released from all claims and actions relating to this
matter. As of September 30, 2001, the Company had a liability of $10,000
included in accrued expenses in the accompanying consolidated balance sheets
relating to this matter. This liability was repaid in full during 2002.

     In June 2002, Jack Nelson, a former executive officer and director of the
Company, commenced two legal proceedings against the Company and George Aaron
and Jonathan Joels, executive officers, directors and principal stockholders of
the Company. The two complaints allege that the individual defendants made
alleged misrepresentations to the plaintiff upon their acquisition of a
controlling interest in the Company in 1999 and thereafter made other alleged
misrepresentations and took other actions as to the plaintiff to the supposed
detriment of the plaintiff and the Company. One action was brought in Superior
Court of New Jersey, Bergen County, and the other was brought as a derivative
action in Federal District Court in New Jersey. The counts in the complaints are
for breach of contract, breach of fiduciary duty and misrepresentation. The
complaint in the Federal Court also alleges that certain actions by the
defendants in connection with the 1999 acquisition transaction and also as
Company officers violated the Federal Racketeer Influenced and Corrupt
Organizations Act (RICO). No amount of damages was specified in either action.
The Company has answered Plaintiff's complaint, denying liability and asserting
affirmative defenses. The parties are currently engaged in written discovery. No
depositions have been taken. A potential outcome cannot be determined by
management, accordingly no amounts have been accrued as of September 30, 2002.


                                      F-12
<PAGE>


     In September 2002, the Company was served with a complaint naming the
Company and its principal officers and directors in the Federal District Court
of New Jersey as a purported class action. The allegations in the complaint
cover the period between February 14, 2000 and June 20, 2002. The plaintiff is a
relative of the wife of the plaintiff in the previously disclosed direct and
derivative actions against the defendants. The allegations in the purported
class action are substantially similar to those in the other two actions. The
complaint seeks an unspecified amount of monetary damages, as well as the
removal of the defendant officers as shareholders of the Company. No answer has
yet been filed to this complaint. The parties agreed to extend the Company's
time to answer the complaint. A potential outcome cannot be determined by
management, accordingly no amounts have been accrued as of September 30, 2002.

     In September 2002, BDC Corp., d/b/a BDC Consulting Corp, brought an action
against the Company and Mr. George 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 planned to purchase MCM. The Company believes there
is no merit to the plaintiff's claim. The parties have entered into discussions
in an effort to resolve this litigation. Under the Companys purchase agreement
with MCM, MCM, its subsidiaries and certain pre-existing shareholders of MCM
have certain obligations to indemnify the Company with respect to damages,
losses, liabilities, costs and expenses arising out of any claim or controversy
in respect of this proceeding. A potential outcome cannot be determined by
management, accordingly no amounts have been accrued as of September 30, 2002.


(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 1,597,930 shares 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.

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

     During the fiscal year ended September 30, 2002, the Company offered to the
current warrant-holders a reduction in the exercise price of outstanding
warrants. Exercise prices were reduced by 80%, not to be below an exercise price
of $0.11 per share, during a set time period that expired on September 30, 2002.
All warrants exercised during fiscal year 2002 were exercised during the
reduction period.

     As of September 30, 2000, the Company had outstanding warrants issued prior
to fiscal year 1999 to purchase 101,500 shares of common stock at exercise
prices ranging from $6.25 to $25.00, with a weighted average exercise price of
$10.41. These warrants expired in fiscal year 2001.

     During fiscal year 1999, in connection with the Opus Diagnostics Inc.
merger, the Company issued a warrant to purchase 617,898 shares of the Company's
common stock at an exercise price of $.0875. The warrant was fully exercised in
November 2000.

     In connection with various bridge financing agreements entered into during
fiscal year 2000, the Company issued warrants to purchase 368,500 shares of
common stock at exercise prices ranging from $0.20 to $1.00 (see below).
Warrants to purchase 68,750 shares at $0.20 per share were exercised in October
2000. Warrants to purchase 38,500 shares at $0.20 per share were exercised in
September 2002. As of September 30, 2002, there were warrants outstanding to
purchase 261,250 shares of common stock at an exercise price of $0.20 per share.
These warrants expire at various dates through March 2005.


                                      F-13
<PAGE>


     In connection with the equity placement completed during fiscal year 2000,
the Company issued 2,600,000 Series A warrants and 1,300,000 Series B warrants.
Series A warrants to purchase 2,172,800 shares at $0.11 per share were exercised
in September 2002. Series B warrants to purchase 1,086,400 shares at $0.15 per
share were exercised in September 2002. As of September 30, 2002, there were
Series A and B warrants outstanding to purchase 640,800 shares of common stock
at exercise prices ranging from $0.50 to $0.75, with a weighted average exercise
price of $0.58.

     In connection with MCM financing entered into during 2002, the Company
issued warrants to purchase 250,000 shares of common stock at $0.09. The market
value of the warrants issued was determined to be $6,700, which is being
amortized over the life of the related debt. These warrants expire in September
2007.

     In connection with a legal settlement entered into during fiscal year 2000,
the Company issued warrants to purchase 120,000 shares of common stock at $0.25.
The market value of the warrants issued was determined. These warrants expire in
August 2003.

     In connection with bridge financing entered into during 2001, the Company
issued warrants to purchase 300,000 shares of common stock at $0.08. The
warrants were determined to have a market value of $12,000 which is being
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 650,000 units at $3.00 per unit. Each unit was
comprised of three shares of Common Stock, four Series A Warrants exercisable at
$0.50 per share and are callable by the Company if the Common Stock of the
Company trades above $3.00 for 15 consecutive days, two Series B Warrants
exercisable at $0.75 per share and are callable by the Company if the Common
Stock trades above $5.00 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 500,000 shares of common stock at $0.75 through June 2005.
Another individual received options to purchase 500,000 shares of common stock
at $1.00 through June 2005.


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

     The Company has an Incentive and Nonqualified Stock Option Plan which
provides for the granting of options to purchase not more than 100,000 shares of
common stock. Exercise prices for any incentive options are at prices not less
than the fair market value at the date of grant, while exercise prices for
nonqualified options may be at any price in excess of $.01. When fair market
value at the date of issuance is in excess of the option exercise price, the
excess is recorded as compensation expense. There were no options outstanding
under this plan as of September 30, 2002 and 2001, respectively.

     During 2002, the Company adopted a stock option plan for both employees and
non-employee directors. The employee and Directors stock option plan provides
for the granting of options to purchase not more than 1,500,000 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. As of September 30, 2002, there were
50,000 options outstanding under the 2002 plan, exercisable at $.05 per share.
During October 2002, the Company granted a total of 961,000 options to officers,
directors, and employees under the 2002 plan. All options are exercisable at
$0.15 per share vesting one third immediately and the balance equally over a two
year period.

     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 1,000,000 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 200,000 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 expire May 25, 2003.


                                      F-14
<PAGE>


     Stock option transactions under the 1993 plans are as follows:

<TABLE>
<CAPTION>
                                                                                  Weighted Average
                                                   Number of     Option Price      Exercise Price
                                                     Shares        Per Share         Per Share
                                                     ------        ---------         ---------
<S>                                                <C>           <C>                   <C>
Balance, September 30, 2000                         915,500      $0.15 - $5.00         $0.52

Cancelled in 2001                                   (14,000)     $0.84 - $2.93          2.03
                                                    -------      -------------         -----

Balance, September 30, 2001                         901,500      $0.15 - $5.00         $0.45

Cancelled in 2002                                  (157,000)     $0.15 - $5.00          1.33
                                                    -------      -------------         -----

Balance, September 30, 2002                         744,500      $0.15 - $5.00         $0.26
                                                    =======      =============         =====
</TABLE>


     Stock option transactions not covered under the option plans in the fiscal
years 2001 and 2002 are as follows:

<TABLE>
<CAPTION>
                                                                                  Weighted Average
                                                   Number of     Option Price      Exercise Price
                                                     Shares        Per Share         Per Share
                                                     ------        ---------         ---------
<S>                                                <C>           <C>                   <C>

Balance, September 30, 2000                        1,096,032     $0.10 - $20.10        1.23

Cancelled in 2001                                    (42,171)    $7.90 - $17.50        9.62
                                                   ---------     --------------        -----

Balance, September 30, 2001 and 2002               1,053,861     $0.10 - $20.10        $0.89
                                                   =========     ==============        =====
</TABLE>


<TABLE>
<CAPTION>
                                                                   Range of          Weighted
                                                   Number of       Price Per       Average Price
Options exercisable at September 30, 2002            Shares          Share           Per Share
-----------------------------------------          ---------       ---------       -------------
<S>                                                <C>           <C>                   <C>
Plan shares                                          727,833     $0.05 -  $5.00        $0.25
Non-plan shares                                    1,053,861     $0.10 - $20.10        $0.89
</TABLE>


                                      F-15
<PAGE>


     The following table summarizes information about stock options outstanding
at September 30, 2002:

<TABLE>
<CAPTION>
                                           Outstanding Options
                            ------------------------------------------------
                                                 Weighted-
                                 Number           Average        Weighted-
         Range of            Outstanding at      Remaining        Average
         Exercise             September 30,     Contractual       Exercise
          Prices                  2002          Life (years)       Price
     -----------------------------------------------------------------------
<S>                            <C>                  <C>          <C>
      $0.10 - $0.25              815,000            7.2          $   0.15
        0.75-1.00              1,011,000            2.7              0.87
           2.93                   14,000            2.5              2.93
           5.00                    4,500            2.5              5.00
       15.80-20.10                 3,861            1.5             17.37
     -----------------------------------------------------------------------
      $0.10 - $20.10           1,848,361            4.7          $   0.62
     =======================================================================

                                           Exercisable Options
                            ------------------------------------------------
                                                 Weighted-
                                 Number           Average        Weighted-
         Range of            Outstanding at      Remaining        Average
         Exercise             September 30,     Contractual       Exercise
          Prices                  2002          Life (years)       Price
     -----------------------------------------------------------------------

       $0.10-$0.25               748,333            7.1          $   0.15
        0.75-1.00              1,011,000            2.7              0.87
           2.93                   14,000            2.5              2.93
           5.00                    4,500            2.5              5.00
       15.80-20.10                 3,861            3.0             17.37
     -----------------------------------------------------------------------
      $0.10 - $20.10           1,781,694            4.5          $   0.63
     =======================================================================
</TABLE>


     The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting or Stock-Based Compensation", but applies Accounting Principles
Board Opinion No. 25 and related interpretations in accounting for its plans.
There was no compensation expense recognized in fiscal 2001 or 2002. If the
Company had elected to recognize compensation cost for the plans based on the
fair value at the grant date for awards under the plans, consistent with the
method prescribed by SFAS No. 123, net loss per share would have been changed to
the pro forma amounts indicated below:


<TABLE>
<CAPTION>
                                    Year Ended September 30,
                                      2002           2001
                                      ----           ----
<S>                                <C>            <C>
Net loss:
   As reported                     $(417,693)     $(818,587)
   Pro forma                       $(505,917)     $(904,780)

Net loss per share:
   As reported                        $(0.02)        $(0.05)
   Pro forma                          $(0.03)        $(0.05)
</TABLE>


                                      F-16
<PAGE>


     The fair value of the Company's stock options used to compute pro forma net
loss and net loss per share disclosures is the estimated present value at grant
date using the Black-Scholes option-pricing model with the following weighted
average assumptions for 2002: dividend yield of 0%; expected volatility of 0.80;
risk free interest rates of 5.59%-7.78%; and an expected holding period of 10
years.

     The weighted-average grant-date fair value of options granted was $0.05 per
share for the year ended September 30, 2002. The Company did not grant options
during fiscal year 2001.


(NOTE I) - Industry Segments
----------------------------

     During the fiscal years ended September 30, 2002 and 2001, the Company
operations were classified into two business segments: imaging and
rehabilitation services and the therapeutic drug monitoring assay business (the
"TDM Business").

     As described in Note J , the Company disposed of it's TDM business in
October, 2002. Accordingly, the Company's continuing operations consisted of the
imaging and rehabilitation services only. Operations related to the TDM business
have been reclassified to discontinued operations for the years ended September
30, 2002 and 2001.


(NOTE J) - Subsequent events
----------------------------

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 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. 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. Assets applicable to the TDM business segment net of liabilities
assumed were segregated in the Company's balance sheet at September 30, 2002 and
shown as net assets of the TDM business segment. Revenues from discontinued
operations, which have been excluded from income from continuing operations in
the accompanying consolidated statements of operations for fiscal years 2002 and
2001, are 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 net assets of the TDM business segment at September 30, 2002
were as follows:

<TABLE>
<CAPTION>
                                                  2002
                                               ----------
<S>                                            <C>
          Current assets                       $  638,609

          Property and equipment                   34,923

          Intangible assets                     2,001,937

          Liabilities                             164,322
                                               ----------
             Net assets                        $2,511,147
                                               ==========
</TABLE>


                                      F-17
<PAGE>


     A summary of operations of the TDM business segment for the years ended
September 30, 2002 and 2001 is as follows:

<TABLE>
<CAPTION>
                                                  2002           2001
                                                  ----           ----
<S>                                            <C>            <C>
          Revenues                             $2,170,446     $2,043,488
          Operating Expenses                   $2,325,799     $2,234,623
                                               ----------     ----------
          Loss from Operations                  ($155,353)     ($191,135)
                                               ==========     ==========
</TABLE>


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. For a six month period commencing 19 months and ending 25 months from
December 17, 2002, 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, at a price based
upon a pre-set determination calculated at such time. At the Company's option,
the purchase price for the remaining MCM shares may be paid in cash or the
Company's common stock. 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, and are included in deferred
acquisition costs in the accompanying consolidated balance sheet as of
September 30, 2002. These costs will be allocated to the purchase price of MCM.
The acquisition will be 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.


                                      F-18