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, 2001
             / /     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, 2001:   $3,546,090

         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 14, 2001:

$ 573,722

         The number of shares  outstanding of Registrant's  Common Stock, $ .01
par value, outstanding on December 14, 2001: 17,098,862 shares

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

                    Documents Incorporated by Reference: None

          Transitional Small Business Disclosure Format: Yes ____ No X


                                       1
<PAGE>

                                      INDEX

                                                                        Page No.
                                                                        --------
PART I
Item 1.   Business                                                           3
Item 2.   Properties                                                         7
Item 3.   Legal Proceedings                                                  7
Item 4    Submission of Matters to a Vote of Securities Holders              7


PART II

Item 5.   Market for Common Equity and Related Stockholder Matters           8
Item 6.   Management's Discussion and Analysis of Financial Conditions       8
          and Results of Operations
Item 7.   Financial Statements                                              11
Item 8.   Changes In and Disagreements with Accountants on Accounting       11
          and Financial Disclosure


PART III

Item  9.  Directors, Executive Officers, Promoters and Control              12
          Persons; Compliance with Section 16 (a) of the Exchange Act.
Item 10.  Executive Compensation                                            14
Item 11.  Security Ownership of Certain Beneficial Owners and Management    16
Item 12.  Certain Relationships and Related Transactions                    17
Item 13.  Exhibits and Reports on Form 8-K                                  18


SIGNATURES                                                                  23


                                       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. The Company continues to
own and operate a comprehensive imaging center located in Lauderhill, Florida.

         The Opus Merger was consummated coincident with the closing of an Asset
Purchase Agreement (the "Oxis Purchase Agreement") between Opus and Oxis Health
Products Inc. ("Oxis") at which time George Aaron and Jonathan Joels became
executive officers, directors, and principle stock holders of the Company. The
purchase price consisted of $500,000 in cash, a secured promissory note (the
"Oxis Note") in the principal amount of $586,389 which was repaid as of December
8, 1999, and a warrant granting Oxis the right to acquire 617,898 shares of the
Company's Common Stock. Additionally, pursuant to a Services Agreement, Oxis had
manufactured the products of the TDM Business of Opus through December 31, 2000.

         Opus currently produces and sells 14 diagnostic assays, their
calibrators and controls for therapeutic drug monitoring which are used on the
Abbott TDx(R) and TDxFLx(R) instruments. Therapeutic drug monitoring ("TDM") is
used to assess medication efficacy and safety of a given therapeutic drug in
human bodily fluids, usually blood. The monitoring allows physicians to
individualize therapeutic regimens for optimal patient relief. The test kits are
used for in vitro testing, meaning the tests are performed outside of the body.

         On April 27, 2000, Caprius completed a private placement offering
(April Placement) in which it sold 650,000 units and received gross proceeds of
$1,950,000. Caprius offered the units at a price of $3.00 per unit, with each
unit consisting of (i) three shares of Common Stock of the Company, (ii) four
redeemable Series A Warrants and (iii) two redeemable Series B Warrants. Each
Series A Warrant gives the holder the right to purchase Common Stock at a price
of $.50 per share and is exercisable for five years. Each Series B Warrant gives
the holder the right to purchase Common Stock at a price of $.75 per share and
is exercisable for five years. Approximately $1,400,000 of the proceeds from the
placement was used to repay outstanding indebtedness and accrued liabilities,
including accrued salaries, and the balance was used for working capital.

         In March 1999, the Company transferred its interest in its
rehabilitation center to an unrelated limited liability company in exchange for
$900,000. In addition, the acquiring group assumed certain liabilities totaling
approximately $400,000. The transfer price of $900,000 was used in part to pay a
balance of approximately $372,000 to the former owner of the center, which was
the remaining amount due from the Company's acquisition of its interest in the
center.

         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 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.


                                       3
<PAGE>


THERAPEUTIC DRUG MONITORING BUSINESS

GENERAL

         Therapeutic drug monitoring (TDM) is a tool to assess medication
efficacy and safety of a given therapeutic drug in human body fluids, usually
blood. This is critical for drugs that have a narrow range between therapeutic
and toxic doses, such as digoxin and theophylline. Diagnostic kits that monitor
serum levels to detect specific amounts of the therapeutic changes in the blood
permit physicians to individualize therapeutic regimens for optimal patient
benefit. The tests provided by the TDM kits sold by Opus generally are
prescribed by physicians for their patients and then are performed in hospitals
and labs. TDM combines the knowledge of pharmaceuticals, pharmacotherapy,
pharmacokinetics and pharmacodynamics.

         Besides providing a method to continually evaluate effective
therapeutic regimens, periodic evaluations of blood serum concentrations can
help to identify problems with medication compliance. This is of particular
relevance in patients taking drugs for chronic conditions. With the trend
towards promoting outpatient therapy and self-treatment, physicians need an
independent evaluation of treatment. An example of this is with young children
who do not readily accept the importance of medication or are in denial of a
disease. Elderly patients are also in need of compliance evaluation.

         There is a large market for assays designed for the routine measurement
of therapeutic drugs. Opus sells a comprehensive line of assays for TDM,
consisting of 14 assays, their calibrators and controls. The line of products
includes two proprietary and exclusive tests; one to monitor Topiramate, a drug
for epilepsy developed by Johnson & Johnson, and the other Teicoplanin, an
antibiotic drug developed by Aventis.

         Our TDM products are sold under the trademark INNOFLUOR(R). These
products are designed to test the following medications:

                                    ANTI-ASTHMATIC
                                    --------------

                                    Theophylline

                                    ANTI-ARRHYTHMIC ASSAYS
                                    ----------------------

                                    Digoxin
                                    Digitoxin
                                    Quinidine

                                    ANTI-EPILEPTIC ASSAYS
                                    ---------------------

                                    Carbamazepine
                                    Phenobarbital
                                    Phenytoin
                                    Topiramate
                                    Valproic Acid

                                    ANTI-BACTERIAL ASSAYS
                                    ---------------------

                                    Amikacin
                                    Gentamicin
                                    Teicoplanin
                                    Tobramycin
                                    Vancomycin


                                       4
<PAGE>


         Opus competes with a variety of companies, many of which are
considerably larger and better known than Opus in the area of therapeutic drug
monitoring. Among its competitors are Abbott Laboratories and Roche Diagnostics,
Inc. Opus competes by way of product reliability, customer service, pricing and
marketing of its diagnostic kits. Both the Topiramate and Teicoplanin kits do
not experience competition as the Company enjoys worldwide exclusivity on each.
All kits are sold domestically and internationally with the exception of the
Teicoplanin, which is available for export only as the Teicoplanin drug it
monitors is not cleared by the Food and Drug Administration (FDA) for sale in
the United States.

         The Company has increased its research and development activities and
is devoting substantial resources to develop new products. The Company
determined that in order to remain cost efficient and to optimize the return on
the use of its assets, it has been contracting its research & development, under
the Company's direction, to third parties. During the fiscal years 2001 and
2000, the Company spent $187,000 and $16,000 on research and development,
representing approximately 9% and 1% of sales respectively. This strategy of
using outside contractors extends also to manufacturing. Since there are
numerous companies in the business of OEM manufacturing for the diagnostic
industry, the Company utilizes this capacity for the manufacture of its
products. This eliminates the need to invest capital and also permits the
Company to maintain a lower overhead. Until December 31, 2000, all of the
Company's manufacturing services had been contracted to Oxis. Since then, the
Company has transferred its production, including raw materials that it
purchased in Fiscal 2001 from Oxis to two third party contractors. One
contractor is responsible for the manufacture of the reagent test kits and the
other contractor is responsible for the production of calibrators and controls
for the tests. This change in the manufacturing arrangement of the Company's
products has lessened its dependence on a single source of production for all of
its products. Notwithstanding, a change in suppliers could cause a delay in
manufacturing and a possible loss of sales, which would adversely affect
operating results. Although the Company maintains adequate inventory levels,
sufficient to meet its customers' demands, excessive levels of inventory cannot
be maintained due to the finite shelf-life of the products. Consequently, there
is still a risk to the Company in the event that it is faced with changing
manufacturers on short notice.

         The Company continues to make an ongoing effort to expand its product
portfolio utilizing the TDM line as a marketing platform. In anticipation of new
products that would require FDA regulatory clearance, the Company consults with
a law firm specializing in health care regulatory affairs and, where
appropriate, the Company will patent any intellectual properties. Management has
initiated discussions and is currently working with several major drug companies
to develop new tests to monitor blood levels of certain of their drugs. While in
this evaluation period, no agreements exist between the parties.

         Effective October 15, 2000, Opus entered into a Development and License
Agreement with Novartis Pharma AG to develop and market internationally an assay
to monitor Certican(TM). Certican(TM) is a Novartis drug candidate and is
presently in the Phase III clinical trial process, as required by the FDA. When
cleared by the FDA, it is anticipated Certican(TM) will be used initially to
treat renal transplant patients. The Opus test to measure Certican is expected
to be used regularly to monitor blood levels of the drug, guiding physicians as
to correct dosage and patient compliance. There are approximately 25,000 renal
transplants annually that take place in the U.S. alone with approximately the
same number outside the U.S.

GOVERNMENT REGULATION

         Opus' distribution and marketing of its diagnostic test kits are
subject to a number of both domestic and international regulatory controls. In
the United States, Opus' activities are subject to regulation by the United
States Food and Drug Administration.

         These regulations require that Opus formally notify the FDA of its
intentions to market any new in vitro diagnostic device through a regulatory
submissions process, utilizing either the Premarket Notification 510 (k) process
or the Premarket Approval Application (PMA) process. If the 510 (k) process is
used, Opus is required to demonstrate that the product is "substantially
equivalent" to another legally marketed assay intended for the same purpose.
Opus cannot proceed with sales of its in vitro diagnostic products in the United
States until such time that FDA clearance is provided in the form of a letter
from FDA notifying Opus that it's in vitro diagnostic device has been determined
to be substantial equivalent. Currently, those products reviewed under the 510
(k) process and meeting all documentation and performance


                                       5
<PAGE>


requirements are cleared in approximately 90 days although a longer period of
time may be necessary in certain circumstances. In certain cases, specifically
for Class III devices, Opus must follow the PMA process which involves a
lengthier and more difficult process. The data for a Class III device approval
is much more demanding and in depth than that of a 510 (k) approval at a
costlier expense to the Company.

         The regulatory controls being imposed upon Opus with respect to the
international distribution and marketing of in vitro diagnostic devices are
increasing. Specifically, member nations of the European Community are
developing a standardized quality system similar to the FDA's Quality System
Regulation (QSR) known as EN 29000 that is anticipated to be effective through
the European Community. Once the grace period to conform to the directive has
expired, Opus will be mandated to conform to the EN 29000 regulations for any
product sold in the European Community. The European Community has adopted the
IVD Directive. All in vitro devices must bear the CE Marking of Conformity by
2005. Opus has commenced working on the process to obtain CE Marking for its
diagnostic kits.

DISTRIBUTION AND MARKETING

         The Opus INNOFLUOR(R) products are sold on a worldwide basis through
distributors. In the United States, Opus has an exclusive distribution agreement
to market its INNOFLUOR(R) products through Polymedco, Inc. Internationally,
Opus continues to expand it sales by appointing additional international
distributors in new markets. Opus grants exclusive and non-exclusive
distributorships, which generally cover limited geographic areas. Opus has
relationships with 26 exclusive and non-exclusive distributors and its products
have been sold in 33 countries. The international sales account for
approximately 68% of Opus' total sales with concentration primarily in Western
Europe where two major customers account for approximately 21% and 15% of total
product sales. All sales are invoiced in U.S. dollars. Since its acquisition of
the therapeutic drug business, the Company has increased the number of its
distributors from 17 to 26. The Company currently sells its products in 33
countries as compared to 17 at the time of acquisition. Opus' unit sales of its
reagent kits have increased by 23.6% during the last fiscal year. Whereas there
can be no assurance of this trend, the Company's new products program should
enhance the existing organic growth.

         Sales of kits to the distributors are made against individual purchase
orders. All products are shipped from one of the manufacturing locations and are
generally delivered domestically within 24 hours and overseas within 48 to 72
hours of shipping.

         Opus provides support to its distributors by offering comprehensive
product training and the necessary technical information to assist their
marketing.

THE 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.


                                       6
<PAGE>

         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 14, 2001, the Company's breast imaging business had a
staff of 17 full-time employees, including 1 senior manager, plus 2 part-time
employees and the diagnostic business employed 7 full-time employees, including
3 senior managers.

         None of the Company'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 sales 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 $10,108. The lease
expires on January 31, 2004.

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

ITEM 3.  LEGAL PROCEEDINGS

         None

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

         None.


                                       7
<PAGE>

                                     PART II
                                     -------

ITEM 5. MARKET FOR REGISTRANT'S 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, 2001, 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 NASDAQ Small Cap Market and OTCBB. Such quotations reflect
inter-dealer prices, without retail mark-up, markdown or commission, and may not
necessarily represent actual transactions. There is no quoted public market for
the trading of the Company's Warrants.

         Common Stock                                  High              Low
                                                       ----              ---

         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


         2000 (year ended September 30, 2000)

                           Fourth Quarter         $    0.45          $  0.22
                           Third Quarter               0.88             0.25
                           Second Quarter              1.13             0.09
                           First Quarter               0.16             0.06


         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, 2001, 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 AND RESULTS 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, 2001 and 2000.


                                       8
<PAGE>

RESULTS OF OPERATIONS

Fiscal Year Ended September 30, 2001 Compared to Fiscal Year Ended
September 30, 2000

         Included in revenues for Fiscal 2001 are $2,043,000 of net sales
revenues for Opus therapeutic drug monitoring assays versus $1,920,000 for
Fiscal 2000. The cost of operations for the Opus business for Fiscal 2001 was
$715,000 versus $620,000 for the prior year. While reagent kit unit sales
increased by 23.6% in Fiscal 2001 versus Fiscal 2000, aggregate net product
sales revenues were impacted due to the change effective October 1, 2000 to an
exclusive distributor for the United States. Sales prices are significantly
lower when selling through a distributor as opposed to selling directly to end
user customers.

         Net patient service revenue at Strax totaled $ 1,503,000 for the year
ended September 30, 2001 ("Fiscal 2001") versus $1,479,000 for the year ended
September 30, 2000 ("Fiscal 2000"). Cost of service operations totaled
$1,077,000 for Fiscal 2001 versus $965,000 for Fiscal 2000. The increases from
Fiscal 2000 to Fiscal 2001 reflect the efforts at Strax to add higher paying and
more costly 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 $1,822,000 for
Fiscal 2001 versus $2,628,000 for Fiscal 2000. This decrease reflects the
Company's continued efforts to reduce corporate overhead and also reflects one
time severance, directors fees and expense payments that were made to two former
executive officers aggregating approximately $564,000 that were paid in Fiscal
2000.

         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
write-down of $500,000 of goodwill, which represents the excess of cost over the
net assets acquired of the Strax Institute.

         Research and development expenses totaled $187,000 for Fiscal 2001
versus $16,000 for Fiscal 2000. This increase reflects the increasing
expenditures on the Company's projects under development for new therapeutic
drug monitoring tests.

         The operating loss from operations totaled $778,000 for Fiscal 2001
versus $833,000 for Fiscal 2000. This decrease reflects the shift in business
operations to the more profitable Opus therapeutic drug monitoring business. The
loss for Fiscal 2001 includes a write-down of goodwill of $500,000 reflecting
the impairment in value of the Strax Institute, for which there was no
comparative expense in Fiscal 2000. Excluding this charge, the operating loss
for Fiscal 2001 would have totaled $278,000 versus $833,000 for Fiscal 2000.

         Included in interest expense for Fiscal 2001 was $7,000 which
represented a non-cash charge for the discount on the Bridge Loans which were
issued during the year. Included in interest expense for Fiscal 2000 was
$227,000 which represented a non-cash charge for the discount on the Bridge
Loans which were issued and repaid during that year.

LIQUIDITY AND CAPITAL RESOURCES

         During February and March 2001, the Company completed a short term
bridge loan of $300,000 through the issuance of loan notes due on February 28,
2002 together with warrants, the proceeds of which were used principally for
working capital and purchase of raw materials previously owned by Oxis, the
previous manufacturer and owner of the Opus products.

         In March and April 2000, the Company completed an equity private
placement of $1,950,000 through the sale of 650,000 units at $3.00 per unit as
described in Note H-3 to the Financial Statements. The Company utilized the net
funds for the repayments mentioned below and the balance was used for working
capital purposes to continue developing the business of Opus by adding new
distributors in territories currently not covered by existing distributors and
for the


                                       9
<PAGE>


development of new diagnostic kits and the acquisition of additional
product lines. The Company has been attempting to sell Strax. The $300,000 short
term bridge loan notes are secured by the assets of Strax and are due for
repayment on February 28, 2002. The Company continues to pursue efforts to
identify additional funds through various funding options, including banking
facilities, government-funded grants and equity offerings in order to provide
capital for future expansion. The ability to secure equity financing has been
more difficult due to the Company's June 1999 delisting from the NASDAQ Small
Cap System. There can be no assurance that such funding initiatives will be
successful, and in light of the current low market price any equity placement
would result in substantial dilution to current stockholders. Consequently, the
Company's viability could be threatened. Accordingly, the auditors' report on
the 2001 financial statements contains an explanatory paragraph expressing
substantial doubt about our ability to continue as a going concern.

         Net cash used in operations for the year ended Fiscal 2001 amounted to
$440,000. There were no significant cash flows used in investing activities for
Fiscal 2001. Cash flows from financing activities in Fiscal 2001 decreased from
Fiscal 2000 due to the proceeds from the sale of Common Stock in 2000.

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 expects to adopt SFAS in the first quarter of
fiscal 2003. SFAS 142 requires the Company to complete a transitional goodwill
impairment test by six months from date of adoption. The Company is also
required to reassess the useful lives of other intangible assets within the
first interim quarter after adoption 0f SFAS 142.

         The Company's previous business combinations were accounted for using
the purchase method, the net carrying amount of goodwill related to those
combinations was $928,671 and other intangible assets was $1,296,081 at
September 30, 2001. Amortization expense for the year ended September 30, 2001
was $155,459. The Company is assessing but has not yet determined how the
adoption of SFAS 141 and SFAS 142 will effect its future financial position and
results of operations.

         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 expects to 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.


                                       10
<PAGE>


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, capital needs to fund any delays or extensions of
development programs, delays in new product development, delays in obtaining
regulatory clearance for new products, changes in governmental regulations, and
availability of capital on terms satisfactory to the Company. The Company
disclaims any obligation to update any forward-looking statements to reflect
events or circumstances after the date hereof.

ITEM 7.   FINANCIAL STATEMENTS

                                                                          PAGE
   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS                            NUMBER

   Independent Auditors' Report                                            F-2

   Consolidated Balance Sheets at September 30, 2001 and 2000              F-3

   Consolidated Statements of Operations for the years ended
   September 30, 2001 and 2000                                             F-4

   Consolidated Statements of Stockholders' Equity for years
   ended September 30, 2001 and 2000                                       F-5

   Consolidated Statements of Cash Flows for the years ended
   September 30, 2001 and 2000                                             F-6

   Notes to Consolidated Financial Statements                      F-7 to F-17


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

         NONE


                                       11
<PAGE>

                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16


DIRECTORS AND EXECUTIVE OFFICERS

         As of December 14, 2001, the directors and executive officers of the
Company were:

Name                           Age         Position
----                           ---         --------

George Aaron                   49          Chairman of the Board,
                                           President and Chief Executive Officer

Jonathan Joels                 45          Chief Financial Officer, Treasurer,
                                           Secretary and Director

Elliott Koppel                 57          VP Sales and Marketing

Shrikant Mehta                 57          Director

Sanjay Mody (1)(2)             42          Director

Robert Spira, MD (1)(2)        52          Director

Sol Triebwasser, Ph.D. (1)(2)  79          Director

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

(1)      Member of the Audit Committee
(2)      Member of the Compensation/Option Committee

         The principal occupations and brief summary of the background of each
Director and executive officer 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 a
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.


                                       12
<PAGE>

         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., which was subsequently acquired. Mr. Joels
was also a co-founder of a bioseparation/agtech company, CBD Technologies, Inc.
Mr. Joels' previous 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 held 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 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 has BS in Commerce from Rider
University.

         SHRIKANT  MEHTA.  Mr. Mehta was  appointed to the Board of Directors in
June 2000. He has been President and CEO of Combine International, Inc., a
wholesale manufacturer of fine jewelry since 1979. He has also served on the
Board of Directors of various private companies. Mr. Mehta has a BS in
Electrical Engineering from Case Institute of Technology and an MS in Electrical
Engineering from Wayne State University.

         SANJAY MODY.  Mr. Mody was appointed to the Board of Directors in
June 2000. Since May 2001, Mr. Mody has served as President, CEO and CFO of
Distinctive Devices, Inc. (OTCBB: DDEV) 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 is also a founder Director
of Realtime Access Inc., a telecommunication access equipment manufacturing
company.

          ROBERT  SPIRA,  M.D.,  F.A.C.P.  Dr. Spira was Vice  Chairman of the
Company from February 1994 to June 1999. Since October 1992, he has been the
Director of the Department of Gastroenterology at St. Michael's Medical Center
in Newark, New Jersey, and for more than five years prior thereto, he served as
Chief of Gastrointestinal Endoscopy at St. Michael's Medical Center. Dr. Spira
is a graduate of New York University Medical School and a past president of both
the New Jersey Society for Gastrointestinal Endoscopy and the New Jersey Society
of Gastroenterology.

         SOL  TRIEBWASSER,  PH.D. Until 1996, Dr. Triebwasser was Director of
Technical Journals and Professional Relations for the IBM Corporation in
Yorktown Heights, New York and currently a Research Staff member emeritus. 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 once in fiscal 2001. Each of the Directors
attended the meeting.

         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.


                                       13
<PAGE>

         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.

COMPENSATION OF DIRECTORS

         In October 1999, the non-employee directors were given the right to
receive (i) options for 50,000 shares of Common Stock or (ii) options for 25,000
shares of Common Stock and $5,000, which options would be exercisable for five
years and at the market price at time of grant. Pursuant to the 1993 Directors
Stock Option Plan for Non-Employee Directors (the "1993 Directors Plan"), which
was amended in December 1997, the number of shares available under the 1993
Directors Plan has been increased to 200,000 shares. In Fiscal 2001, payments of
$5,000 were made to all non-employee directors and no options were granted under
the 1993 Directors Plan.

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, 2001, 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, 2001.

<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       2001         160,000        -0-        -0-              -0-             -0-            -0-           -0-
President/CEO      2000 (1)     160,000        -0-        -0-              -0-          118,500           -0-           -0-

Jonathan Joels     2001         112,000        -0-        -0-              -0-             -0-            -0-           -0-
CFO                2000 (2)     112,000        -0-        -0-              -0-          100,000           -0-           -0-

</TABLE>

(1)      Mr. Aaron was appointed by the Board effective June 28, 1999 as
         President and CEO.
(2)      Mr. Joels was appointed by the Board effective June 28, 1999 as CFO,
         Treasurer and Secretary.


                                       14
<PAGE>


         As of September 30, 2001, the Company does not have any outstanding
employment agreements with any of our officers and/or employees. Since July 1,
1999 Mr. Aaron and Mr. Joels have been paid annual base salaries of $160,000 and
$112,000, respectively with an additional $1,000 per month and $750 per month,
respectively, for automobile expenses.

         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.

<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------------------------------
OPTION/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-

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

<CAPTION>
                                                         FISCAL YEAR END OPTION VALUE

                                            NUMBER OF SECURITIES              VALUE OF UNEXERCISED
                                            UNDERLYING UNEXERCISED            IN-THE-MONEY OPTIONS
                                           OPTIONS AT SEPT. 30, 2001            AT SEPT. 30, 2001
         NAME                              EXERCISABLE/UNEXERCISABLE             EXERCISABLE ($)

<S>                                               <C>                                 <C>
         George Aaron                             43,500/75,000                        $-0-

         Jonathan Joels                           25,000/75,000                        $-0-

</TABLE>


                                       15
<PAGE>

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         The members of the  Company's  Compensation/Option  Committee are
Robert Spira, M.D., F.A.C.P., and Sol Triebwasser, Ph.D. and Sanjay Mody, none
of who is an executive officer or employee of the Company or its subsidiaries.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth, as of September 30, 2001, 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>
George Aaron                           Chairman of the
                                       Board; Chief Executive            3,467,089(2)               18.6%
                                       Officer;
                                       President

Jonathan Joels                         Director; Chief
                                       Financial Officer;                3,350,739(3)               18.4%
                                       Treasurer;
                                       Secretary

Elliott Koppel                         VP Sales & Marketing                113,500(4)                 *

Shrikant Mehta                         Director                          4,300,000(5)                7.0%

Sanjay Mody                            Director                            500,000(6)                 *

Robert Spira, M.D.                     Director                             32,167(7)                 *

Sol Triebwasser, Ph.D.                 Director                             35,167(8)                 *

All executive officers and                                              11,798,662(9)               44.0%
Directors as a group (7 persons)

</TABLE>

------------------------------------
*        Less than one percent (1%).

Includes voting and investment power, except where otherwise noted. The number
of shares beneficially owned includes shares each beneficial owner and the group
has the right to acquire within 60 days of September 30, 2001 pursuant to stock
options, warrants and convertible securities.


                                       16
<PAGE>

1.       Includes voting and investment power, except where otherwise noted. The
         number of shares beneficially owned includes shares each beneficial
         owner and the group has the right to acquire within 60 days of
         September 30, 2001 pursuant to stock options, warrants and convertible
         securities.

2.       Includes (i) 7,050 shares in retirement accounts, (ii) 211,250 shares
         subject to warrants, (iii) 960,000 shares as trustee for his children
         (iv) 100 shares jointly owned with his wife and (v) 68,500 shares
         underlying options presently exercisable, and excludes 50,000 shares
         underlying options which are currently not exercisable.

3.       Includes (i) 960,000 shares as trustee for his children, (ii) 133,750
         shares subject to warrants, (iii) 17,500 shares subject to warrants
         owned by his wife for which he disclaims beneficial ownership, (iv)
         50,000 shares underlying options presently exercisable, and excludes
         50,000 shares underlying options which are currently not exercisable.

4.       Includes (i) 26,000 shares subject to warrants and (ii) 87,500 shares
         underlying options presently exercisable, and excludes 212,500 shares
         underlying options which are not currently exercisable.

5.       Includes (i) 2,600,000 shares subject to warrants and (ii) 500,000
         shares subject to options.

6.       Includes 500,000 shares subject to options.

7.       Includes 32,167 shares underlying options presently exercisable granted
         under the 1993 Directors Plan and excludes 8,333 shares underlying
         options granted under the 1993 Directors Plan, which are currently not
         exercisable.

8.       Includes 35,167 shares underlying options presently exercisable granted
         the 1993 Directors Plan and excludes 8,333 shares underlying options
         granted under the 1993 Directors Plan, which are currently not
         exercisable.

9.       Includes (i) 2,988,500 shares subject to warrants and (ii) 1,273,334
         shares subject to options.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         During February and March 2001, the Company completed a short-term
bridge loan aggregating $300,000 through 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 bear interest at a rate of 11% per annum and
are 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.

         In April 2000, Messrs. Aaron and Joels participated in the April
Placement purchasing 90,000 and 60,000 shares of the Company's Common Stock
respectively and received warrants on the same basis as the other participants.

         In March 2000, Messrs. Aaron, Joels and Koppel loaned $25,000, $25,000
and $20,000 respectively to the Company in order to facilitate shipment of sales
products from Oxis. These loans were repayable at the earlier of 90 days or upon
the closing of a securities placement, and bore interest at the rate of 12% per
annum, payable on maturity. In addition, for each $1.00 principal amount loaned,
the Company granted warrants to purchase an aggregate of 38,500 shares of Common
Stock exercisable for five years. These loans were repaid in April 2000.

         Separately, and in consideration of their participation in the April
2000 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


                                       17
<PAGE>


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 Private 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")).

2.4            Agreement and Plan of Merger among Opus, Aaron, Joels, Caprius
               and Merger Sub dated as of June 28, 1999. (incorporated by
               reference to Exhibit 2.2 to the July 1999 Form 8-K).

2.5            Asset Purchase Agreement among Opus, Oxis and Oxis International
               Inc. (solely for the purposes of Article 10 thereof) dated as of
               June 28, 1999 (incorporated by reference to Exhibit 2.4 to the
               July 1999 Form 8-K).

3.1            Certificate of Incorporation of Registrant. (incorporated by
               reference to Exhibit 3 filed with Registrant's Registration
               Statement on Form S-2, and amendments thereto, declared effective
               August 18, 1993) (File No. 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).


                                       18
<PAGE>

3.3            Amendment to Certificate of Incorporation of Registrant, filed
               August 31, 1995, (incorporated by reference to Exhibit 3.1 to
               Registrant's Form 8-K for an event of August 31, 1995 (the
               "August 1995 Form 8-K")).

3.4            Amendment to Certificate of Incorporation of Registrant, filed
               September 21, 1995 (incorporated by reference to Exhibit 3.1 to
               Registrant's Annual Report on Form 10-K for the nine months ended
               September 30, 1995 (the "ANMR 1995 Form 10-K")).

3.5            Certificate of Designation of Series A Preferred Stock of the
               Registrant (incorporated by reference to the Registrant's Form
               8-K, filed on March 31, 1996.

3.6            Certificate of Designation of Series B Convertible Redeemable
               Preferred Stock of Registrant (incorporated by reference to
               Exhibit 3.1 to Registrant's Form 8-K, filed September 2, 1997).

3.7            Certificate of 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 the 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
               the Registrant's Employee Bridge Financing in March 2000
               (incorporated by reference to Exhibit 4.7 to Registrant's July
               2000 Form SB-2).

4.7            Form of Series A Warrant from the 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).


                                       19
<PAGE>

4.9            Form of Warrant issued to each of Sandra Kessler and Nicholas
               Kessler, by and through his Guardian ad litem (collectively the
               "Claimants"), in connection with the Settlement Agreement among
               the Registrant, the Claimants and others in August 2000
               (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 dated
               March 31, 2001).

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

10.2           Registrant's 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).

10.3.1         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 the
               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 the 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 Nelson (incorporated by reference to
               Exhibit 10.4 to the Registrant's July 1999 Form 8-K).

10.4.2         Form of Secured Promissory Note, dated as of December 28, 1999,
               from Registrant to Jack 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.

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.

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

10.5.2         Form of Secured Promissory Note, dated as of December 28, 1999,
               from Registrant to Enrique 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 Enrique Levy as Agent (incorporated by reference
               to Exhibit 10.16.3 to Registrant's September 1999 Form 10-KSB).


                                       20
<PAGE>

10.5.4*        Letter of Non-disparagement dated January 14, 2000 between
               Registrant and Enrique Levy.

10.5.5*        Letter Agreement dated April 4, 2000 between Registrant and
               Enrique Levy relating to terms and conditions of payment as
               outlined in Severance and Consulting Agreement dated as of June
               28, 1999.

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 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 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 dated March 31, 2001).

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 dated March 31, 2001).

21*            List of Company's subsidiaries.



                                       21
<PAGE>

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


------------------------
*   Filed herewith

(b)      Reports on Form 8-K:
                  None


                                       22
<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 2002.

CAPRIUS, INC.

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

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. 14, 2002
-----------------------------     President and CEO
George Aaron


/s/Jonathan Joels                 Director, CFO, Treasurer        Jan. 14, 2002
-----------------------------     and Secretary
Jonathan Joels

/s/ Skrikant Mody
-----------------------------     Director                        Jan. 14, 2002
Shrikant Mehta

/s/Sanjay Mody                    Director                        Jan. 14, 2002
-----------------------------
Sanjay Mody

/s/ Robert Spira
-----------------------------     Director                        Jan. 14, 2002
Robert Spira, M.D., F.A.C.P.


s/Sol Triebwasser                 Director                        Jan. 14, 2002
----------------------------
Sol Triebwasser, Ph.D.


                                       23
<PAGE>


EXHIBIT INDEX

EXHIBIT

21       Subsidiaries of the Registrant

23.1     Consent of Independent Certified Public Accountants


                                       24
<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-17


                                      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, 2001 and 2000, 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, 2001 and 2000, 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.

         The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. However, the Company has incurred
substantial losses in recent years which raises substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to this matter are described in Note A. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

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

Boston, Massachusetts
November 15, 2001



                                      F-2
<PAGE>

                         CAPRIUS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                        September 30, 2001        September 30, 2000
                                                                       --------------------      --------------------
ASSETS

CURRENT ASSETS:
<S>                                                                     <C>                       <C>
     Cash and cash equivalents                                          $           89,776        $          349,998
     Accounts receivable, net of reserve for bad debts of $26,000 at
         September 30, 2001 and September 30, 2000                                 578,808                   503,922
     Inventories                                                                   396,430                   283,683
     Other current assets                                                            5,324                     8,661
                                                                       --------------------      --------------------
         Total current assets                                                    1,070,338                 1,146,264
                                                                       --------------------      --------------------
PROPERTY AND EQUIPMENT:

     Medical equipment                                                             341,140                   317,718
     Office furniture and equipment                                                220,290                   217,583
     Leasehold improvements                                                            950                       950
                                                                       --------------------      --------------------
                                                                                   562,380                   536,251
     Less:  accumulated depreciation                                               408,354                   275,299
                                                                       --------------------      --------------------
         Net property and equipment                                                154,026                   260,952
                                                                       --------------------      --------------------
OTHER ASSETS:

     Goodwill, net of accumulated amortization of $221,511 at
         September 30, 2001 and $139,071 at September 30, 2000                     928,671                 1,511,111
     Other intangibles, net of accumulated amortization of $164,292 at
         September 30, 2001 and $91,273 at September 30, 2000                    1,296,081                 1,369,100
     Other                                                                          22,794                    22,644
                                                                       --------------------      --------------------
         Total other assets                                                      2,247,546                 2,902,855

                                                                       --------------------      --------------------
TOTAL ASSETS                                                            $        3,471,910        $        4,310,071
                                                                       ====================      ====================
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

     Note payable, net of unamortized discount of $5,000                $          295,000        $                -
     Accounts payable                                                              291,460                   403,681
     Accrued expenses                                                              248,660                   460,152
     Accrued compensation                                                           72,760                    35,861
     Current maturities of long-term debt and capital lease obligations             46,636                   105,174
                                                                       --------------------      --------------------
         Total current liabilities                                                 954,516                 1,004,868

LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, net of current maturities             35,032                    84,070
                                                                       --------------------      --------------------

TOTAL LIABILITIES                                                                  989,548                 1,088,938
                                                                       --------------------      --------------------
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, 2001 and September 30, 2000.

         Liquidation preference $2,700,000                                       2,700,000                 2,700,000
     Common stock, $.01 par value
         Authorized - 50,000,000 shares
         Issued - 17,121,362 shares at September 30, 2001
         and 16,434,714 shares at September 30, 2000                               171,214                   164,347
     Additional paid-in capital                                                 67,154,517                67,081,568
     Accumulated deficit                                                       (67,541,119)              (66,722,532)
     Treasury stock (22,500 common shares, at cost)                                 (2,250)                   (2,250)
                                                                       --------------------      --------------------
         Total stockholders' equity                                              2,482,362                 3,221,133
                                                                       --------------------      --------------------
 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                             $        3,471,910        $        4,310,071
                                                                       ====================      ====================

</TABLE>

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

                                      F-3
<PAGE>

                         CAPRIUS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                        Years Ended September 30,
                                                              ----------------------------------------------
                                                                      2001                     2000
                                                              ---------------------    ---------------------

REVENUES:
<S>                                                            <C>                      <C>
      Net patient service revenues                             $         1,502,602      $         1,478,875
      Net product sales                                                  2,043,488                1,919,707
                                                              ---------------------    ---------------------
           Total revenues                                                3,546,090                3,398,582
                                                              ---------------------    ---------------------
OPERATING EXPENSES:

      Cost of operations                                                 1,077,230                  965,290
      Cost of product sales                                                714,734                  620,432
      Selling, general and administrative                                1,821,624                2,627,935
      Goodwill impairment                                                  500,000                        -
      Research and development                                             186,894                   15,563
      Provision for bad debt and collection costs                           23,523                    2,062
                                                              ---------------------    ---------------------
           Total operating expenses                                      4,324,005                4,231,282
                                                              ---------------------    ---------------------
           Operating loss                                                 (777,915)                (832,700)

Interest income                                                              4,436                   17,749
Interest expense                                                           (45,108)                (304,665)
                                                              ---------------------    ---------------------

      Net loss                                                 $          (818,587)     $        (1,119,616)
                                                              =====================    =====================
Net loss per basic and diluted common share                    $             (0.05)     $             (0.08)
                                                              =====================    =====================
Weighted average number of common shares outstanding,
      basic and diluted                                                 17,054,092               14,907,896
                                                              =====================    =====================

</TABLE>

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

                                      F-4
<PAGE>

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

<TABLE>
<CAPTION>
                                              Preferred Stock      Common Stock $0.01 Par Value
                                       ----------------------------------------------------------  Additional
                                             Number                      Number                     Paid-in
                                           of Shares      Amount       of Shares         Amount     Capital
                                       -----------------------------------------------------------------------

<S>                                           <C>      <C>              <C>            <C>        <C>
BALANCE, SEPTEMBER 30, 1999                   27,000   $ 2,700,000      13,548,017     $ 135,480  $ 64,778,855

Issuance of common stock and warrants
for proceeds from private placement                -             -       1,950,000        19,500     1,930,500

Issuance of common stock in
satisfaction of accrued liabilities                -             -         225,000         2,250        41,805

Issuance of common stock in connection
with class action                                  -             -         425,000         4,250        78,073

Issuance of common stock in connection
with KSH Investment Group agreement                -             -         236,697         2,367        11,835

Issuance of common stock in connection
with legal settlement                              -             -          50,000           500        13,500

Fair value of warrants issued in connection
with bridge financing                              -             -               -             -       227,000

Net loss                                           -             -               -             -             -
                                       -----------------------------------------------------------------------

BALANCE, SEPTEMBER 30, 2000                   27,000     2,700,000      16,434,714       164,347    67,081,568

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

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

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

Net loss                                           -             -               -             -             -
                                       -----------------------------------------------------------------------

BALANCE, SEPTEMBER 30, 2001                   27,000   $ 2,700,000      17,121,362     $ 171,214  $ 67,154,517
                                       =======================================================================

<CAPTION>
                                                          Treasury Stock $0.01 Par Value
                                                          ------------------------------    Total
                                              Accumulated        Number                 Stockholders'
                                                Deficit        of Shares       Amount       Equity
                                            ---------------------------------------------------------

<S>                                        <C>                  <C>         <C>        <C>
BALANCE, SEPTEMBER 30, 1999                 $ (65,602,916)       22,500      $ (2,250)  $ 2,009,169

Issuance of common stock and warrants
for proceeds from private placement                     -             -             -     1,950,000

Issuance of common stock in
satisfaction of accrued liabilities                     -             -             -        44,055

Issuance of common stock in connection
with class action                                       -             -             -        82,323

Issuance of common stock in connection
with KSH Investment Group agreement                     -             -             -        14,202

Issuance of common stock in connection
with legal settlement                                   -             -             -        14,000

Fair value of warrants issued in connection
with bridge financing                                   -             -             -       227,000

Net loss                                       (1,119,616)            -             -    (1,119,616)
                                           ---------------------------------------------------------

BALANCE, SEPTEMBER 30, 2000                   (66,722,532)       22,500        (2,250)    3,221,133

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

Exercise of warrants issued in connection
with Oxis Agreement                                     -             -             -        54,066

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

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

BALANCE, SEPTEMBER 30, 2001                 $ (67,541,119)       22,500      $ (2,250)  $ 2,482,362
                                           =========================================================
</TABLE>

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

                                      F-5
<PAGE>

                         CAPRIUS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                             Year Ended September 30,
                                                                            2001                 2000
                                                                      ------------------   ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:

<S>                                                                          <C>                <C>
     Net Loss                                                                $ (818,587)        $ (1,119,616)
     Adjustments to reconcile net loss to net cash used in
         operating activities:
         Amortization of discount on bridge financing                             7,000              227,000
         Depreciation and amortization                                          288,514              279,409
         Impairment of Goodwill                                                 500,000                    -
         Changes in operating assets and liabilities:
              Accounts receivable, net                                          (74,886)              33,588
              Inventories                                                      (112,747)             (72,700)
              Other current assets                                                3,187               19,732
              Accounts payable and accrued expenses                            (232,748)            (406,023)
                                                                      ------------------   ------------------
                  Net cash used in operating activities                        (440,267)          (1,038,610)
                                                                      ------------------   ------------------

CASH FLOWS FROM INVESTING ACTIVITIES:

     Proceeds from sale of rehabilitation business                                    -               50,000
     Purchase of equipment, furniture and leasehold improvements                (26,129)             (32,981)
                                                                      ------------------   ------------------
                  Net cash provided by(used in) investing activities            (26,129)              17,019
                                                                      ------------------   ------------------

CASH FLOWS FROM FINANCING ACTIVITIES:

     Proceeds from issuance of common stock                                      13,750            1,950,000
     Proceeds from issuance of debt and warrants                                300,000              670,000
     Repayment of debt and capital lease obligations                           (107,576)          (1,364,479)
                                                                      ------------------   ------------------
                  Net cash provided by financing activities                     206,174            1,255,521
                                                                      ------------------   ------------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                           (260,222)             233,930

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                    349,998              116,068
                                                                      ------------------   ------------------

CASH AND CASH EQUIVALENTS, END OF YEAR                                         $ 89,776            $ 349,998
                                                                      ==================   ==================

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

     Cash paid for interest during the period                                  $ 45,108             $ 77,665
                                                                      ==================   ==================
</TABLE>

     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.

     During the year ended September 30, 2000, $154,580 of accrued expenses were
     converted to common stock of the Company.


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

                                      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 Company continues to
own and operate a comprehensive imaging center located in Lauderhill, Florida.

         The Opus Merger was consummated coincident with the closing of an Asset
Purchase Agreement (the "Oxis Purchase Agreement") between Opus and Oxis Health
Products Inc., a Delaware corporation ("Oxis"). The purchase price consisted of
$500,000 in cash, a secured promissory note (the "Oxis Note") in the principal
amount of $586,389 (as adjusted) which was repaid on December 8, 1999, and a
warrant granting Oxis the right to acquire 617,898 shares of the Company's
Common Stock.

         Opus produces and sells 14 diagnostic assays, calibrators and controls
for therapeutic drug monitoring which are used on the Abbott TDx(R) and
TDxFLx(R) instruments. Pursuant to the Oxis Purchase Agreement, Opus acquired
the assets relating to the Oxis reagent patent and trademark and distribution
network for the therapeutic drug monitoring assay business (the "TDM Business").
Additionally, pursuant to a Services Agreement, Oxis was manufacturing the
products of the TDM Business of Opus through December 31, 2000. After December
31, 2000, the Company transferred its production to third party manufacturers.

         In March 1999, the Company transferred its interest in its
rehabilitation center to an unrelated limited liability company in exchange for
$900,000, of which $850,000 was paid as of September 30, 1999, with the balance
paid in fiscal year 2000. In addition, the acquiring group assumed certain
liabilities totaling approximately $400,000. The cash received of $900,000 was
used in part to pay a balance of approximately $372,000 to the former owner of
the center, which was the remaining amount due from the Company's acquisition of
its interest in the center.

         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 accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. The Company has incurred
substantial losses in recent years which raises substantial doubt about its
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty. The
Company had available cash and cash equivalents of $89,776 at September 30,
2001. The Company intends to utilize the funds for working capital purposes to
continue developing the business of Opus by adding new distributors in
territories currently not covered by existing distributors and for the
development of new diagnostic kits. The Company continues to pursue efforts to
identify additional funds through various funding options, including banking
facilities and equity offerings in order to provide capital for future
expansion. The ability to secure equity financing has been more difficult due to
the Company's June 1999 delisting from the NASDAQ Small Cap System. There can be
no assurance that such funding initiatives will be successful and any equity
placement could result in substantial dilution to current stockholders.

(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, 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.


                                      F-7
<PAGE>

         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.

         Asset Classification                             Useful Lives
         --------------------                             ------------

         Medical equipment                                5-8 years
         Office furniture and equipment                   3-5 years
         Leasehold improvements                           Term of lease

         [6]  Goodwill and other intangibles

         At September 30, 2001 and 2000, 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 $500,000 of
goodwill, which represents the excess of cost over the net assets acquired of
the Strax Institute.

         [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.


                                      F-8
<PAGE>

         [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]     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
intangible assets recognized at that date, regardless of when those assets were
initially recognized. The Company expects to adopt SFAS 142 in the first quarter
of fiscal 2003. SFAS 142 requires the Company to complete a transitional
goodwill impairment test by six months from the date of adoption. The Company is
also required to reassess the useful lives of other intangible assets within the
first interim quarter after adoption of SFAS 142.

         The Company's previous business combinations were accounted for using
the purchase method, the net carrying amount of goodwill related to those
combinations was $928,671 and other intangible assets was $1,296,081 at
September 30, 2001. Amortization expense for the year ended September 30, 2001
was $155,459. The Company is assessing but has not yet determined how the
adoption of SFAS 141 and SFAS 142 will effect its future financial position and
results of operations.

         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 expects to 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.

         [11]     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 2000.


                                      F-9
<PAGE>

         The Company currently buys all of its medical diagnostic products from
two suppliers. A change in suppliers could cause a delay in manufacturing and a
possible loss of sales, which would adversely affect operating results.

(NOTE C) - Inventory

         Inventories consist of the following:

                                       SEPTEMBER 30,    SEPTEMBER 30,
                                            2001             2000
                                            ----             ----


            Raw Materials             $    166,340      $          -
            Finished goods                 230,090           283,683
                                      ------------      ------------
                                      $    396,430      $    283,683
                                      ============      ============


(NOTE D) - 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. All
principal and interest amounts are due February 2002. 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 are collateralized by
substantially all assets of the Company.

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

         Capital lease obligations at September 30, 2001 and 2000 consisted of
the following:

                                              SEPTEMBER 30,      SEPTEMBER 30,
                                                  2001               2000
                                                  ----               ----

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 2001 to
October 2004.                                 $     81,668       $    189,244

Less:  current maturities                           46,636            105,174
                                              ------------       ------------
                                              $     35,032       $     84,070
                                              ============       ============


         Future lease payments under capital leases are as follows:

                                      Fiscal
                                       Year
                                      ------
                                       2002         57,379
                                       2003         24,790
                                       2004          8,124
                                                    ------
              Total minimum lease payments          90,293
              Less amount representing interest      8,625
                                                    ------
              Present value of capital lease
              obligations                          $81,668
                                                   =======




                                      F-10
<PAGE>

         Included in property and equipment is leased equipment having a net
book value at September 30, 2001 and 2000 of approximately $101,000 and
$191,000, respectively.

(NOTE F) - Income Taxes

         At September 30, 2001 and 2000, the Company had a deferred tax asset
totaling approximately $18,042,000 and $17,972,000, respectively due primarily
to net operating loss carryovers. A valuation allowance was established in 2001
and 2000 for the full amount of this asset due to uncertainty as to the
realization of the benefit.

         At September 30, 2001 the Company had available net operating loss
carryforwards for tax purposes, expiring through 2021 of approximately
$53,066,000. 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
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,
                                                                            2001                      2000
                                                                            ----                      ----
                 <S>                                                       <C>                      <C>
                 Loss from continuing operations:                          $    (818,587)           $  (1,119,616)
                                                                           ==============           =============
                 Expected tax (benefit) at 34%                             $ (   278,320)           $ (   380,669)
                 Adjustment due to

                   increase in valuation reserve                                 278,320                  380,669
                                                                           -------------            -------------
                 Tax benefit (expense) per
                   financial statements                                    $        -               $        -
                                                                           =============            =============
</TABLE>


(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 $208,000 and
$183,000 for the years ended September 30, 2001 and 2000, respectively.

         Future minimum rental commitments under operating leases are as
follows:

         Fiscal Year                 Amount
         ----------------------------------
             2002                  203,701
             2003                  207,412
             2004                  122,874
             2005                   51,988
                                 ---------
            Total                $ 585,975
                                 =========


                                      F-11
<PAGE>

         [2]  Legal proceedings

         On January 7, 1998, the Company and Jack Nelson, the Company's former
Chairman and Chief Executive Officer were served with a complaint in connection
with a purported class action brought against them by Dorothy L. Lumsden in the
United States District Court of the District of Massachusetts. The complaint
contained claims for alleged violations of Sections 10(b) and 20(a) under the
Securities Exchange Act and for common law fraud. Ms. Lumsden purported to bring
her action "on behalf of herself and all other persons who purchased or
otherwise acquired the common stock of the Company during the period August 10,
1994 through and including December 12, 1997". On February 2, 1998, the Company
and Mr. Nelson were served with a second class action complaint naming them as
defendants in connection with another action brought in the United States
District Court for the District of Massachusetts. This action was brought by
Robert Curry and the complaint alleged the same purported class and contained
similar allegations and claims as the class action complaint discussed above. On
April 24, 1998, the District Court consolidated the two class actions claims
into one for pre-trial purposes. On January 7, 1999, the Company announced that
it had reached a preliminary settlement in the shareholder class action in
Federal Court in Boston. Under the terms of the settlement, Caprius made a cash
payment of $150,000 and agreed to issue 325,000 shares of common stock to
Plaintiffs. Caprius' insurance carrier contributed $100,000 of the cash payment.
In addition, the settlement also stipulated that in the event Caprius sold all
or part of its business within 12 months an additional payment of $75,000 and
issuance of 100,000 additional shares would be made by Caprius to plaintiffs.
Upon the sale of its Aurora Technology in April 1999, the additional payment was
made. For the year ended September 30, 1999, the Company reported $207,323 as
total settlement costs, which included $82,323 for the market value of the
shares to be issued. During the year ended September 30, 2000, the Company
issued 425,000 shares of common stock to the plaintiffs, thereby completing the
settlement.

         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 and 2000, the Company had a liability
of $10,000 and $20,000, respectively, included in accrued expenses in the
accompanying consolidated balance sheets relating to this matter.

         In Nicholas Kessler by and through his Guardian ad Litem, Saundra J.
Kessler and Saundra J. Kessler Plaintiffs vs. Caprius, Inc. formerly known as
Advanced Mammography Systems, Inc., Jack Nelson, an individual, Defendants, Case
No. SA CV 99-193 DOC (EE)(U.S.D.C. Central District of California), the
Plaintiffs, a mother and her minor son, presented eight claims for relief,
including claims for violation of the Securities Act of 1933, violation for
certain rules governing the sale of securities, for fraud, for negligent
misrepresentation, for negligence, for rescission on behalf of both Plaintiffs
and for breach of written contract. As of August 1, 2000, the Plaintiffs and
Defendants entered into a settlement agreement and mutual release of all claims
whereby each party would grant the other a full release with respect to all
present and future claims related to this matter. On September 11, 2000, the
court approved of the Settlement Agreement and the Company issued 25,000 shares
of its common stock and granted warrants exercisable for three years at $0.25
per share to purchase 60,000 shares of its common stock to each of Sandra
Kessler and Nicholas Kessler (through his Guardian ad Litem) in exchange for
existing warrants, and the mutual releases became effective. For the year ended
September 30, 2000, the Company recorded $14,000 for settlement costs,
representing the market value of the shares issued. The market value of the
warrants issued was not recorded as it was immaterial to the financial
statements.


                                      F-12
<PAGE>

(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
              --------

         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, with a weighted
average exercise price of $0.28. These warrants expire at various dates through
March 2005. Warrants to purchase 68,750 shares at $0.20 per share were exercised
in October 2000.

         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. These warrants are to purchase shares of common stock at prices
ranging from $0.50 to $0.75, with a weighted average exercise price of $0.58.
These warrants expire in March 2005.

         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 not recorded as it was
immaterial to the financial statements. 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.



                                      F-13
<PAGE>

         [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, 2001 and 2000, respectively.

         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.

         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, 1999                                      146,636        $0.84 - $25.60           $4.40

Granted in 2000                                                  810,000        $0.15 - $ 0.19            0.17
Cancelled in 2000                                                (41,136)       $0.84 - $25.60            9.87
                                                                 -------        --------------            ----

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
                                                                 =======        ===============          =====


         Stock option transactions not covered under the option plans in the fiscal years 2000 and 2001 are as
follows:

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

Balance, September 30, 1999                                       77,032        $0.84 - $20.10           $7.83

Granted in 2000                                                1,050,000        $0.10 - $ 1.00            0.83
Cancelled in 2000                                                (31,000)       $0.84 - $ 5.00            4.20
                                                                --------        --------------           -----

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                                    1,053,861        $0.10 - $20.10           $0.89
                                                               =========        ==============           =====


                                      F-14
<PAGE>


<CAPTION>
                                                                                   Range of           Weighted
                                                                                  Price Per        Average Price
Options exercisable at September 30, 2001                    Number of Shares       Share            Per Share
-----------------------------------------                    ----------------     ---------        -------------

<S>                                                             <C>             <C>                     <C>
Plan shares                                                       497,350       $0.15 -$ 5.00           $0.71
Non-plan shares                                                 1,021,011       $0.10 -$20.10           $0.92

</TABLE>

The following table summarizes information about stock options outstanding at
September 30, 2001:

                                                Outstanding Options
                                ------------------------------------------------
                                                     Weighted-
                                     Number           Average         Weighted-
             Range of            Outstanding at      Remaining        Average
             Exercise             September 30,     Contractual       Exercise
              Prices                  2001         Life (years)        Price
        ------------------------------------------------------------------------

          $0.10-$0.25                860,000            7.5           $0.17
            0.75-1.00              1,011,000            3.5            0.87
               2.93                   70,000            5.3            2.93
               5.00                   10,500            3.9            5.00
           15.80-20.10                 3,861            3.0            7.37
        ------------------------------------------------------------------------

          $0.10-$20.10             1,955,361            5.3           $0.69
        ========================================================================

                                                Exercisable Options
                                ------------------------------------------------
                                                     Weighted-
                                     Number           Average         Weighted-
             Range of            Outstanding at      Remaining        Average
             Exercise             September 30,     Contractual       Exercise
              Prices                  2001         Life (years)        Price
        ------------------------------------------------------------------------

           $0.10-$0.25               423,000            7.1           $0.16
            0.75-1.00              1,011,000            3.5            0.87
               2.93                   70,000            5.3            2.93
               5.00                   10,500            3.9            5.00
           15.80-20.10                 3,861            3.0           17.37
        ------------------------------------------------------------------------

          $0.10-$20.10             1,518,361            4.6           $0.84
        ========================================================================


         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 2000 or 2001. 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:



                                      F-15
<PAGE>

                                                     Year Ended September 30,
                                                    2001                   2000
                                                    ----                   ----
Net loss:
    As reported                              $  (818,587)         $  (1,119,616)
    Pro forma                                $  (826,666)         $  (1,127,695)

Net loss per share:

    As reported                              $     (0.05)         $       (0.08)
    Pro forma                                $     (0.05)         $       (0.08)


         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 2000: 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 $0.18
per share for the year ended September 30, 2000. The Company did not grant
options during fiscal year 2001.

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

         The Company operations are classified into two business segments:
imaging and rehabilitation services and the therapeutic drug monitoring assay
business (the "TDM Business").

         The following table shows sales, operating loss from continuing
operations and other financial information by industry segment:

<TABLE>
<CAPTION>
                                                        Imaging and
                                                      Rehabilitation            TDM
                                                         Services            Business         Consolidated
                                                         --------            --------         ------------
<S>                                                 <C>                  <C>                <C>
September 30, 2001
Revenues                                            $        1,502,602   $      2,043,488   $       3,546,090
                                                    ==================   ================   =================
Net loss                                            $          627,452   $        191,135   $         818,587
                                                    ==================   ================   =================
Capital Expenditures                                $                -   $         26,129   $          26,129
                                                    ==================   ================   =================
Depreciation and Amortization                       $          154,921   $        133,593   $         288,514
                                                    ==================   ================   =================
Identifiable assets at September 30, 2001           $          404,989   $      3,066,921   $       3,471,910
                                                    ==================   ================   =================
September 30, 2000
Revenues                                            $        1,478,875   $      1,919,707   $       3,398,582
                                                    ==================   ================   =================
Net loss                                            $          244,935   $        874,681   $       1,119,616
                                                    ==================   ================   =================
Capital Expenditures                                $           12,343   $         20,638   $          32,981
                                                    ==================   ================   =================
Depreciation and Amortization                       $          155,867   $        123,542   $         279,409
                                                    ==================   ================   =================
Identifiable assets at September 30, 2000           $        1,077,002   $      3,233,069   $       4,310,071
                                                    ==================   ================   =================
</TABLE>


                                      F-16
<PAGE>


         Geographic Information
         ----------------------

         The following table shows revenues by geographic location for the years
ended September 30, 2001 and 2000. Revenues are attributed to countries based on
location of customer.

                                                Years Ended September 30,

                                                 2001             2000
                                                 ----             ----

                           United States    $ 1,987,834        $2,254,030
                           Europe             1,380,866         1,008,498
                           Japan                177,390           136,054
                                            -----------      ------------
                           Total            $ 3,546,090        $3,398,582
                                            ===========        ==========


                                      F-17