As disclosed by the Company’s FORM 10-KSB For The Fiscal Year Ended September 30, 2004, on May 3, 2004, in a decision separate from the decision in the Federal Derivative Action, the Court granted the defendants' motion and dismissed the Class Action. The federal securities claims asserted by the plaintiffs were
dismissed with prejudice, and having dismissed all federal law claims, the Court
declined to exercise jurisdiction over the remaining state law claims and
dismissed those claims without prejudice. On May 14, 2004, the plaintiffs filed
a motion for reconsideration, which defendants opposed and subsequently this
motion for reargument was denied. The plaintiff did not file a notice of appeal
during the statutory time period.

In February 2003, the Court entered the Order consolidating the Securities Class Action and the Derivative Action Civ. 02-3042 (JCL) for all purposes.

The original Complaint alleges, among other things, violations of the federal securities laws, including Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, against defendants Caprius, Inc., and its top two officers (collectively the "Individual Defendants"). The Individual Defendants first devised a fraudulent plan and scheme by which they sought to obtain control of Caprius. In May 1999, the Individuals Defendants proposed a merger transaction to Caprius' Board of Directors (the "Board") and executive officers. On June 28, 1999, Caprius consummated a merger through which the Individual Defendants acquired 45.6% ownership of Caprius -- equivalent to 6,178,978 million shares of Caprius' common stock. The Complaint alleges that once they gained control of Caprius, the Individual Defendants breached their fiduciary duties to Caprius and its shareholders by disseminating false and misleading statements concerning Caprius' business, operations, and financial results for fiscal 1999, 2000, 2001, and portions of fiscal 2002.

The Complaint alleges that the Individual Defendants: (1) made misrepresentations to the Board and its officers in connection with Caprius' June 1999 merger with Opus Diagnostics, Inc. ("Opus"); (2) misrepresented to the Board and its officers that the Individual Defendants: (i) were in a financial position to and would in fact consummate -- pre-merger -- the asset purchase called for in the merger agreement; (ii) would invest $1 million of their personal capital into the merged entity; (3) exploited Caprius' resources by using Caprius' personnel, office space, and assets to run their private business, the Portman Group ("Portman"); (4) diverted Caprius' assets to their personal use by: (i) using Caprius' funds to consummate -- post-merger -- the asset purchase; (ii) causing Caprius to enter into a series of transactions designed to dilute public ownership in Caprius securities; (5) gouged Caprius' resources by spending substantial time pursuing unrelated, personal business interests while receiving a salary from Caprius; (6) deceived Caprius' Board and its officers into consummating the merger, resulting in business losses and consequential damages; and (7) breached their fiduciary duty to Caprius and its shareholders by: (i) subordinating the rights and interests of Caprius' shareholders to their own; (ii) depleting the assets of Caprius, increasing Caprius' debt, thereby diluting the value of Caprius securities; (iii) causing Caprius to borrow money to cover debt that the Individual Defendants unnecessarily created; and (iv) borrowing money on preferential terms to the lenders.

Because of the Individual Defendants' fraudulent practices, Caprius' stock traded at artificially inflated prices during the Class Period. Further, due to these practices, Caprius' stock price steadily declined to its current price of $0.09 per share, since reaching a high price of $1.12 per share in February 2000. As alleged in the Complaint, the intentional or reckless misconduct of the Individual Defendants has severely damaged Caprius and its shareholders.