UNITED
STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, DC.
20549
FORM 10-Q
(Mark One)
|
[X] |
Quarterly Report Pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934 for the
Quarterly Period ended January 31, 2020 |
or
|
[ ] |
Transition Report Pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934 for the
Transition Period from _______________ to
____________________ |
Commission File Number 000-13176
NON-INVASIVE MONITORING SYSTEMS,
INC.
(Exact name of registrant as specified in its charter)
|
Florida |
|
59-2007840 |
|
(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. employer
identification no.)
|
4400 Biscayne Blvd., Suite 180, Miami, Florida
33137
(Address of principal executive offices) (Zip code)
Registrant’s telephone number, including area code: (305)
575-4207
Securities
registered pursuant to section 12(b) of the Act:
|
Title
of Each Class |
|
Trading
Symbol |
|
Name
of Each Exchange on Which Registered |
|
Common
Stock, $.01 par value per share |
|
NIMU |
|
OTC
-Pink |
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 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 [ ]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
or a smaller reporting company, or an emerging growth company. See
the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
|
Large accelerated filer |
[ ] |
|
Accelerated filer |
[ ] |
| |
|
|
|
|
| Non-accelerated filer |
[X] |
|
Smaller reporting company |
[X] |
| |
|
|
|
|
| Emerging growth company |
[ ] |
|
|
|
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13 of the Exchange Act.
[ ]
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes [X] No
[ ]
154,810,655 shares of the Company’s common stock, par value $0.01
per share, were outstanding as of March 16, 2020.
NON-INVASIVE MONITORING SYSTEMS, INC.
TABLE OF CONTENTS FOR FORM 10-Q
NON-INVASIVE MONITORING SYSTEMS,
INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
|
|
|
January
31, 2020 |
|
|
July
31, 2019 |
|
|
|
|
(Unaudited) |
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
| Current
assets |
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
250 |
|
|
$ |
353 |
|
|
Prepaid
expenses, deposits, and other current assets |
|
|
7 |
|
|
|
5 |
|
|
Current
assets – discontinued operations |
|
|
- |
|
|
|
3 |
|
|
Total
current assets |
|
|
257 |
|
|
|
361 |
|
| |
|
|
|
|
|
|
|
|
|
Total
assets |
|
$ |
257 |
|
|
$ |
361 |
|
| |
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS’ EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Current
liabilities |
|
|
|
|
|
|
|
|
|
Accounts
payable |
|
$ |
191 |
|
|
$ |
198 |
|
|
Accrued expenses |
|
|
32 |
|
|
|
27 |
|
|
Current
liabilities – discontinued operations |
|
|
51 |
|
|
|
55 |
|
|
Total
current liabilities |
|
|
274 |
|
|
|
280 |
|
| |
|
|
|
|
|
|
|
|
|
Total
liabilities |
|
|
274 |
|
|
|
280 |
|
| |
|
|
|
|
|
|
|
|
| Commitments
and contingencies (Note 9) |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Shareholders’
equity (deficit) |
|
|
|
|
|
|
|
|
|
Series
B Preferred Stock, par value $1.00 per share; 100 shares
authorized, issued and outstanding; liquidation preference
$10 |
|
|
- |
|
|
|
- |
|
|
Common
Stock, par value $0.01 per share; 400,000,000 shares authorized;
154,810,655 shares issued and outstanding |
|
|
1,548 |
|
|
|
1,548 |
|
|
Additional
paid in capital |
|
|
26,574 |
|
|
|
26,574 |
|
|
Accumulated
deficit |
|
|
(28,139
|
) |
|
|
(28,041 |
) |
| |
|
|
|
|
|
|
|
|
|
Total
shareholders’ equity (deficit) |
|
|
(17) |
|
|
|
81 |
|
|
Total
liabilities and shareholders’ equity (deficit) |
|
$ |
257 |
|
|
$ |
361 |
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
NON-INVASIVE MONITORING SYSTEMS,
INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS -
Unaudited
(In thousands, except per share data)
| |
|
Three months ended
January 31,
|
|
|
Six months ended
January 31,
|
|
| |
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
| Operating costs and
expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Selling, general and
administrative |
|
$ |
47 |
|
|
$ |
66 |
|
|
|
99 |
|
|
|
201 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total operating
costs and expenses |
|
|
47 |
|
|
|
66 |
|
|
|
99 |
|
|
|
201 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating loss |
|
|
(47 |
) |
|
|
(66 |
) |
|
|
(99 |
) |
|
|
(201 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loss on extinguishment of debt |
|
|
- |
|
|
|
(1,066 |
) |
|
|
- |
|
|
|
(1,066 |
) |
| Interest
expense, net |
|
|
- |
|
|
|
(34 |
) |
|
|
- |
|
|
|
(93 |
) |
| Total other
expense |
|
|
- |
|
|
|
(1,100 |
) |
|
|
- |
|
|
|
(1,159 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loss from continuing operations |
|
|
(47 |
) |
|
|
(1,166 |
) |
|
|
(99 |
) |
|
|
(1,360 |
) |
| Gain (loss)
from discontinued operations |
|
|
4 |
|
|
|
(12 |
) |
|
|
1 |
|
|
|
(25 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(43 |
) |
|
$ |
(1,178 |
) |
|
|
(98 |
) |
|
|
(1,385 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted
average number of common shares outstanding - Basic and
diluted |
|
|
154,811 |
|
|
|
107,263 |
|
|
|
154,811 |
|
|
|
93,290 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic and diluted net loss per common
share from continuing operations |
|
$ |
(0.00 |
) |
|
$ |
(0.01 |
) |
|
|
(0.00 |
) |
|
|
(0.01 |
) |
| Basic and
diluted net loss per common share from discontinued operations |
|
$ |
(0.00 |
) |
|
$ |
(0.00 |
) |
|
|
(0.00 |
) |
|
|
(0.00 |
) |
| Basic and
diluted loss per common share |
|
$ |
(0.00 |
) |
|
$ |
(0.01 |
) |
|
|
(0.00 |
) |
|
|
(0.01 |
) |
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
NON-INVASIVE MONITORING SYSTEMS,
INC.
CONDENSED CONSOLIDATED STATEMENTS OF INTERIM CHANGES IN
SHAREHOLDERS’ EQUITY - Unaudited
For the three and six months ended January 31, 2020
(Dollars in thousands, except share amounts)
|
|
|
Preferred
Stock
Series B |
|
|
Common
Stock |
|
|
Additional
Paid in |
|
|
Accumulated |
|
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at July 31, 2019 |
|
|
100 |
|
|
$ |
- |
|
|
|
154,810,655 |
|
|
$ |
1,548 |
|
|
$ |
26,574 |
|
|
$ |
(28,041 |
) |
|
$ |
81 |
|
|
Net
loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(55 |
) |
|
|
(55 |
) |
|
Balance
at October 31, 2019 |
|
|
100 |
|
|
|
- |
|
|
|
154,810,655 |
|
|
|
1,548 |
|
|
|
26,574 |
|
|
|
(28,096 |
) |
|
|
26 |
|
|
Net
loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(43 |
) |
|
|
(43 |
) |
|
Balance
at January 31, 2020 |
|
|
100 |
|
|
$ |
- |
|
|
|
154,810,655 |
|
|
$ |
1,548 |
|
|
$ |
26,574 |
|
|
$ |
(28,139 |
) |
|
$ |
(17 |
) |
For the three and six months ended January 31, 2019
|
|
|
Preferred
Stock |
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
|
|
|
|
Series
B |
|
|
Series
C |
|
|
Series
D |
|
|
Common
Stock |
|
|
Paid-in- |
|
|
Accumulated |
|
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at July 31, 2018 |
|
|
100 |
|
|
$ |
– |
|
|
|
62,048 |
|
|
$ |
62 |
|
|
|
2,782 |
|
|
$ |
3 |
|
|
|
79,007,423 |
|
|
$ |
790 |
|
|
$ |
21,930 |
|
|
$ |
(26,463 |
) |
|
$ |
(3,678 |
) |
|
Net
loss |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(207 |
) |
|
|
(207 |
) |
|
Balance
at October 31, 2018 |
|
|
100 |
|
|
$ |
- |
|
|
|
62,048 |
|
|
$ |
62 |
|
|
|
2,782 |
|
|
$ |
3 |
|
|
|
79,007,423 |
|
|
$ |
790 |
|
|
$ |
21,930 |
|
|
$ |
(26,670 |
) |
|
$ |
(3,885 |
) |
|
Issuance
of common stock for cash |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
8,571,428 |
|
|
|
86 |
|
|
|
514 |
|
|
|
- |
|
|
|
600 |
|
|
Issuance
of common stock in exchange for extinguishment of debt, accrued
interest and accounts payable |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
53,321,804 |
|
|
|
533 |
|
|
|
4,266 |
|
|
|
- |
|
|
|
4,799 |
|
|
Net
loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,178 |
) |
|
|
(1,178 |
) |
|
Balance
at January 31, 2019 |
|
|
100 |
|
|
|
- |
|
|
|
62,048 |
|
|
$ |
62 |
|
|
|
2,782 |
|
|
$ |
3 |
|
|
|
140,900,655 |
|
|
$ |
1,409 |
|
|
$ |
26,710 |
|
|
$ |
(27,848 |
) |
|
$ |
336 |
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
NON-INVASIVE MONITORING SYSTEMS,
INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS -
Unaudited
(Dollars in thousands)
Six months ended January 31, 2020 and 2019
| |
|
2020 |
|
|
2019 |
|
| Operating
activities |
|
|
|
|
|
|
|
|
| Net
Loss |
|
$ |
(98 |
) |
|
$ |
(1,385 |
) |
| Loss on
extinguishment of debt |
|
|
- |
|
|
|
1,066 |
|
| Add back: (gain)
loss attributable to discontinued operations |
|
|
(1 |
) |
|
|
25 |
|
| Adjustments to
reconcile net loss to net cash used in operating activities |
|
|
|
|
|
|
|
|
| Changes in
operating assets and liabilities |
|
|
|
|
|
|
|
|
| Prepaid expenses,
deposits and other current assets |
|
|
(2 |
) |
|
|
(6 |
) |
| Accounts
payable |
|
|
(7 |
) |
|
|
113 |
|
|
Accrued expenses |
|
|
5 |
|
|
|
33 |
|
| Net cash used in
continuing operations |
|
|
(103 |
) |
|
|
(154 |
) |
| Net
cash used in discontinued operations |
|
|
- |
|
|
|
(25 |
) |
|
Net cash used in operating activities |
|
|
(103 |
) |
|
|
(179 |
) |
| |
|
|
|
|
|
|
|
|
| Financing
activities |
|
|
|
|
|
|
|
|
| Proceeds from issuance of common
stock |
|
|
- |
|
|
|
600 |
|
| Proceeds from
note payable – related party |
|
|
- |
|
|
|
100 |
|
| Net
cash provided by financing activities |
|
|
- |
|
|
|
700 |
|
| |
|
|
|
|
|
|
|
|
| Net decrease in
cash from continuing operations |
|
|
(103 |
) |
|
|
521 |
|
| Cash, beginning of period |
|
|
353 |
|
|
|
90 |
|
| Cash, end of period |
|
$ |
250 |
|
|
$ |
611 |
|
| |
|
|
|
|
|
|
|
|
| Supplemental
disclosure of non-cash financing activity |
|
|
|
|
|
|
|
|
| Accounts
payable and accrued expenses extinguished for issuance of common
stock |
|
$ |
- |
|
|
$ |
1,508 |
|
| Notes payable
extinguished for issuance of common stock |
|
$ |
- |
|
|
$ |
2,225 |
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
NON-INVASIVE MONITORING SYSTEMS,
INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
January 31, 2020
The following (a) condensed consolidated balance sheet at July 31,
2019 was derived from audited annual financial statements, but does
not contain all of the footnote disclosures from the annual
financial statements, and (b) the unaudited condensed consolidated
interim financial statements included herein have been prepared by
Non-Invasive Monitoring Systems, Inc. (together with its
consolidated subsidiaries, the “Company” or “NIMS”) in accordance
with accounting principles generally accepted in the United States
(“GAAP”) for interim financial information and the instructions to
the quarterly report on Form 10-Q and Rule 8-03 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by GAAP for complete financial statements. These
statements reflect adjustments, all of which are of a normal,
recurring nature, and which are, in the opinion of management,
necessary to present fairly the Company’s financial position as of
January 31, 2020, and results of operations and cash flows for the
interim periods ended January 31, 2020 and 2019. The results of
operations for the three and six months ended January 31, 2020, are
not necessarily indicative of the results for a full year. Certain
information and footnote disclosure normally included in financial
statements prepared in accordance with GAAP have been condensed or
omitted. The Company’s accounting policies continue unchanged from
July 31, 2019. These financial statements should be read in
conjunction with the consolidated financial statements and notes
thereto included in the Company’s annual report on Form 10-K for
the year ended July 31, 2019.
1. ORGANIZATION AND BUSINESS
Organization. Non-Invasive Monitoring Systems, Inc.,
a Florida corporation, began business as a medical diagnostic
monitoring company to develop computer-aided continuous monitoring
devices to detect abnormal respiratory and cardiac events using
sensors on the human body’s surface. It has ceased to operate in
this market. The Company has developed and marketed its
Exer-Rest® line of acceleration therapeutic platforms
based upon unique, patented whole body periodic acceleration
(“WBPA”) technology of which the Company maintains patents. The
Company currently does not have any operational inventory.
Business. The Company developed a third generation of
Exer-Rest acceleration therapeutic platforms (designated the
Exer-Rest AT3800 and the Exer-Rest AT4700). The Company is
currently a shell company (as defined in Rule 12b-2 of the Exchange
Act).
Discontinued Operations. On May 3, 2019 the Company
exchanged inventory for forgiveness of accrued unpaid rent. The
Company has no inventory, no immediate plans to replenish inventory
and has no current plans to develop or market new products.
Accordingly, the Company determined that the assets and liabilities
met the discontinued operations criteria in Accounting Standards
Codification 205-20-45 and were classified as discontinued
operations at January 31, 2020 and July 31, 2019 and for the three
and six months ended January 31, 2020 and 2019.
Going Concern. The Company’s consolidated financial
statements have been prepared and presented on a basis assuming it
will continue as a going concern. As reflected in the accompanying
consolidated financial statements, the Company had net losses from
continuing operations of approximately $99,000 and $1,360,000 for the six months ended
January 31, 2020 and 2019, respectively, and has experienced
continuous cash outflows from operating activities. The Company
also has an accumulated deficit of approximately $28,139,000 as of
January 31, 2020. The Company had approximately $250,000 of cash at
January 31, 2020 and working capital deficit of approximately
($17,000). These matters raise substantial doubt about the
Company’s ability to continue as a going concern.
The Company is seeking potential mergers, acquisitions and
strategic collaborations. There is no assurance that the Company
will be successful in this regard, and, if not successful, that it
will be able to continue its business activities. The accompanying
consolidated financial statements do not include any adjustments
that might be necessary from the outcome of this uncertainty.
Equity Exchange Agreement. On December 3, 2018, the
Company entered into an Equity Exchange Agreement with IRA
Financial Trust Company, a South Dakota trust corporation, IRA
Financial Group LLC, a Florida limited liability company
(collectively “IRA Financial”), and their respective equity
holders. The Company, IRA Financial and the equity holders
subsequently amended the Exchange Agreement on three occasions to
extend the outside date for consummation of the Exchange, with the
last such extension expiring on July 3, 2019.
On August 4, 2019, IRAFG delivered to the Company notice of
termination of the Exchange Agreement pursuant to Section
8.01(b)(i) of that agreement due to the failure of the Exchange to
have closed on or prior to the Outside Date. No termination fees,
penalties or other amounts are payable by the Company in respect of
such termination.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation. The condensed consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries, Non-Invasive Monitoring Systems of Florida, Inc.,
which has no current operations, and NIMS of Canada, Inc., a
Canadian corporation, which has no current operations. All
inter-company accounts and transactions have been eliminated in
consolidation.
Discontinued Operations. For the three and six months
ended January 31, 2020 and 2019, results from operations for our
Exer-Rest Business are classified as discontinued operations. The
carve out of the discontinued operations (i) were prepared in
accordance with the SEC’s carve out rules under Staff Accounting
Bulletin (“SAB”) Topic 1B1 and (ii) are derived from identifying
and carving out the specific assets, liabilities, operating
expenses and interest expense associated with the Exer-Rest
Business’s operations.
Discontinued operations expense allocations, consisting of
warehouse rent and other inventory related expenses incurred by us,
are directly attributed to discontinued operations (see Note
3).
Reclassifications. Certain amounts in the condensed
consolidated balance sheet as of July 31, 2019 and condensed
consolidated cash flows statement for the six months ended January
31, 2019 have been reclassified to conform to the current
presentation.
Use of Estimates. The preparation of financial
statements in conformity with accounting principles generally
accepted in the United States of America (“GAAP”) requires
management to make estimates and assumptions. Actual results could
differ materially from these estimates.
Cash and Cash Equivalents. The Company considers all
highly liquid short-term investments purchased with an original
maturity date of three months or less to be cash equivalents. The
Company had approximately $250,000 and $353,000, on deposit in bank
operating accounts at January 31, 2020 and July 31, 2019,
respectively.
Income Taxes. The Company provides for income taxes
using an asset and liability based approach. Deferred income tax
assets and liabilities are recorded to reflect the tax consequences
in future years of temporary differences between the carrying
amounts of assets and liabilities for financial statement and
income tax purposes. The deferred tax asset for loss carryforwards
and other potential future tax benefits has been fully offset by a
valuation allowance since it is uncertain whether any future
benefit will be realized. The utilization of the loss carryforward
is limited to future taxable earnings of the Company and may be
subject to severe limitations if the Company undergoes an ownership
change pursuant to the Internal Revenue Code Section 382.
The Company files its tax returns as prescribed by the laws of the
jurisdictions in which it operates. Tax years ranging from 2016 to
2019 remain open to examination by various taxing jurisdictions as
the statute of limitations has not expired. It is the Company’s
policy to include income tax interest and penalty expense in its
tax provision.
Fair Value of Financial Instruments. Fair value
estimates discussed herein are based upon certain market
assumptions and pertinent information available to management as of
January 31, 2020 and July 31, 2019. The respective carrying value
of certain on-balance-sheet financial instruments such as cash,
prepaid expenses, deposits, other current assets, accounts payable
and accrued expenses approximate fair values because they are short
term in nature or they bear current market interest rates.
Loss Contingencies. We recognize contingent losses
that are both probable and estimable. In this context, we define
probability as circumstances under which events are likely to
occur. In regard to legal costs, we record such costs as
incurred.
Recent Accounting Pronouncements. The Company
considers the applicability and impact of all Accounting Standard
Updates (“ASU’s”). ASU’s not discussed below were assessed and
determined to be either not applicable or are expected to have
minimal impact on our consolidated balance sheets or consolidated
comprehensive statement of operations.
In August 2016, the FASB issued ASU No. 2016-15, Statement of
Cash Flows (Topic 230). This standard addresses the
classification of eight specific cash flow issues with the
objective of reducing the existing diversity in practice. ASU
2016-15 will be effective for fiscal years beginning after December
15, 2017, including interim periods within those fiscal years, with
early adoption permitted. The Company implemented this ASU on
August 1, 2018. The adoption of this update did not have an impact
on the Company’s consolidated financial statements.
In February 2016, the Financial Accounting Standards Board (“FASB”)
issued Accounting Standards Update (“ASU”) No. 2016-02,
Leases (Topic 842). ASU 2016-02 impacts any entity that
enters into a lease with some specified scope exceptions. This new
standard establishes a right-of-use (ROU) model that requires a
lessee to record a ROU asset and a lease liability on the balance
sheet for all leases with terms longer than 12 months. Leases will
be classified as either finance or operating, with classification
affecting the pattern of expense recognition in the statement of
operations. The guidance updates and supersedes Topic 840,
Leases. For public entities, ASU 2016-02 is effective for
fiscal years, and interim periods with those years, beginning after
December 15, 2018, and early adoption was permitted. A modified
retrospective transition approach is required for leases existing
at, or entered into after, the beginning of the earliest
comparative period presented in the financial statements, with
certain practical expedients available. The Company currently has
no long-term leases. However, in the event that the Company should
enter any long-term leases it would then evaluate the effect that
the new guidance would have on its consolidated financial
statements and related disclosures
3. DISCONTINUED OPERATIONS
On May 3, 2019 the Company exchanged its inventory for forgiveness
of accrued unpaid rent. Concurrent with the exchange management
with the appropriate level of authority determined to discontinue
the operations of the product segment. The Company wrote off
accounts payable and liabilities of approximately $4,000 primarily
as a result of discontinued operations and other factors.
The detail of the consolidated balance sheets, the consolidated
statement of operations and consolidated cash flows for the
discontinued operations is as stated below:
| |
|
As of
January 31, 2020
|
|
|
As of
July 31, 2019
|
|
| |
|
|
|
|
|
|
| Current assets –
discontinued operations |
|
|
|
|
|
|
|
|
|
Prepaid expenses |
|
$ |
- |
|
|
$ |
3 |
|
| Total
current assets – discontinued operations |
|
|
- |
|
|
|
3 |
|
|
Total assets – discontinued operations |
|
$ |
- |
|
|
$ |
3 |
|
| |
|
|
|
|
|
|
|
|
| Current liabilities
– discontinued operations |
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
51 |
|
|
$ |
55 |
|
| Total
current liabilities – discontinued operations |
|
|
51 |
|
|
|
55 |
|
|
Total liabilities – discontinued operations |
|
$ |
51 |
|
|
$ |
55 |
|
| |
|
For the three
months ended
January 31, 2020 |
|
|
For the three
months ended
January 31, 2019 |
|
|
For
the six
months ended
January 31, 2020 |
|
|
For
the six
months ended
January 31, 2019 |
|
| Selling, general and
administrative expenses |
|
$ |
- |
|
|
$ |
(12 |
) |
|
$ |
(3 |
) |
|
$ |
(25 |
) |
| Gain on write
off of accounts payable |
|
|
4 |
|
|
|
- |
|
|
|
4 |
|
|
|
- |
|
| Gain
(loss) from discontinued operations |
|
$ |
4 |
|
|
$ |
(12 |
) |
|
$ |
1 |
|
|
$ |
(25 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic and
diluted income (loss) per common share |
|
$ |
(0.00 |
) |
|
$ |
(0.00 |
) |
|
$ |
(0.00 |
) |
|
$ |
(0.00 |
) |
| |
|
For
the three
months ended
January 31, 2020
|
|
|
For
the three
months ended
January 31, 2019
|
|
|
For
the six
months ended
January 31, 2020
|
|
|
For
the six
months ended
January 31, 2019
|
|
| Cash used in
operations for discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gain (loss) from
discontinued operations |
|
$ |
4 |
|
|
$ |
(12 |
) |
|
|
1 |
|
|
$ |
(25 |
) |
| Gain on write off of accounts
payable |
|
|
(4 |
) |
|
|
- |
|
|
|
(4 |
) |
|
|
- |
|
| Prepaid
expenses |
|
|
- |
|
|
|
- |
|
|
|
3 |
|
|
|
- |
|
| Cash used in
discontinued operations |
|
$ |
- |
|
|
$ |
(12 |
) |
|
|
- |
|
|
$ |
(25 |
) |
4.
STOCK-BASED COMPENSATION
The
Company measures the cost of employee, officer and director
services received in exchange for an award of equity instruments
based on the grant-date fair value of the award. The fair value of
the Company’s stock option awards is expensed over the vesting life
of the underlying stock options using the graded vesting method,
with each tranche of vesting options valued separately. The Company
did not record stock-based compensation for the three and six
months ended January 31, 2020 and 2019.
In
November 2010, the Company’s Board and Compensation Committee
approved the Non-Invasive Monitoring Systems, Inc. 2011 Stock
Incentive Plan (the “2011 Plan”). Awards granted under the 2011
Plan may consist of incentive stock options, stock appreciation
rights (SAR), restricted stock grants, restricted stock units (RSU)
performance shares, performance units or cash awards. Subject to
adjustment in certain circumstances, the 2011 Plan authorizes up to
4,000,000 shares of the Company’s common stock for issuance
pursuant to the terms of the 2011 Plan. The 2011 Plan was approved
by our shareholders in March 2012 and no awards have been granted
under the 2011 Plan as of January 31, 2020.
As of
January 31, 2020, there were no outstanding stock options and there
were no unrecognized costs related to outstanding stock options.
The Company did not grant any stock options during the three and
six months ended January 31, 2020 or 2019.
5.
NOTES PAYABLE
The
Company entered into various notes payable with related parties
from 2010 to 2018 with an aggregate principal total of $2,175,000
and with an unrelated third party for $50,000 for total principal
amount of $2,225,000. The interest rate was 11% and the maturity
date was July 31, 2020. The Company could prepay these notes in
advance of the maturity date without premium or penalty.
On
December 21, 2018, the Company issued 50,584,413 shares of Common
Stock in exchange for the extinguishment of debt and related
accrued interest totaling approximately $3,541,000. The Company
incurred interest expense related to the Credit Facility and notes
payable of $0 for the three and six months ended January 31, 2020,
and $33,715 and $93,000 for the three and six months ended January
31, 2019.
The
Company maintains a Note and Security Agreement with Frost Gamma
Investments Trust, a trust controlled by Dr. Phillip Frost, which
beneficially owns in excess of 10% of the Company’s common stock
(“Frost Gamma”), and Hsu Gamma Investments, LP, an entity
controlled by the Company’s Chairman and Interim CEO (“Hsu Gamma”
and together with Frost Gamma, the “Lenders”), pursuant to which
the Lenders have provided a revolving credit line (the “Credit
Facility”) in the aggregate principal amount of up to $1.0 million,
secured by all of the Company’s personal property. The interest
rate payable on amounts outstanding under the Credit Facility is
11% per annum and increases to 16% per annum after the Credit
Facility Maturity Date or after an event of default. The Company is
permitted to borrow and reborrow from time to time under the Credit
Facility until July 31, 2020 (the “Credit Facility Maturity Date”).
The balance of the principal due under the Credit Facility was $0
at January 31, 2020 and July 31, 2019.
6.
SHAREHOLDERS’ EQUITY
The
Company has three classes of Preferred Stock. Holders of Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock are entitled to vote with the holders of common stock as a
single class on all matters.
Series
B Preferred Stock is not redeemable by the Company and has a
liquidation value of $100 per share, plus declared and unpaid
dividends, if any. Dividends are non-cumulative, and are at the
rate of $10 per share, if declared.
Series
C Preferred Stock is redeemable by the Company at a price of $0.10
per share upon 30 days prior written notice. This series has a
liquidation value of $1.00 per share plus declared and unpaid
dividends, if any. Dividends are non-cumulative, and are at the
rate of $0.10 per share, if declared. Each share of Series C
Preferred Stock is convertible into 25 shares of the Company’s
common stock upon payment of a conversion premium of $4.20 per
share of common stock. The conversion rate and the conversion
premium are subject to adjustments in the event of stock splits,
stock dividends, reverse stock splits and certain other events. In
February 2019, all outstanding shares of Series C Preferred Stock
were redeemed by the Company following 30 days written notice. The
redemption amount for the 62,048 Series C Preferred Stock was
approximately $25,000 at a rate of $0.40 per share of which
approximately $15,000 was paid and approximately $10,000 is
included in accrued expenses at January 31, 2020. The redeemed
Series C Preferred Stock were then cancelled following the
redemption.
Series
D Preferred Stock is not redeemable by the Company. This series has
a liquidation value of $1,500 per share, plus declared and unpaid
dividends, if any. Each share of Series D Preferred Stock is
convertible into 5,000 shares of the Company’s common stock. The
conversion rate is subject to adjustments in the event of stock
splits, stock dividends, reverse stock splits and certain other
events. In February 2019, all holders of the 2,782 outstanding
shares of Series D Preferred Stock converted their shares to common
stock. As a result, the Company issued 13,910,000 common
shares.
No
preferred stock dividends were declared for the three and six
months ended January 31, 2020 and 2019.
The
Company did not issue any shares of the Company’s common stock
during the three and six months ended January 31, 2020 and
2019.
7.
BASIC AND DILUTED LOSS PER SHARE
Basic
net loss per common share is computed by dividing net loss
attributable to common shareholders by the weighted average number
of common shares outstanding during the period. Diluted net loss
per common share is computed giving effect to all dilutive
potential common shares that were outstanding during the period.
Diluted potential common shares consist of incremental shares
issuable upon exercise of stock options and warrants and conversion
of preferred stock. In computing diluted net loss per share for the
three and six months ended January 31, 2020 and 2019, no dilution
adjustment has been made to the weighted average outstanding common
shares because the assumed exercise of outstanding options and
warrants and the conversion of preferred stock would be
anti-dilutive. There are no options or warrants outstanding as of
January 31, 2020 and 2019.
Potential
common shares not included in calculating diluted net loss per
share are as follows:
| |
|
January 31, 2020 |
|
|
January 31, 2019 |
|
| Series C Preferred
Stock |
|
|
- |
|
|
|
1,551,200 |
|
| Series D
Preferred Stock |
|
|
- |
|
|
|
13,910,000 |
|
|
Total |
|
|
- |
|
|
|
15,461,200 |
|
8.
RELATED PARTY TRANSACTIONS
Dr.
Hsiao, Dr. Frost and directors Steven Rubin and Rao Uppaluri are
each stockholders, current or former officers and/or directors or
former directors of TransEnterix, Inc. (formerly SafeStitch
Medical, Inc.) (“TransEnterix”), a publicly-traded medical device
company. The Company’s Chief Financial Officer also served as the
Chief Financial Officer of TransEnterix until October 2, 2013. The
Company’s Chief Financial Officer continued as an employee of
TransEnterix until March 3, 2014, during which he supervised the
Miami based accounting staff of TransEnterix under a cost sharing
arrangement whereby the total salaries of the Miami based
accounting staff was shared by the Company and TransEnterix. The
Chief Financial Officer continues to serve as the Chief Financial
Officer of Cocrystal Pharma, Inc., a clinical stage biotechnology
company, and in which Steve Rubin and Jane Hsiao, serve on the
Board. Since December 2009, the Company’s Chief Legal Officer has
served under a similar cost sharing arrangement as the Chief Legal
Officer of TransEnterix.
The
Company signed a five year lease for office space in Miami, Florida
with a company controlled by Dr. Phillip Frost, who is the
beneficial owner of more than 10% of the Company’s common stock.
The rental payments under the Miami office lease, which commenced
January 1, 2008 and expired on December 31, 2012, were
approximately $1,250 per month and then continued on a
month-to-month basis. In February 2016 the rent was reduced to $0
per month. For the three and six months ended January 31, 2020 and
2019, the Company did not record any rent expense related to the
Miami lease. At January 31, 2020 and July 31, 2019, approximately
$0 and $0 in rent was payable, respectively.
The
Company is under common control with multiple entities and the
existence of that control could result in operating results or
financial position of each individual entity significantly
different from those that would have been obtained if the entities
were autonomous. One of those related parties, OPKO Health, Inc.
(“OPKO”) and the Company are under common control and OPKO has a
one percent ownership interest in the Company that OPKO has
accounted for as an equity method investment due to the ability to
significantly influence the Company.
9.
COMMITMENTS AND CONTINGENCIES
Leases.
The
Company was under an operating lease agreement for our corporate
office space that expired in 2012. The lease currently continues on
a month to month basis at no cost.
We
housed our inventory in approximately 4,000 square feet of
warehouse space in Pembroke Park, Florida. The lease commenced
September 15, 2014 and originally expired on September 30, 2015 and
we exercised our option to renew the lease and extended the
expiration to September 15, 2017. Following the expiration, we have
remained on a month-to-month term. On May 3, 2019 the Company
exchanged inventory for forgiveness of $15,000 of accrued unpaid
rent. The Company had previously written off the value of this
inventory resulting in a gain on the forgiveness of approximately
$15,000. The Company no longer leases this Pembroke Park warehouse
following the sale of inventory.
COVID-19.
Current
economic conditions with COVID-19 have been, and continue to be,
volatile and continued instability in these market conditions may
limit our ability to access the capital necessary to fund and grow
our business and to replace, in a timely manner, maturing
liabilities or to successfully examine strategic alternatives.
Quarantines would make our ability to look for strategic
alternatives more difficult and prospects of borrowing or equity
raises would be more challenging. Additionally, the sales of equity
or convertible debt securities may result in dilution to our
stockholders.
Product
Development and Supply Agreement.
In
September 2007, the Company entered into a Product Development and
Supply Agreement under Singapore law (the “Agreement”) with Sing
Lin Technologies Co. Ltd., a company based in Taichung, Taiwan
(“Sing Lin”). Pursuant to the Agreement, the Company consigned to
Sing Lin the development and design of the next generation
Exer-Rest and related devices.
The Company notified Sing Lin in June 2010 that it was terminating
the Agreement effective September 2010, and Sing Lin in July 2010
demanded that the Company place orders sufficient to fulfill the
three year minimum purchase obligations in the Agreement. Sing Lin
has not followed up on its July 2010 demand as of this filing and
the Company does not anticipate that they will in the future. The
Company has opinion from counsel that an adversarial process by
Sing Lin is time-barred under the Limitation Act under Singapore
law where the agreement was bound.
|
ITEM
2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
Cautionary
Statement Regarding Forward-looking
Statements.
This
Interim Report on Form 10-Q contains, in addition to historical
information, certain forward-looking statements regarding
Non-Invasive Monitoring Systems, Inc. (the “Company” or “NIMS,”
also referred to as “us”, “we” or “our”). These forward-looking
statements represent our expectations or beliefs concerning the
Company’s operations, performance, financial condition, business
strategies, and other information and that involve substantial
risks and uncertainties. For this purpose, any statements contained
in this Report that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the
generality of the foregoing, words such as “may,” “will,” “expect,”
“believe,” “anticipate,” “intend,” “could,” “estimate,” or
“continue” or the negative or other variations thereof or
comparable terminology are intended to identify forward-looking
statements. The Company’s actual results of operations, some of
which are beyond the Company’s control, could differ materially
from the activities and results implied by the forward-looking
statements. Factors that could cause or contribute to such
differences include, but are not limited to the Company’s: history
of operating losses and accumulated deficit; need for additional
financing; dependence on management;; risks related to proprietary
rights; other factors described herein as well as the factors
contained in “Item 1A - Risk Factors” of our Annual Report on Form
10-K for the year ended July 31, 2019. We do not undertake any
obligation to update forward-looking statements, except as required
by applicable law. These forward-looking statements are only
predictions and reflect our views as of the date they are made with
respect to future events and financial performance.
Overview
We
previously were engaged in the development, manufacture and
marketing of non-invasive, whole body periodic acceleration
(“WBPA”) therapeutic platforms, which are motorized platforms that
move a subject repetitively head to foot. The Company discontinued
operations in May 2019, accordingly, certain assets, liabilities
and expenses are classified as discontinued operations.
Critical Accounting Policies and Estimates
Our
discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements,
which have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these
consolidated financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities,
expenses, and related disclosure of contingent assets and
liabilities. On an on-going basis, we evaluate our estimates. We
base our estimates on historical experience and on various other
assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that
are not readily apparent from other sources. A more detailed
discussion on the application of these and other accounting
policies can be found in Note 2 in the Notes to the Consolidated
Financial Statements set forth in Item 8 of this Annual Report on
Form 10-K. While we believe that the factors we evaluate provide us
with a meaningful basis for establishing and applying sound
accounting policies, we cannot guarantee that the results will
always be accurate. Since the determination of these estimates
requires the exercise of judgment, actual results could differ from
such estimates.
Results of Operations
In
January 2009 our Exer-Rest line of therapeutic platforms was
registered by the FDA in the United States as Class I (Exempt)
Medical Devices. We began our sales activity with marketing and
promotional pricing beginning in February 2009. We have
discontinued those operations in May 2019. The Company is assessing
potential mergers, acquisitions and strategic
collaborations.
Three and six months ended January 31, 2020 compared to three and
six months ended January 31, 2019
General
and administrative costs and expenses from continuing
operations. General and administrative (“G&A”) costs and
expenses from continuing operations were $47,000 and $99,000 for
the three and six months ended January 31, 2020, respectively, as
compared to $66,000 and $201,000 for the three and six months ended
January 31, 2019, respectively. The $19,000 and $102,000 decrease
for the three and six months was primarily due to legal and
professional services related to the Company’s exploration of a
strategic target in 2019.
Selling,
general and administrative costs and expenses from discontinued
operations. Selling, general and administrative (“SG&A”)
costs and expenses from discontinued operations were $0 and $3,000
for the three and six months ended January 31 2020, as compared to
$12,000 and $25,000 for the three and six months ended January 31,
2019. The $12,000 and $22,000 decrease were primarily due to the
winding down of operations.
Total
operating costs and expenses from continuing operations. Total
operating costs and expenses were $47,000 and $99,000 for the three
and six months ended January 31, 2020, respectively, as compared to
$66,000 and $201,000 for the three and six months ended January 31
2019, respectively. The $19,000 and $102,000 decrease is explained
above in G&A.
Interest
expense. Net interest expense was $0 for the three and six
months ended January 31, 2020, respectively, and net interest
expense was $34,000 and $93,000 for the three and six months ended
January 31, 2019. The $34,000 and $93,000 decrease was related to
the Debt Exchange further described in Note 5 to the accompanying
unaudited condensed consolidated financial statements that
satisfied outstanding principal.
Gain
(loss) from discontinuing operations. Gain from discontinuing
operations was $4,000 and $1,000 for the three and six months ended
January 31, 2020 as compared to a loss of ($12,000) and ($25,000)
for the three and six months ended January 31, 2019. The $16,000
and $26,000 decrease were primarily due to the write off of
approximately $4,000 in accounts payable and other
liabilities.
Liquidity and Capital Resources
The Company’s operations have been primarily financed through
private sales of its equity securities and advances under Credit
Facility and Promissory Notes. At January 31, 2020, we had
approximately $250,000 of cash and working capital deficit of
approximately ($17,000).
We
expect to incur losses from operations for the foreseeable future.
It is likely that we will not be able to generate significant
additional revenue and we will be required to obtain additional
external financing through public or private equity offerings, debt
financings or collaborative agreements to continue operations. No
assurance can be given that such additional financing will be
available on acceptable terms or at all.
Current
economic conditions with COVID-19 have been, and continue to be,
volatile and continued instability in these market conditions may
limit our ability to access the capital necessary to fund and grow
our business and to replace, in a timely manner, maturing
liabilities or to successfully examine strategic alternatives.
Additionally, the sales of equity or convertible debt securities
may result in dilution to our stockholders.
Net
cash used in operating activities was $103,000 and $179,000 for six
months ended January 31, 2020 and 2019, respectively. This $76,000
decrease was primarily due to reduced legal expense related to the
Company’s exploration of strategic alternatives during the six
months ended January 31, 2019 as compared to the six months ended
January 31, 2020.
|
ITEM
3. |
QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK. |
Not
required for smaller reporting companies as defined in Rule 12b-2
of the Exchange Act.
|
ITEM
4. |
CONTROLS AND
PROCEDURES. |
Evaluation
of Disclosure Controls and Procedures
We
carried out an evaluation, under the supervision and with the
participation of our management, including our Chief Executive
Officer and Chief Financial Officer, of the effectiveness of our
disclosure controls and procedures, as defined in Rules 13a-15(e)
and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange
Act”) as of the end of the period covered by this report. Based on
that evaluation, our Chief Executive Officer and Chief Financial
Officer have concluded that our disclosure controls and procedures
as of January 31, 2020 were effective to ensure that information
required to be disclosed by us in reports that we file or submit
under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the Securities and
Exchange Commission’s rules and forms.
Changes
in Internal Control over Financial Reporting
There
were no material changes in our internal controls over financial
reporting or in other factors that could materially affect, or are
reasonably likely to affect, our internal controls over financial
reporting during the quarter ended January 31, 2020. Because of its
inherent limitations, internal control over financial reporting may
not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
PART II. OTHER
INFORMATION
Item
1. Legal Proceedings
None.
Item
1A. Risk Factors
None.
Item
2. Unregistered Sales of Equity Securities
and Use of Proceeds
None.
Item
3. Defaults upon Senior
Securities
None.
Item
4. Mine Safety Disclosures
None.
Item
5. Other Information
None.
Item
6. Exhibits
NON-INVASIVE
MONITORING SYSTEMS, INC
January
31, 2020
SIGNATURES
In
accordance with the requirements of the Exchange Act the Registrant
has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
|
Dated:
March 16, 2020 |
By: |
/s/
Jane H. Hsiao |
| |
|
Jane
H. Hsiao, Interim Chief Executive Officer |
| |
|
|
| Dated:
March 16, 2020 |
By: |
/s/
James J. Martin |
| |
|
James
J. Martin, Chief Financial Officer |
EXHIBIT
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