0001493152-17-002546.txt : 20170317 0001493152-17-002546.hdr.sgml : 20170317 20170317161615 ACCESSION NUMBER: 0001493152-17-002546 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 53 CONFORMED PERIOD OF REPORT: 20170131 FILED AS OF DATE: 20170317 DATE AS OF CHANGE: 20170317 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NON INVASIVE MONITORING SYSTEMS INC /FL/ CENTRAL INDEX KEY: 0000720762 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 592007840 STATE OF INCORPORATION: FL FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-13176 FILM NUMBER: 17698172 BUSINESS ADDRESS: STREET 1: 1840 W AVE CITY: MIAMI BEACH STATE: FL ZIP: 33139 BUSINESS PHONE: 3055343694 MAIL ADDRESS: STREET 1: 1840 WEST AVE CITY: MIAMI BEACH STATE: FL ZIP: 33140 FORMER COMPANY: FORMER CONFORMED NAME: BIRDFINDER CORP DATE OF NAME CHANGE: 19891116 10-Q 1 form10-q.htm

 

 

 

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, 2017

 

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) 575-4200

 

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. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [  ] Accelerated filer [  ] Non-accelerated filer [  ] Smaller reporting company [X]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

 

79,007,423 shares of the Company’s common stock, par value $0.01 per share, were outstanding as of March 7, 2017.

 

 

 

   
   

 

NON-INVASIVE MONITORING SYSTEMS, INC.

 

TABLE OF CONTENTS FOR FORM 10-Q

 

PART I. FINANCIAL INFORMATION    
     
ITEM 1. FINANCIAL STATEMENTS   3
       
  Condensed Consolidated Balance Sheets as of January 31, 2017, (unaudited) and July 31, 2016   3
       
  Condensed Consolidated Comprehensive Statements of Operations for the three and six months ended January 31, 2017 and 2016 (unaudited)   4
       
  Condensed Consolidated Statement of changes in Shareholders’ Deficit for the six months ended January 31, 2017 (unaudited)   5
       
  Condensed Consolidated Statements of Cash Flows for the six months ended January 31, 2017 and 2016 (unaudited)   6
       
  Notes to Condensed Consolidated Financial Statements (unaudited)   7
       
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   17
       
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK   21
       
ITEM 4. CONTROLS AND PROCEDURES   21
       
PART II. OTHER INFORMATION    
       
ITEM 1. LEGAL PROCEEDINGS   22
       
ITEM 1A. RISK FACTORS   22
       
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS   22
       
ITEM 3. DEFAULTS UPON SENIOR SECURITIES   22
       
ITEM 4.

MINE SAFETY DISCLOSURES

  22
       
ITEM 5. OTHER INFORMATION   22
       
ITEM 6. EXHIBITS   22
       
  SIGNATURES   23

 

2

 

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

NON-INVASIVE MONITORING SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

 

   January 31, 2017   July 31, 2016 
   (Unaudited)     
ASSETS          
Current assets          
Cash   $35   $87 
Accounts receivable - trade   6    - 
Prepaid expenses, deposits, and other current assets   24    56 
Total current assets    65    143 
           
Inventories, net   -    99 
           
Total assets  $65   $242 
           
LIABILITIES AND SHAREHOLDERS’ DEFICIT          
           
Current liabilities           
Accounts payable and accrued expenses   $1,391   $1,258 
Customer deposits    4    4 
Notes payable – Related Party    1,675    1,675 
Notes payable – Other    50    50 
Total current liabilities   3,120    2,987 
           
Total liabilities   $3,120   $2,987 
           
Shareholders’ deficit           

Series B Preferred Stock, par value $1.00 per share;

100 shares authorized, issued and outstanding; liquidation preference $10

        

Series C Convertible Preferred Stock, par value $1.00 per share;

62,048 shares authorized, issued and outstanding; liquidation preference $62

   62    62 
Series D Convertible Preferred Stock, par value $1.00 per share; 5,500 shares authorized; 2,782 shares issued and outstanding; liquidation preference $4,173   3    3 
Common Stock, par value $0.01 per share; 400,000,000 shares authorized; 79,007,423 shares issued and outstanding.   790    790 
Additional paid in capital   21,930    21,930 
Accumulated deficit    (25,792)   (25,482)
Accumulated other comprehensive loss    (48)   (48)
Total shareholders’ deficit   (3,055)   (2,745)
Total liabilities and shareholders’ deficit  $65   $242 

 

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

 

3

 

 

NON-INVASIVE MONITORING SYSTEMS, INC.

CONDENSED CONSOLIDATED COMPREHENSIVE STATEMENTS OF OPERATIONS - Unaudited

(In thousands, except per share amounts)

 

   Three months ended January 31,   Six months ended January 31, 
   2017   2016   2017   2016 
Revenues                    
Product sales, net  $5   $8   $6   $16 
                     
Total revenues   5    8    6    16 
                     
Operating costs and expenses                    
                     
Cost of sales   99    3    99    6 
Selling, general and administrative   41    74    121    134 
                     
Total operating costs and expenses   140    77    220    140 
                     
Operating loss   (135)   (69)   (214)   (124)
                     
Interest expense, net   (48)   (42)   (96)   (82)
                     
Net loss  $(183)  $(111)  $(310)  $(206)
                     
Weighted average number of common shares outstanding - Basic and diluted   79,007    79,007    79,007    79,007 
                     
Basic and diluted loss per common share  $(0.00)  $(0.00)  $(0.00)  $(0.00)

 

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

 

4

 

 

NON-INVASIVE MONITORING SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ DEFICIT - Unaudited

 

 For the six months ended January 31, 2017

(Dollars in Thousands)

 

   Preferred Stock       Additional      Accumulated
Other
     
   Series B   Series C   Series D   Common Stock   Paid in   Accumulated   Comprehensive     
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Deficit   Loss   Total 
                                                 
Balance at July 31, 2016   100   $    62,048   $62    2,782   $3    79,007,423   $790   $21,930   $(25,482)   (48)  $(2,745)
                                                             
Net Loss                                       (310)       (310)
Balance at January 31, 2017   100   $    62,048   $62    2,782   $3    79,007,423   $790   $21,930   $(25,792)   (48)  $(3,055)

 

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

 

5

 

 

NON-INVASIVE MONITORING SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - Unaudited

(Dollars in thousands)

 

Six months ended January 31, 2017 and 2016

 

   2017   2016 
Operating activities           
Net loss  $(310)  $(206)
Adjustments to reconcile net loss to net cash used in operating activities           
Depreciation and amortization    -    1 
Write down of inventory   99    - 
Loss on disposal of asset   (3)   - 
           
Changes in operating assets and liabilities           
Accounts receivable - trade   (6)   - 
Inventories, net    -    6 
Prepaid expenses, deposits and other current assets   32    29 
Accounts payable and accrued expenses    133    64 
Net cash used in operating activities   (55)   (106)
           
Investing activities          
Sale of fixed asset   3    - 
Net cash provided by investing activities   3    - 
           
Financing activities          
Proceeds from note payable – related party   -    125 
Net cash provided by financing activities   -    125 
           
Net increase (decrease) in cash   (52)   19 
Cash, beginning of period    87    40 
Cash, end of period  $35   $59 

 

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

 

6

 

 

NON-INVASIVE MONITORING SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

January 31, 2017

 

The following (a) condensed consolidated balance sheet as of January 31, 2017, which has been derived from audited 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, 2017 and results of operations and cash flows for the interim periods ended January 31, 2017 and 2016. The results of operations for the three and six months ended January 31, 2017 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, 2016. 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, 2016.

 

1.             ORGANIZATION AND BUSINESS

 

Organization. Non-Invasive Monitoring Systems, Inc., a Florida corporation (together with its consolidated subsidiaries, the “Company” or “NIMS”), 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 and has licensed the rights to its technology. The Company continues to work on developing and marketing its Exer-Rest® line of acceleration therapeutic platforms based upon unique, patented whole body periodic acceleration (“WBPA”) technology. The Exer-Rest line of acceleration therapeutic platforms currently includes the Exer-Rest AT, AT3800 and AT4700 models.

 

Business. The Company is developing and marketing its Exer-Rest® line of acceleration therapeutic platforms based upon unique, patented whole body periodic acceleration (“WBPA”) technology. The Exer-Rest line of acceleration therapeutic platforms currently includes the Exer-Rest AT, AT3800 and AT4700 models.

 

The Company received revenue from royalties on sales of diagnostic monitoring hardware and software by SensorMedics and from VivoMetrics in prior years. SensorMedics indicated they will discontinue licensed product sales after current inventory is depleted and, therefore, the royalty revenue from SensorMedics is expected to be minimal to none. VivoMetrics ceased operations in July 2009 and filed for Chapter 11 bankruptcy protection in October 2009. Pursuant to VivoMetrics’ approved bankruptcy plan of reorganization, our license with VivoMetrics was assigned to another company; however, there can be no assurance as to the future amount of royalty revenue, if any, that we may derive from this license or from our existing license with SensorMedics. In fiscal year 2009, NIMS began commercial sales of its third generation Exer-Rest therapeutic platforms.

 

During the calendar years 2005 to 2007, the Company designed, developed and manufactured the first Exer-Rest platform (now the Exer-Rest AT), a second generation acceleration therapeutics platform, and updated its operations to promote the Exer-Rest AT overseas as an aid to improve circulation and joint mobility and to relieve minor aches and pains.

 

The Company has developed a third generation of Exer-Rest acceleration therapeutic platforms (designated the Exer-Rest AT3800 and the Exer-Rest AT4700) that has been manufactured by Sing Lin Technologies Co. Ltd. (“Sing Lin”) based in Taichung, Taiwan (see Note 10).

 

The Company’s financial statements have been prepared and presented on a basis assuming it will continue as a going concern. As reflected in the accompanying unaudited condensed consolidated financial statements, the Company had net losses of approximately $310,000 and $206,000 for the six month periods ending January 31, 2017 and 2016, respectively, and has experienced cash outflows from operating activities. The Company also has an accumulated deficit of $25.8 million as of January 31, 2017, and has potential purchase obligations at January 31, 2017 (see note 10). The Company had $35,000 of cash at January 31, 2017 and negative working capital of approximately $3,055,000. These matters raise substantial doubt about the Company’s ability to continue as a going concern.

 

The Company is continuing its business activities without any significant revenues from product sales. Absent any significant revenues from product sales, the Company is seeking debt or equity financing or a strategic collaboration. 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 condensed consolidated financial statements do not include any adjustments that might be necessary from the outcome of this uncertainty.

 

7

 

 

NON-INVASIVE MONITORING SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

January 31, 2017

 

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 material inter-company accounts and transactions have been eliminated in consolidation.

 

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, such as accounts receivable, warranty accrual, deferred taxes, and the input variables for stock based compensation as estimates, that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. 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 $35,000 and $87,000, on deposit in bank operating accounts at January 31, 2017 and July 31, 2016, respectively.

 

Allowances for Doubtful Accounts. Royalties and other receivables are recorded at the stated amount of the transactions. The Company provides an allowance for royalties and other receivables it believes it may not collect in full. Receivables are written off when they are deemed to be uncollectible and all collection attempts have ceased. The amount of bad debt recorded each period and the resulting adequacy of the allowance at the end of each period are determined using a combination of the Company’s historical loss experience, customer-by-customer analysis of the Company’s accounts receivable each period and subjective assessments of the Company’s future bad debt exposure.

 

Inventories. Inventories are stated at lower of cost or net realizable value using the first-in, first-out method, and are evaluated at least annually for impairment. Inventories at January 31, 2017 and July 31, 2016 primarily consist of finished Exer-Rest units and accessories. Provisions for potentially obsolete or slow-moving inventory are made based on management’s analysis of inventory levels, historical obsolescence and future sales forecasts.

 

Tooling and Equipment. These assets are stated at cost and depreciated or amortized using the straight-line method, over their estimated useful lives.

 

Long-lived Assets. The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. In performing the review for recoverability, the Company estimates the future undiscounted cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future cash flows is less than the carrying amount of the assets, an impairment loss is recognized as the difference between the fair value and the carrying amount of the asset.

 

Taxes Assessed on Revenue-Producing Transactions. The Company presents sales taxes assessed on revenue-producing transactions between a seller and customer using the net presentation; thus, sales and cost of revenues are not affected by such taxes.

 

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. Tax years ranging from 2012 to 2016 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.

 

8

 

 

NON-INVASIVE MONITORING SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

January 31, 2017

 

Revenue Recognition. Revenue from product sales is recognized when persuasive evidence of an arrangement exists, the goods are shipped and title has transferred, the price is fixed or determinable, and the collection of the sales proceeds is reasonably assured. The Company recognizes royalties as they are earned, based on reports from licensees. Research and consulting revenue and revenue from sales of extended warranties on therapeutic platforms are recognized over the term of the respective agreements.

 

Advertising Costs. The Company expenses all costs of advertising and promotions as incurred. There were no advertising and promotional costs incurred for the three and six months ended January 31, 2017 and 2016.

 

Research and Development Costs. Research and development costs are expensed as incurred, and primarily consist of payments to third parties for research and development of the Exer-Rest device and regulatory testing and other costs to obtain FDA approval.

 

Warranties. The Company’s warranties are two years on all Exer-Rest products sold domestically and one year for products sold outside of the U.S. and are accrued based on management’s estimates and the history of warranty costs incurred. There were no material warranty costs incurred during the three and six months ended January 31, 2017 and 2016, and management estimates that the Company’s accrued warranty expense at January 31, 2017 will be sufficient to offset claims made for units under warranty.

 

Stock-based compensation. The Company recognizes all share-based payments, including grants of stock options, as operating costs and expenses, based on their grant date fair values. Stock-based compensation expense is recognized over the vesting life of the underlying stock options and is included in selling, general and administrative costs and expenses in the condensed consolidated comprehensive statements of operations for all periods presented.

 

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, 2017 and July 31, 2016. The respective carrying value of certain on-balance-sheet financial instruments such as cash and cash equivalents, royalties and other receivables, accounts payable and accrued expenses approximate fair values because they are short term in nature or they bear current market interest rates. As of January 31, 2017, the respective carrying value of the notes payable – related party and notes payable – other approximate our current borrowing rate for similar debt instruments of comparable maturity and are considered Level 3 measurements within the fair value hierarchy.

 

Foreign Currency Translation. The functional currency for the Company’s foreign subsidiary is the local currency. Assets and liabilities are translated at exchange rates in effect at the balance sheet date while income and expense amounts are translated at average exchange rates during the period. The resulting foreign currency translation adjustments are disclosed as a separate component of stockholders’ deficit and other comprehensive loss.

 

Comprehensive Income (Loss). Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources, including foreign currency translations.

 

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 regards to legal costs, we record such costs as incurred.

 

Recent Accounting Pronouncements. In May 2014, the FASB issued an accounting standard update which affects the revenue recognition of entities that enter into either (1) certain contracts to transfer goods or services to customers or (2) certain contracts for the transfer of nonfinancial assets. The update indicates an entity should recognize revenue in an amount that reflects the consideration the entity expects to be entitled to in exchange for the goods or services transferred by the entity. The update is to be applied to the beginning of the year of implementation or retrospectively and is effective for annual periods beginning after December 15, 2017 and in interim periods in that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently evaluating the effect the update will have on its financial statements.

 

In February 2016, the FASB issued an accounting standard update which amends existing lease guidance. The update requires lessees to recognize a right-of-use asset and related lease liability for many operating leases now currently off-balance sheet under current US GAAP. Accounting by lessors remains largely unchanged from current US GAAP. The update is effective using a modified retrospective approach for fiscal years beginning after December 15, 2018, and interim periods within those years, with early application permitted. The Company is currently evaluating the effect the update will have on its financial statements.

 

9

 

 

NON-INVASIVE MONITORING SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

January 31, 2017

 

3.             INVENTORIES

 

The Company’s inventory consisted of the following at January 31, 2017 (unaudited) and July 31, 2016 (in thousands):

 

   January 31, 2017   July 31, 2016 
Finished goods  $-   $99 
Total inventories  $-   $99 

 

The Company recorded inventory valuation adjustments of $99,000 for the six months ended January 31, 2017. The $99,000 inventory valuation adjustment for the six months ended January 31, 2017 resulted from management’s business review and related assessment of the net realizable value of the Exer-Rest units. Factors in this determination included the age of inventory, sales not meeting expectations, including no sales of the Exer-Rest inventory units during the six month ended January 31, 2017, and the uncertainty of when and if the Company will expand its sales team, either internal or through an alliance or collaboration, for the Exer-Rest. Only inventory sales were accessories during the six months ended January 31, 2017.

 

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 recorded stock-based compensation of $0, for the three and six months ended January 31, 2017 and for the three and six months ended January 31, 2016. Historically, all stock-based compensation was included in the Company’s selling, general and administrative costs and expenses.

 

The Company’s 2000 Stock Option Plan (the “2000 Plan”), as amended, provides for the issuance of up to 2,000,000 shares of the Company’s Common Stock. The 2000 Plan allows the issuance of incentive stock options, stock appreciation rights and restricted stock awards. The exercise price of the options is determined by the compensation committee of the Company’s Board of Directors, but incentive stock options must be granted at an exercise price not less than the fair market value of the Company’s Common Stock as of the grant date or an exercise price of not less than 110% of the fair value for a 10% shareholder. Options expire up to ten years from the date of the grant and are exercisable according to the terms of the individual option agreements. The 2000 Plan expired on March 1, 2012. No additional grants may be made under the 2000 Plan; however, previously granted options will remain in force pursuant to the terms of the individual grants.

 

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, 2017.

 

The Company did not grant any stock options during the three and six months ended January 31, 2017 and 2016.

 

10

 

 

NON-INVASIVE MONITORING SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

January 31, 2017

 

A summary of the Company’s stock option activity for the six months ended January 31, 2017 is as follows:

 

   Shares   Weighted Average Exercise Price   Weighted average remaining contractual term (years)  

Aggregate

intrinsic

Value

 
Options outstanding, July 31, 2016   200,000   $0.430         
Options granted   -    n/a            
Options exercised   -    n/a           
Options forfeited or expired   -    n/a           
Options outstanding, January 31, 2017   200,000   $0.430    0.10    - 
Options expected to vest, January 31, 2017   200,000   $0.430    0.10    - 
Options exercisable, January 31 , 2017   200,000   $0.430    0.10    - 

 

Of the 200,000 options outstanding at January 31, 2017, 200,000 were issued under the 2000 Plan and none were issued outside of shareholder approved plans. There were no options exercised during the six month period ended January 31, 2017 and 2016. There were no options forfeited or expired during the three and six months ended January 31, 2017, 75,000 options expired during the six month period ended January 31, 2016.

 

As of January 31, 2017, there was no unrecognized costs related to outstanding stock options.

 

5.             ROYALTIES

 

The Company is a party to two licensing agreements with SensorMedics and VivoMetrics. The Company previously received royalty income from the sale of its diagnostic monitoring hardware and software from SensorMedics and previously received royalties from VivoMetrics prior to its bankruptcy.

 

There was no royalty income from the SensorMedics license for the three and six months ended January 31, 2017 and 2016. SensorMedics indicated they will discontinue licensed product sales after inventory is depleted. We believe SensorMedics inventory is depleted and, therefore, we do not anticipate any future royalty revenue from SensorMedics. There were no royalties recognized from VivoMetrics for the three and six months ended January 31, 2017 and 2016. VivoMetrics ceased operations in July 2009 and filed for Chapter 11 bankruptcy protection in October 2009. Under VivoMetrics’ proposed bankruptcy plan of reorganization, our license with VivoMetrics was assigned to another company; however, there can be no assurance as to the future amount of royalty income, if any, that may result from this license or from our existing license with SensorMedics.

 

6.             NOTES PAYABLE

 

2010 Credit Facility. On March 31, 2010, the Company entered into a new 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 Company is permitted to borrow and reborrow from time to time under the Credit Facility until July 31, 2017 (the “Credit Facility Maturity Date”). 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. All amounts owing under the Credit Facility are required to be repaid by the Credit Facility Maturity Date, and amounts outstanding are prepayable at any time without premium or penalty. As of January 31, 2017, the Company had drawn an aggregate of $1,000,000 under the Credit Facility and there is no available balance remaining.

 

11

 

 

NON-INVASIVE MONITORING SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

January 31, 2017

 

2011 Promissory Notes. On September 12, 2011, the Company entered into two promissory notes in the principal amount of $50,000 each with Frost Gamma, a trust controlled by Dr. Phillip Frost, which beneficially owns in excess of 10% of the Company’s common stock, and with an unrelated third party for a total of $100,000. The interest rate payable by NIMS on both the Frost Gamma Note and the unrelated third party note is 11% per annum, payable on the maturity date of July 31, 2017 (the “Promissory Notes Maturity Date”). The Company may prepay either or both notes in advance of the Promissory Notes Maturity Date without premium or penalty.

 

2012 Promissory Note. On May 30, 2012, the Company entered into a promissory note in the principal amount of $50,000 with Hsu Gamma, an entity controlled by NIMS’ Chairman of the Board and Interim Chief Executive Officer, Jane H. Hsiao, (the “Hsu Gamma Note”). The interest rate payable by NIMS on the Hsu Gamma Note is 11% per annum, payable on the Promissory Notes Maturity Date. The Hsu Gamma Note may be prepaid in advance of the Promissory Notes Maturity Date without premium or penalty.

 

2013 Promissory Note. On February 22, 2013, the Company entered into a promissory note in the amount of $50,000 with Jane Hsiao, the Company’s Chairman of the Board and Interim Chief Executive Officer (the “2013 Hsiao Note”). The interest rate payable by the Company on the 2013 Hsiao Note is 11% per annum, payable on the Promissory Notes Maturity Date. The 2013 Hsiao Note may be prepaid in advance of the Promissory Notes Maturity Date without premium or penalty.

 

2014 Promissory Note. On September 24, 2014, the Company entered into a promissory note (the “2014 Hsiao Note”) in the principal amount of $50,000 with Jane Hsiao, NIMS’ Chairman of the Board and Interim Chief Executive Officer. The interest rate payable by NIMS on the 2014 Hsiao Note is 11% per annum, payable on the Promissory Notes Maturity Date. The 2014 Hsiao Note may be prepaid in advance of the Promissory Notes Maturity Date without premium or penalty.

 

2015 Promissory Notes. On February 2, 2015, the Company entered into a promissory note (the “2015 Hsiao Note”) in the principal amount of $50,000 with Jane Hsiao, the Company’s Chairman of the Board and Interim Chief Executive Officer. The interest rate payable by the Company on the 2015 Hsiao Note is 11% per annum, payable on the Promissory Notes Maturity Date. The 2015 Hsiao Note may be prepaid in advance of the Promissory Notes Maturity Date without premium or penalty.

 

On April 16, 2015, the Company entered into a promissory note (“April 2015 Frost Gamma Note”) in the amount of $100,000 with Frost Gamma”), a trust controlled by Dr. Phillip Frost, which beneficially owns in excess of 10% of the Company’s common stock. The interest rate payable by the Company on the April 2015 Frost Gamma Note is 11% per annum, payable on the Promissory Notes Maturity Date. The April 2015 Frost Gamma Note may be prepaid in advance of the Promissory Notes Maturity Date without premium or penalty.

 

On August 12, 2015, the Company entered into a promissory note in the principal amount of $25,000 with Frost Gamma (the “August 2015 Frost Gamma Note”), a trust controlled by Dr. Phillip Frost, which beneficially owns in excess of 10% of the Company’s common stock. The interest rate payable by the Company on the August 2015 Frost Gamma Note is 11% per annum, payable on the Promissory Notes Maturity Date. The August 2015 Frost Gamma Note may be prepaid in advance of the Promissory Notes Maturity Date without premium or penalty.

 

On October 27, 2015, the Company entered into a promissory note in the principal amount of $50,000 with Frost Gamma (the “October 2015 Frost Gamma Note”), a trust controlled by Dr. Phillip Frost, which beneficially owns in excess of 10% of the Company’s common stock. The interest rate payable by the Company on the October 2015 Frost Gamma Note is 11% per annum, payable on the Promissory Notes Maturity Date. The October 2015 Frost Gamma Note may be prepaid in advance of the Promissory Notes Maturity Date without premium or penalty.

 

On October 27, 2015, the Company entered into a promissory note in the principal amount of $50,000 with Jane Hsiao, the Company’s Chairman of the Board and Interim Chief Executive Officer (the “October 2015 Hsiao Note”). The interest rate payable by the Company on the October 2015 Hsiao Note is 11% per annum, payable on the Promissory Notes Maturity Date. The October 2015 Hsiao Note may be prepaid in advance of the Promissory Notes Maturity Date without premium or penalty.

 

12

 

 

NON-INVASIVE MONITORING SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

January 31, 2017

 

2016 Promissory Notes. On June 1, 2016, the Company entered into a promissory note in the principal amount of $100,000 with Frost Gamma (the “June 2016 Frost Gamma Note”), a trust controlled by Dr. Phillip Frost, which beneficially owns in excess of 10% of the Company’s common stock. The interest rate payable by the Company on the June 2016 Frost Gamma Note is 11% per annum, payable on the maturity date of July 31, 2017. The June 2016 Frost Gamma Note may be prepaid in advance of the Promissory Notes Maturity Date without premium or penalty.

 

On June 1, 2016, the Company entered into a promissory note in the principal amount of $100,000 with Hsu Gamma, an entity controlled by NIMS’ Chairman of the Board and Interim Chief Executive Officer, Jane H. Hsiao, (the “June 2016 Hsu Gamma Note”). The interest rate payable by NIMS on the June 2016 Hsu Gamma Note is 11% per annum, payable on the Promissory Notes Maturity Date. The June 2016 Hsu Gamma Note may be prepaid in advance of the Promissory Notes Maturity Date without premium or penalty.

 

At January 31, 2017, the Company was obligated under the above described Credit Facility and promissory notes to make future principal payments (excluding interest) as follows:

 

Year Ending January 31,    
     
2017   1,725,000 
   $1,725,000 

 

7.             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.

 

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.

 

The Company did not issue any shares of the Company’s common stock during the six months ended January 31, 2017 and 2016.

 

No preferred stock dividends were declared for the three and six months ended January 31, 2017 and 2016.

 

13

 

 

NON-INVASIVE MONITORING SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

January 31, 2017

 

8.             BASIC AND DILUTED LOSS PER SHARE

 

Basic net loss per common share is computed by dividing net loss 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, 2017 and 2016, 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.

 

Potential common shares not included in calculating diluted net loss per share are as follows:

 

   January 31, 2017   January 31, 2016 
Stock options   200,000    378,750 
Series C Preferred Stock   1,551,200    1,551,200 
Series D Preferred Stock   13,910,000    13,910,000 
Total   15,661,200    15,839,950 

 

9.             RELATED PARTY TRANSACTIONS

 

The Company signed a five year lease for office space in Miami, Florida with a company owned 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 continued on a month-to-month basis. In February 2016, the office space rent was reduced to $0 per month. The Company did not record any rent expense related to the Miami lease for the three and six months ended January 31, 2017. The Company recorded rent expense related to the Miami lease of approximately $0 and $3,800 respectively, for the three and six months ended January 31, 2016.

 

The Company signed a three year lease for warehouse space in Hialeah, Florida with a company jointly controlled by Dr. Frost and Dr. Jane Hsiao, the Company’s Chairman and Interim CEO. The rental payments under the Hialeah warehouse lease, which commenced February 1, 2009 and expired on January 31, 2012, were approximately $5,000 per month for the first year and were subsequently on a month-to-month basis following the expiration of the lease. As further described in Note 10, the Company vacated the Hialeah warehouse in September 2014 and entered into a new lease with an unrelated third party. The Company did not records any rent expense related to the Hialeah warehouse for the three and six months ended January 31, 2017 and 2016.

 

Accounts payable related to the two leases above totaled approximately $191,000 as of January 31, 2017 and July 31, 2016.

 

The Company has the Credit Facility and multiple notes payable outstanding to related parties, as more fully described in Note 6 to these consolidated financial statements.

 

The Company incurred interest expense related to the Credit Facility of approximately $28,000 and $55,000 for the three and six months ended January 31, 2017 and 2016. The Company also incurred interest expense related to the promissory notes of approximately $20,000 and $40,000 for the three and six months ended January 31, 2017 and $7,000 and $14,000 for the three and six months ended January 31, 2016. Approximately $906,000 and $810,000 of accrued interest remained outstanding at January 31, 2017 and July 31, 2016, respectively.

 

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 manufacturer, BioCardia, Inc. (“Biocardia”) (formerly known as Tiger X Medical, Inc.), Cogint, Inc. (“Cogint”) (formerly known as IDI, Inc.), a publicly-traded data fusion company and VBI Vaccines Inc, a vaccine development 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. Since December 2009, the Company’s Chief Legal Officer has served under a similar cost sharing arrangement as Corporate Counsel of Cogint, as the Chief Legal Officer of TransEnterix and as Chief Legal Officer of BioCardia through October 2016.

 

14

 

 

NON-INVASIVE MONITORING SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

January 31, 2017

 

The Company recorded to selling, general and administrative costs and expenses to account for the sharing of costs under these arrangements of $9,000 and $18,000, respectively, for the three and six months ended January 31, 2017, and $9,000 and $18,000, respectively, for the three and six months ended January 31, 2016. Accounts payable to TransEnterix related to these arrangements totaled approximately $1,000 and $1,200 at January 31, 2017 and July 31, 2016.

 

10.             COMMITMENTS AND CONTINGENCIES

 

Leases.

 

The Company is 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 house 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 have exercised our option to renew the lease and extended the expiration to September 15, 2017.

 

Generally, the lease agreements require the payment of base rent plus escalations for increases in building operating costs and real estate taxes. Rental expense for operating leases amounted to $22,000 and $30,000 for the six months ended January 31, 2017 and 2016, respectively.

 

Future minimum rental commitments under non-cancelable leases are approximately as follows for the years ended July 31:

 

2017   7,000 
Total  $7,000 

 

Product Development and Supply Agreement.

 

On September 4, 2007, the Company entered into a Product Development and Supply Agreement (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 Agreement commenced as of September 3, 2007 and had a term that extended three years from the acceptance by NIMS of the first run of production units. Thereafter, the Agreement automatically renewed for successive one year terms unless either party sent the other a notice of non-renewal. Either party was permitted to terminate the Agreement with ninety days prior written notice. Upon termination, each party’s obligations under the Agreement were to be limited to obligations related to confirm orders placed prior to the termination date.

 

Pursuant to the Agreement, Sing Lin designed, developed and manufactured the tooling required to manufacture the acceleration therapeutic platforms for a total cost to the Company of $471,000. Sing Lin utilized the tooling in the performance of its production obligations under the Agreement. The Company paid Sing Lin $150,000 of the tooling cost upon execution of the Agreement and $150,000 upon the Company’s approval of the product prototype concepts and designs. The balance of the final tooling cost became due and payable in September 2008 upon acceptance of the first units produced using the tooling, and was paid in full during the year ended July 31, 2009.

 

Under the now-terminated Agreement, the Company also granted Sing Lin the exclusive distribution rights for the products in certain countries in the Far East, including Taiwan, China, Japan, South Korea, Malaysia, Indonesia and certain other countries. Sing Lin agreed not to sell the Products outside its geographic areas in the Far East.

 

The Agreement provided for the Company to purchase approximately $2.6 million of Exer-Rest units within one year of the September 2008 acceptance of the final product. The Agreement further provided for the Company to purchase $4.1 million and $8.8 million of Exer-Rest products in the second and third years following such acceptance, respectively. These minimum purchase amounts were based upon 2007 product costs multiplied by volume commitments. Through January 31, 2017, the Company had paid Sing Lin $1.7 million in connection with orders placed through that date. As of January 31, 2017, the Company has approximately $41,000 of payables due to Sing Lin. As of January 31, 2017, aggregate minimum future purchases under the Agreement totaled approximately $13.9 million.

 

15

 

 

NON-INVASIVE MONITORING SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

January 31, 2017

 

As of January 31, 2017, the Company had not placed orders sufficient to meet the first-year or second-year minimum purchase obligations under the Agreement. 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. As of the date of the issuance of these financial statements Sing Lin has not followed up on its July 2010 demand. There can be no assurance that Sing Lin will not attempt to enforce its remedies under the Agreement, or pursue other potential remedies.

 

11.             RISKS AND UNCERTAINTIES AND CONCENTRATIONS OF RISK

 

Financial instruments that potentially subject the Company to risk consist principally of cash, royalties and other receivables, and purchases and advances to contract manufacturer.

 

Cash. The Company does not have cash deposits in excess of the Federal Deposit Insurance Corporation (“FDIC”) limit.

 

Inventories: The provision on inventory is an estimate based on multiple factors as further described in Note 3. The ultimate realization of the inventory amounts may be materially different. During 2016, the Company did not renew its FDA registration for the Exer-Rest and as of the date of these financial statement, the Company had started the process to renew its registration and does not anticipate any significant delays or effects on operations. If the registration were to be rejected or significantly delayed, the Company’s sales could be affected. Also, during 2016, the Company did not renew its International Organization for standardization (“ISO”) certification which could prevent sales from being permitted in Europe and other areas that may require ISO certification. The Company does not anticipate this will significantly affect its expected revenues, in part because the Company does not anticipate significant potential future revenues from Europe.

 

Royalties and Other Receivables. The Company currently grants credit to a limited number of customers, substantially all of whom are corporations and medical providers located throughout the United States and Canada. The Company typically does not require collateral from these customers.

 

Purchases from and Advances to Contract Manufacturer. Substantially all of the Company’s current inventory has been acquired from Sing Lin pursuant to the now-terminated Agreement. The Company notified Sing Lin in June 2010 that it was terminating the agreement effective September 2010. If the Company is unable to establish a contract and obtain a sufficient alternative supply from Sing Lin or another supplier, it may not be able to procure additional inventory on a timely basis or in the quantities required. Sing Lin and its subcontractors currently maintain custody of the Company’s specialized tooling, which could adversely impact the Company’s ability to reallocate production to other vendors.

 

Major Customers. Substantially all of the Company’s revenue for the year ended July 31, 2016 resulted from sales from 1 customer who was a distributor outside the United States. There is no guarantee such sales will be made in the future to this customer. Sales to foreign distributors generally require prepayment by such distributors or letter of credit guarantees in respect of payments by such distributors.

 

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NON-INVASIVE MONITORING SYSTEMS, INC

January 31, 2017

 

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; immediate need for additional financing; the Company’s inability to repay the Credit Facility currently due on July 31, 2017 or promissory notes due on July 31, 2017, dependence on future sales of the Exer-Rest® motion platforms; current and future purchase commitments; competition; dependence on management; changes in healthcare rules and regulations; risks related to proprietary rights; government regulation, including regulatory approvals; 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, 2016. 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 are primarily engaged in the sales of non-invasive, whole body periodic acceleration (“WBPA”) therapeutic platforms, which are motorized platforms that move a subject repetitively head to foot. Our acceleration therapeutic platforms are the inventions of Marvin A. Sackner, M.D., our founder, former Chief Executive Officer and a current member of our Board of Directors. Over thirty peer reviewed scientific publications attest to the benefits of whole body periodic acceleration in animal and human research investigations. According to those studies, the application of this technology causes increased release of beneficial substances such as nitric oxide from the inner lining of blood vessels throughout the vasculature for improved circulation and the reduction of inflammation. These findings are not being claimed as an intended use of the device for marketing purposes, but demonstrate a potential mechanism for its benefits.

 

The sales and inventory maintenance of the Exer-Rest and general corporate matters has necessitated expenditures and commitments of capital, and we anticipate expenses and associated losses to continue for the foreseeable future. We will be required to raise additional capital to fulfill our business plan, but no commitment to raise such additional capital exists or can be assured. We are also examining strategic alternatives. If we are unsuccessful in our efforts to expand sales and/or raise capital, or some other strategic alternative, we will not be able to continue operations.

 

Products

 

Whole Body Periodic Acceleration (“WBPA”) Therapeutic Devices

 

The original AT-101 was a comfortable gurney-styled device that provided movement of a platform repetitively in a head-to-foot motion at a rapid pace. Sales of the AT-101 commenced in October 2002 in Japan and in February 2003 in the United States. QTM Incorporated (“QTM”), an FDA registered manufacturer located in Oldsmar, Florida, manufactured the device, which was built in accordance with ISO and current Good Manufacturing Practices. As discussed above, we ceased manufacturing and selling the AT-101 in the United States in January 2005 as we began development of the Exer-Rest AT. We continued selling our existing inventory of AT-101 devices overseas until the Exer-Rest AT became available in October 2007, at which time we discontinued marketing of the AT-101.

 

The Exer-Rest AT is based upon the design and concept of the AT-101, but has the dimensions and appearance of a commercial extra long twin bed. The Exer-Rest AT, which was also manufactured by QTM until we stopped production in July 2009, weighs about half as much as the AT-101, has a much more efficient and less costly drive mechanism, has a much lower selling price than did the AT-101 and is designed such that the user can utilize and operate it without assistance. The wired hand held controller provides digital values for speed, travel and time, rather than analog values for speed and arbitrary force values as in the AT-101. Sales of the Exer-Rest AT began outside the United States in October 2007 and in the United States in February 2009. We discontinued manufacturing of the Exer-Rest AT in July 2009, and we expect to utilize our remaining inventory of these units primarily for research purposes.

 

17

 

 

NON-INVASIVE MONITORING SYSTEMS, INC

January 31, 2017

 

The Exer-Rest AT3800 and Exer-Rest AT4700, which were manufactured for us by Sing Lin prior to the termination of our agreement with them, are next generation versions of the Exer-Rest AT and further advance the acceleration therapeutic platform technology. The AT3800 (38” wide) and AT4700 (47” wide) models combine improved drive technology for quieter operation, a more comfortable “memory-foam” mattress, more convenient operation with a multi-function wireless remote and a more streamlined look to improve the WBPA experience. Sales of the Exer-Rest AT3800 and Exer-Rest AT4700 platforms began outside the United States in October 2008, and U.S. sales commenced in February 2009.

 

LifeShirt®

 

The LifeShirt is a patented Wearable Physiological Computer that incorporates transducers, electrodes and sensors into a sleeveless garment. These sensors transmit vital and physiological signs to a miniaturized, battery-powered, electronic module which saves the raw waveforms and digital data to the compact flash memory of a Personal Digital Assistant (“PDA”) attached to the LifeShirt. Users of the LifeShirt can enter symptoms (with intensity), mood and medication information directly into the PDA for integration with the physiologic information collected by the LifeShirt garment. The flash memory can then be removed from the LifeShirt and the data uploaded and converted into minute-by-minute median trends of more than 30 physical and emotional signs of health and disease. Vital and physiological signs can therefore be obtained non-invasively, continuously, cheaply and reliably with the comfortably worn LifeShirt garment system while resting, exercising, working or sleeping. The LifeShirt was sold exclusively by VivoMetrics, but has not been marketed since VivoMetrics ceased operations in July 2009. Under VivoMetrics’ approved bankruptcy plan of reorganization, our license with VivoMetrics was assigned to another company; however, there can be no assurance as to the future amount of LifeShirt sales, if any, that may result from this license.

 

Critical Accounting Policies and Estimates

 

The discussion and analysis of our financial condition and results of operations set forth below under “Results of Operations” and “Liquidity and Capital Resources” should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this Form 10-Q. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to royalties, inventory, tooling and equipment and contingencies. The Company’s accounting policy for loss contingencies complies with ASC 450-20-25-2. 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 our Annual Report on Form 10-K for the year ended July 31, 2016. Actual results may differ from these estimates.

 

Results of Operations

 

In January 2005, we began developing the Exer-Rest line of acceleration therapeutic platforms, which were designed to be more efficient and less expensive than the original AT-101 platform. The Exer-Rest AT platform was first available for delivery to certain locations outside of the United States in October 2007. Our newest platforms, the Exer-Rest AT3800 and AT4700, which we developed under our former agreement with Sing Lin, became available for sale in October 2008. In January 2009, the Exer-Rest line of therapeutic platforms was registered by the FDA in the United States as Class I (Exempt) Medical Devices. We began our US and international sales activity with aggressive marketing and promotional pricing beginning in February 2009. We opened our first demonstration and therapy center in Toronto, Canada in April 2009; however, we closed that facility in January 2010 to focus our marketing and sales efforts on healthcare providers as well as individuals. We continue to offer the Exer-Rest to hospitals, cardiac rehabilitation clinics, chiropractic and physical therapy centers, senior living communities and other healthcare providers, as well as to their patients, professional athletes and other individuals.

 

18

 

 

NON-INVASIVE MONITORING SYSTEMS, INC

January 31, 2017

 

Three and six months ended January 31, 2017 compared to three and six months ended January 31, 2016

 

Revenues. Total revenue was $5,000 and $8,000 for the three months ended January 31, 2017 and 2016, respectively. Total revenue for the six months ended January 31, 2017 was $6,000, as compared to $16,000 for the six months ended January 31, 2016. This $10,000 decrease resulted from lower sales of Exer-Rest units. The revenue for the three months ended January 31, 2017 was from the sale of an Exer-Rest that was previously classified as a fixed asset and from Exer-Rest accessories.

 

There was no royalty revenue for the three and six months ended January 31, 2017 and 2016.

 

Cost of Sales. Cost of sales was $99,000 for the three and six months ended January 31, 2017 and was $3,000 and $6,000 for the three and six months ended January 31, 2016. The increase during the three and six months ended January 31, 2017 was primarily due to an approximate $99,000 inventory impairment adjustment.

 

Selling, general and administrative costs and expenses. Selling, general and administrative (“SG&A”) was $41,000 and $121,000 for the three and six months ended January 31, 2017, respectively, and $74,000 and $134,000 for the three and six months ended January 31, 2016 respectively. The $33,000 and $13,000 decreases were primarily attributable to changes in professional fee accruals related to the timing of invoices and decreases in rent and depreciation expense and a year-to-date reduction in legal fees.

 

Research and development costs and expenses. There was no Research and development (“R&D”) costs and expenses for the three and six months ended January 31, 2017 and 2016.

 

Total operating costs and expenses. Total operating costs and expenses was $140,000 and $220,000 for the three and six months ended January 31, 2017, respectively, and $77,000 and $140,000 for the three and six months ended January 31, 2016 respectively. The $63,000 and $80,000 increases were primarily attributable to a $99,000 inventory impairment adjustment.

 

Interest expense. Interest expense was $48,000 and $96,000 for the three and six months ended January 31, 2017, respectively, and $42,000 and $82,000 for the three and six months ended January 31, 2016 respectively. The $6,000 and $14,000 increases were primarily related to an increase in interest expense resulting from the addition of interest bearing promissory notes entered into by the Company (see Note 6).

 

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, 2017, we had approximately $35,000 of cash and negative working capital of approximately $3,055,000. We believe that the cash on hand at January 31, 2017 will not be sufficient to meet our anticipated cash requirements for operations over the next 12 months.

 

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. We are also examining strategic alternatives. Our ability to sell additional shares of our stock and/or borrow cash could be materially adversely affected by the current climate in the global equity and credit markets. Current economic conditions 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 $55,000 and $106,000 for six months ended January 31, 2017 and 2016, respectively. This $51,000 decrease is primarily due to a decrease in outstanding accounts payable and accrued expenses.

 

Net cash used in investing activities was $3,000 and $0 for the six months ended January 31, 2017 and 2016. This $3,000 increase was the result of the sale of a fixed asset.

 

Net cash provided by financing activities $0 and $125,000 for the six months ended January 31, 2017 and 2016, respectively. The $125,000 decrease was a result of obtaining related party promissory notes in 2016 (see Note 9).

 

19

 

 

NON-INVASIVE MONITORING SYSTEMS, INC

January 31, 2017

 

2010 Credit Facility. On March 31, 2010, the Company entered into a new 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 Chief Executive Officer, Jane H. Hsiao (“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 Company is permitted to borrow and reborrow from time to time under the Credit Facility until July 31, 2017 (the “Credit Facility Maturity Date”). 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. All amounts owing under the Credit Facility are required to be repaid by the Credit Facility Maturity Date, and amounts outstanding are prepayable at any time. As of January 31, 2017, the Company had drawn an aggregate of $1,000,000 under the Credit Facility and there is no available balance remaining.

 

2011 Promissory Notes. On September 12, 2011, the Company entered into two promissory notes in the principal amount of $50,000 each with Frost Gamma and with an unrelated third party for a total of $100,000. The interest rate payable by NIMS on both the Frost Gamma note and the unrelated third party note is 11% per annum, payable on the maturity date of July 31, 2017 (the “Promissory Notes Maturity Date”). The Company may prepay either or both notes in advance of the Promissory Notes Maturity Date without premium or penalty.

 

2012 Promissory Note. On May 30, 2012, the Company entered into a promissory note in the principal amount of $50,000 with Hsu Gamma, an entity controlled by NIMS’ Chairman of the Board and Interim Chief Executive Officer, Jane H. Hsiao, (the “Hsu Gamma Note”). The interest rate payable by NIMS on the Hsu Gamma Note is 11% per annum, payable on the Promissory Notes Maturity Date. The Hsu Gamma Note may be prepaid in advance of the Promissory Notes Maturity Date without premium or penalty.

 

2013 Promissory Note. On February 22, 2013, the Company entered into a promissory note in the amount of $50,000 with Jane Hsiao, the Company’s Chairman of the Board and Interim Chief Executive Officer (the “2013 Hsiao Note”). The interest rate payable by the Company on the 2013 Hsiao Note is 11% per annum, payable on the Promissory Notes Maturity Date. The 2013 Hsiao Note may be prepaid in advance of the Promissory Notes Maturity Date without premium or penalty.

 

2014 Promissory Note. On September 24, 2014, the Company entered into a promissory note (the “2014 Hsiao Note”) in the principal amount of $50,000 with Jane Hsiao, NIMS’ Chairman of the Board and Interim Chief Executive Officer. The interest rate payable by NIMS on the 2014 Hsiao Note is 11% per annum, payable on the Promissory Notes Maturity Date. The 2014 Hsiao Note may be prepaid in advance of the Maturity Date without premium or penalty.

 

2015 Promissory Notes. On February 2, 2015, the Company entered into a promissory note (the “2015 Hsiao Note”) in the principal amount of $50,000 with Jane Hsiao, the Company’s Chairman of the Board and Interim Chief Executive Officer. The interest rate payable by the Company on the 2015 Hsiao Note is 11% per annum, payable on the Promissory Notes Maturity Date. The 2015 Hsiao Note may be prepaid in advance of the Promissory Notes Maturity Date without premium or penalty.

 

On April 16, 2015, the Company entered into a promissory note (“April 2015 Frost Gamma Note”) in the amount of $100,000 with Frost Gamma”), a trust controlled by Dr. Phillip Frost, which beneficially owns in excess of 10% of the Company’s common stock. The interest rate payable by the Company on the April 2015 Frost Gamma Note is 11% per annum, payable on the Promissory Notes Maturity Date. The April 2015 Frost Gamma Note may be prepaid in advance of the Promissory Notes Maturity Date without premium or penalty.

 

On August 12, 2015, the Company entered into a promissory note in the principal amount of $25,000 with Frost Gamma (the “August 2015 Frost Gamma Note”), a trust controlled by Dr. Phillip Frost, which beneficially owns in excess of 10% of the Company’s common stock. The interest rate payable by the Company on the August 2015 Frost Gamma Note is 11% per annum, payable on the Promissory Notes Maturity Date. The August 2015 Frost Gamma Note may be prepaid in advance of the Promissory Notes Maturity Date without premium or penalty.

 

20

 

 

NON-INVASIVE MONITORING SYSTEMS, INC

January 31, 2017

 

On October 27, 2015, the Company entered into a promissory note in the principal amount of $50,000 with Frost Gamma (the “October 2015 Frost Gamma Note”), a trust controlled by Dr. Phillip Frost, which beneficially owns in excess of 10% of the Company’s common stock. The interest rate payable by the Company on the October 2015 Frost Gamma Note is 11% per annum, payable on the Promissory Notes Maturity Date. The October 2015 Frost Gamma Note may be prepaid in advance of the Promissory Notes Maturity Date without premium or penalty.

 

On October 27, 2015, the Company entered into a promissory note in the principal amount of $50,000 with Jane Hsiao, the Company’s Chairman of the Board and Interim Chief Executive Officer (the “October 2015 Hsiao Note”). The interest rate payable by the Company on the October 2015 Hsiao Note is 11% per annum, payable on the Promissory Notes Maturity Date. The October 2015 Hsiao Note may be prepaid in advance of the Promissory Notes Maturity Date without premium or penalty.

 

2016 Promissory Notes. On June 1, 2016, the Company entered into a promissory note in the principal amount of $100,000 with Frost Gamma (the “June 2016 Frost Gamma Note”), a trust controlled by Dr. Phillip Frost, which beneficially owns in excess of 10% of the Company’s common stock. The interest rate payable by the Company on the June 2016 Frost Gamma Note is 11% per annum, payable on the maturity date of July 31, 2017. The June 2016 Frost Gamma Note may be prepaid in advance of the Promissory Notes Maturity Date without premium or penalty.

 

On June 1, 2016, the Company entered into a promissory note in the principal amount of $100,000 with Hsu Gamma, an entity controlled by NIMS’ Chairman of the Board and Interim Chief Executive Officer, Jane H. Hsiao, (the “June 2016 Hsu Gamma Note”). The interest rate payable by NIMS on the June 2016 Hsu Gamma Note is 11% per annum, payable on the Promissory Notes Maturity Date. The June 2016 Hsu Gamma Note may be prepaid in advance of the Promissory Notes Maturity Date without premium or penalty.

 

As of March 10, 2017, the Company had cash and cash equivalents of approximately $30,000, and did not have any further funding available under the Credit Facility. If we are unable to generate significant revenues from sales of Exer-Rest platforms, we will have insufficient funds to repay our existing debt and continue operations without raising additional capital. We are also examining strategic alternatives. There can be no assurance that we will be able to raise such additional capital on terms acceptable to us or at all or that we will be successful in our examination of strategic alternatives. This uncertainty, along with the Company’s limited remaining cash balances, raises substantial doubt about the Company’s ability to continue as a going concern.

 

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, 2017 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, 2017. 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.

 

21

 

 

NON-INVASIVE MONITORING SYSTEMS, INC

January 31, 2017

 

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 Index

 

  31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a)*
     
  31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a)*
     
  32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
     
  32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
     
  101.INS XBRL Instance Document*
     
  101.SCH XBRL Taxonomy Extension Schema Document*
     
  101.CAL XBRL Taxonomy Extension Calculation Linkbase Document*
     
  101.DEF XBRL Taxonomy Extension Definition Linkbase Document*
     
  101.LAB XBRL Taxonomy Extension Label Linkbase Document*
     
  101.PRE XBRL Taxonomy Extension Presentation Linkbase Document*

 

* Filed herewith

 

22

 

 

NON-INVASIVE MONITORING SYSTEMS, INC

January 31, 2017

 

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 17, 2017 By: /s/ Jane H. Hsiao
    Jane H. Hsiao, Interim Chief Executive Officer
     
Dated: March 17, 2017 By: /s/ James J. Martin
    James J. Martin, Chief Financial Officer

 

23

 

 

EXHIBIT INDEX

 

31.1 Certification of Chief Executive Officer pursuant to Rules 13a–14 and 15d-14 under the Securities Exchange Act of 1934.
   
31.2 Certification of Chief Financial Officer pursuant to Rules 13a–14 and 15d-14 under the Securities Exchange Act of 1934.
   
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350 as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350 as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

24

 

 

EX-31.1 2 ex31-1.htm

 

Exhibit 31.1

 

Certification of Chief Executive Officer Pursuant to Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934.

 

 

 

I, Jane H. Hsiao, certify that:

 

  1. I have reviewed this Quarterly Report on Form 10-Q of Non-Invasive Monitoring Systems, Inc.;
     
  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
     
  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
     
  4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

  5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

  Dated: March 17, 2017 By: /s/ Jane H. Hsiao
      Jane H. Hsiao, Interim Chief Executive Officer

 

 
 

EX-31.2 3 ex31-2.htm

 

Exhibit 31.2

 

Certification of Chief Financial Officer Pursuant to Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934.

 

 

 

I, James J. Martin, certify that:

 

  1. I have reviewed this Quarterly Report on Form 10-Q of Non-Invasive Monitoring Systems, Inc.;
     
  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
     
  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
     
  4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

  5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

  Dated: March 17, 2017 By: /s/ James J. Martin
      James J. Martin, Chief Financial Officer

 

 
 

EX-32.1 4 ex32-1.htm

 

Exhibit 32.1

 

CERTIFICATIONS PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

 

In connection with the Quarterly Report of Non Invasive Monitoring Systems, Inc. (the “Company”) on Form 10-Q for the quarterly period ended January 31, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jane H. Hsiao, Interim Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1)       The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

(2)       The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

Dated: March 17, 2017 By: /s/ Jane H. Hsiao
    Jane H. Hsiao, Interim Chief Executive Officer

 

 
 

EX-32.2 5 ex32-2.htm

 

Exhibit 32.2

 

CERTIFICATIONS PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

 

In connection with the Quarterly Report of Non Invasive Monitoring Systems, Inc. (the “Company”) on Form 10-Q for the quarterly period ended January 31, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James J. Martin, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1)       The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

(2)       The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

Dated: March 17, 2017 By: /s/ James J. Martin
    James J. Martin, Chief Financial Officer

 

 
 

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Exer-Rest® Products [Member] Outside U.S. [Member] U.S. [Member] 2011 Stock Incentive Plan [Member] June 1, 2016 [Member] Stock Options [Member] Hsu Gamma [Member] Lease expiration date description. Commitment And Contingencies Table. Commitments And Contingencies Line Items. Preferred stock conversion premium price per share. TransEnterix, Inc [Member] The amount of cash paid on approval of product prototype concepts and designs during the period. Royalties [Text Block] It represent the value negative working capital. TwoThousandStockOptionPlanMember Assets, Current Assets Liabilities, Current Liabilities Stockholders' Equity Attributable to Parent Liabilities and Equity Revenues [Default Label] Costs and Expenses Operating Income (Loss) Shares, Outstanding Increase (Decrease) in Accounts Receivable Increase (Decrease) in Inventories Increase (Decrease) in Prepaid Expense and Other Assets Increase (Decrease) in Accounts Payable and Accrued Liabilities Net Cash Provided by (Used in) Operating Activities, Continuing Operations Net Cash Provided by (Used in) Investing Activities, Continuing Operations Net Cash Provided by (Used in) Financing Activities, Continuing Operations Cash and Cash Equivalents, Period Increase (Decrease) RoyaltiesTextBlock Inventory, Policy [Policy Text Block] Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Number Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Number Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Weighted Average Exercise Price Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Exercise Price Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Intrinsic Value Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Aggregate Intrinsic Value Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Intrinsic Value Long-term Debt Operating Leases, Future Minimum Payments Receivable, in Two Years Operating Leases, Future Minimum Payments Receivable EX-101.PRE 11 nimu-20170131_pre.xml XBRL PRESENTATION FILE XML 12 R1.htm IDEA: XBRL DOCUMENT v3.6.0.2
Document And Entity Information - shares
6 Months Ended
Jan. 31, 2017
Mar. 07, 2017
Document And Entity Information [Abstract]    
Entity Registrant Name NON INVASIVE MONITORING SYSTEMS INC /FL/  
Entity Central Index Key 0000720762  
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Jan. 31, 2017  
Current Fiscal Year End Date --07-31  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   79,007,423
Trading Symbol NIMU  
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2017  
XML 13 R2.htm IDEA: XBRL DOCUMENT v3.6.0.2
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Jan. 31, 2017
Jul. 31, 2016
Current assets    
Cash $ 35 $ 87
Accounts receivable - trade 6
Prepaid expenses, deposits, and other current assets 24 56
Total current assets 65 143
Inventories, net 99
Total assets 65 242
Current liabilities    
Accounts payable and accrued expenses 1,391 1,258
Customer deposits 4 4
Notes payable - Related Party 1,675 1,675
Notes payable - Other 50 50
Total current liabilities 3,120 2,987
Total liabilities 3,120 2,987
Shareholders' deficit    
Common Stock, par value $0.01 per share; 400,000,000 shares authorized; 79,007,423 shares issued and outstanding. 790 790
Additional paid in capital 21,930 21,930
Accumulated deficit (25,792) (25,482)
Accumulated other comprehensive loss (48) (48)
Total shareholders' deficit (3,055) (2,745)
Total liabilities and shareholders' deficit 65 242
Series B Preferred Stock [Member]    
Shareholders' deficit    
Preferred Stock, value
Series C Preferred Stock [Member]    
Shareholders' deficit    
Preferred Stock, value 62 62
Series D Preferred Stock [Member]    
Shareholders' deficit    
Preferred Stock, value $ 3 $ 3
XML 14 R3.htm IDEA: XBRL DOCUMENT v3.6.0.2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
Jan. 31, 2017
Jul. 31, 2016
Common stock, par value $ 0.01 $ 0.01
Common stock, shares authorized 400,000,000 400,000,000
Common stock, shares issued 79,007,423 79,007,423
Common stock, shares outstanding 79,007,423 79,007,423
Series B Preferred Stock [Member]    
Preferred stock, par value $ 1.00 $ 1.00
Preferred stock, shares authorized 100 100
Preferred stock, shares issued 100 100
Preferred stock, shares outstanding 100 100
Preferred stock, liquidation preference $ 10 $ 10
Series C Preferred Stock [Member]    
Preferred stock, par value $ 1.00 $ 1.00
Preferred stock, shares authorized 62,048 62,048
Preferred stock, shares issued 62,048 62,048
Preferred stock, shares outstanding 62,048 62,048
Preferred stock, liquidation preference $ 62 $ 62
Series D Preferred Stock [Member]    
Preferred stock, par value $ 1.00 $ 1.00
Preferred stock, shares authorized 5,500 5,500
Preferred stock, shares issued 2,782 2,782
Preferred stock, shares outstanding 2,782 2,782
Preferred stock, liquidation preference $ 4,173 $ 4,173
XML 15 R4.htm IDEA: XBRL DOCUMENT v3.6.0.2
Condensed Consolidated Comprehensive Statements of Operations (Unaudited) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jan. 31, 2017
Jan. 31, 2016
Jan. 31, 2017
Jan. 31, 2016
Revenues        
Product sales, net $ 5 $ 8 $ 6 $ 16
Total revenues 5 8 6 16
Operating costs and expenses        
Cost of sales 99 3 99 6
Selling, general and administrative 41 74 121 134
Total operating costs and expenses 140 77 220 140
Operating loss (135) (69) (214) (124)
Interest expense, net (48) (42) (96) (82)
Net loss $ (183) $ (111) $ (310) $ (206)
Weighted average number of common shares outstanding - Basic and diluted 79,007,000 79,007,000 79,007,000 79,007,000
Basic and diluted loss per common share $ (0.00) $ (0.00) $ (0.00) $ (0.00)
XML 16 R5.htm IDEA: XBRL DOCUMENT v3.6.0.2
Condensed Consolidated Statement of Changes in Shareholders' Deficit (Unaudited) - 6 months ended Jan. 31, 2017 - USD ($)
$ in Thousands
Series B Preferred Stock [Member]
Series C Preferred Stock [Member]
Series D Preferred Stock [Member]
Common Stock [Member]
Additional Paid In Capital [Member]
Accumulated Deficit [Member]
Accumulated Other Comprehensive Loss [Member]
Total
Balance, beginning at Jul. 31, 2016 $ 62 $ 3 $ 790 $ 21,930 $ (25,482) $ (48) $ (2,745)
Balance, beginning share at Jul. 31, 2016 100 62,048 2,782 79,007,423
Net Loss $ (310) $ (310)
Balance, ending at Jan. 31, 2017 $ 62 $ 3 $ 790 $ 21,930 $ (25,792) $ (48) $ (3,055)
Balance, ending shares at Jan. 31, 2017 100 62,048 2,782 79,007,423
XML 17 R6.htm IDEA: XBRL DOCUMENT v3.6.0.2
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
6 Months Ended
Jan. 31, 2017
Jan. 31, 2016
Operating activities    
Net loss $ (310) $ (206)
Adjustments to reconcile net loss to net cash used in operating activities    
Depreciation and amortization 1
Write down of inventory 99
Loss on disposal of asset (3)
Changes in operating assets and liabilities    
Accounts receivable - trade (6)
Inventories, net 6
Prepaid expenses, deposits and other current assets 32 29
Accounts payable and accrued expenses 133 64
Net cash used in operating activities (55) (106)
Investing activities    
Sale of fixed asset 3
Net cash provided by investing activities 3
Financing activities    
Proceeds from note payable - related party 125
Net cash provided by financing activities 125
Net increase (decrease) in cash (52) 19
Cash, beginning of period 87 40
Cash, end of period $ 35 $ 59
XML 18 R7.htm IDEA: XBRL DOCUMENT v3.6.0.2
Organization and Business
6 Months Ended
Jan. 31, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization and Business

1.             ORGANIZATION AND BUSINESS

 

Organization. Non-Invasive Monitoring Systems, Inc., a Florida corporation (together with its consolidated subsidiaries, the “Company” or “NIMS”), 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 and has licensed the rights to its technology. The Company continues to work on developing and marketing its Exer-Rest® line of acceleration therapeutic platforms based upon unique, patented whole body periodic acceleration (“WBPA”) technology. The Exer-Rest line of acceleration therapeutic platforms currently includes the Exer-Rest AT, AT3800 and AT4700 models.

 

Business. The Company is developing and marketing its Exer-Rest® line of acceleration therapeutic platforms based upon unique, patented whole body periodic acceleration (“WBPA”) technology. The Exer-Rest line of acceleration therapeutic platforms currently includes the Exer-Rest AT, AT3800 and AT4700 models.

 

The Company received revenue from royalties on sales of diagnostic monitoring hardware and software by SensorMedics and from VivoMetrics in prior years. SensorMedics indicated they will discontinue licensed product sales after current inventory is depleted and, therefore, the royalty revenue from SensorMedics is expected to be minimal to none. VivoMetrics ceased operations in July 2009 and filed for Chapter 11 bankruptcy protection in October 2009. Pursuant to VivoMetrics’ approved bankruptcy plan of reorganization, our license with VivoMetrics was assigned to another company; however, there can be no assurance as to the future amount of royalty revenue, if any, that we may derive from this license or from our existing license with SensorMedics. In fiscal year 2009, NIMS began commercial sales of its third generation Exer-Rest therapeutic platforms.

 

During the calendar years 2005 to 2007, the Company designed, developed and manufactured the first Exer-Rest platform (now the Exer-Rest AT), a second generation acceleration therapeutics platform, and updated its operations to promote the Exer-Rest AT overseas as an aid to improve circulation and joint mobility and to relieve minor aches and pains.

 

The Company has developed a third generation of Exer-Rest acceleration therapeutic platforms (designated the Exer-Rest AT3800 and the Exer-Rest AT4700) that has been manufactured by Sing Lin Technologies Co. Ltd. (“Sing Lin”) based in Taichung, Taiwan (see Note 10).

 

The Company’s financial statements have been prepared and presented on a basis assuming it will continue as a going concern. As reflected in the accompanying unaudited condensed consolidated financial statements, the Company had net losses of approximately $310,000 and $206,000 for the six month periods ending January 31, 2017 and 2016, respectively, and has experienced cash outflows from operating activities. The Company also has an accumulated deficit of $25.8 million as of January 31, 2017, and has potential purchase obligations at January 31, 2017 (see note 10). The Company had $35,000 of cash at January 31, 2017 and negative working capital of approximately $3,055,000. These matters raise substantial doubt about the Company’s ability to continue as a going concern.

 

The Company is continuing its business activities without any significant revenues from product sales. Absent any significant revenues from product sales, the Company is seeking debt or equity financing or a strategic collaboration. 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 condensed consolidated financial statements do not include any adjustments that might be necessary from the outcome of this uncertainty.

XML 19 R8.htm IDEA: XBRL DOCUMENT v3.6.0.2
Summary of Significant Accounting Policies
6 Months Ended
Jan. 31, 2017
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

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 material inter-company accounts and transactions have been eliminated in consolidation.

 

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, such as accounts receivable, warranty accrual, deferred taxes, and the input variables for stock based compensation as estimates, that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. 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 $35,000 and $87,000, on deposit in bank operating accounts at January 31, 2017 and July 31, 2016, respectively.

 

Allowances for Doubtful Accounts. Royalties and other receivables are recorded at the stated amount of the transactions. The Company provides an allowance for royalties and other receivables it believes it may not collect in full. Receivables are written off when they are deemed to be uncollectible and all collection attempts have ceased. The amount of bad debt recorded each period and the resulting adequacy of the allowance at the end of each period are determined using a combination of the Company’s historical loss experience, customer-by-customer analysis of the Company’s accounts receivable each period and subjective assessments of the Company’s future bad debt exposure.

 

Inventories. Inventories are stated at lower of cost or net realizable value using the first-in, first-out method, and are evaluated at least annually for impairment. Inventories at January 31, 2017 and July 31, 2016 primarily consist of finished Exer-Rest units and accessories. Provisions for potentially obsolete or slow-moving inventory are made based on management’s analysis of inventory levels, historical obsolescence and future sales forecasts.

 

Tooling and Equipment. These assets are stated at cost and depreciated or amortized using the straight-line method, over their estimated useful lives.

 

Long-lived Assets. The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. In performing the review for recoverability, the Company estimates the future undiscounted cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future cash flows is less than the carrying amount of the assets, an impairment loss is recognized as the difference between the fair value and the carrying amount of the asset.

 

Taxes Assessed on Revenue-Producing Transactions. The Company presents sales taxes assessed on revenue-producing transactions between a seller and customer using the net presentation; thus, sales and cost of revenues are not affected by such taxes.

 

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. Tax years ranging from 2012 to 2016 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.

 

Revenue Recognition. Revenue from product sales is recognized when persuasive evidence of an arrangement exists, the goods are shipped and title has transferred, the price is fixed or determinable, and the collection of the sales proceeds is reasonably assured. The Company recognizes royalties as they are earned, based on reports from licensees. Research and consulting revenue and revenue from sales of extended warranties on therapeutic platforms are recognized over the term of the respective agreements.

 

Advertising Costs. The Company expenses all costs of advertising and promotions as incurred. There were no advertising and promotional costs incurred for the three and six months ended January 31, 2017 and 2016.

 

Research and Development Costs. Research and development costs are expensed as incurred, and primarily consist of payments to third parties for research and development of the Exer-Rest device and regulatory testing and other costs to obtain FDA approval.

 

Warranties. The Company’s warranties are two years on all Exer-Rest products sold domestically and one year for products sold outside of the U.S. and are accrued based on management’s estimates and the history of warranty costs incurred. There were no material warranty costs incurred during the three and six months ended January 31, 2017 and 2016, and management estimates that the Company’s accrued warranty expense at January 31, 2017 will be sufficient to offset claims made for units under warranty.

 

Stock-based compensation. The Company recognizes all share-based payments, including grants of stock options, as operating costs and expenses, based on their grant date fair values. Stock-based compensation expense is recognized over the vesting life of the underlying stock options and is included in selling, general and administrative costs and expenses in the condensed consolidated comprehensive statements of operations for all periods presented.

 

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, 2017 and July 31, 2016. The respective carrying value of certain on-balance-sheet financial instruments such as cash and cash equivalents, royalties and other receivables, accounts payable and accrued expenses approximate fair values because they are short term in nature or they bear current market interest rates. As of January 31, 2017, the respective carrying value of the notes payable – related party and notes payable – other approximate our current borrowing rate for similar debt instruments of comparable maturity and are considered Level 3 measurements within the fair value hierarchy.

 

Foreign Currency Translation. The functional currency for the Company’s foreign subsidiary is the local currency. Assets and liabilities are translated at exchange rates in effect at the balance sheet date while income and expense amounts are translated at average exchange rates during the period. The resulting foreign currency translation adjustments are disclosed as a separate component of stockholders’ deficit and other comprehensive loss.

 

Comprehensive Income (Loss). Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources, including foreign currency translations.

 

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 regards to legal costs, we record such costs as incurred.

 

Recent Accounting Pronouncements. In May 2014, the FASB issued an accounting standard update which affects the revenue recognition of entities that enter into either (1) certain contracts to transfer goods or services to customers or (2) certain contracts for the transfer of nonfinancial assets. The update indicates an entity should recognize revenue in an amount that reflects the consideration the entity expects to be entitled to in exchange for the goods or services transferred by the entity. The update is to be applied to the beginning of the year of implementation or retrospectively and is effective for annual periods beginning after December 15, 2017 and in interim periods in that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently evaluating the effect the update will have on its financial statements.

 

In February 2016, the FASB issued an accounting standard update which amends existing lease guidance. The update requires lessees to recognize a right-of-use asset and related lease liability for many operating leases now currently off-balance sheet under current US GAAP. Accounting by lessors remains largely unchanged from current US GAAP. The update is effective using a modified retrospective approach for fiscal years beginning after December 15, 2018, and interim periods within those years, with early application permitted. The Company is currently evaluating the effect the update will have on its financial statements.

XML 20 R9.htm IDEA: XBRL DOCUMENT v3.6.0.2
Inventories
6 Months Ended
Jan. 31, 2017
Inventory Disclosure [Abstract]  
Inventories

3.             INVENTORIES

 

The Company’s inventory consisted of the following at January 31, 2017 (unaudited) and July 31, 2016 (in thousands):

 

    January 31, 2017     July 31, 2016  
Finished goods   $ -     $ 99  
Total inventories   $ -     $ 99  

 

The Company recorded inventory valuation adjustments of $99,000 for the six months ended January 31, 2017. The $99,000 inventory valuation adjustment for the six months ended January 31, 2017 resulted from management’s business review and related assessment of the net realizable value of the Exer-Rest units. Factors in this determination included the age of inventory, sales not meeting expectations, including no sales of the Exer-Rest inventory units during the six month ended January 31, 2017, and the uncertainty of when and if the Company will expand its sales team, either internal or through an alliance or collaboration, for the Exer-Rest. Only inventory sales were accessories during the six months ended January 31, 2017.

XML 21 R10.htm IDEA: XBRL DOCUMENT v3.6.0.2
Stock-Based Compensation
6 Months Ended
Jan. 31, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Compensation

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 recorded stock-based compensation of $0, for the three and six months ended January 31, 2017 and for the three and six months ended January 31, 2016. Historically, all stock-based compensation was included in the Company’s selling, general and administrative costs and expenses.

 

The Company’s 2000 Stock Option Plan (the “2000 Plan”), as amended, provides for the issuance of up to 2,000,000 shares of the Company’s Common Stock. The 2000 Plan allows the issuance of incentive stock options, stock appreciation rights and restricted stock awards. The exercise price of the options is determined by the compensation committee of the Company’s Board of Directors, but incentive stock options must be granted at an exercise price not less than the fair market value of the Company’s Common Stock as of the grant date or an exercise price of not less than 110% of the fair value for a 10% shareholder. Options expire up to ten years from the date of the grant and are exercisable according to the terms of the individual option agreements. The 2000 Plan expired on March 1, 2012. No additional grants may be made under the 2000 Plan; however, previously granted options will remain in force pursuant to the terms of the individual grants.

 

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, 2017.

 

The Company did not grant any stock options during the three and six months ended January 31, 2017 and 2016.

 

A summary of the Company’s stock option activity for the six months ended January 31, 2017 is as follows:

 

    Shares     Weighted Average Exercise Price     Weighted average remaining contractual term (years)    

Aggregate

intrinsic

Value

 
Options outstanding, July 31, 2016     200,000     $ 0.430                  
Options granted     -       n/a                  
Options exercised     -       n/a                  
Options forfeited or expired     -       n/a                  
Options outstanding, January 31, 2017     200,000     $ 0.430       0.10       -  
Options expected to vest, January 31, 2017     200,000     $ 0.430       0.10       -  
Options exercisable, January 31 , 2017     200,000     $ 0.430       0.10       -  

 

Of the 200,000 options outstanding at January 31, 2017, 200,000 were issued under the 2000 Plan and none were issued outside of shareholder approved plans. There were no options exercised during the six month period ended January 31, 2017 and 2016. There were no options forfeited or expired during the three and six months ended January 31, 2017, 75,000 options expired during the six month period ended January 31, 2016.

 

As of January 31, 2017, there was no unrecognized costs related to outstanding stock options.

XML 22 R11.htm IDEA: XBRL DOCUMENT v3.6.0.2
Royalties
6 Months Ended
Jan. 31, 2017
Royalties  
Royalties

5.             ROYALTIES

 

The Company is a party to two licensing agreements with SensorMedics and VivoMetrics. The Company previously received royalty income from the sale of its diagnostic monitoring hardware and software from SensorMedics and previously received royalties from VivoMetrics prior to its bankruptcy.

 

There was no royalty income from the SensorMedics license for the three and six months ended January 31, 2017and 2016. SensorMedics indicated they will discontinue licensed product sales after inventory is depleted. We believe SensorMedics inventory is depleted and, therefore, we do not anticipate any future royalty revenue from SensorMedics. There were no royalties recognized from VivoMetrics for the three and six months ended January 31, 2017 and 2016. VivoMetrics ceased operations in July 2009 and filed for Chapter 11 bankruptcy protection in October 2009. Under VivoMetrics’ proposed bankruptcy plan of reorganization, our license with VivoMetrics was assigned to another company; however, there can be no assurance as to the future amount of royalty income, if any, that may result from this license or from our existing license with SensorMedics.

XML 23 R12.htm IDEA: XBRL DOCUMENT v3.6.0.2
Notes Payable
6 Months Ended
Jan. 31, 2017
Debt Disclosure [Abstract]  
Notes Payable

6.             NOTES PAYABLE

 

2010 Credit Facility. On March 31, 2010, the Company entered into a new 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 Company is permitted to borrow and reborrow from time to time under the Credit Facility until July 31, 2017 (the “Credit Facility Maturity Date”). 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. All amounts owing under the Credit Facility are required to be repaid by the Credit Facility Maturity Date, and amounts outstanding are prepayable at any time without premium or penalty. As of January 31, 2017, the Company had drawn an aggregate of $1,000,000 under the Credit Facility and there is no available balance remaining.

 

2011 Promissory Notes. On September 12, 2011, the Company entered into two promissory notes in the principal amount of $50,000 each with Frost Gamma, a trust controlled by Dr. Phillip Frost, which beneficially owns in excess of 10% of the Company’s common stock, and with an unrelated third party for a total of $100,000. The interest rate payable by NIMS on both the Frost Gamma Note and the unrelated third party note is 11% per annum, payable on the maturity date of July 31, 2017 (the “Promissory Notes Maturity Date”). The Company may prepay either or both notes in advance of the Promissory Notes Maturity Date without premium or penalty.

 

2012 Promissory Note. On May 30, 2012, the Company entered into a promissory note in the principal amount of $50,000 with Hsu Gamma, an entity controlled by NIMS’ Chairman of the Board and Interim Chief Executive Officer, Jane H. Hsiao, (the “Hsu Gamma Note”). The interest rate payable by NIMS on the Hsu Gamma Note is 11% per annum, payable on the Promissory Notes Maturity Date. The Hsu Gamma Note may be prepaid in advance of the Promissory Notes Maturity Date without premium or penalty.

 

2013 Promissory Note. On February 22, 2013, the Company entered into a promissory note in the amount of $50,000 with Jane Hsiao, the Company’s Chairman of the Board and Interim Chief Executive Officer (the “2013 Hsiao Note”). The interest rate payable by the Company on the 2013 Hsiao Note is 11% per annum, payable on the Promissory Notes Maturity Date. The 2013 Hsiao Note may be prepaid in advance of the Promissory Notes Maturity Date without premium or penalty.

 

2014 Promissory Note. On September 24, 2014, the Company entered into a promissory note (the “2014 Hsiao Note”) in the principal amount of $50,000 with Jane Hsiao, NIMS’ Chairman of the Board and Interim Chief Executive Officer. The interest rate payable by NIMS on the 2014 Hsiao Note is 11% per annum, payable on the Promissory Notes Maturity Date. The 2014 Hsiao Note may be prepaid in advance of the Promissory Notes Maturity Date without premium or penalty.

 

2015 Promissory Notes. On February 2, 2015, the Company entered into a promissory note (the “2015 Hsiao Note”) in the principal amount of $50,000 with Jane Hsiao, the Company’s Chairman of the Board and Interim Chief Executive Officer. The interest rate payable by the Company on the 2015 Hsiao Note is 11% per annum, payable on the Promissory Notes Maturity Date. The 2015 Hsiao Note may be prepaid in advance of the Promissory Notes Maturity Date without premium or penalty.

 

On April 16, 2015, the Company entered into a promissory note (“April 2015 Frost Gamma Note”) in the amount of $100,000 with Frost Gamma”), a trust controlled by Dr. Phillip Frost, which beneficially owns in excess of 10% of the Company’s common stock. The interest rate payable by the Company on the April 2015 Frost Gamma Note is 11% per annum, payable on the Promissory Notes Maturity Date. The April 2015 Frost Gamma Note may be prepaid in advance of the Promissory Notes Maturity Date without premium or penalty.

 

On August 12, 2015, the Company entered into a promissory note in the principal amount of $25,000 with Frost Gamma (the “August 2015 Frost Gamma Note”), a trust controlled by Dr. Phillip Frost, which beneficially owns in excess of 10% of the Company’s common stock. The interest rate payable by the Company on the August 2015 Frost Gamma Note is 11% per annum, payable on the Promissory Notes Maturity Date. The August 2015 Frost Gamma Note may be prepaid in advance of the Promissory Notes Maturity Date without premium or penalty.

 

On October 27, 2015, the Company entered into a promissory note in the principal amount of $50,000 with Frost Gamma (the “October 2015 Frost Gamma Note”), a trust controlled by Dr. Phillip Frost, which beneficially owns in excess of 10% of the Company’s common stock. The interest rate payable by the Company on the October 2015 Frost Gamma Note is 11% per annum, payable on the Promissory Notes Maturity Date. The October 2015 Frost Gamma Note may be prepaid in advance of the Promissory Notes Maturity Date without premium or penalty.

 

On October 27, 2015, the Company entered into a promissory note in the principal amount of $50,000 with Jane Hsiao, the Company’s Chairman of the Board and Interim Chief Executive Officer (the “October 2015 Hsiao Note”). The interest rate payable by the Company on the October 2015 Hsiao Note is 11% per annum, payable on the Promissory Notes Maturity Date. The October 2015 Hsiao Note may be prepaid in advance of the Promissory Notes Maturity Date without premium or penalty.

  

2016 Promissory Notes. On June 1, 2016, the Company entered into a promissory note in the principal amount of $100,000 with Frost Gamma (the “June 2016 Frost Gamma Note”), a trust controlled by Dr. Phillip Frost, which beneficially owns in excess of 10% of the Company’s common stock. The interest rate payable by the Company on the June 2016 Frost Gamma Note is 11% per annum, payable on the maturity date of July 31, 2017. The June 2016 Frost Gamma Note may be prepaid in advance of the Promissory Notes Maturity Date without premium or penalty.

 

On June 1, 2016, the Company entered into a promissory note in the principal amount of $100,000 with Hsu Gamma, an entity controlled by NIMS’ Chairman of the Board and Interim Chief Executive Officer, Jane H. Hsiao, (the “June 2016 Hsu Gamma Note”). The interest rate payable by NIMS on the June 2016 Hsu Gamma Note is 11% per annum, payable on the Promissory Notes Maturity Date. The June 2016 Hsu Gamma Note may be prepaid in advance of the Promissory Notes Maturity Date without premium or penalty.

 

At January 31, 2017, the Company was obligated under the above described Credit Facility and promissory notes to make future principal payments (excluding interest) as follows:

 

Year Ending January 31,      
       
2017     1,725,000  
    $ 1,725,000  

XML 24 R13.htm IDEA: XBRL DOCUMENT v3.6.0.2
Shareholders' Equity
6 Months Ended
Jan. 31, 2017
Equity [Abstract]  
Shareholders' Equity

7.             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.

 

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.

 

The Company did not issue any shares of the Company’s common stock during the six months ended January 31, 2017 and 2016.

 

No preferred stock dividends were declared for the three and six months ended January 31, 2017 and 2016.

XML 25 R14.htm IDEA: XBRL DOCUMENT v3.6.0.2
Basic and Diluted Loss per Share
6 Months Ended
Jan. 31, 2017
Earnings Per Share [Abstract]  
Basic and Diluted Loss Per Share

8.             BASIC AND DILUTED LOSS PER SHARE

 

Basic net loss per common share is computed by dividing net loss 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, 2017 and 2016, 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.

 

Potential common shares not included in calculating diluted net loss per share are as follows:

 

    January 31, 2017     January 31, 2016  
Stock options     200,000       378,750  
Series C Preferred Stock     1,551,200       1,551,200  
Series D Preferred Stock     13,910,000       13,910,000  
Total     15,661,200       15,839,950  

XML 26 R15.htm IDEA: XBRL DOCUMENT v3.6.0.2
Related Party Transactions
6 Months Ended
Jan. 31, 2017
Related Party Transactions [Abstract]  
Related Party Transactions

9.             RELATED PARTY TRANSACTIONS

 

The Company signed a five year lease for office space in Miami, Florida with a company owned 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 continued on a month-to-month basis. In February 2016, the office space rent was reduced to $0 per month. The Company did not record any rent expense related to the Miami lease for the three and six months ended January 31, 2017. The Company recorded rent expense related to the Miami lease of approximately $0 and $3,800 respectively, for the three and six months ended January 31, 2016.

 

The Company signed a three year lease for warehouse space in Hialeah, Florida with a company jointly controlled by Dr. Frost and Dr. Jane Hsiao, the Company’s Chairman and Interim CEO. The rental payments under the Hialeah warehouse lease, which commenced February 1, 2009 and expired on January 31, 2012, were approximately $5,000 per month for the first year and were subsequently on a month-to-month basis following the expiration of the lease. As further described in Note 10, the Company vacated the Hialeah warehouse in September 2014 and entered into a new lease with an unrelated third party. The Company did not records any rent expense related to the Hialeah warehouse for the three and six months ended January 31, 2017 and 2016.

 

Accounts payable related to the two leases above totaled approximately $191,000 as of January 31, 2017 and July 31, 2016.

 

The Company has the Credit Facility and multiple notes payable outstanding to related parties, as more fully described in Note 6 to these consolidated financial statements.

 

The Company incurred interest expense related to the Credit Facility of approximately $28,000 and $55,000 for the three and six months ended January 31, 2017 and 2016. The Company also incurred interest expense related to the promissory notes of approximately $20,000 and $40,000 for the three and six months ended January 31, 2017 and $7,000 and $14,000 for the three and six months ended January 31, 2016. Approximately $906,000 and $810,000 of accrued interest remained outstanding at January 31, 2017 and July 31, 2016, respectively.

 

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 manufacturer, BioCardia, Inc. (“Biocardia”) (formerly known as Tiger X Medical, Inc.), Cogint, Inc. (“Cogint”) (formerly known as IDI, Inc.), a publicly-traded data fusion company and VBI Vaccines Inc, a vaccine development 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. Since December 2009, the Company’s Chief Legal Officer has served under a similar cost sharing arrangement as Corporate Counsel of Cogint, as the Chief Legal Officer of TransEnterix and as Chief Legal Officer of BioCardia through October 2016.

 

The Company recorded to selling, general and administrative costs and expenses to account for the sharing of costs under these arrangements of $9,000 and $18,000, respectively, for the three and six months ended January 31, 2017, and $9,000 and $18,000, respectively, for the three and six months ended January 31, 2016. Accounts payable to TransEnterix related to these arrangements totaled approximately $1,000 and $1,200 at January 31, 2017 and July 31, 2016.

XML 27 R16.htm IDEA: XBRL DOCUMENT v3.6.0.2
Commitments and Contingencies
6 Months Ended
Jan. 31, 2017
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

10.             COMMITMENTS AND CONTINGENCIES

 

Leases.

 

The Company is 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 house 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 have exercised our option to renew the lease and extended the expiration to September 15, 2017.

 

Generally, the lease agreements require the payment of base rent plus escalations for increases in building operating costs and real estate taxes. Rental expense for operating leases amounted to $22,000 and $30,000 for the six months ended January 31, 2017 and 2016, respectively.

 

Future minimum rental commitments under non-cancelable leases are approximately as follows for the years ended July 31:

 

2017     7,000  
Total   $ 7,000  

 

Product Development and Supply Agreement.

 

On September 4, 2007, the Company entered into a Product Development and Supply Agreement (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 Agreement commenced as of September 3, 2007 and had a term that extended three years from the acceptance by NIMS of the first run of production units. Thereafter, the Agreement automatically renewed for successive one year terms unless either party sent the other a notice of non-renewal. Either party was permitted to terminate the Agreement with ninety days prior written notice. Upon termination, each party’s obligations under the Agreement were to be limited to obligations related to confirm orders placed prior to the termination date.

 

Pursuant to the Agreement, Sing Lin designed, developed and manufactured the tooling required to manufacture the acceleration therapeutic platforms for a total cost to the Company of $471,000. Sing Lin utilized the tooling in the performance of its production obligations under the Agreement. The Company paid Sing Lin $150,000 of the tooling cost upon execution of the Agreement and $150,000 upon the Company’s approval of the product prototype concepts and designs. The balance of the final tooling cost became due and payable in September 2008 upon acceptance of the first units produced using the tooling, and was paid in full during the year ended July 31, 2009.

 

Under the now-terminated Agreement, the Company also granted Sing Lin the exclusive distribution rights for the products in certain countries in the Far East, including Taiwan, China, Japan, South Korea, Malaysia, Indonesia and certain other countries. Sing Lin agreed not to sell the Products outside its geographic areas in the Far East.

 

The Agreement provided for the Company to purchase approximately $2.6 million of Exer-Rest units within one year of the September 2008 acceptance of the final product. The Agreement further provided for the Company to purchase $4.1 million and $8.8 million of Exer-Rest products in the second and third years following such acceptance, respectively. These minimum purchase amounts were based upon 2007 product costs multiplied by volume commitments. Through January 31, 2017, the Company had paid Sing Lin $1.7 million in connection with orders placed through that date. As of January 31, 2017, the Company has approximately $41,000 of payables due to Sing Lin. As of January 31, 2017, aggregate minimum future purchases under the Agreement totaled approximately $13.9 million.

 

As of January 31, 2017, the Company had not placed orders sufficient to meet the first-year or second-year minimum purchase obligations under the Agreement. 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. As of the date of the issuance of these financial statements Sing Lin has not followed up on its July 2010 demand. There can be no assurance that Sing Lin will not attempt to enforce its remedies under the Agreement, or pursue other potential remedies.

XML 28 R17.htm IDEA: XBRL DOCUMENT v3.6.0.2
Risks and Uncertainties and Concentrations of Risk
6 Months Ended
Jan. 31, 2017
Risks and Uncertainties [Abstract]  
Risks and Uncertainties and Concentrations of Risk

11.             RISKS AND UNCERTAINTIES AND CONCENTRATIONS OF RISK

 

Financial instruments that potentially subject the Company to risk consist principally of cash, royalties and other receivables, and purchases and advances to contract manufacturer.

 

Cash. The Company does not have cash deposits in excess of the Federal Deposit Insurance Corporation (“FDIC”) limit.

 

Inventories: The provision on inventory is an estimate based on multiple factors as further described in Note 3. The ultimate realization of the inventory amounts may be materially different. During 2016, the Company did not renew its FDA registration for the Exer-Rest and as of the date of these financial statement, the Company had started the process to renew its registration and does not anticipate any significant delays or effects on operations. If the registration were to be rejected or significantly delayed, the Company’s sales could be affected. Also, during 2016, the Company did not renew its International Organization for standardization (“ISO”) certification which could prevent sales from being permitted in Europe and other areas that may require ISO certification. The Company does not anticipate this will significantly affect its expected revenues, in part because the Company does not anticipate significant potential future revenues from Europe.

 

Royalties and Other Receivables. The Company currently grants credit to a limited number of customers, substantially all of whom are corporations and medical providers located throughout the United States and Canada. The Company typically does not require collateral from these customers.

 

Purchases from and Advances to Contract Manufacturer. Substantially all of the Company’s current inventory has been acquired from Sing Lin pursuant to the now-terminated Agreement. The Company notified Sing Lin in June 2010 that it was terminating the agreement effective September 2010. If the Company is unable to establish a contract and obtain a sufficient alternative supply from Sing Lin or another supplier, it may not be able to procure additional inventory on a timely basis or in the quantities required. Sing Lin and its subcontractors currently maintain custody of the Company’s specialized tooling, which could adversely impact the Company’s ability to reallocate production to other vendors.

 

Major Customers. Substantially all of the Company’s revenue for the year ended July 31, 2016 resulted from sales from 1 customer who was a distributor outside the United States. There is no guarantee such sales will be made in the future to this customer. Sales to foreign distributors generally require prepayment by such distributors or letter of credit guarantees in respect of payments by such distributors.

XML 29 R18.htm IDEA: XBRL DOCUMENT v3.6.0.2
Summary of Significant Accounting Policies (Policies)
6 Months Ended
Jan. 31, 2017
Accounting Policies [Abstract]  
Consolidation

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 material inter-company accounts and transactions have been eliminated in consolidation.

Use of Estimates

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, such as accounts receivable, warranty accrual, deferred taxes, and the input variables for stock based compensation as estimates, that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from these estimates.

Cash and Cash Equivalents

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 $35,000 and $87,000, on deposit in bank operating accounts at January 31, 2017 and July 31, 2016, respectively.

Allowances for Doubtful Accounts

Allowances for Doubtful Accounts. Royalties and other receivables are recorded at the stated amount of the transactions. The Company provides an allowance for royalties and other receivables it believes it may not collect in full. Receivables are written off when they are deemed to be uncollectible and all collection attempts have ceased. The amount of bad debt recorded each period and the resulting adequacy of the allowance at the end of each period are determined using a combination of the Company’s historical loss experience, customer-by-customer analysis of the Company’s accounts receivable each period and subjective assessments of the Company’s future bad debt exposure.

Inventories

Inventories. Inventories are stated at lower of cost or net realizable value using the first-in, first-out method, and are evaluated at least annually for impairment. Inventories at January 31, 2017 and July 31, 2016 primarily consist of finished Exer-Rest units and accessories. Provisions for potentially obsolete or slow-moving inventory are made based on management’s analysis of inventory levels, historical obsolescence and future sales forecasts.

Tooling and Equipment

Tooling and Equipment. These assets are stated at cost and depreciated or amortized using the straight-line method, over their estimated useful lives.

Long-lived Assets

Long-lived Assets. The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. In performing the review for recoverability, the Company estimates the future undiscounted cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future cash flows is less than the carrying amount of the assets, an impairment loss is recognized as the difference between the fair value and the carrying amount of the asset.

Taxes Assessed on Revenue-Producing Transactions

Taxes Assessed on Revenue-Producing Transactions. The Company presents sales taxes assessed on revenue-producing transactions between a seller and customer using the net presentation; thus, sales and cost of revenues are not affected by such taxes.

Income Taxes

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. Tax years ranging from 2012 to 2016 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.

Revenue Recognition

Revenue Recognition. Revenue from product sales is recognized when persuasive evidence of an arrangement exists, the goods are shipped and title has transferred, the price is fixed or determinable, and the collection of the sales proceeds is reasonably assured. The Company recognizes royalties as they are earned, based on reports from licensees. Research and consulting revenue and revenue from sales of extended warranties on therapeutic platforms are recognized over the term of the respective agreements.

Advertising Costs

Advertising Costs. The Company expenses all costs of advertising and promotions as incurred. There were no advertising and promotional costs incurred for the three and six months ended January 31, 2017 and 2016.

Research and Development Costs

Research and Development Costs. Research and development costs are expensed as incurred, and primarily consist of payments to third parties for research and development of the Exer-Rest device and regulatory testing and other costs to obtain FDA approval.

Warranties

Warranties. The Company’s warranties are two years on all Exer-Rest products sold domestically and one year for products sold outside of the U.S. and are accrued based on management’s estimates and the history of warranty costs incurred. There were no material warranty costs incurred during the three and six months ended January 31, 2017 and 2016, and management estimates that the Company’s accrued warranty expense at January 31, 2017 will be sufficient to offset claims made for units under warranty.

Stock-based Compensation

Stock-based compensation. The Company recognizes all share-based payments, including grants of stock options, as operating costs and expenses, based on their grant date fair values. Stock-based compensation expense is recognized over the vesting life of the underlying stock options and is included in selling, general and administrative costs and expenses in the condensed consolidated comprehensive statements of operations for all periods presented.

Fair Value of Financial Instruments

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, 2017 and July 31, 2016. The respective carrying value of certain on-balance-sheet financial instruments such as cash and cash equivalents, royalties and other receivables, accounts payable and accrued expenses approximate fair values because they are short term in nature or they bear current market interest rates. As of January 31, 2017, the respective carrying value of the notes payable – related party and notes payable – other approximate our current borrowing rate for similar debt instruments of comparable maturity and are considered Level 3 measurements within the fair value hierarchy.

Foreign Currency Translation

Foreign Currency Translation. The functional currency for the Company’s foreign subsidiary is the local currency. Assets and liabilities are translated at exchange rates in effect at the balance sheet date while income and expense amounts are translated at average exchange rates during the period. The resulting foreign currency translation adjustments are disclosed as a separate component of stockholders’ deficit and other comprehensive loss.

Comprehensive Income (Loss)

Comprehensive Income (Loss). Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources, including foreign currency translations.

Loss Contingencies

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 regards to legal costs, we record such costs as incurred.

Recent Accounting Pronouncements

Recent Accounting Pronouncements. In May 2014, the FASB issued an accounting standard update which affects the revenue recognition of entities that enter into either (1) certain contracts to transfer goods or services to customers or (2) certain contracts for the transfer of nonfinancial assets. The update indicates an entity should recognize revenue in an amount that reflects the consideration the entity expects to be entitled to in exchange for the goods or services transferred by the entity. The update is to be applied to the beginning of the year of implementation or retrospectively and is effective for annual periods beginning after December 15, 2017 and in interim periods in that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently evaluating the effect the update will have on its financial statements.

 

In February 2016, the FASB issued an accounting standard update which amends existing lease guidance. The update requires lessees to recognize a right-of-use asset and related lease liability for many operating leases now currently off-balance sheet under current US GAAP. Accounting by lessors remains largely unchanged from current US GAAP. The update is effective using a modified retrospective approach for fiscal years beginning after December 15, 2018, and interim periods within those years, with early application permitted. The Company is currently evaluating the effect the update will have on its financial statements.

XML 30 R19.htm IDEA: XBRL DOCUMENT v3.6.0.2
Inventories (Tables)
6 Months Ended
Jan. 31, 2017
Inventory Disclosure [Abstract]  
Schedule of Inventory

The Company’s inventory consisted of the following at January 31, 2017 (unaudited) and July 31, 2016 (in thousands):

 

    January 31, 2017     July 31, 2016  
Finished goods   $ -     $ 99  
Total inventories   $ -     $ 99  

XML 31 R20.htm IDEA: XBRL DOCUMENT v3.6.0.2
Stock-Based Compensation (Tables)
6 Months Ended
Jan. 31, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Schedule of Share-based Compensation Stock Options Activity

A summary of the Company’s stock option activity for the six months ended January 31, 2017 is as follows:

 

    Shares     Weighted Average Exercise Price     Weighted average remaining contractual term (years)    

Aggregate

intrinsic

Value

 
Options outstanding, July 31, 2016     200,000     $ 0.430                  
Options granted     -       n/a                  
Options exercised     -       n/a                  
Options forfeited or expired     -       n/a                  
Options outstanding, January 31, 2017     200,000     $ 0.430       0.10       -  
Options expected to vest, January 31, 2017     200,000     $ 0.430       0.10       -  
Options exercisable, January 31 , 2017     200,000     $ 0.430       0.10       -  

XML 32 R21.htm IDEA: XBRL DOCUMENT v3.6.0.2
Notes Payable (Tables)
6 Months Ended
Jan. 31, 2017
Debt Disclosure [Abstract]  
Schedule of Credit Facility and Promissory Notes to Future Principal Payments

At January 31, 2017, the Company was obligated under the above described Credit Facility and promissory notes to make future principal payments (excluding interest) as follows:

 

Year Ending January 31,      
       
2017     1,725,000  
    $ 1,725,000  

XML 33 R22.htm IDEA: XBRL DOCUMENT v3.6.0.2
Basic and Diluted Loss per Share (Tables)
6 Months Ended
Jan. 31, 2017
Earnings Per Share [Abstract]  
Schedule of Common Shares Not Included in Calculation of Diluted Net Loss Per Share

Potential common shares not included in calculating diluted net loss per share are as follows:

 

    January 31, 2017     January 31, 2016  
Stock options     200,000       378,750  
Series C Preferred Stock     1,551,200       1,551,200  
Series D Preferred Stock     13,910,000       13,910,000  
Total     15,661,200       15,839,950  

XML 34 R23.htm IDEA: XBRL DOCUMENT v3.6.0.2
Commitments and Contingencies (Tables)
6 Months Ended
Jan. 31, 2017
Commitments and Contingencies Disclosure [Abstract]  
Schedule of Future Minimum Rental Commitments Under Non-cancelable Leases

Future minimum rental commitments under non-cancelable leases are approximately as follows for the years ended July 31:

 

2017     7,000  
Total   $ 7,000  

XML 35 R24.htm IDEA: XBRL DOCUMENT v3.6.0.2
Organization and Business (Details Narrative) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jan. 31, 2017
Jan. 31, 2016
Jan. 31, 2017
Jan. 31, 2016
Jul. 31, 2016
Jul. 31, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]            
Net income (loss) $ 183 $ 111 $ 310 $ 206    
Accumulated deficit 25,792   25,792   $ 25,482  
Cash 35 $ 59 35 $ 59 $ 87 $ 40
Negative working capital $ 3,055   $ 3,055      
XML 36 R25.htm IDEA: XBRL DOCUMENT v3.6.0.2
Summary of Significant Accounting Policies (Details Narrative) - USD ($)
$ in Thousands
6 Months Ended
Jan. 31, 2017
Jan. 31, 2016
Jul. 31, 2016
Jul. 31, 2015
Cash $ 35 $ 59 $ 87 $ 40
Advertising and promotional costs    
Warranty costs    
Foreign currency translation adjustments    
Exer-Rest Products [Member] | U.S. [Member]        
Product warranties period 2 years      
Exer-Rest Products [Member] | Outside U.S. [Member]        
Product warranties period 1 year      
Minimum [Member]        
Income tax examination year 2012      
Maximum [Member]        
Income tax examination year 2016      
XML 37 R26.htm IDEA: XBRL DOCUMENT v3.6.0.2
Inventories (Details Narrative)
$ in Thousands
Jan. 31, 2017
USD ($)
Inventory valuation adjustments $ 99
Exer Rest Units [Member]  
Inventory valuation adjustments $ 99
XML 38 R27.htm IDEA: XBRL DOCUMENT v3.6.0.2
Inventories - Schedule of Inventory (Details) - USD ($)
$ in Thousands
Jan. 31, 2017
Jul. 31, 2016
Inventory Disclosure [Abstract]    
Finished goods $ 99
Total inventories $ 99
XML 39 R28.htm IDEA: XBRL DOCUMENT v3.6.0.2
Stock-Based Compensation (Details Narrative) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jan. 31, 2017
Jan. 31, 2016
Jan. 31, 2017
Jan. 31, 2016
Jul. 31, 2016
Nov. 30, 2010
Allocated Share-based compensation expense $ 0 $ 0 $ 0 $ 0    
Share-based compensation options outstanding 200,000   200,000   200,000  
Share-based compensation options forfeited or expired     75,000    
Share-based compensation options exercised        
Unrecognized costs related to outstanding stock options        
2011 Stock Incentive Plan [Member]            
Maximum number of shares authorized for issuance under the plan           4,000,000
2000 Stock Option Plan [Member]            
Maximum number of shares authorized for issuance under the plan 2,000,000   2,000,000      
Share-based compensation options outstanding 200,000   200,000      
2000 Stock Option Plan [Member]            
Share-based compensation, Description     The exercise price of the options is determined by the compensation committee of the Company’s Board of Directors, but incentive stock options must be granted at an exercise price not less than the fair market value of the Company’s Common Stock as of the grant date or an exercise price of not less than 110% of the fair value for a 10% shareholder.      
Stock option plan expiration date     Mar. 01, 2012      
2000 Stock Option Plan [Member] | Maximum [Member]            
Options expire term     10 years      
XML 40 R29.htm IDEA: XBRL DOCUMENT v3.6.0.2
Stock-Based Compensation - Schedule of Share-based Compensation Stock Options Activity (Details) - USD ($)
$ / shares in Units, $ in Thousands
6 Months Ended
Jan. 31, 2017
Jan. 31, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]    
Options outstanding shares, beginning balance 200,000  
Options granted  
Options exercised
Options forfeited or expired  
Options outstanding shares, ending balance 200,000  
Options expected to vest, shares 200,000  
Options exercisable, shares 200,000  
Weighted average exercise price options outstanding, beginning balance $ 0.430  
Weighted average exercise price options granted  
Weighted average exercise price options exercised  
Weighted average exercise price options forfeited or expired  
Weighted average exercise price options outstanding, ending balance 0.430  
Weighted average exercise price options expected to vest 0.430  
Weighted average exercise price options exercisable $ 0.430  
Weighted average remaining contractual term (years) options outstanding 1 month 6 days  
Weighted average remaining contractual term (years) options expected to vest 1 month 6 days  
Weighted average remaining contractual term (years) options exercisable 1 month 6 days  
Aggregate intrinsic value options outstanding $ 0  
Aggregate intrinsic value options expected to vest 0  
Aggregate intrinsic value options exercisable $ 0  
XML 41 R30.htm IDEA: XBRL DOCUMENT v3.6.0.2
Royalties (Details Narrative) - USD ($)
3 Months Ended 6 Months Ended
Jan. 31, 2017
Jan. 31, 2016
Jan. 31, 2017
Jan. 31, 2016
SensorMedics [Member]        
Royalty income
XML 42 R31.htm IDEA: XBRL DOCUMENT v3.6.0.2
Notes Payable (Details Narrative) - USD ($)
$ in Thousands
6 Months Ended
Jun. 01, 2016
Sep. 12, 2011
Mar. 31, 2010
Jan. 31, 2017
Jan. 31, 2016
Oct. 27, 2015
Aug. 12, 2015
Apr. 16, 2015
Feb. 02, 2015
Sep. 24, 2014
Feb. 22, 2013
May 30, 2012
Short-term Debt [Line Items]                        
Proceeds from unrelated third party       $ 125              
Frost Gamma Investment Trust [Member] | 2011 Promissory Notes [Member]                        
Short-term Debt [Line Items]                        
Beneficial ownership percentage   10.00%                    
Aggregate principal amount   $ 50                    
Debt instrument maturity date   Jul. 31, 2017                    
Debt instrument interest rate   11.00%                    
Proceeds from unrelated third party   $ 100                    
Frost Gamma Investment Trust [Member] | 2015 Promissory Note [Member]                        
Short-term Debt [Line Items]                        
Beneficial ownership percentage           10.00% 10.00% 10.00%        
Aggregate principal amount           $ 50 $ 25 $ 100        
Debt instrument interest rate           11.00% 11.00% 11.00%        
Frost Gamma Investment Trust [Member] | 2016 Promissory Note [Member]                        
Short-term Debt [Line Items]                        
Beneficial ownership percentage 10.00%                      
Aggregate principal amount $ 100                      
Debt instrument maturity date Jul. 31, 2017                      
Debt instrument interest rate 11.00%                      
Hsu Gamma Investments L P [Member] | 2012 Promissory Note [Member]                        
Short-term Debt [Line Items]                        
Aggregate principal amount                       $ 50
Debt instrument interest rate                       11.00%
Jane Hsiao [Member] | 2013 Promissory Note [Member]                        
Short-term Debt [Line Items]                        
Aggregate principal amount                     $ 50  
Debt instrument interest rate                     11.00%  
Jane Hsiao [Member] | 2014 Promissory Note [Member]                        
Short-term Debt [Line Items]                        
Aggregate principal amount                   $ 50    
Debt instrument interest rate                   11.00%    
Jane Hsiao [Member] | 2015 Promissory Note [Member]                        
Short-term Debt [Line Items]                        
Aggregate principal amount           $ 50     $ 50      
Debt instrument interest rate           11.00%     11.00%      
Hsu Gamma [Member] | 2016 Promissory Note [Member]                        
Short-term Debt [Line Items]                        
Aggregate principal amount $ 100                      
Debt instrument interest rate 11.00%                      
2010 Credit Facility [Member] | Frost Gamma and Hsu Gamma [Member]                        
Short-term Debt [Line Items]                        
Beneficial ownership percentage     10.00%                  
Aggregate principal amount     $ 1,000                  
Debt instrument maturity date     Jul. 31, 2017                  
Debt instrument interest rate     11.00%                  
2010 Credit Facility [Member] | Frost Gamma and Hsu Gamma [Member] | Maximum [Member]                        
Short-term Debt [Line Items]                        
Debt instrument interest rate     16.00%                  
Credit Facility [Member]                        
Short-term Debt [Line Items]                        
Line of credit facility outstanding       $ 1,000                
XML 43 R32.htm IDEA: XBRL DOCUMENT v3.6.0.2
Notes Payable - Schedule of Credit Facility and Promissory Notes to Future Principal Payments (Details)
$ in Thousands
Jan. 31, 2017
USD ($)
Debt Disclosure [Abstract]  
2017 $ 1,725
Total $ 1,725
XML 44 R33.htm IDEA: XBRL DOCUMENT v3.6.0.2
Shareholders' Equity (Details Narrative) - $ / shares
3 Months Ended 6 Months Ended
Jan. 31, 2017
Jan. 31, 2016
Jan. 31, 2017
Jan. 31, 2016
Subsidiary, Sale of Stock [Line Items]        
Preferred stock dividend declared
Series B Preferred Stock [Member]        
Subsidiary, Sale of Stock [Line Items]        
Preferred stock liquidation preference 100   100  
Dividends payable amount per share 10   10  
Series C Preferred Stock [Member]        
Subsidiary, Sale of Stock [Line Items]        
Preferred stock liquidation preference 1.00   1.00  
Dividends payable amount per share 0.10   0.10  
Preferred stock, redemption price per share $ 0.10   $ 0.10  
Convertible preferred stock, shares issued upon conversion 25   25  
Preferred stock conversion premium price per share $ 4.20   $ 4.20  
Preferred stock, conversion basis     Each share of Series C Preferred Stock is convertible into 25 shares  
Series D Preferred Stock [Member]        
Subsidiary, Sale of Stock [Line Items]        
Preferred stock liquidation preference $ 1,500   $ 1,500  
Convertible preferred stock, shares issued upon conversion 5,000   5,000  
Preferred stock, conversion basis     Each share of Series D Preferred Stock is convertible into 5,000 shares of the Company's common stock.  
XML 45 R34.htm IDEA: XBRL DOCUMENT v3.6.0.2
Basic and Diluted Loss per Share - Schedule of Common Shares Not Included in Calculation of Diluted Net Loss Per Share (Details) - shares
6 Months Ended
Jan. 31, 2017
Jan. 31, 2016
Class of Stock [Line Items]    
Total 15,661,200 15,839,950
Series C Preferred Stock [Member]    
Class of Stock [Line Items]    
Total 1,551,200 1,551,200
Series D Preferred Stock [Member]    
Class of Stock [Line Items]    
Total 13,910,000 13,910,000
Stock Options [Member]    
Class of Stock [Line Items]    
Total 200,000 378,750
XML 46 R35.htm IDEA: XBRL DOCUMENT v3.6.0.2
Related Party Transactions (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended 6 Months Ended
Feb. 29, 2016
Jan. 01, 2008
Feb. 01, 2009
Jan. 31, 2017
Jan. 31, 2016
Jan. 31, 2017
Jan. 31, 2016
Jul. 31, 2016
Related Party Transaction [Line Items]                
Rent expenses $ 0              
Operating leases, rent expense           $ 22,000 $ 30,000  
Accounts payable, related parties       $ 191,000   191,000   $ 191,000
Interest expense       28,000 $ 55,000 28,000 55,000  
Interest expense related to promissory notes       20,000 7,000 40,000 14,000  
Accrued interest       906,000   906,000   810,000
Related party transaction selling general and administrative expenses from transactions with related party       9,000 18,000 9,000 18,000  
Miami Lease [Member]                
Related Party Transaction [Line Items]                
Lease term   5 years            
Lease expire date   Dec. 31, 2012            
Payments for Rent   $ 1,250            
Operating leases, rent expense       0 $ 0 0 3,800  
Dr Phillip Frost [Member]                
Related Party Transaction [Line Items]                
Beneficial ownership percentage   10.00%            
Hialeah Lease [Member]                
Related Party Transaction [Line Items]                
Lease term     3 years          
Lease expire date     Jan. 31, 2012          
Payments for Rent     $ 5,000          
Operating leases, rent expense           0 $ 0  
TransEnterix, Inc [Member]                
Related Party Transaction [Line Items]                
Accounts payable, related parties       $ 1,000   $ 1,000   $ 1,200
XML 47 R36.htm IDEA: XBRL DOCUMENT v3.6.0.2
Commitments and Contingencies (Details Narrative)
$ in Thousands
6 Months Ended
Sep. 04, 2007
USD ($)
Jan. 31, 2017
USD ($)
ft²
Jan. 31, 2016
USD ($)
Area of land | ft²   4,000  
Lease expiration date description   The lease commenced September 15, 2014 and originally expired on September 30, 2015 and we have exercised our option to renew the lease and extended the expiration to September 15, 2017.  
Operating leases, rent expense   $ 22 $ 30
Manufacturing costs $ 471    
Cost of utilities 150    
Payments on approval of product prototype concepts and designs $ 150    
Payments to suppliers   1,700  
Purchase obligation   13,900  
Exer Rest Units [Member]      
Purchase obligation, due in next twelve months   2,600  
Purchase obligation, due in second year   4,100  
Purchase obligation, due in third year   8,800  
Sing Lin [Member]      
Payables to customers   $ 41  
XML 48 R37.htm IDEA: XBRL DOCUMENT v3.6.0.2
Commitments and Contingencies - Schedule of Future Minimum Rental Commitments Under Non-cancelable Leases (Details)
$ in Thousands
Jan. 31, 2017
USD ($)
Commitments and Contingencies Disclosure [Abstract]  
2017 $ 7
Total $ 7
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