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 April 30, 2019 |
or
| [ ] | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Transition Period from _______________ to ____________________ |
Commission File Number 000-13176
| NON-INVASIVE MONITORING SYSTEMS, INC. |
| (Exact name of registrant as specified in its charter) |
| Florida | 59-2007840 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. employer identification no.) |
4400 Biscayne Blvd., Suite 180, Miami, Florida 33137
(Address of principal executive offices) (Zip code)
Registrant’s telephone number, including area code: (305) 575-4207
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | [ ] | Accelerated filer | [ ] | |
| Non-accelerated filer | [ ] | Smaller reporting company | [X] | |
| Emerging growth company | [ ] |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol | Name of each exchange on which registered | ||
Common Stock $0.01 par value per share |
NIMU | OTC Pink |
154,810,655 shares of the Company’s common stock, par value $0.01 per share, were outstanding as of June 14, 2019.
NON-INVASIVE MONITORING SYSTEMS, INC.
TABLE OF CONTENTS FOR FORM 10-Q
| 2 |
NON-INVASIVE MONITORING SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
| April 30, 2019 | July 31, 2018 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | 575 | $ | 90 | ||||
| Prepaid expenses, deposits, and other current assets | 25 | 20 | ||||||
| Total current assets | 600 | 110 | ||||||
| Total assets | $ | 600 | $ | 110 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ | 474 | $ | 1,659 | ||||
| Customer deposits | 4 | 4 | ||||||
| Total current liabilities | 478 | 1,663 | ||||||
| Long term liabilities | ||||||||
| Notes payable – Related Party | - | 2,075 | ||||||
| Notes payable – Other | - | 50 | ||||||
| Total long term liabilities | - | 2,125 | ||||||
| Total liabilities | 478 | 3,788 | ||||||
| Shareholders’ equity (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; 0 and 62,048 shares authorized, issued and outstanding as of April 30, 2019 and July 31, 2018, respectively; liquidation preference $62 at July 31, 2018 | - | 62 | ||||||
| Series D Convertible Preferred Stock, par value $1.00 per share; 0 and 5,500 shares authorized as of April 30, 2019 and July 31, 2018, respectively; 0 and 2,782 shares issued and outstanding as of April 30, 2019 and July 31, 2018, respectively; liquidation preference $4,173 at July 31, 2018 | - | 3 | ||||||
| Common Stock, par value $0.01 per share; 400,000,000 shares authorized; 154,810,655 and 79,007,423 shares issued and outstanding as of April 30, 2019 and July 31, 2018, respectively | 1,548 | 790 | ||||||
| Additional paid in capital | 26,574 | 21,930 | ||||||
| Accumulated deficit | (28,000 | ) | (26,463 | ) | ||||
| Total shareholders’ equity (deficit) | 122 | (3,678 | ) | |||||
| Total liabilities and shareholders’ equity | $ | 600 | $ | 110 | ||||
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 data)
| Three months ended April 30, | Nine months ended April 30, | |||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| Operating costs and expenses | ||||||||||||||||
| Selling, general and administrative | $ | 189 | $ | 55 | $ | 415 | $ | 177 | ||||||||
| Total operating costs and expenses | 189 | 55 | 415 | 177 | ||||||||||||
| Operating loss | (189 | ) | (55 | ) | (415 | ) | (177 | ) | ||||||||
| Other expense | ||||||||||||||||
| Loss on extinguishment of debt | - | - | (1,066 | ) | - | |||||||||||
| Interest expense, net | - | (56 | ) | (93 | ) | (161 | ) | |||||||||
| Total other expense | - | (56 | ) | (1,159 | ) | (161 | ) | |||||||||
| Net loss | $ | (189 | ) | $ | (111 | ) | $ | (1,574 | ) | $ | (338 | ) | ||||
| Weighted average number of common shares outstanding - Basic and diluted | 152,935 | 79,007 | 112,630 | 79,007 | ||||||||||||
| Basic and diluted loss per common share | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.00 | ) | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
NON-INVASIVE MONITORING SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INTERIM CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT) - Unaudited
For the three, six and nine months ended April 30, 2018 and 2019
(Dollars in thousands, except share amounts)
| Preferred Stock | Additional | Accumulated | ||||||||||||||||||||||||||||||||||||||||||
| Series B | Series C | Series D | Common Stock | Paid-in- | Equity | |||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | (Deficit) | Total | ||||||||||||||||||||||||||||||||||
| Balance at July 31, 2017 | 100 | $ | - | 62,048 | $ | 62 | 2,782 | $ | 3 | 79,007,423 | $ | 790 | $ | 21,930 | $ | (26,018 | ) | $ | (3,233 | ) | ||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | (128 | ) | (128 | ) | |||||||||||||||||||||||||||||||
| Balance at October 31, 2017 | 100 | - | 62,048 | 62 | 2,782 | 3 | 79,007,423 | 790 | 21,930 | (26,146 | ) | (3,361 | ) | |||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | (99 | ) | (99 | ) | |||||||||||||||||||||||||||||||
| Balance at January 31, 2018 | 100 | - | 62,048 | 62 | 2,782 | 3 | 79,007,423 | 790 | 21,930 | (26,245 | ) | (3,460 | ) | |||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | (111 | ) | (111 | ) | |||||||||||||||||||||||||||||||
| Balance at April 30, 2018 | 100 | $ | - | 62,048 | $ | 62 | 2,782 | $ | 3 | 79,007,423 | $ | 790 | $ | 21,930 | $ | (26,356 | ) | $ | (3,571 | ) | ||||||||||||||||||||||||
| Preferred Stock | Additional | |||||||||||||||||||||||||||||||||||||||||||
| Series B | Series C | Series D | Common Stock | Paid-in- | Accumulated | |||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||||||||
| Balance at July 31, 2018 | 100 | $ | - | 62,048 | $ | 62 | 2,782 | $ | 3 | 79,007,423 | $ | 790 | $ | 21,930 | $ | (26,463 | ) | $ | (3,678 | ) | ||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | (207 | ) | (207 | ) | |||||||||||||||||||||||||||||||
| Balance at October 31, 2018 | 100 | - | 62,048 | 62 | 2,782 | 3 | 79,007,423 | 790 | 21,930 | (26,670 | ) | (3,885 | ) | |||||||||||||||||||||||||||||||
| Issuance of common stock for cash | - | - | - | - | - | - | 8,571,428 | 86 | 514 | - | 600 | |||||||||||||||||||||||||||||||||
| Issuance of common stock in exchange for extinguishment of debt, accrued interest and accounts payable | - | - | - | - | - | - | 53,321,804 | 533 | 4,266 | - | 4,799 | |||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | (1,178 | ) | (1,178 | ) | |||||||||||||||||||||||||||||||
| Balance at January 31, 2019 | 100 | - | 62,048 | 62 | 2,782 | 3 | 140,900,655 | 1,409 | 26,710 | (27,848 | ) | 336 | ||||||||||||||||||||||||||||||||
| Redemption of Series C Preferred Stock | - | - | (62,048 | ) | (62 | ) | - | - | - | - | - | 37 | (25 | ) | ||||||||||||||||||||||||||||||
| Conversion of Series D Preferred Stock | - | - | - | - | (2,782 | ) | (3 | ) | 13,910,000 | 139 | (136 | ) | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | (189 | ) | (189 | ) | ||||||||||||||||||||||||||||||||||||||
| Balance at April 30, 2019 | 100 | $ | - | - | $ | - | - | $ | - | 154,810,655 | $ | 1,548 | $ | 26,574 | $ | (28,000 | ) | $ | 122 | |||||||||||||||||||||||||
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)
Nine months ended April 30, 2019 and 2018
| 2019 | 2018 | |||||||
| Operating activities | ||||||||
| Net Loss | $ | (1,574 | ) | $ | (338 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Loss on extinguishment of debt | 1,066 | - | ||||||
| Changes in operating assets and liabilities | ||||||||
| Prepaid expenses, deposits and other current assets | (5 | ) | 1 | |||||
| Accounts payable and accrued expenses | 298 | 183 | ||||||
| Net cash used in operating activities | (215 | ) | (154 | ) | ||||
| Financing activities | ||||||||
| Proceeds from issuance of common stock | 600 | - | ||||||
| Proceeds from note payable – related party | 100 | 300 | ||||||
| Net cash provided by financing activities | 700 | 300 | ||||||
| Net increase in cash | 485 | 146 | ||||||
| Cash, beginning of period | 90 | 11 | ||||||
| Cash, end of period | $ | 575 | $ | 157 | ||||
| Supplemental disclosure of non-cash financing activity | ||||||||
| Accounts payable and accrued expenses extinguished for issuance of common stock | $ | 1,508 | $ | - | ||||
| Notes payable extinguished for issuance of common stock | $ | 2,225 | $ | - | ||||
| Accrued redemption for Series D Preferred Stock | $ | 25 | $ | - | ||||
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)
April 30, 2019
The following (a) condensed consolidated balance sheet as of April 30, 2019, 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 April 30, 2019, and results of operations and cash flows for the interim periods ended April 30, 2019 and 2018. The results of operations for the three and nine months ended April 30, 2019, 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, 2018. 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, 2018.
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. The Company has developed and marketed its Exer-Rest® line of acceleration therapeutic platforms based upon unique, patented whole body periodic acceleration (“WBPA”) technology of which the Company maintains patents.
Business. 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 then 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 8).
The Company continues researching the development of a next generation Exer-Rest® line of acceleration therapeutic platforms. The goal for this fourth generation Exer-Rest model is to be more portable than the current models and reduce cost to manufacture.
The Company’s condensed 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 $1,574,000 and $338,000 for the nine month periods ended April 30, 2019 and 2018, respectively, and has experienced cash outflows from operating activities. The Company also has an accumulated deficit of approximately $28.0 million as of April 30, 2019 and has potential purchase obligations at April 30, 2019 (see note 8). The Company had $575,000 of cash at April 30, 2019 and working capital of approximately $122,000. These matters raise substantial doubt about the Company’s ability to continue as a going concern.
| 7 |
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.
Equity Exchange Agreement. On December 3, 2018, the Company entered into an Equity Exchange Agreement, as amended on April 17, 2019 by Amendment No. 1 and as amended on June 3, 2019 by Amendment No. 2, with IRA Financial Trust Company, a South Dakota trust corporation (“IRA Trust”), IRA Financial Group LLC, a Florida limited liability company (“IRAFG” and, together with IRA Trust, “IRA Financial”), and their respective equity holders (the “Equityholders”). Upon the terms and subject to the conditions contained in the Exchange Agreement, the Company will issue to the Equityholders shares of a newly-designated series of its convertible preferred stock (the “Exchange Shares”) in exchange for 100% of the issued and outstanding equity in IRA Financial (the “Exchange”).
Upon consummation of the Exchange, the Exchange Shares, on an as-converted basis, will comprise 85% of the issued and outstanding shares of the Company’s common stock.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Non-Invasive Monitoring Systems of Florida, Inc., which has no current operations, and NIMS of Canada, Inc., a Canadian corporation, which has no current operations. All inter-company accounts and transactions have been eliminated in consolidation.
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 warranty accrual and deferred taxes as estimates, that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and reported amounts of 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 $575,000 and $90,000, on deposit in bank operating accounts at April 30, 2019 and July 31, 2018, respectively.
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 April 30, 2019 and July 31, 2018 primarily consist of finished Exer-Rest units, spare parts 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. The Company had fully written down its inventory during the year ended July 31, 2018 and had no inventory value at April 30, 2019 and July 31, 2018.
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.
| 8 |
The Company files its tax returns as prescribed by the laws of the jurisdictions in which it operates. Tax years ranging from 2015 to 2018 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. The Company adopted ASC Topic 606, Revenue from Contracts with Customers, on July 1, 2018. The Company’s revenue consists of product sales and parts. The Company accounts for a contract with a customer when there is a legally enforceable contract between the Company and the customer, the rights of the parties are identified, the contract has commercial substance, and collectability of the contract consideration is probable. The Company’s revenues are measured based on consideration specified in the contract with each customer, net of any sales incentives and taxes collected from customers that are remitted to government authorities.
Segments The Company operates in only one segment. Management uses cash flow as the primary measure to manage its business and does not segment its business for internal reporting or decision-making.
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. There were no transactions that resulted in comprehensive income or losses during the three and nine months ended April 30, 2019 or 2018.
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. Warranty accrual of approximately $12,000 is included in accounts payable and accrued liabilities as of April 30, 2019 and July 31, 2018. There were no material warranty costs incurred during the three and nine months ended April 30, 2019 and 2018, and management estimates that the Company’s accrued warranty expense at April 30, 2019 will be sufficient to offset claims made for units under warranty.
Fair Value of Financial Instruments. Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of April 30, 2019 and July 31, 2018. The respective carrying value of certain on-balance-sheet financial instruments such as cash, prepaid expenses, deposits, other current assets, accounts payable and accrued expenses approximate fair values because they are short term in nature or they bear current market interest rates. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:
Level 1 — quoted prices in active markets for identical assets or liabilities.
Level 2 — other significant observable inputs for the assets or liabilities through corroboration with market data at the measurement date.
Level 3 — significant unobservable inputs that reflect management’s best estimate of what market participants would use to price the assets or liabilities at the measurement date.
Financial instruments recognized in the consolidated balance sheet consist of cash, prepaid expenses, deposits, and other current assets. The Company believes that the carrying value of its current financial instruments approximates their fair values due to the short-term nature of these instruments. The Company does not hold any derivative financial instruments.
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.
The following table presents changes in Level 3 financial liabilities measured at fair value on a recurring basis:
| Level 3 | ||||
| Fair value of promissory notes at July 31, 2018 | $ | 2,125,000 | ||
| Additions: | 100,000 | |||
| Reductions: | 2,225,000 | |||
| Changes in fair value | - | |||
| Fair value at April 30, 2019 | $ | - | ||
| 9 |
Recent Accounting Pronouncements. The Company considers the applicability and impact of all Accounting Standard Updates (“ASU’s”). ASU’s not discussed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated balance sheets or consolidated comprehensive statement of operations.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230). This standard addresses the classification of eight specific cash flow issues with the objective of reducing the existing diversity in practice. ASU 2016-15 will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. The Company implemented this ASU on October 1, 2018. The adoption of this update did not have an impact on the Company’s consolidated financial statements.
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842). ASU 2016-02 impacts any entity that enters into a lease with some specified scope exceptions. This new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the statement of operations. The guidance updates and supersedes Topic 840, Leases. For public entities, ASU 2016-02 is effective for fiscal years, and interim periods with those years, beginning after December 15, 2018, and early adoption is permitted. A modified retrospective transition approach is required for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company currently has no long-term leases. However, in the event that the Company should enter any long-term leases it would then evaluate the effect that the new guidance would have on its consolidated financial statements and related disclosures.
3. STOCK-BASED COMPENSATION
The Company measures the cost of employee, officer and director services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The fair value of the Company’s stock option awards is expensed over the vesting life of the underlying stock options using the graded vesting method, with each tranche of vesting options valued separately. The Company did not record any stock-based compensation for the three and nine months ended April 30, 2019 and 2018.
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 April 30, 2019.
As of April 30, 2019, there were no outstanding stock options. The Company did not grant any stock options during the three and nine months ended April 30, 2019 or 2018.
4. NOTES PAYABLE
The Company entered into various notes payable with related parties from 2010 to 2018 with an aggregate principal total of $2,175,000 and with an unrelated third party for $50,000 for total principal amount of $2,225,000. The interest rate was 11% and the maturity date was July 31, 2020. The Company could prepay these notes in advance of the maturity date without premium or penalty.
As discussed further in Note 5, on December 21, 2018, the Company issued 50,584,413 shares of Common Stock in exchange for the extinguishment of debt and related accrued interest totaling approximately $3,541,000. The Company incurred interest expense related to the Credit Facility and notes payable of $0 and $93,000 for the three and nine months ended April 30, 2019, respectively, and 56,000 and $161,000 for the three and nine months ended April 30, 2018, respectively.
| 10 |
As a result of this transaction on April 30, 2019, the Company no longer has debt under the promissory notes and Credit Facility discussed above.
5. SHAREHOLDERS’ EQUITY
The Company has three classes of Preferred Stock. Holders of Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock are entitled to vote with the holders of common stock as a single class on all matters.
Series B Preferred Stock is not redeemable by the Company and has a liquidation value of $100 per share, plus declared and unpaid dividends, if any. Dividends are non-cumulative, and are at the rate of $10 per share, if declared.
Series C Preferred Stock is redeemable by the Company at a price of $0.10 per share upon 30 days prior written notice. This series has a liquidation value of $1.00 per share plus declared and unpaid dividends, if any. Dividends are non-cumulative, and are at the rate of $0.10 per share, if declared. Each share of Series C Preferred Stock is convertible into 25 shares of the Company’s common stock upon payment of a conversion premium of $4.20 per share of common stock. The conversion rate and the conversion premium are subject to adjustments in the event of stock splits, stock dividends, reverse stock splits and certain other events. In February 2019, all outstanding shares of Series C Preferred Stock were redeemed by the Company following 30 days written notice. The redemption amount for the 62,048 Series C Preferred Stock was $24,819 at a rate of $0.40 per share and was included in accrued expenses at April 30, 2019. The redeemed Series C Preferred Stock were then cancelled following the redemption.
Series D Preferred Stock is not redeemable by the Company. This series has a liquidation value of $1,500 per share, plus declared and unpaid dividends, if any. Each share of Series D Preferred Stock is convertible into 5,000 shares of the Company’s common stock. The conversion rate is subject to adjustments in the event of stock splits, stock dividends, reverse stock splits and certain other events. In February 2019, all holders of the 2,782 outstanding shares of Series D Preferred Stock converted their shares to common stock. As a result, the Company issued 13,910,000 common shares.
No preferred stock dividends were declared for the three and nine months ended April 30, 2019 and 2018.
On December 21, 2018, the Company entered into stock purchase agreements (each, a “Purchase Agreement”) with Frost Gamma Investments Trust (“FGIT”), a trust controlled by Dr. Philip Frost, and Jane Hsiao, Ph.D., the Company’s Chairman and Interim CEO. As a result of the Purchase Agreements, the Company issued and sold to FGIT and Dr. Hsiao an aggregate of 8,571,428 shares of the Company’s common stock, par value $0.01 per share (at a purchase price of $0.07 per share for total aggregate amount of $600,000.
On December 21, 2018, the Company entered into a Debt Exchange Agreement with Frost Gamma Investments Trust, Dr. Jane Hsiao, Hsu Gamma Investments LP and Marie Wolf (collectively, the “Creditors”), pursuant to which the Company issued to the Creditors aggregate of 50,584,413 shares of Common Stock (the “Exchange Shares”) in exchange the extinguishment of the credit facility and notes payable totaling $2,225,000 and related accrued interest of approximately $1,316,000. In addition, the Company issued an additional 2,737,391 shares of common stock to Hsu Gamma Investments LP and Frost Gamma Investments Trust, for in exchange for the extinguishment of rent payable totaling approximately $192,000. The Company issued the Exchange Shares at a price of $0.07 per share. The fair value of the stock issued was based on the closing price of the Company’s stock on the day of the debt exchange which was $0.09 per share resulting in a $1,066,000 loss on the extinguishment of debt.
6. BASIC AND DILUTED LOSS PER SHARE
Basic net loss per common share is computed by dividing net loss attributable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed giving effect to all dilutive potential common shares that were outstanding during the period. Diluted potential common shares consist of incremental shares issuable upon exercise of stock options and warrants and conversion of preferred stock. In computing diluted net loss per share for the three and nine months ended April 30, 2019 and 2018, 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.
| 11 |
Potential weighted average outstanding common shares not included in calculating diluted net loss per share are as follows:
Three April 30, 2019 | Nine April 30, 2019 | Three April 30, 2018 | Nine April 30, 2018 | |||||||||||||
| Series C Preferred Stock | 366,013 | 1,164,821 | 1,551,200 | 1,551,200 | ||||||||||||
| Series D Preferred Stock | 2,031,798 | 10,037,619 | 13,910,000 | 13,910,000 | ||||||||||||
| Total | 2,397,811 | 11,202,440 | 15,461,200 | 15,461,200 | ||||||||||||
7. RELATED PARTY TRANSACTIONS
Dr. Hsiao, Dr. Frost and directors Steven Rubin and Rao Uppaluri are each stockholders, current or former officers and/or directors or former directors of TransEnterix, Inc. (formerly SafeStitch Medical, Inc.) (“TransEnterix”), a publicly-traded medical device company. The Company’s Chief Financial Officer also served as the Chief Financial Officer of TransEnterix until October 2, 2013. The Company’s Chief Financial Officer continued as an employee of TransEnterix until March 3, 2014, during which he supervised the Miami based accounting staff of TransEnterix under a cost sharing arrangement whereby the total salaries of the Miami based accounting staff was shared by the Company and TransEnterix. The Chief Financial Officer continues to serve as the Chief Financial Officer of Cocrytal Pharma, Inc., a clinical stage biotechnology company, and in which Steve Rubin and Jane Hsiao, serve on the Board. Since December 2009, the Company’s Chief Legal Officer has served under a similar cost sharing arrangement as the Chief Legal Officer of TransEnterix.
The Company signed a five year lease for office space in Miami, Florida with a company controlled by Dr. Phillip Frost, who is the beneficial owner of more than 10% of the Company’s common stock. The rental payments under the Miami office lease, which commenced January 1, 2008 and expired on December 31, 2012, were approximately $1,250 per month and then continued on a month-to-month basis. In February 2016 the rent was reduced to $0 per month. For the three and nine months ended April 30, 2019 and 2018, the Company did not record any rent expense related to the Miami lease. On December 21, 2018, the Company issued common shares in exchange for the extinguishment of rent payable of $76,000 (see Note 5). At April 30, 2019 and July 31, 2018, approximately $0 and $76,000 respectively in rent was payable.
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. The Company vacated the Hialeah warehouse in September 2014 and entered into a new lease with an unrelated third party. The Company did not record any rent expense related to the Hialeah lease for the three and nine months ended April 30, 2019 and 2018, respectively. On December 21, 2018, the Company issued common shares in exchange for the extinguishment of rent payable of $115,000 (see Note 5). At April 30, 2019 and July 31, 2018, approximately $0 and $115,000 respectively in rent was payable under the previous Hialeah lease.
The Company had the Credit Facility and multiple notes payable outstanding to related parties, as more fully described in Note 4 to these consolidated financial statements.
The Company is under common control with multiple entities and the existence of that control could result in operating results or financial position of each individual entity significantly different from those that would have been obtained if the entities were autonomous. One of those related parties, OPKO Health, Inc. (“OPKO”) and the Company are under common control and OPKO has a one percent ownership interest in the Company that OPKO has accounted for as an equity method investment due to the ability to significantly influence the Company.
| 12 |
8. COMMITMENTS AND CONTINGENCIES
Leases.
The Company is under an operating lease agreement with a related party for our corporate office space that expired in 2012. The lease currently continues on a month to month basis at no cost.
We house a majority of 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. Following the expiration, we have remained on a month-to-month term.
The Pembroke Park lease agreement requires the payment of base rent. Rental expense for operating leases amounted to $34,000 and $33,000 for the nine months ended April 30, 2019 and 2018, respectively, and $11,300 and $11,000 for the three months ended April 30, 2019 and 2018, respectively. As discussed in Note 11, on May 3, 2019 the Company exchanged the inventory stored in the warehouse for forgiveness of the accrued rent.
9. RISKS AND UNCERTAINTIES AND CONCENTRATIONS OF RISK
Financial instruments that potentially subject the Company to risk consist principally of purchases and advances to contract manufacturer.
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.
10. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses are summarized in the following table (in thousands):
| April 30, 2019 | July 31, 2018 | |||||||
| Accounts Payable | $ | 381 | $ | 417 | ||||
| Accrual Professional Fees | 35 | - | ||||||
| Accrued Interest | - | 1,223 | ||||||
| Accrued Warranty | 12 | 12 | ||||||
| Accrued Other | 46 | 7 | ||||||
| Total | $ | 474 | $ | 1,659 | ||||
11. SUBSEQUENT EVENTS
On May 3, 2019 the Company exchanged inventory for forgiveness of $16,000 of accrued unpaid rent. The Company had previously written off the value of this inventory resulting in a gain on the forgiveness of approximately $16,000.
| 13 |
| 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; 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, 2018. 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 development, manufacture and marketing of non-invasive, whole body periodic acceleration (“WBPA”) therapeutic platforms, which are motorized platforms that move a subject repetitively head to foot. 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 development and commercialization of the Exer-Rest has necessitated substantial 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.
Equity Exchange Agreement. On December 3, 2018, we entered into an Equity Exchange Agreement with IRA Financial Trust Company, a South Dakota trust corporation (“IRA Trust”), IRA Financial Group LLC, a Florida limited liability company (“IRAFG” and, together with IRA Trust, “IRA Financial”), and their respective equity holders (the “Equityholders”). Upon the terms and subject to the conditions contained in the Exchange Agreement, we will issue to the Equityholders shares of a newly-designated series of its convertible preferred stock (the “Exchange Shares”) in exchange for 100% of the issued and outstanding equity in IRA Financial (the “Exchange”).
Upon consummation of the Exchange, the Exchange Shares, on an as-converted basis, will comprise 85% of the issued and outstanding shares of our common stock.
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 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 Condensed Consolidated Financial Statements set forth in Item 8 of our Annual Report on Form 10-K for the year ended July 31, 2018. Actual results may materially differ from these estimates.
| 14 |
Results of Operations
Our 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 U.S. and international sales activity with marketing and promotional pricing beginning in February 2009. We continue to explore development of a next generation Exer-Rest that is more portable than the current models and reduces cost to manufacture.
Three and Nine months ended April 30, 2019 Compared to Three and Nine months Ended April 30, 2018
Selling, general and administrative costs and expenses. Selling, general and administrative (“SG&A”) costs and expenses were $189,000 and $415,000 for the three and nine months ended April 30, 2019, respectively, as compared to $55,000 and $177,000 for the three and nine months ended April 30, 2018, respectively. The $134,000 and $238,000 increase were primarily due to legal expense and professional fees related to the Company’s exploration of strategic alternatives and entering into an equity exchange agreement.
Total operating costs and expenses. Total operating costs and expenses were $189,000 and $415,000 for the three and nine months ended April 30, 2019, respectively, as compared to $55,000 and $177,000 for the three months and nine ended April 30, 2018, respectively. The $134,000 and $238,000 increase is explained above in SG&A.
Interest expense. Net interest expense was $0 and $93,000 for the three and nine months ended April 30, 2019, respectively, and net interest expense was $56,000 and $161,000 for the three and nine months ended April 30, 2018, respectively. The $56,000 and $68,000 respective decreases for the three and nine month comparative periods were related to the extinguishment of debt (see note 5).
Loss on the extinguishment of debt. The loss on the extinguishment of debt was $0 and $1,066,000 for the three and nine months ended April 30, 2019, respectively, and there was no loss on the extinguishment of debt for the three and nine months ended April 30, 2018 (see note 5).
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 April 30, 2019, we had approximately $575,000 of cash and working capital of approximately $122,000. We believe that the cash on hand at April 30, 2019 is not sufficient to meet our anticipated cash requirements for operations for 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 and on December 3, 2018, entered into an Equity Exchange Agreement (the “Exchange Agreement”), as amended on April 17, 2019 by Amendment No. 1 and as amended on June 3, 2019 by Amendment No. 2, with IRA Financial Trust Company, a South Dakota trust corporation (“IRA Trust”), IRA Financial Group LLC, a Florida limited liability company (“IRAFG” and, together with IRA Trust, “IRA Financial”), and their respective equity holders (the “Equityholders”). Upon the terms and subject to the conditions contained in the Exchange Agreement, the Company will issue to the Equityholders shares of a newly-designated series of its convertible preferred stock (the “Exchange Shares”) in exchange for 100% of the issued and outstanding equity in IRA Financial (the “Exchange”). 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 $215,000 and $154,000 for nine months ended April 30, 2019 and 2018, respectively. This $61,000 increase was primarily due to increased legal expense.
Net cash provided by financing activities was $700,000 and $300,000 for the nine months ended April 30, 2019 and 2018, respectively, from proceeds from the Private Placement and Promissory Notes described below.
| 15 |
On November 16, 2018, the Company entered into a promissory note in the principal amount of $50,000 with Frost Gamma Investments Trust (the “November 2018 Frost Gamma Note”), a trust controlled by Dr. Phillip Frost, which beneficially owns in excess of 10% of NIMS’ common stock. The interest rate payable by NIMS on the November 2018 Frost Gamma Note is 11% per annum, payable on the Promissory Notes Maturity Date. The 2018 Frost Gamma Note may be prepaid in advance of the Maturity Date without penalty.
On November 16, 2018, NIMS entered into a promissory note in the principal amount of $50,000 with Hsu Gamma Investments, L.P., an entity controlled by the Company’s Chairman and Interim CEO, Jane Hsiao (the “November 2018 Hsu Gamma Note”). The interest rate payable by NIMS on the November 2018 Hsu Gamma Note is 11% per annum, payable on the Promissory Notes Maturity Date. The November 2018 Hsu Gamma Note may be prepaid in advance of the Maturity Date without penalty.
On December 21, 2018, the Company entered into a Debt Exchange Agreement with Frost Gamma Investments Trust, Dr. Jane Hsiao, Hsu Gamma Investments LP and Marie Wolf (collectively, the “Creditors”), pursuant to which the Company issued to the Creditors or designees thereof an aggregate of 53,321,804 shares of Common Stock (the “Exchange Shares”) in exchange for aggregate indebtedness for borrowed money (as discussed above) and unpaid rent, including principal and accrued and unpaid interest thereon, of approximately $3,733,000 held by the Creditors, which indebtedness was cancelled by the Company upon its acquisition. The Company issued the Exchange Shares at a price of $0.07 per share. The fair value of the stock issued was based on the closing price of the Company’s stock on the day of the debt exchange which was $0.09 per share resulting in a $1,066,000 loss on the extinguishment of debt.
On December 21, 2018, the Company entered into stock purchase agreements (each, a “Purchase Agreement”) with Frost Gamma Investments Trust (“FGIT”), a trust controlled by Dr. Philip Frost, and Jane Hsiao, Ph.D., the Company’s Chairman and Interim CEO. As a result of the Purchase Agreements, the Company issued and sold to FGIT and Dr. Hsiao an aggregate of 8,571,428 shares of the Company’s common stock, par value $0.01 per share (at a purchase price of $0.07 per share for total aggregate amount of $600,000.
As of April 30, 2019, the Company no longer has debt under the promissory notes and Credit Facility discussed above.
As of April 30, 2019, the Company had cash and cash equivalents of approximately $575,000. It is likely we will be unable to develop a next generation Exer-Rest platform to generate significant revenues based on our current cash position. Therefore, we will have insufficient funds to continue current operations without raising additional capital. 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. We are also examining strategic alternatives and on December 3, 2018, as amended on April 17, 2019 by Amendment No. 1 and as amended on June 3, 2019 by Amendment No. 2, we entered into the Equity Exchange Agreement as discussed above.
| 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 April 30, 2019 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 April 30, 2019. 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.
| 16 |
None.
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.
None.
| 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 |
| 17 |
NON-INVASIVE MONITORING SYSTEMS, INC
April 30, 2019
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: June 14, 2019 | By: | /s/ Jane H. Hsiao |
| Jane H. Hsiao, Interim Chief Executive Officer | ||
| Dated: June 14, 2019 | By: | /s/ James J. Martin |
| James J. Martin, Chief Financial Officer |
| 18 |
INDEX TO EXHIBITS
| 19 |
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: June 14, 2019 | By: | /s/ Jane H. Hsiao |
| Jane H. Hsiao, Interim Chief Executive Officer |
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: June 14, 2019 | By: | /s/ James J. Martin |
| James J. Martin, Chief Financial Officer |
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 April 30, 2019, 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: June 14, 2019 | By: | /s/ Jane H. Hsiao |
| Jane H. Hsiao, Interim Chief Executive Officer |
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 April 30, 2019, 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: June 14, 2019 | By: | /s/ James J. Martin |
| James J. Martin, Chief Financial Officer |
Document And Entity Information - shares |
9 Months Ended | |
|---|---|---|
Apr. 30, 2019 |
Jun. 14, 2019 |
|
| Document And Entity Information [Abstract] | ||
| Entity Registrant Name | NON INVASIVE MONITORING SYSTEMS INC /FL/ | |
| Entity Central Index Key | 0000720762 | |
| Document Type | 10-Q | |
| Document Period End Date | Apr. 30, 2019 | |
| Amendment Flag | false | |
| Current Fiscal Year End Date | --07-31 | |
| Entity's Reporting Status Current | Yes | |
| Entity Interactive Data Current | No | |
| Entity Filer Category | Non-accelerated Filer | |
| Entity Small Business Flag | true | |
| Entity Emerging Growth Company | false | |
| Entity Ex Transition Period | false | |
| Entity Shell Company | false | |
| Entity Common Stock, Shares Outstanding | 154,810,655 | |
| Document Fiscal Period Focus | Q3 | |
| Document Fiscal Year Focus | 2019 |
Condensed Consolidated Comprehensive Statements of Operations (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Apr. 30, 2019 |
Apr. 30, 2018 |
Apr. 30, 2019 |
Apr. 30, 2018 |
|
| Operating costs and expenses | ||||
| Selling, general and administrative | $ 189 | $ 55 | $ 415 | $ 177 |
| Total operating costs and expenses | 189 | 55 | 415 | 177 |
| Operating loss | (189) | (55) | (415) | (177) |
| Other expense | ||||
| Loss on extinguishment of debt | (1,066) | |||
| Interest expense, net | (56) | (93) | (161) | |
| Total other expense | (56) | (1,159) | (161) | |
| Net loss | $ (189) | $ (111) | $ (1,574) | $ (338) |
| Weighted average number of common shares outstanding - Basic and diluted | 152,935,000 | 79,007,000 | 112,630,000 | 79,007,000 |
| Basic and diluted loss per common share | $ (0.00) | $ (0.00) | $ (0.01) | $ (0.00) |
Condensed Consolidated Statements of Interim Changes in Shareholders' Equity (Deficit) (Unaudited) - USD ($) |
Series B Preferred Stock [Member] |
Series C Preferred Stock [Member] |
Series D Preferred Stock [Member] |
Common Stock [Member] |
Additional Paid-in-Capital [Member] |
Accumulated Equity (Deficit) [Member] |
Total |
|---|---|---|---|---|---|---|---|
| Balance, beginning at Jul. 31, 2017 | $ 62,000 | $ 3,000 | $ 790,000 | $ 21,930,000 | $ (26,018,000) | $ (3,233,000) | |
| Balance, beginning shares at Jul. 31, 2017 | 100 | 62,048 | 2,782 | 79,007,423 | |||
| Net loss | (128,000) | (128,000) | |||||
| Balance, ending at Oct. 31, 2017 | $ 62,000 | $ 3,000 | $ 790,000 | 21,930,000 | (26,146,000) | (3,361,000) | |
| Balance, ending shares at Oct. 31, 2017 | 100 | 62,048 | 2,782 | 79,007,423 | |||
| Balance, beginning at Jul. 31, 2017 | $ 62,000 | $ 3,000 | $ 790,000 | 21,930,000 | (26,018,000) | (3,233,000) | |
| Balance, beginning shares at Jul. 31, 2017 | 100 | 62,048 | 2,782 | 79,007,423 | |||
| Net loss | (338,000) | ||||||
| Balance, ending at Apr. 30, 2018 | $ 62,000 | $ 3,000 | $ 790,000 | 21,930,000 | (26,356,000) | (3,571,000) | |
| Balance, ending shares at Apr. 30, 2018 | 100 | 62,048 | 2,782 | 79,007,423 | |||
| Balance, beginning at Oct. 31, 2017 | $ 62,000 | $ 3,000 | $ 790,000 | 21,930,000 | (26,146,000) | (3,361,000) | |
| Balance, beginning shares at Oct. 31, 2017 | 100 | 62,048 | 2,782 | 79,007,423 | |||
| Net loss | (99,000) | (99,000) | |||||
| Balance, ending at Jan. 31, 2018 | $ 62,000 | $ 3,000 | $ 790,000 | 21,930,000 | (26,245,000) | (3,460,000) | |
| Balance, ending shares at Jan. 31, 2018 | 100 | 62,048 | 2,782 | 79,007,423 | |||
| Net loss | (111,000) | (111,000) | |||||
| Balance, ending at Apr. 30, 2018 | $ 62,000 | $ 3,000 | $ 790,000 | 21,930,000 | (26,356,000) | (3,571,000) | |
| Balance, ending shares at Apr. 30, 2018 | 100 | 62,048 | 2,782 | 79,007,423 | |||
| Balance, beginning at Jul. 31, 2018 | $ 62,000 | $ 3,000 | $ 790,000 | 21,930,000 | (26,463,000) | (3,678,000) | |
| Balance, beginning shares at Jul. 31, 2018 | 100 | 62,048 | 2,782 | 79,007,423 | |||
| Net loss | (207,000) | (207,000) | |||||
| Balance, ending at Oct. 31, 2018 | $ 62,000 | $ 3,000 | $ 790,000 | 21,930,000 | (26,670,000) | (3,885,000) | |
| Balance, ending shares at Oct. 31, 2018 | 100 | 62,048 | 2,782 | 79,007,423 | |||
| Balance, beginning at Jul. 31, 2018 | $ 62,000 | $ 3,000 | $ 790,000 | 21,930,000 | (26,463,000) | (3,678,000) | |
| Balance, beginning shares at Jul. 31, 2018 | 100 | 62,048 | 2,782 | 79,007,423 | |||
| Redemption of Series C Preferred Stock | $ 24,819 | ||||||
| Redemption of Series C Preferred Stock, shares | (62,048) | ||||||
| Net loss | (1,574,000) | ||||||
| Balance, ending at Apr. 30, 2019 | $ 1,548,000 | 26,574,000 | (28,000,000) | 122,000 | |||
| Balance, ending shares at Apr. 30, 2019 | 100 | 154,810,655 | |||||
| Balance, beginning at Oct. 31, 2018 | $ 62,000 | $ 3,000 | $ 790,000 | 21,930,000 | (26,670,000) | (3,885,000) | |
| Balance, beginning shares at Oct. 31, 2018 | 100 | 62,048 | 2,782 | 79,007,423 | |||
| Issuance of common stock for cash | $ 86,000 | 514,000 | 600,000 | ||||
| Issuance of common stock for cash, shares | 8,571,428 | ||||||
| Issuance of common stock in exchange for extinguishment of debt, accrued interest and accounts payable | $ 533,000 | 4,266,000 | 4,799,000 | ||||
| Issuance of common stock in exchange for extinguishment of debt, accrued interest and accounts payable, shares | 53,321,804 | ||||||
| Net loss | (1,178,000) | (1,178,000) | |||||
| Balance, ending at Jan. 31, 2019 | $ 62,000 | $ 3,000 | $ 1,409,000 | 26,710,000 | (27,848,000) | 336,000 | |
| Balance, ending shares at Jan. 31, 2019 | 100 | 62,048 | 2,782 | 140,900,655 | |||
| Redemption of Series C Preferred Stock | $ (62,000) | 37,000 | (25,000) | ||||
| Redemption of Series C Preferred Stock, shares | (62,048) | ||||||
| Conversion of Series D Preferred Stock | $ (3,000) | $ 139,000 | (136,000) | ||||
| Conversion of Series D Preferred Stock, shares | (2,782) | 13,910,000 | |||||
| Net loss | (189,000) | (189,000) | |||||
| Balance, ending at Apr. 30, 2019 | $ 1,548,000 | $ 26,574,000 | $ (28,000,000) | $ 122,000 | |||
| Balance, ending shares at Apr. 30, 2019 | 100 | 154,810,655 |
Organization and Business |
9 Months Ended |
|---|---|
Apr. 30, 2019 | |
| 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. The Company has developed and marketed its Exer-Rest® line of acceleration therapeutic platforms based upon unique, patented whole body periodic acceleration (“WBPA”) technology of which the Company maintains patents.
Business. 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 then 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 8).
The Company continues researching the development of a next generation Exer-Rest® line of acceleration therapeutic platforms. The goal for this fourth generation Exer-Rest model is to be more portable than the current models and reduce cost to manufacture.
The Company’s condensed 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 $1,574,000 and $338,000 for the nine month periods ended April 30, 2019 and 2018, respectively, and has experienced cash outflows from operating activities. The Company also has an accumulated deficit of approximately $28.0 million as of April 30, 2019 and has potential purchase obligations at April 30, 2019 (see note 8). The Company had $575,000 of cash at April 30, 2019 and working capital of approximately $122,000. 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.
Equity Exchange Agreement. On December 3, 2018, the Company entered into an Equity Exchange Agreement, as amended on April 17, 2019 by Amendment No. 1 and as amended on June 3, 2019 by Amendment No. 2, with IRA Financial Trust Company, a South Dakota trust corporation (“IRA Trust”), IRA Financial Group LLC, a Florida limited liability company (“IRAFG” and, together with IRA Trust, “IRA Financial”), and their respective equity holders (the “Equityholders”). Upon the terms and subject to the conditions contained in the Exchange Agreement, the Company will issue to the Equityholders shares of a newly-designated series of its convertible preferred stock (the “Exchange Shares”) in exchange for 100% of the issued and outstanding equity in IRA Financial (the “Exchange”).
Upon consummation of the Exchange, the Exchange Shares, on an as-converted basis, will comprise 85% of the issued and outstanding shares of the Company’s common stock. |
Summary of Significant Accounting Policies |
9 Months Ended | ||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Apr. 30, 2019 | |||||||||||||||||||||||||||||||
| 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 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 warranty accrual and deferred taxes as estimates, that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and reported amounts of 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 $575,000 and $90,000, on deposit in bank operating accounts at April 30, 2019 and July 31, 2018, respectively.
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 April 30, 2019 and July 31, 2018 primarily consist of finished Exer-Rest units, spare parts 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. The Company had fully written down its inventory during the year ended July 31, 2018 and had no inventory value at April 30, 2019 and July 31, 2018.
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.
The Company files its tax returns as prescribed by the laws of the jurisdictions in which it operates. Tax years ranging from 2015 to 2018 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. The Company adopted ASC Topic 606, Revenue from Contracts with Customers, on July 1, 2018. The Company’s revenue consists of product sales and parts. The Company accounts for a contract with a customer when there is a legally enforceable contract between the Company and the customer, the rights of the parties are identified, the contract has commercial substance, and collectability of the contract consideration is probable. The Company’s revenues are measured based on consideration specified in the contract with each customer, net of any sales incentives and taxes collected from customers that are remitted to government authorities.
Segments The Company operates in only one segment. Management uses cash flow as the primary measure to manage its business and does not segment its business for internal reporting or decision-making.
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. There were no transactions that resulted in comprehensive income or losses during the three and nine months ended April 30, 2019 or 2018.
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. Warranty accrual of approximately $12,000 is included in accounts payable and accrued liabilities as of April 30, 2019 and July 31, 2018. There were no material warranty costs incurred during the three and nine months ended April 30, 2019 and 2018, and management estimates that the Company’s accrued warranty expense at April 30, 2019 will be sufficient to offset claims made for units under warranty.
Fair Value of Financial Instruments. Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of April 30, 2019 and July 31, 2018. The respective carrying value of certain on-balance-sheet financial instruments such as cash, prepaid expenses, deposits, other current assets, accounts payable and accrued expenses approximate fair values because they are short term in nature or they bear current market interest rates. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:
Level 1 — quoted prices in active markets for identical assets or liabilities.
Level 2 — other significant observable inputs for the assets or liabilities through corroboration with market data at the measurement date.
Level 3 — significant unobservable inputs that reflect management’s best estimate of what market participants would use to price the assets or liabilities at the measurement date.
Financial instruments recognized in the consolidated balance sheet consist of cash, prepaid expenses, deposits, and other current assets. The Company believes that the carrying value of its current financial instruments approximates their fair values due to the short-term nature of these instruments. The Company does not hold any derivative financial instruments.
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.
The following table presents changes in Level 3 financial liabilities measured at fair value on a recurring basis:
Recent Accounting Pronouncements. The Company considers the applicability and impact of all Accounting Standard Updates (“ASU’s”). ASU’s not discussed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated balance sheets or consolidated comprehensive statement of operations.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230). This standard addresses the classification of eight specific cash flow issues with the objective of reducing the existing diversity in practice. ASU 2016-15 will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. The Company implemented this ASU on October 1, 2018. The adoption of this update did not have an impact on the Company’s consolidated financial statements.
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842). ASU 2016-02 impacts any entity that enters into a lease with some specified scope exceptions. This new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the statement of operations. The guidance updates and supersedes Topic 840, Leases. For public entities, ASU 2016-02 is effective for fiscal years, and interim periods with those years, beginning after December 15, 2018, and early adoption is permitted. A modified retrospective transition approach is required for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company currently has no long-term leases. However, in the event that the Company should enter any long-term leases it would then evaluate the effect that the new guidance would have on its consolidated financial statements and related disclosures. |
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Stock-Based Compensation |
9 Months Ended |
|---|---|
Apr. 30, 2019 | |
| Share-based Payment Arrangement [Abstract] | |
| Stock-Based Compensation |
3. STOCK-BASED COMPENSATION
The Company measures the cost of employee, officer and director services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The fair value of the Company’s stock option awards is expensed over the vesting life of the underlying stock options using the graded vesting method, with each tranche of vesting options valued separately. The Company did not record any stock-based compensation for the three and nine months ended April 30, 2019 and 2018.
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 April 30, 2019.
As of April 30, 2019, there were no outstanding stock options. The Company did not grant any stock options during the three and nine months ended April 30, 2019 or 2018. |
Notes Payable |
9 Months Ended |
|---|---|
Apr. 30, 2019 | |
| Debt Disclosure [Abstract] | |
| Notes Payable |
4. NOTES PAYABLE
The Company entered into various notes payable with related parties from 2010 to 2018 with an aggregate principal total of $2,175,000 and with an unrelated third party for $50,000 for total principal amount of $2,225,000. The interest rate was 11% and the maturity date was July 31, 2020. The Company could prepay these notes in advance of the maturity date without premium or penalty.
As discussed further in Note 5, on December 21, 2018, the Company issued 50,584,413 shares of Common Stock in exchange for the extinguishment of debt and related accrued interest totaling approximately $3,541,000. The Company incurred interest expense related to the Credit Facility and notes payable of $0 and $93,000 for the three and nine months ended April 30, 2019, respectively, and 56,000 and $161,000 for the three and nine months ended April 30, 2018, respectively.
As a result of this transaction on April 30, 2019, the Company no longer has debt under the promissory notes and Credit Facility discussed above. |
Shareholders' Equity |
9 Months Ended |
|---|---|
Apr. 30, 2019 | |
| Equity [Abstract] | |
| Shareholders' Equity |
5. SHAREHOLDERS’ EQUITY
The Company has three classes of Preferred Stock. Holders of Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock are entitled to vote with the holders of common stock as a single class on all matters.
Series B Preferred Stock is not redeemable by the Company and has a liquidation value of $100 per share, plus declared and unpaid dividends, if any. Dividends are non-cumulative, and are at the rate of $10 per share, if declared.
Series C Preferred Stock is redeemable by the Company at a price of $0.10 per share upon 30 days prior written notice. This series has a liquidation value of $1.00 per share plus declared and unpaid dividends, if any. Dividends are non-cumulative, and are at the rate of $0.10 per share, if declared. Each share of Series C Preferred Stock is convertible into 25 shares of the Company’s common stock upon payment of a conversion premium of $4.20 per share of common stock. The conversion rate and the conversion premium are subject to adjustments in the event of stock splits, stock dividends, reverse stock splits and certain other events. In February 2019, all outstanding shares of Series C Preferred Stock were redeemed by the Company following 30 days written notice. The redemption amount for the 62,048 Series C Preferred Stock was $24,819 at a rate of $0.40 per share and was included in accrued expenses at April 30, 2019. The redeemed Series C Preferred Stock were then cancelled following the redemption.
Series D Preferred Stock is not redeemable by the Company. This series has a liquidation value of $1,500 per share, plus declared and unpaid dividends, if any. Each share of Series D Preferred Stock is convertible into 5,000 shares of the Company’s common stock. The conversion rate is subject to adjustments in the event of stock splits, stock dividends, reverse stock splits and certain other events. In February 2019, all holders of the 2,782 outstanding shares of Series D Preferred Stock converted their shares to common stock. As a result, the Company issued 13,910,000 common shares.
No preferred stock dividends were declared for the three and nine months ended April 30, 2019 and 2018.
On December 21, 2018, the Company entered into stock purchase agreements (each, a “Purchase Agreement”) with Frost Gamma Investments Trust (“FGIT”), a trust controlled by Dr. Philip Frost, and Jane Hsiao, Ph.D., the Company’s Chairman and Interim CEO. As a result of the Purchase Agreements, the Company issued and sold to FGIT and Dr. Hsiao an aggregate of 8,571,428 shares of the Company’s common stock, par value $0.01 per share (at a purchase price of $0.07 per share for total aggregate amount of $600,000.
On December 21, 2018, the Company entered into a Debt Exchange Agreement with Frost Gamma Investments Trust, Dr. Jane Hsiao, Hsu Gamma Investments LP and Marie Wolf (collectively, the “Creditors”), pursuant to which the Company issued to the Creditors aggregate of 50,584,413 shares of Common Stock (the “Exchange Shares”) in exchange the extinguishment of the credit facility and notes payable totaling $2,225,000 and related accrued interest of approximately $1,316,000. In addition, the Company issued an additional 2,737,391 shares of common stock to Hsu Gamma Investments LP and Frost Gamma Investments Trust, for in exchange for the extinguishment of rent payable totaling approximately $192,000. The Company issued the Exchange Shares at a price of $0.07 per share. The fair value of the stock issued was based on the closing price of the Company’s stock on the day of the debt exchange which was $0.09 per share resulting in a $1,066,000 loss on the extinguishment of debt. |
Basic and Diluted Loss Per Share |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basic and Diluted Loss Per Share |
6. BASIC AND DILUTED LOSS PER SHARE
Basic net loss per common share is computed by dividing net loss attributable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed giving effect to all dilutive potential common shares that were outstanding during the period. Diluted potential common shares consist of incremental shares issuable upon exercise of stock options and warrants and conversion of preferred stock. In computing diluted net loss per share for the three and nine months ended April 30, 2019 and 2018, 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 weighted average outstanding common shares not included in calculating diluted net loss per share are as follows:
|
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Related Party Transactions |
9 Months Ended |
|---|---|
Apr. 30, 2019 | |
| Related Party Transactions [Abstract] | |
| Related Party Transactions |
7. RELATED PARTY TRANSACTIONS
Dr. Hsiao, Dr. Frost and directors Steven Rubin and Rao Uppaluri are each stockholders, current or former officers and/or directors or former directors of TransEnterix, Inc. (formerly SafeStitch Medical, Inc.) (“TransEnterix”), a publicly-traded medical device company. The Company’s Chief Financial Officer also served as the Chief Financial Officer of TransEnterix until October 2, 2013. The Company’s Chief Financial Officer continued as an employee of TransEnterix until March 3, 2014, during which he supervised the Miami based accounting staff of TransEnterix under a cost sharing arrangement whereby the total salaries of the Miami based accounting staff was shared by the Company and TransEnterix. The Chief Financial Officer continues to serve as the Chief Financial Officer of Cocrytal Pharma, Inc., a clinical stage biotechnology company, and in which Steve Rubin and Jane Hsiao, serve on the Board. Since December 2009, the Company’s Chief Legal Officer has served under a similar cost sharing arrangement as the Chief Legal Officer of TransEnterix.
The Company signed a five year lease for office space in Miami, Florida with a company controlled by Dr. Phillip Frost, who is the beneficial owner of more than 10% of the Company’s common stock. The rental payments under the Miami office lease, which commenced January 1, 2008 and expired on December 31, 2012, were approximately $1,250 per month and then continued on a month-to-month basis. In February 2016 the rent was reduced to $0 per month. For the three and nine months ended April 30, 2019 and 2018, the Company did not record any rent expense related to the Miami lease. On December 21, 2018, the Company issued common shares in exchange for the extinguishment of rent payable of $76,000 (see Note 5). At April 30, 2019 and July 31, 2018, approximately $0 and $76,000 respectively in rent was payable.
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. The Company vacated the Hialeah warehouse in September 2014 and entered into a new lease with an unrelated third party. The Company did not record any rent expense related to the Hialeah lease for the three and nine months ended April 30, 2019 and 2018, respectively. On December 21, 2018, the Company issued common shares in exchange for the extinguishment of rent payable of $115,000 (see Note 5). At April 30, 2019 and July 31, 2018, approximately $0 and $115,000 respectively in rent was payable under the previous Hialeah lease.
The Company had the Credit Facility and multiple notes payable outstanding to related parties, as more fully described in Note 4 to these consolidated financial statements.
The Company is under common control with multiple entities and the existence of that control could result in operating results or financial position of each individual entity significantly different from those that would have been obtained if the entities were autonomous. One of those related parties, OPKO Health, Inc. (“OPKO”) and the Company are under common control and OPKO has a one percent ownership interest in the Company that OPKO has accounted for as an equity method investment due to the ability to significantly influence the Company. |
Commitments and Contingencies |
9 Months Ended |
|---|---|
Apr. 30, 2019 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| Commitments and Contingencies |
8. COMMITMENTS AND CONTINGENCIES
Leases.
The Company is under an operating lease agreement with a related party for our corporate office space that expired in 2012. The lease currently continues on a month to month basis at no cost.
We house a majority of 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. Following the expiration, we have remained on a month-to-month term.
The Pembroke Park lease agreement requires the payment of base rent. Rental expense for operating leases amounted to $34,000 and $33,000 for the nine months ended April 30, 2019 and 2018, respectively, and $11,300 and $11,000 for the three months ended April 30, 2019 and 2018, respectively. As discussed in Note 11, on May 3, 2019 the Company exchanged the inventory stored in the warehouse for forgiveness of the accrued rent. |
Risks and Uncertainties and Concentrations of Risk |
9 Months Ended |
|---|---|
Apr. 30, 2019 | |
| Risks and Uncertainties [Abstract] | |
| Risks and Uncertainties and Concentrations of Risk |
9. RISKS AND UNCERTAINTIES AND CONCENTRATIONS OF RISK
Financial instruments that potentially subject the Company to risk consist principally of purchases and advances to contract manufacturer.
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. |
Accounts Payable and Accrued Expenses |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Apr. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Payables and Accruals [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounts Payable and Accrued Expenses |
10. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses are summarized in the following table (in thousands):
|
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Subsequent Events |
9 Months Ended |
|---|---|
Apr. 30, 2019 | |
| Subsequent Events [Abstract] | |
| Subsequent Events |
11. SUBSEQUENT EVENTS
On May 3, 2019 the Company exchanged inventory for forgiveness of $16,000 of accrued unpaid rent. The Company had previously written off the value of this inventory resulting in a gain on the forgiveness of approximately $16,000. |
Summary of Significant Accounting Policies (Policies) |
9 Months Ended | ||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Apr. 30, 2019 | |||||||||||||||||||||||||||||||
| 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 inter-company accounts and transactions have been eliminated in consolidation. |
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| 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 warranty accrual and deferred taxes as estimates, that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and reported amounts of expenses during the reporting period. Actual results could differ materially from these estimates. |
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| 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 $575,000 and $90,000, on deposit in bank operating accounts at April 30, 2019 and July 31, 2018, respectively. |
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| 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 April 30, 2019 and July 31, 2018 primarily consist of finished Exer-Rest units, spare parts 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. The Company had fully written down its inventory during the year ended July 31, 2018 and had no inventory value at April 30, 2019 and July 31, 2018. |
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| 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. |
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| 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. |
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| 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.
The Company files its tax returns as prescribed by the laws of the jurisdictions in which it operates. Tax years ranging from 2015 to 2018 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. |
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| Revenue Recognition |
Revenue Recognition. The Company adopted ASC Topic 606, Revenue from Contracts with Customers, on July 1, 2018. The Company’s revenue consists of product sales and parts. The Company accounts for a contract with a customer when there is a legally enforceable contract between the Company and the customer, the rights of the parties are identified, the contract has commercial substance, and collectability of the contract consideration is probable. The Company’s revenues are measured based on consideration specified in the contract with each customer, net of any sales incentives and taxes collected from customers that are remitted to government authorities. |
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| Segments |
Segments The Company operates in only one segment. Management uses cash flow as the primary measure to manage its business and does not segment its business for internal reporting or decision-making. |
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| 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. There were no transactions that resulted in comprehensive income or losses during the three and nine months ended April 30, 2019 or 2018. |
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| 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. Warranty accrual of approximately $12,000 is included in accounts payable and accrued liabilities as of April 30, 2019 and July 31, 2018. There were no material warranty costs incurred during the three and nine months ended April 30, 2019 and 2018, and management estimates that the Company’s accrued warranty expense at April 30, 2019 will be sufficient to offset claims made for units under warranty. |
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| 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 April 30, 2019 and July 31, 2018. The respective carrying value of certain on-balance-sheet financial instruments such as cash, prepaid expenses, deposits, other current assets, accounts payable and accrued expenses approximate fair values because they are short term in nature or they bear current market interest rates. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:
Level 1 — quoted prices in active markets for identical assets or liabilities.
Level 2 — other significant observable inputs for the assets or liabilities through corroboration with market data at the measurement date.
Level 3 — significant unobservable inputs that reflect management’s best estimate of what market participants would use to price the assets or liabilities at the measurement date.
Financial instruments recognized in the consolidated balance sheet consist of cash, prepaid expenses, deposits, and other current assets. The Company believes that the carrying value of its current financial instruments approximates their fair values due to the short-term nature of these instruments. The Company does not hold any derivative financial instruments.
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.
The following table presents changes in Level 3 financial liabilities measured at fair value on a recurring basis:
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| Recent Accounting Pronouncements |
Recent Accounting Pronouncements. The Company considers the applicability and impact of all Accounting Standard Updates (“ASU’s”). ASU’s not discussed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated balance sheets or consolidated comprehensive statement of operations.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230). This standard addresses the classification of eight specific cash flow issues with the objective of reducing the existing diversity in practice. ASU 2016-15 will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. The Company implemented this ASU on October 1, 2018. The adoption of this update did not have an impact on the Company’s consolidated financial statements.
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842). ASU 2016-02 impacts any entity that enters into a lease with some specified scope exceptions. This new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the statement of operations. The guidance updates and supersedes Topic 840, Leases. For public entities, ASU 2016-02 is effective for fiscal years, and interim periods with those years, beginning after December 15, 2018, and early adoption is permitted. A modified retrospective transition approach is required for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company currently has no long-term leases. However, in the event that the Company should enter any long-term leases it would then evaluate the effect that the new guidance would have on its consolidated financial statements and related disclosures. |
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Summary of Significant Accounting Policies (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Apr. 30, 2019 | |||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||
| Schedule of Financial Liabilities Measured at Fair Value on a Recurring Basis |
The following table presents changes in Level 3 financial liabilities measured at fair value on a recurring basis:
|
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Basic and Diluted Loss Per Share (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Apr. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Weighted Average Outstanding Common Shares Not Included in Calculation of Diluted Net Loss Per Share |
Potential weighted average outstanding common shares not included in calculating diluted net loss per share are as follows:
|
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Accounts Payable and Accrued Expenses (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Apr. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Payables and Accruals [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Accounts Payable and Accrued Expenses |
Accounts payable and accrued expenses are summarized in the following table (in thousands):
|
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Organization and Business (Details Narrative) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
Apr. 30, 2019 |
Jan. 31, 2019 |
Oct. 31, 2018 |
Apr. 30, 2018 |
Jan. 31, 2018 |
Oct. 31, 2017 |
Apr. 30, 2019 |
Apr. 30, 2018 |
Dec. 03, 2018 |
Jul. 31, 2018 |
|
| Net loss | $ (189) | $ (1,178) | $ (207) | $ (111) | $ (99) | $ (128) | $ (1,574) | $ (338) | ||
| Accumulated deficit | (28,000) | (28,000) | $ (26,463) | |||||||
| Cash | 575 | 575 | $ 90 | |||||||
| Working capital | $ 122 | $ 122 | ||||||||
| Equity Exchange Agreement [Member] | ||||||||||
| Percentage on issued and outstanding equity | 85.00% | |||||||||
| Equity Exchange Agreement [Member] | IRA Financial Trust [Member] | ||||||||||
| Percentage on issued and outstanding equity | 100.00% | |||||||||
Summary of Significant Accounting Policies (Details Narrative) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
|
Apr. 30, 2019
USD ($)
|
Apr. 30, 2018
USD ($)
|
Apr. 30, 2019
USD ($)
Number
|
Apr. 30, 2018
USD ($)
|
Jul. 31, 2018
USD ($)
|
|
| Cash | $ 575 | $ 575 | $ 90 | ||
| Inventories | |||||
| Number of operating segment | Number | 1 | ||||
| Accrued warranty | 12 | $ 12 | $ 12 | ||
| Warranty costs | |||||
| Exer-Rest Products [Member] | Domestic [Member] | |||||
| Product warranties period | 2 years | ||||
| Exer-Rest Products [Member] | U.S. Outside [Member] | |||||
| Product warranties period | 1 year | ||||
| Minimum [Member] | |||||
| Income tax examination year under examination | 2015 | ||||
| Maximum [Member] | |||||
| Income tax examination year under examination | 2018 | ||||
Summary of Significant Accounting Policies - Schedule of Financial Liabilities Measured at Fair Value on a Recurring Basis (Details) - Fair Value, Inputs, Level 3 [Member] $ in Thousands |
9 Months Ended |
|---|---|
|
Apr. 30, 2019
USD ($)
| |
| Fair value of promissory notes at July 31, 2018 | $ 2,125 |
| Additions: | 100 |
| Reductions: | 2,225 |
| Changes in fair value | |
| Fair value at April 30, 2019 |
Stock-Based Compensation (Details Narrative) - shares |
3 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
Apr. 30, 2019 |
Apr. 30, 2018 |
Apr. 30, 2019 |
Apr. 30, 2018 |
Nov. 30, 2010 |
|
| Stock options, outstanding | |||||
| Number of stock options granted | |||||
| 2011 Stock Incentive Plan [Member] | Maximum [Member] | |||||
| Maximum number of shares authorized for issuance under the plan | 4,000,000 | ||||
Notes Payable (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
Dec. 21, 2018 |
Apr. 30, 2019 |
Apr. 30, 2018 |
Apr. 30, 2019 |
Apr. 30, 2018 |
|
| Short-term Debt [Line Items] | |||||
| Proceeds from unrelated third party | $ 100,000 | $ 300,000 | |||
| Debt conversion of common stock issued | 50,584,413 | ||||
| Accrued interest related debt | $ 3,541,000 | ||||
| Interest expenses | $ 0 | $ 56,000 | 93,000 | $ 161,000 | |
| 2010 to 2018 [Member] | |||||
| Short-term Debt [Line Items] | |||||
| Aggregate principal amount | 2,175,000 | 2,175,000 | |||
| Proceeds from unrelated third party | 50,000 | ||||
| Total principal amount | $ 2,225,000 | $ 2,225,000 | |||
| Debt instrument interest rate | 11.00% | 11.00% | |||
| Debt instrument maturity date | Jul. 31, 2020 | ||||
Basic and Diluted Loss Per Share - Schedule of Weighted Average Outstanding Common Shares Not Included in Calculation of Diluted Net Loss Per Share (Details) - shares |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Apr. 30, 2019 |
Apr. 30, 2018 |
Apr. 30, 2019 |
Apr. 30, 2018 |
|
| Class of Stock [Line Items] | ||||
| Total | 2,397,811 | 15,461,200 | 11,202,440 | 15,461,200 |
| Series C Preferred Stock [Member] | ||||
| Class of Stock [Line Items] | ||||
| Total | 366,013 | 1,551,200 | 1,164,821 | 1,551,200 |
| Series D Preferred Stock [Member] | ||||
| Class of Stock [Line Items] | ||||
| Total | 2,031,798 | 13,910,000 | 10,037,619 | 13,910,000 |
Related Party Transactions (Details Narrative) - USD ($) |
1 Months Ended | 3 Months Ended | 9 Months Ended | ||||||
|---|---|---|---|---|---|---|---|---|---|
Jan. 01, 2008 |
Feb. 28, 2016 |
Feb. 01, 2009 |
Apr. 30, 2019 |
Apr. 30, 2018 |
Apr. 30, 2019 |
Apr. 30, 2018 |
Dec. 21, 2018 |
Jul. 31, 2018 |
|
| Related Party Transaction [Line Items] | |||||||||
| Rent expenses | $ 0 | $ 11,300 | $ 11,000 | $ 34,000 | $ 33,000 | ||||
| Rent payable | $ 115,000 | ||||||||
| Miami Lease [Member] | |||||||||
| Related Party Transaction [Line Items] | |||||||||
| Rent expenses | |||||||||
| Rent payable | 0 | 0 | $ 76,000 | $ 76,000 | |||||
| Hialeah Lease [Member] | |||||||||
| Related Party Transaction [Line Items] | |||||||||
| Lease term | 3 years | ||||||||
| Lease expire date | Jan. 31, 2012 | ||||||||
| Payments for rent | $ 5,000 | ||||||||
| Rent expenses | |||||||||
| Rent payable | $ 0 | $ 0 | $ 115,000 | ||||||
| Dr Phillip Frost [Member] | Miami Lease [Member] | |||||||||
| Related Party Transaction [Line Items] | |||||||||
| Lease term | 5 years | ||||||||
| Beneficial ownership percentage | 10.00% | ||||||||
| Lease expire date | Dec. 31, 2012 | ||||||||
| Payments for rent | $ 1,250 | ||||||||
Commitments and Contingencies (Details Narrative) |
1 Months Ended | 3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|---|
|
Feb. 28, 2016
USD ($)
|
Apr. 30, 2019
USD ($)
ft²
|
Apr. 30, 2018
USD ($)
|
Apr. 30, 2019
USD ($)
ft²
|
Apr. 30, 2018
USD ($)
|
|
| Commitments and Contingencies Disclosure [Abstract] | |||||
| Area of land | ft² | 4,000 | 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 | $ | $ 0 | $ 11,300 | $ 11,000 | $ 34,000 | $ 33,000 |
Accounts Payable and Accrued Expenses - Schedule of Accounts Payable and Accrued Expenses (Details) - USD ($) $ in Thousands |
Apr. 30, 2019 |
Jul. 31, 2018 |
|---|---|---|
| Payables and Accruals [Abstract] | ||
| Accounts Payable | $ 381 | $ 417 |
| Accrual Professional Fees | 35 | |
| Accrued Interest | 1,223 | |
| Accrued Warranty | 12 | 12 |
| Accrued Other | 46 | 7 |
| Total | $ 474 | $ 1,659 |
Subsequent Events (Details Narrative) - Subsequent Event [Member] $ in Thousands |
May 03, 2019
USD ($)
|
|---|---|
| Inventory for forgiveness of accrued unpaid rent | $ 16,000 |
| Inventory previously written off value resulting in gain on forgiveness | $ 16,000 |
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