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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| Non Invasive Monitoring Systems Inc (PK) | USOTC:NIMU | OTCMarkets | Common Stock |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -0.0001 | -3.85% | 0.0025 | 0.0025 | 0.0057 | 0.0036 | 0.0025 | 0.0026 | 80,250 | 19:52:18 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
FORM 10-Q
(Mark One)
| ☒ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period ended October 31, 2021 |
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 ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |
| 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 has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒ No ☐
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 December 10, 2021.
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)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 3 |
NON-INVASIVE MONITORING SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - Unaudited
(In thousands, except per share data)
| 2021 | 2020 | |||||||
| Three months ended October 31, | ||||||||
| 2021 | 2020 | |||||||
| Operating costs and expenses | ||||||||
| General and administrative | $ | 57 | $ | 59 | ||||
| Total operating costs and expenses | 57 | 59 | ||||||
| Operating loss | (57 | ) | (59 | ) | ||||
| Interest expense | (1 | ) | - | |||||
| Net loss | $ | (58 | ) | $ | (59 | ) | ||
| Weighted average number of common shares outstanding - basic and diluted | 154,811 | 154,811 | ||||||
| Basic and diluted net loss from continuing operations | $ | (0.00 | ) | $ | (0.00 | ) | ||
| Basic and diluted loss per common share | $ | (0.00 | ) | $ | (0.00 | ) | ||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
NON-INVASIVE MONITORING SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT - Unaudited
Three months ended October 31, 2021
(Dollars in thousands, except share amounts)
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
|
Preferred
Stock
Series B |
Common Stock |
Additional
Paid in |
Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balance at July 31, 2021 | 100 | $ | - | 154,810,655 | $ | 1,548 | $ | 26,574 | $ | (28,362 | ) | $ | (240 | ) | ||||||||||||||
| Net loss | - | - | - | - | - | (58 | ) | (58 | ) | |||||||||||||||||||
| Balance at October 31, 2021 | 100 | $ | - | 154,810,655 | $ | 1,548 | $ | 26,574 | $ | (28,420 | ) | $ | (298 | ) | ||||||||||||||
Three months ended October 31, 2020
(Dollars in thousands, except share amounts)
|
Preferred
Stock
Series B |
Common Stock |
Additional
Paid in |
Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balance at July 31, 2020 | 100 | $ | - | 154,810,655 | $ | 1,548 | $ | 26,574 | $ | (28,204 | ) | $ | (82 | ) | ||||||||||||||
| Balance | 100 | $ | - | 154,810,655 | $ | 1,548 | $ | 26,574 | $ | (28,204 | ) | $ | (82 | ) | ||||||||||||||
| Net loss | - | - | - | - | - | (59 | ) | (59 | ) | |||||||||||||||||||
| Balance at October 31, 2020 | 100 | $ | - | 154,810,655 | $ | 1,548 | $ | 26,574 | $ | (28,263 | ) | $ | (141 | ) | ||||||||||||||
| Balance | 100 | $ | - | 154,810,655 | $ | 1,548 | $ | 26,574 | $ | (28,263 | ) | $ | (141 | ) | ||||||||||||||
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)
Three months ended October 31, 2021 and 2020
| 2021 | 2020 | |||||||
| Operating activities | ||||||||
| Net Loss | $ | (58 | ) | $ | (59 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Changes in operating assets and liabilities | ||||||||
| Prepaid expenses | (44 | ) | (35 | ) | ||||
| Accounts payable and accrued expenses | (17 | ) | 30 | |||||
| Accrued interest | 1 | - | ||||||
| Net cash used in operating activities | (118 | ) | (64 | ) | ||||
| Financing activities | ||||||||
| Proceeds from note payable – related parties | 150 | - | ||||||
| Net cash provided by financing activities | 150 | - | ||||||
| Net increase (decrease) in cash | 32 | (64 | ) | |||||
| Cash, beginning of period | 55 | 203 | ||||||
| Cash, end of period | $ | 87 | $ | 139 | ||||
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)
October 31, 2021
The following (a) condensed consolidated balance sheet at July 31, 2021 was derived from audited annual consolidated financial statements, but does not contain all of the footnote disclosures from the annual financial statements, and (b) the unaudited condensed consolidated interim financial statements included herein have been prepared by Non-Invasive Monitoring Systems, Inc. (together with its consolidated subsidiaries, the “Company” or “NIMS”) in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to the quarterly report on Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These statements reflect adjustments, all of which are of a normal, recurring nature, and which are, in the opinion of management, necessary to present fairly the Company’s financial position as of October 31, 2021, and results of operations and cash flows for the interim periods ended October 31, 2021 and 2020. The results of operations for the three months ended October 31, 2021, 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, 2021. 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, 2021.
1. ORGANIZATION AND BUSINESS
Organization. Non-Invasive Monitoring Systems, Inc., a Florida corporation (together with its consolidated subsidiaries, the “Company” or “NIMS”). The Company previously developed and marketed its Exer-Rest® line of acceleration therapeutic platforms based upon unique, patented whole body periodic acceleration (“WBPA”) technology of which the Company maintains patents. The Company maintains limited administration, but does not have any operations or inventory.
Business. The Company is currently a shell company (as defined in Rule 12b-2 of the Exchange Act).
Discontinued Operations. On May 3, 2019, the Company exchanged inventory for forgiveness of accrued unpaid rent. The Company has no inventory, no immediate plans to replenish inventory and has no current plans to develop or market new products.
Accordingly, the Company determined that the assets and liabilities met the discontinued operations criteria in Accounting Standards Codification 205-20-45 and were classified as discontinued operations at October 31, 2021 and July 31, 2021.
| 7 |
Going Concern. The Company’s condensed consolidated financial statements have been prepared and presented on a basis assuming it will continue as a going concern. As reflected in the accompanying condensed consolidated financial statements, the Company had net losses of approximately $58,000 and $59,000 for the three months ended October 31, 2021 and 2020, respectively, and has experienced continuous cash outflows from operating activities. The Company also has an accumulated deficit of approximately $28.4 million as of October 31, 2021. The Company had $87,000 of cash at October 31, 2021 and negative working capital of approximately $147,000. These matters raise substantial doubt about the Company’s ability to continue as a going concern.
The Company is seeking potential mergers, acquisitions and strategic collaborations. There is no assurance that the Company will be successful in this regard, and, if not successful, that it will be able to continue its business activities. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary from the outcome of this uncertainty.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Non-Invasive Monitoring Systems of Florida, Inc., which has no current operations, and NIMS of Canada, Inc., a Canadian corporation, which has no current operations. All inter-company accounts and transactions have been eliminated in consolidation.
Discontinued Operations. For the three months ended October 31, 2021 and 2020, results from operations for our Exer-Rest Business are classified as discontinued operations. The carve out of the discontinued operations (i) were prepared in accordance with the SEC’s carve out rules under Staff Accounting Bulletin (“SAB”) Topic 1B1 and (ii) are derived from identifying and carving out the specific assets, liabilities, operating expenses and interest expense associated with the Exer-Rest Business’s operations (see Note 3).
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 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 $87,000 and $55,000, on deposit in bank operating accounts at October 31, 2021 and July 31, 2021, respectively. At October 31, 2021 and July 31, 2021, the Company had no cash equivalents.
Income Taxes. The Company provides for income taxes using an asset and liability based approach. Deferred income tax assets and liabilities are recorded to reflect the tax consequences in future years of temporary differences between the carrying amounts of assets and liabilities for financial statement and income tax purposes. The deferred tax asset for loss carryforwards and other potential future tax benefits has been fully offset by a valuation allowance since it is uncertain whether any future benefit will be realized. The utilization of the loss carryforward is limited to future taxable earnings of the Company and may be subject to severe limitations if the Company undergoes an ownership change pursuant to the Internal Revenue Code Section 382. Tax years ranging from 2016 to 2020 remain open to examination by various taxing jurisdictions as the statute of limitations has not expired.
Fair Value of Financial Instruments. Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of October 31, 2021 and July 31, 2021. The respective carrying value of certain on-balance-sheet financial instruments such as cash, prepaid expenses, accounts payable, accrued expenses and accrued interest approximate fair values because they are short term in nature or they bear current market interest rates. As of October 31, 2021, the respective carrying value of the notes payable – related parties approximate our current borrowing rate for similar debt instruments of comparable maturity.
| 8 |
Loss Contingencies. We recognize contingent losses that are both probable and estimable. In this context, we define probability as circumstances under which events are likely to occur. In regard to legal costs, we record such costs as incurred.
Related Parties. The Company follows ASC 850 “Related Party Disclosures,” for the identification of related parties and disclosure of related party transactions.
Reclassification of Prior Year Presentation. Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations.
An adjustment has been made to the Condensed Consolidated Balance Sheets for the fiscal year ended July 31, 2021, to reclassify approximately $1,000 from continued operations accounts payable to discontinued operations accounts payable.
Recent Accounting Pronouncements. The Company considers the applicability and impact of all relevant Accounting Standard Updates (“ASU’s”). Our conclusion was that they did not have any material effect on the condensed consolidated financial statements.
3. DISCONTINUED OPERATIONS
On May 3, 2019 the Company exchanged its inventory for forgiveness of accrued unpaid rent. Concurrent with the exchange management with the appropriate level of authority determined to discontinue the operations of the product segment.
The detail of the condensed consolidated balance sheets for the discontinued operations is as stated below:
SCHEDULE OF BALANCE SHEETS OF DISCONTINUED OPERATIONS
|
As of October 31, 2021 |
As of July 31, 2021 |
|||||||
| Current liabilities – discontinued operations | ||||||||
| Accounts payable and accrued expenses | $ | 51 | $ | 51 | ||||
| Total current liabilities – discontinued operations | 51 | 51 | ||||||
| Total liabilities – discontinued operations | $ | 51 | $ | 51 | ||||
| 9 |
4. SHAREHOLDERS’ EQUITY
The Company has a single class of Preferred Stock. Holders of Series B Preferred Stock are entitled to vote with the holders of common stock as a single class on all matters. We are currently authorized to issue an aggregate of 401,000,000 shares of capital stock, consisting of 400,000,000 shares of common stock and 1,000,000 designated shares of preferred stock with preferences and rights to be determined by our Board of Directors
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.
No preferred stock dividends were declared for the three months ended October 31, 2021 and 2020.
The Company did not issue any shares of the Company’s common stock during the three months ended October 31, 2021 and 2020.
5. 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 the conversion of preferred stock. In computing diluted net loss per share for the periods ended October 31, 2021 and 2020, no dilution adjustment has been made to the weighted average outstanding common shares because the assumed conversion of preferred stock would be anti-dilutive.
6. RELATED PARTY TRANSACTIONS
Dr. Hsiao, Dr. Frost and directors Steven Rubin and Rao Uppaluri are stockholders and/or directors or former directors of Asensus Surgical, Inc. (formerly TransEnterix, Inc.) (“Asensus”), a publicly-traded medical device company. The Company’s Chief Legal Officer has served under a cost sharing arrangement as the Chief Legal Officer of Asensus, from December 2009 until August 31, 2021. Since September 1, 2021 the Company’s Chief Legal Officer has been compensated directly from the Company. The Company’s Chief Financial Officer also serves as the Chief Financial Officer and Co-Interim Chief Executive Officer of Cocrystal Pharma, Inc., a clinical stage Nasdaq listed biotechnology company, and in which Steve Rubin and Dr. Frost serves on the Board. The Company expensed $400 under the cost sharing arrangement during the three months ended October 31, 2021 and 2020. At October 31, 2021 and July 31, 2021, the Company had an accounts payable liability of $0 and $400 under the cost sharing arrangement with Asensus, respectively.
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 months ended October 31, 2021 and 2020, the Company did not record any rent expense related to the Miami lease. At October 31, 2021 and 2020 there was no rent payable.
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.
| 10 |
7. NOTES PAYABLE – RELATED PARTIES
On October 4, 2021, the Company entered into a Promissory Note in the principal amount of $75,000 with Frost Gamma Investments Trust (the “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 the Company on the Frost Gamma Note is 11% per annum, payable on the maturity date of October 4, 2023 (the “Maturity Date”). The Frost Gamma Note may be prepaid in advance of the Maturity Date without penalty.
On October 4, 2021, the Company entered into a Promissory Note in the principal amount of $75,000 with Jane Hsiao, Ph.D., the Company’s Chairman and Interim CEO (the “Hsiao Note”) and a beneficial holder in excess of 10% of NIMS’ common stock. The interest rate payable by the Company on the Hsiao Note is 11% per annum, payable on the Maturity Date. The Hsiao Note may be prepaid in advance of the Maturity Date without penalty.
8. COMMITMENTS AND CONTINGENCIES
Leases.
The Company was under an operating lease agreement for our corporate office space that expired in 2012. The lease currently continues on a month to month basis at no cost.
COVID-19
Current economic conditions with COVID-19 have been, and continue to be, volatile and continued instability in these market conditions may limit our ability to access the capital necessary to fund and grow our business and to replace, in a timely manner, maturing liabilities or to successfully examine strategic alternatives. Quarantines would make our ability to look for strategic alternatives more difficult and prospects of borrowing or equity raises would be more challenging. Additionally, the sales of equity or convertible debt securities may result in dilution to our stockholders.
Product Development and Supply Agreement.
In September 2007, the Company entered into a Product Development and Supply Agreement (the “Agreement”) with Sing Lin Technologies Co. Ltd., a company based in Taichung, Taiwan (“Sing Lin”). Pursuant to the Agreement, the Company consigned to Sing Lin the development and design of the next generation Exer-Rest and related devices. The Agreement commenced as of September 3, 2007 and had a term that extended three years from the acceptance by NIMS of the first run of production units. Thereafter, the Agreement automatically renewed for successive one year terms unless either party sent the other a notice of non-renewal. Either party was permitted to terminate the Agreement with ninety days prior written notice. Upon termination, each party’s obligations under the Agreement were to be limited to obligations related to confirmed orders placed prior to the termination date.
Pursuant to the Agreement, Sing Lin designed, developed and manufactured the tooling required to manufacture the acceleration therapeutic platforms for a total cost to the Company of $471,000. Sing Lin utilized the tooling in the performance of its production obligations under the Agreement. The Company paid Sing Lin $150,000 of the tooling cost upon execution of the Agreement and $150,000 upon the Company’s approval of the product prototype concepts and designs. The balance of the final tooling cost became due and payable in September 2008 upon acceptance of the first units produced using the tooling, and was paid in full during the year ended July 31, 2009.
Under the now-terminated Agreement, the Company also granted Sing Lin the exclusive distribution rights for the products in certain countries in the Far East, including Taiwan, China, Japan, South Korea, Malaysia, Indonesia and certain other countries. Sing Lin agreed not to sell the Products outside its geographic areas in the Far East.
The Agreement provided for the Company to purchase approximately $2.6 million of Exer-Rest units within one year of the September 2008 acceptance of the final product. The Agreement further provided for the Company to purchase $4.1 million and $8.8 million of Exer-Rest products in the second and third years following such acceptance, respectively. These minimum purchase amounts were based upon 2007 product costs multiplied by volume commitments. Through October 31, 2021, the Company had paid Sing Lin $1.7 million in connection with orders placed through that date. As of October 31, 2021, the Company has approximately $41,000 of payables due to Sing Lin. As of October 31, 2021, aggregate minimum future purchases under the Agreement totaled approximately $13.9 million.
As of October 31, 2021, the Company had not placed orders sufficient to meet the purchase obligations under the Agreement. The Company notified Sing Lin in June 2010 that it was terminating the Agreement effective September 2010, and Sing Lin in July 2010 demanded that the Company place orders sufficient to fulfill the three year minimum purchase obligations in the Agreement. As of the date of this filing, Sing Lin has not followed up on its July 2010 demand. There can be no assurance that Sing Lin will not attempt to enforce its remedies under the Agreement, or pursue other potential remedies. The Company believes that Sing Lin in no longer in business.
| 11 |
| 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 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, 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 losses and accumulated deficit; need for additional financing; dependence on management;; risks related to proprietary rights; other factors described herein as well as the factors contained in “Item 1A – Risk Factors” of our Annual Report on Form 10-K for the year ended July 31, 2021. We do not undertake any obligation to update forward-looking statements, except as required by applicable law. These forward-looking statements are only predictions and reflect our views as of the date they are made with respect to future events and financial performance.
Overview
We previously were engaged in the development, manufacture and marketing of non-invasive, whole body periodic acceleration (“WBPA”) therapeutic platforms, which are motorized platforms that move a subject repetitively head to foot. The Company discontinued operations in May 2019, accordingly, certain liabilities are classified as discontinued operations.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these condensed consolidated 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 income taxes. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. A more detailed discussion on the application of these and other accounting policies can be found in Note 2 in the Notes to the Consolidated Financial Statements set forth in Item 8 of this Annual Report on Form 10-K. While we believe that the factors we evaluate provide us with a meaningful basis for establishing and applying sound accounting policies, we cannot guarantee that the results will always be accurate. Since the determination of these estimates requires the exercise of judgment, actual results could differ from such estimates.
Results of Operations
We have discontinued operations in May 2019. The Company is assessing potential mergers, acquisitions and strategic collaborations.
Three months ended October 31, 2021 Compared to Three months Ended October 31, 2020
General and administrative costs and expenses. General and administrative (“G&A”) costs and expenses were $57,000 for the three months ended October 31, 2021 as compared to $59,000 for the three months ended October 31, 2020. The $2,000 decrease was primarily due to professional fees.
Total operating costs and expenses. Total operating costs and expenses were $57,000 for the three months ended October 31, 2021 as compared to $59,000 for the three months ended October 31, 2020. The $2,000 decrease is explained above in G&A.
Other expense. Net interest expense was $1,000 for the three months ended October 31, 2021 as compared to $0 for the three months ended October 31, 2020. The interest expense is related to the Promissory Notes described in Note 7 to the accompanying unaudited condensed consolidated financial statements.
| 12 |
Liquidity and Capital Resources
The Company’s operations have been primarily financed through private sales of its equity securities and advances under promissory notes. At October 31, 2021, we had approximately $87,000 of cash and negative working capital of approximately $147,000. We believe that the cash on hand at October 31, 2021 is not sufficient to meet our anticipated cash requirements for the next 12 months. We are currently exploring promissory notes for additional capital.
We expect to incur losses for the foreseeable future. It is likely that we will be required to obtain additional external financing through public or private equity offerings, debt financings or collaborative agreements. No assurance can be given that such additional financing will be available on acceptable terms or at all.
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 in a timely manner. Additionally, the sales of equity or convertible debt securities may result in dilution to our stockholders.
Net cash used in operating activities was $118,000 and $64,000 for three months ended October 31, 2021 and 2020, respectively. This $54,000 increase in cash used was primarily due to increases in prepaid expense and decreases in accounts payable.
Net cash provided by financing activities was $150,000 and $0 for three months ended October 31, 2021 and 2020, respectively. This $150,000 increase was due to proceeds from Promissory Notes described in Note 7 to the accompanying unaudited condensed consolidated financial statements.
| 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. |
The Company’s management, with the participation of its Interim Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) or 15d-15(e)) as of October 31, 2021. Based upon that evaluation, the Interim Chief Executive Officer and Chief Financial Officer concluded that, as of that date, the Company’s disclosure controls and procedures were not effective due to the material weakness identified below.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed 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. Internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over financial reporting as of October 31, 2021, the Company determined that there were control deficiencies that constituted material weaknesses, as described below.
| 1. | Process and procedures – Because of the inherent limitations due to the size of our business, our internal controls over financial reporting are inadequately designed and may not prevent or detect misstatements. |
Accordingly, the Company concluded that these control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls.
As a result of the material weaknesses described above, management has concluded that the Company did not maintain effective internal control over financial reporting as of October 31, 2021 based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
Notwithstanding the existence of these material weaknesses in the Company’s internal control over financial reporting, the Company’s management believes that the condensed consolidated financial statements included in this Form 10-Q fairly present in all material respects the Company’s financial condition, results of operations and cash flows for the periods presented.
Remedial Actions to Address Material Weaknesses
Management has actively implemented a remediation plan to ensure that control deficiencies contributing to the material weakness are remediated such that these controls will operate effectively. Consistent with the remediation plan we have conducted internal control training to address the lower levels of materiality in order to maintain internal control effectively against a material weakness as first reported in Item 9A of our Annual Report on Form 10-K for the year ended July 31, 2021. This remains an ongoing process.
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.
| 13 |
PART II. OTHER INFORMATION
| Item 1. | Legal Proceedings |
None.
| Item 1A. | Risk Factors |
None.
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
None.
| Item 3. | Defaults upon Senior Securities |
None.
| Item 4. | Mine Safety Disclosures |
None.
| Item 5. | Other Information |
None.
| Item 6. | Exhibits |
| 10.1 | ||
| 10.2 | ||
| 31.1 | Certification of Chief Executive Officer pursuant to Rules 13a–14 and 15d-14 under the Securities Exchange Act of 1934. | |
| 31.2 | Certification of Chief Financial Officer pursuant to Rules 13a–14 and 15d-14 under the Securities Exchange Act of 1934. | |
| 32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350 as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350 as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 101.INS | Inline XBRL Instance Document* | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document* | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document* | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document* | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document* | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document* | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| * | Filed herewith |
| 14 |
NON-INVASIVE MONITORING SYSTEMS, INC
October 31, 2021
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: December 10, 2021 | By: | /s/ Jane H. Hsiao |
| Jane H. Hsiao, Interim Chief Executive Officer | ||
| Dated: December 10, 2021 | By: | /s/ James J. Martin |
| James J. Martin, Chief Financial Officer |
| 15 |
EXHIBIT INDEX
| 16 |
1 Year Non Invasive Monitoring ... (PK) Chart |
1 Month Non Invasive Monitoring ... (PK) Chart |
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