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FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1996
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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 O-13176
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NON-INVASIVE MONITORING SYSTEMS, INC.
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(Exact name of registrant as specified in its charter)
FLORIDA 59-2007840
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification number)
1840 West Avenue
Miami Beach, Florida 33139
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(Address of principal executive offices)
(Zip Code)
(305) 534-3694
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(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
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APPLICABLE ONLY TO CORPORATE ISSUERS
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Number of shares of the registrant's common stock outstanding as of December
12, 1996 is 12,439,729.
Transitional Small Business Disclosure Format: (Check one)
Yes No X
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This document consists of 11 pages.
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NON-INVASIVE MONITORING SYSTEMS, INC.
Index
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed consolidated balance sheets--July 31, 1996 and October 31,
1996.
Condensed consolidated statements of operations--Three Months Ended
October 31, 1995 and 1996
Condensed consolidated statements of cash flows--Three Months Ended
October 31, 1995 and 1996
Notes to condensed consolidated financial statements--October 31, 1996
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
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PART I - FINANCIAL INFORMATION
NON-INVASIVE MONITORING SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
July 31, October 31,
1996 1996
(Note) (Unaudited)
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 189,092 $ 208,617
Accounts and royalties receivable 632,542 86,308
Inventories 337,280 346,011
Prepaid expenses and other current assets 16,678 16,678
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TOTAL CURRENT ASSETS 1,175,592 657,614
PLANT AND EQUIPMENT
Furniture and equipment 615,191 615,191
Leasehold improvements 15,730 15,730
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630,921 630,921
Less accumulated depreciation
and amortization (570,595) (582,758)
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60,326 48,163
OTHER ASSETS
Patent costs, net of accumulated amortization
of $129,587 in October and $124,885 in July 241,552 240,424
Deferred software production costs, net of
accumulated amortization of $470,204 in
October and $447,704 in July 37,606 15,106
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279,158 255,530
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$ 1,515,076 $ 961,307
=========== ===========
</TABLE>
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NON-INVASIVE MONITORING SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS--Continued
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
July 31, October 31,
1996 1996
(Note) (Unaudited)
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<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Customer deposit 84,000 -
Accounts payable 419,456 35,021
Accrued expenses 116,439 127,391
Royalties payable to related party 66,103 -
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TOTAL CURRENT LIABILITIES 685,998 162,412
SHAREHOLDERS' EQUITY
Convertible Preferred Stock, $1.00
par value, 1,000,000 shares authorized:
Series B: (liquidation preference
of $100 per share, aggregating
$10,000) 100 100
Series C: 62,048 shares issued
and outstanding 62,048 62,048
Common Stock, $.01 par value,
100,000,000 shares authorized,
12,439,729 issued and outstanding 124,398 124,398
Additional Paid-in capital 10,693,126 10,693,126
Accumulated deficit (10,050,594) (10,080,777)
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829,078 798,895
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$ 1,515,076 $ 961,307
=========== ============
</TABLE>
Note: The balance sheet at July 31, 1996 has been derived from the audited
financial statements at that date.
See notes to condensed consolidated financial statements.
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NON-INVASIVE MONITORING SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
October 31,
1995 1996
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<S> <C> <C>
Net sales $ 357,278 $ 280,301
Less:
Cost of goods sold 199,360 124,221
Amortization of software production costs 22,500 22,500
----------- -----------
135,418 133,580
Operating expenses:
Selling and distribution 17,633 1,166
General and administrative 110,561 93,497
Research and development 74,902 75,262
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203,096 169,925
LOSS INCOME FROM OPERATIONS (67,678) (36,345)
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Other income:
Interest income 677 -
Royalties 4,940 3,600
Other income 4,370 2,562
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9,987 6,162
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NET (LOSS) INCOME $ (57,691) $ (30,183)
=========== ===========
AVERAGE COMMON SHARES OUTSTANDING 12,439,729 12,439,729
(LOSS) INCOME PER COMMON SHARE $ (0.005) $ (0.002)
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
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NON-INVASIVE MONITORING SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
October 31,
1995 1996
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<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (57,691) $ (30,183)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 43,399 39,365
Changes in operating assets and liabilities:
Decrease (increase) in accounts
and royalties receivable (111,988) 546,234
(Increase) decrease in inventories 95,275 (8,731)
Decrease in prepaid expenses
and other current assets (7,371) -
Increase (decrease) in accounts payable
current liabilities 30,680 (523,586)
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NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (7,696) 23,099
INVESTING ACTIVITIES
Purchases of plant and equipment (2,214) -
Patent costs (8,659) (3,574)
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NET CASH USED IN INVESTING ACTIVITIES (10,873) (3,574)
(DECREASE) INCREASE IN CASH (18,569) 19,525
CASH AT BEGINNING OF PERIOD 189,769 189,092
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CASH AT END OF PERIOD $ 171,200 $ 208,617
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</TABLE>
See notes to condensed consolidated financial statements.
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NON-INVASIVE MONITORING SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Three Months Ended October 31, 1996
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three month period ended October 31, 1996 are not
necessarily indicative of the results that may be expected for the year ended
July 31, 1997. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's 10-KSB and/or Annual
Report for the fiscal year ended July 31, 1996.
NOTE B--INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
July 31, 1996 October 31, 1996
------------- ----------------
<S> <C> <C>
Raw materials $ 194,971 $ 232,344
Work-in-process 65,000 46,692
Finished Goods 77,309 66,975
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$ 337,280 $ 346,011
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</TABLE>
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Item 2. Management's Discussion and Analysis or Plan of Operations.
The following discussion contains, in addition to historical information,
forward looking statements with respect to Non-Invasive Monitoring Systems,
Inc. (the "Company") that involve risks and uncertainties. The Company's
actual results could differ materially. 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 other variations
thereof or comparable terminology are intended to identify forward-looking
statements. Factors that could cause or contribute to such difference include,
but not limited to, history of operating losses and accumulated deficit;
possible need for additional financing; dependence on distributors;
competition; dependance on management; risk related to proprietary rights; and
government regulation; and other factors discussed in the Company's filings
with the Securities and Exchange Commission.
Results of Operations
The Company had a net loss of approximately $30,000 for the three month period
ended October 31, 1996 as compared to a net loss of approximately $58,000 for
the three month period ended October 31, 1995. This loss was primarily due to
higher gross margin offset by lower sales and reduction in operating expenses.
Net sales for the three month period ended October 31, 1996 were approximately
$280,000, as compared to approximately $357,000 for the three month period
ended October 31, 1995 due to lower sales to the Company's exclusive
distributor as described below.
The Company's products are distributed exclusively by SensorMedics Corporation
("SMC"), a subsidiary of Thermo Electron Corp., pursuant to a distribution
agreement (the "SMC Agreement"), which was scheduled to expire in August 1997.
SMC produces instruments for pulmonary function testing, metabolic
measurements, sleep diagnostics and like support and has over 30 years
experience in the medical device industry. SMC distributes through 35 direct
representatives in the United States, the United Kingdom, the Benelux
countries, France, and Germany and uses 50 dealers in other countries.
Under the terms of the Agreement, the Company has granted SMC exclusive
world-wide distribution rights (as defined) for certain products. In return,
SMC must purchase minimum quantities of the Company's products to maintain
these exclusive distribution rights. Pursuant to the marketing agreement, SMC
purchases at a discount of 30% to 50% of the Company's published list price.
Sales to SMC during the three month period ended October 31, 1996 amounted to
approximately $190,000 as compared to approximately $289,000 for the three
month period ended October 31, 1995.
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In recent years, the increasing financial cost of domestic and foreign
regulatory compliance in the manufacturer and marketing of medical devices has
adversely affected the Company's ability, particularly in light of its limited
capital resources, to manufacture and market new products targeted to adult and
infant critical care. Accordingly, in December 1996, the Company and SMC
amended the terms of the SMC Agreement to provide for the granting by the
Company to SMC of the exclusive rights to manufacture the Company's Respibands
and non-exclusive rights to manufacture the Company's Respitrace Plus and
Respitrace PT. In exchange for such rights, the Company will receive certain
fixed payments from SMC, as well as ongoing royalties. The Company will also
develop a new sleep diagnostic device to be manufactured and marketed
exclusively by SMC. As SMC will be responsible for regulatory compliance, the
Company believes that by granting manufacturing rights to SMC, it will allow
the Company to focus its efforts on research and development which, in the
opinion of management, has always been the Company's strength. The Company
plans to undertake research and development efforts to improve existing
products and develop new products and to license to third parties the rights to
manufacture such products and market them to the medical community.
Cost of goods sold expressed as a percentage of sales was approximately 44% for
the three month period ended October 31, 1996 compared to approximately 56% for
the three months ended October 31, 1995 due to higher gross margin as a result
of product mix. As described above, the Company and SMC have amended the SMC
Agreement to grant SMC certain manufacturing rights for the Company's products.
Such agreement will largely eliminate cost of goods sold and should result in
expense reductions in future periods.
Operating expenses decreased from approximately $203,000 for the three month
period ended October 31, 1995 to approximately $170,000 for the three month
period ended October 31, 1996. Selling and distribution expenses were
approximately $16,000 lower for the three month period ending October 31, 1996
as compared to the same period in 1995. Due to the SMC Agreement, pursuant to
the above, the Company is not incurring any significant selling and
distribution expense. General and administrative expenses were approximately
$17,000 lower for the three month period ending October 31, 1996 as compared to
the same period in 1995 as a result of decreased expense associated with
securing FDA 510(k) permission to market the Respitrace PT and RespiEvents -
EDP, which was granted in February 1996.
Liquidity and Capital Resources
The Company's primary sources of working capital are revenues from operations.
Working capital was approximately $495,000 at October 31, 1996 as compared to
approximately $490,000 at July 31, 1996.
Management believes that revenues resulting from the amended SMC Agreement will
generate sufficient cash flow to meet working capital needs and continue
operations for the fiscal year ending July 31, 1997. If revenues
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generated from the SMC Agreement, as amended, do not reach levels sufficient to
fund working capital requirements the Company may require further financing to
continue operations during fiscal year ending July 31, 1997 and in any event
may require additional capital to fund its research and development efforts
thereafter. Failure to secure necessary financing might result in the further
reduction and curtailment of operations.
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PART II OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits - 27 Financial Data Schedule (for SEC use only)
B. Not applicable
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
NON-INVASIVE MONITORING SYSTEMS, INC.
Registrant
Date: December 12, 1996 By: /s/Marvin A. Sackner
Marvin A. Sackner, as Chairman and
Principal Executive Officer
Date: December 12, 1996 By:/s/Richard L. Dougherty
Richard L. Dougherty, as President
and Principal Operating, Financial
and Accounting Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> AUG-01-1996
<PERIOD-END> OCT-31-1996
<CASH> 208,617
<SECURITIES> 0
<RECEIVABLES> 86,308
<ALLOWANCES> 0
<INVENTORY> 346,011
<CURRENT-ASSETS> 657,614
<PP&E> 630,921
<DEPRECIATION> 582,758
<TOTAL-ASSETS> 48,163
<CURRENT-LIABILITIES> 162,412
<BONDS> 0
100
62,048
<COMMON> 124,398
<OTHER-SE> 798,895
<TOTAL-LIABILITY-AND-EQUITY> 961,307
<SALES> 280,301
<TOTAL-REVENUES> 280,301
<CGS> 124,221
<TOTAL-COSTS> 133,580
<OTHER-EXPENSES> 169,925
<LOSS-PROVISION> (36,345)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (30,183)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (30,183)
<EPS-PRIMARY> (0.002)
<EPS-DILUTED> 0
</TABLE>
