<PAGE> 1
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 April 30, 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
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Commission file number 0-13176
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NON-INVASIVE MONITORING SYSTEMS, INC.
-------------------------------------
(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
--------------------------
(Address of principal executive offices)
(Zip Code)
(305) 534-3694
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(Registrant's telephone number, including area code)
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
--- ---
Number of shares of the registrant's common stock outstanding as of June 12,
1996 is 12,439,729.
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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, 1995 and April 30,
1996.
Condensed consolidated statements of operations--Three and Nine Months
Ended April 30, 1995 and 1996.
Condensed consolidated statements of cash flows--Nine Months Ended
April 30, 1995 and 1996.
Notes to condensed consolidated financial statements--April 30, 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
2
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PART I - FINANCIAL INFORMATION
NON-INVASIVE MONITORING SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
July 31, April 30,
1995 1996
(Note) (Unaudited)
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<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 189,769 $ 63,794
Accounts and royalties receivable 108,752 212,976
Inventories 623,575 720,614
Prepaid expenses and other current assets 42,539 16,678
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TOTAL CURRENT ASSETS 964,653 1,014,062
PLANT AND EQUIPMENT
Furniture and equipment 608,070 615,191
Leasehold improvements 15,730 15,730
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623,800 630,921
Less accumulated depreciation
and amortization 509,925 557,097
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113,875 73,824
OTHER ASSETS
Patent costs, net of accumulated
amortization of $120,512 in April
and $107,537 in July 238,066 254,641
Deferred software production costs,
net of accumulated amortization
of $425,204 in April and $357,704
in July 127,606 60,109
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365,672 314,750
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$1,444,182 $1,402,636
========== ==========
</TABLE>
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NON-INVASIVE MONITORING SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS--Continued
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
July 31, April 30,
1995 1996
(Note) (Unaudited)
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<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Customer deposits 12,983 220,000
Accounts payable 63,604 182,929
Accrued expenses 99,110 102,163
Royalties payable to related party 45,267 66,103
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TOTAL CURRENT LIABILITIES 220,964 571,195
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, $.01 par value,
100,000,000 shares authorized,
12,439,729 issued and outstanding 124,398 124,398
Additional Paid-in capital 10,693,126 10,693,126
Accumulated deficit (9,656,454) (10,048,231)
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1,223,218 831,441
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$ 1,444,182 $ 1,402,636
=========== ============
</TABLE>
Note: The balance sheet at July 31, 1995 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 Nine Months Ended
April 30, April 30,
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 318,508 $ 236,638 $ 1,408,656 $ 686,740
Cost of goods sold 133,190 134,722 656,327 409,008
Amortization of software
production costs 22,500 22,500 67,500 67,500
----------- ----------- ----------- ----------
162,818 79,416 684,829 210,232
Operating expenses:
Selling and distribution 40,307 2,554 122,555 33,035
General and administrative 81,301 107,484 243,853 341,398
Research and development 91,255 109,067 249,818 265,353
----------- ----------- ----------- ----------
212,863 219,105 616,226 639,786
LOSS FROM OPERATIONS (50,045) (139,689) (68,603) (429,554)
----------- ----------- ----------- ----------
Other (expense) income:
Interest expense (177) -0- (20,883) -0-
Interest income 1,473 124 14,043 1,356
Royalties 4,900 3,600 16,900 12,140
Other income (expense) (9,160) 6,640 (7,463) 22,510
----------- ----------- ----------- ----------
(2,964) 10,364 (2,597) 36,006
----------- ----------- ----------- ----------
NET INCOME (LOSS) $ (53,009) $ (129,323) $ 71,200 $ (393,548)
=========== =========== =========== ==========
AVERAGE COMMON SHARES
OUTSTANDING 12,439,729 12,439,729 12,439,729 12,439,729
PROFIT (LOSS) PER
COMMON SHARE $ 0.00 $ (0.01) $ 0.01 $ (0.03)
=========== =========== =========== ==========
</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>
Nine Months Ended
April 30
1995 1996
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<S> <C> <C>
OPERATING ACTIVITIES
Net profit (loss) $ 71,200 $(393,548)
Adjustments to reconcile net profit (loss)
to net cash provided by operating
activities:
Depreciation and amortization 111,891 127,919
Changes in operating assets
and liabilities:
Restricted certificate of deposit 2,000,000 -0-
Accounts and royalties receivable (38,439) (104,224)
Inventories 71,406 (97,309)
Prepaid expenses and other
current assets (17,861) 25,861
Accounts payable and accrued expenses (25,768) 144,980
Customer deposits (188,647) 207,017
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NET CASH PROVIDED IN
OPERATING ACTIVITIES $ 1,983,782 $ (89,304)
INVESTING ACTIVITIES
Purchases of plant and equipment (56,368) (7,121)
Patent costs (4,283) (29,550)
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NET CASH USED IN INVESTING ACTIVITIES $ (60,651) $ (36,671)
FINANCING ACTIVITIES
Net proceeds from (payments of) notes payable (1,965,000) -0-
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NET CASH PROVIDED USED IN
FINANCING ACTIVITIES $(1,965,000) $ -0-
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(DECREASE) INCREASE IN CASH $ (41,869) $(125,975)
CASH AT BEGINNING OF PERIOD $ 297,088 $ 189,769
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CASH AT END OF PERIOD $ 255,219 $ 63,794
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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)
April 30, 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 and
Article 10 of regulation S-B. 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 and
nine month periods ended April 30, 1996 are not necessarily indicative of the
results that may be expected for the year ended July 31, 1996. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10KSB for the fiscal
year ended July 31, 1995.
NOTE B--INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
July 31, 1995 April 30, 1996
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<S> <C> <C>
Raw materials $217,353 $250,369
Work-in-process 266,324 223,648
Finished Goods 139,898 246,597
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$623,575 $720,614
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</TABLE>
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results 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. 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's net loss for the three month period ended April 30, 1996 was
approximately $129,000 as compared to a net loss of approximately $53,000 for
the three month period April 30, 1995. The net loss for the nine month period
ended April 30, 1996 was approximately $394,000 as compared to a net income of
approximately $71,000 for the same period in 1995. This increased loss for the
three and nine month periods was primarily due to decreased sales and lower
gross margins as described below.
Net sales for the three month period ended April 30, 1996 were approximately
$236,000 as compared to approximately $319,000 for the three month period ended
April 30, 1995: net sales for the nine month period ended April 30, 1996 were
approximately $686,000 as compared to approximately $1,409,000 for the nine
month period ended April 30, 1995. Net sales for both the three and nine month
period ended April 30, 1995 included sales to the National Institutes of Health
(NIH) CHIME Study, which did not recur in both the three and nine periods
ending April 30, 1996. Sales were further negatively impacted due to extended
vendor delivery schedules and delays in new product approvals by the U.S. Food
and Drug Administration (the "FDA") more fully described below. The Company
principally sells its products through SensorMedics Corporation ("SMC")
pursuant to a marketing agreement which expires in August 1997. 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 CHIME amounted to approximately $15,000 and $88,000, respectively, for
the three and nine month periods ending April 30, 1996 while sales to SMC
amounted to approximately $200,000 and $529,000, respectively, for the same
three and nine month periods.
Cost of goods sold expressed as a percentage of net sales was approximately 57%
during the three month period ended April 30, 1996 compared to approximately
42% for the three month period ending April 30, 1995. Cost of goods sold was
approximately 59% during the nine month period ended April 30, 1996 compared to
approximately 47% for the same period last year. The
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decrease in this percentage for both the three and nine month periods ending
April 30, 1996 resulted from higher margin due to product mix.
Operating expenses increased slightly from approximately $213,000 for the three
month period ended April 30, 1995 to approximately $219,000 for the three month
period ended April 30, 1996 and from approximately $616,000 for the nine month
period ended April 30, 1995 to approximately $639,000 for the nine month period
ended April 30, 1996.
In February 1996, the Company received FDA permission to market two new
products, the Respitrace PT recorder and the RespiEvents software package.
Nims began shipping Respitrace PT, under the name SomnoStar PT, and RespiEvents
to its sole distributor, SMC, in mid April 1996.
The RespiEvents contains a method, whose US patent application recently issued,
for quality control over validity of arterial oxygen saturation values measured
with pulse oximetry. It acts by automatically eliminating erroneous oxygen
values caused by movement of the oxygen sensor, a shortcoming of this widely
utilized technology in sleep disorders. The Company believes that such patent
will enhance the marketability of the two new products.
In May 1996, the Company received verification from Underwriters Laboratories,
Inc that the RespiTrace PT and the RespiTrace Plus comply with the emissions
and immunity requirements of the Electromagnetic Compatibility ("EMC")
Directive (89/336/EEC) issued by the European Community ("EC") requiring all
electrical and electronic equipment to demonstrate compliance prior to export
to the European marketplace. The Company believes this compliance will enhance
product acceptance in Europe while providing a positive step towards gaining CE
Mark on these products.
Liquidity and Capital Resources
The Company's primary source of working capital is revenues from operations.
Working capital was approximately $443,000 at April 30, 1996 as compared to
approximately $745,000 at July 31, 1995. The decrease in working capital is due
to a net loss generated during the nine month period. During the three month
period ended April 30, 1996 the Company continued to limit research and
development activities to projects which have the potential for generating
revenues in the short term.
As a result of working capital constraints, the Company continues to focus its
resources on the following areas of activity. These areas include; 1) Company
participation in regulatory standards development aimed at gaining new product
clearance to market, 2) in connection with the CHIME study vendor of choice
technical involvement and participation as a non-voting member to CHIME
Steering Committee meetings when requested, 3) servicing the product marketing
agreement with SMC as described above, 4) planning further submissions of
510(k) applications to the Food & Drug Administration (FDA) for permission to
market certain additional products including an upgrade of
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RespiEvents. The Company expects to continue efforts in these areas of
activity during fiscal 1996.
If sales do not continue at levels sufficient to fund working capital
requirements, the Company may require further financing to continue operations
beyond the end of fiscal 1996 and in any event may require additional capital
to fund its research and development efforts. Although the Company is
exploring various potential sources of financing, the Company has no
commitments in this regard. 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
Exhibits 27 - Financial Data Schedule (for SEC use only).
B. Not applicable
11
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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 June 13, 1996 By: /s/Marvin A. Sackner
-------------------- ----------------------------------------
Marvin A. Sackner, as Chairman and
Principal Executive Officer
Date June 13, 1996 By: /s/Richard L. Dougherty
-------------------- ----------------------------------------
Richard L. Dougherty, as President
and Principal Operating, Financial
and Accounting Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF NON-INVASIVE MONITORING SYSTEMS, INC. FOR THE NINE
MONTHS ENDED APRIL 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> APR-30-1996
<CASH> 63,794
<SECURITIES> 0
<RECEIVABLES> 212,976
<ALLOWANCES> 0
<INVENTORY> 720,614
<CURRENT-ASSETS> 1,014,062
<PP&E> 630,921
<DEPRECIATION> 557,097
<TOTAL-ASSETS> 1,402,636
<CURRENT-LIABILITIES> 571,195
<BONDS> 0
100
62,048
<COMMON> 124,398
<OTHER-SE> 644,895
<TOTAL-LIABILITY-AND-EQUITY> 1,402,636
<SALES> 686,740
<TOTAL-REVENUES> 686,740
<CGS> 409,008
<TOTAL-COSTS> 639,786
<OTHER-EXPENSES> 36,006
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (393,548)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
