<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, 1997
--------------
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
---------
NON-INVASIVE MONITORING SYSTEMS, INC.
-------------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA 59-2007840
- ------------------------------- ---------------------
(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
--------------
(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
--- ---
1
<PAGE> 2
Number of shares of the registrant's common stock outstanding as of June 5, 1997
is 12,439,729.
This document consists of 12 pages.
NON-INVASIVE MONITORING SYSTEMS, INC.
Index
PART I. FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements (unaudited)
Condensed consolidated balance sheets -- July 31, 1996 and April 30, 1997.
Condensed consolidated statements of operations--Three and Nine Months
Ended April 30, 1996 and 1997
Condensed consolidated statements of cash flows--Nine Months Ended April
30, 1996 and 1997
Notes to condensed consolidated financial statements--April 30, 1997
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
<PAGE> 3
PART I - FINANCIAL INFORMATION
------------------------------
NON-INVASIVE MONITORING SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
July 31, 1996 April 30,1997
(Note) (Unaudited)
------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 189,092 $ 583,453
Accounts and royalties receivable 632,542 106,377
Inventories 337,280 125,280
Prepaid expenses and other current assets 16,678 13,974
---------- ----------
TOTAL CURRENT ASSETS 1,175,592 829,084
PLANT AND EQUIPMENT
Furniture and equipment 615,191 680,744
Leasehold improvements 15,730 15,730
---------- ----------
630,921 696,474
Less accumulated depreciation
and amortization 570,595 602,526
---------- ----------
60,326 93,948
OTHER ASSETS
Patent costs, net of accumulated amortization
of $ 139,545 in April and $124,885 in July 241,552 258,504
Deferred software production costs, net of
accumulated amortization of $485,204 in
April and $447,704 in July 37,606 106
---------- ----------
279,158 258,610
---------- ----------
$1,515,076 $1,181,642
---------- ----------
</TABLE>
3
<PAGE> 4
NON-INVASIVE MONITORING SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS--Continued
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
July 31,1996 April 30, 1997
(Note) (Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Customer deposits 84,000 -
Accounts payable 419,456 23,451
Accrued expenses 116,439 147,514
Royalties payable to related party 66,103 -
------------- -------------
TOTAL CURRENT LIABILITIES 685,998 170,965
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) (9,868,995)
------------ ------------
829,078 1,101,677
------------ ------------
$ 1,515,076 $ 1,181,642
------------ ------------
</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.
4
<PAGE> 5
NON-INVASIVE MONITORING SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
April 30, April 30,
1996 1997 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Product sales $ 236,638 $ 78,958 $ 686,740 $ 516,771
License revenue and product
sales under Joint Development,
Manufacturing and Marketing
Agreement 250,000 638,251
Royalty income 3,600 28,600 12,140 44,133
---------- ---------- ---------- ----------
Total revenue 239,968 357,558 698,880 1,199,155
Operating Expenses:
Cost of goods sold 134,722 65,377 409,008 256,171
Cost of goods sold under
Joint Development,
Manufacturing and Marketing
Agreement 138,251
Amortization of software
production costs 22,500 67,500 37,500
Selling and distribution 2,554 2,139 33,035 8,240
General and administrative 107,484 108,336 341,398 321,684
Research and development 109,067 94,363 265,353 263,799
---------- ---------- ---------- ----------
Total operating expenses 376,327 270,215 739,969 1,025,645
(LOSS) INCOME FROM
OPERATIONS (139,689) 87,343 (429,554) 173,510
Other income 10,364 1,926 36,006 8,089
---------- ---------- ---------- ----------
NET (LOSS) INCOME $ (129,323) $ 89,269 $$(393,548) $ 181,599
========== ========== ========== ==========
AVERAGE COMMON SHARES
OUTSTANDING 12,439,729 12,439,729 12,439,729 12,439,729
(LOSS) INCOME PER
COMMON SHARE $ (0.01) $ 0.01 $ (0.03) $ 0.01
============ ============ ============ ============
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
NON-INVASIVE MONITORING SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
April 30,
1996 1997
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net (loss) income $(393,548) $ 181,599
Adjustment to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 127,919 84,091
Changes in operating assets and liabilities:
Decrease (Increase) in accounts and
royalties receivable (104,224) 526,165
Decrease (Increase) in inventories (97,309) 159,189
Decrease (Increase) in prepaid expenses
and other current assets 25,861 2,704
Increase (Decrease) in accounts
payable and accrued expenses 144,980 (431,033)
Increase (Decrease) in customer deposits 207,017 (84,000)
--------- ---------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (40,987) 438,715
INVESTING ACTIVITIES
Purchases of plant and equipment (7,121) (12,742)
Patent costs (29,550) (31,612)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (36,671) (44,354)
(DECREASE) INCREASE IN CASH (125,975) 394,361
CASH AT BEGINNING OF PERIOD 189,769 189,092
--------- ---------
CASH AT END OF PERIOD $ 63,794 $ 583,453
--------- ---------
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE> 7
NON-INVASIVE MONITORING SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
April 30, 1997
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, 1997 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:
July 31, 1996 April 30, 1997
------------- --------------
Raw materials $194,971 $121,091
Work-in-process 65,000 2,214
Finished Goods 77,309 1,975
-------- --------
$337,280 $125,280
-------- --------
Management is currently evaluating the inventory items that will be used in its
increased research and development activities. Management believes that the
remaining inventory will be sold at cost.
7
<PAGE> 8
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 SensorMedics Corporation ("SMC");
competition; dependence 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.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
INTRODUCTION
Prior to December 1996, the Company's products were distributed exclusively by
SMC, a subsidiary of Thermo Electron Corp., pursuant to a distribution agreement
(the "Distribution Agreement"). 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 Distribution Agreement, the Company granted SMC exclusive
world-wide distribution rights (as defined) for certain products. In return, SMC
was required to purchase minimum quantities of the Company's products to
maintain these exclusive distribution rights. Pursuant to the Distribution
Agreement, SMC purchased at a discount of 30% to 50% of the Company's published
list price. Sales to SMC during the three and nine month periods ended April 30,
1997 amounted to approximately $72,000 and $394,000, respectively, as compared
to approximately $200,000 and $529,000 for the same periods in 1996.
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 Distribution Agreement and signed a Joint Development,
Manufacturing and Marketing Agreement ("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
received certain fixed payments from SMC ($500,000 during the nine months ended
April 30, 1997) as well as ongoing royalties. The Company is also developing 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
8
<PAGE> 9
new products and to license to third parties the rights to manufacture such
products and market them to the medical community.
RESULTS OF OPERATIONS
Product sales for the three month period ended April 30, 1997 were approximately
$ 79,000 as compared to approximately $236,000 for the three month period ended
April 30, 1996. The decrease was due to decreased sales to SMC during the three
month period ended April 30, 1997. Net sales for the nine month period ended
April 30, 1997 were approximately $516,000 as compared to approximately $687,000
for the nine month period ended April 30, 1996.
In connection with the SMC Agreement, during the three and nine months ended
April 30, 1997 the Company received $250,000 and $500,000 respectively as
payment for the license grant and sold product pursuant to the SMC Agreement at
a cost of $138,251. Royalty income increased approximately $25,000 and $32,000
during the three and nine month periods ended April 30, 1997 respectively as
compared to the same periods in 1996, as a result of the minimum royalties
earned under the SMC Agreement.
Cost of goods sold expressed as a percentage of product sales was approximately
18% during the three month period ended April 30, 1997 compared to approximately
57 % for the three months ended April 30, 1996. Cost of goods sold was
approximately 50% during the nine month period ended April 30, 1997 compared to
approximately 59% for the same period last year. These decreases are due to
lower sales and fixed production costs. 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.
Selling and distribution expenses were approximately $400 and $25,000 lower for
the three and nine month periods ending April 30, 1997 as compared to the same
periods in 1996. Due to the SMC Agreement pursuant to the above, the Company is
not incurring and does not expect to incur any significant selling and
distribution expenses.
General and administrative expenses were approximately $13,000 and $20,000 lower
for the three month and nine month periods ending April 30, 1997 as compared to
the same periods in 1996 as a result of decreased expenses associated with
securing FDA 510(k) permission to market the Respitrace PT and RespiEvents -
EDP, which was granted in February 1996.
Research and development expenses were approximately $15,000 lower for the three
month period due to a reduction in research and development personnel.
The Company's net income for the three month period ended April 30, 1997 was
approximately $89,000 as compared to a net loss of approximately $129,323 for
the three month period ended April 30, 1996. The net income for the nine month
period ended April 30, 1997 was approximately $182,000 as compared to a net loss
of approximately $393,548 for the same period in 1996. The significant
improvement in performance for the three and six month periods was primarily due
to the factors described above.
9
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of working capital are revenues from operations.
Working capital was approximately $659,000 at April 30, 1997 as compared to
approximately $489,000 at July 30, 1996. The increase in working capital is due
to net income generated during the nine month period.
Management believes that revenues resulting from the amended SMC Agreement will
generate sufficient cash flows to meet working capital needs and continue
operations for the fiscal year ending July 30, 1997. If revenues 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 30, 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.
10
<PAGE> 11
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 - 27.1 - Financial data schedule (SEC use only)
B. Not applicable
11
<PAGE> 12
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 5, 1997 By: /s/ Marvin A. Sackner
----------------------------------
Marvin A. Sackner, as Chairman and
Principal Executive Officer
Date: June 5, 1997 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> 9-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> APR-30-1996
<PERIOD-END> APR-30-1997
<CASH> 583,453
<SECURITIES> 0
<RECEIVABLES> 106,377
<ALLOWANCES> 0
<INVENTORY> 125,280
<CURRENT-ASSETS> 829,084
<PP&E> 696,474
<DEPRECIATION> 602,526
<TOTAL-ASSETS> 93,948
<CURRENT-LIABILITIES> 170,965
<BONDS> 0
100
62,048
<COMMON> 124,398
<OTHER-SE> 824,131
<TOTAL-LIABILITY-AND-EQUITY> 1,101,677
<SALES> 516,771
<TOTAL-REVENUES> 1,199,155
<CGS> 256,171
<TOTAL-COSTS> 1,025,645
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 181,599
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 181,599
<EPS-PRIMARY> .01
<EPS-DILUTED> 0
</TABLE>
