<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 January 31, 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
----- -----
Number of shares of the registrant's common stock outstanding as of March 13,
1997 is 12,439,729.
1
<PAGE> 2
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 January 31,
1997.
Condensed consolidated statements of operations--Three and Six Months
Ended January 31, 1996 and 1997
Condensed consolidated statements of cash flows--Six Months Ended
January 31, 1996 and 1997
Notes to condensed consolidated financial statements--January 31, 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, January 31,
1996 1997
(Note) (Unaudited)
---------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 189,092 $ 314,536
Accounts and royalties receivable 632,542 270,440
Inventories 337,280 184,337
Prepaid expenses and other current assets 16,678 11,025
---------- ----------
TOTAL CURRENT ASSETS 1,175,592 780,338
PLANT AND EQUIPMENT
Furniture and equipment 615,191 620,030
Leasehold improvements 15,730 15,730
---------- ----------
630,921 635,760
Less accumulated depreciation
and amortization 570,595 593,213
---------- ----------
60,326 42,547
OTHER ASSETS
Patent costs, net of accumulated amortization
of $134,564 in January and $124,885 in July 241,552 251,333
Deferred software production costs, net of
accumulated amortization of $485,204 in
January and $447,704 in July 37,606 106
---------- ----------
279,158 251,439
---------- ----------
$1,515,076 $1,074,324
========== ==========
</TABLE>
3
<PAGE> 4
NON-INVASIVE MONITORING SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS--Continued
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
July 31, January 31,
1996 1997
(Note) (Unaudited)
------------ ------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Customer deposits 84,000 --
Accounts payable 419,456 55,783
Accrued expenses 116,439 97,133
Royalties payable to related party 66,103 --
------------ ------------
TOTAL CURRENT LIABILITIES 685,998 152,916
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) (9,958,264)
------------ ------------
829,078 921,408
------------ ------------
$ 1,515,076 $ 1,074,324
============ ============
</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 Six Months Ended
January 31, January 31,
1996 1997 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Product sales $ 92,824 $ 157,512 450,102 437,813
License revenue and product
sales under Joint Development,
Manufacturing and Marketing
Agreement -- 388,251 -- 388,251
Royalty income 3,600 11,933 8,540 15,533
------------ ------------ ------------ ------------
Total revenue 96,424 557,696 458,642 841,597
Operating Expenses:
Cost of goods sold 74,927 66,573 274,287 190,794
Cost of goods sold under
Joint Development,
Manufacturing and Marketing
Agreement -- 138,251 -- 138,251
Amortization of software
production costs 22,500 15,000 45,000 37,500
Selling and distribution 12,849 4,935 30,482 6,101
General and administrative 123,353 119,851 233,914 213,348
Research and development 81,384 94,174 156,286 169,436
------------ ------------ ------------ ------------
Total operating expenses 315,013 438,784 739,969 755,430
(LOSS) INCOME FROM
OPERATIONS (218,589) 118,912 (281,327) 86,167
Other income 12,055 3,601 17,102 6,163
------------ ------------ ------------ ------------
NET (LOSS) INCOME $ (206,534) $ 122,513 $(264,225) $ 92,330
============ ============ ============ ============
AVERAGE COMMON SHARES
OUTSTANDING 12,439,729 12,439,729 12,439,729 12,439,729
(LOSS) INCOME PER
COMMON SHARE $ (0.02) $ 0.01 $ (0.02) $ 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
January 31,
1996 1997
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net (loss) income $(264,225) $ 92,330
Adjustment to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 85,566 69,797
Changes in operating assets and liabilities:
Decrease in accounts and
royalties receivable 51,901 362,102
Decrease in inventories 16,443 152,943
Decrease in prepaid expenses
and other current assets 21,651 5,653
Decrease in accounts
payable and accrued expenses 58,193 (449,085)
Decrease in customer deposits (10,516) (84,000)
--------- ---------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES $ (40,987) $ 149,740
INVESTING ACTIVITIES
Purchases of plant and equipment (6,947) (4,839)
Patent costs (16,895) (19,457)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES $ (23,842) $ (24,296)
(DECREASE) INCREASE IN CASH $ (64,829) $ 125,444
CASH AT BEGINNING OF PERIOD $ 189,769 $ 189,092
--------- ---------
CASH AT END OF PERIOD $ 124,940 $ 314,536
--------- ---------
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE> 7
NON-INVASIVE MONITORING SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
January 31, 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 six month periods ended
January 31, 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:
<TABLE>
<CAPTION>
July 31, 1996 January 31, 1997
------------- ----------------
<S> <C> <C>
Raw materials $ 194,971 $ 89,808
Work-in-process 65,000 28,522
Finished Goods 77,309 66,007
--------- ---------
$ 337,280 $ 184,337
--------- ---------
</TABLE>
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 six month periods ended January
31, 1997 amounted to approximately $ 191,000 and $322,000, respectively, as
compared to approximately $ 41,000 and $ 330,000 for the same periods in fiscal
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
8
<PAGE> 9
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 ($250,000 during the six
months ended January 31, 1997) 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.
Results of Operations
Product sales for the three month period ended January 31, 1997 were
approximately $158,000 as compared to approximately $93,000 for the three month
period ended January 31, 1996. The increase was due to increased sales to SMC
during the three month period ended January 31, 1997 as compared to the same
period in 1996. Net sales for the six month period ended January 31, 1997 were
approximately $438,000 as compared to approximately $450,000 for the six month
period ended January 31, 1996.
In connection with the SMC Agreement, during the three months ended January 31,
1997 the Company received $250,000 as an initial payment for the license grant
and sold product pursuant to the SMC Agreement at a cost of $138,251. Royalty
income increased approximately $8,000 during the three and six month periods
ended January 31, 1997 as compared to the same periods in 1996, as a result of
the minimum royalties paid under the SMC Agreement.
Cost of goods sold expressed as a percentage of product sales was approximately
42% during the three month period ended January 31, 1997 compared to
approximately 81% for the three months ended January 31, 1996. Cost of goods
sold was approximately 44% during the six month period ended January 31, 1997
compared to approximately 61% for the same period last year 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.
Selling and distribution expenses were approximately $6,000 and $24,000 lower
for the three and six month periods ending January 31, 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 $4,000 and $10,000 lower
for the three month and six month periods ending January 31, 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
9
<PAGE> 10
and RespiEvents - EDP, which was granted in February 1996.
Research and development expenses were approximately $13,000 higher for the
three and six month period due to increased research and development activities,
including the development of new products pursuant to the SMC Agreement.
The Company's net income for the three month period ended January 31, 1997 was
approximately $123,000 as compared to a net loss of approximately $207,000 for
the three month period ended January 31, 1996. The net income for the six month
period ended January 31, 1997 was approximately $92,000 as compared to a net
loss of approximately $264,000 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.
Liquidity and Capital Resources
The Company's primary sources of working capital are revenues from operations.
Working capital was approximately $627,000 at January 31, 1997 as compared to
approximately $490,000 at July 31, 1996. The increase in working capital is due
to net income generated during the six 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 31, 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 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.
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: March 13, 1997 By: /s/Marvin A. Sackner
Marvin A. Sackner, as Chairman and
Principal Executive Officer
Date: March 13, 1997 By: /s/Richard L. Dougherty
Richard L. Dougherty, as President
and Principal Operating, Financial
and Accounting Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY>US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> JAN-31-1996
<PERIOD-END> JAN-31-1997
<EXCHANGE-RATE> 1
<CASH> 314,536
<SECURITIES> 0
<RECEIVABLES> 270,440
<ALLOWANCES> 0
<INVENTORY> 184,337
<CURRENT-ASSETS> 780,338
<PP&E> 635,760
<DEPRECIATION> 593,213
<TOTAL-ASSETS> 42,547
<CURRENT-LIABILITIES> 152,916
<BONDS> 0
100
62,048
<COMMON> 124,398
<OTHER-SE> 644,895
<TOTAL-LIABILITY-AND-EQUITY> 1,074,324
<SALES> 437,813
<TOTAL-REVENUES> 841,597
<CGS> 190,794
<TOTAL-COSTS> 755,430
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 92,330
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 92,330
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0
</TABLE>
