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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 APRIL 30, 1998
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 0-13176
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
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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)
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 10,
1998 is 16,514,726.
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, 1997 and April 30,
1998.
Condensed consolidated statements of operations--Three and Nine Months
Ended April 30, 1997 and 1998
Condensed consolidated statements of cash flows--Nine Months Ended
April 30, 1997 and 1998
Notes to condensed consolidated financial statements--April 30, 1998
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
<TABLE>
<CAPTION>
JULY 31, 1997 APRIL 30, 1998
(NOTE) (UNAUDITED)
------ -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 646,261 $ 531,317
Accounts and royalties receivable 93,905 17,815
Prepaid expenses and other current assets 10,313 4,000
----------- -----------
750,479 553,132
Property and equipment:
Furniture and equipment 695,428 715,038
Leasehold improvements 15,731 15,731
----------- -----------
711,159 730,769
Less accumulated depreciation and amortization (616,339) (651,924)
----------- -----------
94,820 78,845
Other assets:
Patent costs, net of accumulated
amortization of $161,543 in April
and $144,284 in July 253,326 291,238
Security deposits 3,770 3,770
----------- -----------
257,096 295,008
----------- -----------
Total assets $ 1,102,396 $ 926,985
----------- -----------
</TABLE>
Note: The balance sheet at July 31, 1997 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 BALANCE SHEETS--Continued
JULY 31, 1997 APRIL 30, 1998
(NOTE) (UNAUDITED)
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Accounts payable $ 25,775 $ 45,564
Accrued expenses 84,638 76,838
------------ ------------
Total current liabilities 110,413 122,402
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,
16,514,726 issued and outstanding 124,398 165,148
Additional Paid-in capital 10,693,127 10,896,877
Accumulated deficit (9,887,691) (10,319,590)
------------ ------------
Total shareholders' equity 991,982 804,583
------------ ------------
Total liabilities and shareholders' equity $ 1,102,395 $ 926,985
------------ ------------
Note: The balance sheet at July 31, 1997 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 APRIL 30 NINE MONTHS ENDED APRIL 30
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Product sales $ 78,958 $ 7,321 $ 516,771 $ 67,732
License revenue and product sales
under Joint Development,
Manufacturing and Marketing
Agreement 250,000 -- 638,251 --
Royalty income 28,600 28,600 44,133 85,800
------------ ------------ ------------ ------------
Total revenue 357,558 35,921 1,199,155 153,532
Operating Expenses:
Cost of goods sold 65,377 833 256,171 2,261
Cost of goods sold under Joint
Development, Manufacturing and
Marketing Agreement -- -- 138,251 --
Amortization of software
production costs -- -- 37,500 --
Selling and distribution 2,139 11,084 8,240 15,615
General and administrative 108,336 79,722 321,684 286,868
Research and development 94,363 93,329 263,799 293,591
------------ ------------ ------------ ------------
Total operating expenses 270,215 184,968 1,025,645 598,335
(Loss) income from operations 87,343 (149,047) 173,510 (444,803)
Other income 1,926 4,513 8,089 12,904
------------ ------------ ------------ ------------
Net income (loss) $ 89,269 $ (144,534) $ 181,599 $ (431,899)
Average common shares
outstanding 12,439,729 16,514,726 12,439,729 16,514,726
Income (loss) per common share $ 0.01 $ 0.01 $ 0.01 $ 0.01
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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NON-INVASIVE MONITORING SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED APRIL 30,
1997 1998
---- ----
OPERATING ACTIVITIES
Net (loss) income $ 181,599 $(431,899)
Adjustment to reconcile net loss to
net cash provided by operating
activities:
Depreciation and amortization 84,091 52,844
Changes in operating assets and
liabilities:
Decrease (Increase) in accounts
and royalties receivable (526,165) 76,090
Increase in inventories (159,189) --
Decrease (Increase) in prepaid
expenses and other current
assets 2,704 6,313
Increase (Decrease) in accounts
payable and accrued expenses (431,033) 11,989
Decrease in customer deposits (84,000) --
---------
Net cash used in operating activities (438,715) (284,663)
INVESTING ACTIVITIES
Purchases of plant and equipment (12,742) (19,610)
Patent Costs (31,612) (55,171)
--------- ---------
Net cash (used in) investing activities (44,354) (74,781)
FINANCING ACTIVITY
Proceeds from private offering of
common stock -- 244,500
(Decrease) increase in cash 394,361 (114,944)
Cash at beginning of period 189,092 624,261
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Cash at end of period $ 583,453 $ 531,317
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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, 1998
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, 1998 are not necessarily indicative of the results that may be
expected for the year ended July 31, 1998. 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, 1997.
NOTE B--INVENTORIES
During the fourth fiscal quarter of the year ended July 31, 1997, the Company
wrote off its inventory balance with a cost of approximately $164,072.
NOTE C--COMMON STOCK
On April 30, 1998, the Company completed a private offering of 4,074,997 shares
of common stock to certain directors, executive offices and employees of the
Company at a price of $.06 per share for total proceeds of $244,500.
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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. 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
other factors discussed in this Report and the Company's filings with the
Securities and Exchange Commission.
INTRODUCTION
- ------------
Prior to December 1996, the Company's products were distributed exclusively by
SMC, a subsidiary of Thermo Electron Corporation. In December 1996, the Company
and SMC, amended the terms of their existing arrangement and entered into a
Joint Development, Manufacturing and Marketing Agreement (the "SMC Agreement")
pursuant to which the Company granted SMC 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, Nims received or
will receive certain fixed payments from SMC, as well as ongoing royalties. The
Company has also developed a new sleep diagnostic device to be manufactured and
marketed exclusively by SMC. SMC also 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.
In recent years, the increasing financial cost of domestic and foreign
regulatory compliance in the manufacture and marketing of medical devices has
adversely affected Nims' ability, particularly in light of its limited capital
resources, to manufacture and market new products targeted to adult and infant
critical care. As SMC is responsible under the Agreement for regulatory
compliance, the Company believes that by granting manufacturing rights to SMC,
it allows Nims to focus its efforts on product development which, in the opinion
of management, has always been the Company's strength. Nims is pursuing such
development efforts to improve its existing products and develop new products
for licensing to third parties for manufacture and marketing to the medical
community.
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RESULTS OF OPERATIONS
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Total revenue for the three and nine month periods ended April 30, 1998 was
approximately $36,000 and $153,000 respectively as compared to approximately
$357,000 and $1,200,000 for the same periods in the prior year. The decrease was
due to decreased sales to SMC during the 1998 period as compared to the 1997
period and also to the fact that the 1997 periods included certain non-recurring
license revenues of $250,000 and $500,000 as payment for the license grant under
the SMC agreement.
Royalty income remained the same during the three month period ended April 30,
1998 as compared to the 1997 period. Royalty income increased by approximately
$40,000 during the nine month period ended April 30, 1998 as compared to the
1997 period due to minimum royalties earned under the SMC Agreement.
General and administrative expenses decreased approximately $29,000 and $34,000
during the three and nine month period ended April 30, 1998 as compared to the
same periods in 1997.
Research and development expenses increased approximately $30,000 during the
nine month period ended April 30, 1998 as compared to the same period in 1997,
due to increased research and development of new products pursuant to the SMC
Agreement and otherwise.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Working capital at April 30, 1998 was approximately $430,000 as compared to
approximately $640,000 at July 31, 1997. The decrease in working capital is
primarily due to cash used for operations during the nine month period ended
April 30, 1998, offset by the funds raised in an April 1998 private offering as
desribed below.
In April 1998, Nims required additional working capital to fund continued
operations, as royalties generated under the SMC Agreement was not sufficient to
fund increased research and development of new products pursuant to the SMC
Agreement and otherwise. Accordingly, during April 1998 certain directors,
executive officers and employees of Nims purchased an aggregate of 4,074,997
shares of Common Stock in a private offering at a price of $.06 per share. The
proceeds of the offering of $244,500 will be used to fund operations.
Management believes that current working capital levels and anticipated revenues
from the SMC Agreement will generate sufficient cash flows to meet working
capital needs and continue operations for the fiscal year ending July 31, 1998.
If revenues generated from the SMC Agreement, do not reach levels sufficient to
fund working capital requirements the Company may require further financing to
continue operations in subsequent periods 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
---------------------
On April 30, 1998, the Company completed a private
offering of 4,074,997 shares of common stock to certain
directors, executive officers and employees of the Company, at
a price of $.06 per share for total proceeds of $244,500. Such
shares were sold pursuant to the exemption from Registration
afforded by Section 4(2) of the Securities Act of 1933, as
amended and Regulation D promulgated thereunder, each
purchaser of shares having delivered appropriate investment
representations to the Company and having consented to the
imposition of a restrictive legend on certificates evidencing
the shares.
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
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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 15, 1998 By: /s/ Marvin A. Sackner
Marvin A. Sackner, Chairman and
Principal Executive Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000720762
<NAME> NON-INVASIVE MONITORING SYSTEMS, INC./FL/
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> APR-30-1998
<CASH> 531,317
<SECURITIES> 0
<RECEIVABLES> 17,815
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 553,132
<PP&E> 730,769
<DEPRECIATION> 651,924
<TOTAL-ASSETS> 78,845
<CURRENT-LIABILITIES> 122,402
<BONDS> 0
100
62,048
<COMMON> 165,148
<OTHER-SE> 577,287
<TOTAL-LIABILITY-AND-EQUITY> 926,985
<SALES> 67,732
<TOTAL-REVENUES> 153,532
<CGS> 2,261
<TOTAL-COSTS> 598,335
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<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 431,899
<INCOME-TAX> 0
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 431,899
<EPS-PRIMARY> 0.01
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