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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 January 31, 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.
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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)
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
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Number of shares of the registrant's common stock outstanding as of March 12,
1998 is 12,439,729.
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This document consists of 11 pages.
NON-INVASIVE MONITORING SYSTEMS, INC.
Index
PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements (unaudited)
Condensed consolidated balance sheets -- July 31, 1997 and January 31,
1998.
Condensed consolidated statements of operations--Three Months Ended
January 31, 1997 And 1998
Condensed consolidated statements of cash flows--Three and Six Months
Ended January 31, 1997 And 1998
Notes to condensed consolidated financial statements--January 31, 1998
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations
PART II. OTHER INFORMATION
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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, 1997 January 31, 1998
(Note) (Unaudited)
----------- -----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 646,261 $ 415,691
Accounts and royalties receivable 93,905 51,660
Prepaid expenses and other current assets 10,313 1,571
----------- -----------
750,479 468,922
PROPERTY AND EQUIPMENT
Furniture and equipment 695,428 696,904
Leasehold improvements 15,731 15,731
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711,159 712,635
Less accumulated depreciation
and amortization (616,339) 641,509
----------- -----------
94,820 71,126
OTHER ASSETS
Patent costs, net of accumulated amortization
of security deposits $155,392 in January and
$144,284 in July 253,326 265,215
3,770 3,770
----------- -----------
257,096 268,985
----------- -----------
$ 1,102,395 $ 809,033
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</TABLE>
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NON-INVASIVE MONITORING SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS--Continued
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
July 31, 1997 January 31, 1998
(Note) (Unaudited)
------------ ----------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 25,775 $ 78,490
Accrued expenses 84,638 25,926
------------ ------------
110,413 104,416
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 10,693,127 10,693,127
Accumulated deficit (9,887,691) (10,175,056)
------------ ------------
Total shareholder's equity 991,982 704,617
------------ ------------
Total liabilities and shareholders equity $ 1,102,395 $ 809,033
------------ ------------
</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 STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
January 31, January 31,
1997 1998 1997 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES:
Product sales $ 157,512 $ 38,973 $ 437,813 $ 60,411
License revenue and product sales under Joint
Development, Manufacturing and Marketing
Agreement 388,251 -- 388,251 --
Royalty income 11,933 28,600 15,533 57,200
------------ ------------ ------------ ------------
Total revenue 557,696 67,573 841,597 117,611
OPERATING EXPENSES:
Cost of goods sold 66,573 666 190,794 1,428
Cost of goods sold under
Joint Development,
Manufacturing and Marketing Agreement 138,251 -- 138,251 --
Amortization of software
production costs 15,000 -- 37,500 --
Selling, and distribution 4,935 3,006 6,101 4,531
General and administrative 119,851 95,686 213,348 207,146
Research and development 94,174 90,757 169,436 200,262
------------ ------------ ------------ ------------
Total operating expenses 438,784 190,115 755,430 413,367
INCOME (LOSS) FROM OPERATIONS 118,912 (122,542) 86,167 (295,756)
Interest income --
Other income 3,601 3,497 6,163 8,391
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 122,513 $ (119,045) $ 92,330 $ (287,365)
============ ============ ============ ============
AVERAGE COMMON SHARES OUTSTANDING 12,439,729 12,439,729 12,439,729 12,439,729
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)
<TABLE>
<CAPTION>
Six Months Ended
January 31,
1997 1998
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<S> <C> <C>
OPERATING ACTIVITIES
Net (loss) income $ 92,303 $(287,365)
Adjustment to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 69,797 36,278
Changes in operating assets and liabilities:
Decrease in accounts and
royalties receivable 362,102 42,245
Decrease in inventories 152,943 --
Decrease in prepaid expenses
and other current assets 5,653 8,742
Decrease in accounts
payable and accrued expenses (449,085) (5,997)
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 233,713 (206,097)
INVESTING ACTIVITIES -- --
Purchases of plant and equipment (4,839) (1,476)
Patent costs (19,457) (22,997)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (24,296) (24,473)
INCREASE (DECREASE) IN CASH 209,417 (230,570)
CASH AT BEGINNING OF PERIOD 189,092 646,261
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CASH AT END OF PERIOD $ 398,509 $ 415,691
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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)
January 31, 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 month period ended January 31,
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.
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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
Revenue for the three and six month periods ended January 31, 1998 was
approximately $68,000 and $118,000 respectively as compared to approximately
$558,000 and $842,000 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 period included certain non-recurring
license revenues under the SMC agreement.
Royalty income increased approximately $17,000 to $42,000 during the three and
six month periods ended January 31, 1998 period as compared to the same period
1997 as a result of the minimum royalties earned under the SMC Agreement.
General and administrative expenses decreased approximately $24,000 and $6,000
during the three and six month period ended January 31, 1998 as compared to the
same periods in 1997, due to the overall reduction in the Company's operations
that included among others, reduction in personnel.
Research and development expenses increased approximately $31,000 during the six
month period ended January 31, 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
As of January 31, 1998, Nims primary source of working capital was generated
from royalties under the SMC Agreement.
Working capital at January 31, 1998 was approximately $364,000 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 six month period ended
January 31, 1998.
Management believes that current working capital levels and anticipated revenues
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, 1998. 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, 1998
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 - 27.1 - 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: March 15, 1998 By: /s/ Marvin A. Sackner
----------------------------------
Marvin A. Sackner, as Chairman and
Principal Executive Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-31-1997
<PERIOD-END> JAN-31-1998
<CASH> 415,691
<SECURITIES> 0
<RECEIVABLES> 51,660
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 468,922
<PP&E> 712,635
<DEPRECIATION> 641,509
<TOTAL-ASSETS> 71,126
<CURRENT-LIABILITIES> 104,416
<BONDS> 0
100
62,048
<COMMON> 124,398
<OTHER-SE> 518,071
<TOTAL-LIABILITY-AND-EQUITY> 809,033
<SALES> 60,411
<TOTAL-REVENUES> 117,611
<CGS> 1,428
<TOTAL-COSTS> 413,367
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (287,365)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (287,365)
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0
</TABLE>
