x |
Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 for the Quarterly Period ended October 31, 2013 |
¨ |
Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 for the Transition Period from _______________ to ____________________ |
NON-INVASIVE MONITORING SYSTEMS, INC. |
(Exact name of registrant as specified in its charter) |
Florida |
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59-2007840 |
(State or other jurisdiction of incorporation or |
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(I.R.S. employer identification no.) |
organization) |
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Large accelerated filer o |
Accelerated filer o |
Non-accelerated filer o |
Smaller reporting company x |
PART I. FINANCIAL INFORMATION |
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ITEM 1. |
FINANCIAL STATEMENTS |
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Condensed Consolidated Balance Sheets as of October 31, 2013 (unaudited) and July 31, 2013 |
3 |
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Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended October 31, 2013 and 2012 (unaudited) |
4 |
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Condensed Consolidated Statement of Changes in Shareholders’ Deficit for the three months ended October 31, 2013 (unaudited) |
5 |
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Condensed Consolidated Statements of Cash Flows for the three months ended October 31, 2013 and 2012 (unaudited) |
6 |
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Notes to Condensed Consolidated Financial Statements (unaudited) |
7 |
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ITEM 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
15 |
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ITEM 3. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
18 |
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ITEM 4. |
CONTROLS AND PROCEDURES |
18 |
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PART II. OTHER INFORMATION |
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ITEM 1. |
LEGAL PROCEEDINGS |
20 |
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ITEM 1A. |
RISK FACTORS |
20 |
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ITEM 2. |
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
20 |
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ITEM 3. |
DEFAULTS UPON SENIOR SECURITIES |
20 |
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ITEM 4. |
MINE SAFETY DISCLUSURE |
20 |
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ITEM 5. |
OTHER INFORMATION |
20 |
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ITEM 6. |
EXHIBITS |
20 |
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SIGNATURES |
21 |
2 | ||
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October 31, 2013 |
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July 31, 2013 |
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(Unaudited) |
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ASSETS |
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Current assets |
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Cash |
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$ |
187 |
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$ |
296 |
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Royalties and other receivables, net |
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|
1 |
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|
1 |
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Inventories, net |
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461 |
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|
462 |
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Prepaid expenses, deposits, and other current assets |
|
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33 |
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|
46 |
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Total current assets |
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|
682 |
|
|
805 |
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Tooling and equipment, net |
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3 |
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5 |
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Total assets |
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$ |
685 |
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$ |
810 |
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LIABILITIES AND SHAREHOLDERS' DEFICIT |
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Current liabilities |
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Accounts payable and accrued expenses |
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$ |
746 |
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$ |
754 |
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Customer deposits |
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|
4 |
|
|
4 |
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Total current liabilities |
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|
750 |
|
|
758 |
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Long term liabilities |
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Notes payable Related party |
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$ |
1,150 |
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$ |
1,150 |
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Notes payable other |
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|
50 |
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|
50 |
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Total long term liabilities |
|
|
1,200 |
|
|
1,200 |
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|
|
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Total liabilities |
|
$ |
1,950 |
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$ |
1,958 |
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|
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Shareholders' deficit |
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|
|
|
|
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Series B Preferred Stock, par value $1.00 per share; 100 shares authorized, issued and outstanding, as of October 31, 2013 and July 31, 2013; liquidation preference $10 |
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Series C Convertible Preferred Stock, par value $1.00 per share; 62,048 shares authorized, issued and outstanding, as of October 31, 2013 and July 31, 2013; liquidation preference $62 |
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62 |
|
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62 |
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Series D Convertible Preferred Stock, par value $1.00 per share; 5,500 shares authorized; 2,795 shares issued and outstanding as of October 31, 2013 and July 31, 2013; liquidation preference $4,193 |
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3 |
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|
3 |
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Common Stock, par value $0.01 per share; 400,000,000 shares authorized; 78,942,423 shares issued and outstanding as of October 31, 2013 and July 31, 2013 |
|
|
789 |
|
|
789 |
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Additional paid in capital |
|
|
21,928 |
|
|
21,927 |
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Accumulated deficit |
|
|
(23,998) |
|
|
(23,880) |
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Accumulated other comprehensive loss |
|
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(49) |
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|
(49) |
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Total shareholders' deficit |
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(1,265) |
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|
(1,148) |
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Total liabilities and shareholders' deficit |
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$ |
685 |
|
$ |
810 |
|
3 | ||
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Three months ended October 31, |
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2013 |
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2012 |
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Revenues |
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Product sales, net |
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$ |
|
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$ |
34 |
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Royalties |
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|
1 |
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15 |
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Total revenues |
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1 |
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|
49 |
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Operating costs and expenses |
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|
|
|
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|
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Cost of sales |
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11 |
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Selling, general and administrative |
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85 |
|
|
119 |
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Research and development |
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|
1 |
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4 |
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|
|
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|
|
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Total operating costs and expenses |
|
|
86 |
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134 |
|
|
|
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Operating loss |
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(85) |
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(85) |
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Other expense |
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Interest expense, net |
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(33) |
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(31) |
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Total other expense |
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(33) |
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(31) |
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Net loss |
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$ |
(118) |
|
$ |
(116) |
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Comprehensive net loss |
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$ |
(118) |
|
$ |
(116) |
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Net loss attributable to common shareholders |
|
$ |
(118) |
|
$ |
(116) |
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|
|
|
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Weighted average number of common shares outstanding - basic and diluted |
|
|
78,942 |
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|
68,922 |
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|
|
|
|
|
|
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Basic and diluted loss per common share |
|
$ |
(0.00) |
|
$ |
(0.00) |
|
4 | ||
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Preferred Stock |
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Additional |
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Accum- |
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Accumu- lated Other Compre- |
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Series B |
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Series C |
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Series D |
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Common Stock |
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Paid in |
|
ulated |
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hensive |
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Shares |
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Amount |
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Shares |
|
Amount |
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Shares |
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Amount |
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Shares |
|
Amount |
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Capital |
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Deficit |
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Loss |
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Total |
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Balance at July 31, 2013 |
|
|
100 |
|
$ |
|
|
|
62,048 |
|
$ |
62 |
|
|
2,795 |
|
$ |
3 |
|
|
78,942,423 |
|
$ |
789 |
|
$ |
21,927 |
|
$ |
(23,880) |
|
$ |
(49) |
|
$ |
(1,148) |
|
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Stock-based compensation |
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1 |
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|
1 |
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Net loss |
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|
|
|
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|
|
|
|
|
|
|
|
|
|
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|
|
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(118) |
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(118) |
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|
|
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Balance at October 31, 2013 |
|
|
100 |
|
$ |
|
|
|
62,048 |
|
$ |
62 |
|
|
2,795 |
|
$ |
3 |
|
|
78,942,423 |
|
$ |
789 |
|
$ |
21,928 |
|
$ |
(23,998) |
|
$ |
(49) |
|
$ |
(1,265) |
|
5 | ||
|
|
2013 |
|
2012 |
| ||
Operating activities |
|
|
|
|
|
|
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Net loss |
|
$ |
(118) |
|
$ |
(116) |
|
Adjustments to reconcile net loss to net cash used in operating activities |
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
2 |
|
|
1 |
|
Stock-based compensation expense |
|
|
1 |
|
|
4 |
|
|
|
|
|
|
|
|
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Changes in operating assets and liabilities |
|
|
|
|
|
|
|
Accounts and royalties receivable, net |
|
|
|
|
|
9 |
|
Inventories, net |
|
|
1 |
|
|
9 |
|
Prepaid expenses, deposits and other current assets |
|
|
13 |
|
|
12 |
|
Accounts payable and accrued expenses |
|
|
(8) |
|
|
76 |
|
Net cash used in operating activities |
|
|
(109) |
|
|
(5) |
|
|
|
|
|
|
|
|
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Net decrease in cash |
|
|
(109) |
|
|
(5) |
|
Cash, beginning of period |
|
|
296 |
|
|
56 |
|
Cash, end of period |
|
$ |
187 |
|
$ |
51 |
|
|
|
|
|
|
|
|
|
Supplemental Disclosure: |
|
|
|
|
|
|
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Non cash activities: |
|
|
|
|
|
|
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Transfer of tooling and equipment to inventory |
|
$ |
|
|
$ |
1 |
|
6 | ||
7 | ||
8 | ||
|
|
October 31, 2013 |
|
July 31, 2013 |
| ||
Work-in-progress, spare parts and accessories |
|
$ |
9 |
|
$ |
9 |
|
Finished goods |
|
|
452 |
|
|
453 |
|
Total inventories |
|
$ |
461 |
|
$ |
462 |
|
9 | ||
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
Weighted |
|
average |
|
|
|
|
|
|
|
|
|
Average |
|
remaining |
|
|
Aggregate |
|
|
|
|
|
|
Exercise |
|
contractual |
|
|
intrinsic |
|
|
|
Shares |
|
|
Price |
|
term (years) |
|
|
Value |
|
Options outstanding, July 31, 2013 |
|
613,750 |
|
$ |
0.335 |
|
|
|
|
|
|
Options granted |
|
- |
|
|
n/a |
|
|
|
|
|
|
Options exercised |
|
- |
|
|
n/a |
|
|
|
|
|
|
Options forfeited or expired |
|
(75,000) |
|
$ |
0.751 |
|
|
|
|
|
|
Options outstanding, October 31, 2013 |
|
538,750 |
|
$ |
0.326 |
|
2.18 |
|
$ |
0 |
|
Options expected to vest, October 31, 2013 |
|
536,857 |
|
$ |
0.326 |
|
2.17 |
|
$ |
0 |
|
Options exercisable, October 31, 2013 |
|
502,500 |
|
$ |
0.319 |
|
2.09 |
|
$ |
0 |
|
10 | ||
11 | ||
Year Ending October 31, |
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2015 |
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|
1,200,000 |
|
|
|
$ |
1,200,000 |
|
|
|
October 31, 2013 |
|
October 31, 2012 |
|
Stock options |
|
538,750 |
|
758,750 |
|
Series C Preferred Stock |
|
1,551,200 |
|
1,551,200 |
|
Series D Preferred Stock |
|
13,975,000 |
|
13,975,000 |
|
Total |
|
16,064,950 |
|
16,284,950 |
|
12 | ||
13 | ||
|
|
Estimated |
|
October 31, |
|
July 31, |
| ||
|
|
Useful Life |
|
2013 |
|
2013 |
| ||
Furniture and fixtures, leasehold improvements, office equipment and computers |
|
3 5 years |
|
$ |
89 |
|
$ |
89 |
|
Website and software |
|
3 years |
|
|
26 |
|
|
26 |
|
|
|
|
|
|
115 |
|
|
115 |
|
Less accumulated depreciation |
|
|
|
|
(112) |
|
|
(110) |
|
Tooling and equipment, net |
|
|
|
$ |
3 |
|
$ |
5 |
|
14 | ||
ITEM 2. |
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
15 | ||
16 | ||
17 | ||
18 | ||
19 | ||
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31.1 |
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Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a). |
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31.2 |
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Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a). |
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32.1* |
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Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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32.2* |
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Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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101.INS |
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XBRL Instance Document. |
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101.SCH |
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XBRL Taxonomy Extension Schema Document. |
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101.CAL |
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XBRL Taxonomy Extension Calculation Linkbase Document. |
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101.DEF |
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XBRL Taxonomy Extension Definition Linkbase Document. |
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101.LAB |
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XBRL Taxonomy Extension Label Linkbase Document. |
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101.PRE |
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XBRL Taxonomy Extension Presentation Linkbase Document. |
* |
Pursuant to Item 601(b)(32) of Regulation S-K, this exhibit is furnished, rather than filed, with this Quarterly Report on Form 10-Q. |
20 | ||
Dated: December 16, 2013 |
By: |
/s/ Jane H. Hsiao |
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|
Jane H. Hsiao, Interim Chief Executive Officer |
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Dated: December 16, 2013 |
By: |
/s/ James J. Martin |
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|
James J. Martin, Chief Financial Officer |
|
21 | ||
1. |
I have reviewed this Quarterly Report on Form 10-Q of Non-Invasive Monitoring Systems, Inc.; | |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
c. |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
d. |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated: December 16, 2013 |
By: |
/s/ Jane H. Hsiao |
|
|
|
Jane H. Hsiao, Interim Chief Executive Officer |
|
1. |
I have reviewed this Quarterly Report on Form 10-Q of Non-Invasive Monitoring Systems, Inc.; | |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
c. |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
d. |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated: December 16, 2013 |
By: |
/s/ James J. Martin |
|
|
|
James J. Martin, Chief Financial Officer |
|
Dated: December 16, 2013 |
By: |
/s/ Jane H. Hsiao |
|
|
|
Jane H. Hsiao, Interim Chief Executive Officer |
|
Dated: December 16, 2013 |
By: |
/s/ James J. Martin |
|
|
|
James J. Martin, Chief Financial Officer |
|
LONG-LIVED ASSETS
|
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Oct. 31, 2013
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Long Lived Assets [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LONG-LIVED ASSETS | 11. LONG-LIVED ASSETS The Company’s long-lived assets include furniture and equipment, tooling, websites and software, leasehold improvements, patents and trademarks. Tooling and equipment, net of accumulated depreciation, consists of the following at October 31 and July 31, 2013 (in thousands):
Depreciation expense was $2,000 and $1,000 during the three months ended October 31, 2013 and 2012, respectively. Ten Exer-Rest AT3800 and AT4700 demonstration units are included in furniture and fixtures at an aggregate cost of $30,000. These units were placed in service in fiscal 2009 and 2010, and are being depreciated based upon five-year estimated useful lives. In August 2012, the Company transferred as Exer-Rest unit with a net book value of $1,000 from long-lived assets to inventory. |
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (USD $)
In Thousands, except Per Share data, unless otherwise specified |
3 Months Ended | |
---|---|---|
Oct. 31, 2013
|
Oct. 31, 2012
|
|
Revenues | ||
Product sales, net | $ 0 | $ 34 |
Royalties | 1 | 15 |
Total revenues | 1 | 49 |
Operating costs and expenses | ||
Cost of sales | 0 | 11 |
Selling, general and administrative | 85 | 119 |
Research and development | 1 | 4 |
Total operating costs and expenses | 86 | 134 |
Operating loss | (85) | (85) |
Other expense | ||
Interest expense, net | (33) | (31) |
Total other expense | (33) | (31) |
Net loss | (118) | (116) |
Comprehensive net loss | (118) | (116) |
Net loss attributable to common shareholders | $ (118) | $ (116) |
Weighted average number of common shares outstanding - basic and diluted | 78,942 | 68,922 |
Basic and diluted loss per common share | $ 0.00 | $ 0.00 |
STOCK-BASED COMPENSATION
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3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Oct. 31, 2013
|
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Stock-Based Compensation [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCK-BASED COMPENSATION | 4. STOCK-BASED COMPENSATION The Company measures the cost of employee, officer and director services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The fair value of the Company’s stock option awards is expensed over the vesting life of the underlying stock options using the graded vesting method, with each tranche of vesting options valued separately. The Company recorded stock-based compensation of $1,000 and $4,000, respectively, for the three months ended October 31, 2013 and 2012, respectively. All stock-based compensation is included in the Company’s selling, general and administrative costs and expenses. The Company’s 2000 Stock Option Plan, as amended (the “2000 Plan”), provides for the issuance of up to 2,000,000 shares of the Company’s common stock. The 2000 Plan allows the issuance of incentive stock options, stock appreciation rights and restricted stock awards. The exercise price of the options is determined by the compensation committee of the Company’s Board of Directors, but incentive stock options, if any, must be granted at an exercise price not less than the fair market value of the Company’s common stock as of the grant date or an exercise price of not less than 110% of the fair value for a 10% shareholder. Options expire up to ten years from the date of the grant and are exercisable according to the terms of the individual option agreements. The 2000 Plan expired on March 1, 2012. No additional grants may be made under the 2000 Plan; however, previously granted options will remain in force pursuant to the terms of the individual grants. In November 2010, the Board and Compensation Committee approved the Non-Invasive Monitoring Systems, Inc. 2011 Stock Incentive Plan (the “2011 Plan”). Awards granted under the 2011 Plan may consist of incentive stock options, stock appreciation rights (SAR), restricted stock grants, restricted stock units (RSU) performance shares, performance units or cash awards. Subject to adjustment in certain circumstances, the 2011 Plan authorizes up to 4,000,000 shares of the Company’s common stock for issuance pursuant to the terms of the 2011 Plan. The 2011 Plan was approved by our shareholders in March 2012 and no awards have been granted under the 2011 Plan as of October 31, 2013. The Company did not grant any stock options during the three months ended October 31, 2013 or 2012. A summary of the Company’s stock option activity for the three months ended October 31, 2013 is as follows:
Of the 538,750 options outstanding at October 31, 2013, 378,750 were issued under the 2000 Plan and 160,000 were issued outside of shareholder approved plans. There were no options exercised during the three month periods ended October 31, 2013 and 2012. There were 75,000 and 522,500 options forfeited or expired during the three month periods ending October 31, 2013 and 2012, respectively. As of October 31, 2013, there was $2,000 of unrecognized costs related to outstanding stock options. These costs are expected to be recognized over a weighted average period of 0.35 years. |
ORGANIZATION AND BUSINESS (Details Textual) (USD $)
|
3 Months Ended | ||
---|---|---|---|
Oct. 31, 2013
|
Oct. 31, 2012
|
Jul. 31, 2013
|
|
Net loss | $ (118,000) | $ (116,000) | |
Accumulated deficit | (23,998,000) | (23,880,000) | |
Cash | 187,000 | 296,000 | |
Negative Working Capital | $ 68,000 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
|
3 Months Ended | |
---|---|---|
Oct. 31, 2013
|
||
Accounting Policies [Abstract] | ||
Consolidation | Consolidation. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Non-Invasive Monitoring Systems of Florida, Inc., which has no current operations, and NIMS of Canada, Inc., a Canadian corporation, which has no current operations. All material inter-company accounts and transactions have been eliminated in consolidation. |
|
Use of Estimates | Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions, such as accounts receivable, stock based compensation, warranty accrual and deferred taxes as estimates, that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Such items include input variables for stock based compensation, accounts receivable, warranty accrual and deferred taxes. Actual results could differ materially from these estimates. |
|
Cash and Cash Equivalents | Cash and Cash Equivalents. The Company considers all highly liquid short-term investments purchased with an original maturity date of three months or less to be cash equivalents. The Company had approximately $187,000 and $296,000 on deposit in bank operating accounts at October 31, 2013 and July 31, 2013, respectively. |
|
Allowances for Doubtful Accounts | Allowances for Doubtful Accounts. Royalties and other receivables are recorded at the stated amount of the transactions. The Company provides an allowance for royalties and other receivables it believes it may not collect in full. Receivables are written off when they are deemed to be uncollectible and all collection attempts have ceased. The amount of bad debt recorded each period and the resulting adequacy of the allowance at the end of each period are determined using a combination of the Company’s historical loss experience, customer-by-customer analysis of the Company’s accounts receivable each period and subjective assessments of the Company’s future bad debt exposure. |
|
Inventory | Inventories. Inventories are stated at lower of cost or market using the first-in, first-out method, and are evaluated at least annually for impairment. Inventories at October 31, 2013 and July 31, 2013 primarily consisted of finished Exer-Rest units and accessories. Provisions for potentially obsolete or slow-moving inventory are made based on management’s analysis of inventory levels, historical obsolescence and future sales forecasts. |
|
Tooling and Equipment | Tooling and Equipment. These assets are stated at cost and depreciated or amortized using the straight-line method, over their estimated useful lives. |
|
Long-lived Assets | Long-lived Assets. The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. In performing the review for recoverability, the Company estimates the future undiscounted cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future cash flows is less than the carrying amount of the assets, an impairment loss is recognized as the difference between the fair value and the carrying amount of the asset. |
|
Taxes Assessed On Revenue-Producing Transactions | Taxes Assessed on Revenue-Producing Transactions. The Company presents sales taxes assessed on revenue-producing transactions between a seller and customer using the net presentation; thus, sales and cost of revenues are not affected by such taxes. |
|
Income Taxes | Income Taxes. The Company provides for income taxes using an asset and liability based approach. Deferred income tax assets and liabilities are recorded to reflect the tax consequences in future years of temporary differences between the carrying amounts of assets and liabilities for financial statement and income tax purposes. The deferred tax asset for loss carryforwards and other potential future tax benefits has been fully offset by a valuation allowance since it is uncertain whether any future benefit will be realized. The Company files its tax returns as prescribed by the laws of the jurisdictions in which it operates. Tax years ranging from 2010 to 2013 remain open to examination by various taxing jurisdictions as the statute of limitations has not expired. It is the Company’s policy to include income tax interest and penalty expense in its tax provision. |
|
Revenue Recognition | Revenue Recognition. Revenue from product sales is recognized when persuasive evidence of an arrangement exists, the goods are shipped and title has transferred, the price is fixed or determinable, and the collection of the sales proceeds is reasonably assured. The Company recognizes royalties as they are earned, based on reports from licensees. Research and consulting revenue and revenue from sales of extended warranties on therapeutic platforms are recognized over the term of the respective agreements. |
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Advertising Costs | Advertising Costs. The Company expenses all costs of advertising and promotions as incurred. There were no advertising and promotional costs incurred for the three months ended October 31, 2013 and 2012 |
|
Research and Development Costs | Research and Development Costs. Research and development costs are expensed as incurred, and primarily consist of payments to third parties for research and development of the Exer-Rest device and regulatory testing and other costs to obtain FDA approval. |
|
Warranties | Warranties. The Company’s warranties are two years on all Exer-Rest products sold domestically and one year for products sold outside of the U.S. and are accrued based on management’s estimates and the history of warranty costs incurred. There were no material warranty costs incurred during the three months ended October 31, 2013 and 2012, and management estimates that the Company’s accrued warranty expense at October 31, 2013 will be sufficient to offset claims made for units under warranty. |
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Stock-based compensation | Stock-based compensation. The Company recognizes all share-based payments, including grants of stock options, as operating expenses, based on their grant date fair values. Stock-based compensation expense is recognized over the vesting life of the underlying stock options and is included in selling, general and administrative costs and expenses in the condensed consolidated comprehensive statements of operations for all periods presented. |
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Fair Value of Financial Instruments | Fair Value of Financial Instruments. Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of October 31, 2013 and July 31, 2013. The respective carrying value of certain on-balance-sheet financial instruments such as cash, royalties and other receivables, accounts payable and accrued expenses approximate fair values because they are short term in nature or they bear current market interest rates. As of October 31, 2013, the respective carrying value of the notes payable related party and notes payable other approximate our current borrowing rate for similar debt instruments of comparable maturity and are considered Level 3 measurements within the fair value hierarchy |
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Foreign Currency Translation | Foreign Currency Translation. The functional currency for the Company’s foreign subsidiary is the local currency. Assets and liabilities are translated at exchange rates in effect at the balance sheet date while income and expense amounts are translated at average exchange rates during the period. The resulting foreign currency translation adjustments are disclosed as a separate component of stockholders’ deficit and other comprehensive loss. There was no foreign currency translation adjustments for the three months ended October 31, 2013 and 2012. |
|
Comprehensive Income (Loss) | Comprehensive Income (Loss). Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources, including foreign currency translations. |
|
Loss Contingencies | Loss Contingencies. We recognize contingent losses that are both probable and estimable. In this context, we define probability as circumstances under which events are likely to occur. In regards to legal costs, we record such costs as incurred. |
|
Recent Accounting Pronouncements | Recent Accounting Pronouncements. In February 2013, the FASB issued an accounting standard update (“ASU”) which modifies disclosure requirements relating to amounts reclassified out of accumulated other comprehensive income. The update is effective prospectively for reporting periods beginning after December 15, 2012 with early application permitted. The Company does not believe the update will have a material impact on the condensed consolidated financial statements. |
INVENTORIES (Details) (USD $)
In Thousands, unless otherwise specified |
Oct. 31, 2013
|
Jul. 31, 2013
|
---|---|---|
Work-in-progress, spare parts and accessories | $ 9 | $ 9 |
Finished goods | 452 | 453 |
Total inventories | $ 461 | $ 462 |
RELATED PARTY TRANSACTIONS (Details Textual) (USD $)
|
3 Months Ended | 3 Months Ended | 1 Months Ended | 3 Months Ended | 12 Months Ended | 3 Months Ended | 3 Months Ended | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Oct. 31, 2013
|
Oct. 31, 2012
|
Jul. 31, 2013
|
Sep. 12, 2011
Frost Gamma Investment Trust [Member]
|
Sep. 12, 2011
Two Thousand and Eleven Promissory Notes [Member]
Hsu Gamma Investments, L.P [Member]
|
Sep. 12, 2011
Two Thousand and Eleven Promissory Notes [Member]
Frost Gamma Investment Trust [Member]
|
May 30, 2012
Two Thousand and Twelve Promissory Note [Member]
Hsu Gamma Investments, L.P [Member]
|
Feb. 22, 2013
Two Thousand and Thirteen Promissory Note [Member]
Jane Hsiao [Member]
|
Oct. 31, 2013
Promissory Notes [Member]
|
Oct. 31, 2012
Promissory Notes [Member]
|
Jan. 31, 2008
Miami Lease [Member]
|
Oct. 31, 2013
Miami Lease [Member]
|
Oct. 31, 2012
Miami Lease [Member]
|
Oct. 31, 2013
Safestitch [Member]
|
Jul. 31, 2013
Safestitch [Member]
|
Oct. 31, 2013
Hialeah Lease [Member]
|
Oct. 31, 2012
Hialeah Lease [Member]
|
Oct. 31, 2013
Two Thousand and Ten Credit Facility [Member]
|
Oct. 31, 2012
Two Thousand and Ten Credit Facility [Member]
|
Jul. 31, 2013
Two Thousand and Ten Credit Facility [Member]
|
Oct. 31, 2013
Credit Facility [Member]
|
Oct. 31, 2012
Credit Facility [Member]
|
|
Payments for Rent | $ 1,300 | |||||||||||||||||||||
Operating Leases, Rent Expense | 15,000 | 29,000 | 4,000 | 13,000 | 11,000 | 16,000 | ||||||||||||||||
Debt Instrument, Interest Rate, Stated Percentage | 11.00% | 11.00% | 11.00% | 11.00% | ||||||||||||||||||
Debt Instrument, Face Amount | 100,000 | 50,000 | 50,000 | 50,000 | ||||||||||||||||||
Beneficial Ownership Percentage | 10.00% | 10.00% | ||||||||||||||||||||
Line of Credit Facility, Amount Outstanding | 1,000,000 | 1,000,000 | 1,000,000 | 1,000,000 | ||||||||||||||||||
Interest Expense, Debt | 5,000 | 3,000 | 28,000 | 28,000 | ||||||||||||||||||
Interest Payable | 399,000 | 366,000 | ||||||||||||||||||||
Related Party Transaction, Selling, General and Administrative Expenses from Transactions with Related Party | $ 3,000 | $ 49,000 | $ 9,000 | $ 10,000 |
NOTES PAYABLE (Details Textual) (USD $)
|
0 Months Ended | 1 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Oct. 31, 2013
|
Jul. 31, 2013
|
Sep. 12, 2011
Frost Gamma Investment Trust [Member]
|
Sep. 12, 2011
Two Thousand and Eleven Promissory Notes [Member]
Hsu Gamma Investments, L.P [Member]
|
Sep. 12, 2011
Two Thousand and Eleven Promissory Notes [Member]
Unrealted Third Party [Member]
|
Sep. 12, 2011
Two Thousand and Eleven Promissory Notes [Member]
Frost Gamma Investment Trust [Member]
|
May 30, 2012
Two Thousand and Twelve Promissory Note [Member]
Hsu Gamma Investments, L.P [Member]
|
Feb. 22, 2013
Two Thousand and Thirteen Promissory Note [Member]
Jane Hsiao [Member]
|
Jul. 31, 2013
Two Thousand and Ten Credit Facility [Member]
|
Oct. 31, 2013
Two Thousand and Ten Credit Facility [Member]
|
Jul. 31, 2013
Two Thousand and Ten Credit Facility [Member]
Maximum [Member]
|
Jul. 31, 2013
Two Thousand and Ten Credit Facility [Member]
Minimum [Member]
|
|
Debt Instrument, Interest Rate, Stated Percentage | 11.00% | 11.00% | 11.00% | 11.00% | 16.00% | 11.00% | ||||||
Debt Instrument, Face Amount | $ 100,000 | $ 50,000 | $ 50,000 | $ 50,000 | $ 50,000 | |||||||
Line of Credit Facility, Amount Outstanding | 1,000,000 | 1,000,000 | 1,000,000 | 1,000,000 | ||||||||
Debt Instrument, Maturity Date | Jul. 31, 2015 | Jul. 31, 2015 | Jul. 31, 2015 | Jul. 31, 2015 | Jul. 31, 2015 | |||||||
Line of Credit Facility, Maximum Borrowing Capacity | $ 1,000,000 | |||||||||||
Beneficial Ownership Percentage | 10.00% | 10.00% |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Textual) (USD $)
In Thousands, unless otherwise specified |
Oct. 31, 2013
|
Jul. 31, 2013
|
Oct. 31, 2012
|
Jul. 31, 2012
|
---|---|---|---|---|
Cash, end of period | $ 187 | $ 296 | $ 51 | $ 56 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | |
---|---|---|
Oct. 31, 2013
|
Oct. 31, 2012
|
|
Operating Activities | ||
Net loss | $ (118) | $ (116) |
Adjustments to reconcile net loss to net cash used in operating activities | ||
Depreciation and amortization | 2 | 1 |
Stock-based compensation expense | 1 | 4 |
Changes in operating assets and liabilities | ||
Accounts and royalties receivable, net | 0 | 9 |
Inventories, net | 1 | 9 |
Prepaid expenses, deposits and other current assets | 13 | 12 |
Accounts payable and accrued expenses | (8) | 76 |
Net cash used in operating activities | (109) | (5) |
Net decrease in cash | (109) | (5) |
Cash, beginning of period | 296 | 56 |
Cash, end of period | 187 | 51 |
Supplemental Disclosure: | ||
Transfer of tooling and equipment to inventory | $ 0 | $ 1 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
3 Months Ended | |
---|---|---|
Oct. 31, 2013
|
||
Accounting Policies [Abstract] | ||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Consolidation. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Non-Invasive Monitoring Systems of Florida, Inc., which has no current operations, and NIMS of Canada, Inc., a Canadian corporation, which has no current operations. All material inter-company accounts and transactions have been eliminated in consolidation. Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions, such as accounts receivable, stock based compensation, warranty accrual and deferred taxes as estimates, that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Such items include input variables for stock based compensation, accounts receivable, warranty accrual and deferred taxes. Actual results could differ materially from these estimates. Cash and Cash Equivalents. The Company considers all highly liquid short-term investments purchased with an original maturity date of three months or less to be cash equivalents. The Company had approximately $187,000 and $296,000 on deposit in bank operating accounts at October 31, 2013 and July 31, 2013, respectively. Allowances for Doubtful Accounts. Royalties and other receivables are recorded at the stated amount of the transactions. The Company provides an allowance for royalties and other receivables it believes it may not collect in full. Receivables are written off when they are deemed to be uncollectible and all collection attempts have ceased. The amount of bad debt recorded each period and the resulting adequacy of the allowance at the end of each period are determined using a combination of the Company’s historical loss experience, customer-by-customer analysis of the Company’s accounts receivable each period and subjective assessments of the Company’s future bad debt exposure. Inventories. Inventories are stated at lower of cost or market using the first-in, first-out method, and are evaluated at least annually for impairment. Inventories at October 31, 2013 and July 31, 2013 primarily consisted of finished Exer-Rest units and accessories. Provisions for potentially obsolete or slow-moving inventory are made based on management’s analysis of inventory levels, historical obsolescence and future sales forecasts. Tooling and Equipment. These assets are stated at cost and depreciated or amortized using the straight-line method, over their estimated useful lives. Long-lived Assets. The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. In performing the review for recoverability, the Company estimates the future undiscounted cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future cash flows is less than the carrying amount of the assets, an impairment loss is recognized as the difference between the fair value and the carrying amount of the asset. Taxes Assessed on Revenue-Producing Transactions. The Company presents sales taxes assessed on revenue-producing transactions between a seller and customer using the net presentation; thus, sales and cost of revenues are not affected by such taxes. Income Taxes. The Company provides for income taxes using an asset and liability based approach. Deferred income tax assets and liabilities are recorded to reflect the tax consequences in future years of temporary differences between the carrying amounts of assets and liabilities for financial statement and income tax purposes. The deferred tax asset for loss carryforwards and other potential future tax benefits has been fully offset by a valuation allowance since it is uncertain whether any future benefit will be realized. The Company files its tax returns as prescribed by the laws of the jurisdictions in which it operates. Tax years ranging from 2010 to 2013 remain open to examination by various taxing jurisdictions as the statute of limitations has not expired. It is the Company’s policy to include income tax interest and penalty expense in its tax provision. Revenue Recognition. Revenue from product sales is recognized when persuasive evidence of an arrangement exists, the goods are shipped and title has transferred, the price is fixed or determinable, and the collection of the sales proceeds is reasonably assured. The Company recognizes royalties as they are earned, based on reports from licensees. Research and consulting revenue and revenue from sales of extended warranties on therapeutic platforms are recognized over the term of the respective agreements. Advertising Costs. The Company expenses all costs of advertising and promotions as incurred. There were no advertising and promotional costs incurred for the three months ended October 31, 2013 and 2012. Research and Development Costs. Research and development costs are expensed as incurred, and primarily consist of payments to third parties for research and development of the Exer-Rest device and regulatory testing and other costs to obtain FDA approval. Warranties. The Company’s warranties are two years on all Exer-Rest products sold domestically and one year for products sold outside of the U.S. and are accrued based on management’s estimates and the history of warranty costs incurred. There were no material warranty costs incurred during the three months ended October 31, 2013 and 2012, and management estimates that the Company’s accrued warranty expense at October 31, 2013 will be sufficient to offset claims made for units under warranty. Stock-based compensation. The Company recognizes all share-based payments, including grants of stock options, as operating expenses, based on their grant date fair values. Stock-based compensation expense is recognized over the vesting life of the underlying stock options and is included in selling, general and administrative costs and expenses in the condensed consolidated comprehensive statements of operations for all periods presented. Fair Value of Financial Instruments. Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of October 31, 2013 and July 31, 2013. The respective carrying value of certain on-balance-sheet financial instruments such as cash, royalties and other receivables, accounts payable and accrued expenses approximate fair values because they are short term in nature or they bear current market interest rates. As of October 31, 2013, the respective carrying value of the notes payable related party and notes payable other approximate our current borrowing rate for similar debt instruments of comparable maturity and are considered Level 3 measurements within the fair value hierarchy. Foreign Currency Translation. The functional currency for the Company’s foreign subsidiary is the local currency. Assets and liabilities are translated at exchange rates in effect at the balance sheet date while income and expense amounts are translated at average exchange rates during the period. The resulting foreign currency translation adjustments are disclosed as a separate component of stockholders’ deficit and other comprehensive loss. There was no foreign currency translation adjustments for the three months ended October 31, 2013 and 2012. Comprehensive Income (Loss). Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources, including foreign currency translations. Loss Contingencies. We recognize contingent losses that are both probable and estimable. In this context, we define probability as circumstances under which events are likely to occur. In regards to legal costs, we record such costs as incurred. Recent Accounting Pronouncements. In February 2013, the FASB issued an accounting standard update (“ASU”) which modifies disclosure requirements relating to amounts reclassified out of accumulated other comprehensive income. The update is effective prospectively for reporting periods beginning after December 15, 2012 with early application permitted. The Company does not believe the update will have a material impact on the condensed consolidated financial statements. |
ROYALTIES
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3 Months Ended | |
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Oct. 31, 2013
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Royalties [Abstract] | ||
ROYALTIES | 5. ROYALTIES The Company is a party to two licensing agreements with SensorMedics and VivoMetrics. The Company receives royalty income from the sale of its diagnostic monitoring hardware and software from SensorMedics and previously received royalties from VivoMetrics prior to its bankruptcy. Royalty income from the SensorMedics license amounted to $1,000 and $15,000 for the three months ended October 31, 2013 and 2012, respectively. SensorMedics indicated they will discontinue licensed product sales after current inventory is depleted and, therefore, the royalty revenue from SensorMedics is expected to be minimal to none. There were no royalties recognized from VivoMeterics for the three months ended October 31, 2013 and 2012. VivoMetrics ceased operations in July 2009 and filed for Chapter 11 bankruptcy protection in October 2009. Under VivoMetrics’ approved bankruptcy plan of reorganization, our license with VivoMetrics was assigned to another company; however, there can be no assurance as to the future amount of royalty income, if any, that may result from this license or from our existing license with SensorMedics. |
INVENTORIES
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3 Months Ended | |||||||||||||||||||||||||||||||||
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Oct. 31, 2013
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Inventories [Abstract] | ||||||||||||||||||||||||||||||||||
INVENTORIES | 3. INVENTORIES The Company’s inventory consisted of the following at October 31, 2013 and July 31, 2013 (in thousands):
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SHAREHOLDERS' EQUITY (Details Textual) (USD $)
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0 Months Ended | |||||
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Apr. 08, 2013
Dr.Hsiao [Member]
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Apr. 08, 2013
Frost Gamma [Member]
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Apr. 08, 2013
Private Placement [Member]
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Oct. 31, 2013
Series B Preferred Stock [Member]
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Oct. 31, 2013
Series C Preferred Stock [Member]
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Oct. 31, 2013
Series D Preferred Stock [Member]
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Convertible Preferred Stock, Shares Issued upon Conversion | 25 | 5,000 | ||||
Preferred stock, liquidation preference | $ 100 | $ 1.00 | $ 1,500 | |||
Dividends Payable, Amount Per Share | $ 10 | $ 0.10 | ||||
Preferred Stock, Redemption Price Per Share | $ 0.10 | |||||
Preferred Stock Conversion Premium | $ 4.20 | |||||
Stock Issued During Period, Shares, New Issues | 2,000,000 | 2,000,000 | 10,020,000 | |||
Stock Issued During Period, Value, New Issues | $ 501,000 | |||||
Common Stock,Par Value | $ 0.01 | |||||
Sale of Stock, Price Per Share | $ 0.05 | |||||
Share Price | $ 0.12 |
LONG-LIVED ASSETS (Details Textual) (USD $)
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3 Months Ended | ||||
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Oct. 31, 2013
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Oct. 31, 2012
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Jul. 31, 2013
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Aug. 31, 2012
Inventory Exchanges [Member]
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Oct. 31, 2013
Furniture and Fixtures [Member]
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Property, Plant and Equipment, Gross | $ 115,000 | $ 115,000 | $ 30,000 | ||
Depreciation | 2,000 | 1,000 | |||
Long-Lived Assets | $ 1,000 |