RELATED PARTY TRANSACTIONS

The Company signed a five year lease for office space in Miami, Florida with a company owned by Dr. Phillip Frost, who is the beneficial owner of more than 10% of the Company’s Common Stock. The current rental payments under the Miami office lease, which commenced January 1, 2008 and ended on December 31, 2012, were approximately $1,300 per month and are currently on a month-to-month basis. The Company recorded rent expense related to the Miami lease of approximately $4,000 and $11,000, respectively, for the three and nine months ended April 30, 2014, and approximately $14,000 and $42,000, respectively, for the three and nine months ended April 30, 2013.

The Company signed a three year lease for warehouse space in Hialeah, Florida with a company jointly controlled by Dr. Frost and Dr. Jane Hsiao, the Company’s Chairman and Interim CEO. The rental payments under the Hialeah warehouse lease, which commenced February 1, 2009 and expired on January 31, 2012, and are currently on a month-to-month basis. The Company recorded rent expense related to the Hialeah warehouse of approximately $17,000 and $45,000, respectively, for the three and nine months ended April 30, 2014 and approximately $17,000 and $49,000, respectively, for the three and nine months ended April 30, 2013.

As more fully described in Note 6, the Company entered into a $1.0 million Credit Facility in March 2010 with both an entity controlled by Dr. Frost and an entity controlled by Dr. Hsiao. There were no advances under the Credit Facility during the three and nine months ended April 30, 2014. There was $1.0 million outstanding balance due, plus interest, on the Credit Facility as of April 30, 2014 and July 31, 2013 and there is no available balance remaining. The Credit Facility expires in July 31, 2015.

On September 12, 2011, the Company entered into a Promissory Note in the principal amount of $50,000 with Frost Gamma Investments Trust (“Frost Gamma”), a trust controlled by Dr. Phillip Frost, which beneficially owns in excess of 10% of the Company’s common stock (the “Frost Gamma Note”). The interest rate payable on the Frost Gamma Note is 11% per annum, payable on the Promissory Notes Maturity Date of July 31, 2015. The Company may prepay the Frost Gamma Note without premium or penalty.

On May 30, 2012, the Company entered into a Promissory Note in the principal amount of $50,000 with Hsu Gamma Investments, L.P. (“Hsu Gamma”), an entity controlled by NIMS’ Chairman of the Board and Interim Chief Executive Officer, Jane H. Hsiao, (the “Hsu Gamma Note”). The interest rate payable on the Hsu Gamma Note is 11% per annum, payable on the Promissory Notes Maturity Date of July 31, 2015. The Company may prepay the HSU Gamma Note without premium or penalty.

On February 22, 2013, the Company entered into a Promissory Note in the amount of $50,000 with Jane Hsiao, the Company’s Chairman of the Board and Interim Chief Executive Officer (the “Hsiao Note”). The interest rate payable by the Company on the Hsiao Note is 11% per annum, payable on the Promissory Notes Maturity Date of July 31, 2015. The Hsiao Note may be prepaid in advance of the Promissory Notes Maturity Date without penalty.

The Company also incurred interest expense related to the Credit Facility of approximately $27,000 and $82,000 for the three and nine months ended April 30, 2014 and 2013, respectively. The Company also incurred interest expense related to the promissory notes of approximately $5,000 and $16,000 for the three and nine months ended April 30, 2014 and 2013, respectively. Approximately $465,000 and $366,000 of accrued interest remained outstanding for all debt at April 30, 2014 and July 31, 2013, respectively.

Dr. Hsiao, Dr. Frost and directors Steven Rubin and Rao Uppaluri are each significant stockholders, officers and/or directors or former directors of TransEnterix, Inc. (formerly SafeStitch Medical, Inc.) (“TransEnterix”), a publicly-traded, medical device manufacturer, Tiger X Medical, Inc. (“Tiger X”) (formerly known as Cardo Medical, Inc.), a publicly traded former medical device company, and Tiger Media, Inc. (“Tiger Media”) (formerly known as SearchMedia Holdings Limited), a publicly-traded media company operating primarily in China. The Company’s Chief Financial Officer also served as the Chief Financial Officer of TransEnterix until October 2, 2013. The Company’s Chief Financial Officer continued as an employee of TransEnterix until March 3, 2014, during which he supervised the Miami based accounting staffs of TransEnterix under a board-approved cost sharing arrangement whereby the total salaries of the Miami based accounting staffs of NIMS and TransEnterix are shared. Since December 2009, the Company’s Chief Legal Officer has served under a similar board-approved cost sharing arrangement as Corporate Counsel of Tiger Media and as the Chief Legal Officer of each of TransEnterix and Tiger X. The Company recorded additions to selling, general and administrative costs and expenses to account for the sharing of costs under these arrangements of $9,000 and $27,000, respectively, for the three and nine months ended April 30, 2014, and $8,000 and $26,000, respectively, for the three and nine months ended April 30, 2013. Accounts payable to TransEnterix related to these arrangements totaled approximately $3,000 and $49,000 respectively, at April 30, 2014 and July 31, 2013.