UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
FORM
(Mark One)
| Annual report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 | |
| For
the fiscal year ended |
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
| (Exact name of registrant as specified in its charter) |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. employer identification no.) |
(Address of principal executive offices) (Zip code)
Registrant’s
telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol | Name of each exchange on which registered | ||
| OTC Pink |
Indicate
by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate
by check mark whether the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐
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.
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding
12 month (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
The
aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the average bid and
asked price of such common equity, as of January 31, 2022 was: $
As of October 28, 2022, there were shares of common stock, $0.01 par value outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: None
Non-Invasive Monitoring Systems, INC.
TABLE OF CONTENTS FOR FORM 10-K
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains, in addition to historical information, certain forward-looking statements about our expectations, beliefs or intentions regarding, among other things, our business, financial results, strategies or prospects. You can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results as of the date they are made. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially from the activities and results described in forward-looking statements. These factors include those set forth below as well as those contained in “Item 1A - Risk Factors” of this Annual Report on Form 10-K and our other filings with the Securities and Exchange Commission (“SEC”). We do not undertake any obligation to update forward-looking statements, except as required by applicable law. These forward-looking statements reflect our views only as of the date they are made with respect to future events and financial performance.
Risks and uncertainties, the occurrence of which could adversely affect our business, include the following:
| ● | We have a history of operating losses, we do not expect to become profitable in the near future and absent additional equity or debt financing, we may be unable to continue as a going concern. | |
| ● | We will require additional funding, which may not be available to us on acceptable terms, or at all. | |
| ● | We do not anticipate paying dividends on our common stock in the foreseeable future. | |
| ● | Because our common stock is a “penny stock,” it may be more difficult for investors to sell shares of our Common Stock, and the market price of our common stock may be adversely affected. | |
| ● | Our stock price has been volatile and there may not be an active, liquid trading market for our common stock. | |
| ● | Our quarterly results of operations will fluctuate, and these fluctuations could cause our stock price to decline. | |
| ● | Shareholders may experience dilution of ownership interests because of the future issuance of additional shares of our common stock and our preferred stock. |
* * * * *
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PART I
Item 1. Business.
General
Non-Invasive Monitoring Systems, Inc. (together with its consolidated subsidiaries, the “Company,” “NIMS,” “we,” “us” or “our”) was incorporated under the laws of the State of Florida on July 16, 1980. The Company’s offices are located at 4400 Biscayne Boulevard, Miami, Florida, 33137 and its telephone number is (305) 575-4207.
Company Overview
Our primary business previously consisted of research, development, manufacturing, marketing and sales of non-invasive, motorized, whole body periodic acceleration (“WBPA”) platforms. These therapeutic acceleration platforms are intended as aids to temporarily increase local circulation for temporary relief of minor aches and pains, produce local muscle relaxation and reduce morning stiffness.
In May 2019, we effectively discontinued operations. The Company is a shell company as defined in Rule 12b-2 of the Exchange Act.
Products
We currently have no inventory and do not have any of our products available for sale.
Item 1A. Risk Factors.
Our future operating results may vary substantially from anticipated results due to a number of factors, many of which are beyond our control. The following discussion highlights some of these factors and the possible impact of these factors on our future results of operations. If any of the following events actually occurs, our business, financial condition or results of operations could be materially harmed. In that case, the value of our common stock could decline substantially.
Risks Relating to Our Business.
We have a history of operating losses, we do not expect to become profitable in the near future and absent additional equity or debt financing, we may be unable to continue as a going concern.
Our consolidated financial statements for the years ended July 31, 2022 and 2021 were prepared on a “going concern” basis; however substantial doubt exists about our ability to continue as a going concern as a result of recurring losses and an accumulated deficit. We are not profitable and have been incurring material losses. Our net losses for our fiscal years ended July 31, 2022 and 2021 were $0.2 million and $0.2 million respectively. As of July 31, 2022, we had an accumulated deficit of $28.5 million. The Company had $15,000 of cash at July 31, 2022 and negative working capital of approximately $249,000. Absent additional equity or debt financing, we will be unable to continue as a going concern, and you may lose all of your investment in us.
We will require additional funding, which may not be available to us on acceptable terms, or at all.
We will need to raise additional capital in order for us to continue as a going concern. We will need to finance future cash needs primarily through public or private equity offerings, debt financings or strategic collaborations. We do not know whether additional funding will be available on acceptable terms, or at all. We cannot assure you that we could obtain such approval. To the extent that we raise additional funds by issuing equity securities, our shareholders may experience significant dilution, and debt financing, if available, may require that we agree to covenants that restrict our operations. To the extent that we raise additional funds through collaboration and licensing arrangements, it may be necessary to relinquish some rights to our products or grant licenses on terms that may not be favorable to us.
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Risks Relating to Our Stock.
We do not anticipate paying dividends on our common stock in the foreseeable future.
We have not declared and paid cash dividends on our common stock in the past, and we do not anticipate paying any cash dividends in the foreseeable future. We intend to retain all of our earnings, if any, for the foreseeable future to finance the operation and expansion of our business. As a result, you may only receive a return on your investment in our common stock if the market price of our common stock increases and you sell your shares.
Because our common stock is a “penny stock,” it may be more difficult for investors to sell shares of our common stock, and the market price of our common stock may be adversely affected.
Our common stock, which trades on the OTC PINK, is a “penny stock” since, among other things, the stock price is below $5.00 per share, it is not listed on a national securities exchange, and it has not met certain net tangible asset or average revenue requirements. Broker-dealers who sell penny stocks must provide purchasers of these stocks with a standardized risk-disclosure document prepared by the SEC. This document provides information about penny stocks and the nature and level of risks involved in investing in the penny-stock market. A broker must also give a purchaser, orally or in writing, bid and offer quotations and information regarding broker and salesperson compensation, make a written determination that the penny stock is a suitable investment for the purchaser and obtain the purchaser’s written agreement to the purchase. Broker-dealers must also provide customers that hold penny stock in their accounts with such broker-dealer a monthly statement containing price and market information relating to the penny stock. If a penny stock is sold to an investor in violation of the penny stock rules, the investor may be able to cancel its purchase and get its money back.
If applicable, the penny stock rules may make it difficult for investors to sell their shares of our common stock. Because of the rules and restrictions applicable to a penny stock, there is less trading in penny stocks and the market price of our common stock may be adversely affected. Also, many brokers choose not to participate in penny stock transactions. Accordingly, investors may not always be able to resell their shares of our common stock publicly at times and prices acceptable to them.
Our stock price has been volatile and there may not be an active, liquid trading market for our common stock.
Our stock price has experienced significant price and volume fluctuations and may continue to experience volatility in the future. The price of our common stock has ranged between $0.01 and $0.04 for the 52-week period ended July 31, 2022. Many factors, including those described in this report and others, have a significant impact on the price of our common stock. Also, you may not be able to sell your shares at the best market price if trading in our stock in not active or if the volume is low. There is no guarantee that an active trading market for our common stock will be maintained on the OTC PINK or elsewhere.
Our quarterly results of operations may fluctuate, and these fluctuations could cause our stock price to decline.
Our quarterly operating results may fluctuate in the future. These fluctuations could cause our stock price to decline. As a result, in some future quarters our financial or operating results may not meet the expectations of potential securities analysts and investors which could result in a decline in the price of our stock.
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Shareholders may experience dilution of ownership interests because of the future issuance of additional shares of our common stock and our preferred stock.
In the future, we may issue our authorized but previously unissued equity securities, resulting in the dilution of the ownership interests of our present shareholders. We are currently authorized to issue an aggregate of 401,000,000 shares of capital stock, consisting of 400,000,000 shares of common stock and 1,000,000 designated shares of preferred stock with preferences and rights to be determined by our Board of Directors. As of October 28, 2022, there were outstanding 154,810,655 shares of our common stock, 100 shares of our Series B preferred stock and there were no outstanding options to purchase shares of our common stock. We may also issue additional shares of our common stock or other securities that are convertible into or exercisable for common stock in connection with hiring or retaining employees, future acquisitions, future sales of our securities for capital raising purposes, or for other business purposes. The future issuance of any such additional shares of our common stock may create downward pressure on the trading price of the common stock. We may issue additional shares, warrants or other convertible securities in the future in conjunction with capital raising efforts, including at a price (or exercise price) below the price at which shares of our common stock are then currently traded on the OTC PINK.
Item 2. Properties.
Our principal corporate office is located at 4400 Biscayne Blvd., Miami, Florida. We occupy this space from Frost Real Estate Holdings, LLC, which is a company controlled by Dr. Phillip Frost, one of our largest beneficial shareholders. We previously leased the approximately 1,800 square feet under a lease agreement, which commenced with a five-year term on January 1, 2008 and expired on December 31, 2012, and then we went on a month-to-month basis and then in February 2016 the office space rent was reduced to $0 per month.
Item 3. Legal Proceedings.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market for common stock
Our common stock is quoted on the OTC PINK under the symbol NIMU.OB. The table below sets forth, for the respective periods indicated, the high and low bid prices for the Company’s common stock as reported by the OTC PINK. The following bid quotations represent inter-dealer prices, without adjustments for retail mark-ups, mark-downs or commissions and may not necessarily represent actual transactions.
| Quarter Ended | High | Low | |||||||
| October 31, 2020 | $ | 0.06 | $ | 0.02 | |||||
| January 31, 2021 | $ | 0.05 | $ | 0.02 | |||||
| April 30, 2021 | $ | 0.07 | $ | 0.03 | |||||
| July 31, 2021 | $ | 0.05 | $ | 0.02 | |||||
| October 31, 2021 | $ | 0.04 | $ | 0.02 | |||||
| January 31, 2022 | $ | 0.04 | $ | 0.02 | |||||
| April 30, 2022 | $ | 0.03 | $ | 0.01 | |||||
| July 31, 2022 | $ | 0.02 | $ | 0.01 | |||||
Since our inception, we have not paid any dividends on our common stock, and we do not anticipate that we will pay dividends in the foreseeable future. At July 31, 2022, we had 1,390 shareholders of record based on information provided by our transfer agent, Equity Stock Transfer. We believe that the actual number of beneficial shareholders is considerably higher.
Item 6. Selected Financial Data.
As a smaller reporting company as defined in Rule 12b-2 of the Exchange Act, we are not required to include information otherwise required by this item.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This Annual Report on Form 10-K contains, in addition to historical information, certain forward-looking statements about our expectations, beliefs or intentions regarding, among other things, our business, financial condition, results of operations, strategies or prospects. You can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results as of the date they are made. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those set forth below as well as those contained in “Item 1A - Risk Factors” of this Annual Report on Form 10-K. We do not undertake any obligation to update forward-looking statements, except as required by applicable law. These forward-looking statements reflect our views only as of the date they are made with respect to future events and financial performance.
Overview
We previously were engaged in the development, manufacture and marketing of non-invasive, whole body periodic acceleration (“WBPA”) therapeutic platforms, which are motorized platforms that move a subject repetitively head to foot. The Company discontinued operations in May 2019, accordingly, certain assets, liabilities and expenses are classified as discontinued operations.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to income taxes and contingencies. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. A more detailed discussion on the application of these and other accounting policies can be found in Note 2 in the Notes to the Consolidated Financial Statements set forth in Item 8 of this Annual Report on Form 10-K. While we believe that the factors we evaluate provide us with a meaningful basis for establishing and applying sound accounting policies, we cannot guarantee that the results will always be accurate. Since the determination of these estimates requires the exercise of judgment, actual results could differ from such estimates.
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Results of Operations
We have discontinued operations in May 2019. The Company is assessing potential mergers, acquisitions and strategic collaborations.
Year Ended July 31, 2022 Compared to Year Ended July 31, 2021
General and administrative costs and expenses. General and administrative (“GA”) costs and expenses was $159,000 for the year ended July 31, 2022, as compared to $158,000 for the year ended July 31, 2021. This $1,000 net increase was primarily associated with professional fees incurred in the year ended July 31, 2022.
Total operating costs and expenses. Total operating costs and expenses from continuing operations was $159,000 for the year ended July 31, 2022, as compared to $158,000 for the year ended July 31, 2021. This $1,000 increase is primarily attributable to GA noted above.
Interest expense. Net interest expense was $14,000 for the year ended July 31, 2022, as compared to $0 for the year ended July 31, 2021. The interest expense is related to the Promissory Notes described in Note 11 to the accompanying consolidated financial statements.
Net loss. Net loss was $173,000 for the year ended July 31, 2022, as compared to $158,000 for the year ended July 31, 2021. This $15,000 increase is primarily attributable to interest expense as noted above.
Liquidity and Capital Resources
Our operations have been primarily financed through private sales of our equity securities and advances under credit facilities previously available to us.
At July 31, 2022, we had cash of $15,000 and negative working capital of approximately $249,000. We expect that our existing funds will not be sufficient to support our current operations over the next twelve months. No assurance can be given that such additional financing will be available on acceptable terms or at all. Our ability to sell additional shares of our stock and/or borrow cash could be materially adversely affected by the economic uncertainty in the global equity and credit markets. Current economic conditions have been, and continue to be, volatile, and continued instability in these market conditions may limit our ability to access the capital necessary to fund and grow our business and to replace, in a timely manner, maturing liabilities.
Net cash used in operating activities increased to $190,000 for the year ended July 31, 2022 as compared to $148,000 for the year ended July 31, 2021. This $42,000 increase was principally due to the increase in the operating loss offset by an increase in cash used by accounts payable and accrued expenses.
On October 4, 2021, the Company entered into two Promissory Notes in the principal amount of $75,000 each with Frost Gamma Investments Trust (the “Frost Gamma Note”), a trust controlled by Dr. Phillip Frost and with Jane Hsiao, Ph.D., the Company’s Chairman and Interim CEO (the “Hsiao Note”), both which beneficially own in excess of 10% of NIMS’ common stock. The interest rate payable by NIMS on the Frost Gamma Note and Hsiao Note is 11% per annum, payable on the maturity date of October 4, 2023 (the “Maturity Date”). The Frost Gamma Note and Hsiao Note may be prepaid in advance of the Maturity Date without penalty.
On September 16, 2022, the Company entered into two Promissory Notes in the principal amount of $75,000 each with Frost Gamma Investments Trust (the “Frost Gamma Note 2”), a trust controlled by Dr. Phillip Frost and with Jane Hsiao, Ph.D., the Company’s Chairman and Interim CEO (the “Hsiao Note 2”), both which beneficially own in excess of 10% of NIMS’ common stock. The interest rate payable by NIMS on the Frost Gamma Note 2 and Hsiao Note 2 is 11% per annum, payable on the Maturity Date. The Frost Gamma Note 2 and Hsiao Note 2 may be prepaid in advance of the Maturity Date without penalty.
The Company plans include assessing potential mergers, acquisitions and strategic collaborations. We will need to raise additional capital. There can be no assurance that we will be able to raise additional capital on terms acceptable to us or at all.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
As a smaller reporting company as defined in Rule 12b-2 of the Exchange Act, we are not required to include the information otherwise required by this item.
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Item 8. Financial Statements and Supplementary Data.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Non-Invasive Monitoring Systems, Inc. and Subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Non-Invasive Monitoring Systems, Inc. and Subsidiaries (the “Company”) as of July 31, 2022 and 2021, and the related consolidated statements of operations, changes in shareholders’ deficit, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of July 31, 2022 and 2021, and the results of their operations and their cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has experienced recurring net losses, cash outflows from operating activities, has an accumulated deficit and a substantial purchase commitment that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
| /s/
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We have served as the Company’s auditor since 2018.
EISNERAMPER LLP
October 28, 2022
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NON-INVASIVE MONITORING SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
| July 31, 2022 | July 31, 2021 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Current liabilities - discontinued operations | ||||||||
| Total current liabilities | ||||||||
| Notes payable – related parties | $ | $ | ||||||
| Accrued interest | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies (Note 8) | ||||||||
| Shareholders’ deficit | ||||||||
| Series B Preferred Stock, par value $ per share; shares authorized, issued and outstanding; liquidation preference $ | ||||||||
| Common Stock, par value $ per share; shares authorized; shares issued and outstanding as of July 31, 2022 and 2021, respectively | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and shareholders’ deficit | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
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NON-INVASIVE MONITORING SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended July 31, 2022 and 2021
(In thousands, except per share data)
| 2022 | 2021 | |||||||
| Operating costs and expenses | ||||||||
| General and administrative | $ | $ | ||||||
| Total operating costs and expenses | ||||||||
| Operating loss | ( | ) | ( | ) | ||||
| Interest expense | ( | ) | ||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Weighted average number of common shares outstanding - basic and diluted | $ | $ | ||||||
| Basic and diluted loss per common share | $ | ( | ) | $ | ( | ) | ||
The accompanying notes are an integral part of these consolidated financial statements.
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NON-INVASIVE MONITORING SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
Years ended July 31, 2022 and 2021 (Dollars in thousands, except share amounts)
| Preferred Stock | Additional | |||||||||||||||||||||||||||
| Series B | Common Stock | Paid in | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balance at July 31, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance at July 31, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance at July 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
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NON-INVASIVE MONITORING SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended July 31, 2022 and 2021
(Dollars in thousands)
| 2022 | 2021 | |||||||
| Operating activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Changes in operating assets and liabilities | ||||||||
| Prepaid expenses | ( | ) | ( | ) | ||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Accrued interest | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Financing activities | ||||||||
| Proceeds from notes payable – related parties | ||||||||
| Net cash provided by financing activities | ||||||||
| Net decrease in cash | ( | ) | ( | ) | ||||
| Cash, beginning of year | ||||||||
| Cash, end of year | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
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NON-INVASIVE MONITORING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Organization. Non-Invasive Monitoring Systems, Inc., a Florida corporation (together with its consolidated subsidiaries, the “Company” or “NIMS”). The Company previously developed and marketed its Exer-Rest® line of acceleration therapeutic platforms based upon unique, patented whole body periodic acceleration (“WBPA”) technology of which the Company maintains patents. The Company maintains limited administration, but does not have any operations or inventory.
Business. The Company is currently a shell company (as defined in Rule 12b-2 of the Exchange Act).
Going
Concern. The Company’s consolidated financial statements have been prepared and presented on a basis assuming it will continue
as a going concern. As reflected in the accompanying consolidated financial statements, the Company had net losses from continuing operations
of approximately $
On
September 16, 2022, the Company entered into two Promissory Notes in the principal amount of $
The Company is seeking potential mergers, acquisitions and strategic collaborations. There is no assurance that the Company will be successful in this regard, and, if not successful, that it will be able to continue its business activities. The accompanying consolidated financial statements do not include any adjustments that might be necessary from the outcome of this uncertainty.
Discontinued Operations. On May 3, 2019 the Company exchanged inventory for forgiveness of accrued unpaid rent. The Company has no inventory, no immediate plans to replenish inventory and has no current plans to develop or market new products.
Accordingly, the Company determined that the assets and liabilities met the discontinued operations criteria in Accounting Standards Codification 205-20-45 and were classified as discontinued operations at May 3, 2019. See Discontinued Operations Note 3.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation. The 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 inter-company accounts and transactions have been eliminated in consolidation.
Discontinued Operations. For the years ended July 31, 2022 and 2021, results from operations for our Exer-Rest Business are classified as discontinued operations. The carve out of the discontinued operations (i) were prepared in accordance with the SEC’s carve out rules under Staff Accounting Bulletin (“SAB”) Topic 1B1 and (ii) are derived from identifying and carving out the specific assets, liabilities, operating expenses and interest expense associated with the Exer-Rest Business’s operations (see Note 3).
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 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 consolidated financial statements and reported amounts of expenses during the reporting period. Actual results could differ materially from these estimates.
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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 $
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 utilization of the loss carryforward is limited to future taxable earnings of the Company and may be subject to severe limitations if the Company undergoes an ownership change pursuant to the Internal Revenue Code Section 382.
The Company files its tax returns as prescribed by the laws of the jurisdictions in which it operates. Tax years ranging from 2018 to 2022 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.
Fair Value of Financial Instruments. Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of July 31, 2022 and 2021. The respective carrying value of certain on-balance-sheet financial instruments such as cash, prepaid expenses and accounts payable and accrued expenses approximate fair values because they are short term in nature.
Notes Payable. The carrying value of such financial instruments approximates their fair value since the stated interest rates approximates market rates for loans with similar terms for borrowers with similar credit profiles. The respective carrying value of the notes payable – related party approximate our current borrowing rate for similar debt instruments of comparable maturity.
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 regard to legal costs, we record such costs as incurred.
Related Parties. The Company follows ASC 850 “Related Party Disclosures,” for the identification of related parties and disclosure of related party transactions.
Reclassification of Prior Year Presentation. Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations.
An
adjustment has been made to the Consolidated Balance Sheets for the fiscal year ended July 31, 2021, to reclassify
approximately $
Recent Accounting Pronouncements. The Company considers the applicability and impact of all relevant Accounting Standard Updates (“ASU’s”). Our conclusion was that they did not have any material effect on the consolidated financial statements.
3. DISCONTINUED OPERATIONS
On May 3, 2019 the Company exchanged its inventory for forgiveness of accrued unpaid rent. Concurrent with the exchange management with the appropriate level of authority determined to discontinue the operations of the product segment.
| 16 |
The detail of the consolidated balance sheets for discontinued operations is as stated below:
As of July 31, 2022 | As of July 31, 2021 | |||||||
| Current liabilities – discontinued operations | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Total current liabilities – discontinued operations | ||||||||
| Total liabilities – discontinued operations | $ | $ | ||||||
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 did t record any stock-based compensation during the twelve months ended July 31, 2022 and 2021.
In November 2010, the Company’s 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 have consisted 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 authorized up to 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 the 2011 Plan expired in November 2020. awards have been granted under the 2011 Plan as of July 31, 2022.
As of July 31, 2022, there were outstanding stock options and there were unrecognized costs related to outstanding stock options. As of July 31, 2022 the Company does not have an equity compensation plan.
5. SHAREHOLDERS’ EQUITY
The Company has one class of Preferred Stock. Holders of Series B Preferred Stock are entitled to vote with the holders of common stock as a single class on all matters. We are currently authorized to issue an aggregate of shares of capital stock, consisting of shares of common stock and designated shares of preferred stock with preferences and rights to be determined by our Board of Directors.
Series
B Preferred Stock is not redeemable by the Company and has a liquidation value of $
The Company did t issue any shares of the Company’s common stock during the years ended July 31, 2022 and 2021.
| 17 |
Basic net loss per common share is computed by dividing net loss attributable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed giving effect to all dilutive potential common shares that were outstanding during the period. Diluted potential common shares consist of incremental shares issuable upon conversion of preferred stock. In computing diluted net loss per share for the years ended July 31, 2022 and 2021, dilution adjustment has been made to the weighted average outstanding common shares because the assumed conversion of preferred stock would be anti-dilutive.
7. RELATED PARTY TRANSACTIONS
Dr.
Hsiao, Dr. Frost and directors Steven Rubin and Rao Uppaluri are each stockholders, current or former officers and/or directors or former
directors of Asensus Surgical, Inc. (formerly TransEnterix, Inc.) (“Asensus”), a publicly-traded medical device company.
The Company’s Chief Financial Officer also serves as the Chief Financial Officer and Co-Interim Chief Executive Officer of Cocrystal
Pharma, Inc., a clinical stage Nasdaq listed biotechnology company, and in which Steve Rubin serves on the Board. From December 2009
until August 31, 2021, the Company’s Chief Legal Officer had served under a cost sharing arrangement as the Chief Legal Officer
of Asensus. The Company recorded additions to general and administrative costs and expenses to account for the sharing of costs under
this arrangement of $
The
Company signed a
The Company is under common control with multiple entities and the existence of that control could result in operating results or financial position of each individual entity significantly different from those that would have been obtained if the entities were autonomous. One of those related parties, OPKO Health, Inc. (“OPKO”) and the Company are under common control and OPKO has a one percent ownership interest in the Company that OPKO has accounted for as an equity method investment due to the ability to significantly influence the Company.
| 18 |
8. COMMITMENTS AND CONTINGENCIES
Leases.
The
Company was under an operating lease agreement for our corporate office space that expired in
Product Development and Supply Agreement.
In September 2007, the Company entered into a Product Development and Supply Agreement (the “Agreement”) with Sing Lin Technologies Co. Ltd., a company based in Taichung, Taiwan (“Sing Lin”). Pursuant to the Agreement, the Company consigned to Sing Lin the development and design of the next generation Exer-Rest and related devices. The Agreement commenced as of September 3, 2007 and had a term that extended three years from the acceptance by NIMS of the first run of production units. Thereafter, the Agreement automatically renewed for successive one year terms unless either party sent the other a notice of non-renewal. Either party was permitted to terminate the Agreement with ninety days prior written notice. Upon termination, each party’s obligations under the Agreement were to be limited to obligations related to confirmed orders placed prior to the termination date.
Pursuant
to the Agreement, Sing Lin designed, developed and manufactured the tooling required to manufacture the acceleration therapeutic platforms
for a total cost to the Company of $
Under the now-terminated Agreement, the Company also granted Sing Lin the exclusive distribution rights for the products in certain countries in the Far East, including Taiwan, China, Japan, South Korea, Malaysia, Indonesia and certain other countries. Sing Lin agreed not to sell the Products outside its geographic areas in the Far East.
The
Agreement provided for the Company to purchase approximately $
As
of July 31, 2022, the Company had not placed orders sufficient to meet the purchase obligations under the Agreement.
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9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses from continuing operations are summarized in the following table (in thousands):
| July 31, 2022 | July 31, 2021 | |||||||
| Accounts payable | $ | $ | ||||||
| Accrued redemption | ||||||||
| Accrued other | ||||||||
| Total | $ | $ | ||||||
10. INCOME TAXES
The Company accounts for income taxes using the asset and liability method. Pursuant to this method, deferred tax assets and liabilities are established for the differences between the financial reporting and the tax bases of the Company’s assets and liabilities and net operating loss carryforwards at enacted tax rates expected to be in effect when such amounts are realized or settled. A valuation allowance related to deferred tax assets is recorded when it is more likely than not that some portion or all of the deferred tax assets will not be realized.
The
accounting for uncertain tax positions guidance under ASC 740 requires that we recognize the financial statement benefit of a tax position
only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions
meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a
The Company files its tax returns in the U.S. federal jurisdiction and with U.S. states. The Company is subject to tax audits in all jurisdictions for which it files tax returns. Tax audits by their very nature are often complex and can require several years to complete. There are currently no tax audits that have commenced with respect to income tax or any other returns in any jurisdiction. Tax years ranging from 2018 to 2022 remain open to examination by various taxing jurisdictions as the statute of limitations has not expired. Because the Company is carrying forward income tax attributes, such as net operating losses and tax credits from 2018 and earlier tax years, these attributes can still be audited when utilized on returns filed in the future. It is the Company’s policy to include income tax interest and penalties expense in its tax provision.
The difference between income taxes at the statutory federal income tax rate of 21% in 2022 and 2021 and income taxes reported in the consolidated statements of operations are attributable to the following (in thousands):
| July 31, 2022 | % | July 31, 2021 | % | |||||||||||||
| Income tax benefit at the federal statutory rate from continuing operations | $ | ( | ) | $ | ( | ) | ||||||||||
| State income taxes, net of effect of federal taxes | ( | ) | ( | ) | ||||||||||||
| Expired net operating losses | ( | ) | ( | ) | ||||||||||||
| Change in valuation allowance | ( | ) | ( | ) | ||||||||||||
| Total | $ | $ | ||||||||||||||
| 20 |
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets consist of the following (in thousands):
| July 31, 2022 | July 31, 2021 | |||||||
| Federal and State net operating loss | $ | $ | ||||||
| Foreign net operating loss | ||||||||
| Other | ||||||||
| Less: Valuation allowance | ( | ) | ( | ) | ||||
| Net deferred tax asset | $ | $ | ||||||
At
July 31, 2022, the Company had available Federal and State net operating loss carry forwards of approximately $
A
valuation allowance is required to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely
than not that some portion or all of the deferred tax assets will not be realized. After consideration of all the evidence, both positive
and negative, management has determined that a full $
11. PROMISORY NOTES PAYABLE – RELATED PARTY
On
October 4, 2021,
12. SUBSEQUENT EVENTS
On
September 16, 2022,
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
The Company’s management, with the participation of its Interim Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) or 15d-15(e)) as of July 31, 2022. Based upon that evaluation, the Interim Chief Executive Officer and Chief Financial Officer concluded that, as of that date, the Company’s disclosure controls and procedures were not effective due to the material weakness identified below.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed 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. Internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over financial reporting as of July 31, 2022, the Company determined that there were control deficiencies that constituted material weaknesses, as described below.
| 1. | Process and procedures – The internal control procedures over the completeness and accuracy of the general ledger information and the risk assessment process are not formally documented and may not be designed and operate with a level of precision adequate to prevent or detect misstatements. |
Accordingly, the Company concluded that these control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the Company’s internal controls.
As a result of the material weaknesses described above, management has concluded that the Company did not maintain effective internal control over financial reporting as of July 31, 2022 based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
Notwithstanding the existence of these material weaknesses in the Company’s internal control over financial reporting, the Company’s management believes that the consolidated financial statements included in this Form 10-K fairly present in all material respects the Company’s financial condition, results of operations and cash flows for the periods presented.
Remedial Actions to Address Material Weaknesses
Management has actively implemented an ongoing remediation plan to ensure that control deficiencies contributing to the material weakness are remediated such that these controls will operate effectively. Consistent with the remediation plan we continue to conduct internal control training to address the lower levels of materiality in order to maintain internal control effectively against a material weakness as reported in Item 9A of our Annual Report on Form 10-K for the year ended July 31, 2022. This remains an ongoing process.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting during the last quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 9B. Other Information.
None.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance.
We believe that the combination of the respective qualifications, skills and experience of our directors contribute to an effective and well-functioning board and that, individually and as a whole, our directors possess the necessary qualifications to provide effective oversight of our business and quality advice to our management. Our directors are elected annually and serve until the next annual meeting of shareholders and until their successors are elected and appointed, or until his or her earlier resignation, removal from office or death. Information regarding the age, experience and qualifications of each director is set forth below.
| Name | Age | |||
| Jane H. Hsiao, Ph.D., MBA | 75 | |||
| Steven D. Rubin | 62 | |||
| Subbarao V. Uppaluri, Ph.D. | 73 | |||
Jane H. Hsiao, Ph.D., MBA. Dr. Hsiao has served as a Director and Chairman of the Board of Directors (the “Board”) of the Company since October 2008 and as Interim Chief Executive Officer since February 2012. Dr. Hsiao has served as Vice Chairman and Chief Technical Officer of OPKO Health, Inc. (“OPKO”) (NASDAQ: OPK), a specialty healthcare company, since May 2007 and as a director since February 2007. Dr. Hsiao previously served as a director of each of Asensus Surgical, Inc. (NYSE American: ASXC), a medical device company, Cocrystal Pharma, Inc. (NASDAQ: COCP), a biotechnology company developing antiviral therapeutics for human diseases, Neovasc, Inc. (NASDAQ: NVCN), a company developing and marketing medical specialty vascular devices. Dr. Hsiao served as the Vice Chairman-Technical Affairs of IVAX from 1995 to January 2006. Dr. Hsiao served as Chairman, Chief Executive Officer and President of IVAX Animal Health, IVAX’s veterinary products subsidiary, from 1998 to 2006.
Dr. Hsiao’s background in medical device and pharmaceutical industry, as well as her senior management experience, allow her to play an integral role in overseeing our product development and regulatory affairs and in navigating the regulatory pathways for our products and product candidates. In addition, as a result of her role as director and/or chairman of other companies in the biotechnology and life sciences space, she also has a keen understanding and appreciation of the many regulatory and development issues confronting pharmaceutical and biotechnology companies.
Steven D. Rubin. Mr. Rubin has served as a Director of the Company since October 2008. Mr. Rubin currently serves as Executive Vice President – Administration since May 2007 and as a director of the OPKO (NASDAQ: OPKO) since February 2007. Mr. Rubin also currently serves on the board of directors of Red Violet, Inc. (NASDAQ CM:RDVT), a software and services company, Cocrystal Pharma, Inc. (NASDAQ GM:COCP), a publicly traded biotechnology company developing new treatments for viral diseases, Eloxx Pharmaceuticals, Inc. (NASDAQ:ELOX), a clinical stage biopharmaceutical company dedicated to treating patients suffering from rare and ultra-rare disease caused by premature termination codon nonsense mutations, Neovasc, Inc. (NASDAQ CM:NVCN), a company that develops and markets medical specialty vascular devices, and ChromaDex Corp. (NASDAQ CM:CDXC), a science-based, integrated nutraceutical company devoted to improving the way people age. Mr. Rubin previously served as a director of VBI Vaccines, Inc. (NASDAQ CM:VBIV), a biopharmaceutical company developing next generation vaccines, BioCardia, Inc.(NASDAQ GS: BCDA), a clinical-stage regenerative medicine company developing novel therapeutics for cardiovascular diseases, Cogint, Inc. (NASDAQ GM:COGT), now known as Fluent, Inc. (NASDAQ:FLNT), an information solutions provider focused on the data-fusion market, prior to the spin-off of its data and analytics operations and assets into Red Violet, Inc., Kidville, Inc. (OTCBB:KVIL), which operated large, upscale facilities, catering to newborns through five-year-old children and their families, Sevion Therapeutics, Inc., prior to its merger with Eloxx Pharmaceuticals, Inc., Dreams, Inc. (NYSE American:DRJ), a vertically integrated sports licensing and products company, SciVac Therapeutics, Inc. prior to its merger with VBI Vaccines, Inc., Tiger X Medical, Inc. prior to its merger with BioCardia, Inc., and Castle Brands, Inc. (NYSE American:ROX), a developer and marketer of premium brand spirits. Mr. Rubin also served as the Senior Vice President, General Counsel and Secretary of IVAX from August 2001 until September 2006.
Mr. Rubin brings extensive leadership, business, and legal experience, as well as tremendous knowledge of our business and the pharmaceutical industry generally, to the Board. He has advised pharmaceutical companies in several aspects of business, regulatory, transactional, and legal affairs for more than 25 years. His experience as a practicing lawyer, general counsel, management executive and board member to multiple public companies, including several pharmaceutical and life sciences companies, has given him broad understanding and expertise, particularly relating to strategic planning and acquisitions.
Subbarao V. Uppaluri, Ph.D. Dr. Uppaluri has served as a Director of the Company since October 2008. Dr. Uppaluri served as Senior Vice President and Chief Financial Officer of OPKO from May 2007 until July 2012 and as a consultant of OPKO until February 2014. Dr. Uppaluri is a member of The Frost Group. Dr. Uppaluri served as the Vice President, Strategic Planning and Treasurer of IVAX from 1997 until December 2006. Before joining IVAX, from 1987 to August 1996, Dr. Uppaluri was Senior Vice President, Senior Financial Officer and Chief Investment Officer with Intercontinental Bank, a publicly traded commercial bank in Florida. In addition, he served in various positions, including Senior Vice President, Chief Investment Officer and Controller, at Peninsula Federal Savings Loan Association, a publicly traded Florida SL, from October 1983 to 1987. His prior employment, during 1974 to 1983, included engineering, marketing and research positions with multinational companies and research institutes in India and the United States. Dr. Uppaluri previously served on the boards of OPKO, Winston Pharmaceuticals Inc., Ideation Acquisition Corp., Tiger X Medical, Inc. and Kidville.
Dr. Uppaluri brings extensive leadership, business, and accounting experience, as well as knowledge of our business and the pharmaceutical industry generally, to the Board. His experience as the former chief financial officer of OPKO and board member to multiple public companies, including several pharmaceutical and life sciences companies, has given him broad understanding and expertise, particularly relating to business, accounting and finance matters.
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Identification of Executive Officers
The following individuals are our executive officers:
| Name | Age | Position | ||
| Jane H. Hsiao, Ph.D., MBA | 75 | Interim Chief Executive Officer and Director | ||
| James J. Martin, CPA, MBA | 56 | Chief Financial Officer and Treasurer |
Each of our officers serves until the earlier of her or his resignation, removal by the Board or death.
Biographical information for Jane H. Hsiao is set forth above.
James J. Martin. Mr. Martin, has served as our Chief Financial Officer since January 2011, and, from July 2010 through January 2011, he served as our Controller. Since February 2017, Mr. Martin serves as the Chief Financial Officer and Interim Co-Chief Executive Officer of Cocrystal Pharma, Inc (NASDAQ: COCP), a clinical stage biotechnology company. From January 2011 to October 2, 2013, Mr. Martin served as Chief Financial Officer of SafeStitch prior to its merger with Asensus Surgical, Inc. Since September 2014 Mr. Martin has served as Chief Financial Officer of VBI Vaccines Inc. (formerly SciVac Therapeutics, Inc.) (NASDAQ: VBIV), pharmaceutical development and manufacturing company. From April 2014 to September 2015, Mr. Martin served as Chief Financial Officer of Vapor Corp, Inc. (NASDAQ: VPCO), a vaporizer retail and wholesale company. From July 2010 through January 2011, Mr. Martin served as Controller of each of SafeStitch and Aero Pharmaceuticals, Inc. (“Aero”). Prior to joining NIMS, from 2008 through 2010, Mr. Martin served as Controller of AAR Aircraft Services-Miami, a subsidiary of AAR Corp, an aerospace and defense company at which he was responsible for all financial reporting and logistics for AAR Aircraft Services-Miami. From 2005-2008, Mr. Martin served as Controller of Avborne Heavy Maintenance, a commercial aircraft maintenance repair and overhaul company. Mr. Martin previously has served as Vice President of Finance of Aero, a privately held pharmaceutical distributor.
Section 16(a) Beneficial Ownership Reporting Compliance
Under section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company’s directors, executive officers and persons who own more than ten percent (10%) of our common stock are required to file with the Securities and Exchange Commission (the “SEC”) initial reports of ownership and reports of changes in ownership of the common stock and other equity securities of the Company. To the Company’s knowledge, based solely on a review of copies of such reports furnished to the Company during and/or with respect to Fiscal 2022, the Company is not aware of any late or delinquent filings required under Section 16(a) of the Exchange Act in respect of the Company’s common stock or other equity securities.
Code of Ethics
We have adopted a Code of Business Conduct and Ethics that applies to our principal executive officer, principal financial officer and other persons performing similar functions. A copy of our Code of Business Conduct and Ethics is available by request. We intend to post amendments to, or waivers from a provision of, our Code of Business Conduct and Ethics that apply to our principal executive officer, principal financial officer or persons performing similar functions on our website. Neither our website nor any information contained or linked therein constitutes a part of this report.
Audit Committee
We have a separately-designated standing audit committee, established in accordance with section 3(a)(58)(A) of the Exchange Act. The Audit Committee is composed of Dr. Subbarao V. Uppaluri, Chairman. Through March 15, 2022, Steven D. Rubin also served on the Audit Committee. Our Board has determined that Dr. Uppaluri is an independent audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K. Following Mr. Rubin’s resignation from the Audit Committee, the full Board of Directors has acted as the Audit Committee.
| 24 |
Item 11. Executive Compensation.
Summary Compensation Table
The following table summarizes the compensation information for the years ended July 31, 2022 and 2021 for our principal executive officer and each of the two most highly compensated executive officers receiving compensation in excess of $100,000 in any such fiscal year. We refer to these persons as our named executive officers.
SUMMARY COMPENSATION TABLE
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Option Awards ($) |
All Other Compensation ($) |
Total ($) | ||||||||||||||||||
| Jane Hsiao – Interim CEO (1) | 2022 | – | – | – | – | – | ||||||||||||||||||
| 2021 | – | – | – | – | – |
| 1. | Dr. Hsiao receives no salary from the Company and does not have any outstanding stock option awards. |
Outstanding Equity Awards as of July 31, 2022
We did not have any equity award plan during the year ended July 31, 2022 and we did not have any equity awards outstanding.
Risk Considerations in our Compensation Programs
We have reviewed our compensation structures and policies as they pertain to risk and have determined that our compensation programs do not create or encourage the taking of risks that are reasonably likely to have a material adverse effect on the Company.
We did not have any equity award plan during the year ended July 31, 2022 and we did not have any outstanding. As of July 31, 2022, the aggregate number of outstanding stock options (both exercisable and unexercisable) for each non-employee director was as follows:
| Name | Stock Options |
|||
| Jane H. Hsiao, Chairman/CEO | – | |||
| Steven D. Rubin | – | |||
| Subbarao V. Uppaluri, Ph.D. | – |
| 25 |
Director Compensation
For the year ended July 31, 2022, our Directors did not receive any compensation for their respective service on our Board or any committee thereof. Our Directors do not have any outstanding stock options.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of October 28, 2022 concerning the beneficial ownership of our voting stock by (i) each person known by us to be the beneficial owner of more than 5% of the outstanding shares of each class of voting stock, (ii) each of our directors, (iii) each current named executive officer, and (iv) all of our current named executive officers and directors as a group. Unless otherwise noted, all holders listed below have sole voting power and investment power over the shares beneficially owned by them, except to the extent such power may be shared with such person’s spouse.
| Common Stock | ||||||||
Names and Addresses of Directors, Officers and 5% Beneficial Holders (1) | No. of Shares Beneficially Owned (2) | Percent of Class (3) | ||||||
| Jane H. Hsiao, Ph.D., Chairman of the Board and Interim CEO (4) | 43,455,734 | 28.1 | % | |||||
| Steven D. Rubin, Director | 100,000 | * | ||||||
| Subbarao V. Uppaluri, Ph.D., Director | – | * | ||||||
| James J. Martin, Chief Financial Officer | 25,000 | * | ||||||
| All Directors and Executive Officers as a group (5 Persons) | 43,620,734 | 28.2 | % | |||||
| Phillip Frost, M.D. (5) | 54,690,325 | 35.3 | % | |||||
| Frost Gamma Investments Trust (6) | 54,690,325 | 35.3 | % | |||||
| Hsu Gamma Investments, L.P. (7) | 24,553,660 | 15.9 | % | |||||
| * | Less than 1% |
| (1) | The mailing address of each 5% beneficial holder listed is 4400 Biscayne Blvd., Miami, Florida 33137. |
| (2) | A person is deemed to be the beneficial owner of common stock and preferred stock that can be acquired by such person within 60 days from July 31, 2022 upon exercise of option and warrants, or through the conversion of convertible preferred stock. |
| (3) | Based on 154,810,655 shares of common stock issued and outstanding as of July 31, 2022. Each beneficial owner’s percentage ownership is determined by assuming that options and warrants that are held by such person (but not those held by any other person) and that are exercisable within 60 days from the date hereof have been exercised and that any convertible secured stock held by such person (but no other person) has been converted into common stock. |
| (4) | Common stock holdings include 24,553,660 shares of common stock held by Hsu Gamma Investments, L.P. and 2,150,000 common stock held by Chin Hsiung Hsiao Family Trust A. Dr. Jane Hsiao is trustee of the Chin Hsiung Hsiao Family Trust A. and Dr. Jane Hsiao is the general partner of Hsu Gamma Investments, L.P. |
| (5) | Includes beneficial ownership of shares held by Frost Gamma Investments Trust. |
| (6) | Dr. Phillip Frost is the trustee and Frost Gamma, Limited Partnership is the sole and exclusive beneficiary of Frost Gamma Investments Trust. Dr. Frost is one of two limited partners of Frost Gamma, Limited Partnership. The general partner of Frost Gamma Limited Partnership is Frost Gamma Inc. and the sole shareholder of Frost Gamma, Inc. is Frost-Nevada Corporation. Dr. Frost is also the sole shareholder of Frost-Nevada Corporation. |
| (7) | Dr. Jane Hsiao is the general partner of Hsu Gamma Investments, L.P. |
| 26 |
Equity Compensation Plan Information
A majority of our shareholders approved the Non-Invasive Monitoring Systems, Inc. 2011 Equity Incentive Plan (the “2011 Plan”) on March 16, 2012. We have reserved a total of 4,000,000 shares of our common stock for issuance under this plan, subject to adjustment for stock splits or any future stock dividends or other similar changes in our common stock or our capital structure. As of July 31, 2022, no options have been granted under the 2011 Plan. A more detailed summary of the 2000 Plan is contained in Note 4 to our consolidated financial statements set forth herein under Item 8 of this Annual Report on Form 10-K. The following table provides information about our equity compensation plans as of July 31, 2022:
Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) |
Weighted- average exercise price of outstanding options, warrants and rights (b) |
Number of securities remaining available for future issuance under equity compensation plans (c) |
||||||||||
| Equity compensation plans approved by security holders(1) | - | $ | - | - | ||||||||
| Equity compensation plans not approved by security holders(2) | - | - | - | |||||||||
| Total | - | $ | - | - |
| (1) | Non-Invasive Monitoring Systems, Inc. 2011 Stock Option Plans. The 2011 Plan authorizes up to 4,000,000 shares of our common stock. No options have been granted under the 2011 Stock Option Plan. |
| (2) | There are no outstanding options that were not granted under shareholder approved plans. |
In November 2010, our 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. The 2011 Plan authorizes up to 4,000,000 shares of our 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 July 31, 2022. The 2011 Plan expired in November 2021 and as of July 31, 2022 the Company does not have an equity compensation plan.
| 27 |
Item 13. Certain Relationships and Related Transactions, and Director Independence.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Dr. Hsiao, Dr. Frost and directors Steven Rubin and Rao Uppaluri are each stockholders, current or former officers and/or directors or former directors of Asensus Surgical, Inc. (formerly TransEnterix, Inc.) (“Asensus”), a publicly-traded medical device company. The Company’s Chief Financial Officer also serves as the Chief Financial Officer and Co-Interim Chief Executive Officer of Cocrystal Pharma, Inc., a clinical stage Nasdaq listed biotechnology company, and in which Steve Rubin serves on the Board. From December 2009 until August 31, 2021, the Company’s Chief Legal Officer has served under a cost sharing arrangement as the Chief Legal Officer of Asensus. The Company recorded additions to general and administrative costs and expenses to account for the sharing of costs under this arrangement of $400 and $4,800 for the years ended July 31, 2022 and 2021, respectively. Aggregate accounts payable to Asensus totaled approximately $0 and $400 at July 31, 2022 and 2021, respectively.
The Company signed a five-year lease for office space in Miami, Florida with a company controlled by Dr. Phillip Frost, who is the beneficial owner of more than 10% of the Company’s common stock. The rental payments under the Miami office lease, which commenced January 1, 2008 and expired on December 31, 2012, were approximately $1,250 per month and then continued on a month-to-month basis. In February 2016 the rent was reduced to $0 per month. For the years ended July 31, 2022 and 2021, the Company did not record any rent expense related to the Miami lease. At July 31, 2022 and 2021, approximately $0 in rent was payable.
The Company is under common control with multiple entities and the existence of that control could result in operating results or financial position of each individual entity significantly different from those that would have been obtained if the entities were autonomous. One of those related parties, OPKO Health, Inc. (“OPKO”) and the Company are under common control and OPKO has a one percent ownership interest in the Company that OPKO has accounted for as an equity method investment due to the ability to significantly influence the Company.
On October 4, 2021, the Company entered into two Promissory Notes in the principal amount of $75,000 each with Frost Gamma Investments Trust (the “Frost Gamma Note”), a trust controlled by Dr. Phillip Frost and with Jane Hsiao, Ph.D., the Company’s Chairman and Interim CEO (the “Hsiao Note”), both which beneficially owns in excess of 10% of NIMS’ common stock. The interest rate payable by NIMS on the Frost Gamma Note and Hsiao Note is 11% per annum, payable on the maturity date of October 4, 2023 (the “Maturity Date”). The Frost Gamma Note and Hsiao Note may be prepaid in advance of the Maturity Date without penalty.
On September 16, 2022, the Company entered into two Promissory Notes in the principal amount of $75,000 each with Frost Gamma Investments Trust (the “Frost Gamma Note 2”), a trust controlled by Dr. Phillip Frost and with Jane Hsiao, Ph.D., the Company’s Chairman and Interim CEO (the “Hsiao Note 2”), both which beneficially owns in excess of 10% of NIMS’ common stock. The interest rate payable by NIMS on the Frost Gamma Note 2 and Hsiao Note 2 is 11% per annum, payable on the Maturity Date of October 4, 2023 (the “Maturity Date”). The Frost Gamma Note 2 and Hsiao Note 2 may be prepaid in advance of the Maturity Date without penalty.
Director Independence
The Board of Directors, in the exercise of its reasonable business judgment, has determined that each of the Company’s directors qualifies as an independent director pursuant to Nasdaq Stock Market Rule 5605(a)(2) and applicable SEC rules and regulations, other than Jane Hsiao, who serves as the Company’s Interim CEO.
Item 14. Principal Accountant Fees and Services.
Principal Accountant
EisnerAmper LLP (“EisnerAmper”) had served as our independent registered public accounting firm since October 4, 2018.
Fees and Services
The following table sets forth the total fees billed to us by EisnerAmper for its audit of our consolidated annual financial statements and other services for the years ended July 31, 2022 and 2021.
| 2022 | 2021 | |||||||
| Audit Fees | $ | 54,000 | $ | 46,000 | ||||
| Audit-Related Fees | – | – | ||||||
| Tax Fees | – | – | ||||||
| All Other Fees | – | – | ||||||
| Total Fees | $ | 54,000 | $ | 46,000 | ||||
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Pre-Approval Policies and Procedures
Our Audit Committee has a policy in place that requires its review and pre-approval of all audit and permissible non-audit services provided by our independent auditors. The services requiring pre-approval by the audit committee may include audit services, audit related services, tax services and other services. The pre-approval requirement is waived with respect to the provision of non-audit services if (i) the aggregate amount of all such non-audit services provided to us constitutes not more than 5% of the total fees paid by us to our independent auditors during the fiscal year in which such non-audit services were provided, (ii) such services were not recognized at the time of the engagement to be non-audit services, and (iii) such services are promptly brought to the attention of the Audit Committee or by one or more of its members to whom authority to grant such approvals has been delegated by the Audit Committee. During fiscal 2022 and 2021, 100% of the audit related services, tax services and all other services provided by EisnerAmper for the periods as our principal independent registered public accountant were pre-approved by the Audit Committee.
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a) List of documents filed as part of this report:
1. Financial Statements: The information required by this item is contained in Item 8 of this Annual Report on Form 10-K.
2. Financial Statement Schedules: The information required by this item is included in the consolidated financial statements contained in Item 8 of this Annual Report on Form 10-K.
3. Exhibits: See Index to Exhibits.
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| NON-INVASIVE MONITORING SYSTEMS, INC. | ||
| Date: October 28, 2022 | By: | /s/ Jane H. Hsiao |
| Jane H. Hsiao | ||
| Interim Chief Executive Officer | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /s/ Jane H. Hsiao, Ph.D. | Interim Chief Executive Officer and Chairman of the | October 28, 2022 | ||
| Jane H. Hsiao, Ph.D. | Board of Directors (Principal Executive Officer) | |||
| /s/ Steven D. Rubin | Director | October 28, 2022 | ||
| Steven D. Rubin | ||||
| /s/ Subbarao V. Uppaluri | Director | October 28, 2022 | ||
| Subbarao Uppaluri | ||||
| /s/ James J. Martin | Chief Financial Officer (Principal Financial Officer) | October 28, 2022 | ||
| James J. Martin |
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INDEX TO EXHIBITS
The following exhibits are filed as part of, or incorporated by reference into, this Annual Report on Form 10-K.
| * | Filed herewith |
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