4. SHAREHOLDERS’ EQUITY

The Company has a single 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 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.

Series B Preferred Stock is not redeemable by the Company and has a liquidation value of $100 per share, plus declared and unpaid dividends, if any. Dividends are non-cumulative, and are at the rate of $10 per share, if declared.

NaNNo preferred stock dividends were declared for the three and ninesix months ended April 30, 2022January 31, 2023 and 2021.2022.

The Company did not issue any shares of the Company’s common stock during the three and ninesix months ended April 30, 2022January 31, 2023 and 2021.2022.

5. BASIC AND DILUTED LOSS PER SHARE

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 exercise of stock options and warrants and conversion of preferred stock. In computing diluted net loss per share for the periods ended April 30,January 31, 2023 and 2022, and 2021, 0no dilution adjustment has been made to the weighted average outstanding common shares because the assumed conversion of preferred stock would be anti-dilutive.

6. RELATED PARTY TRANSACTIONS

Dr. Hsiao, Dr. Frost and directors Steven Rubin and Rao Uppaluri are stockholders and/or directors or former directors of Asensus Surgical, Inc. (formerly TransEnterix, Inc.) (“Asensus”), a publicly-traded medical device company. The Company’s Chief Legal Officer has served under a cost sharing arrangement as the Chief Legal Officer of Asensus, from December 2009 until August 31, 2021. Since September 1, 2021 the Company’s Chief Legal Officer has been compensated directly from the 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 and Dr. Frost serve on the Board. The Company expensed $0 and $400 per month under the cost sharing arrangement during the three and ninesix months ended April 30, 2022January 31, 2023 and 2021.2022. At April 30, 2022January 31, 2023 and July 31, 2021,2022, the Company had an accounts payableno liability of $0 and $400 under the cost sharing arrangement with Asensus, respectively.Asensus.

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 three and ninesix months ended April 30,January 31, 2023 and 2022, and 2021, the Company did not record any rent expense related to the Miami lease. At April 30,January 31, 2023 and 2022 and 2021 there was 0no rent 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.

7. NOTES PAYABLE – RELATED PARTIES

On October 4, 2021, the Company entered into atwo Promissory NoteNotes 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 the CompanyNIMS 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 October 4, 2021,September 16, 2022, the Company entered into atwo Promissory NoteNotes 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”Note 2”) and a beneficial holder, both which beneficially owns in excess of 10% of NIMS’ common stock. The interest rate payable by the CompanyNIMS on the Frost Gamma Note 2 and Hsiao Note 2 is 11% per annum, payable on the Maturity Date.Date of October 4, 2023. The Frost Gamma Note 2 and Hsiao Note 2 may be prepaid in advance of the Maturity Date without penalty.

8. COMMITMENTS AND CONTINGENCIES

Leases.

The Company was under an operating lease agreement for our corporate office space that expired in 2012. The lease currently continues on a month to month basis at no cost.

COVID-19.

Current economic conditions with COVID-19 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 or to successfully examine strategic alternatives. Quarantines would make our ability to look for strategic alternatives more difficult and prospects of borrowing or equity raises would be more challenging. Additionally, the sales of equity or convertible debt securities may result in dilution to our stockholders.

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 $471,000. Sing Lin utilized the tooling in the performance of its production obligations under the Agreement. The Company paid Sing Lin $150,000 of the tooling cost upon execution of the Agreement and $150,000 upon the Company’s approval of the product prototype concepts and designs. The balance of the final tooling cost became due and payable in September 2008 upon acceptance of the first units produced using the tooling, and was paid in full during the year ended July 31, 2009.

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 $2.6 million of Exer-Rest units within one year of the September 2008 acceptance of the final product. The Agreement further provided for the Company to purchase $4.1 million and $8.8 million of Exer-Rest products in the second and third years following such acceptance, respectively. These minimum purchase amounts were based upon 2007 product costs multiplied by volume commitments. Through April 30, 2022,January 31, 2023, the Company had paid Sing Lin $1.7 million in connection with orders placed through that date. As of April 30, 2022,January 31, 2023, the Company has approximately $41,000 of payables due to Sing Lin. As of April 30, 2022,January 31, 2023, aggregate minimum future purchases under the Agreement totaled approximately $13.9 million.

As of April 30, 2022,January 31, 2023, the Company had not placed orders sufficient to meet the purchase obligations under the Agreement. The Company notified Sing Lin in June 2010 that it was terminating the Agreement effective September 2010, and Sing Lin in July 2010 demanded that the Company place orders sufficient to fulfill the three year minimum purchase obligations in the Agreement.Agreement. As of the date of this filing, Sing Lin has not followed up on its July 2010 demand. There can be no assurance that Sing Lin will not attempt to enforce its remedies under the Agreement, or pursue other potential remedies. The Company believes that Sing Lin inis no longer in business.

Cautionary Statement Regarding Forward-looking Statements.

This Interim Report on Form 10-Q contains, in addition to historical information, certain forward-looking statements regarding Non-Invasive Monitoring Systems, Inc. (the “Company” or “NIMS,” also referred to as “us”, “we” or “our”). These forward-looking statements represent our expectations or beliefs concerning the Company’s operations, performance, financial condition, business strategies, and other information and that involve substantial risks and uncertainties. For this purpose, any statements contained in this Report that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” or “continue” or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. The Company’s actual results of operations, some of which are beyond the Company’s control, could differ materially from the activities and results implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to the Company’s: history of operating losses and accumulated deficit; need for additional financing; dependence on management; risks related to proprietary rights; other factors described herein as well as the factors contained in “Item 1A - Risk Factors” of our Annual Report on Form 10-K for the year ended July 31, 2021.2022. We do not undertake any obligation to update forward-looking statements, except as required by applicable law. These forward-looking statements are only predictions and reflect our views 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 liabilities 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 condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to income taxes. 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.

Results of Operations

We have discontinued operations in May 2019. The Company is assessing potential mergers, acquisitions, strategic collaborations and strategic collaborations.liquidation.

Three and Ninesix months ended April 30,January 31, 2023 compared to three and six months ended January 31, 2022 Compared to Three and Nine months Ended April 30, 2021

General and administrative costs and expenses from continuing operations.expenses. General and administrative (“G&A”) costs and expenses from continuing operations were $31,000$40,000 and $124,000$105,000 for the three and ninesix months ended April 30, 2022,January 31, 2023, respectively, as compared to $29,000$36,000 and $127,000$93,000 for the three and ninesix months ended April 30, 2021,January 31, 2022, respectively. The $2,000$4,000 and $12,000 increase and $3,000 decrease for the three and ninesix months ended January 31, 2023, respectively, was primarily due to professional services.fees.

Total operating costs and expenses from continuing operations.expenses. Total operating costs and expenses were $31,000$40,000 and $124,000$105,000 for the three and ninesix months ended April 30, 2022,January 31, 2023, respectively, as compared to $29,000$36,000 and $127,000$93,000 for the three and ninesix months ended April 30, 2021,January 31, 2022, respectively. The $2,000$4,000 and $12,000 increase and $3,000 decrease for the three and ninesix months are explained above in G&A.ended January 31, 2023, respectively, was primarily due to professional fees.

Interest expense. Net interest expense was $4,000$8,000 and $10,000$14,000 for the three and ninesix months ended April 30, 2022,January 31, 2023, respectively, as compared to $0$5,000 and $6,000 for the three and ninesix months ended April 30, 2021January 31, 2022. The interest expense is related to the Promissory Notes described in Note 7 to the accompanying unaudited condensed consolidated financial statements.

Net loss. Net loss was $35,000$48,000 and $134,000$119,000 for the three and ninesix months ended April 30, 2022,January 31, 2023, respectively, as compared to $29,000$41,000 and $127,000$99,000 for the three and ninesix months ended April 30,January 31 2021, respectively. The $6,000$7,000 and $7,000$20,000 increase for the three and ninesix months ended April 30, 2022,January 31, 2023, respectively, was primarily due to professional fees and interest expense on related party notes payable (see Note 7) and professional fees..

Liquidity and Capital Resources

The Company’s operations have been primarily financed through private sales of its equity securities and advances under Credit Facility and Promissory Notes.promissory notes. At April 30, 2022,January 31, 2023, we had approximately $53,000$31,000 of cash and working capital deficit of approximately $214,000. $532,000. We believe that the cash on hand at April 30, 2022January 31, 2023 is not sufficient to meet our anticipated cash requirements for the next 12 months. No assurance can be given that such additional financing will be available on acceptable terms or at all.

We expect to incur losses for the foreseeable future. It is likely that we will be required to obtain additional external financing through public or private equity offerings, debt financings from shareholders or collaborative agreements. No assurance can be given that such additional financing will be available on acceptable terms or at all.

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 in a timely manner. Additionally, the sales of equity or convertible debt securities may result in dilution to our stockholders.

Net cash used in operating activities was $152,000$134,000 and $142,000$138,000 for ninesix months ended April 30,January 31, 2023 and 2022, and 2021, respectively. This $10,000 increase$4,000 decrease in cash used in operating was primarily due to increasedincreases in prepaid expenses, offset by increases in accounts payable and accrued interest and a reduction of accrued expenses and accounts payable during the nine months ended April 30, 2022 as compared to the nine months ended April 30, 2021.expenses.

Net cash provided by financing activities was $150,000 and $0$150,000 for ninesix months ended April,January 31, 2023 and 2022, and 2021, respectively. This $150,000 increasein each six month period was primarily due to the proceeds from Promissory Notes described in Note 7 to the accompanying unaudited condensed consolidated financial statements.

Not required for smaller reporting companies as defined in Rule 12b-2 of the Exchange Act.

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 April 30, 2022.January 31, 2023. 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 April 30, 2022,January 31, 2023, the Company determined that there were control deficiencies that constituted material weaknesses, as described below.

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 April 30, 2022January 31, 2023 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 condensed consolidated financial statements included in this Form 10-Q 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 a 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 have conducted internal control training to address the lower levels of materiality in order to maintain internal control effectively against a material weakness as first reported in Item 9A of our Annual Report on Form 10-K for the year ended July 31, 2021.2022. 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.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

None.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

Item 6. Exhibits

NON-INVASIVE MONITORING SYSTEMS, INC

April 30, 2022January 31, 2023

SIGNATURES

In accordance with the requirements of the Exchange Act the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

EXHIBIT INDEX TO EXHIBITS