Table of Contents
SECURITIES AND EXCHANGE COMMISSION
þ | Annual report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 |
o | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Florida | 59-2007840 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
4400 Biscayne Blvd., Suite 180, Miami, Florida, | 33137 | |
(Address of principal executive offices) | (Zip Code) |
(Title of Class)
Large accelerated filero | Accelerated filero | Non-accelerated filero | Smaller reporting companyþ |
Document | Where Incorporated | |
Proxy Statement for the 2011 Annual Meeting of Shareholders | Part III of this Form 10-K |
TABLE OF CONTENTS FOR FORM 10-K
6 | ||||||||
6 | ||||||||
13 | ||||||||
19 | ||||||||
19 | ||||||||
19 | ||||||||
20 | ||||||||
20 | ||||||||
20 | ||||||||
21 | ||||||||
24 | ||||||||
25 | ||||||||
42 | ||||||||
42 | ||||||||
42 | ||||||||
43 | ||||||||
43 | ||||||||
43 | ||||||||
43 | ||||||||
43 | ||||||||
43 | ||||||||
44 | ||||||||
44 | ||||||||
45 | ||||||||
Exhibit 21.1 | ||||||||
Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 32.1 | ||||||||
Exhibit 32.2 |
2
Table of Contents
• | We have a history of operating losses, we do not expect to become profitable in the near future and absent a significant increase in revenue or additional equity or debt financing, we may be unable to continue as a going concern. |
• | We will likely require additional funding, which may not be available to us on acceptable terms, or at all. In addition, we may need to amend our Articles of Incorporation to increase our number of authorized shares of common stock. |
• | We terminated the Product and Supply Agreement with Sing Lin and may potentially be obligated to pay amounts under the agreement. |
• | We rely on third parties to manufacture and supply our products, and we presently have no agreement with any third party to manufacture and supply our products. |
• | The current worldwide economic crisis and concurrent market instability may materially and adversely affect the demand for our products, as well as our ability to obtain credit or secure funds through sales of our stock, which may materially and adversely affect our business, financial condition and ability to fund our operations. |
• | Healthcare policy changes, including recent reforms to the U.S. healthcare system, may have a material adverse effect on us. |
• | The terms of clearances or approvals and ongoing regulation of our products may limit how we manufacture and market our products, which could materially impair our ability to generate anticipated revenues. |
• | Our competitors may develop and market products that are more effective, safer or less expensive than our products, negatively impacting our commercial opportunities. |
• | If we are unable to obtain and enforce patent protection for our products, our business could be materially harmed. |
• | If we are unable to protect the confidentiality of our proprietary information and know-how, the value of our technology and products could be adversely affected. |
• | Our commercial success depends significantly on our ability to operate without infringing the patents and other proprietary rights of third parties. |
3
Table of Contents
• | If we become involved in patent litigation or other proceedings related to a determination of rights, we could incur substantial costs and expenses, substantial liability for damages or be required to stop our product development and commercialization efforts. |
• | Failure to obtain regulatory approval outside the United States will prevent us from marketing our products abroad. |
• | Non-U.S. governments often impose strict price controls, which may adversely affect our future profitability. |
• | Our business is subject to economic, political, regulatory and other risks associated with international operations. |
• | 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. |
4
Table of Contents
5
Table of Contents
• | the aging population; |
• | the increasing number of elderly persons reporting chronic ailments; |
• | an increased awareness of the benefits of exercise, particularly as a form of prevention; |
• | an increasing portion of the population that is incapable of performing traditional exercise; |
• | the expanding body of research connecting the body’s production of nitric oxide with vasodilatation, reduction of inflammation and improved transmission of neural impulses; and |
• | the expanding body of research linking WBPA to production of nitric oxide and related benefits. |
6
Table of Contents
US Patent | Inventors | Title | Expiration Date | |||
7,404,221 | Sackner, Marvin A. | Reciprocating movement platform for the external addition of pulses to the fluid channels of a subject | August 4, 2028 | |||
7.228,576 | Inman, D. Michael; Sackner, Marvin A. | Reciprocating movement platform for the addition of pulses of the fluid channels of a subject | June 12, 2027 | |||
7,111,346 | Inman, D. Michael; Sackner, Marvin A. | Reciprocating movement platform for the addition of pulses of the fluid channels of a subject | May 15, 2023 | |||
7,090,648 | Sackner, Marvin A.; Inman, D. Michael | External addition of pulses to fluid channels of body to release or suppress endothelial mediators and to determine effectiveness of such intervention | September 28, 2021 | |||
6,155,976 | Sackner, Marvin A.; Inman, D. Michael; Meichner, William J. | Reciprocating movement platform for shifting subject to and fro in headwards-footwards direction | May 24, 2019 |
7
Table of Contents
8
Table of Contents
9
Table of Contents
10
Table of Contents
• | The anti-kickback statute (Section 1128B(b) of the Social Security Act) prohibits certain business practices and relationships that might affect the provision and cost of healthcare services reimbursable under Medicare, Medicaid and other federal healthcare programs, including the payment or receipt of remuneration for the referral of patients whose care will be paid by Medicare or other governmental programs; |
• | The physician self-referral prohibition (Ethics in Patient Referral Act of 1989, as amended, commonly referred to as the Stark Law, Section 1877 of the Social Security Act), which prohibits referrals by physicians of Medicare or Medicaid patients to providers of a broad range of designated healthcare services in which the physicians (or their immediate family members) have ownership interests or with which they have certain other financial arrangements. |
• | The anti-inducement law (Section 1128A(a)(5) of the Social Security Act), which prohibits providers from offering anything to a Medicare or Medicaid beneficiary to induce that beneficiary to use items or services covered by either program; |
• | The False Claims Act (31 U.S.C. § 3729 et seq.), which prohibits any person from knowingly presenting or causing to be presented false or fraudulent claims for payment to the federal government (including the Medicare and Medicaid programs); and |
• | The Civil Monetary Penalties Law (Section 1128A of the Social Security Act), which authorizes the United States Department of Health and Human Services to impose civil penalties administratively for fraudulent or abusive acts. |
11
Table of Contents
12
Table of Contents
13
Table of Contents
14
Table of Contents
15
Table of Contents
16
Table of Contents
17
Table of Contents
• | difficulties in compliance with non-U.S. laws and regulations; |
• | changes in non-U.S. regulations and customs; |
• | changes in non-U.S. currency exchange rates and currency controls; |
• | changes in a specific country’s or region’s political or economic environment; |
• | trade protection measures, import or export licensing requirements or other restrictive actions by U.S. or non-U.S. governments; |
• | negative consequences from changes in tax laws; and |
• | difficulties associated with staffing and managing foreign operations, including differing labor relations. |
18
Table of Contents
19
Table of Contents
Quarter Ended | High | Low | ||||||
October 31, 2008 | $ | 0.61 | $ | 0.29 | ||||
January 31, 2009 | $ | 0.46 | $ | 0.27 | ||||
April 30, 2009 | $ | 0.40 | $ | 0.26 | ||||
July 31, 2009 | $ | 0.40 | $ | 0.30 | ||||
October 31, 2009 | $ | 0.46 | $ | 0.26 | ||||
January 31, 2010 | $ | 0.43 | $ | 0.27 | ||||
April 30, 2010 | $ | 0.43 | $ | 0.30 | ||||
July 31, 2010 | $ | 0.36 | $ | 0.30 |
20
Table of Contents
21
Table of Contents
22
Table of Contents
23
Table of Contents
24
Table of Contents
26 | ||||
27 | ||||
28 | ||||
29 | ||||
30 | ||||
31 | ||||
25
Table of Contents
Non-Invasive Monitoring Systems, Inc.
We have audited the accompanying consolidated balance sheets of Non-Invasive Monitoring Systems, Inc. and subsidiaries as of July 31, 2010 and 2009, and the related consolidated comprehensive statements of operations, changes in shareholders’ equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Non-Invasive Monitoring Systems, Inc. and subsidiaries as of July 31, 2010 and 2009, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in the Note 1 to the consolidated financial statements, the Company has experienced recurring net losses, cash outflows from operating activities and has an accumulated deficit and substantial purchase commitments 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 consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
As further discussed in Notes 10 and 14, during 2010, the Company terminated its agreement with its supplier of products. The supplier has demanded the Company to purchase inventory at levels sufficient to fulfill the minimum three-year purchase obligation under the agreement. The Company is currently unable to fund such a purchase and is attempting to resolve the issue. The Company also has net receivables of approximately $200,000 from the supplier, and tooling and equipment with a net book value of approximately $283,000 is in the possession of the supplier in Asia. The ultimate realization of the assets is dependent on the Company’s ability to resolve the issue with the supplier. The loss of the business relationship with the supplier could also adversely impact the company’s business operations. As the ultimate resolution of these matters will be determined in the future, no amounts have been provided for losses, if any.
/s/ Morrison, Brown Argiz & Farra, LLP | ||
Miami, Florida October 29, 2010 |
26
Table of Contents
July 31, 2010 | July 31, 2009 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash | $ | 165 | $ | 886 | ||||
Royalties and other receivables, net | 211 | 60 | ||||||
Inventories, net | 766 | 911 | ||||||
Advances to contract manufacturer | 90 | 144 | ||||||
Prepaid expenses, deposits, and other current assets | 57 | 75 | ||||||
Total current assets | 1,289 | 2,076 | ||||||
Tooling and equipment, net | 342 | 460 | ||||||
Total assets | $ | 1,631 | $ | 2,536 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities | ||||||||
Notes payable — Related party | $ | 600 | $ | — | ||||
Notes payable — other | 33 | 34 | ||||||
Accounts payable and accrued expenses | 276 | 242 | ||||||
Customer deposits | 16 | 9 | ||||||
Total current liabilities | 925 | 285 | ||||||
Total liabilities | $ | 925 | $ | 285 | ||||
Commitments and Contingencies (Note 10) | — | — | ||||||
Shareholders’ equity | ||||||||
Series B Preferred Stock, par value $1.00 per share; 100 shares authorized, issued and outstanding; liquidation preference $10 | — | — | ||||||
Series C Convertible Preferred Stock, par value $1.00 per share; 62,048 shares authorized, issued and outstanding; liquidation preference $62 | 62 | 62 | ||||||
Series D Convertible Preferred Stock, par value $1.00 per share; 5,500 shares authorized; 2,828 and 2,891 shares issued and outstanding, respectively; liquidation preference $4,242 | 3 | 3 | ||||||
Common Stock, par value $0.01 per share; 100,000,000 shares authorized; 68,738,165 and 68,385,637 shares issued and outstanding, respectively | 687 | 684 | ||||||
Additional paid in capital | 21,419 | 21,327 | ||||||
Accumulated deficit | (21,427 | ) | (19,803 | ) | ||||
Accumulated other comprehensive loss | (38 | ) | (22 | ) | ||||
Total shareholders’ equity | 706 | 2,251 | ||||||
Total liabilities and shareholders’ equity | $ | 1,631 | $ | 2,536 | ||||
27
Table of Contents
2010 | 2009 | |||||||
Revenues | ||||||||
Product sales, net | $ | 449 | $ | 325 | ||||
Royalties | 168 | 219 | ||||||
Research, consulting and warranty | — | 2 | ||||||
Total revenues | 617 | 546 | ||||||
Operating costs and expenses | ||||||||
Cost of sales | 243 | 250 | ||||||
Selling, general and administrative | 1,899 | 1,949 | ||||||
Research and development | 118 | 176 | ||||||
Total operating costs and expenses | 2,260 | 2,375 | ||||||
Operating loss | (1,643 | ) | (1,829 | ) | ||||
Other income | ||||||||
Interest income (expense), net | (16 | ) | (7 | ) | ||||
Other income (expense) | 35 | 68 | ||||||
Total other income | 19 | 61 | ||||||
Net loss | $ | (1,624 | ) | $ | (1,768 | ) | ||
Other comprehensive loss | ||||||||
Foreign currency translation adjustment | (16 | ) | (22 | ) | ||||
Comprehensive net loss | $ | (1,640 | ) | $ | (1,790 | ) | ||
Net loss attributable to common shareholders and loss per common share: | ||||||||
Net loss | (1,624 | ) | (1,768 | ) | ||||
Deemed dividend on Series D Preferred Stock | — | 1,078 | ||||||
Net loss attributable to common shareholders | $ | (1,624 | ) | $ | (2,846 | ) | ||
Weighted average number of common shares outstanding — basic and diluted | 68,497 | 68,051 | ||||||
Basic and diluted loss per common share | $ | (0.02 | ) | $ | (0.04 | ) | ||
28
Table of Contents
Accumu- | ||||||||||||||||||||||||||||||||||||||||||||||||
lated Other | ||||||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock | Additional | Accum- | Compre- | |||||||||||||||||||||||||||||||||||||||||||||
Series B | Series C | Series D | Common Stock | Paid in | ulated | hensive | ||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Loss | Total | |||||||||||||||||||||||||||||||||||||
Balance at July 31, 2008 | 100 | $ | — | 62,048 | $ | 62 | 1,000 | $ | 1 | 68,039,065 | $ | 680 | $ | 18,256 | $ | (18,035 | ) | $ | — | $ | 964 | |||||||||||||||||||||||||||
Issuance of series D preferred stock | — | — | — | — | 1,891 | 2 | — | — | 2,835 | — | — | $ | 2,837 | |||||||||||||||||||||||||||||||||||
Fair value of beneficial conversion feature of Series D Preferred Stock | — | — | — | — | — | — | — | — | 1,078 | — | — | $ | 1,078 | |||||||||||||||||||||||||||||||||||
Deemed dividend to Series D Preferred Shareholders, charged to additional paid-in-capital in the absence of retained earnings | — | — | — | — | — | — | — | — | (1,078 | ) | — | — | $ | (1,078 | ) | |||||||||||||||||||||||||||||||||
Common stock issued for cash on exercise of options and warrants | — | — | — | — | — | — | 338,333 | 4 | 47 | — | — | $ | 51 | |||||||||||||||||||||||||||||||||||
Cashless exercise of 13,333 options | — | — | — | — | — | — | 8,239 | — | — | — | — | $ | — | |||||||||||||||||||||||||||||||||||
Stock based compensation | — | — | — | — | — | — | — | — | 189 | — | — | $ | 189 | |||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | — | — | — | — | — | (22 | ) | $ | (22 | ) | |||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | — | (1,768 | ) | — | $ | (1,768 | ) | |||||||||||||||||||||||||||||||||
Balance at July 31, 2009 | 100 | $ | — | 62,048 | $ | 62 | 2,891 | $ | 3 | 68,385,637 | $ | 684 | $ | 21,327 | $ | (19,803 | ) | $ | (22 | ) | $ | 2,251 | ||||||||||||||||||||||||||
Common stock issued for cash on exercise of options and warrants | — | — | — | — | — | — | 13,333 | — | 1 | — | — | $ | 1 | |||||||||||||||||||||||||||||||||||
Cashless Exercise of 39,999 options | — | — | — | — | — | — | 24,195 | — | — | — | — | $ | — | |||||||||||||||||||||||||||||||||||
Conversion of Series D Preferred Stock into Common Stock | — | — | — | — | (63 | ) | — | 315,000 | 3 | (3 | ) | — | — | $ | — | |||||||||||||||||||||||||||||||||
Stock based compensation | — | — | — | — | — | — | — | — | 94 | — | — | $ | 94 | |||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | — | — | — | — | — | (16 | ) | $ | (16 | ) | |||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | — | (1,624 | ) | — | $ | (1,624 | ) | |||||||||||||||||||||||||||||||||
Balance at July 31, 2010 | 100 | $ | — | 62,048 | $ | 62 | 2,828 | $ | 3 | 68,738,165 | $ | 687 | $ | 21,419 | $ | (21,427 | ) | $ | (38 | ) | $ | 706 | ||||||||||||||||||||||||||
29
Table of Contents
2010 | 2009 | |||||||
Operating Activities | ||||||||
Net loss | $ | (1,624 | ) | $ | (1,768 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Deferred warranty income | — | (2 | ) | |||||
Depreciation and amortization | 123 | 114 | ||||||
Stock-based compensation expense | 94 | 189 | ||||||
Loss on disposal of assets | 3 | 17 | ||||||
Allowance for doubtful accounts | — | 10 | ||||||
Inventory valuation adjustment | 35 | 113 | ||||||
Foreign currency transaction gain | (38 | ) | (85 | ) | ||||
Changes in operating assets and liabilities | ||||||||
Accounts and royalties receivable | (150 | ) | (24 | ) | ||||
Inventories, net | 145 | (824 | ) | |||||
Advances to contract manufacturer | 54 | 515 | ||||||
Prepaid expenses, deposits and other current assets | 19 | (47 | ) | |||||
Accounts payable and accrued expenses | 23 | (85 | ) | |||||
Customer deposits | 7 | 9 | ||||||
Net cash used in operating activities | (1,309 | ) | (1,868 | ) | ||||
Investing Activities | ||||||||
Fixed asset purchases | — | (232 | ) | |||||
Net cash used in investing activities | — | (232 | ) | |||||
Financing Activities | ||||||||
Net proceeds from issuance of common stock and exercise of options and warrants | 1 | 51 | ||||||
Net proceeds from issuance of preferred stock | — | 2,837 | ||||||
Net proceeds from issuance of notes payable | 670 | 363 | ||||||
Repayments of notes payable | (71 | ) | (348 | ) | ||||
Net cash provided by financing activities | 600 | 2,903 | ||||||
Effect of exchange rate changes on cash | (12 | ) | (3 | ) | ||||
Net increase (decrease) in cash | (721 | ) | 800 | |||||
Cash, beginning of year | 886 | 86 | ||||||
Cash, end of year | $ | 165 | $ | 886 | ||||
Supplemental disclosure | ||||||||
Cash paid for interest | $ | — | $ | 8 | ||||
Supplemental schedule of non-cash financing activities | ||||||||
(Satisfaction) incurrence of liability for tooling development in progress | $ | — | $ | (142 | ) | |||
Transfer of demonstration units from inventory to fixed assets | $ | (8 | ) | $ | (31 | ) | ||
30
Table of Contents
31
Table of Contents
32
Table of Contents
July 31, 2010 | July 31, 2009 | |||||||
Work-in-progress, including sub-assemblies and spare parts | $ | 5 | $ | 11 | ||||
Finished goods | 761 | 900 | ||||||
Total inventories | $ | 766 | $ | 911 | ||||
33
Table of Contents
Year ended July 31, 2010 | Year ended July 31, 2009 | |||
Expected volatility | 112.21% – 116.86% | 91.63% – 110.18% | ||
Expected dividend yield | 0.00% | 0.00% | ||
Risk-free interest rate | 1.93% – 2.51% | 1.50% – 2.83% | ||
Expected life | 4.0 – 5.5 years | 4.0 – 5.5 years | ||
Forfeiture rate | 2.50% | 0.00% – 2.50% |
Weighted | Weighted average | |||||||||||||||
Average | remaining | Aggregate | ||||||||||||||
Exercise | contractual term | Intrinsic | ||||||||||||||
Shares | Price | (years) | Value | |||||||||||||
Options outstanding, July 31, 2008 | 2,074,330 | $ | 0.593 | |||||||||||||
Options granted | 340,000 | $ | 0.338 | |||||||||||||
Options exercised | (26,666 | ) | $ | 0.150 | ||||||||||||
Options forfeited | (37,500 | ) | $ | 0.400 | ||||||||||||
Options outstanding, July 31, 2009 | 2,350,164 | $ | 0.564 | |||||||||||||
Options granted | 355,000 | $ | 0.430 | |||||||||||||
Options exercised | (53,332 | ) | $ | 0.150 | ||||||||||||
Options forfeited | (106,000 | ) | $ | 0.501 | ||||||||||||
Options outstanding, July 31, 2010 | 2,545,832 | $ | 0.557 | 2.93 | $ | 37,633 | ||||||||||
Options expected to vest, July 31, 2010 | 2,511,082 | $ | 0.559 | 2.89 | $ | 37,436 | ||||||||||
Options exercisable, July 31, 2010 | 2,043,332 | $ | 0.594 | 2.12 | $ | 35,083 | ||||||||||
34
Table of Contents
35
Table of Contents
36
Table of Contents
July 31, 2010 | July 31, 2009 | |||||||
Stock options | 2,545,832 | 2,350,164 | ||||||
Series C Preferred Stock | 1,551,200 | 1,551,200 | ||||||
Series D Preferred Stock | 14,140,000 | 14,455,000 | ||||||
Total | 18,237,032 | 18,356,364 | ||||||
37
Table of Contents
Year Ending July 31, | ||||
2011 | $ | 130,000 | ||
2012 | 105,000 | |||
2013 | 32,000 | |||
2014 | — | |||
$ | 267,000 | |||
38
Table of Contents
Estimated | July 31, | July 31, | ||||||||||
Useful Life | 2010 | 2009 | ||||||||||
Tooling and equipment (Note 10) | 5 years | $ | 471 | $ | 471 | |||||||
Furniture and fixtures, leasehold improvements, office equipment and computers | 3 – 5 years | 99 | 94 | |||||||||
Website and software | 3 years | 26 | 26 | |||||||||
596 | 591 | |||||||||||
Less accumulated depreciation | (254 | ) | (131 | ) | ||||||||
Tooling and equipment, net | $ | 342 | $ | 460 | ||||||||
39
Table of Contents
July 31, 2010 | July 31, 2009 | |||||||
Income tax benefit at the federal statutory rate | 34.00 | % | 34.00 | % | ||||
State and local income taxes, net of effect of federal taxes | 3.11 | 3.22 | ||||||
Expiration of net operating losses | (0.11 | ) | (18.33 | ) | ||||
Other, net | (0.40 | ) | (0.40 | ) | ||||
Increase in valuation allowance | (36.60 | ) | (18.49 | ) | ||||
Provision for income tax | 0.00 | % | 0.00 | % | ||||
July 31, 2010 | July 31, 2009 | |||||||
Federal and State net operating loss | $ | 4,568 | $ | 4,038 | ||||
Foreign net operating loss | 145 | 61 | ||||||
Stock-based compensation and other | 354 | 359 | ||||||
5,067 | 4,458 | |||||||
Less: Valuation allowance | (5,067 | ) | (4,458 | ) | ||||
Net deferred tax asset | $ | — | $ | — | ||||
Year Ended | Year Ended | |||||||
July 31, 2010 | July 31, 2009 | |||||||
U.S. | $ | (1,395 | ) | $ | (1,578 | ) | ||
Foreign | (229 | ) | (190 | ) | ||||
Total | $ | (1,624 | ) | $ | (1,768 | ) | ||
40
Table of Contents
Major Customers.Approximately 28% of the Company’s revenues result from sales to authorized distributors outside the United States. Sales to foreign distributors generally require prepayment or letter of credit guarantees. Because Sing Lin served as both a vendor and a customer prior to the termination of the Agreement, the Company extended credit terms to Sing Lin and offsets collections from Sing Lin for sales against payments to Sing Lin for inventory purchases. For the year ended July 31, 2010, Sing Lin accounted for approximately 25% of the Company’s total revenues, and accounts receivable from Sing Lin at July 31, 2010 were approximately $152,000, representing approximately 72% of total accounts receivable. It is uncertain whether Sing Lin will continue to act as the Company’s authorized distributor in Asia, and the loss of Sing Lin as a customer could have a material adverse effect on the Company’s consolidated financial position, results of operations and liquidity.
41
Table of Contents
42
Table of Contents
43
Table of Contents
44
Table of Contents
NON-INVASIVE MONITORING SYSTEMS, INC. | ||||
Date: October 29, 2010 | By: | /s/ Marvin A. Sackner, M.D. | ||
Marvin A. Sackner, M.D. | ||||
Chief Executive Officer and President |
Signature | Title | Date | ||
/s/ Marvin A. Sackner, M.D. | Chief Executive Officer and President (Principal Executive Officer) | October 29, 2010 | ||
/s/ Jane H. Hsiao, Ph.D. | Chairman of the Board of Directors | October 29, 2010 | ||
/s/ Taffy Gould | Director | October 29, 2010 | ||
/s/ Morton J. Robinson, M.D. | Director | October 29, 2010 | ||
/s/ Steven D. Rubin | Director | October 29, 2010 | ||
/s/ Subbarao Uppaluri | Director | October 29, 2010 | ||
/s/ Adam S. Jackson | Chief Financial Officer (Principal Financial Officer) | October 29, 2010 |
45
Table of Contents
Exhibit No. | Description of Exhibits | |||
3.1 | Articles of Incorporation, as amended (Incorporated by Reference from Exhibit 3.1 to Form 8-K filed on April 8, 2008) | |||
3.2 | Articles of Amendment to Articles of Incorporation (Incorporated by Reference from Exhibit 3.1 to Form 8-K filed on December 3, 2008) | |||
3.3 | Articles of Amendment to Articles of Incorporation (Incorporated by Reference from Exhibit 3.3 to Form 10-Q filed on March 17, 2010) | |||
3.4 | By-Laws, as amended (Incorporated by reference from Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q filed on December 15, 2009) | |||
10.1 | License Agreement dated as of May 22, 1996 between the Company and SensorMedics Corporation (Incorporated by reference from Exhibit 10.1 to Form 10-KSB/A filed on April 22, 2008) | |||
10.2 | Letter of Agreement dated April 21, 1999 between the Company and SensorMedics Corporation (Incorporated by reference from Exhibit 10.2 to Form 10-KSB/A filed on April 22, 2008) | |||
10.3 | Agreement Regarding Assignment of Patents and Intellectual Property dated August 14, 2000 between the Company and LifeShirt.com, Inc. (Incorporated by reference from Exhibit 10.3 to Form 10-KSB/A filed on April 22, 2008) | |||
10.4 | Amendment to Agreement Regarding Assignment of Patents and Intellectual Property dated December 23, 2000 between the Company and LifeShirt.com, Inc. (Incorporated by reference from Exhibit 10.4 to Form 10-KSB/A filed on April 22, 2008) | |||
10.5 | Form of Preferred Stock Purchase Agreements dated as of December 1 and 2, 2008 between the Company and the Investors named therein (Incorporated by reference from Exhibit 10.1 to Form 8-K filed on December 3, 2008) | |||
10.6 | Preferred Stock Purchase Agreement dated as of January 29, 2009 between the Company and the Investors named therein (Incorporated by reference from Exhibit 10.1 to Form 8-K filed on April 8, 2008) | |||
10.7 | Product Development and Supply Agreement executed September 4, 2007 between Sing Lin Technologies Ltd and the Company (Incorporated by reference from Exhibit 10.1 to Form 10-QSB/A filed on April 22, 2008) (Confidentiality Treatment has been granted for portions of this Exhibit) | |||
10.8 | Note and Security Agreement dated as of August 28, 2008 between the Company and various lenders (incorporated by reference from Exhibit 10.1 to Form 8-K filed on September 12, 2008) | |||
10.9 | Offer Letter from the Company to Steven B. Mrha dated December 21, 2007 and executed on December 22, 2007 detailing the terms of employment of Mr. Mrha (incorporated by reference from Exhibit 10.1 to Form 8-K filed on December 27, 2007) | |||
10.10 | Offer Letter from the Company to Adam S. Jackson dated March 11, 2008 (incorporated by reference from Exhibit 10.1 to the Form 8-K filed on May 15, 2008) | |||
10.11 | Offer Letter from SafeStitch Medical, Inc. to Adam S. Jackson, dated March 11, 2008 (incorporated by reference to the Current Report on Form 8-K filed by SafeStitch Medical, Inc. on April 4, 2008) | |||
10.12 | 2000 Stock Option Plan (Incorporated by reference from the Company’s Information Statement on Schedule 14C filed on April 5, 2001)(SEC Accession No.0000950170-01-000484) | |||
10.13 | Lease Agreement dated January 1, 2008 between the Registrant and Frost Real Estate Holdings, LLC (incorporated by reference from Exhibit 10.17 to Form 10-K filed on October 29, 2009). | |||
10.14 | Lease Agreement dated February 1, 2009 between the Registrant and Hialeah Warehouse Holdings, LLC (incorporated by reference from Exhibit 10.18 to Form 10-K filed on October 29, 2009). | |||
10.15 | First Amendment to Letter of Agreement, dated as of April 21, 2009 between the Registrant and Cardinal Health 211, Inc. (as successor in interest to SensorMedics Corporation)(incorporated by reference from Exhibit 10.1 to Form 8-K filed on June 9, 2009). | |||
10.15 | Note and Security Agreement dated as of March 31, 2010 between the Company and Frost Gamma Investments Trust and Hsu Gamma Investments, L.P. (incorporated by reference from Exhibit 10.1 to Form 8-K filed on April 6, 2010). |
46
Table of Contents
Exhibit No. | Description of Exhibits | |||
14.1 | Code of Ethics (incorporated by reference from Exhibit 14.1 to Form 10-K filed on October 29, 2009). | |||
21.1 | * | Subsidiaries of the Company | ||
31.1 | * | Certification of Periodic Report by Chief Executive Officer pursuant to Rule 13a-14 and 15d-14 of the Securities Exchange Act of 1934. | ||
31.2 | * | Certification of Periodic Report by Chief Financial Officer pursuant to Rule 13a-14 and 15d-14 of the Securities Exchange Act of 1934. | ||
32.1 | * | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
32.2 | * | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
* | Filed herewith |
47