##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-K
  þ
    
    Annual report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
 For the fiscal year ended July 31, 2010
 OR
 o
    
    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 0-13176
 NON-INVASIVE MONITORING SYSTEMS, INC.
  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)
 (305) 575-4200
 None
  Common stock, $0.01 par value per share
 o
 o
 þ o
 o o
 þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE
 Document
    
    Where IncorporatedProxy Statement for the 2011 Annual Meeting of Shareholders
    
    Part III of this Form 10-K




---



##### 



NON-INVASIVE MONITORING SYSTEMS, INC.

TABLE OF CONTENTS FOR FORM 10-K
 PART I
    
    
    6Item 1. Business
    
    
    6Item 1A. Risk Factors
    
    
    13Item 2. Properties
    
    
    19Item 3. Legal Proceedings
    
    
    19Item 4. (Removed and Reserved)
    
    
    19PART II
    
    
    20Item 5. Market for Registrants Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    20Item 6. Selected Financial Data
    
    
    20Item 7. Managements Discussion and Analysis
of Financial Condition and Results of Operations
    
    
    21Item 7A. Quantitative and Qualitative Disclosures About
Market Risk
    
    
    24Item 8. Financial Statements and Supplementary Data
    
    
    25Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
    
    
    42Item 9A(T). Controls and Procedures
    
    
    42Item 9B. Other Information
    
    
    42PART III
    
    
    43Item 10. Directors, Executive Officers and Corporate
Governance
    
    
    43Item 11. Executive Compensation
    
    
    43Item 12. Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters
    
    
    43Item 13. Certain Relationships and Related Transactions,
and Director Independence
    
    
    43Item 14. Principal Accountant Fees and Services
    
    
    43PART IV
    
    
    44Item 15. Exhibits, Financial Statement Schedules
    
    
    44SIGNATURES
    
    
    45Exhibit 21.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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##### Table of Contents



CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
   
    
    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




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
    
    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




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##### Table of Contents



PART I
 
 Item 1. Business.
 General
  Company Overview
   ®
  5




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Market Opportunities
  
    
    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.
  Products
 Whole Body Periodic Acceleration (WBPA) Therapeutic Devices
   6




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##### Table of Contents



LifeShirt®
  Intellectual Property
  US Patent
    
    Inventors
    
    Title
    
    Expiration Date7,404,221
    
    Sackner, Marvin A.
    
    Reciprocating movement platform for the external addition of pulses to the fluid channels of a subject
    
    August 4, 20287.228,576
    
    Inman, D. Michael; Sackner, Marvin A.
    
    Reciprocating movement platform for the addition of pulses of the fluid channels of a subject
    
    June 12, 20277,111,346
    
    Inman, D. Michael; Sackner, Marvin A.
    
    Reciprocating movement platform for the addition of pulses of the fluid channels of a subject
    
    May 15, 20237,090,648
    
    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, 20216,155,976
    
    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




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Research and Development
  Competition
  Government Regulation of our Medical Device Development and Distribution Activities
   FDA Regulation of the Design, Manufacture and Distribution of Medical Devices
    8




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Recently Enacted Health Care Reform Legislation
    9




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Third-Party Payments, Especially payments by Medicare and Medicaid
 A. Medicare Coverage
    B. Reimbursement Levels
   10




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Anti-Fraud and Abuse Rule
  
    
    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




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The Privacy Provisions of HIPAA
  Manufacturing
  Sales & Marketing
   12




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Employees
  Our Executive Officers
 Marvin A. Sackner, M.D.
 Steven B. Mrha.
 Adam S. Jackson
 
 Item 1A. Risk Factors.
  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 a significant increase in revenue or additional equity or debt financing, we may be unable
to continue as a going concern.
   13




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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.
    14




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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 recently enacted legislation reforming 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.
   15




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##### Table of Contents



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.
   16




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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 any of which could
materially adversely affect our liquidity, business prospects and results of operations.
   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.
   17




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##### Table of Contents



Our business is subject to economic, political, regulatory and other risks associated with
international operations.
  
    
    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.
 Risks Relating to Our Stock.
 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.
   18




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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.
  
 Item 2. Properties.
   
 Item 3. Legal Proceedings.
  
 Item 4. (Removed and Reserved).
  19




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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
  Quarter Ended
    
    High
    
    
    LowOctober 31, 2008
    
    $
    0.61
    
    
    $
    0.29January 31, 2009
    
    $
    0.46
    
    
    $
    0.27April 30, 2009
    
    $
    0.40
    
    
    $
    0.26July 31, 2009
    
    $
    0.40
    
    
    $
    0.30October 31, 2009
    
    $
    0.46
    
    
    $
    0.26January 31, 2010
    
    $
    0.43
    
    
    $
    0.27April 30, 2010
    
    $
    0.43
    
    
    $
    0.30July 31, 2010
    
    $
    0.36
    
    
    $
    0.30
  
 Item 6. Selected Financial Data.
   20




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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 This Annual Report on Form 10-K contains certain forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995 (PSLRA), Section 27A of the Securities
Act of 1933, as amended (the Securities Act) and Section 21E of the Securities Exchange Act of
1934, as amended, (the Exchange Act), about our expectations, beliefs or intentions regarding our
product development efforts, 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. We intend that all forward-looking statements be subject to the safe harbor provisions of the
PSLRA. 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
  Critical Accounting Policies and Estimates
  Results of Operations
 
  21




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Year Ended July 31, 2010 Compared to Year Ended July 31, 2009
 Revenue.
 Cost of sales.
 Selling, general and administrative costs and expenses.
 Research and development costs and expenses.
 Total operating costs and expenses.
 Other income and expense.
 Liquidity and Capital Resources
    22




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Series D Preferred Stock Offerings.
 December 2008 Series D Preferred Stock Offering.
  23




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##### Table of Contents



January 2009 Series D Preferred Stock Offering.
 2008 Revolver
 2010 Credit Facility.
  
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
   24




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Item 8. Financial Statements and Supplementary Data.
 Report of Independent Registered Public Accounting Firm
    
    
    26Consolidated Balance Sheets at July 31, 2010 and 2009
    
    
    27Consolidated Comprehensive Statements of Operations for the years ended July 31, 2010 and 2009
    
    
    28Consolidated Statements of Changes in Shareholders Equity for the years ended July 31, 2010 and 2009
    
    
    29Consolidated Statements of Cash Flows for the years ended July 31, 2010 and 2009
    
    
    30Notes to Consolidated Financial Statements
    
    
    31
  25




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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

Morrison, Brown Argiz & Farra, LLPMiami, Florida
October 29, 2010
  26




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NON-INVASIVE MONITORING SYSTEMS, INC.
 
 CONSOLIDATED BALANCE SHEETS
 (In thousands, except share and per share data)
 July 31, 2010
    
    
    July 31, 2009ASSETSCurrent assetsCash
    
    $
    165
    
    
    $
    886Royalties and other receivables, net
    
    
    211
    
    
    
    60Inventories, net
    
    
    766
    
    
    
    911Advances to contract manufacturer
    
    
    90
    
    
    
    144Prepaid expenses, deposits, and other current assets
    
    
    57
    
    
    
    75Total current assets
    
    
    1,289
    
    
    
    2,076Tooling and equipment, net
    
    
    342
    
    
    
    460Total assets
    
    $
    1,631
    
    
    $
    2,536LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesNotes payable  Related party
    
    $
    600
    
    
    $
    Notes payable  other
    
    
    33
    
    
    
    34Accounts payable and accrued expenses
    
    
    276
    
    
    
    242Customer deposits
    
    
    16
    
    
    
    9Total current liabilities
    
    
    925
    
    
    
    285Total liabilities
    
    $
    925
    
    
    $
    285Commitments and Contingencies (Note 10)
    
    
    
    
    
    
    Shareholders equitySeries 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
    
    
    
    62Series 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
    
    
    
    3Common 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
    
    
    
    684Additional paid in capital
    
    
    21,419
    
    
    
    21,327Accumulated deficit
    
    
    (21,427
    )
    
    
    (19,803
    )Accumulated other comprehensive loss
    
    
    (38
    )
    
    
    (22
    )Total shareholders equity
    
    
    706
    
    
    
    2,251Total liabilities and shareholders equity
    
    $
    1,631
    
    
    $
    2,536
   27




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NON-INVASIVE MONITORING SYSTEMS, INC.
 
 CONSOLIDATED COMPREHENSIVE STATEMENTS OF OPERATIONS
 Years ended July 31, 2010 and 2009
 (In thousands, except per share data)
 2010
    
    
    2009RevenuesProduct sales, net
    
    $
    449
    
    
    $
    325Royalties
    
    
    168
    
    
    
    219Research, consulting and warranty
    
    
    
    
    
    
    2Total revenues
    
    
    617
    
    
    
    546Operating costs and expensesCost of sales
    
    
    243
    
    
    
    250Selling, general and administrative
    
    
    1,899
    
    
    
    1,949Research and development
    
    
    118
    
    
    
    176Total operating costs and expenses
    
    
    2,260
    
    
    
    2,375Operating loss
    
    
    (1,643
    )
    
    
    (1,829
    )Other incomeInterest income (expense), net
    
    
    (16
    )
    
    
    (7
    )Other income (expense)
    
    
    35
    
    
    
    68Total other income
    
    
    19
    
    
    
    61Net loss
    
    $
    (1,624
    )
    
    $
    (1,768
    )Other comprehensive lossForeign 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
    
    
    
    
    
    
    1,078Net loss attributable to common shareholders
    
    $
    (1,624
    )
    
    $
    (2,846
    )Weighted average number of common
shares outstanding  basic and diluted
    
    
    68,497
    
    
    
    68,051Basic and diluted loss per common share
    
    $
    (0.02
    )
    
    $
    (0.04
    )
   28




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NON-INVASIVE MONITORING SYSTEMS, INC.
 
 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
 Years ended July 31, 2010 and 2009
 (Dollars in Thousands)
 Accumu-lated OtherPreferred Stock
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    Accum-
    
    
    Compre-Series B
    
    
    Series C
    
    
    Series D
    
    
    Common Stock
    
    
    Paid in
    
    
    ulated
    
    
    hensiveShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Loss
    
    
    TotalBalance at July 31, 2008
    
    
    100
    
    
    $
    
    
    
    
    62,048
    
    
    $
    62
    
    
    
    1,000
    
    
    $
    1
    
    
    
    68,039,065
    
    
    $
    680
    
    
    $
    18,256
    
    
    $
    (18,035
    )
    
    $
    
    
    
    $
    964Issuance of
series Dpreferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,891
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    2,835
    
    
    
    
    
    
    
    
    
    
    $
    2,837Fair value of beneficial conversion feature of Series D Preferred Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,078
    
    
    
    
    
    
    
    
    
    
    $
    1,078Deemed 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
    
    
    
    
    
    
    
    
    
    
    $
    51Cashless exercise of 13,333 options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,239
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    189
    
    
    
    
    
    
    
    
    
    
    $
    189Foreign
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
    )
    
    $
    2,251Common stock issued for cash on exercise of options and warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,333
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    $
    1Cashless 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
    
    
    
    
    
    
    
    
    
    
    $
    94Foreign
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




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##### Table of Contents



NON-INVASIVE MONITORING SYSTEMS, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Years ended July 31, 2010 and 2009
 (Dollars in Thousands)
 2010
    
    
    2009Operating ActivitiesNet 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
    
    
    
    114Stock-based compensation expense
    
    
    94
    
    
    
    189Loss on disposal of assets
    
    
    3
    
    
    
    17Allowance for doubtful accounts
    
    
    
    
    
    
    10Inventory valuation adjustment
    
    
    35
    
    
    
    113Foreign currency transaction gain
    
    
    (38
    )
    
    
    (85
    )Changes in operating assets and liabilitiesAccounts and royalties receivable
    
    
    (150
    )
    
    
    (24
    )Inventories, net
    
    
    145
    
    
    
    (824
    )Advances to contract manufacturer
    
    
    54
    
    
    
    515Prepaid expenses, deposits and other current assets
    
    
    19
    
    
    
    (47
    )Accounts payable and accrued expenses
    
    
    23
    
    
    
    (85
    )Customer deposits
    
    
    7
    
    
    
    9Net cash used in operating activities
    
    
    (1,309
    )
    
    
    (1,868
    )Investing ActivitiesFixed asset purchases
    
    
    
    
    
    
    (232
    )Net cash used in investing activities
    
    
    
    
    
    
    (232
    )Financing ActivitiesNet proceeds from issuance of common stock and exercise of options and warrants
    
    
    1
    
    
    
    51Net proceeds from issuance of preferred stock
    
    
    
    
    
    
    2,837Net proceeds from issuance of notes payable
    
    
    670
    
    
    
    363Repayments of notes payable
    
    
    (71
    )
    
    
    (348
    )Net cash provided by financing activities
    
    
    600
    
    
    
    2,903Effect of exchange rate changes on cash
    
    
    (12
    )
    
    
    (3
    )Net increase (decrease) in cash
    
    
    (721
    )
    
    
    800Cash, beginning of year
    
    
    886
    
    
    
    86Cash, end of year
    
    $
    165
    
    
    $
    886Supplemental disclosureCash paid for interest
    
    $
    
    
    
    $
    8Supplemental 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




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##### Table of Contents



NON-INVASIVE MONITORING SYSTEMS, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. ORGANIZATION AND BUSINESS
 Organization. ®
  Business.
 
 
    31




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##### Table of Contents



2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Consolidation.
 Use of Estimates.
 Cash and Cash Equivalents.
 Allowances for Doubtful Accounts.
 Inventories.
 Tooling and Equipment.
 Long-lived Assets.
  32




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##### Table of Contents



Income Taxes.
 Revenue Recognition.
 Advertising Costs.
 Research and Development Costs.
 Warranties.
 Stock-based compensation.
 Fair Value of Financial Instruments.
 Foreign Currency Translation.
 Comprehensive Income (Loss).
 3. INVENTORIES
  July 31, 2010
    
    
    July 31, 2009Work-in-progress, including sub-assemblies and spare parts
    
    $
    5
    
    
    $
    11Finished goods
    
    
    761
    
    
    
    900Total inventories
    
    $
    766
    
    
    $
    911
   33




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##### Table of Contents



4. STOCK-BASED COMPENSATION
    Year ended July 31, 2010
    
    Year ended July 31, 2009Expected 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 yearsForfeiture rate
    
    2.50%
    
    0.00%  2.50%
  Weighted
    
    
    Weighted averageAverage
    
    
    remaining
    
    
    AggregateExercise
    
    
    contractual term
    
    
    IntrinsicShares
    
    
    Price
    
    
    (years)
    
    
    ValueOptions outstanding, July 31, 2008
    
    
    2,074,330
    
    
    $
    0.593Options granted
    
    
    340,000
    
    
    $
    0.338Options exercised
    
    
    (26,666
    )
    
    $
    0.150Options forfeited
    
    
    (37,500
    )
    
    $
    0.400Options outstanding, July 31, 2009
    
    
    2,350,164
    
    
    $
    0.564Options granted
    
    
    355,000
    
    
    $
    0.430Options exercised
    
    
    (53,332
    )
    
    $
    0.150Options forfeited
    
    
    (106,000
    )
    
    $
    0.501Options outstanding, July 31, 2010
    
    
    2,545,832
    
    
    $
    0.557
    
    
    
    2.93
    
    
    $
    37,633Options expected to vest, July
31, 2010
    
    
    2,511,082
    
    
    $
    0.559
    
    
    
    2.89
    
    
    $
    37,436Options exercisable, July 31, 2010
    
    
    2,043,332
    
    
    $
    0.594
    
    
    
    2.12
    
    
    $
    35,083
  34




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##### Table of Contents



5. ROYALTIES
   6. NOTES PAYABLE
 2008 Revolver.
 2010 Credit Facility.
   35




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##### Table of Contents



7. SHAREHOLDERS EQUITY
      December 2008 Offering.
 January 2009 Offering.
    36




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##### Table of Contents



8. BASIC AND DILUTED LOSS PER SHARE
   July 31, 2010
    
    
    July 31, 2009Stock options
    
    
    2,545,832
    
    
    
    2,350,164Series C Preferred Stock
    
    
    1,551,200
    
    
    
    1,551,200Series D Preferred Stock
    
    
    14,140,000
    
    
    
    14,455,000Total
    
    
    18,237,032
    
    
    
    18,356,364
 9. RELATED PARTY TRANSACTIONS
      37




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##### Table of Contents



10. COMMITMENTS
 Leases
  Year Ending July 31,2011
    
    $
    130,0002012
    
    
    105,0002013
    
    
    32,0002014
    
    
    $
    267,000
 Product Development and Supply Agreement.
     38




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##### Table of Contents



11. LONG-LIVED ASSETS
  Estimated
    
    
    July 31,
    
    
    July 31,Useful Life
    
    
    2010
    
    
    2009Tooling and equipment (Note 10)
    
    5 years
    
    $
    471
    
    
    $
    471Furniture and fixtures, leasehold
improvements, office equipment and
computers
    
    3  5 years
    
    
    99
    
    
    
    94Website and software
    
    3 years
    
    
    26
    
    
    
    26596
    
    
    
    591Less accumulated depreciation
    
    
    
    
    
    
    (254
    )
    
    
    (131
    )Tooling and equipment, net
    
    
    
    
    
    $
    342
    
    
    $
    460
   12. INCOME TAXES
    39




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##### Table of Contents



July 31, 2010
    
    
    July 31, 2009Income tax benefit at the federal statutory rate
    
    
    34.00
    %
    
    
    34.00
    %State and local income taxes, net of effect of federal taxes
    
    
    3.11
    
    
    
    3.22Expiration 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, 2009Federal and State net operating loss
    
    $
    4,568
    
    
    $
    4,038Foreign net operating loss
    
    
    145
    
    
    
    61Stock-based compensation and other
    
    
    354
    
    
    
    3595,067
    
    
    
    4,458Less: Valuation allowance
    
    
    (5,067
    )
    
    
    (4,458
    )Net deferred tax asset
    
    $
    
    
    
    $
    
     Year Ended
    
    
    Year EndedJuly 31, 2010
    
    
    July 31, 2009U.S.
    
    $
    (1,395
    )
    
    $
    (1,578
    )Foreign
    
    
    (229
    )
    
    
    (190
    )Total
    
    $
    (1,624
    )
    
    $
    (1,768
    )
  40




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##### Table of Contents



13. EMPLOYEE BENEFIT PLANS
  14. CONCENTRATIONS OF RISK
  Cash.
 Royalties and Other Receivables.
 Purchases from and Advances to Contract Manufacturer.
 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. 15. RECENT ACCOUNTING PRONOUNCEMENTS
 Noncontrolling Interests 
 Codification 
  41




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##### Table of Contents



Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
  
 Item 9A(T). Controls and Procedures.
  Managements Report on Internal Control over Financial Reporting
     Changes in Internal Controls Over Financial Reporting
  
 Item 9B. Other Information.
   42




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##### Table of Contents



PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance.
  
 Item 11. Executive Compensation.
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
  
 Item 13. Certain Relationships and Related Transactions, and Director Independence.
  
 Item 14. Principal Accountant Fees and Services.
   43




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##### Table of Contents



PART IV
 
 Item 15. Exhibits, Financial Statement Schedules
      44




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##### Table of Contents



SIGNATURES
  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.

Marvin A. Sackner, M.D.
    
    Chief Executive Officer and
President (Principal Executive
Officer)
    
    October 29, 2010/s/ Jane H. Hsiao, Ph.D.

Jane H. Hsiao, Ph.D.
    
    Chairman of the Board of Directors
    
    October 29, 2010/s/ Taffy Gould

Taffy Gould
    
    Director
    
    October 29, 2010/s/ Morton J. Robinson, M.D.

Morton J. Robinson, M.D.
    
    Director
    
    October 29, 2010/s/ Steven D. Rubin

Steven D. Rubin
    
    Director
    
    October 29, 2010/s/ Subbarao Uppaluri

Subbarao Uppaluri
    
    Director
    
    October 29, 2010/s/ Adam S. Jackson

Adam S. Jackson
    
    Chief Financial Officer
(Principal Financial Officer)
    
    October 29, 2010
  45




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##### Table of Contents



INDEX TO EXHIBITS
  Exhibit No.
    
    Description of Exhibits3.1
    
    
    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




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##### Table of Contents



Exhibit No.
    
    Description of Exhibits14.1
    
    
    Code of Ethics (incorporated by reference from Exhibit 14.1 to Form 10-K filed on October 29, 2009).21.1
    *
    
    Subsidiaries of the Company31.1
    *
    
    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 200232.2
    *
    
    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