UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,DC.20549







FORM
10-Q





(Mark One)




x
            Quarterly Report Pursuant to
      Section 13 or 15 (d) of the Securities Exchange Act of 1934for theQuarterlyPeriod endedOctober
      31,
      2008




or




 ̈
            TransitionReport Pursuant to Section 13 or
      15 (d) of the Securities Exchange Act of 1934for the Transition Period
      from ________________ to
  ________________




Commission
File Number000-13176




NON-INVASIVE MONITORING SYSTEMS,
      INC.(Exactname ofregistrantasspecified initscharter)Florida
                        
                        
                        59-2007840(State orotherjurisdiction ofincorporation ororganization)
                        
                        
                        (I.R.S.employeridentificationno.)





4400
Biscayne Blvd., Suite 680,Miami,Florida33137


(Address ofprincipalexecutiveoffices) (Zip code)





Registrant’stelephone number, including area code:(305)861-0075





Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90
days.




Yesx              No





Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company.  See the definitions of “large
accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule
12b-2 of the Exchange Act.




Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting
companyx





Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).Yes Nox





68,039,065shares of the Company’scommonstock,par value$0.001per share,were outstanding as ofDecember1, 2008.











NON-INVASIVE MONITORING
SYSTEMS,
INC.





TABLE OF CONTENTS FOR FORM
10-Q




PART
      I.FINANCIAL
      INFORMATIONITEM 1.
                    FINANCIAL
      STATEMENTSCondensed Balance Sheets as ofOctober
      31, 2008
      (unaudited)andJuly31, 2008
                    3Condensed Statements of Operations
      for the ThreeMonthsendedOctober 31, 2008 and 2007(unaudited)
                    4CondensedStatements of Shareholders’ Equity forthe period July 31,
      2007through October 31, 2008
      (unaudited)
                    5CondensedStatements of Cash Flows for theThree
      MonthsendedOctober
      31, 2008 and
      2007(unaudited)
                    6Notes to unaudited condensed
      financial statements
                    7ITEM 2.
                    MANAGEMENT’S DISCUSSION AND
      ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                    16ITEM 3.
                    QUANTITATIVE AND QUALITATIVE
      DISCLOSURES ABOUT MARKET RISK
                    21ITEM 4T.
                    CONTROLS AND
      PROCEDURES
                    21PART
      II.OTHER
      INFORMATIONITEM 1.
                    LEGAL
      PROCEEDINGS
                    22ITEM 1A.
                    RISK
FACTORS
                    22ITEM 2.
                    UNREGISTEREDSALES OF EQUITY SECURITIES AND
      USE OF PROCEEDS
                    22ITEM 3.
                    DEFAULTS UPON SENIOR
      SECURITIES
                    22ITEM 4.
                    SUBMISSIONOF MATTERS TO A VOTE OF SECURITY
      HOLDERS
                    22ITEM 5.
                    OTHER
      INFORMATION
                    22ITEM 6.
                    EXHIBITS
                    22SIGNATURES
                    23




2





NON-INVASIVE MONITORING SYSTEMS,
INC.





CONDENSED BALANCE SHEETS


(In thousands, except share and per share
data)





October
      31, 2008
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              July
      31, 2008ASSETS
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              (Unaudited)Current
      assetsCash
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              $
                                                                                                                                                                                                                                                                                                                                                                                                                              67
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              $
                                                                                                                                                                                                                                                                                                                                                                                                                              86Royalties
      receivable
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              39
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              43Inventories
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              311
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              173Advances
      to contract manufacturer
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              628
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              659Prepaid
      expenses, deposits, and other current assets
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              17
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              28Total
      current assets
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              1,062
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              989Furniture
      and equipment, net
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              468
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              470Total
      assets
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              $
                                                                                                                                                                                                                                                                                                                                                                                                                              1,530
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              $
                                                                                                                                                                                                                                                                                                                                                                                                                              1,
      459LIABILITIES
      AND SHAREHOLDERS' EQUITYCurrent
      liabilitiesNotes
      payable – related parties
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              $
                                                                                                                                                                                                                                                                                                                                                                                                                              275
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              $
                                                                                                                                                                                                                                                                                                                                                                                                                              –Notes
      payable – other
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              34
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              19Accounts
      payable and accrued expenses
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              646
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              474Unearned
      revenue
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              44
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              2Total
      current liabilities
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              999
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              495Total
      liabilities
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              $
                                                                                                                                                                                                                                                                                                                                                                                                                              999
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              $
                                                                                                                                                                                                                                                                                                                                                                                                                              495Commitments
      (Note 9)
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              –
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              –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;1,000
      shares authorized, issued and outstanding; liquidation preference
      $1,500
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              1
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              1Common
      Stock, par value $0 .01 per share; 100,000,000 shares
      authorized;68,039,065
      shares issued and outstanding
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              680
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              680Additional
      paid in capital
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              18,321
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              18,256Accumulated
      deficit
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              (18,533
                                                                                                                                                                                                                                                                                                                                                                                                                              )
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              (18,035
                                                                                                                                                                                                                                                                                                                                                                                                                              )Total
      shareholders' equity
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              531
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              964Total
      liabilities and shareholders' equity
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              $
                                                                                                                                                                                                                                                                                                                                                                                                                              1,530
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                                                                                                                                                              $
                                                                                                                                                                                                                                                                                                                                                                                                                              1,459





The
accompanying notes are an integral part of the unaudited condensed financial
statements.





3




NON-INVASIVE
MONITORING SYSTEMS, INC.





CONDENSED STATEMENTS OF
OPERATIONS-
Unaudited


(In thousands, except per share
amounts)





Three
      months ended October 31,2008
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            2007RevenueProduct
      sales, net
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            $
                                                                                                                                                                                                                                                                                                                                            6
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            $
                                                                                                                                                                                                                                                                                                                                            14Royalties
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            63
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            72Research,
      consulting and warranty
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            1
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            1Total
      Revenue
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            70
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            87Operating
      ExpensesCost
      of sales
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            5
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            11Selling,
      general and administrative
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            505
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            364Research
      and development
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            53
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            49Total
      Operating Expenses
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            563
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            424Operating
      Loss
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            (493
                                                                                                                                                                                                                                                                                                                                            )
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            (337
                                                                                                                                                                                                                                                                                                                                            )Interest
      Income (Expense), Net
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            (5
                                                                                                                                                                                                                                                                                                                                            )
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            7Net
      Loss
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            $
                                                                                                                                                                                                                                                                                                                                            (498
                                                                                                                                                                                                                                                                                                                                            )
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            $
                                                                                                                                                                                                                                                                                                                                            (330
                                                                                                                                                                                                                                                                                                                                            )Weighted
      average number of commonshares
      outstanding - Basic and diluted
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            68,039
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            67,336Basic
      and diluted loss per common share
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            $
                                                                                                                                                                                                                                                                                                                                            (0.01
                                                                                                                                                                                                                                                                                                                                            )
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            $
                                                                                                                                                                                                                                                                                                                                            (0.00
                                                                                                                                                                                                                                                                                                                                            )





The
accompanying notes are an integral part of the unaudited condensed financial
statements.





4





NON-INVASIVE MONITORING SYSTEMS,
INC.


CONDENSED STATEMENTS OFCHANGES IN SHAREHOLDERS’ EQUITY -Unaudited


For the periodJuly 31, 2008through October 31,2008


(Dollars in
Thousands)




Preferred
      Stock
                
                
                
                
                
                AdditionalSeries
      B
                
                
                Series
      C
                
                
                Series
      D
                
                
                Common
      Stock
                
                
                Paid-in-
                
                
                AccumulatedShares
                
                
                Amount
                
                
                Shares
                
                
                Amount
                
                
                Shares
                
                
                Amount
                
                
                Shares
                
                
                Amount
                
                
                Capital
                
                
                Deficit
                
                
                TotalBalance
      at July 31, 2008
                
                
                100
                
                
                $
                0
                
                
                
                62,048
                
                
                $
                62
                
                
                
                1,000
                
                
                $
                1
                
                
                
                68,039,065
                
                
                $
                680
                
                
                $
                18,256
                
                
                $
                (18,035
                )
                
                $
                964Stock
      based compensation
                
                
                –
                
                
                
                0
                
                
                
                –
                
                
                
                0
                
                
                
                –
                
                
                
                0
                
                
                
                –
                
                
                
                0
                
                
                
                65
                
                
                
                0
                
                
                $
                65Net
      loss
                
                
                –
                
                
                
                0
                
                
                
                –
                
                
                
                0
                
                
                
                –
                
                
                
                0
                
                
                
                –
                
                
                
                0
                
                
                
                0
                
                
                
                (498
                )
                
                $
                (498
                )Balance
      at October 31, 2008
                
                
                100
                
                
                $
                0
                
                
                
                62,048
                
                
                $
                62
                
                
                
                1,000
                
                
                $
                1
                
                
                
                68,039,065
                
                
                $
                680
                
                
                $
                18,321
                
                
                $
                (18,533
                )
                
                $
                531





The
accompanying notes are an integral part of these financial
statements.




5




NON-INVASIVE MONITORING SYSTEMS,
INC.





CONDENSED STATEMENTS OFCASHFLOWS- Unaudited


(Dollars in thousands)





Three MonthsendedOctober 31,2008 and 2007





2008
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              2007Operating
      ActivitiesNet
      loss
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              $
                                                                                                                                                                                                                                                                                              (498
                                                                                                                                                                                                                                                                                              )
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              $
                                                                                                                                                                                                                                                                                              (330
                                                                                                                                                                                                                                                                                              )Adjustments
      to reconcile net loss to net cash used in operating
    activitiesDeferred
      warranty income
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              (1
                                                                                                                                                                                                                                                                                              )
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              (1
                                                                                                                                                                                                                                                                                              )Depreciation
      and amortization
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              27
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              2Stock
      based compensation expense
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              65
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              132Changes
      in operating assets and liabilitiesRoyalties
      receivable
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              4
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              4Inventories
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              (133
                                                                                                                                                                                                                                                                                              )
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              (100
                                                                                                                                                                                                                                                                                              )Advances
      to contract manufacturer
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              31
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              –Prepaid
      expenses and other assets
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              10
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              12Accounts
      payable and accrued expenses
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              193
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              3Unearned
      revenue
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              43
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              –Net
      cash used in operating activities
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              (259
                                                                                                                                                                                                                                                                                              )
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              (278
                                                                                                                                                                                                                                                                                              )Investing
      ActivitiesFixed
      asset purchases
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              (50
                                                                                                                                                                                                                                                                                              )
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              (175
                                                                                                                                                                                                                                                                                              )Net
      cash used in investing activities
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              (50
                                                                                                                                                                                                                                                                                              )
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              (175
                                                                                                                                                                                                                                                                                              )Financing
      ActivitiesNet
      proceeds from issuance of common stock and exercise of options and
      warrants
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              –
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              81Proceeds
      from notes payable
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              300
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              –Repayments
      of notes payable
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              (10
                                                                                                                                                                                                                                                                                              )
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              (13
                                                                                                                                                                                                                                                                                              )Net
      cash provided by financing activities
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              290
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              68Net
      decrease in cash
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              (19
                                                                                                                                                                                                                                                                                              )
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              (385
                                                                                                                                                                                                                                                                                              )Cash,
      beginning of period
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              86
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              1,156Cash,
      end of period
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              $
                                                                                                                                                                                                                                                                                              67
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              $
                                                                                                                                                                                                                                                                                              771Supplemental disclosureCash
      paid for interest
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              $
                                                                                                                                                                                                                                                                                              –
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              $
                                                                                                                                                                                                                                                                                              10Supplemental schedule of non-cash
      activitiesAccrual
      for tooling development in progress
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              $
                                                                                                                                                                                                                                                                                              29
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                                                                              $
                                                                                                                                                                                                                                                                                              –





The
accompanying notes are an integral part of the unaudited condensed financial
statements.





6




NON-INVASIVE
MONITORING SYSTEMS, INC.
  NOTES TO
CONDENSED FINANCIAL STATEMENTS (unaudited)
  October
31, 2008






The
condensed consolidated balance sheet as of July 31, 2008, which has been
derived from audited financial statements, and the unaudited condensed interim
financial statements included herein have been prepared by Non-Invasive
Monitoring Systems, Inc. (the “Company” or “NIMS”) in accordance with accounting
principles generally accepted in the United States (“GAAP”) for interim
financial information and the instructions to the quarterly report on Form 10-Q
and Rule 10-01 of Regulation S-X.  Accordingly, they do not
include all of the information and footnotes required by GAAP for complete
financial statements.  These statements reflect adjustments, all of
which are of a normal, recurring nature, and which are, in the opinion of
management, necessary to present fairly the Company’s financial position as of
October 31, 2008, and results of operations and cash flows for the interim
periods ended October 31, 2008 and 2007.  The results of operations
for the three months ended October 31, 2008, are not necessarily indicative of
the results for a full year.  Certain information and footnote
disclosure normally included in financial statements prepared in accordance with
GAAP have been condensed or omitted.  The Company’s accounting
policies continue unchanged from July 31, 2008.  These financial
statements should be read in conjunction with the financial statements and notes
thereto included in the Company’s annual report on Form 10-KSB for the year
ended July 31, 2008.





1.
            ORGANIZATION
      AND BUSINESS


Organization.Non-Invasive
Monitoring Systems, Inc. (the “Company” or  "NIMS”), a Florida
corporation, began business as a medical diagnostic monitoring company to
develop computer-aided continuous monitoring devices to detect abnormal
respiratory and cardiac events using sensors on the body’s
surface.  It has ceased to operate in this market and has licensed the
rights to its technology to the SensorMedics division of ViaSys Healthcare Inc.
(which is now a unit of Cardinal Health, Inc. (“SensorMedics”)), and to
VivoMetrics, Inc. (“VivoMetrics”).  The Company is now focused on
developing and marketing therapeutic devices based upon unique, patented whole
body, periodic acceleration technology.  The Company has begun to
market and sell its Exer-Rest® line of
acceleration therapeutic platforms overseas.


The
Exer-Rest® line is
not currently approved for sale in the United States.  The Company is
seeking FDA approval to market the Exer-Rest®
platforms in the United States for their intended use to improve circulation and
for temporary relief of aches and pains.


Business.  The
Company receives revenue from royalties on sales of diagnostic monitoring
hardware and software by SensorMedics and VivoMetrics.  Additionally,
the Company receives revenues from sales of parts and service and from sales of
acceleration therapeutics platforms used for research purposes.


During
the calendar years 2005 to 2007, the Company designed, developed and
manufactured the first Exer-Rest® platform
(now the Exer-Rest® AT), a
second generation acceleration therapeutics platform, and updated its operations
to promote the Exer-Rest®AT
overseas as an aid to improve circulation and joint mobility, and to relieve
minor aches and pains.  In the three months ended October 31, 2008,
the Company sold one Exer-Rest® AT unit
overseas.


The
Company has developed a third generation of Exer-Rest®acceleration therapeutic platforms (designated the Exer-Rest®SL and
the Exer-Rest®TL) that
are being manufactured by Sing Lin Technologies Co. Ltd. (“Sing Lin”) based in
Taichung, Taiwan (see Note 9).  Sing Lin will also have distribution
rights to the Company’s acceleration therapeutics platforms in the Far
East.  The Company has also engaged Sing Lin to build the
Somno-EaseTM
platform, a variation of the Exer-Rest® that is
designed to aid patients with sleep disorders as well as provide feedback for
slow rhythmic breathing exercises for the relief of stress associated with daily
living.  This device is in its initial testing and is intended to be
marketed and sold in the United States and overseas upon completion of the
respective approval processes.  The Company is also developing a
further product line extension called Exer-Rest® Plus, a
device that combines the features of the Exer-Rest® and
Somno-EaseTM for
future marketing in the United States.


The Company’s financial statements have
been prepared and presented on a basis assuming it will continue as a going
concern.As reflected in the accompanying
financial statements the Company had net lossesin the amount of$498,000and $330,000 for thethree monthsendedOctober 31, 2008 and 2007, respectively,
and has experienced cash outflows from operating activities.  The
Company alsohas an
accumulated deficit of $18.5 millionas ofOctober 31,2008, and has substantial purchase
commitments atOctober
31,2008 (seeNote9).These matters raise substantial doubt
about the Company’s ability to continue as a going concern.


7
  NON-INVASIVE
MONITORING SYSTEMS, INC.
  NOTES TO
CONDENSED FINANCIAL STATEMENTS (unaudited)
  October
31, 2008
 Although the Companyraised approximately $2.2 million from
the sales of its Series D Preferred Stock in April and December 2008 (see Notes
6 and 12), the Companywill
need togenerate additional
fundsduringfiscalyear 2009.  Absent any significant revenues from
product sales, additional
debt or equity financing will be required for the Company to continue its
business activities, which are currently focused on theproduction, marketing andcommercial saleof theExer-Rest®.  It is management’s
intention to obtainanyadditional capital needed to continue
its business activities through new debt or equity financing, but there can be
no assurance that it will be successful in this regard.  The
accompanying financial statements do not include any adjustments that might be
necessary from the outcome of this uncertainty.


2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES


Use of
Estimates.  The preparation of financial statements in
conformity with GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting
period.  Such items include input variables relating to valuation of
stock based compensation and other financial instruments.  Actual
results could differ from these estimates.


Inventories.Inventories
are stated at lower of cost or market using the first-in, first-out
method.  Inventories at October 31, 2008 primarily consist of finished
Exer-Rest® units
and purchased sub-assemblies to be used by the Company’s US-based contract
manufacturer in production of the Exer-Rest®
AT.


Furniture,
Equipment and Tooling.These assets arestated at cost and depreciated or
amortized using the straight-line method, over their estimated useful
lives.




Long-lived
Assets.The Company reviews
its long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable.In performing the review for
recoverability, the Company estimates the futureundiscountedcash flows expected to result from the
use of the asset and its eventual disposition.If the sum of the expected future cash
flows is less than the carrying amount of the assets, an impairment loss is
recognized as the difference between the fair value and the carrying amount of
the asset.




Income
Taxes.The Company provides for income taxes in accordance
with Statement of Financial Accounting Standards (“SFAS”) No. 109, “Accounting for Income Taxes”
(“SFAS No. 109”) using an asset and liability based approach.  Deferred
income tax assets and liabilities are recorded to reflect the tax consequences
in future years of temporary differences between the carrying amounts of assets
and liabilities for financial statement and income tax purposes.  SFAS
No. 109 provides that the Company recognize income tax benefits for loss
carryforwards.  The tax benefits recognized must be reduced by a
valuation allowance if it is more likely than not that loss carryforwards will
expire before the Company is able to realize their benefit, or if future
deductibility is uncertain.  For financial statement purposes, the
deferred tax asset for loss carryforwards has been fully offset by a valuation
allowance since it is uncertain whether any future benefit will be
realized.




As of
October 31, 2008, the Company had a net operating loss carryforward of
approximately $11.1 million available to offset future taxable income for
federal and state income tax purposes.  The net operating loss
carryforward is subject to limitation if there have been significant changes of
ownership as defined in provisions under Section 382 of the Internal Revenue
Code and similar state provisions.




Effective
August 1, 2007, the Company adopted the provisions of the Financial Accounting
Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes, an interpretation of FASB Statement No.109” (“FIN
48”).  FIN 48 clarifies the accounting for uncertainties in income
taxes recognized in a company’s financial statements in accordance with SFAS No.
109 and prescribes a recognition threshold and measurement attribute for
financial disclosure of tax positions taken or expected to be taken on a tax
return.  In addition, FIN 48 provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition.  The adoption of FIN 48 did notimpact our financial
position, results of operations or cash flows for the three months ended October
31, 2008.




The
Company files its tax returns as prescribed by the laws of the jurisdictions in
which it operates.  Tax years ranging from 2005 to 2008 remain open to
examination by various taxing jurisdictions as the statute of limitations has
not expired.  It is the Company’s policy to include income tax
interest and penalties expense in its tax provision.


8
  NON-INVASIVE
MONITORING SYSTEMS, INC.
  NOTES TO
CONDENSED FINANCIAL STATEMENTS (unaudited)
  October
31, 2008
 Revenue
Recognition.  Revenue from product sales is recognized
when persuasive evidence of an arrangement exists, the goods are shipped and
title has transferred, the price is fixed or determinable, and the collection of
the sales proceeds is reasonably assured.The Company recognizes royalties as they
are earned, based on reports from licensees.Research and consulting revenue and
warranty income on extended AT-101 warranties outstanding are
recognized over the term of the respective agreements.




Advertising
Costs.The Company expenses all costs of advertising as
incurred.  There were no material advertising costs included in
general and administrative expenses during the three months ended October 31,
2008 and 2007.




Research and
Development Costs.  Research and development costs are expensed
as incurred, and primarily consist of payments to third parties for research and
development of the Exer-Rest® device
and regulatory testing and other costs to obtain FDA approval.




Warranties.  The
Company’s warranties are one-year on all products sold and are accrued based on
management’s estimates and the history of warranty costs
incurred.  There were no warranty costs during the three months ended
October 31, 2008 and 2007.




Fair Value of
Financial Instruments.  Fair value estimates discussed herein
are based upon certain market assumptions and pertinent information available to
management as of October 31, 2008.  The respective carrying value of
certain on-balance-sheet financial instruments such as royalties receivable,
accounts payable, accrued expenses and notes payable approximate fair values
because they are short term in nature or they bear current market interest
rates.





3.
            INVENTORIES




The
Company’s inventory consists of the following at October 31, 2008 (in
thousands):





Work-in-progress, including
      sub-assemblies
                    
                    $
                    66Finished
    goods
                    
                    
                    245Total
      inventories
                    
                    $
                    311





4.
            STOCK
      BASED COMPENSATION




The
Company accounts for stock-based compensation in accordance with  SFAS
No. 123 (Revised 2004), “Share-Based Payment” (“SFAS
No. 123R”) which requires a public entity to measure the cost of employee,
officer and director services received in exchange for an award of equity
instruments based on the grant-date fair value of the
award.  Compensation cost is recognized over the period that an
employee provides service in exchange for the award.




The
Company recorded share-based compensation of $65,000 and $132,000 for the three
months ended October 31, 2008 and 2007 respectively, which is included in the
Company’s selling, general and administrative expenses.




The
Company’s 2000 Stock Option Plan (the “Plan”), as amended, provides for a total
of 2,000,000 shares of Common Stock.  The Plan allows the issuance of
incentive stock options, stock appreciation rights and restricted stock
awards.  The exercise price of the options is determined by the
compensation committee of the Company’s Board of Directors, but incentive stock
options must be granted at an exercise price not less than the fair market value
of the Company’s Common Stock as of the grant date or an exercise price of not
less than 110% of the fair value for a 10% shareholder.  Options
expire up to ten years from the date of the grant and are exercisable according
to the terms of the individual options agreement.




There
were 75,000 options granted during the three months ended October 31, 2008, and
547,500 options granted during the three months ended October 31,
2007.  No options were exercised in the three months ended October 31,
2008 and 161,665 options were exercised in the three months ended October 31,
2007.  The total intrinsic value of stock options exercised for the
three months ended October 31, 2007 was $53,000.


9
  NON-INVASIVE
MONITORING SYSTEMS, INC.
  NOTES TO
CONDENSED FINANCIAL STATEMENTS (unaudited)
  October
31, 2008


A summary
of the Company’s stock option activity for the three months ended October 31,
2008 is as follows:




Shares
                  
                  
                  Weighted
      Average
                    Exercise
      Price
                  
                  
                  Weighted
      average
                    remaining
                    contractual
                    term
      (years)
                  
                  
                  Aggregate
                    intrinsic
      ValueOptions
      outstanding, July 31, 2008
                  
                  
                  2,074,330
                  
                  
                  $
                  0.593Options
      granted *
                  
                  
                  75,000
                  
                  
                  $
                  0.400Options
      exercised
                  
                  
                  –
                  
                  
                  
                  –Options
      forfeited
                  
                  
                  (37,500
                  )
                  
                  $
                  0.400Options
      outstanding, October 31, 2008
                  
                  
                  2,111,830
                  
                  
                  $
                  0.590
                  
                  
                  
                  3.67
                  
                  
                  $
                  56,533Options
      expected to vest, October 31, 2008
                  
                  
                  2,103,537
                  
                  
                  $
                  0.590
                  
                  
                  
                  3.66
                  
                  
                  $
                  56,533Options
      exercisable, October 31, 2008
                  
                  
                  1,675,830
                  
                  
                  $
                  0.556
                  
                  
                  
                  3.40
                  
                  
                  $
                  56,533




* 75,000
options were issued from the Company's 2000 Stock Option
Plan.




The
Company estimates the fair value of stock options using a Black-Scholes
valuation model, consistent with provisions of SFAS No.123R, Securities and
Exchange Commission (SEC) Staff Accounting Bulletin No. 107 (“SAB No. 107”) and
the Company's prior period pro forma disclosures of net loss, including the fair
value of stock-based compensation.  Key input assumptions used to
estimate the fair value of stock options include the expected term until
exercise of the option, expected volatility of the Company's stock, the risk
free interest rate, option forfeiture rates, and dividends, if
any.  The expected term of stock option awards granted is generally
based upon the “simplified” method for “plain vanilla” options contained in SAB
No. 107, as amended by SEC Staff Accounting Bulletin No. 110.  The
expected volatility is derived from historical volatility of the Company's stock
on the U.S. over-the-counter bulletin board for a period that matches the
expected term of the option.  The risk-free interest rate is the yield
from a Treasury bond or note corresponding to the expected term of the
option.  The Company has not paid cash dividends and does not expect
to pay cash dividends in the future.  Forfeiture rates are based on
management’s estimates.  The fair value of each option granted during
the three months ended October 31, 2008 and 2007 was estimated using the
following assumptions:







Three
      months endedOctober 31, 2008
                
                Three
      months endedOctober 31, 2007Expected
      volatility
                110.18%
                
                79.00%Expected
      dividend yield
                0.00%
                
                0.00%Risk-free
      interest rate
                2.83%
                
                4.23%Expected
      life
                5.0  years
                
                5.0  yearsForfeiture
      rate
                0.00%
                
                0.00%




Compensation
costs for stock options are recognized over the vesting period.  As of
October 31, 2008, there was $158,000 of unrecognized costs related
to outstanding stock options.  These costs are expected to be
recognized over a weighted average period of 1.29 years.  A summary of
the status of the Company’s non-vested options and changes during the three
months ended October 31, 2008 is presented below.





Stock
      Options
              
              Weighted
      AverageGrant DateFair ValueNon-vested
      at July 31, 2008
              476,000
              
              $0.492Options
      granted
              75,000
              
              $0.319Options
      vested
              (115,000
              )
              $0.410Non-vested
      at October 31, 2008
              436,000
              
              $0.492


10
  NON-INVASIVE
MONITORING SYSTEMS, INC.
  NOTES TO
CONDENSED FINANCIAL STATEMENTS (unaudited)
  October
31, 2008


5.
            NOTES
      PAYABLE




On August
28, 2008 the Company entered into a Note and Security Agreement (the
“Agreement”) with four persons (the “Lenders”), pursuant to which the Lenders
granted the Company a revolving credit line (the “Revolver”) in the aggregate
amount of $300,000, secured by all of the Company’s personal
property.  The Lenders included a holder of more than 10% of the
outstanding Common Stock, a director and executive officer of the Company who
also holds more than 10% of the outstanding Common Stock and an entity
controlled by the Company’s Chairman.  The Company was permitted to
borrow and reborrow from time to time under the Revolver until October 31, 2008
(the “Maturity Date”).  The interest rate payable on amounts
outstanding under the Revolver was 11% per annum, and increased to 16% after the
Maturity Date or after an Event of Default.  All amounts owing under
the Revolver were required to be repaid by the Maturity Date, and amounts
outstanding were prepayable at any time.  On August 29, 2008 the
Company drew down $300,000 under the Revolver.  The Revolver was
amended, effective October 31, 2008, to extend the Maturity Date until November
30, 2008.  All principal and interest outstanding under the Revolver
as of November 30, 2008 was repaid with proceeds from the sale of Series D
Preferred Stock on December 1, 2008 as described in Notes 6 and 12
below.




The notes
payable balance at October 31, 2008 also includes $9,000 related to the
third-party financing of certain of the Company’s insurance
policies.  These notes are self-amortizing installment loans which
mature at various dates from December 2008 to February 2009.  The
annual interest rates on these notes range from 10.63% to 12.52%





6.
            SHAREHOLDERS'
      EQUITY




During
the three months ended October 31, 2007, the Company received $81,000 from
existing optionholders for the exercise of options to purchase 161,665 shares of
Common Stock.  No options were exercised in the three months ended
October 31, 2008.




In
December 2008, the Company sold an aggregate of 491 shares of its Series D
Convertible Preferred Stock (the “Series D Preferred Stock”), to certain private
investors (collectively, the “Investors”) pursuant to Stock Purchase Agreements
entered between December 1, 2008 and December 2, 2008 (the sale of 286 shares
closed on December 1, 2008 and the sale of 205 shares closed on December 2,
2008).  The Investors include a director of the Company, a holder of
more than 10% of the outstanding Common Stock,  a director and
executive officer of the Company who also holds more than 10% of the outstanding
Common Stock and an entity controlled by the Company’s Chairman (collectively,
the “Related Party Investors”).  The aggregate purchase price for the
Series D Preferred Stock was $736,500, of which $382,500 was paid by the Related
Party Investors.  Of the $382,500 paid by the Related Party Investors,
$282,200 was paid from the proceeds of their respective interests in the
Revolver described in Note 5 above.




The
Series D Preferred Stock has no preference with respect to dividends to the
Company’s common stock, and is entitled to receive dividends when, as and if
declared by the Company’s Board of Directors, together with the holders of the
common stock, ratably on an “as-converted” basis.  Each holder of a
share of the Series D Preferred Stock has the right, at any time, to convert
such share of Series D Preferred Stock into shares of Common Stock at an initial
rate of 5,000 shares of Common Stock per share of Series D Preferred
Stock.  The holders of the Series D Preferred Stock are entitled to
vote, on an “as-converted basis,” together with the holders of the Common Stock
and holders of any other series of Preferred Stock or other class of the
Company’s capital stock which are granted such voting rights as a single class
on all matters, except as otherwise provided by law.  In the event of
any liquidation, dissolution or winding up of the affairs of the Company, either
voluntarily or involuntarily, the holders of the Series D Preferred Stock will
be entitled to a liquidation preference of $1,500 per share of Series D
Preferred Stock prior to any distribution to the holders of the Common
Stock.  The Series D Preferred Stock ranks (1) pari passu in respect of the
preferences as to dividends, distributions and payments upon the liquidation,
dissolution or winding up of the Company to all shares of Series C Preferred
Stock, par value $1.00 per share, of the Company and (2) senior in respect of
the preferences as to dividends, distributions and payments upon the
liquidation, dissolution or winding up of the Company to all shares of Common
Stock.  The Series D Preferred Stock is not redeemable.


11
  NON-INVASIVE
MONITORING SYSTEMS, INC.
  NOTES TO
CONDENSED FINANCIAL STATEMENTS (unaudited)
  October
31, 2008


The
Series D Preferred Stock was issued at $1,500 per share, which is equivalent to
$0.30 per share of Common Stock on an “as-converted” basis.  The
December 2, 2008 closing price of the Common Stock on the over-the-counter
bulletin board was $0.38 per share, resulting in a beneficial conversion feature
of $400 per share of Series D Preferred Stock on the issue date.  In
accordance with the guidance in FASB Emerging Issues Task Force Issue
Nos. 98-5, “Accounting
for Convertible Securities with Beneficial Conversion Features or Contingently
Adjustable Conversion Ratio,” and 00-27, “Application of Issue No. 98-5 to
Certain Convertible Instruments,”the $196,000 aggregate beneficial
conversion feature of the Series D Preferred Stock on the issue date will be
deemed a discount on the issuance of the shares and will be recorded as an
increase to additional paid in capital in the balance sheet.  Because
the Series D Preferred Stock was immediately convertible to Common Stock, the
$196,000 intrinsic value will be deemed a dividend paid to the Investors on the
closing date.  In the absence of retained earnings, the dividend will
be recorded as a reduction of additional paid in capital, and as an increase in
loss attributable to common shareholders on the date of the
transaction.  Because the above transaction occurred subsequent to
October 31, 2008, these amounts are not included in the accompanying unaudited
condensed financial statements, but will be reflected in future financial
statements.





7.
            BASIC
      AND DILUTED LOSS PER SHARE




Basic net
loss per common share is computed by dividing net loss attributable to common
shares 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 three months
ended October 31, 2008 and 2007, no dilution adjustment has been made to the
weighted average outstanding common shares because the assumed exercise of
outstanding options and warrants and the conversion of preferred stock would be
anti-dilutive.




Potential
common shares not included in calculating diluted net loss per share are as
follows:





October
      31, 2008
              
              October
      31, 2007Stock
      options
              2,111,830
              
              3,271,996Stock
      warrants
              325,000
              
              325,000Series
      C Preferred Stock
              1,551,200
              
              1,551,200Series
      D Preferred Stock
              5,000,000
              
              –Total
              8,988,030
              
              5,148,196





8.
            RELATED
      PARTY TRANSACTIONS




Dr.
Marvin A. Sackner, the Company’s CEO and director, formerly leased office space
to the Company on a month to month basis in North Bay Village, Florida under an
arrangement with the Company which was discontinued effective October 31,
2007.  The Company reimbursed Dr. Sackner for the cost of the space
monthly.  The amount reimbursed to Dr. Sackner by the Company for the
three months ended October 31, 2007 was $5,000.




The
Company signed a five year lease for office space in Miami, Florida with a
company owned by one of the Company’s major shareholders.  The rental
payments under the Miami office lease, which commenced January 1, 2008, are
approximately $4,000 per month for the first year and escalate 4.5% annually
over the life of the lease.  The Company recorded $9,000 of rent
expense on a straight-line basis related to the Miami lease in the three months
ended October 31, 2008.




Adam
Jackson, the Company’s Chief Financial Officer, also serves as the Chief
Financial Officer and supervises the accounting staff of SafeStitch Medical,
Inc. (“SafeStitch”), a publicly-traded, developmental-stage medical device
manufacturer.  The Company’s Chairman, Dr. Jane Hsiao, also serves as
Chairman of SafeStitch, and director Steven Rubin also serves as a director of
SafeStitch.  Under a board-approved cost sharing arrangement, the
total salaries of the accounting staffs of NIMS and SafeStitch have been shared
equally since March 2008.  The Company has recorded General and
Administrative expense for the three months ended October 31, 2008 totaling
$12,000 to account for the sharing of costs under this
arrangement.  Accounts payable to SafeStitch outstanding at October
31, 2008 totaled $12,000.




Dr. Hsiao
is a director of Great Eastern Bank of Florida, a bank where the Company
maintains a bank account in the normal course of business.  As of
October 31, 2008, the Company had $56,000 on deposit with Great Eastern Bank of
Florida.


12
  NON-INVASIVE
MONITORING SYSTEMS, INC.
  NOTES TO
CONDENSED FINANCIAL STATEMENTS (unaudited)
  October
31, 2008


9.
            COMMITMENTS




Leases.




The
Company leased office space in Sarasota, Florida at a rate of approximately
$3,000 per month under a lease which expired in November 2008.  The
Company signed a five year lease for office space in Miami, Florida commencing
January 1, 2008.  The rental payments under the Miami office lease are
approximately $4,000 per month for the first year and escalate 4.5% annually
over the life of the lease.




Product
Development and Supply Agreement.




On
September 4, 2007, the Company executed 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®,
Somno-EaseTM and Exer-Rest® Plus
devices.  Sing Lin will also manufacture all of the Company’s
acceleration therapeutic platforms.  The Agreement commenced as of
September 3, 2007 and has a term that extends three years from the acceptance of
the first run of production units by NIMS.  Thereafter, the Agreement
automatically renews for successive one year terms unless either party sends the
other a notice of non-renewal.




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 will utilize 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 August 2008 upon acceptance of the first units produced using
the tooling.  Approximately $121,000 of the remaining balance was owed
as of October 31, 2008.  These amounts have been applied toward
tooling costs, and are included in furniture and equipment, net.




Under the
Agreement, the Company also grants 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 has agreed not to sell the Products outside its
geographic areas in the Far East.




The
Company has committed to purchase approximately $2.2 million of Exer-Rest® and
Somno-EaseTM units within one year of the August 2008 acceptance of the final
product.  Additionally, the Company has agreed to purchase $3.5
million and $7.5 million of Exer-Rest®,
Exer-Rest® Plus and
Somno-EaseTM products in the second and third years following such acceptance,
respectively.  These purchase commitment amounts are based upon
estimated product costs at the time the Agreement was executed, and may change
subject to the Company’s prior approval.  Through October 31, 2008,
the Company had paid Sing Lin $672,000 in connection with orders placed through
that date.  Of this amount, $628,000 is included in advances to
contract manufacturer in the accompanying unaudited condensed financial
statements.  As of October 31, 2008, aggregate future purchase
commitments under the Agreement totaled approximately $12.5
million.




10.
            LONG-LIVED
      ASSETS




The
Company’s long-lived assets include furniture and equipment, tooling, patents
and trademarks and long-term investments.




Furniture
and equipment, net of accumulated depreciation, consists of the following at
October 31, 2008 (in thousands):




Furniture
      and fixtures, office equipment and computers
                    
                    $
                    47Tooling
      and equipment
                    
                    
                    471518Less
      accumulated depreciation
                    
                    
                    (50
                    )Furniture
      and equipment, net
                    
                    $
                    468




Depreciation
expense was $27,000 and $1,000 during the three months ended October 31, 2008
and 2007, respectively.  Depreciation on the tooling commenced in
August 2008 based upon an estimated useful life of five years.  Four
Exer-Rest® AT
demonstration units are included in furniture and fixtures at an aggregate cost
of $19,000.  These units were placed in service in fiscal 2008, and
are being depreciated based upon a five-year estimated useful life.


13
  NON-INVASIVE
MONITORING SYSTEMS, INC.
  NOTES TO
CONDENSED FINANCIAL STATEMENTS (unaudited)
  October
31, 2008


Patents
and trademarks have been fully amortized as of October 31,
2007.  Amortization expense was less than $1,000 for the three months
ended October 31, 2007.




The
Company’s long-term investments consist of 940,000 shares (approximately a 2%
interest) of LifeShirt.com, Inc. (now VivoMetrics, Inc.), a privately-held
company.  These shares were obtained as consideration for the
Company’s assignment of all of its rights, title and interest in certain patents
and intellectual property as well as a non-exclusive, worldwide license under
these items to VivoMetrics.  The shares are carried at zero value in
the accompanying financial statements.





11.
            RECENT
      ACCOUNTING PRONOUNCEMENTS




Effective
August 1, 2008, the Company adopted SFAS 157, which defines fair value,
establishes a framework for measuring fair value and requires additional
disclosures about fair value measurements.  In February 2008, the
Financial Accounting Standards Board (“FASB”) delayed the effective date of SFAS
157 for one year for all nonfinancial assets and nonfinancial liabilities,
except for those items that are recognized or disclosed at fair value in the
financial statements on a recurring basis.  On October 10, 2008, the
FASB issued FSP FAS 157-3, “Determining the Fair Value of a
Financial Asset in a Market That Is Not Active.”  The FSP was
effective upon issuance, including periods for which financial statements have
not been issued.  The FSP clarified the application of SFAS 157 in an
inactive market and provided an illustrative example to demonstrate how the fair
value of a financial asset is determined when the market for that financial
asset is inactive.  Management has determined that the adoption of
SFAS 157 and the FSP did not have a material impact on the Company’s financial
position and results of operations.




Effective
August 1, 2008, the Company adopted SFAS No. 159, “The Fair Value Option for Financial
Assets and Financial Liabilities- including an amendment of FASB Statement
115” (“SFAS 159”).  This statement provides companies with an
option to report selected financial assets and liabilities at fair
value.  As of October 31, 2008, the Company has not elected to use the
fair value option allowed by SFAS 159.  Management has determined that
the adoption of SFAS 159 did not have a material effect on the Company’s
financial position and results of operations.




In
December 2007, the FASB issued Statement of Financial Accounting Standards No.
141 (revised 2007), “Business
Combinations” (“SFAS No.141R”).  SFAS No. 141R will replace
SFAS 141, and establishes principles and requirements for how the acquirer in a
business combination reorganizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed and any noncontrolling
interest in the acquiree; recognizes and measures the goodwill acquired in the
business combination or gain from a bargain purchase; and determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination.  SFAS
No. 141R applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008.  Currently, the
Company does not anticipate that this Statement will have a significant impact
on its financial statements, however the Company will be required to expense
costs related to any acquisitions consummated after July 31, 2009.




In
December 2007, the FASB issued Statement of Financial Accounting Standards No.
160, “Non-Controlling
Interests in Consolidated Financial Statements – an amendment of ARB No.
51” (“SFAS No. 160”).  This statement requires that
noncontrolling or minority interests in subsidiaries be presented in the
consolidated statement of financial position within equity, but separate from
the parents’ equity, and that the amount of the consolidated net income
attributable to the parent and to the noncontrolling interest be clearly
identified and presented on the face of the consolidated statement of
income.  SFAS No. 160 will be effective for the Company’s fiscal year
beginning August 1, 2009.  Currently, the Company does not anticipate
that this statement will have a significant impact on its financial
statements.




In
June 2007, the FASB ratified Emerging Issues Task Force Issue
No. 07-3, “Accounting for
Nonrefundable Advance Payments for Goods or Services to Be Used in Future
Research and Development Activities” (“EITF 07-3”).  EITF 07-3
requires non-refundable advance payments for goods and services to be used in
future research and development activities to be recorded as an asset and the
payments to be expensed when the research and development activities are
performed.  EITF 07-3 became effective for the Company’s fiscal year
beginning August 1, 2008.  Management has determined that the
application of this standard has not had a significant impact on its financial
statements.




In
December 2007, the FASB ratified the consensus reached on Emerging Issues Task
Force Issue No. 07-1, “Accounting for Collaborative
Arrangements Related to the Development and Commercialization of Intellectual
Property” (“EITF 07-1”).  EITF 07-1 defines collaborative
arrangements and establishes reporting requirements for transactions between
participants in a collaborative arrangement and between participants in the
arrangement and third parties.  EITF 07-1 will be effective for the
Company’s fiscal year beginning August 1, 2009.  The Company is currently
evaluating the potential impact of this standard on the financial
statements.


14
  NON-INVASIVE
MONITORING SYSTEMS, INC.
  NOTES TO
CONDENSED FINANCIAL STATEMENTS (unaudited)
  October
31, 2008


In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (“SFAS 162”).  SFAS 162 identifies the
sources of accounting principles and the framework for selecting the principles
used in the preparation of financial statements that are presented in conformity
with GAAP.  SFAS 162 will become effective 60 days following the SEC’s
approval of the Public Company Accounting Oversight Board amendments to AU
Section 411, “The Meaning of
Present Fairly in Conformity With Generally Accepted Accounting
Principles.”  The Company does not expect the adoption of SFAS
162 to have a material impact on its consolidated financial
statements.





12.
            SUBSEQUENT
      EVENTS




As
described in Note 6 above, in December 2008, the Company sold an aggregate of
491 shares of the Series D Preferred Stock to the Investors pursuant to Stock
Purchase Agreements entered on December 1, 2008 and December 2, 2008 (the sale
of 286 shares closed on December 1, 2008 and the sale of 205 shares closed on
December 2, 2008).




On
December 1, 2008, the Company repaid all outstanding principal and interest on
the Revolver with funds provided from the sale of the first 286 shares of Series
D Preferred Stock, as described in Notes 5 and 6 above.


15
  NON-INVASIVE
MONITORING SYSTEMS, INC.


ITEM
      2.
              MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS.





Cautionary
Statement Regarding Forward-looking Statements.




This
Interim Report on Form 10-Q contains, in addition to historical information,
certain forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 (“PLSRA”), 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”) 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 future sales of the Exer-Rest® and
Somno-EaseTM motion
platforms; competition; dependence on management; risks related to proprietary
rights; government regulation; other factors described herein as well as the
factors contained in the “Risk Factors” section of Item 1 of our Annual Report
on Form 10-KSB for the year ended July 31, 2008.  We do not undertake
any obligation to update forward-looking statements.  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


We are
primarily engaged in the development, manufacture and marketing of non-invasive,
whole body, periodic acceleration therapeutic platforms, which are motorized
platforms that move a subject repetitively from head to foot.  Our
acceleration therapeutic platforms are the inventions of Marvin A. Sackner,
M.D., our founder, Chief Executive Officer and a director.  Dr.
Sackner holds 32 United States patents and is a past President of the American
Thoracic Society, past Chairman of the Pulmonary Disease Subspecialty Board and
a past Member of the American Board of Internal Medicine.  Twenty-six
peer reviewed scientific publications attest to the benefits of whole body
periodic acceleration in animal and human research
investigations.  The application of this technology causes release of
beneficial substances such as nitric oxide from the inner lining of blood
vessels to the same extent as moderate to strenuous exercise.  These
findings are not being claimed as an intended use of the device for marketing
purposes, but demonstrate a potential mechanism for its
benefits.


Prior to
2002, our primary business was the development of computer assisted,
non-invasive diagnostic monitoring devices and related software designed to
detect abnormal respiratory, cardiac, and other medical conditions from sensors
placed externally on the body’s surface.  We assigned our patents for
these ambulatory monitoring devices to the SensorMedics division of ViaSys
Healthcare Inc. (which is now a unit of Cardinal Health, Inc. (“SensorMedics”)),
for cash and royalties on sales.  We also assigned the patents to
VivoMetrics, Inc. (“VivoMetrics”), then a related party, for an equity ownership
interest in VivoMetrics (now carried at zero value for financial reporting purposes) and royalties on sales
and leasing of VivoMetrics’ LifeShirt®
systems.  In April 2002, VivoMetrics received FDA clearance to market
the LifeShirt®
system.  We continue to receive royalties from both SensorMedics and
VivoMetrics, however there can be no assurance as to the amount of royalty
revenue that will be derived from these patent assignments.


In 2002, we began restructuring our
operations and business strategy to focus onthe research, development,
manufacturing, marketing, and sales of non-invasive, motorized, whole body
periodic acceleration platforms.  Thesetherapeutic acceleration platforms are
intended for use in the home, wellness centers and clinics as an aid to improve
circulation and joint mobility, relieve minor aches and pains, relieve troubled
sleep and as a mechanical feedback device for slow rhythmic breathing exercise
for stress management.  The Company’s first such platform, the AT-101,
was initially registered with the United States Food and Drug Administration
(the“FDA”) as a Class 1 (exempt) powered
exercise device and was sold to physicians and their patients.  In
January 2005, theFDAdisagreed withourdevice classification, and requested
thatwecease commercial sales and marketing
effortsforthe AT-101 until we received a Class
1Therapeutic Vibratorapproval from the FDA.Accordingly, we ceased
sales and marketing efforts in the U.S. for this platform pending FDA
approval.


In January 2005webegan development of a less costly and
more efficient secondgeneration version of the
AT-101, theExer-Rest®(now designated the
Exer-Rest®AT).The Company entered
into a Product and Development and Supply Agreement with Sing Lin Technology
Co., Ltd. (“Sing Lin”) of Taichung, Taiwan on September 4,
2007.  Under this agreement, Sing Lin will manufacture new third
generation versions of our patented Exer-Rest®
motorized platforms (designated the Exer-Rest®SL and the Exer-Rest®TL).  In January 2008,
we received ISO 13485 certification for Canada, the United Kingdom and Europe
from SGS United Kingdom Ltd., the world’s leading verification and certification
body.  ISO 13485 certification is recognized and accepted worldwide as
a sign of design and manufacturing quality for medical devices.  In
addition to our ISO certification, NIMS’ Exer-Rest® AT
acceleration therapeutic platform (Class IIa) was awarded CE0120 certification,
which requires several safety related conformity tests including clinical
assessment for safety and effectiveness.  The CE0120 marking is often
referred to as a “passport” that allows manufacturers from anywhere in
the world to sell their goods throughout the European market as well as in many
other countries.


16
  NON-INVASIVE
MONITORING SYSTEMS, INC.
 We have
determined that it is in the best interest of NIMS and its shareholders to focus the
Company’s time and resources on developing and marketing the Exer-Rest® line of
acceleration therapeutic platforms.  These devices will be marketed
and sold by NIMS in Canada, the UK, Europe, India and Latin
America.  They will be sold by Sing Lin in certain Far East markets
upon completion of testing and obtaining proper registration.  We are
awaiting FDA approval for our acceleration therapeutic platforms prior to
commencing sales of the Exer-Rest®as a medical device in theU.S.


The development of theExer-Rest®has necessitated additionalexpenditures and commitments ofcapital, and weanticipate experiencing losses throughthe end of the 2009 fiscal
yearaswecommencesalesinCanada,theUK, Europe,IndiaandLatin America.Weplan to raise additional capital to
fulfillourbusiness plan, butnocommitment to raisesuch additional capitalexists orcan be assured.If we are unsuccessful in
our efforts to raise capital, we will not be able to continue
operations.  We have begunactively marketingand sellingtheExer-Rest®inCanadaand in certain other countries
overseas.The Exer-Rest®is currently not approved
for sale in the U.S., however the Company is seeking such FDA approval.The Exer-Rest®willonlybemarketed and sold commercially
in the U.S. as a medical device when and if FDA approval is
obtained.  We filed a 510(k) application with the FDA in October 2008 for approval to
market the Exer-Rest® in the
United States.  The 510(k) application included clinical trial and
investigational data to support the intended use of the Exer-Rest® as an
aid to improve circulation and provide temporary relief of aches and
pains.  The FDA is expected to provide a preliminary response to our
application by the end of January 2009, however there can be no assurance that
the FDA will respond in that timeframe.  Although we believe that our
application satisfies all of the FDA’s requirements to grant approval to market
the Exer-Rest®in the
United States, there can be no assurance that such approval will be
granted.


Products




Exer-Rest®Therapeutic
Vibrators.  The Exer-Rest® AT
therapeutic vibrator is based upon the design and concept of our original AT-101
therapeutic vibrator, but has the dimensions and appearance of a commercial
extra long twin bed, is more efficient, less costly and priced
lower.  QTM Incorporated (“QTM”), an FDA registered manufacturer
(Oldsmar, FL) manufactured the device, which was built in accordance with ISO
and FDA Good Manufacturing Practices.  Sales of the Exer-Rest ® AT began
overseas in October 2007.  The Exer-Rest® SL and
Exer-Rest® TL,
which are being manufactured by Sing Lin, further advance the acceleration
therapeutic platform technology.  The SL and TL models combine
improved drive technology for quieter operation, a more comfortable
“memory-foam” mattress,  more convenient operation with a
multi-function wireless remote and a more streamlined look to improve the whole
body, periodic acceleration experience.  Overseas deliveries of
Exer-Rest® SL and
Exer-Rest® TL
platforms began in October 2008.  The Somno-EaseTM, a
variation of the Exer-Rest®
currently in development, is designed to aid patients with sleep disorders as
well as provide feedback for slow rhythmic breathing exercises for the relief of
stress associated with daily living.  The Somno-EaseTM will have a
similar appearance to the Exer-Rest® SL and
TL models, but produces slower motion over a greater travel distance than
Exer-Rest® and is
based upon the notion of “rocking” the adult to sleep analogous to rocking a
baby to sleep.  The Exer-Rest® Plus,
which is also in development, will combine the features of both the
Exer-Rest® and
Somno-EaseTM.




LifeShirt®.The
LifeShirt® is a
patented Wearable Physiological Computer that incorporates transducers,
electrodes and sensors into a low turtle neck sleeveless
garment.  These transducers are connected to a miniaturized, battery
powered, electronic module for collection of respiratory and cardiac
data.  In addition, the monitored patient can enter symptoms with
intensity, mood, and medication information for integration with the physiologic
information collected with the LifeShirt®
garment.  Data can be mailed to VivoMetrics, Inc.’s Data Collection
Center for quality control, generation of reports, and database
storage.  Vital and physiological signs can be obtained
non-invasively, continuously, cheaply, and reliably with the comfortably worn
LifeShirt® garment
system while at rest, during exercise, at work, and during sleep.  We
transferred the patent rights for the LifeShirt®in 1999
and currently collect royalties from VivoMetrics.


17
  NON-INVASIVE
MONITORING SYSTEMS, INC.


Recent Accounting
Pronouncements




Effective
August 1, 2008, we adopted SFAS 157, which defines fair value, establishes a
framework for measuring fair value and requires additional disclosures about
fair value measurements.  In February 2008, the Financial Accounting
Standards Board (“FASB”) delayed the effective date of SFAS 157 for one year for
all nonfinancial assets and nonfinancial liabilities, except for those items
that are recognized or disclosed at fair value in the financial statements on a
recurring basis.  On October 10, 2008, the FASB issued FSP FAS 157-3,
“Determining the Fair Value of
a Financial Asset in a Market That Is Not Active.”  The FSP was
effective upon issuance, including periods for which financial statements have
not been issued.  The FSP clarified the application of SFAS 157 in an
inactive market and provided an illustrative example to demonstrate how the fair
value of a financial asset is determined when the market for that financial
asset is inactive.  We have determined that the adoption of SFAS 157
and the FSP did not have a material impact on our financial position and results
of operations.




Effective
August 1, 2008, we adopted SFAS No. 159, “The Fair Value Option for Financial
Assets and Financial Liabilities- including an amendment of FASB Statement
115” (“SFAS 159”).  This statement provides companies with an
option to report selected financial assets and liabilities at fair
value.  As of October 31, 2008, we have not elected to use the fair
value option allowed by SFAS 159.  We have determined that the
adoption of SFAS 159 did not have a material effect on our financial position
and results of operations.




In
December 2007, the FASB issued Statement of Financial Accounting Standards No.
141 (revised 2007), “Business
Combinations” (“SFAS No.141R”).  SFAS No. 141R will replace
SFAS 141, and establishes principles and requirements for how the acquirer in a
business combination reorganizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed and any noncontrolling
interest in the acquiree; recognizes and measures the goodwill acquired in the
business combination or gain from a bargain purchase; and determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination.  SFAS
No. 141R applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008.  Currently, we do not
anticipate that this Statement will have a significant impact on our financial
statements, however we will be required to expense costs related to any
acquisitions consummated after July 31, 2009.




In
December 2007, the FASB issued Statement of Financial Accounting Standards No.
160, “Non-Controlling
Interests in Consolidated Financial Statements – an amendment of ARB No.
51” (“SFAS No. 160”).  This statement requires that
noncontrolling or minority interests in subsidiaries be presented in the
consolidated statement of financial position within equity, but separate from
the parents’ equity, and that the amount of the consolidated net income
attributable to the parent and to the noncontrolling interest be clearly
identified and presented on the face of the consolidated statement of
income.  SFAS No. 160 will be effective for our fiscal year beginning
August 1, 2009.  Currently, we do not anticipate that this statement
will have a significant impact on our financial statements.




In
June 2007, the FASB ratified Emerging Issues Task Force Issue
No. 07-3, “Accounting for
Nonrefundable Advance Payments for Goods or Services to Be Used in Future
Research and Development Activities” (“EITF 07-3”).  EITF 07-3
requires non-refundable advance payments for goods and services to be used in
future research and development activities to be recorded as an asset and the
payments to be expensed when the research and development activities are
performed.  EITF 07-3 became effective for our fiscal year beginning
August 1, 2008.  We have determined that the application of this
standard has not had a significant impact on our financial
statements.




In
December 2007, the FASB ratified the consensus reached on Emerging Issues Task
Force Issue No. 07-1, “Accounting for Collaborative
Arrangements Related to the Development and Commercialization of Intellectual
Property” (“EITF 07-1”).  EITF 07-1 defines collaborative
arrangements and establishes reporting requirements for transactions between
participants in a collaborative arrangement and between participants in the
arrangement and third parties.  EITF 07-1 will be effective for our fiscal
year beginning August 1, 2009.  We are currently evaluating the potential
impact of this standard on our financial statements.




In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (“SFAS 162”).  SFAS 162 identifies the
sources of accounting principles and the framework for selecting the principles
used in the preparation of financial statements that are presented in conformity
with GAAP.  SFAS 162 will become effective 60 days following the SEC’s
approval of the Public Company Accounting Oversight Board amendments to AU
Section 411, “The Meaning of
Present Fairly in Conformity With Generally Accepted Accounting
Principles.”  We do not expect the adoption of SFAS 162 to have
a material impact on our consolidated financial statements.


18
  NON-INVASIVE
MONITORING SYSTEMS, INC.


Results of
Operations




In
January 2005, we began developing the Exer-Rest® line of
acceleration therapeutic platforms, which were designed to be more efficient and
less expensive than the original AT-101 platform.  The Exer-Rest®AT
platform was first available for delivery to certain locations outside of the
United States in October
2007.  Prior to the first export sales of the Exer-Rest® AT, we
continued to sell the AT-101 in certain locations outside of the United States.  In
anticipation of the launch of the Exer-Rest line, in July 2006 we wrote down as
obsolete our existing inventory of AT-101 platforms and parts to zero
value.  The newest Exer-Rest® SL and
TL platforms, which have been developed under our agreement with Sing Lin,
became available for sale in the first quarter of our 2009 fiscal
year.  We expect to increase our international sales activity with
aggressive marketing and promotional pricing throughout fiscal
2009.




The
Exer-Rest® line is
not currently approved for sale in the United States.  The Company has
submitted a 510(k) application to the FDA for approval to market the
Exer-Rest®
platforms in the United States for their intended use to improve circulation and
for temporary relief of aches and pains.  There can be no assurance
that the FDA will grant such approval.




Three Months ended October
31, 2008 Compared to Three Months Ended October 31, 2007




Revenue.  Total
revenues were $70,000 for the three months ended October 31, 2008, as compared
to $87,000 for the three months ended October 31, 2007.  This $17,000
decrease in revenues was due to an $8,000 decrease in product sales and a $9,000
reduction in royalty revenues.  One Exer-Rest® AT
platform was sold overseas in the three months ended October 31, 2008, whereas
one AT-101 unit was sold for research purposes in the three months ended October
31, 2007.




Cost of Sales.Cost of sales
were $5,000 and $11,000 for the three months ended October 31, 2008 and 2007,
respectively.  One therapeutic platform unit was sold during each of
the three month periods ended October 31, 2008 and 2007.  The decrease
in cost of sales is attributable primarily to the lower manufacturing cost
associated with the Exer-Rest® product
line, as compared to the AT-101.




Selling, general and administrative
expenses.Selling,
general and administrative expenses increased to $505,000 for the three months
ended October 31, 2008 from $364,000 for the three months ended October 31,
2007.  This $141,000 increase primarily resulted from increased wages,
professional fees, travel, sales and marketing and office
expenses.  Expenses relating to stock-based compensation, all of which
are included in general and administrative expense, decreased from $132,000 in
the three months ended October 31, 2007 to $65,000 for the three months ended
October 31, 2008 primarily as a result of fewer option grants in the 2008
period.




Research and development
costs.  Research and development costs were approximately
$53,000 for the three months ended October 31, 2008, as compared to $49,000 for
the three months ended October 31, 2007.  This increase was primarily
a result of costs associated with the submission of our 510(k)
application for FDA approval.




Interest income (expense),
net.  Net interest expense was $5,000 for the three months
ended October 31, 2008, attributable to interest accruing on the Revolver
described below.  Net interest income was $7,000 for the three months
ended October 31, 2007, resulting from funds held in interest-bearing
accounts.




Net loss.Net loss
increased from $330,000, for the three months ended October 31, 2007, to
$498,000, for the three months ended October 31, 2008, an increase of
$168,000.The
increased loss was primarily due to the increase in operating
expenses.





Liquidity and Capital
Resources




Our
operations have been primarily financed through private sales of our equity
securities and, in August 2008, through the proceeds of loans.  At
October 31, 2008, we had cash of $67,000 and working capital of
$63,000.  These funds will not be sufficient for our operating needs,
and the Company will need to obtain additional debt or equity financing to
continue its business activities during fiscal 2009.  No assurance can
be given that such additional financing will be available on acceptable terms or
at all.  Our ability to sell additional shares of our stock and/or
borrow cash under existing or new credit facilities could be materially
adversely affected by the recent economic turmoil in the World’s equity and
credit markets.  Current economic conditions have been, and continue
to be, volatile and the volatility has reached unprecedented levels in recent
months.  Continued instability in these market conditions may limit
our ability to access the capital necessary to fund and grow our business and to
replace, in a timely manner, maturing liabilities.




Net cash
used in operating activities increased to $309,000 for the three months ended
October 31, 2008 from $278,000 for the three months ended October 31,
2007.  This increase of $31,000 was principally due to the increased
loss described above and an increase in inventory, offset in part by increased
customer deposits and increases in accounts payable and accrued
liabilities.




Net cash
used by investing activities decreased to $50,000 for the three months ended
October 31, 2008 from $175,000 for the three months ended October 31,
2007.  Cash flows in both periods were primarily related to payments
for tooling development under the agreement with Sing Lin.


19
  NON-INVASIVE
MONITORING SYSTEMS, INC.


Net cash
provided by financing activities increased to $290,000 for the three months
ended October 31, 2008 from $68,000 for the three months ended October 31,
2007.  The increase of $222,000 was principally due to the borrowing
of $300,000 under the Revolver described below.  Financing activities
in the 2007 period included $81,000 of proceeds from the exercise of stock
options, whereas no options were exercised in the 2008 period.




April 2008 Series D Preferred Stock
Offering.  On April 7, 2008, we completed the sale of an
aggregate of 1,000 shares of a new series of our Preferred Stock, par value
$1.00 per share (the “Preferred Stock”), designated as Series D Convertible
Preferred Stock (the “Series D Preferred Stock”), to certain private investors
(collectively, the “Investors”) pursuant to a Stock Purchase Agreement entered
into on April 3, 2008 (the “Stock Purchase Agreement”).  The Investors
include Marvin Sackner, a director and executive officer of the Company who also
holds more than 10% of the outstanding Common Stock; Steven Mrha, an executive
officer of the Company, and Frost Gamma Investments Trust (“Frost Gamma”), a
holder of more than 10% of the outstanding Common Stock (collectively, the
“Related Party Investors”).  Dr. Jane Hsiao, who became a director and
Chairman in October 2008, is trustee of one of the Investors which is not one of
the Related Party Investors.  The aggregate purchase price for the
Series D Preferred Stock was $1,500,000, of which $795,000 was paid by the
Related Party Investors.  Each holder of a share of the Series D
Preferred Stock has the right, at any time, to convert such share of Series D
Preferred Stock into shares of the Company’s common stock at an initial rate of
5,000 shares of common stock per share of Series D Preferred
Stock.  The Series D Preferred Stock was issued at $1,500 per share,
which is equivalent to $0.30 per share of Common Stock on an “as-converted”
basis.  The April 7, 2008 closing price of the Common Stock on the
over-the-counter bulletin board was $0.53 per share, resulting in a $1,150
intrinsic value per share of Series D Preferred Stock on the issue
date.  The $1,150,000 aggregate intrinsic value of the Series D
Preferred Stock on the issue date was deemed a dividend paid to the Investors on
the closing date, and as an increase in loss attributable to common shareholders
in the financial statements for the period then ended.




December 2008 Series D Preferred
Stock Offering.  On December 2, 2008, we completed the sale of
an aggregate of 491 additional shares of our Series D Preferred Stock to certain
investors pursuant to stock purchase agreements entered between December 1, 2008
and December 2, 2008 (the sale of 286 shares closed on December 1, 2008 and the
sale of 205 shares closed on December 2, 2008).  These investors
include a director, a holder of more than 10% of the outstanding Common Stock,
an entity controlled by our Chairman and a director and executive officer of the
Company who also holds more than 10% of the outstanding Common Stock
(collectively, the “New Related Party Investors”).  The aggregate
purchase price for the Series D Preferred Stock was $736,500, of which $382,500
was paid by the New Related Party Investors.  Of the $382,500 paid by
the New Related Party Investors, $282,200 was paid from the proceeds of their
respective interests in the Revolver described below.  (See Notes 6
and 12 to the accompanying financial statements.)




August 2008 Revolver
Loan.  On August 28, 2008 we entered into a Note and Security
Agreement (the “Agreement”) with four persons (the “Lenders”), pursuant to which
the Lenders granted us a revolving credit line (the “Revolver”) in the aggregate
amount of $300,000, secured by all of the Company’s personal
property.  The Lenders included a holder of more than 10% of the
outstanding Common Stock, an entity controlled by our Chairman and a director
and executive officer of the Company who also holds more than 10% of the
outstanding Common Stock.  We were permitted to borrow and reborrow
from time to time under the Revolver until October 31, 2008 (the “Maturity
Date”).  The interest rate payable by us on amounts outstanding under
the Revolver was 11% per annum, and increased to 16% after the Maturity Date or
after an Event of Default.  We were required to repay all amounts
owing under the Revolver by the Maturity Date, and amounts outstanding were
prepayable at any time.  On August 29, 2008 we drew down $300,000
under the Revolver.  The Revolver was amended, effective October 31,
2008, to extend the Maturity Date until November 30, 2008.  All
principal and interest outstanding under the Revolver as of November 30, 2008
was repaid with proceeds from the sale of Series D Preferred Stock on December
1, 2008 as described above.  (See Notes 5 and 12 to the accompanying
financial statements.)




Aggregate
royalty payments from VivoMetrics and SensorMedics were $68,000 and $73,000 in
three months ended October 31, 2008 and 2007 respectively.  There can
be no assurances that the Company will continue to receive similar royalty
payments.




Under the
Agreement with Sing Lin, we are committed to purchase the tooling required to
manufacture the acceleration therapeutic platforms.  The total cost of
the tooling was $471,000, all of which has been paid as of December 5,
2008.  These amounts have been applied toward tooling costs, and are
included in furniture and equipment, net.  The Company has also
committed to purchase approximately $2.2 million of Exer-Rest® and
Somno-EaseTM units
within one year of acceptance of the final product and an additional $3.5
million and $7.5 million of products in the second and third years following
acceptance of the final product, respectively.  Under the Agreement,
the Company must pay a portion of the product purchase price at the time
production orders are placed, with the balance due upon
delivery.  Through October 31, 2008, we have paid Sing Lin $672,000 in
connection with orders placed through that date, and we will be required to make
additional payments totaling approximately $448,000 upon taking delivery of the
units currently in production.  Deliveries have commenced and we
expect such deliveries to continue periodically throughout the 2009 fiscal
year.


20
  NON-INVASIVE
MONITORING SYSTEMS, INC.


At
October 31, 2008, we had available net operating loss carryforwards of
approximately $11.1 million which expire in various years through
2028.  The net operating loss carryforwards may be subject to
limitation due to change of ownership provisions under Section 382 of the
Internal Revenue Code and similar state provisions.




As of
December 5, 2008, we had cash and cash equivalents of approximately $195,000,
including deposits collected on Exer-Rest® orders
and amounts raised in the December 2008 Series D Preferred Stock offering
described above.  We estimate that our current cash reserves will be
sufficient to fund our operations for only the next two months.  If we
are unable to obtain additional debt or equity financing and/or generate
significant revenues from sales of Exer-Rest®
platforms, we will have insufficient funds to continue operations without
raising additional capital.  As of November 30, 2008, we had open
orders for the overseas delivery of 12 Exer-Rest®
platforms and the U.S. delivery of 14 units for research
purposes.  The aggregate purchase price for these 26 units is
approximately $220,000, however there can be no assurance that our customers
will take delivery of the ordered units, or that payment for delivered units
will be collected in a timely manner.





ITEM
      3.
              QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.




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





ITEM
      4T.
              CONTROLS
      AND PROCEDURES.




We
carried out an evaluation, under the supervision and with the participation of
our management, including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of our disclosure controls and procedures, as
defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934
(the “Exchange Act”) as of the end of the period covered by this
report.  Based on that evaluation, our Chief Executive Officer and
Chief Financial Officer have concluded that our disclosure controls and
procedures as of October 31, 2008 were effective to ensure that information
required to be disclosed by us in reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission’s rules and
forms.




There
were no material changes in our internal controls over financial reporting or in
other factors that could materially affect, or are reasonably likely to affect,
our internal controls over financial reporting during the quarter
ended October 31, 2008.  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.


21
  NON-INVASIVE
MONITORING SYSTEMS, INC.


PART II.  OTHER
INFORMATION





Item
1. Legal
Proceedings




None.




Item
1A. Risk
Factors





The
current recessionary economic environment and concurrent market instability may
materially and adversely affect our ability to obtain credit or secure funds
through sales of our stock, which may materially and adversely affect our
ability to fund our operations.





We have
funded our operations to date primarily through sales of our stock in private
placements and through borrowing cash under credit facilities available to us
from stockholders and other individuals.  Our ability to sell
additional shares of our stock and/or borrow cash under existing or new credit
facilities could be materially adversely affected by the recent economic turmoil
in the World’s equity and credit markets.  There can therefore be no
assurance that we will be able to raise such funds on acceptable terms or at
all, which may materially adversely affect our ability to continue our
operations.  Additionally, the current economic turmoil could also
reduce the demand for new and innovative medical devices, resulting in delayed
market acceptance of our products.  Such delay could have a material
adverse impact on our expected cash flows, results of operations and financial
position.




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





None.




Item
3. Defaults upon
Senior Securities





None.





Item
4. Submissions of
Matters to a Vote of Security Holders.





None.





Item
5. Other
Information





None.





Item
6. Exhibits
Index





10.1
              Note
      and Security Agreement dated as of August 28, 2008 between the Registrant
      and the Lenders named therein (Incorporated by reference to Exhibit 10.1
      to the Form 8-K filed September 12,
2008).





10.2
              First
      Amendment to the Note and Security Agreement dated as of August 28, 2008
      between the Registrant and the Lenders named therein (Incorporated by
      reference to Exhibit 10.1 to the Form 8-K filed November 5,
      2008).





31.1
              Certification
      of Chief Executive Officer Pursuant to Rules 13a–14 and 15d-14 under the
      SecuritiesExchange
      Act of 1934.





31.2
              Certification
      of Chief Financial Officer Pursuant to Rules 13a–14 and 15d-14 under the
      SecuritiesExchange
      Act of 1934.





32.1
            Certification
      of Chief Executive Officer Pursuant to 18 U.S.C. 1350 as enacted Pursuant
      to Section 906of
      the Sarbanes-Oxley Act of 2002.





32.2
              Certification
      of Chief Financial Officer Pursuant to 18 U.S.C. 1350 as enacted Pursuant
      to Section 906of
      the Sarbanes-Oxley Act of
2002.


22
  NON-INVASIVE
MONITORING SYSTEMS, INC.




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.




Dated: December
      15, 2008
                    By:
                    /s/ Dr.
      Marvin A. SacknerDr.
      Marvin A. Sackner, Chief Executive OfficerDated: December
      15, 2008
                    By:
                    /s/
      Adam S. JacksonAdam
      S. Jackson, Chief Financial Officer




23





EXHIBIT
INDEX


10.1
                Note
      and Security Agreement dated as of August 28, 2008 between the Registrant
      and the Lenders named therein (Incorporated by reference to Exhibit 10.1
      to the Form 8-K filed September 12,
2008).
 
 10.2
                First
      Amendment to the Note and Security Agreement dated as of August 28, 2008
      between the Registrant and the Lenders named therein (Incorporated by
      reference to Exhibit 10.1 to the Form 8-K filed November 5,
      2008).
 
 31.1
                Certification
      of Chief Executive Officer Pursuant to Rules 13a–14 and 15d-14 under the
      SecuritiesExchange
      Act of 1934.
 
 31.2
                Certification
      of Chief Financial Officer Pursuant to Rules 13a–14 and 15d-14 under the
      SecuritiesExchange
      Act of 1934.
 
 32.1
              Certification
      of Chief Executive Officer Pursuant to 18 U.S.C. 1350 as enacted Pursuant
      to Section 906of
      the Sarbanes-Oxley Act of 2002.
 
 32.2
                Certification
      of Chief Financial Officer Pursuant to 18 U.S.C. 1350 as enacted Pursuant
      to Section 906of
      the Sarbanes-Oxley Act of
2002.
 24