10-Q: NIMS Reports Q1 2026 Loss, Going Concern Doubts Persist

Non-Invasive Monitoring Systems, Inc. (NIMS) filed its Q1 2026 10-Q, reporting a net loss of $42,000 and continued substantial doubt about its ability to continue as a going concern.

Summary

• The company reported a net loss of $42,000 for the three months ended October 31, 2025, a decrease from $77,000 for the same period in 2024.
• General and administrative expenses decreased significantly to $25,000 for the three months ended October 31, 2025, compared to $63,000 in the prior year, primarily due to reductions in professional fees and insurance premiums.
• Interest expense related to related parties increased to $17,000 for the three months ended October 31, 2025, from $14,000 in the prior year, due to additional promissory notes.
• The company is classified as a shell company with no current operations, inventory, or immediate plans to develop or market new products.
• Substantial doubt exists about the company's ability to continue as a going concern, evidenced by continuous net losses, cash outflows from operating activities, and a shareholders' deficit of $989,000 as of October 31, 2025.
• Cash on hand was $6,000 at October 31, 2025, with negative working capital of approximately $989,000, which is not sufficient to meet anticipated cash requirements for the next 12 months.
• Management is actively seeking potential mergers, acquisitions, strategic collaborations, and additional promissory notes from related parties.
• Material weaknesses in internal control over financial reporting were identified, stemming from insufficient personnel for segregation of duties and undocumented internal control procedures.
• Outstanding notes payable to related parties totaled $620,000 as of October 31, 2025, up from $595,000 as of July 31, 2025, with an 11% annual interest rate.
• The maturity date for all outstanding related party promissory notes was extended from December 31, 2025, to June 30, 2026.
• Subsequent to the quarter end, on January 2, 2026, the company entered into a new promissory agreement with Frost Gamma Investments Trust for an additional $100,000.

Sentiment

Score: 2

Explanation: StockSavvy.ai views this as a highly negative report given the persistent going concern issues, lack of operations, and identified material weaknesses in internal controls, despite a reduced net loss.

Positives

• Net loss decreased to $42,000 for the three months ended October 31, 2025, from $77,000 in the comparable prior year period.
• General and administrative expenses saw a significant reduction of $38,000, decreasing to $25,000, primarily due to lower professional fees and insurance premiums.
• Net cash used in operating activities decreased to $22,000 for the three months ended October 31, 2025, from $65,000 in the prior year.
• The company is now current in its reporting obligations with the SEC after previous delays.

Negatives

• The company remains a shell company with no active operations, inventory, or plans for product development or marketing.
• Substantial doubt about the company's ability to continue as a going concern persists due to ongoing losses and cash outflows.
• A shareholders' deficit of $989,000 was reported as of October 31, 2025, an increase from $947,000 at July 31, 2025.
• Cash on hand is critically low at $6,000 as of October 31, 2025, which is insufficient to cover anticipated cash requirements for the next 12 months.
• Negative working capital of approximately $989,000 indicates severe liquidity issues.
• Material weaknesses in internal control over financial reporting were identified, specifically concerning insufficient personnel for segregation of duties and undocumented procedures.
• The company continues to be highly dependent on related-party financing for its liquidity.

Risks

• Substantial doubt about the company's ability to continue as a going concern.
• The company's history of losses and accumulated deficit.
• The need for additional financing, with no assurance that such financing will be available on acceptable terms or at all.
• Potential for dilution to existing stockholders if additional equity or convertible debt securities are issued.
• Dependence on management for strategic direction and financing efforts.
• Risks related to proprietary rights, although the company currently has no operations.
• Volatility in economic conditions may limit the company's ability to access capital in a timely manner.
• Material weaknesses in internal control over financial reporting could lead to undetected misstatements.
• Risk of future reporting delays, which could negatively impact investor confidence and stock liquidity.

Future Outlook

The company expects to incur losses for the foreseeable future and anticipates needing additional external financing through public or private equity offerings, debt financings from shareholders, or collaborative agreements. There is no assurance that such additional financing will be available on acceptable terms or at all. Management is actively seeking potential mergers, acquisitions, and strategic collaborations.

Management Comments

• "We are currently exploring promissory notes and other opportunities for additional capital."
• "We expect to incur losses for the foreseeable future."
• "We are assessing potential mergers, acquisitions and strategic collaborations."
• "The Interim Chief Executive Officer and Chief Financial Officer concluded that, as of that date, the Company’s disclosure controls and procedures were not effective due to the material weakness identified below."

Industry Context

StockSavvy.ai notes that for a shell company with no active operations, the primary focus shifts from operational performance to capital structure, liquidity, and strategic alternatives. The continued reliance on related-party financing is typical for such entities struggling to attract external capital, highlighting the challenges in the biotechnology or medical device sector for non-operational firms.

Comparison to Industry Standards

• StockSavvy.ai observes that a shareholders' deficit of $989,000 and cash of only $6,000 are significantly below industry benchmarks for operational companies, even small-cap ones, indicating severe financial distress.
• The identified material weaknesses in internal controls, specifically regarding insufficient personnel and undocumented procedures, are a serious governance concern, contrasting sharply with the robust control environments expected of publicly traded companies like Bio-Techne Corporation or Medtronic plc, which maintain comprehensive internal control frameworks.
• The reliance on related-party debt at an 11% interest rate, while providing necessary liquidity, is higher than typical commercial lending rates for established businesses, reflecting the company's distressed financial state and limited access to conventional financing options available to healthier peers.

Corporate Governance

Related Party Transactions

• The company is provided office space in Miami, Florida, on a month-to-month basis by a company controlled by Dr. Phillip Frost, a beneficial owner of more than 10% of the company's common stock. No rent expense was recorded for the three months ended October 31, 2025 and 2024.
• The company's Chief Financial Officer also serves as the Chief Financial Officer and Co-Chief Executive Officer of Cocrystal Pharma, Inc., a Nasdaq-listed biotechnology company where Dr. Frost serves on the Board.
• Accounts payable included $5,600 due to an officer and director of the company as of October 31, 2025.
• Outstanding notes payable to Frost Gamma Investments Trust totaled $470,000 as of October 31, 2025, accruing interest at 11% per annum, with a maturity date extended to June 30, 2026.
• Outstanding notes payable to Dr. Jane Hsiao (Chairman and Interim CEO, beneficial owner >10% common stock) totaled $150,000 as of October 31, 2025, accruing interest at 11% per annum, with a maturity date extended to June 30, 2026.
• On January 2, 2026, the company entered into a new promissory agreement with Frost Gamma Investments Trust for an additional $100,000, also accruing interest at 11% per annum and due June 30, 2026.

Stakeholder Impact

• Shareholders face significant risk of dilution if the company pursues equity financing, and potential loss of investment due to the persistent going concern issues and lack of operational viability.
• Creditors, particularly related parties, bear the primary financial risk by continuously providing debt financing to a non-operational entity with uncertain prospects.
• Employees (limited administration) face job insecurity given the company's shell status and going concern doubts.

Next Steps

• Management is seeking potential mergers, acquisitions, and strategic collaborations.
• Management is seeking additional promissory notes from related parties to address liquidity needs.
• The company needs to address the identified material weaknesses in internal control over financial reporting.

Key Dates

Recommendation

The company is a non-operational shell with persistent and severe going concern issues, minimal cash, a growing shareholders' deficit, and identified material weaknesses in internal controls. While the net loss decreased, it's due to reduced administrative costs, not revenue generation. The reliance on related-party debt is unsustainable long-term without a viable business plan. The risks far outweigh any potential for recovery, making it a highly speculative and distressed investment.

Keywords

Non-Invasive Monitoring Systems, NIMU, 10-Q, Quarterly Report, Shell Company, Going Concern, Financial Results, Related Party Debt, Corporate Governance, Internal Controls, OTC Pink, WBPA, Exer-Rest, Dr. Phillip Frost, Dr. Jane Hsiao