8-K: Non-Invasive Monitoring Secures $810K Convertible Note

Non-Invasive Monitoring Systems, Inc. has secured an $809,705.75 convertible note to repay existing related-party debt, with conversion tied to a pending merger.

Summary

• Non-Invasive Monitoring Systems, Inc. (the Maker) issued a Convertible Promissory Note (the Note) for $809,705.75 to Defender Opportunity LLC (the Holder) on June 24, 2026.
• The proceeds from the Note Sale Transaction were used to repay $720,000 in principal and $89,705.75 in accrued interest on outstanding promissory notes (Original Notes) held by Dr. Jane Hsaio (an officer and director) and an affiliate of Dr. Phillip Frost (a director).
• The Note bears interest at 11% per annum until November 12, 2026, increasing to 22% per annum thereafter, with a maturity date of December 31, 2026.
• No interest will be payable on the Note if the previously disclosed merger with Gravitics, Inc. (dated March 6, 2026) is consummated on or before September 30, 2026.
• The Note is convertible into common stock at the Holder's option at a conversion price of $0.01966 per share, subject to a 4.99% beneficial ownership limitation (which can be increased to 9.99%).
• The full amount of the Note will automatically convert into common stock at the conversion price upon the closing of the merger with Gravitics, Inc.
• The Company committed to filing a registration statement for the resale of the conversion shares within 60 days after the merger's effective date and to use commercially reasonable efforts to make it effective.
• Dr. Frost and Dr. Hsiao still hold $300,000 in Remaining Notes, which are non-convertible and are expected to be repaid from proceeds of a financing related to the merger.

Sentiment

Score: 5

Explanation: StockSavvy.ai views this as a neutral to slightly negative development. While it addresses immediate related-party debt, the high interest rates and potential for significant dilution, coupled with the critical dependence on the merger for favorable terms, introduce new financial pressures and risks.

Positives

• The Company successfully refinanced $809,705.75 of existing promissory notes, including principal and accrued interest, held by related parties.
• The new financing from an unaffiliated third party (Defender Opportunity LLC) reduces the Company's reliance on insider debt.
• The Convertible Note provides a mechanism for the Company to potentially avoid interest payments if the merger with Gravitics, Inc. closes by September 30, 2026.
• The Company committed to registering the resale of the conversion shares, which can facilitate liquidity for the Holder.

Negatives

• The Convertible Note carries a high interest rate, starting at 11% and increasing to 22% after November 12, 2026, if the merger is not consummated by September 30, 2026.
• The conversion of the Note into common stock at $0.01966 per share could lead to significant dilution for existing shareholders.
• The Company remains obligated for an additional $300,000 in promissory notes held by related parties, which are expected to be repaid from future merger-related financing.
• Failure to register the resale of conversion shares within the stipulated timeframe could result in liquidated damages of 1.0% per month (up to 6.0% total) of the outstanding principal amount.

Risks

• Failure to consummate the merger with Gravitics, Inc. by September 30, 2026, will result in the Company incurring substantial interest payments on the Convertible Note (11% then 22%).
• The conversion of the Note into common stock will dilute the ownership percentage of current shareholders.
• The Company faces potential financial penalties (liquidated damages) if it fails to timely register the resale of the Conversion Shares.
• The Company's ability to repay the remaining $300,000 in related-party notes is contingent on a future financing event tied to the merger, introducing further financial uncertainty.

Future Outlook

The Company's immediate future is closely tied to the consummation of its merger with Gravitics, Inc. by September 30, 2026, which would eliminate interest payments on the new convertible note. Post-merger, the Company plans to conduct additional financing to repay remaining related-party debt and will file a registration statement for the resale of conversion shares.

Management Comments

• Management, through the CFO, has executed a strategic financing agreement to address immediate debt obligations, particularly those owed to key officers and directors.
• The Company is actively pursuing the consummation of the merger with Gravitics, Inc., which is a critical condition for favorable terms on the newly issued convertible debt.

Industry Context

StockSavvy.ai notes that securing convertible debt with high interest rates (11-22%) often indicates a company with limited access to traditional, lower-cost financing, potentially due to its stage of development, financial health, or market perception. The reliance on a merger to mitigate interest costs highlights the strategic importance of the Gravitics, Inc. transaction for the Company's financial stability and future capital structure. This type of financing is common for smaller, growth-oriented companies or those undergoing significant corporate transitions.

Comparison to Industry Standards

• The interest rates of 11% rising to 22% are significantly higher than typical corporate debt for established, publicly traded companies, which often secure financing in the low single digits or mid-single digits, reflecting a higher perceived risk for Non-Invasive Monitoring Systems, Inc. compared to industry leaders.
• The conversion price of $0.01966 per share suggests a low valuation for the Company's common stock, which is not uncommon for micro-cap or pre-revenue companies, but it implies substantial dilution potential compared to companies with higher share prices.
• The beneficial ownership limitation of 4.99% (adjustable to 9.99%) is a standard protective measure in convertible debt agreements to prevent immediate change of control or triggering certain SEC reporting requirements for the holder, aligning with common practices for such transactions.

Related Party Transactions

• The proceeds from the Convertible Note were used to repay $720,000 in principal and $89,705.75 in accrued interest on promissory notes held by Dr. Jane Hsaio (an officer and director) and an affiliate of Dr. Phillip Frost (a director).
• Dr. Frost and Dr. Hsiao continue to hold $300,000 in promissory notes from the Company, which are expected to be repaid from future merger-related financing.

Stakeholder Impact

• Shareholders: Face potential dilution from the conversion of the Convertible Note and the high interest rates could impact future earnings if the merger deadline is missed.
• Creditors (Defender Opportunity LLC): Gains a convertible note with high interest and a clear path to conversion or repayment, with protections against non-compliance.
• Related Parties (Dr. Hsaio, Dr. Frost): A significant portion of their outstanding loans to the Company has been repaid, reducing their direct exposure, though $300,000 remains outstanding.
• Employees, Customers, Suppliers: Indirectly impacted by the Company's financial stability and strategic direction, particularly the success of the Gravitics merger.

Next Steps

• Consummation of the merger with Gravitics, Inc. on or before September 30, 2026.
• Preparation and filing of a registration statement with the SEC for the resale of Conversion Shares within 60 days after the effective date of the merger.
• Conducting a financing in connection with the merger to repay the remaining $300,000 in promissory notes held by Dr. Frost and Dr. Hsiao.

Key Dates

Recommendation

The filing indicates a necessary refinancing of related-party debt, which is a positive for corporate governance by reducing insider financial exposure. However, the high interest rates on the new convertible note and the potential for significant shareholder dilution upon conversion, especially if the merger is delayed, introduce new risks. The stock's performance will heavily depend on the successful and timely consummation of the Gravitics, Inc. merger. Without further information on the merger's prospects or the Company's operational performance, a 'hold' recommendation is appropriate, advising investors to monitor merger progress and its financial implications closely.

Keywords

Convertible Note, Debt Refinancing, Merger Agreement, Related Party Transaction, Dilution, SEC Filing, Promissory Note, Corporate Finance, Gravitics Inc.