Form 10-Q - Quarterly report [Sections 13 or 15(d)]

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 21549

Form 10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to________

Commission file number: 001-11789

ENCISION INC.

(Exact name of registrant as specified in its charter)

Colorado

84-1162056

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer Identification No.)

6797 Winchester Circle

Boulder, Colorado 80301

(Address of principal executive offices)

(303) 444-2600

(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	ECIA	OTC Bulletin Board

Securities registered under Section 12(g) of the Act: None

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.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ 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 company ☒
		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:

Common Stock no par value

(Class)

11,875,145 Shares

(outstanding at October 31, 2024)

ENCISION INC.

FORM 10-Q

For the Three and Six Months ended September 30, 2024

INDEX

		Page Number
PART I.	FINANCIAL INFORMATION	1
ITEM 1 -	Condensed Unaudited Interim Financial Statements:	1
	Condensed Unaudited Balance Sheets as of September 30, 2024 and Audited Balance Sheets as of March 31, 2024	1
	Condensed Unaudited Statements of Operations for the Three and Six months Ended September 30, 2024 and 2023	2
	Condensed Unaudited Statements of Cash Flows for the Six months Ended September 30, 2024 and 2023	3
	Notes to Condensed Unaudited Interim Financial Statements	4

ITEM 2 -	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
ITEM 3 -	Quantitative and Qualitative Disclosures About Market Risk	16
ITEM 4 -	Controls and Procedures	17

PART II.	OTHER INFORMATION	18
ITEM 1 -	Legal Proceedings	18
ITEM 1A -	Risk Factors	18
ITEM 2 -	Unregistered Sales of Equity Securities and Use of Proceeds	18
ITEM 3 -	Defaults Upon Senior Securities	18
ITEM 4 -	Mine Safety Disclosures	18
ITEM 5 -	Other Information	18
ITEM 6 -	Exhibits	19
SIGNATURES		20

PART I FINANCIAL INFORMATION

ITEM 1 - Condensed Interim Financial Statements

Encision Inc.

Condensed Balance Sheets


	September 30, 2024 Unaudited			March 31, 2024 Audited
ASSETS
Current assets:
Cash	$	230,014		$	42,509
Accounts receivable		817,002			891,129
Inventories		1,164,666			1,402,338
Prepaid expenses		70,628			90,298
Total current assets		2,282,310			2,426,274
Equipment:
Furniture, fixtures and equipment, at cost		2,668,544			2,627,726
Accumulated depreciation		(2,402,419	)		(2,373,722	)
Equipment, net		266,125			254,004
Right of use asset		736,850			900,787
Patents, net		169,283			164,010
Other assets		69,376			65,641
TOTAL ASSETS	$	3,523,944		$	3,810,716
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	319,371		$	346,049
Line of credit		78,851			156,685
Secured notes		43,041			42,194
Accrued compensation		192,810			184,913
Other accrued liabilities		91,145			119,804
Accrued lease liability		414,730			370,377
Total current liabilities		1,139,948			1,220,022
Long-term liabilities:
Secured notes		200,496			67,336
Accrued lease liability		481,411			696,610
Total liabilities		1,821,855			1,983,968
Commitments and contingencies (Note 4)		—			—
Shareholders’ equity:
Preferred stock, no par value: 10,000,000 shares authorized; none issued and outstanding		—			—
Common stock and additional paid-in capital, no par value: 100,000,000 shares authorized; 11,875,145 and 11,858,627 issued and outstanding at September 30, 2024 and March 31, 2024, respectively		24,395,358			24,371,795
Accumulated (deficit)		(22,693,269	)		(22,545,047	)
Total shareholders’ equity		1,702,089			1,826,748
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	3,523,944		$	3,810,716

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

Encision Inc.

Condensed Statements of Operations

(Unaudited)


	Three Months Ended						Six Months Ended
	September 30, 2024			September 30, 2023			September 30, 2024			September 30, 2023
NET REVENUE:
Product	$	1,653,820		$	1,752,413		$	3,245,779		$	3,365,965
Service		101,568			73,978			140,539			113,809
Total revenue		1,755,388			1,826,391			3,386,318			3,479,774

COST OF REVENUE:
Product		882,886			926,455			1,550,520			1,696,493
Service		44,020			37,327			64,653			57,947
Total cost of revenue		926,906			963,782			1,615,173			1,754,440
GROSS PROFIT		828,482			862,609			1,771,145			1,725,334
OPERATING EXPENSES:
Sales and marketing		458,480			389,342			881,716			822,778
General and administrative		373,405			366,377			725,310			755,133
Research and development		155,515			100,854			294,695			269,274
Total operating expenses		987,400			856,573			1,901,721			1,847,185
OPERATING INCOME (LOSS)		(158,918	)		6,036			(130,576	)		(121,851	)
Interest expense, net		(10,598	)		(16,851	)		(16,967	)		(31,083	)
Other income (expense), net		(746	)		3,286			(679	)		4,951
Interest expense and other income (expense), net		(11,344	)		(13,565	)		(17,646	)		(26,132	)
(LOSS) BEFORE PROVISION FOR INCOME TAXES		(170,262	)		(7,529	)		(148,222	)		(147,983	)
Provision for income taxes		—			—			—			—
NET (LOSS)	$	(170,262	)	$	(7,529	)	$	(148,222	)	$	(147,983	)
Net (loss) per share—basic and diluted	$	(0.01	)	$	0.00		$	(0.01	)	$	(0.01	)
Weighted average shares—basic and diluted		11,875,145			11,769,543			11,875,145			11,769,543

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

Encision Inc.

Condensed Statements of Cash Flows

(Unaudited)


Six Months Ended	September 30, 2024			September 30, 2023
Cash flows (used in) operating activities:
Net (loss)	$	(148,222	)	$	(147,983	)
Adjustments to reconcile net (loss) to net cash (used in) operating activities:
Depreciation and amortization		42,525			43,775
Stock-based compensation expense related to stock options		25,011			26,149
Provision for potential inventory obsolescence		83,152			64,000
Change in operating assets and liabilities:
Right of use asset, net		(6,909	)		(97,490	)
Accounts receivable		74,127			(103,629	)
Inventories		154,520			193,079
Prepaid expenses and other assets		15,935			54,630
Accounts payable		(26,678	)		47,198
Accrued compensation and other accrued liabilities		(20,762	)		(82,732	)
Net cash provided by (used in) operating activities		192,699			(3,003	)
Cash flows (used in) investing activities:
Acquisition of property and equipment		(42,559	)		(122	)
Patent costs		(17,359	)		(16,727	)
Net cash (used in) investing activities		(59,918	)		(16,849	)
Cash flows from financing activities:
(Paydown) of line of credit		(77,834	)		—
(Payments) from options exercised		(1,449	)		—
Borrowing from secured notes		134,007			136,887
Net cash provided by (used in) financing activities		54,724			136,887

Net increase in cash		187,505			117,035
Cash, beginning of fiscal year		42,509			188,966
Cash, end of six months	$	230,014		$	306,001

Supplemental disclosures of cash flow information:
Cash paid during the year for interest	$	16,967		$	31,083

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

ENCISION INC.

NOTES TO UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

(Unaudited)

Note 1. ORGANIZATION AND NATURE OF BUSINESS

Encision Inc. ( the “Company”) is a medical device company that designs, develops, manufactures and markets patented surgical instruments that provide greater safety to, and saves lives of, patients undergoing minimally-invasive surgery. The Company believes that the patented AEM^® (Active Electrode Monitoring) surgical instrument technology is changing the marketplace for electrosurgical devices and instruments by providing a solution to a patient safety risk in laparoscopic surgery. The Company sales to date have been made principally in the United States.

The Company has an accumulated deficit of $22,693,269 at September 30, 2024. A significant portion of the Company operating funds has been provided by issuances of common stock and warrants, the exercise of stock options to purchase common stock, loans, and (in some periods) by operating profits. Shareholders’ equity decreased by $124,659 since March 31, 2024 because of net loss of $148,222 and stock-based compensation of $25,011. Should the Company’s liquidity be diminished in the future because of operating losses, the Company may be required to seek additional capital.

The strategic marketing and sales plan is designed to expand the use of the Company products in surgically active hospitals and surgery centers in the United States.

Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation. The unaudited condensed interim financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles accepted in the United States (“GAAP”) have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures made are adequate to make the information presented not misleading. The unaudited condensed interim financial statements and notes thereto should be read in conjunction with the financial statements and the notes thereto included in the Annual Report on Form 10-K for the fiscal year ended March 31, 2024 filed on July 15, 2024.

The accompanying unaudited condensed interim financial statements have been prepared, in all material respects, in conformity with the standards of accounting measurements and reflect, in the opinion of management, all adjustments necessary to summarize fairly the financial position and results of operations for such periods in accordance with GAAP. All adjustments are of a normal recurring nature. The results of operations for the most recent interim period are not necessarily indicative of the results to be expected for the full year.

The Company had a net loss of $170,262 and $148,222 for the three and six months ended September 30, 2024, respectively. At September 30, 2024, the Company had cash of $230,014 current borrowings of $78,851 and borrowing capacity up to $921,149, as restricted by eligible accounts receivable, under the line of credit. Working capital was $1,142,362, a decrease of $64,890 from March 31, 2024. The Company increased $187,505 of cash in the fiscal six months ended September 30, 2024, primarily because of cash generated by operating activities and borrowings. Management is developing plans to ensure that the Company has the working capital necessary to fund operations. The Company increased the pricing on products to mitigate higher material costs. Management concludes that it is probable that cash resources and line of credit will be sufficient to meet cash requirements for twelve months from the issuance of the unaudited condensed financial statements. Therefore, the accompanying unaudited condensed financial statements have been prepared assuming that the Company will continue as a going concern.

Use of Estimates in the Preparation of Financial Statements. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. Such estimates and assumptions affect the reported amounts of assets and liabilities as well as disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents. For purposes of reporting cash flows, the company considers all cash and highly liquid investments with an original maturity of three months or less to be cash equivalents.

Fair Value of Financial Instruments. The financial instruments consist of cash, trade receivables, payables and Economic Injury Disaster Loan (“EIDL”) loan. The carrying values of cash and trade receivables approximate their fair value due to their short maturities. The fair values of the EIDL loan approximates the carrying value based on estimated discounted future cash flows using the current rates at which similar loans would be made.

Concentration of Credit Risk. Financial instruments, which potentially subject us to concentrations of credit risk, consist of cash and accounts receivable. From time to time, the amount of cash on deposit with financial institutions may exceed the $250,000 federally insured limit. We believe that cash on deposit that exceeds $250,000 with financial institutions is financially sound and the risk of loss is minimal.

The Company has no off-balance sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements. The Company maintains the majority of cash balances with one financial institution in the form of demand deposits.

Accounts receivable are typically unsecured and are derived from transactions with and from entities in the healthcare industry primarily located in the United States. Accordingly, the Company may be exposed to credit risk generally associated with the healthcare industry. The accounts receivable balance at September 30, 2024 of $817,002 and at March 31, 2024 of $891,129 included no more than 8% from any one customer.

Inventories. Inventories are stated at the lower of cost (first-in, first-out basis) or net realizable value. The Company reduces inventory for estimated obsolete or unmarketable inventory equal to the difference between the cost of inventory and the net realizable value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. At September 30, 2024 and March 31, 2024 inventory consisted of the following:

Schedule of inventory
	September 30, 2024		March 31, 2024
Raw materials	$	857,366	$	1,044,161
Finished goods		307,300		358,177
Total inventories	$	1,164,666	$	1,402,338

Property and Equipment. Property and equipment are stated at cost, with depreciation computed over the estimated useful lives of the assets, generally five to seven years. Depreciation expense for the three and six months ended September 30, 2024 and 2023 was $16,295 and $30,438, respectively and $15,464 and $31,240, respectively. The Company uses the straight-line method of depreciation for property and equipment. Leasehold improvements are depreciated over the shorter of the remaining lease term or the estimated useful life of the asset. Maintenance and repairs are expensed as incurred and major additions, replacements and improvements are capitalized.

Long-Lived Assets. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. A long-lived asset is considered impaired when estimated future cash flows related to the asset, undiscounted and without interest, are insufficient to recover the carrying amount of the asset. If deemed impaired, the long-lived asset is reduced to its estimated fair value. Long-lived assets to be disposed of are reported at the lower of their carrying amount or estimated fair value less cost to sell.

Patents. The costs of applying for patents are capitalized and amortized on a straight-line basis over the lesser of the patent’s economic or legal life (20 years from the date of application in the United States). Capitalized costs are expensed if patents are not issued. The Company reviews the carrying value of patents periodically to determine whether the patents have continuing value and such reviews could result in the conclusion that the recorded amounts have been impaired.

Income Taxes. The Company accounts for income taxes under the provisions of FASB Accounting Standards Codification (“ASC”) Topic 740, “Accounting for Income Taxes” (“ASC 740”). ASC 740 requires recognition of deferred income tax assets and liabilities for the expected future income tax consequences, based on enacted tax laws, of temporary differences between the financial reporting and tax bases of assets and liabilities. ASC 740 also requires recognition of deferred tax assets for the expected future tax effects of all deductible temporary differences, loss carryforwards and tax credit carryforwards. Deferred tax assets are then reduced, if deemed necessary, by a valuation allowance for the amount of any tax benefits, which, more likely than not based on current circumstances, are not expected to be realized. As a result, no provision for income tax is reflected in the accompanying statements of operations. Should the Company achieve sufficient, sustained income in the future, the Company may conclude that some or all of the valuation allowance should be reversed. The Company is required to make many subjective assumptions and judgments regarding income tax exposures. At September 30, 2024, the Company had no unrecognized tax benefits, which would affect the effective tax rate if recognized and had no accrued interest, or penalties related to uncertain tax positions.

Revenue Recognition. The Company records revenue at a single point in time, when control is transferred to the customer. The Company will continue to apply the current business processes, policies, systems and controls to support recognition and disclosure. The shipping policy is Free On Board (FOB) Shipping Point. We recognize revenue from sales to stocking distributors when there is no right of return, other than for normal warranty claims. The Company has no ongoing obligations related to product sales, except for normal warranty obligations. As presented on the Statement of Operations revenue is disaggregated between product revenue and service revenue. As it relates specifically to product revenue, the Company does not believe further disaggregation is necessary as substantially all of the product revenue comes from multiple products within a line of medical devices. The engineering service contracts are billed on a time and materials basis and revenue is recognized over time as the services are performed.

Research and Development Expenses. The Company expenses research and development costs for products and processes as incurred.

Stock-Based Compensation. Stock-based compensation is presented in accordance with the guidance of ASC Topic 718, “Compensation – Stock Compensation” (“ASC 718”). Under the provisions of ASC 718, the Company is required to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the statements of operations.

Stock-based compensation expense recognized under ASC 718 for the three and six months ended September 30, 2024 and 2023 was $12,637 and $25,011 and $13,074 and $26,149, respectively, which consisted of stock-based compensation expense related to grants of employee stock options.

Segment Reporting. In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280) ("ASU 2023-07"), Improvements to Reportable Segment Disclosures, requiring companies to disclose segment expense information based on what the chief operating decision maker (CODM) deems to be material. These disclosures must be made both quarterly and annually. As of September 30, 2024 the company is evaluating the adoption of Topic 280. The Company has concluded that we have two operating segments, product and service. Product designs, develops, manufactures and markets patented surgical instruments. Service performs electrical engineering activities for external entities.

Information, by segment, for the three and six months ended September 30, 2024 and 2023 follows:

Schedule of information by segment
	Three Months Ended September 30, 2024								Six Months Ended September 30, 2024
	Product			Service		Total			Product			Service		Total
Net revenue	$	1,653,820		$	101,568	$	1,755,388		$	3,245,779		$	140,539	$	3,386,318
Cost of revenue		882,886			44,020		926,906			1,550,520			64,653		1,615,173
Gross profit		770,934			57,548		828,482			1,695,259			75,886		1,771,145
Operating income (loss)		(216,466	)		57,548		(158,918	)		(206,462	)		75,886		(130,576	)
Depreciation and amortization		23,203			—		23,203			42,525			—		42,525
Patent and capital expenditures		40,377			—		40,377			59,918			—		59,918
Equipment and patents, net	$	435,408		$	—	$	435,408		$	435,408		$	—	$	435,408


	Three Months Ended September 30, 2023						Six Months Ended September 30, 2023
	Product		Service		Total		Product			Service		Total
Net revenue	$	1,752,413	$	73,978	$	1,826,391	$	3,365,965		$	113,809	$	3,479,774
Cost of revenue		926,455		37,327		963,782		1,696,493			57,947		1,754,440
Gross profit		825,958		36,651		862,609		1,669,472			55,862		1,725,334
Operating income (loss)		6,036		—		6,036		(177,714	)		55,862		(121,851	)
Depreciation and amortization		21,525		—		21,525		43,775			—		43,775
Patent and capital expenditures		16,350		—		16,350		16,849			—		16,849
Equipment and patents, net	$	439,484	$	—	$	439,484	$	439,484		$	—	$	439,484

Note 3. BASIC AND DILUTED INCOME AND LOSS PER COMMON SHARE

The Company reports both basic and diluted net income (loss) per share. Basic net income or loss per common share is computed by dividing net income or loss for the period by the weighted average number of common shares outstanding for the period. Diluted net income or loss per common share is computed by dividing the net income or loss for the period by the weighted average number of common and potential common shares outstanding during the period if the effect of the potential common shares is dilutive. The shares used in the calculation of dilutive potential common shares exclude options to purchase shares where the exercise price was greater than the average market price of common shares for the period.

The following table presents the calculation of basic and diluted net income (loss) per share:


	Three Months Ended						Six Months Ended
	September 30, 2024			September 30, 2023			September 30, 2024			September 30, 2023
Net income (loss)	$	(170,262	)	$	(7,529	)	$	(148,222	)	$	(147,983	)
Weighted-average basic shares outstanding		11,875,145			11,769,543			11,875,145			11,769,543
Effect of dilutive securities		—			—			—			—
Weighted-average diluted shares		11,875,145			11,769,543			11,875,145			11,769,543
Basic net income (loss) per share	$	(0.01	)	$	0.00		$	(0.01	)	$	(0.01	)
Diluted net income (loss) per share	$	(0.01	)	$	0.00		$	(0.01	)	$	(0.01	)
Antidilutive employee stock options		1,099,000			1,049,000			1,099,000			1,049,000

Note 4. COMMITMENTS AND CONTINGENCIES

The Company has a noncancelable lease agreement for the facilities at 6797 Winchester Circle, Boulder, Colorado. The lease expires October 31, 2026.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) ("ASU 2016-02"), which modified lease accounting for both lessees and lessors to increase transparency and comparability by recognizing lease assets and lease liabilities by lessees for those leases classified as either finance or operating leases under previous accounting standards and disclosing key information about leasing arrangements. The Company adopted Topic 842 on April 1, 2019, using the alternative modified transition method, which requires a cumulative effect adjustment, if any, to the opening balance of retained earnings to be recognized on the date of adoption with prior periods not restated. There was no cumulative effect adjustment recorded on April 1, 2019. The primary impact was the balance sheet recognition of right-of-use (“ROU”) assets and lease liabilities for operating leases as a lessee.

The Company determines if an arrangement contains a lease at inception. The Company currently does not have any finance leases. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. ROU assets also include any initial direct costs incurred and any lease payments made at or before the lease commencement date, less lease incentives received. The Company uses the incremental borrowing rate based on the information available at the commencement date in determining the lease liabilities as the leases do not provide an implicit rate. Lease expense is recognized on a straight-line basis over the lease term.

Effective November 9, 2017, the Company extended the noncancelable lease agreement through July 31, 2024, and further extended it through October 31, 2026, for the facilities at 6797 Winchester Circle, Boulder, Colorado. Lease expense was $357,503 for the fiscal year ended March 31, 2024 and $329,255 for the fiscal year ended March 31, 2023. Lease expense for the six months ended September 30, 2024 is $163,937. The minimum future lease payment, by fiscal year, as of September 30, 2024 is as follows:


Fiscal Year	Amount
2025	$	199,531
2026		430,398
2027		266,212
Total	$	896,141

On August 4, 2020, the Company received $150,000 in loan funding from the U.S. Small Business Administration (“SBA”) under the Economic Injury Disaster Loan (“EIDL”) program administered by the SBA, which program was expanded pursuant to the CARES Act. The EIDL is evidenced by a promissory note, dated August 1, 2021 in the original principal amount of $150,000 with the SBA, the lender. Under the terms of the Note, interest accrues on the outstanding principal at the rate of 3.75% per annum. The term of the Note is thirty years, though it may be payable sooner upon an event of default under the Note.

On November 15, 2023, he Company entered into a loan and security agreement with Pathward, N.A. (formerly Crestmark Bank). The loan is due on demand and has no financial covenants. Under the agreement, the Company was provided with a line of credit that is not to exceed the lesser of $1,000,000 or 85% of eligible accounts receivable. The interest rate is prime rate plus 0.5%, with a floor of 6.75%, plus a monthly maintenance fee of 0.4%, based on the average monthly loan balance. Interest is charged on a minimum loan balance of $300,000, a loan fee of 0.5% at closing and annually, and an exit fee of 3%, 2% and 1% during years one, two and three respectively.

The minimum future EIDL payment, by fiscal year, as of September 30, 2024 is as follows:


Fiscal Year	Amount
2025	$	1,581
2026		3,147
2027		3,189
2028		3,294
Thereafter		143,892
Total	$	155,103

During June 2020, The Company entered into a note agreement with U.S. Bank for $92,000. The note is for five5 years at a 5% interest rate and the proceeds were used to purchase equipment. The note is secured by the equipment.

The minimum future U.S. Bank payment, by fiscal year, as of September 30, 2024 is as follows:


Fiscal Year	Amount
2025	$	9,200
2026		13,800
Total	$	23,000

During September 2022, the Company entered into a note agreement with U.S. Bank for $115,004. The note is for five5 years at a 6% interest rate and the proceeds were used to purchase equipment. The note is secured by the equipment.

The minimum future principal U.S. Bank payment, by fiscal year, as of September 30, 2024 is as follows:


Fiscal Year	Amount
2025		11,897
2026		23,794
2027		23,794
2028		5,949
Total	$	65,434

Aside from the line of credit, operating lease, EIDL loan and U.S. Bank loans, the Company does not have any material contractual commitments requiring settlement in the future.

The Company is subject to regulation by the United States Food and Drug Administration (“FDA”). The FDA provides regulations governing the manufacture and sale of products and regularly inspects the Company and other manufacturers to determine compliance with these regulations. the Company believes that it was in substantial compliance with all known regulations at September 30, 2024. FDA inspections are conducted periodically at the discretion of the FDA. The latest inspection by the FDA occurred in October 2019.

Note 5. SHARE-BASED COMPENSATION

The provisions of ASC 718-10-55 requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors, including employee stock options and RSUs, based on estimated fair values. The following table summarizes stock-based compensation expense related to employee stock options for the three and six months ended September 30, 2024 and 2023, which was allocated as follows:


	Three Months Ended				Six Months Ended
	September 30, 2024		September 30, 2023		September 30, 2024		September 30, 2023
Cost of sales	$	201	$	—	$	402	$	—
Sales and marketing		1,750		1,779		3,369		3,558
General and administrative		10,606		10,254		21,080		20,508
Research and development		80		1,041		160		2,083
Stock-based compensation expense	$	12,637	$	13,074	$	25,011	$	26,149

Share-based compensation cost for stock options is measured at the grant date, based on the fair value as calculated by the Black-Scholes-Merton ("BSM") option-pricing model. The BSM option-pricing model requires the use of actual employee exercise behavior data and the application of a number of assumptions, including expected volatility, risk-free interest rate and expected dividends. There were 45,000 and 410,000 stock options granted and 22,000 and 62,000 exercised or forfeited during the three and six months ended September 30, 2024, respectively. As of September 30, 2024, approximately $199,000 of total unrecognized compensation costs related to nonvested stock options is expected to be recognized over a period of five years.

Note 6. RELATED PARTY TRANSACTION

The Company paid consulting fees of $15,043 and $27,670 and $15,747 and $32,032 to an entity owned by one of the board members during the three and six months ended September 30, 2024 and 2023, respectively.

Note 7. SUBSEQUENT EVENTS

Management evaluated all of the activity as of the date the unaudited condensed interim financial statements were issued and concluded that no subsequent events have occurred that would require recognition in the financial statements or disclosed in the notes to the unaudited condensed interim financial statements.

ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Certain statements contained in this section on Management’s Discussion and Analysis are not historical facts, including statements about strategies and expectations with respect to new and existing products, market demand, acceptance of new and existing products, marketing efforts, technologies and opportunities, market and industry segment growth, and return on investments in products and markets. These statements are forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and involve substantial risks and uncertainties that may cause actual results to differ materially from those indicated by the forward looking statements. All forward looking statements in this section on Management’s Discussion and Analysis are based on information available to us on the date of this document, and we assume no obligation to update such forward looking statements. Readers of this Form 10-Q are strongly encouraged to review the section entitled “Risk Factors” in the Form 10-K for the fiscal year ended March 31, 2024.

General

Encision Inc., a medical device company based in Boulder, Colorado, has developed and markets innovative technology that provides unprecedented outcomes and patient safety in minimally-invasive surgery. Approximately one in every three surgeons may have a patient injury each year from preventable stray energy burns. We believe that the patented Active Electrode Monitoring (“AEM®”) AEM EndoShield™ Burn Protection System is changing the marketplace for electrosurgical devices and laparoscopic instruments by providing a solution to a well-documented hazard unique to laparoscopic surgery. The Center for Medicare and Medicaid Services has published its Hospital-Acquired Condition Reduction Program. The program has begun to levy as much as a 1% penalty on Medicare reimbursements to hospitals in the lower quadrant of performance for selected quality indicators, including accidental puncture and laceration (“APL”). Examples of APL include the use of a cautery device (electrosurgery) or scissors to dissect a tissue plane that errantly causes an injury to underlying bowels.

We address market opportunities created by the increase in minimally-invasive surgery (“MIS”) and surgeons’ use of electrosurgery devices in these procedures. The product opportunity exists in that monopolar electrosurgery instruments used in laparoscopic procedures provide excellent clinical results, but are also susceptible to causing inadvertent collateral tissue damage outside the surgeon’s field of view due to insulation failure and capacitive coupling. The risk of unintended electrosurgical burn injury to the patient in laparoscopic surgery has been well documented. This risk poses a threat to patient safety, including the risk of death, and creates liability exposure for surgeons and hospitals, as well as increased and preventable readmissions.

The patented AEM technology provides surgeons with the desired tissue effects, while capturing stray electrosurgical energy that can cause unintended and unseen tissue injury that may result in death. AEM Surgical Instruments are equivalent to conventional instruments in size, shape, ergonomics, functionality and competitive pricing, but they incorporate “Active Electrode Monitoring” technology to dynamically and continuously monitor the flow of electrosurgical current, thereby preventing patient injury from stray energy burns. With the “shielded and monitored” instruments, surgeons can perform electrosurgical procedures more safely, effectively and economically than is possible using conventional instruments or alternative energy sources.

The AEM system consists of shielded 5mm AEM Instruments and an AEM monitor. The AEM Instruments are designed to function identically to the conventional 5mm instruments that surgeons are familiar with, but with the added benefit of enhanced patient safety. The entire line of laparoscopic instruments has the integrated AEM design and includes the full range of instruments that are common in laparoscopic surgery today. The AEM monitor is compatible with most electrosurgical generators and can also be adapted for use in robotic systems. AEM Surgical Instruments provide enhanced patient safety, require no change in surgeon technique and are cost competitive. Thus, conversion to AEM Surgical Instruments is easy and economical.

AEM technology has been recommended and endorsed by many groups involved in MIS. Surgeons, nurses, biomedical engineers, the medicolegal community, malpractice insurance carriers and electrosurgical device manufacturers advocate the use of AEM technology. We have focused our marketing strategies to date on expanding the market awareness of the AEM technology and our broad independent endorsements and have continued efforts to improve and expand the AEM technology penetration.

When a hospital or surgery center changes to AEM technology, we receive recurring revenue from sales of replacement instruments. We believe that there is no directly competing technology to supplant AEM products. The replacement market of reusable and disposable AEM products in hospitals and surgery centers that use our AEM technology represented over 90% of our product revenue during the three and six months ended September 30, 2024. This revenue stream is expected to grow as the base of accounts using AEM technology expands. In addition, we intend to further develop disposable versions of more of our AEM products in order to meet market demands and expand our sales opportunities.

We have an accumulated deficit of $22,693,269 at September 30, 2024. A significant portion of our operating funds have been provided by issuances of our common stock and warrants and the exercise of stock options to purchase our common stock, loans, and (in some periods) by operating profits. Should our liquidity be diminished in the future because of operating losses, we may be required to seek additional capital.

During the six months ended September 30, 2024, we generated $192,699 of cash in our operating activities and used $42,559 for investments in property and equipment. At September 30, 2024, we had $230,014 in cash and at March 31, 2024 we had $42,509 in cash available to fund future operations, an increase of $187,505 from March 31, 2024. The increase to cash was principally the result of cash generated by operating activities and borrowing from our line of credit. Our working capital was $1,142,362 at September 30, 2024 compared to $1,206,252 at March 31, 2024.

Historical Perspective

We were organized in 1991 and spent several years developing the AEM monitoring system and protective sheaths to adapt to conventional electrosurgical instruments. We have invested heavily in an effort to protect our valuable technology, and, as a result of this effort, we have been issued 16 unexpired relevant patents that together form a significant intellectual property position. Our patents relate to the basic shielding and monitoring technologies that we incorporate into our AEM products.

Our AEM Surgical Instruments have been engineered to provide a seamless transition for surgeons switching from conventional laparoscopic instruments. AEM technology has been integrated into instruments that have the same look, feel and functionality as conventional instruments that surgeons have been using for years. The AEM product line encompasses the full range of instrument sizes, types and styles favored by surgeons. Additionally, we continue to improve quality and add to the product line. These additions include more disposable versions, the introduction of hand-activated instruments, our enhanced scissors, our eEdge™ scissors, our EM3 AEM Monitor, our AEM EndoShield Burn Protection System and the recent introduction of our AEM 2X enTouch® Scissors. Hospitals can make a complete and smooth conversion to our product line, thereby advancing patient safety in MIS with optimal convenience.

Outlook

Installed Base of AEM Monitoring Equipment: We believe that sales of our installed base of AEM products will increase as the inherent risks associated with monopolar laparoscopic electrosurgery become more widely acknowledged and as we focus on increasing our sales efficiency and continue to enhance our product line. We expect that the replacement sales of electrosurgical instruments and accessories will also increase as additional facilities adopt AEM technology. We anticipate that the efforts to improve the productivity of sales representatives carrying the AEM product line, along with the introduction of next generation products, may provide the basis for increased sales and profitable operations. However, these measures, or any others that we may adopt, may not result in either increased sales or profitable operations.

We believe that the unique performance of the AEM technology and our breadth of independent endorsements provide an opportunity for continued market share growth. In our view, market awareness and awareness of the clinical credibility of the AEM technology, as well as awareness of our endorsements, are improving, and we expect this awareness to benefit our sales efforts for the remainder of fiscal year 2025. Our objectives for the remainder of fiscal year 2025 are to optimize sales execution, to expand market awareness of the AEM technology and to maximize the number of additional hospital and surgery center accounts switching to AEM instruments while retaining existing customers. In addition, acceptance of AEM products depends on surgeons’ preference for our instruments, which depends on factors such as ergonomics, quality and ease of use in addition to the technological and safety advantages of AEM products. If surgeons prefer other instruments to our instruments, our business results will suffer.

Possibility of Operating Losses: We have an accumulated deficit of $22,693,269 at September 30, 2024. A significant portion of our operating funds have been provided by issuances of our common stock and warrants and the exercise of stock options to purchase our common stock, loans, and (in some periods) by operating profits. Should our liquidity be diminished in the future because of operating losses, we may be required to seek additional capital. We have made strides toward improving our operating results but due to the ongoing need to develop, optimize and train our direct sales managers and the independent sales representative network, the need to support the development of refinements to our product line, and the need to increase sustained sales to a level adequate to cover fixed and variable operating costs, we may operate at a net loss. Sustained losses, or our inability to generate sufficient cash flow from operations to fund our obligations, may result in a need to raise additional capital.

Revenue Growth: We expect to generate increased product revenue in the U.S. from sales to new customers and from expanded sales to existing customers as the medical device industry stabilizes and our network of direct and independent sales representatives becomes more efficient. We believe that the visibility and credibility of the independent clinical endorsements for AEM technology will contribute to new accounts and increased product revenue in fiscal year 2025. We also expect to increase market share through promotional programs of placing our AEM monitors at no charge into hospitals that commit to standardize with AEM instruments. However, all of these efforts to increase market share and grow product revenue will depend in part on our ability to expand the efficiency and effective coverage range of our direct and independent sales representatives, as well as maintain and in some cases, improve the quality of our product offerings. The omission or delay of elective surgeries would negatively impact the extent and timing of revenue growth. Service revenue represents design, development and product supply revenue from our agreements with strategic partners.

We also have longer-term initiatives in place to improve our prospects. We expect that development of next generation versions of our AEM products will better position our products in the marketplace and improve our retention rate at hospitals and surgery centers that have changed to AEM technology, enabling us to grow our sales. We are exploring overseas markets to assess opportunities for sales growth internationally. Finally, we intend to explore opportunities to capitalize on our proven AEM technology via licensing arrangements and strategic alliances. These efforts to generate additional sales and further the market penetration of our products are longer term in nature and may not materialize. Even if we are able to successfully develop next generation products or identify potential international markets or strategic partners, we may not be able to capitalize on these opportunities.

Gross Profit and Gross Margins: Gross profit and gross margins can be expected to fluctuate from quarter to quarter as a result of product sales mix, sales volume and service revenue. Gross margins on products manufactured or assembled by us are expected to improve at higher levels of production and sales.

Sales and Marketing Expenses: We continue to refine our domestic and international distribution capability, and we believe that sales and marketing expenses will decrease as a percentage of net sales with increasing sales volume.

Research and Development Expenses: Research and development expenses are expected to increase to support quality improvement efforts and development of refinements to our AEM product line and new products, which will further expand options for surgeons and hospitals.

Results of Operations

For the quarter ended September 30, 2024 compared to the quarter ended September 30, 2023.

Net Product revenue. Net product revenue for the quarter ended September 30, 2024 was $1,653,820 compared to $1,752,413 for the quarter ended September 30, 2023, a decrease of 6%. The decrease in net product revenue is primarily due to a reduction in the sales of disposable products, which suggests a decrease in the number of procedures performed during this perod. This reduction in procedural volume has, in turn, lowered the overall demand for our products.

Net Service revenue. Net service revenue for the quarter ended September 30, 2024 was $101,568 compared to $73,978 for the quarter ended September 30, 2023. Increase was because of services performed under a Master Services Agreement with Vicarious Surgical Inc.

Gross profit. Gross profit for the quarter ended September 30, 2024 of $828,482 represented a decrease of 4% from gross profit of $862,609 for the quarter ended September 30, 2023. Gross profit decreased because of a non-cash cost increase of $81,603 to inventory reserves for the quarter ended September 30, 2024. Gross profit on product net revenue as a percentage of sales (gross margin) was 47% for the quarters ended September 30, 2024 and 2023. If the cost increase to inventory reserve were excluded, then gross profit on net revenue would have been 52%.

Sales and marketing expenses. Sales and marketing expenses of $458,480 for the quarter ended September 30, 2024 represented an increase of 18% from sales and marketing expenses of $389,342 for the quarter ended September 30, 2023. The increase was because of trade shows and commissions.

General and administrative expenses. General and administrative expenses of $373,405 for the quarter ended September 30, 2024 represented an increase of 2% from general and administrative expenses of $366,377 for the quarter ended September 30, 2023.This increase was because of additional staffing needs.

Research and development expenses. Research and development expenses of $155,515 for the quarter ended September 30, 2024 represented an increase of 54% compared to $100,854 for the quarter ended September 30, 2023. The increase was because of an increase of allocated resources for product development.

Net loss. Net loss was $170,262 for the quarter ended September 30, 2024 compared to net loss of $7,529 for the quarter ended September 30, 2023. The increase to net loss was primarily because of the increase to inventory reserves and an increase to operating expenses.

For the six months ended September 30, 2024 compared to the six months ended September 30, 2023.

Net Product revenue. Net product revenue for the six months ended September 30, 2024 was $3,245,779 compared to $3,365,965 for the six months ended September 30, 2023, a decrease of 4%. The decrease of net product revenue is attributable to decreased demand for our products.

Net Service revenue. Net service revenue for the six months ended September 30, 2024 was $140,539 compared to $113,809 for the six months ended September 30, 2023. Net service revenue for the six months ended September 30, 2023 was for engineering services performed under a Master Services Agreement with Vicarious Surgical Inc.

Gross profit. Gross profit for the six months ended September 30, 2024 of $1,771,145 represented an increase of 3% from gross profit of $1,725,334 for the six months ended September 30, 2023. Gross profit on product net revenue as a percentage of sales (gross margin) was 52% for the six months ended September 30, 2024 and 50% for the six months ended September 30, 2023. Gross profit on net revenue increased because of higher operating efficiencies.

Sales and marketing expenses. Sales and marketing expenses of $881,716 for the six months ended September 30, 2024 represented an increase of 7% from sales and marketing expenses of $822,778 for the six months ended September 30, 2023. The increase was the result of higher commissions.

General and administrative expenses. General and administrative expenses of $725,310 for the six months ended September 30, 2024 represented a decrease of 4% from general and administrative expenses of $755,133 for the six months ended September 30, 2023. The decrease was because of decreased bad debt expense and outside accountants’ cost.

Research and development expenses. Research and development expenses of $294,695 for the six months ended September 30, 2024 represented an increase of 9% compared to $269,274 for the six months ended September 30, 2023. The increase was the result of an increase to allocations.

Net loss. Net loss was $148,222 for the six months ended September 30, 2024 compared to net loss of $147,983 for the six months ended September 30, 2023.

The results of operations for the three and six months ended September 30, 2024 are not necessarily indicative of the results of operations for all or any part of the balance of the fiscal year.

Liquidity and Capital Resources

To date, a significant portion of our operating funds have been provided by issuances of our common stock and warrants, the exercise of stock options to purchase our common stock, loans, and (in some periods) by operating profits. Common stock and additional paid in capital totaled $24,395,358 from inception through September 30, 2024.

On August 4, 2020, we received $150,000 in loan funding from the U.S. Small Business Administration (“SBA”) under the Economic Injury Disaster Loan (“EIDL”) program administered by the SBA, which program was expanded pursuant to the CARES Act. The EIDL is evidenced by a promissory note, dated August 1, 2021 in the original principal amount of $150,000 with the SBA, the lender. Under the terms of the Note, interest accrues on the outstanding principal at the rate of 3.75% per annum. The term of the Note is thirty years, though it may be payable sooner upon an event of default under the Note.

During January 2023, we entered into a note agreement with U.S. Bank for $92,000. The note is for five years at a 5% interest rate and the proceeds were used to purchase equipment. The note is secured by the equipment.

During September 2023, we entered into a note agreement with U.S. Bank for $115,004. The note is for five years at a 6% interest rate and the proceeds were used to purchase equipment. The note is secured by the equipment.

On November 15, 2023, we entered into a loan and security agreement with Pathward, N.A. (formerly Crestmark Bank). The loan is due on demand and has no financial covenants. Under the agreement, we were provided with a line of credit that is not to exceed the lesser of $1,000,000 or 85% of eligible accounts receivable. The interest rate is prime rate plus 0.5%, with a floor of 6.75%, plus a monthly maintenance fee of 0.4%, based on the average monthly loan balance. Interest is charged on a minimum loan balance of $300,000, a loan fee of 0.5% at closing and annually, and an exit fee of 3%, 2% and 1% during years one, two and three respectively.

Our operations generated $192,699 of cash during the six months ended September 30, 2024 on net revenue of $3,386,318. The amounts of cash generated by operations for the six months ended September 30, 2024 are not necessarily indicative of the expected amounts of cash to be generated from or used in operations in fiscal year 2025. At September 30, 2024, we had $230,014 in cash available to fund future operations and a line of credit for up to $921,149, restricted by eligible account receivables. Our working capital was $1,142,362 at September 30, 2024 compared to $1,206,252 at March 31, 2024. Current liabilities were $1,140,082 at September 30, 2024 compared to $1,220,022 at March 31, 2024. We have a noncancelable lease agreement for our facilities at 6797 Winchester Circle, Boulder, Colorado. The lease expires October 31, 2026.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which modified lease accounting for both lessees and lessors to increase transparency and comparability by recognizing lease assets and lease liabilities by lessees for those leases classified as operating leases under previous accounting standards and disclosing key information about leasing arrangements. The primary impact for us was the balance sheet recognition of right-of-use (“ROU”) assets and lease liabilities for operating leases as a lessee.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. ROU assets also include any initial direct costs incurred and any lease payments made at or before the lease commencement date, less lease incentives received. We use our incremental borrowing rate based on the information available at the commencement date in determining the lease liabilities as our leases do not provide an implicit rate. Lease expense is recognized on a straight-line basis over the lease term.

The minimum future EIDL payment, by fiscal year, as of September 30, 2024 is as follows:

Fiscal Year		Amount
	2025	$	1,581
	2026		3,147
	2027		3,189
	2028		3,294
	Thereafter		143,892
	Total	$	155,103

During June 2020, we entered into a note agreement with U.S. Bank for $92,000. The note is for five years at a 5% interest rate and the proceeds were used to purchase equipment. The note is secured by the equipment.

The minimum future U.S. Bank payment, by fiscal year, as of September 30, 2024 is as follows:

Fiscal Year		Amount
	2025	$	9,200
	2026		13,800
	Total	$	23,000

During September 2022, we entered into a note agreement with U.S. Bank for $115,004. The note is for five years at a 6% interest rate and the proceeds were used to purchase equipment. The note is secured by the equipment.

The minimum future principal U.S. Bank payment, by fiscal year, as of September 30, 2024 is as follows:

Fiscal Year		Amount
	2025		11,897
	2026		23,794
	2027		23,794
	2028		5,949
	Total	$	65,434

Aside from the line of credit, operating lease, EIDL loan and U.S. Bank loans, we do not have any material contractual commitments requiring settlement in the future.

As of September 30, 2024, the following table shows our contractual obligations for the periods presented:

	Payment due by period
Contractual obligations	Totals		Less than 1 year		1-3 years		3-5 years		More than 5 years
Line of credit	$	78,851	$	78,851	$	—	$	—	$	—
Operating lease obligations		896,141		414,730		481,411		—		—
EIDL loan		155,103		3,147		6,401		6,856		138,699
U.S. Bank loan		23,000		16,100		6,900		—		—
U.S. Bank loan		65,434		23,794		41,640		—		—
Total	$	1,218,529	$	536,622	$	536,352	$	6,856	$	138,699

Our fiscal year 2025 operating plan is focused on increasing new accounts, retaining existing customers, growing revenue, increasing gross profits and conserving cash. We are investing in research and development efforts to develop next generation versions of the AEM product line. We have invested in manufacturing property and equipment to manufacture disposable scissors inserts internally and to reduce our cost of product revenue. We cannot predict with certainty the expected revenue, gross profit, net income or loss and usage of cash for fiscal year 2024. If we are unable to manage our business operations in line with budget expectations, it could have a material adverse effect on our business viability, financial position, results of operations and cash flows.

Income Taxes

As of March 31, 2024, net operating loss carryforwards totaling approximately $8.9 million are available to reduce taxable income in the future. The net operating loss carryforwards expire, if not previously utilized, at various dates beginning in the fiscal year ending March 31, 2025. We have not paid income taxes since our inception. The Tax Reform Act of 1986 and other income tax regulations contain provisions which may limit the net operating loss carryforwards available to be used in any given year if certain events occur, including changes in ownership interests. We have established a valuation allowance for the entire amount of our deferred tax asset since inception due to our history of losses. Should we achieve sufficient, sustained income in the future, we may conclude that some or all of the valuation allowance should be reversed. If some or all of the valuation allowance were reversed, then, to the extent of the reversal, a tax benefit would be recognized which would result in an increase to net income.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, sales and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to bad debts, inventories, sales returns, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect the more significant judgments and estimates used in the preparation of our financial statements.

We record revenue at a single point in time, when control is transferred to the customer, which is consistent with past practice. We will continue to apply our current business processes, policies, systems and controls to support recognition and disclosure. Our shipping policy is FOB Shipping Point. We recognize revenue from sales to stocking distributors when there is no right of return, other than for normal warranty claims. We have no ongoing obligations related to product sales, except for normal warranty obligations. We evaluated the requirement to disaggregate revenue, and concluded that substantially all of our revenue comes from multiple products within a line of medical devices. Our engineering service contracts are billed on a time and materials basis and revenue is recognized over time as the services are performed. We record deferred revenue when funds are received prior to the recognition of the associated revenue. We record a contract liability to deferred revenue which includes customer prepayments and is included in other accrued liabilities.

We provide for the estimated cost of product warranties at the time sales are recognized. While we engage in extensive product quality programs and processes, including actively monitoring and evaluating the quality of our component suppliers, we have experienced some costs related to warranties. The warranty accrual is based on historical experience and is adjusted based on current experience. Should actual warranty experience differ from our estimates, revisions to the estimated warranty liability would be required.

We reduce inventory for estimated obsolete or unmarketable inventory equal to the difference between the cost of inventory and the estimated realizable value based on assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. Any write-downs of inventory would reduce our reported net income during the period in which such write-downs were applied. To the extent that our estimates prove to be too high, and we ultimately utilize or sell inventory previously determined to be impaired, we may record a reversal of the provision in the period of such determination.

We recognize deferred income tax assets and liabilities for the expected future income tax consequences, based on enacted tax laws, of temporary differences between the financial reporting and tax bases of assets and liabilities. Deferred tax assets are then reduced, if deemed necessary, by a valuation allowance for the amount of any tax benefits, which, more likely than not based on current circumstances, are not expected to be realized. Should we maintain sufficient, sustained income in the future, we may conclude that all or some of the valuation allowance should be reversed.

Property and equipment are stated at cost, with depreciation computed over the estimated useful lives of the assets, generally five to seven years. We use the straight-line method of depreciation for property and equipment. Leasehold improvements are depreciated over the shorter of the remaining lease term or the estimated useful life of the asset. Maintenance and repairs are expensed as incurred and major additions, replacements and improvements are capitalized.

We amortize our patent costs over their estimated useful lives, which is typically the remaining statutory life. From time to time, we may be required to adjust these useful lives of our patents based on advances in technology, competitor actions, and the like. We review the recorded amounts of patents at each period end to determine if their carrying amount is still recoverable based on our expectations regarding sales of related products. Such an assessment, in the future, may result in a conclusion that the assets are impaired, with a corresponding charge against earnings.

We currently estimate forfeitures for stock-based compensation expense related to employee stock options at 40% and evaluate the forfeiture rate quarterly. Other assumptions that are used in calculating stock-based compensation expense include risk-free interest rate, expected life, expected volatility and expected dividend.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

ITEM 4.

Controls and procedures

Management’s Evaluation of Disclosures Controls and Procedures

Our management, comprised of our Chief Executive Officer (CEO) and Principal Financial and Accounting Officer (PFAO) evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2024. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Based on that evaluation, and taking the matters described below into account, the Company’s CEO and PFAO have concluded that our disclosure controls and procedures over financial reporting were not effective during reporting period ended September 30, 2024.

Remediation Activities Regarding Material Weakness

As disclosed in our Annual Report on Form 10-K for the March 31, 2024 fiscal year, management determined that (i) we had a material weakness over our entity level control environment as of March 31, 2024 and (ii) our internal control over financial reporting was not effective as of March 31, 2024.

Management has been actively engaged in remediating the above described material weaknesses. The following remedial actions have been taken:

We have made changes in our policy regarding how contract revenue and related costs are booked. Under the revised policy, such revenue and costs are now booked in the same month as the related work is performed.

We have changed our policy regarding reserves for slow moving inventory. Under our revised, policy we now book additional inventory reserves for all inventory older than 18 months, even if management believes such inventory is still salable.

While progress has been made to enhance our internal control over financial reporting, we are still in the process of implementing these processes, procedures and controls. Additional time is required to complete implementation and to assess and ensure the sustainability of these procedures. We believe the above actions will be effective in remediating the material weaknesses described above and we will continue to devote significant time and attention to these remedial efforts. However, the material weaknesses cannot be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded that these controls are operating effectively.

Changes In Internal Control Over Financial Reporting

Other than the applicable remediation efforts described above, there were no significant changes in our internal control over financial reporting during the quarter ended September 30, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II.

Item 1.

Legal Proceedings

From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. We are not currently aware of any such proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or results of operations.

Item 1A.

Risk Factors

In addition to the information set forth in this Form 10-Q, you should carefully consider the risk factors disclosed under the heading “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended March 31, 2024. There have been no material changes to our risk factors from those included in our Annual Report on Form 10-K for the year ended March 31, 2024.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

None.

Issuer Purchases of Equity Securities

We did not repurchase any of our equity securities during the three months ended June 30, 2024.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

None.

Item 5.

Other Information

During the fiscal year ended September 30, 2024, no director or officer adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as each term is defined in Item 408(a) of Regulation S-K.

Item 6. Exhibits

The following exhibits are filed with this report on Form 10-Q or are incorporated by reference:

3.1	Articles of Incorporation of the Company, as amended. (Incorporated by reference from Registration Statement #333-4118-D dated June 25, 1996).

3.2	Bylaws of the Company. (Incorporated by reference from Current Report on Form 8-K filed on October 30, 2007).

3.3	First Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on May 31, 2017).

4.1	Form of certificate for shares of Common Stock. (Incorporated by reference from Registration Statement #333-4118-D dated June 25, 1996).

4.2	Description of Capital Stock. (Incorporated by reference from Annual Report on Form 10-K filed on June 14, 2019).

10.1	Lease Agreement dated June 3, 2004 between Encision Inc. and DaPuzzo Investment Group, LLC (Incorporated by reference from Quarterly Report on Form 10-QSB filed on November 14, 2004).

10.2	Encision Inc. 2007 Stock Option Plan (Incorporated by reference from Proxy Statement dated June 30, 2007). †

10.3	Encision Inc. First Amended and Restated 2014 Stock Option Plan (Incorporated by reference from Proxy Statement dated July 6, 2020. †

10.4	Employment Agreement, dated November 14, 2016, between Encision Inc. and Gregory J. Trudel (Incorporated by reference to Exhibit 10-1 to our Current Report on Form 8-K filed on November 18, 2016). †

10.5	Fifth Amendment to Office Building Lease dated November 9, 2017 (Incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q filed February 12, 2018).

10.6	PPP Promissory Note dated as of April 17, 2020 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on April 23, 2020).

10.8	Economic Injury Disaster Loan dated as of August 1, 2022 (incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on August 14, 2020).

10.9	US Bank Note dated September 28, 2020 (Incorporated by reference to Exhibit 10.9 to Quarterly Report on Form 10-Q filed August 12, 2022)

10.10	PPP Promissory Note dated as of February 8, 2021 (incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on February 12, 2021.

10.11	Supply Agreement dated August 23, 2021 between Auris Health, Inc. and Encision Inc. (incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on November 15, 2021).+

10.12	New Line of Credit and Security Agreement with Pathward, N.A. dated November 15, 2022 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on November 17, 2022).

31.1	Certification of President and CEO under Rule 13a-14(a) of the Exchange Act (filed herewith).

31.2	Certification of Principal Financial and Accounting Officer under Rule 13a-14(a) of the Exchange Act (filed herewith).

32.1	Certifications of President and CEO and Principal Financial and Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

101	The following materials from Encision Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, formatted in XBRL (Extensible Business Reporting Language): (i) the unaudited Condensed Balance Sheets, (ii) the unaudited Condensed Statements of Income, (iii) the unaudited Condensed Statements of Cash Flows, and (iv) Notes to Condensed Financial Statements, tagged at Level I.

+	Certain portions of the exhibit have been omitted pursuant to Rule 601(b)(10) of Regulation S-K. The omitted information is (i) not material and (ii) would likely cause competitive harm to the Company if publicly disclosed.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Encision Inc.

November 14, 2024	/s/ Brandon Shepard
Date	Brandon Shepard
	Controller, Principal Accounting Officer &
	Principal Financial Officer

Exhibit 31.1

CERTIFICATIONS

I, Gregory Trudel, certify that:

I have reviewed this quarterly report on Form 10-Q of Encision Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and,

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 14, 2024	/s/ Gregory Trudel
	Gregory Trudel
	President and CEO

Exhibit 31.2

CERTIFICATIONS

I, Brandon Shepard, certify that:

I have reviewed this quarterly report on Form 10-Q of Encision Inc.;

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Dated: November 14, 2024	/s/ Brandon Shepard
	Brandon Shepard
	Controller, Principal Accounting Officer &
	Principal Financial Officer

Exhibit 32.1

CERTIFICATIONS OF PERIODIC REPORT

I, Gregory Trudel, President and CEO of Encision Inc. (the “Company”), hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

•

the Quarterly Report on Form 10-Q of the Company for the three and six months ended September 30, 2024 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

•

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the period covered by the Report.

Dated: November 14, 2024	/s/ Gregory Trudel
	Gregory Trudel
	President and CEO

I, Brandon Shepard, Controller and Principal Accounting Officer of Encision Inc. (the “Company”), hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

•

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the period covered by the Report.


Dated: November 14, 2024	/s/ Brandon Shepard
	Brandon Shepard
	Controller, Principal Accounting Officer &
	Principal Financial Officer

Cover - shares	6 Months Ended
Cover - shares	Sep. 30, 2024	Oct. 31, 2024
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Sep. 30, 2024
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2025
Current Fiscal Year End Date	--03-31
Entity File Number	001-11789
Entity Registrant Name	ENCISION INC.
Entity Central Index Key	0000930775
Entity Tax Identification Number	84-1162056
Entity Incorporation, State or Country Code	CO
Entity Address, Address Line One	6797 Winchester Circle
Entity Address, City or Town	Boulder
Entity Address, State or Province	CO
Entity Address, Postal Zip Code	80301
City Area Code	303
Local Phone Number	444-2600
Title of 12(b) Security	Common Stock, no par value
Trading Symbol	ECIA
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		11,875,145

Condensed Balance Sheets - USD ($)	Sep. 30, 2024	Mar. 31, 2024
Current assets:
Cash	$ 230,014	$ 42,509
Accounts receivable	817,002	891,129
Inventories	1,164,666	1,402,338
Prepaid expenses	70,628	90,298
Total current assets	2,282,310	2,426,274
Equipment:
Furniture, fixtures and equipment, at cost	2,668,544	2,627,726
Accumulated depreciation	(2,402,419)	(2,373,722)
Equipment, net	266,125	254,004
Right of use asset	736,850	900,787
Patents, net	169,283	164,010
Other assets	69,376	65,641
TOTAL ASSETS	3,523,944	3,810,716
Current liabilities:
Accounts payable	319,371	346,049
Line of credit	78,851	156,685
Secured notes	43,041	42,194
Accrued compensation	192,810	184,913
Other accrued liabilities	91,145	119,804
Accrued lease liability	414,730	370,377
Total current liabilities	1,139,948	1,220,022
Long-term liabilities:
Secured notes	200,496	67,336
Accrued lease liability	481,411	696,610
Total liabilities	1,821,855	1,983,968
Commitments and contingencies (Note 4)
Shareholders’ equity:
Preferred stock, no par value: 10,000,000 shares authorized; none issued and outstanding	0	0
Common stock and additional paid-in capital, no par value: 100,000,000 shares authorized; 11,875,145 and 11,858,627 issued and outstanding at September 30, 2024 and March 31, 2024, respectively	24,395,358	24,371,795
Accumulated (deficit)	(22,693,269)	(22,545,047)
Total shareholders’ equity	1,702,089	1,826,748
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$ 3,523,944	$ 3,810,716

Condensed Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2024	Mar. 31, 2024
Statement of Financial Position [Abstract]
Preferred stock, par value	$ 0	$ 0
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock and additional paid-in capital, par value	$ 0	$ 0
Common stock and additional paid-in capital, shares authorized	100,000,000	100,000,000
Common stock and additional paid-in capital, shares issued	11,875,145	11,858,627
Common stock and additional paid-in capital, shares outstanding	11,875,145	11,858,627

Condensed Statements of Operations (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
NET REVENUE:
Total revenue	$ 1,755,388	$ 1,826,391	$ 3,386,318	$ 3,479,774
COST OF REVENUE:
Total cost of revenue	926,906	963,782	1,615,173	1,754,440
GROSS PROFIT	828,482	862,609	1,771,145	1,725,334
OPERATING EXPENSES:
Sales and marketing	458,480	389,342	881,716	822,778
General and administrative	373,405	366,377	725,310	755,133
Research and development	155,515	100,854	294,695	269,274
Total operating expenses	987,400	856,573	1,901,721	1,847,185
OPERATING INCOME (LOSS)	(158,918)	6,036	(130,576)	(121,851)
Interest expense, net	(10,598)	(16,851)	(16,967)	(31,083)
Other income (expense), net	(746)	3,286	(679)	4,951
Interest expense and other income (expense), net	(11,344)	(13,565)	(17,646)	(26,132)
(LOSS) BEFORE PROVISION FOR INCOME TAXES	(170,262)	(7,529)	(148,222)	(147,983)
Provision for income taxes	0	0	0	0
NET (LOSS)	$ (170,262)	$ (7,529)	$ (148,222)	$ (147,983)
Net income (loss) per share-basic	$ (0.01)	$ 0.00	$ (0.01)	$ (0.01)
Net income (loss) per share-diluted	$ (0.01)	$ 0.00	$ (0.01)	$ (0.01)
Weighted average shares - basic	11,875,145	11,769,543	11,875,145	11,769,543
Weighted average shares - diluted	11,875,145	11,769,543	11,875,145	11,769,543
Product [Member]
NET REVENUE:
Total revenue	$ 1,653,820	$ 1,752,413	$ 3,245,779	$ 3,365,965
COST OF REVENUE:
Total cost of revenue	882,886	926,455	1,550,520	1,696,493
Service [Member]
NET REVENUE:
Total revenue	101,568	73,978	140,539	113,809
COST OF REVENUE:
Total cost of revenue	$ 44,020	$ 37,327	$ 64,653	$ 57,947

Condensed Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Sep. 30, 2024	Sep. 30, 2023
Cash flows (used in) operating activities:
Net (loss)	$ (148,222)	$ (147,983)
Adjustments to reconcile net (loss) to net cash (used in) operating activities:
Depreciation and amortization	42,525	43,775
Stock-based compensation expense related to stock options	25,011	26,149
Provision for potential inventory obsolescence	83,152	64,000
Change in operating assets and liabilities:
Right of use asset, net	(6,909)	(97,490)
Accounts receivable	74,127	(103,629)
Inventories	154,520	193,079
Prepaid expenses and other assets	15,935	54,630
Accounts payable	(26,678)	47,198
Accrued compensation and other accrued liabilities	(20,762)	(82,732)
Net cash provided by (used in) operating activities	192,699	(3,003)
Cash flows (used in) investing activities:
Acquisition of property and equipment	(42,559)	(122)
Patent costs	(17,359)	(16,727)
Net cash (used in) investing activities	(59,918)	(16,849)
Cash flows from financing activities:
(Paydown) of line of credit	(77,834)	0
(Payments) from options exercised	(1,449)	0
Borrowing from secured notes	134,007	136,887
Net cash provided by (used in) financing activities	54,724	136,887
Net increase in cash	187,505	117,035
Cash, beginning of fiscal year	42,509	188,966
Cash, end of six months	230,014	306,001
Supplemental disclosures of cash flow information:
Cash paid during the year for interest	$ 16,967	$ 31,083

Pay vs Performance Disclosure - USD ($)	3 Months Ended		6 Months Ended
Pay vs Performance Disclosure - USD ($)	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Pay vs Performance Disclosure [Table]
Net Income (Loss)	$ (170,262)	$ (7,529)	$ (148,222)	$ (147,983)

Insider Trading Arrangements	3 Months Ended
Insider Trading Arrangements	Sep. 30, 2024
Insider Trading Arrangements [Line Items]
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false

ORGANIZATION AND NATURE OF BUSINESS

6 Months Ended

Sep. 30, 2024

Organization, Consolidation and Presentation of Financial Statements [Abstract]

ORGANIZATION AND NATURE OF BUSINESS

Note 1. ORGANIZATION AND NATURE OF BUSINESS

The strategic marketing and sales plan is designed to expand the use of the Company products in surgically active hospitals and surgery centers in the United States.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Sep. 30, 2024

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents. For purposes of reporting cash flows, the company considers all cash and highly liquid investments with an original maturity of three months or less to be cash equivalents.

Schedule of inventory
	September 30, 2024		March 31, 2024
Raw materials	$	857,366	$	1,044,161
Finished goods		307,300		358,177
Total inventories	$	1,164,666	$	1,402,338

Research and Development Expenses. The Company expenses research and development costs for products and processes as incurred.

Information, by segment, for the three and six months ended September 30, 2024 and 2023 follows:

Schedule of information by segment
	Three Months Ended September 30, 2024								Six Months Ended September 30, 2024
	Product			Service		Total			Product			Service		Total
Net revenue	$	1,653,820		$	101,568	$	1,755,388		$	3,245,779		$	140,539	$	3,386,318
Cost of revenue		882,886			44,020		926,906			1,550,520			64,653		1,615,173
Gross profit		770,934			57,548		828,482			1,695,259			75,886		1,771,145
Operating income (loss)		(216,466	)		57,548		(158,918	)		(206,462	)		75,886		(130,576	)
Depreciation and amortization		23,203			—		23,203			42,525			—		42,525
Patent and capital expenditures		40,377			—		40,377			59,918			—		59,918
Equipment and patents, net	$	435,408		$	—	$	435,408		$	435,408		$	—	$	435,408


	Three Months Ended September 30, 2023						Six Months Ended September 30, 2023
	Product		Service		Total		Product			Service		Total
Net revenue	$	1,752,413	$	73,978	$	1,826,391	$	3,365,965		$	113,809	$	3,479,774
Cost of revenue		926,455		37,327		963,782		1,696,493			57,947		1,754,440
Gross profit		825,958		36,651		862,609		1,669,472			55,862		1,725,334
Operating income (loss)		6,036		—		6,036		(177,714	)		55,862		(121,851	)
Depreciation and amortization		21,525		—		21,525		43,775			—		43,775
Patent and capital expenditures		16,350		—		16,350		16,849			—		16,849
Equipment and patents, net	$	439,484	$	—	$	439,484	$	439,484		$	—	$	439,484

BASIC AND DILUTED INCOME AND LOSS PER COMMON SHARE

6 Months Ended

Sep. 30, 2024

Earnings Per Share [Abstract]

BASIC AND DILUTED INCOME AND LOSS PER COMMON SHARE

Note 3. BASIC AND DILUTED INCOME AND LOSS PER COMMON SHARE

The following table presents the calculation of basic and diluted net income (loss) per share:


	Three Months Ended						Six Months Ended
	September 30, 2024			September 30, 2023			September 30, 2024			September 30, 2023
Net income (loss)	$	(170,262	)	$	(7,529	)	$	(148,222	)	$	(147,983	)
Weighted-average basic shares outstanding		11,875,145			11,769,543			11,875,145			11,769,543
Effect of dilutive securities		—			—			—			—
Weighted-average diluted shares		11,875,145			11,769,543			11,875,145			11,769,543
Basic net income (loss) per share	$	(0.01	)	$	0.00		$	(0.01	)	$	(0.01	)
Diluted net income (loss) per share	$	(0.01	)	$	0.00		$	(0.01	)	$	(0.01	)
Antidilutive employee stock options		1,099,000			1,049,000			1,099,000			1,049,000

COMMITMENTS AND CONTINGENCIES

6 Months Ended

Sep. 30, 2024

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

Note 4. COMMITMENTS AND CONTINGENCIES

The Company has a noncancelable lease agreement for the facilities at 6797 Winchester Circle, Boulder, Colorado. The lease expires October 31, 2026.


Fiscal Year	Amount
2025	$	199,531
2026		430,398
2027		266,212
Total	$	896,141

The minimum future EIDL payment, by fiscal year, as of September 30, 2024 is as follows:


Fiscal Year	Amount
2025	$	1,581
2026		3,147
2027		3,189
2028		3,294
Thereafter		143,892
Total	$	155,103

The minimum future U.S. Bank payment, by fiscal year, as of September 30, 2024 is as follows:


Fiscal Year	Amount
2025	$	9,200
2026		13,800
Total	$	23,000

The minimum future principal U.S. Bank payment, by fiscal year, as of September 30, 2024 is as follows:


Fiscal Year	Amount
2025		11,897
2026		23,794
2027		23,794
2028		5,949
Total	$	65,434

Aside from the line of credit, operating lease, EIDL loan and U.S. Bank loans, the Company does not have any material contractual commitments requiring settlement in the future.

SHARE-BASED COMPENSATION

6 Months Ended

Sep. 30, 2024

Equity [Abstract]

SHARE-BASED COMPENSATION

Note 5. SHARE-BASED COMPENSATION


	Three Months Ended				Six Months Ended
	September 30, 2024		September 30, 2023		September 30, 2024		September 30, 2023
Cost of sales	$	201	$	—	$	402	$	—
Sales and marketing		1,750		1,779		3,369		3,558
General and administrative		10,606		10,254		21,080		20,508
Research and development		80		1,041		160		2,083
Stock-based compensation expense	$	12,637	$	13,074	$	25,011	$	26,149

RELATED PARTY TRANSACTION

6 Months Ended

Sep. 30, 2024

RELATED PARTY TRANSACTION

Note 6. RELATED PARTY TRANSACTION

SUBSEQUENT EVENTS

6 Months Ended

Sep. 30, 2024

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

Note 7. SUBSEQUENT EVENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Sep. 30, 2024

Accounting Policies [Abstract]

Basis of Presentation

Use of Estimates in the Preparation of Financial Statements

Cash and Cash Equivalents

Cash and Cash Equivalents. For purposes of reporting cash flows, the company considers all cash and highly liquid investments with an original maturity of three months or less to be cash equivalents.

Fair Value of Financial Instruments

Concentration of Credit Risk

Inventories

Schedule of inventory
	September 30, 2024		March 31, 2024
Raw materials	$	857,366	$	1,044,161
Finished goods		307,300		358,177
Total inventories	$	1,164,666	$	1,402,338

Property and Equipment

Research and Development Expenses

Research and Development Expenses. The Company expenses research and development costs for products and processes as incurred.

Stock-Based Compensation

Segment Reporting

Information, by segment, for the three and six months ended September 30, 2024 and 2023 follows:

Schedule of information by segment
	Three Months Ended September 30, 2024								Six Months Ended September 30, 2024
	Product			Service		Total			Product			Service		Total
Net revenue	$	1,653,820		$	101,568	$	1,755,388		$	3,245,779		$	140,539	$	3,386,318
Cost of revenue		882,886			44,020		926,906			1,550,520			64,653		1,615,173
Gross profit		770,934			57,548		828,482			1,695,259			75,886		1,771,145
Operating income (loss)		(216,466	)		57,548		(158,918	)		(206,462	)		75,886		(130,576	)
Depreciation and amortization		23,203			—		23,203			42,525			—		42,525
Patent and capital expenditures		40,377			—		40,377			59,918			—		59,918
Equipment and patents, net	$	435,408		$	—	$	435,408		$	435,408		$	—	$	435,408


	Three Months Ended September 30, 2023						Six Months Ended September 30, 2023
	Product		Service		Total		Product			Service		Total
Net revenue	$	1,752,413	$	73,978	$	1,826,391	$	3,365,965		$	113,809	$	3,479,774
Cost of revenue		926,455		37,327		963,782		1,696,493			57,947		1,754,440
Gross profit		825,958		36,651		862,609		1,669,472			55,862		1,725,334
Operating income (loss)		6,036		—		6,036		(177,714	)		55,862		(121,851	)
Depreciation and amortization		21,525		—		21,525		43,775			—		43,775
Patent and capital expenditures		16,350		—		16,350		16,849			—		16,849
Equipment and patents, net	$	439,484	$	—	$	439,484	$	439,484		$	—	$	439,484

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

6 Months Ended

Sep. 30, 2024

Accounting Policies [Abstract]

Schedule of inventory

Schedule of inventory
	September 30, 2024		March 31, 2024
Raw materials	$	857,366	$	1,044,161
Finished goods		307,300		358,177
Total inventories	$	1,164,666	$	1,402,338

Schedule of information by segment

Schedule of information by segment
	Three Months Ended September 30, 2024								Six Months Ended September 30, 2024
	Product			Service		Total			Product			Service		Total
Net revenue	$	1,653,820		$	101,568	$	1,755,388		$	3,245,779		$	140,539	$	3,386,318
Cost of revenue		882,886			44,020		926,906			1,550,520			64,653		1,615,173
Gross profit		770,934			57,548		828,482			1,695,259			75,886		1,771,145
Operating income (loss)		(216,466	)		57,548		(158,918	)		(206,462	)		75,886		(130,576	)
Depreciation and amortization		23,203			—		23,203			42,525			—		42,525
Patent and capital expenditures		40,377			—		40,377			59,918			—		59,918
Equipment and patents, net	$	435,408		$	—	$	435,408		$	435,408		$	—	$	435,408


	Three Months Ended September 30, 2023						Six Months Ended September 30, 2023
	Product		Service		Total		Product			Service		Total
Net revenue	$	1,752,413	$	73,978	$	1,826,391	$	3,365,965		$	113,809	$	3,479,774
Cost of revenue		926,455		37,327		963,782		1,696,493			57,947		1,754,440
Gross profit		825,958		36,651		862,609		1,669,472			55,862		1,725,334
Operating income (loss)		6,036		—		6,036		(177,714	)		55,862		(121,851	)
Depreciation and amortization		21,525		—		21,525		43,775			—		43,775
Patent and capital expenditures		16,350		—		16,350		16,849			—		16,849
Equipment and patents, net	$	439,484	$	—	$	439,484	$	439,484		$	—	$	439,484

BASIC AND DILUTED INCOME AND LOSS PER COMMON SHARE (Tables)

6 Months Ended

Sep. 30, 2024

Earnings Per Share [Abstract]

Schedule of basic and diluted net income (loss) per share


	Three Months Ended						Six Months Ended
	September 30, 2024			September 30, 2023			September 30, 2024			September 30, 2023
Net income (loss)	$	(170,262	)	$	(7,529	)	$	(148,222	)	$	(147,983	)
Weighted-average basic shares outstanding		11,875,145			11,769,543			11,875,145			11,769,543
Effect of dilutive securities		—			—			—			—
Weighted-average diluted shares		11,875,145			11,769,543			11,875,145			11,769,543
Basic net income (loss) per share	$	(0.01	)	$	0.00		$	(0.01	)	$	(0.01	)
Diluted net income (loss) per share	$	(0.01	)	$	0.00		$	(0.01	)	$	(0.01	)
Antidilutive employee stock options		1,099,000			1,049,000			1,099,000			1,049,000

COMMITMENTS AND CONTINGENCIES (Tables)

6 Months Ended

Sep. 30, 2024

Lease Payment [Member]

Defined Benefit Plan Disclosure [Line Items]

Schedule of minimum future lease payment


Fiscal Year	Amount
2025	$	199,531
2026		430,398
2027		266,212
Total	$	896,141

EIDL Payment [Member]

Defined Benefit Plan Disclosure [Line Items]

Schedule of minimum future lease payment


Fiscal Year	Amount
2025	$	1,581
2026		3,147
2027		3,189
2028		3,294
Thereafter		143,892
Total	$	155,103

U.S. Bank Payment [Member]

Defined Benefit Plan Disclosure [Line Items]

Schedule of minimum future lease payment


Fiscal Year	Amount
2025	$	9,200
2026		13,800
Total	$	23,000

U.S. Bank Payment 1 [Member]

Defined Benefit Plan Disclosure [Line Items]

Schedule of minimum future lease payment


Fiscal Year	Amount
2025		11,897
2026		23,794
2027		23,794
2028		5,949
Total	$	65,434

SHARE-BASED COMPENSATION (Tables)

6 Months Ended

Sep. 30, 2024

Equity [Abstract]

Schedule of stock-based compensation expense


	Three Months Ended				Six Months Ended
	September 30, 2024		September 30, 2023		September 30, 2024		September 30, 2023
Cost of sales	$	201	$	—	$	402	$	—
Sales and marketing		1,750		1,779		3,369		3,558
General and administrative		10,606		10,254		21,080		20,508
Research and development		80		1,041		160		2,083
Stock-based compensation expense	$	12,637	$	13,074	$	25,011	$	26,149

ORGANIZATION AND NATURE OF BUSINESS (Details Narrative) - USD ($)		3 Months Ended		6 Months Ended
	Mar. 31, 2024	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Accumulated deficit	$ 22,545,047	$ 22,693,269		$ 22,693,269
Shareholders equity increased	$ 124,659
Net income		$ 170,262	$ 7,529	148,222	$ 147,983
Stock-based compensation				$ 25,011

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($)	Sep. 30, 2024	Mar. 31, 2024
Accounting Policies [Abstract]
Raw materials	$ 857,366	$ 1,044,161
Finished goods	307,300	358,177
Total inventories	$ 1,164,666	$ 1,402,338

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - USD ($)	3 Months Ended		6 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Product Information [Line Items]
Net revenue	$ 1,755,388	$ 1,826,391	$ 3,386,318	$ 3,479,774
Cost of revenue	926,906	963,782	1,615,173	1,754,440
Gross profit	828,482	862,609	1,771,145	1,725,334
Operating income (loss)	(158,918)	6,036	(130,576)	(121,851)
Depreciation and amortization	23,203	21,525	42,525	43,775
Patent and capital expenditures	40,377	16,350	59,918	16,849
Equipment and patents, net	435,408	439,484	435,408	439,484
Products [Member]
Product Information [Line Items]
Net revenue	1,653,820	1,752,413	3,245,779	3,365,965
Cost of revenue	882,886	926,455	1,550,520	1,696,493
Gross profit	770,934	825,958	1,695,259	1,669,472
Operating income (loss)	(216,466)	6,036	(206,462)	(177,714)
Depreciation and amortization	23,203	21,525	42,525	43,775
Patent and capital expenditures	40,377	16,350	59,918	16,849
Equipment and patents, net	435,408	439,484	435,408	439,484
Services [Member]
Product Information [Line Items]
Net revenue	101,568	73,978	140,539	113,809
Cost of revenue	44,020	37,327	64,653	57,947
Gross profit	57,548	36,651	75,886	55,862
Operating income (loss)	57,548	0	75,886	55,862
Depreciation and amortization	0	0	0	0
Patent and capital expenditures	0	0	0	0
Equipment and patents, net	$ 0	$ 0	$ 0	$ 0

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023	Mar. 31, 2024
Accounting Policies [Abstract]
Net income	$ 170,262	$ 7,529	$ 148,222	$ 147,983
Cash	230,014		230,014
Borrowings	78,851		78,851		$ 156,685
Borrowing capacity	921,149		921,149
Working capital	1,142,362		1,142,362
Working capital increase			64,890
Net increased in cash			187,505	117,035
Federally insured limit	250,000		250,000
Cash on deposit			250,000
Accounts receivable	817,002		817,002		$ 891,129
Depreciation expense	16,295	15,464	30,438	31,240
Stock-based compensation expense	$ 12,637	$ 13,074	$ 25,011	$ 26,149

BASIC AND DILUTED INCOME AND LOSS PER COMMON SHARE (Details) - USD ($)	3 Months Ended		6 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Earnings Per Share [Abstract]
Net income (loss)	$ (170,262)	$ (7,529)	$ (148,222)	$ (147,983)
Weighted-average basic shares outstanding	11,875,145	11,769,543	11,875,145	11,769,543
Effect of dilutive securities	0	0	0	0
Weighted-average diluted shares	11,875,145	11,769,543	11,875,145	11,769,543
Basic net income (loss) per share	$ (0.01)	$ 0.00	$ (0.01)	$ (0.01)
Diluted net income (loss) per share	$ (0.01)	$ 0.00	$ (0.01)	$ (0.01)
Antidilutive employee stock options	1,099,000	1,049,000	1,099,000	1,049,000

COMMITMENTS AND CONTINGENCIES (Details) - Lease Payment [Member]	Sep. 30, 2024 USD ($)
Defined Benefit Plan Disclosure [Line Items]
2025	$ 199,531
2026	430,398
2027	266,212
Total	$ 896,141

COMMITMENTS AND CONTINGENCIES (Details 1) - EIDL Payment [Member]	Sep. 30, 2024 USD ($)
Defined Benefit Plan Disclosure [Line Items]
2025	$ 1,581
2026	3,147
2027	3,189
2028	3,294
Thereafter	143,892
Total	$ 155,103

COMMITMENTS AND CONTINGENCIES (Details 2) - U.S. Bank Payment [Member]	Sep. 30, 2024 USD ($)
Defined Benefit Plan Disclosure [Line Items]
2025	$ 9,200
2026	13,800
Total	$ 23,000

COMMITMENTS AND CONTINGENCIES (Details 3) - U.S. Bank Payment 1 [Member]	Sep. 30, 2024 USD ($)
Defined Benefit Plan Disclosure [Line Items]
2025	$ 11,897
2026	23,794
2027	23,794
2028	5,949
Total	$ 65,434

COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($)			1 Months Ended		6 Months Ended	12 Months Ended
	Aug. 01, 2021	Aug. 04, 2020	Sep. 30, 2022	Jun. 30, 2020	Sep. 30, 2024	Mar. 31, 2024	Mar. 31, 2023
Debt Instrument [Line Items]
Lease expense					$ 163,937	$ 357,503	$ 329,255
Crestmark Bank [Member]
Debt Instrument [Line Items]
Debt instrument description					Under the agreement, the Company was provided with a line of credit that is not to exceed the lesser of $1,000,000 or 85% of eligible accounts receivable. The interest rate is prime rate plus 0.5%, with a floor of 6.75%, plus a monthly maintenance fee of 0.4%, based on the average monthly loan balance. Interest is charged on a minimum loan balance of $300,000, a loan fee of 0.5% at closing and annually, and an exit fee of 3%, 2% and 1% during years one, two and three respectively.
US Bank [Member] \| Note Agreement [Member]
Debt Instrument [Line Items]
Principal amount			$ 115,004	$ 92,000
Interest rate			6.00%	5.00%
Debt term			5 years	5 years
SBA [Member]
Debt Instrument [Line Items]
Proceed from loan		$ 150,000
Principal amount	$ 150,000
Interest rate	3.75%

SHARE-BASED COMPENSATION (Details) - USD ($)	3 Months Ended		6 Months Ended
SHARE-BASED COMPENSATION (Details) - USD ($)	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Stock-based compensation expense	$ 12,637	$ 13,074	$ 25,011	$ 26,149
Cost of Sales [Member]
Stock-based compensation expense	201	0	402	0
Selling and Marketing Expense [Member]
Stock-based compensation expense	1,750	1,779	3,369	3,558
General and Administrative Expense [Member]
Stock-based compensation expense	10,606	10,254	21,080	20,508
Research and Development Expense [Member]
Stock-based compensation expense	$ 80	$ 1,041	$ 160	$ 2,083

SHARE-BASED COMPENSATION (Details Narrative)	3 Months Ended	6 Months Ended
SHARE-BASED COMPENSATION (Details Narrative)	Sep. 30, 2024 USD ($) shares	Sep. 30, 2024 USD ($) shares
Equity [Abstract]
Stock options granted	45,000	410,000
Stock options exercised or forfeited	22,000	62,000
Unrecognized compensation costs \| $	$ 199,000	$ 199,000

RELATED PARTY TRANSACTION (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
RELATED PARTY TRANSACTION (Details Narrative) - USD ($)	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Director [Member]
Related Party Transaction [Line Items]
Consulting fees paid	$ 15,043	$ 15,747	$ 27,670	$ 32,032

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