ECIA Encision Inc (PK)

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 June 30, 2023

OR

☐

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, 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” , “smaller reporting company” and “emerging growth” 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. ☐

 

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)

11,769,543 Shares (outstanding at July 31, 2023)

 

 

ENCISION INC.

 

FORM 10-Q

 

For the Three Months Ended June 30, 2023

 

 

		Page Number
PART I.	FINANCIAL INFORMATION
ITEM 1 -	Condensed Interim Financial Statements:
	-       Condensed Balance Sheets as of June 30, 2023 and March 31, 2023	1
	-       Condensed Statements of Nine Months Ended June 30, 2023 and	2
	-       Condensed Statements of Cash Flows for the Three Ended June 30, 2023 and 2022	3
	-       Notes to Condensed Interim Financial Statements	4
ITEM 2 -	Management’s Discussion and Analysis of Financial Condition and Results of Operations	9
ITEM 4 -	Controls and Procedures	15
PART II.	OTHER INFORMATION
ITEM 1 -	Legal Proceedings	16
ITEM 1A -	Risk Factors	16
ITEM 2 -	Unregistered Sales of Equity Securities	16
ITEM 3 -	Defaults on Senior Securities	16
ITEM 4 -	Mine Safety Disclosures	16
ITEM 5 -	Other Information	16
ITEM 6 -	Exhibits	16
SIGNATURE		17

 

  

 

PART I FINANCIAL INFORMATION

 

ITEM 1 - Condensed Interim Financial Statements

 

Encision Inc.

Condensed Balance Sheets

(Unaudited)

		June 30, 2023				March 31, 2023
ASSETS
Current assets:
Cash		$	130,527			$	188,966
Accounts receivable			912,617				920,721
Inventories, net of reserve for obsolescence of $60,000 at June 30, 2023 and $51,000 at March 31, 2023			1,866,791				1,899,202
Prepaid expenses			85,799				115,714
Total current assets			2,995,734				3,124,603
Equipment:
Furniture, fixtures and equipment, at cost			2,615,676				2,615,676
Accumulated depreciation			(2,328,177	)			(2,312,400	)
Equipment, net			287,499				303,276
Right of use asset			420,748				496,004
Patents, net of accumulated amortization of $313,419 at June 30, 2023 and $306,946 at March 31, 2023			157,159				163,133
Other assets			54,128				46,953
TOTAL ASSETS		$	3,915,268			$	4,133,969
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	277,099			$	252,957
Line of credit			178,736				177,402
Secured notes			44,639				44,491
Accrued compensation			219,360				217,724
Other accrued liabilities			66,139				84,578
Accrued lease liability			332,195				353,674
Total current liabilities			1,118,168				1,130,826
Long-term liability:
Secured notes			255,563				268,512
Accrued lease liability			174,104				239,820
Total liabilities			1,547,835				1,639,158
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; 11,769,543 issued and outstanding at June 30, 2023 and March 31, 2023			24,361,150				24,348,075
Accumulated (deficit)			(21,993,717	)			(21,853,264	)
Total shareholders’ equity			2,367,433				2,494,811
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	3,915,268			$	4,133,969

 

 

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

 

 

Encision Inc.

Condensed Statements of Operations

(Unaudited)

 

		Three Months Ended
		June 30, 2023				June 30, 2022
NET REVENUE:
Product		$	1,613,552			$	1,696,029
Service			39,831				458,333
Total revenue			1,653,383				2,154,362
COST OF REVENUE:
Product			770,037				869,905
Service			20,621				—
Total cost of revenue			790,658				869,905
GROSS PROFIT			862,725				1,284,457
OPERATING EXPENSES:
Sales and marketing			433,436				502,967
General and administrative			388,757				344,119
Research and development			168,420				170,469
Total operating expenses			990,613				1,017,555
OPERATING (LOSS) INCOME			(127,888	)			266,902
Interest expense, net			(14,232	)			(2,363	)
Other income (expense), net			1,667				61
Interest expense, extinguishment of debt income and other income (expense), net			(12,565	)			(2,302	)
(LOSS) INCOME BEFORE PROVISION FOR INCOME TAXES			(140,453	)			264,601
Provision for income taxes			—				—
NET (LOSS) INCOME		$	(140,453	)		$	264,601
Net (loss) income per share—basic and diluted		$	(0.01	)		$	0.02
Weighted average shares—basic			11,769,543				11,719,543
Weighted average shares—diluted			11,769,543				12,021,280

 

  

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

 

 

  

 

Encision Inc.

Condensed Statements of Cash Flows

(Unaudited)

 

Three Months Ended		June 30, 2023				June 30, 2022
Cash flows (used in) operating activities:
Net income (loss)		$	(140,453	)		$	264,601
Adjustments to reconcile net income (loss) to net cash (used in) operating activities:
Depreciation and amortization			22,250				20,087
Stock-based compensation expense related to stock options			13,074				12,361
Provision for (recovery from) inventory obsolescence, net change			9,000				(1,052	)
Change in operating assets and liabilities:
Right of use asset, net			(11,939	)			(8,312	)
Accounts receivable			8,104				26,500
Inventories			23,411				(213,282	)
Prepaid expenses and other assets			22,740				10,888
Accounts payable			24,143				(188,304	)
Accrued compensation and other accrued liabilities			(16,803	)			20,481
Net cash (used in) operating activities			(46,473	)			(56,032	)
Cash flows (used in) investing activities:
Acquisition of property and equipment			—				(57,463	)
Patent costs			(499	)			(4,866	)
Net cash (used in) investing activities			(499	)			(62,329	)
Cash flows generated by financing activities:
(Paydown of) secured notes			(11,467	)			(3,340	)
Net cash generated by (used in) financing activities			(11,467	)			(3,340	)
Net (decrease) in cash			(58,439	)			(121,701	)
Cash, beginning of fiscal year			188,966				949,645
Cash, end of fiscal quarter		$	130,527			$	827,944
Supplemental disclosures of cash flow information:
Cash paid during the three months for interest		$	14,232			$	2,363

  

 

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

 

 

  

ENCISION INC.

 

NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS

 

JUNE 30, 2023

(Unaudited)

 

 

Note 1. ORGANIZATION AND NATURE OF BUSINESS

 

Encision Inc. 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. We believe that our 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. Our sales to date have been made principally in the United States.

 

We have an accumulated deficit of $21,993,717 at June 30, 2023. 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. Shareholders’ equity decreased by $127,378 since March 31, 2023 as a result of our net loss of $140,453 and share-based compensation of $13,075. Should our liquidity be diminished in the future because of operating losses, we may be required to seek additional capital.

 

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

 

Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation. The condensed interim financial statements included herein have been prepared by us, 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 we believe that the disclosures made are adequate to make the information presented not misleading. The condensed interim financial statements and notes thereto should be read in conjunction with the financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023 filed on June 28, 2023.

 

The accompanying 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.

 

We had net loss of $140,453 for the three months ended June 30, 2023. At June 30, 2023, we had cash of $130,527, current borrowings of $178,736 and borrowing capacity up to $1,000,000, as restricted by our eligible accounts receivable, under our line of credit. Working capital was $1,877,566, a decrease of $116,211 from March 31, 2023. We used $46,473 of cash in the fiscal three months ended June 30, 2023, primarily as a result of our net loss. The principal reason for our loss for the three months ended June 30, 2023 was reduced revenue and higher material costs. Management is developing plans to ensure that we have the working capital necessary to fund operations. We will increase our pricing on products to mitigate our higher material costs. Management concludes that it is probable that our cash resources and line of credit will be sufficient to meet our cash requirements for twelve months from the issuance of the condensed financial statements. Therefore, the accompanying condensed financial statements have been prepared assuming that we 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 expense during the reporting period. Actual results could differ from those estimates.

 

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

 

 

4

Fair Value of Financial Instruments. Our 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 at June 30, 2023. We believe that our cash on deposit that exceeds $250,000 with financial institutions is financially sound and the risk of loss is minimal.

 

We have no significant off-balance sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements. We maintain the majority of our 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, we may be exposed to credit risk generally associated with the healthcare industry. The net accounts receivable balance at June 30, 2023 of $912,617 and at March 31, 2023 of $920,721 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. We reduce 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 June 30, 2023 and March 31, 2023 inventory consisted of the following:

 

Schedule of inventory
		June 30, 2023				March 31, 2023
Raw materials		$	1,504,256			$	1,456,473
Finished goods			422,535				493,729
Total gross inventories			1,926,791				1,950,202
Less reserve for obsolescence			(60,000	)			(51,000	)
Total net inventories		$	1,866,791			$	1,899,202

 

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 months ended June 30, 2023 and 2022 was $15,776 and $12,091, respectively. 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 expense 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. We review the carrying value of our 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. We account 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 we achieve sufficient, sustained income in the future, we may conclude that some or all of the valuation allowance should be reversed. We are required to make many subjective assumptions and judgments regarding our income tax exposures. At June 30, 2023, we 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.

 

 

5

Revenue Recognition. We record revenue at a single point in time, when control is transferred to the customer. 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. As presented on the Statement of Operations our revenue is disaggregated between product revenue and service revenue. As it relates specifically to product revenue, we do not believe further disaggregation is necessary as substantially all of our product 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.

 

Research and Development Expenses. We expense 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, we are 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 our statements of operations.

 

Stock-based compensation expense recognized under ASC 718 for the three months ended June 30, 2023 and 2022 was $13,074 and $12,361, respectively, which consisted of stock-based compensation expense related to grants of employee stock options.

 

Segment Reporting. We have 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 months ended June 30, 2023 and 2022 follows:

 

Schedule of reporting segments
		Three Months Ended June 30, 2023												Three Months Ended June 30, 2022
		Product				Service				Total				Product				Service				Total
Net revenue		$	1,613,552			$	39,831			$	1,653,383			$	1,696,029			$	458,333			$	2,154,362
Cost of revenue			770,037				20,621				790,658				869,905				—				869,905
Gross profit			843,515				19,210				862,725				826,124				458,333				1,284,457
Operating income (loss)			(147,098	)			19,210				(127,888	)			(191,431	)			458,333				266,902
Depreciation and amortization			22,250				—				22,250				20,087				—				20,087
Patent and capital expenditures			(499	)			—				(499	)			62,329				—				62,329
Equipment and patents, net		$	444,658			$	—			$	444,658			$	412,258			$	—			$	412,258

 

 

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

 

We report 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:

 

Schedule of basic and diluted net income (loss) per share
		Three Months Ended
		June 30, 2023				June 30, 2022
Net income (loss)		$	(140,453	)		$	264,601
Weighted-average basic shares outstanding			11,769,543				11,719,543
Effect of dilutive securities			—				301,737
Weighted-average diluted shares			11,769,543				12,021,280
Basic net income (loss) per share		$	(0.01	)		$	0.02
Diluted net income (loss) per share		$	(0.01	)		$	0.02
Antidilutive employee stock options			1,049,000				756,263

 

 

6

Note 4. COMMITMENTS AND CONTINGENCIES

 

We have a noncancelable lease agreement for our facilities at 6797 Winchester Circle, Boulder, Colorado. The lease expires October 31, 2024.

 

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. We 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 for us was the balance sheet recognition of right-of-use (“ROU”) assets and lease liabilities for operating leases as a lessee.

 

We determine if an arrangement contains a lease at inception. We currently do 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. 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 lease payment, by fiscal year, as of June 30, 2023 is as follows:

Schedule of principal U.S. Bank payment
Fiscal Year			Amount
2024			$	274,160
2025				232,139
Total			$	506,299

 

On August 4, 2020, we received $150,000 principal 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, 2020 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. The Note may be prepaid in part or in full, at any time, without penalty.

 

During January 2022, 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 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.

 

On November 15, 2022, 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.

 

The minimum future EIDL payment, by fiscal year, as of June 30, 2023 is as follows:

Schedule of principal U.S. Bank payment
Fiscal Year			Amount
2024			$	2,406
2025				3,331
2026				3,457
Thereafter				149,832
Total			$	159,026

 

 

7

During January 2022, 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 principal U.S. Bank payment, by fiscal year, as of June 30, 2023 is as follows:

Schedule of principal U.S. Bank payment
Fiscal Year			Amount
2024			$	13,800
2025				18,400
2026				13,800
Total			$	46,000

 

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 June 30, 2023 is as follows:

Schedule of principal U.S. Bank payment
Fiscal Year			Amount
2024			$	17,250
2025				23,000
2026				23,000
Thereafter				31,926
Total			$	95,176

 

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

 

We are subject to regulation by the United States Food and Drug Administration (“FDA”). The FDA provides regulations governing the manufacture and sale of our products and regularly inspects us and other manufacturers to determine compliance with these regulations. We believe that we were in substantial compliance with all known regulations at June 30, 2023. FDA inspections are conducted periodically at the discretion of the FDA. Our 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 our 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 months ended June 30, 2023 and 2022, which was allocated as follows:

Schedule of summarizes stock-based compensation
		Three Months Ended
		June 30, 2023				June 30, 2022
Cost of sales		$	—			$	158
Sales and marketing			1,779				1,656
General and administrative			10,253				9,429
Research and development			1,042				1,118
Stock-based compensation expense		$	13,074			$	12,361

 

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 no stock options granted, exercised or forfeited during the three months ended June 30, 2023 and 2022. As of June 30, 2023, approximately $181,000 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

 

We paid consulting fees of $16,285 and $13,728 to an entity owned by one of our directors during the three months ended June 30, 2023 and 2022, respectively.

 

Note 7. SUBSEQUENT EVENTS

We evaluated all of our activity as of the date the condensed interim financial statements were issued and concluded that no subsequent events have occurred that would require recognition in our financial statements or disclosed in the notes to our 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 our 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 our Form 10-K for the fiscal year ended March 31, 2023.

 

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 our 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. A Safety Communication was released by the FDA on May 29, 2018 which is on the FDA's website at: https://www.fda.gov/MedicalDevices/Safety/AlertsandNotices/ucm608637.htm. The Safety Communication states that, "In addition to serving as an ignition source, monopolar energy use can directly result in unintended patient burns from capacitive coupling and intra-operative insulation failure. If a monopolar electrosurgical unit (“ESU”) is used: Do not activate when near or in contact with other instruments.”

 

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.

 

Our 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 helping to prevent patient injury. With our “shielded and monitored” instruments, surgeons are able to perform electrosurgical procedures more safely, effectively and economically than is possible using conventional instruments or alternative energy sources.

 

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 months ended June 30, 2023. 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.

 

 

A number of factors are contributing to a decrease in surgical procedures that take away from top line results. COVID resurgences continued to negatively impact surgical procedure volumes. In addition, MarketWatch announced that, “A record share of U.S. adults said they or a family member delayed medical care last year due to affordability issues. According to a Gallup poll, thirty-eight percent of Americans said they or a family member avoided treatment over cost in 2022, a full 12 percentage points higher than the year prior.” Finally, hospitals are struggling to maintain critical staffing levels to enable them to keep up with even the decreased demand for procedures.

 

We have an accumulated deficit of $21,993,717 at June 30, 2023. 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 three months ended June 30, 2023, we used $46,473 of cash in our operating activities and used $0 for investments in property and equipment. At June 30, 2023, we had $130,527 and at March 31, 2023 we had $188,966 in cash available to fund future operations, a decrease of $58,439 from March 31, 2023. The decrease to cash was principally the result of net loss. Our working capital was $1,877,566 at June 30, 2023 compared to $1,993,777 at March 31, 2023.

 

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 2024. Our objectives for the remainder of fiscal year 2024 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.

 

On April 20, 2020, we entered into a Master Services Agreement (“MSA”) with Auris Health, Inc. (“Auris Health”), which is based in Redwood City, CA and a part of Johnson & Johnson Medical Devices Companies. The MSA (and the initial related Statement of Work thereunder) were effective as of March 3, 2020. Under the MSA, we and Auris Health collaborated on the development of equipment designed to enable the compatibility of our AEM technology with monopolar instruments produced by Auris Health. The MSA had a term of up to three years, but either party could terminate the MSA sooner upon 10 business days’ prior written notice. On August 23, 2022, we entered into a Supply Agreement with Auris Health, Inc. On May 5, 2022, the parties mutually agreed to terminate all of our agreements.

 

 

Possibility of Operating Losses: We have an accumulated deficit of $21,993,717 at June 30, 2023. 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 2024. 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 June 30, 2023 compared to the quarter ended June 30, 2022.

 

Net Product revenue. Net product revenue for the quarter ended June 30, 2023 was $1,613,552 compared to $1,696,029 for the quarter ended June 30, 2022, a decrease of 5%. The decrease of net product revenue is attributable to decreased demand for our products and supply chain issues which resulted in lost business from hospitals that used AEM technology during the year.

 

Net Service revenue. Net service revenue for the quarter ended June 30, 2023 was $39,831 compared to $458,333 for the quarter ended June 30, 2022. Net service revenue for the quarter ended June 30, 2022 was for engineering services performed under a Master Services Agreement with Auris Health.

Gross profit. Gross profit for the quarter ended June 30, 2023 of $862,725 represented a decrease of 33% from gross profit of $1,284,457 for the quarter ended June 30, 2022. Gross profit decreased as a result of higher total revenue for the quarter ended June 30, 2022. Gross profit on product net revenue as a percentage of sales (gross margin) was 52% for the quarter ended June 30, 2023 and 49% for the quarter ended June 30, 2022. Gross profit on net revenue increased as a result of higher operating efficiencies.

Sales and marketing expenses. Sales and marketing expenses of $433,436 for the quarter ended June 30, 2023 represented a decrease of 14% from sales and marketing expenses of $502,967 for the quarter ended June 30, 2022. The decrease was the result of lower salaries and commissions.

 

General and administrative expenses. General and administrative expenses of $388,757 for the quarter ended June 30, 2023 represented an increase of 13% from general and administrative expenses of $344,119 for the quarter ended June 30, 2022. The increase was primarily the result of a reclassification of an employee from production to administration.

 

 

Research and development expenses. Research and development expenses of $168,420 for the quarter ended June 30, 2023 represented a decrease of 1% compared to $170,469 for the quarter ended June 30, 2022. The decrease was the result of a decrease to compensation that was primarily offset by an increase to test materials.

 

Net loss. Net loss was $140,453 for the quarter ended June 30, 2023 compared to net income of $264,601 for the quarter ended June 30, 2022. The net decrease was principally a result of higher service revenue for the quarter ended June 30, 2022.

 

The results of operations for the three months ended June 30, 2023 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 $24,361,150 from inception through June 30, 2023.

 

On August 4, 2020, we received $150,000 principal 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, 2020 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. The Note may be prepaid in part or in full, at any time, without penalty.

 

During January 2022, 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 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.

 

On November 15, 2022, 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 used $46,473 of cash during the three months ended June 30, 2023 on net revenue of $1,653,383. The amounts of cash used by operations for the three months ended June 30, 2023 are not necessarily indicative of the expected amounts of cash to be generated from or used in operations in fiscal year 2024. At June 30, 2023, we had $130,527 in cash available to fund future operations and a line of credit for up to $1,000,000, restricted by eligible account receivables. Our working capital was $1,877,566 at June 30, 2023 compared to $1,993,777 at March 31, 2023. Current liabilities were $1,118,168 at June 30, 2023 compared to $1,130,826 at March 31, 2023. We have a noncancelable lease agreement for our facilities at 6797 Winchester Circle, Boulder, Colorado. The lease expires October 31, 2024.

 

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 lease payment, by fiscal year, as of June 30, 2023 is as follows:

 

Fiscal Year			Amount
2024			$	274,160
2025				232,139
Total			$	506,299

 

The minimum future EIDL payment, by fiscal year, as of June 30, 2023 is as follows:

 

Fiscal Year			Amount
2024			$	2,406
2025				3,331
2026				3,457
Thereafter				149,832
Total			$	159,026

 

 

  

 

 

The minimum future principal U.S. Bank payment, by fiscal year, as of June 30, 2023 is as follows:

 

Fiscal Year			Amount
2024			$	13,800
2025				18,400
2026				13,800
Total			$	46,000

 

The minimum future principal U.S. Bank payment, by fiscal year, as of June 30, 2023 is as follows:

 

Fiscal Year			Amount
2024			$	17,250
2025				23,000
2026				23,000
Thereafter				31,926
Total			$	95,176

 

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

 

As of June 30, 2023, 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
Operating lease obligations		$	506,299			$	332,195			$	174,104			$	—			$	—
Line of credit			178,736				178,736				—				—				—
EIDL loans			159,026				3,239				5,645				6,788				143,354
U.S. Bank loan			46,000				18,400				27,600				—				—
U.S. Bank loan			95,176				23,000				46,000				26,176				—
Total		$	985,237			$	555,570			$	253,349			$	32,964			$	143,354

 

Our fiscal year 2024 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, 2023, net operating loss carryforwards totaling approximately $7.3 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, 2024. 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 June 30, 2023. 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 June 30, 2023.

 

Remediation Activities Regarding Material Weakness

 

As disclosed in our Annual Report on Form 10-K for the March 31, 2023 fiscal year, management determined that (i) we had a material weakness over our entity level control environment as of March 31, 2023 and (ii) our internal control over financial reporting was not effective as of March 31, 2023. Our preventive and review controls failed to detect errors related to the valuation of inventory and cutoff of service revenue.

 

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.

 

The Company will design and implement additional procedures during fiscal 2024 in order to assure that audit/accounting personnel are more involved with the Company’s inventory activities and service revenue to monitor and earlier identify accounting issues that may be raised by the Company’s ongoing activities.

 

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 June 30, 2023 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, 2023. 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, 2023.

 

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

 

None.

  

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

None.

 

Item 5. Other Information

 

None.

 

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 12, 2022).
10.9	US Bank Note dated January 21, 2021. (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, 2022 (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, 2022 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 June 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.
August 10, 2023	By:	/s/ Mala Ray
Date		Mala Ray Controller Principal Accounting Officer & Principal Financial Officer

  

 

                                                                                              

 

 

 

 

 

 

Exhibit 31.1

 

CERTIFICATIONS

 

I, Gregory Trudel, certify that:

 

1.

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

 

2.

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;

 

3.

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;

 

4.

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:

 

a)

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;

 

b)

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;

 

c)

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

 

d)

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,

 

5.

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):

 

a)

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

 

b)

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: August 10, 2023	s/ Gregory Trudel
	Gregory Trudel
	President and CEO

Exhibit 31.2

 

 

CERTIFICATIONS

 

I, Mala Ray, certify that:

 

1.

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

 

2.

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 quarterly report;

 

3.

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;

 

4.

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:

 

a)

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;

 

b)

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;

 

c)

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

 

d)

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,

 

5.

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):

 

a)

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

 

b)

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: August 10, 2023	/s/ Mala Ray
	Mala Ray
	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 months ended June 30, 2023 (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: August 10, 2023	/s/ Gregory Trudel
	Gregory Trudel
	President and CEO

 

 

 

 

I, Mala Ray, 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 Quarterly Report on Form 10-Q of the Company for the three months ended June 30, 2023 (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: August 10, 2023	/s/ Mala Ray
	Mala Ray
	Controller
	Principal Accounting Officer &
	Principal Financial Officer

v3.23.2

Cover - shares	3 Months Ended
	Jun. 30, 2023	Jul. 31, 2023
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Jun. 30, 2023
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2024
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		11,769,543

v3.23.2

Condensed Balance Sheets (Unaudited) - USD ($)	Jun. 30, 2023	Mar. 31, 2023
Current assets:
Cash	$ 130,527	$ 188,966
Accounts receivable	912,617	920,721
Inventories, net of reserve for obsolescence of $60,000 at June 30, 2023 and $51,000 at March 31, 2023	1,866,791	1,899,202
Prepaid expenses	85,799	115,714
Total current assets	2,995,734	3,124,603
Equipment:
Furniture, fixtures and equipment, at cost	2,615,676	2,615,676
Accumulated depreciation	(2,328,177)	(2,312,400)
Equipment, net	287,499	303,276
Right of use asset	420,748	496,004
Patents, net of accumulated amortization of $313,419 at June 30, 2023 and $306,946 at March 31, 2023	157,159	163,133
Other assets	54,128	46,953
TOTAL ASSETS	3,915,268	4,133,969
Current liabilities:
Accounts payable	277,099	252,957
Line of credit	178,736	177,402
Secured notes	44,639	44,491
Accrued compensation	219,360	217,724
Other accrued liabilities	66,139	84,578
Accrued lease liability	332,195	353,674
Total current liabilities	1,118,168	1,130,826
Long-term liability:
Secured notes	255,563	268,512
Accrued lease liability	174,104	239,820
Total liabilities	1,547,835	1,639,158
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; 11,769,543 issued and outstanding at June 30, 2023 and March 31, 2023	24,361,150	24,348,075
Accumulated (deficit)	(21,993,717)	(21,853,264)
Total shareholders’ equity	2,367,433	2,494,811
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$ 3,915,268	$ 4,133,969

v3.23.2

Condensed Balance Sheets (Unaudited) (Parenthetical) - USD ($)	Jun. 30, 2023	Mar. 31, 2023
Statement of Financial Position [Abstract]
Inventories, reserve for obsolescence	$ 60,000	$ 51,000
Accumulated amortization	$ 313,419	$ 306,946
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, 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	11,769,543	11,769,543
Common stock and additional paid-in capital, shares outstanding	11,769,543	11,769,543

v3.23.2

Condensed Statements of Operations (Unaudited) - USD ($)	3 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
NET REVENUE:
Total revenue	$ 1,653,383	$ 2,154,362
COST OF REVENUE:
Total cost of revenue	790,658	869,905
GROSS PROFIT	862,725	1,284,457
OPERATING EXPENSES:
Sales and marketing	433,436	502,967
General and administrative	388,757	344,119
Research and development	168,420	170,469
Total operating expenses	990,613	1,017,555
OPERATING (LOSS) INCOME	(127,888)	266,902
Interest expense, net	(14,232)	(2,363)
Other income (expense), net	1,667	61
Interest expense, extinguishment of debt income and other income (expense), net	(12,565)	(2,302)
(LOSS) INCOME BEFORE PROVISION FOR INCOME TAXES	(140,453)	264,601
Provision for income taxes	0	0
NET (LOSS) INCOME	$ (140,453)	$ 264,601
Weighted average shares—basic	11,769,543	11,719,543
Weighted average shares—diluted	11,769,543	12,021,280
Product [Member]
NET REVENUE:
Total revenue	$ 1,613,552	$ 1,696,029
COST OF REVENUE:
Total cost of revenue	770,037	869,905
GROSS PROFIT	843,515	826,124
OPERATING EXPENSES:
OPERATING (LOSS) INCOME	(147,098)	(191,431)
Service [Member]
NET REVENUE:
Total revenue	39,831	458,333
COST OF REVENUE:
Total cost of revenue	20,621	0
GROSS PROFIT	19,210	458,333
OPERATING EXPENSES:
OPERATING (LOSS) INCOME	$ 19,210	$ 458,333

v3.23.2

Condensed Statements of Operations (Unaudited) (Parenthetical) - $ / shares	3 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Income Statement [Abstract]
Net (loss) income per share, Basic	$ (0.01)	$ 0.02
Net (loss) income per share, Diluted	$ (0.01)	$ 0.02

v3.23.2

Condensed Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Cash flows (used in) operating activities:
Net income (loss)	$ (140,453)	$ 264,601
Adjustments to reconcile net income (loss) to net cash (used in) operating activities:
Depreciation and amortization	22,250	20,087
Stock-based compensation expense related to stock options	13,074	12,361
Provision for (recovery from) inventory obsolescence, net change	9,000	(1,052)
Change in operating assets and liabilities:
Right of use asset, net	(11,939)	(8,312)
Accounts receivable	8,104	26,500
Inventories	23,411	(213,282)
Prepaid expenses and other assets	22,740	10,888
Accounts payable	24,143	(188,304)
Accrued compensation and other accrued liabilities	(16,803)	20,481
Net cash (used in) operating activities	(46,473)	(56,032)
Cash flows (used in) investing activities:
Acquisition of property and equipment	0	(57,463)
Patent costs	(499)	(4,866)
Net cash (used in) investing activities	(499)	(62,329)
Cash flows generated by financing activities:
(Paydown of) secured notes	(11,467)	(3,340)
Net cash generated by (used in) financing activities	(11,467)	(3,340)
Net (decrease) in cash	(58,439)	(121,701)
Cash, beginning of fiscal year	188,966	949,645
Cash, end of fiscal quarter	130,527	827,944
Supplemental disclosures of cash flow information:
Cash paid during the three months for interest	$ 14,232	$ 2,363

v3.23.2

ORGANIZATION AND NATURE OF BUSINESS	3 Months Ended
	Jun. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]
ORGANIZATION AND NATURE OF BUSINESS	Note 1. ORGANIZATION AND NATURE OF BUSINESS   Encision Inc. 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. We believe that our 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. Our sales to date have been made principally in the United States.   We have an accumulated deficit of $21,993,717 at June 30, 2023. 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. Shareholders’ equity decreased by $127,378 since March 31, 2023 as a result of our net loss of $140,453 and share-based compensation of $13,075. Should our liquidity be diminished in the future because of operating losses, we may be required to seek additional capital.   Our strategic marketing and sales plan is designed to expand the use of our products in surgically active hospitals and surgery centers in the United States.

v3.23.2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	3 Months Ended
	Jun. 30, 2023
Accounting Policies [Abstract]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES   Basis of Presentation. The condensed interim financial statements included herein have been prepared by us, 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 we believe that the disclosures made are adequate to make the information presented not misleading. The condensed interim financial statements and notes thereto should be read in conjunction with the financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023 filed on June 28, 2023.   The accompanying 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.   We had net loss of $140,453 for the three months ended June 30, 2023. At June 30, 2023, we had cash of $130,527, current borrowings of $178,736 and borrowing capacity up to $1,000,000, as restricted by our eligible accounts receivable, under our line of credit. Working capital was $1,877,566, a decrease of $116,211 from March 31, 2023. We used $46,473 of cash in the fiscal three months ended June 30, 2023, primarily as a result of our net loss. The principal reason for our loss for the three months ended June 30, 2023 was reduced revenue and higher material costs. Management is developing plans to ensure that we have the working capital necessary to fund operations. We will increase our pricing on products to mitigate our higher material costs. Management concludes that it is probable that our cash resources and line of credit will be sufficient to meet our cash requirements for twelve months from the issuance of the condensed financial statements. Therefore, the accompanying condensed financial statements have been prepared assuming that we 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 expense during the reporting period. Actual results could differ from those estimates.   Cash and Cash Equivalents. For purposes of reporting cash flows, we consider all cash and highly liquid investments with an original maturity of three months or less to be cash equivalents.   Fair Value of Financial Instruments. Our 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 at June 30, 2023. We believe that our cash on deposit that exceeds $250,000 with financial institutions is financially sound and the risk of loss is minimal.   We have no significant off-balance sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements. We maintain the majority of our 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, we may be exposed to credit risk generally associated with the healthcare industry. The net accounts receivable balance at June 30, 2023 of $912,617 and at March 31, 2023 of $920,721 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. We reduce 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 June 30, 2023 and March 31, 2023 inventory consisted of the following:   Schedule of inventory                     June 30, 2023     March 31, 2023   Raw materials   $ 1,504,256     $ 1,456,473   Finished goods     422,535       493,729   Total gross inventories     1,926,791       1,950,202   Less reserve for obsolescence     (60,000 )     (51,000 ) Total net inventories   $ 1,866,791     $ 1,899,202     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 months ended June 30, 2023 and 2022 was $15,776 and $12,091, respectively. 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 expense 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. We review the carrying value of our 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. We account 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 we achieve sufficient, sustained income in the future, we may conclude that some or all of the valuation allowance should be reversed. We are required to make many subjective assumptions and judgments regarding our income tax exposures. At June 30, 2023, we 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. We record revenue at a single point in time, when control is transferred to the customer. 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. As presented on the Statement of Operations our revenue is disaggregated between product revenue and service revenue. As it relates specifically to product revenue, we do not believe further disaggregation is necessary as substantially all of our product 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.   Research and Development Expenses. We expense 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, we are 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 our statements of operations.   Stock-based compensation expense recognized under ASC 718 for the three months ended June 30, 2023 and 2022 was $13,074 and $12,361, respectively, which consisted of stock-based compensation expense related to grants of employee stock options.   Segment Reporting. We have 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 months ended June 30, 2023 and 2022 follows:   Schedule of reporting segments                                                     Three Months Ended June 30, 2023     Three Months Ended June 30, 2022         Product       Service       Total       Product       Service       Total   Net revenue   $ 1,613,552     $ 39,831     $ 1,653,383     $ 1,696,029     $ 458,333     $ 2,154,362   Cost of revenue     770,037       20,621       790,658       869,905       —         869,905   Gross profit     843,515       19,210       862,725       826,124       458,333       1,284,457   Operating income (loss)     (147,098 )     19,210       (127,888 )     (191,431 )     458,333       266,902   Depreciation and amortization     22,250       —         22,250       20,087       —         20,087   Patent and capital expenditures     (499 )     —         (499 )     62,329       —         62,329   Equipment and patents, net   $ 444,658     $ —       $ 444,658     $ 412,258     $ —       $ 412,258

v3.23.2

BASIC AND DILUTED INCOME AND LOSS PER COMMON SHARE	3 Months Ended
	Jun. 30, 2023
Earnings Per Share [Abstract]
BASIC AND DILUTED INCOME AND LOSS PER COMMON SHARE	Note 3. BASIC AND DILUTED INCOME AND LOSS PER COMMON SHARE   We report 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:   Schedule of basic and diluted net income (loss) per share                     Three Months Ended       June 30, 2023     June 30, 2022   Net income (loss)   $ (140,453 )   $ 264,601   Weighted-average basic shares outstanding     11,769,543       11,719,543   Effect of dilutive securities     —         301,737   Weighted-average diluted shares     11,769,543       12,021,280   Basic net income (loss) per share   $ (0.01 )   $ 0.02   Diluted net income (loss) per share   $ (0.01 )   $ 0.02   Antidilutive employee stock options     1,049,000       756,263

v3.23.2

COMMITMENTS AND CONTINGENCIES	3 Months Ended
	Jun. 30, 2023
Commitments and Contingencies Disclosure [Abstract]
COMMITMENTS AND CONTINGENCIES	Note 4. COMMITMENTS AND CONTINGENCIES   We have a noncancelable lease agreement for our facilities at 6797 Winchester Circle, Boulder, Colorado. The lease expires October 31, 2024.   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. We 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 for us was the balance sheet recognition of right-of-use (“ROU”) assets and lease liabilities for operating leases as a lessee.   We determine if an arrangement contains a lease at inception. We currently do 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. 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 lease payment, by fiscal year, as of June 30, 2023 is as follows: Schedule of principal U.S. Bank payment           Fiscal Year     Amount   2024     $ 274,160   2025       232,139   Total     $ 506,299     On August 4, 2020, we received $150,000 principal 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, 2020 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. The Note may be prepaid in part or in full, at any time, without penalty.   During January 2022, 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 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.   On November 15, 2022, 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.   The minimum future EIDL payment, by fiscal year, as of June 30, 2023 is as follows: Schedule of principal U.S. Bank payment           Fiscal Year     Amount   2024     $ 2,406   2025       3,331   2026       3,457   Thereafter       149,832   Total     $ 159,026     During January 2022, 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 principal U.S. Bank payment, by fiscal year, as of June 30, 2023 is as follows: Schedule of principal U.S. Bank payment           Fiscal Year     Amount   2024     $ 13,800   2025       18,400   2026       13,800   Total     $ 46,000     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 June 30, 2023 is as follows: Schedule of principal U.S. Bank payment           Fiscal Year     Amount   2024     $ 17,250   2025       23,000   2026       23,000   Thereafter       31,926   Total     $ 95,176     Aside from the operating lease, EIDL loan and U.S. Bank loans, we do not have any material contractual commitments requiring settlement in the future.   We are subject to regulation by the United States Food and Drug Administration (“FDA”). The FDA provides regulations governing the manufacture and sale of our products and regularly inspects us and other manufacturers to determine compliance with these regulations. We believe that we were in substantial compliance with all known regulations at June 30, 2023. FDA inspections are conducted periodically at the discretion of the FDA. Our latest inspection by the FDA occurred in October 2019.

v3.23.2

SHARE-BASED COMPENSATION	3 Months Ended
	Jun. 30, 2023
Equity [Abstract]
SHARE-BASED COMPENSATION	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 our 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 months ended June 30, 2023 and 2022, which was allocated as follows: Schedule of summarizes stock-based compensation                     Three Months Ended       June 30, 2023     June 30, 2022   Cost of sales   $ —       $ 158   Sales and marketing     1,779       1,656   General and administrative     10,253       9,429   Research and development     1,042       1,118   Stock-based compensation expense   $ 13,074     $ 12,361     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 no stock options granted, exercised or forfeited during the three months ended June 30, 2023 and 2022. As of June 30, 2023, approximately $181,000 of total unrecognized compensation costs related to nonvested stock options is expected to be recognized over a period of five years.

v3.23.2

RELATED PARTY TRANSACTION	3 Months Ended
	Jun. 30, 2023
Related Party Transactions [Abstract]
RELATED PARTY TRANSACTION	Note 6. RELATED PARTY TRANSACTION   We paid consulting fees of $16,285 and $13,728 to an entity owned by one of our directors during the three months ended June 30, 2023 and 2022, respectively.

v3.23.2

SUBSEQUENT EVENTS	3 Months Ended
	Jun. 30, 2023
Subsequent Events [Abstract]
SUBSEQUENT EVENTS	Note 7. SUBSEQUENT EVENTS We evaluated all of our activity as of the date the condensed interim financial statements were issued and concluded that no subsequent events have occurred that would require recognition in our financial statements or disclosed in the notes to our condensed interim financial statements.

v3.23.2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	3 Months Ended
	Jun. 30, 2023
Accounting Policies [Abstract]
Basis of Presentation	Basis of Presentation. The condensed interim financial statements included herein have been prepared by us, 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 we believe that the disclosures made are adequate to make the information presented not misleading. The condensed interim financial statements and notes thereto should be read in conjunction with the financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023 filed on June 28, 2023.   The accompanying 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.   We had net loss of $140,453 for the three months ended June 30, 2023. At June 30, 2023, we had cash of $130,527, current borrowings of $178,736 and borrowing capacity up to $1,000,000, as restricted by our eligible accounts receivable, under our line of credit. Working capital was $1,877,566, a decrease of $116,211 from March 31, 2023. We used $46,473 of cash in the fiscal three months ended June 30, 2023, primarily as a result of our net loss. The principal reason for our loss for the three months ended June 30, 2023 was reduced revenue and higher material costs. Management is developing plans to ensure that we have the working capital necessary to fund operations. We will increase our pricing on products to mitigate our higher material costs. Management concludes that it is probable that our cash resources and line of credit will be sufficient to meet our cash requirements for twelve months from the issuance of the condensed financial statements. Therefore, the accompanying condensed financial statements have been prepared assuming that we will continue as a going concern.
Use of Estimates in the Preparation of Financial Statements	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 expense during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents	Cash and Cash Equivalents. For purposes of reporting cash flows, we consider all cash and highly liquid investments with an original maturity of three months or less to be cash equivalents.
Fair Value of Financial Instruments	Fair Value of Financial Instruments. Our 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	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 at June 30, 2023. We believe that our cash on deposit that exceeds $250,000 with financial institutions is financially sound and the risk of loss is minimal.   We have no significant off-balance sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements. We maintain the majority of our 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, we may be exposed to credit risk generally associated with the healthcare industry. The net accounts receivable balance at June 30, 2023 of $912,617 and at March 31, 2023 of $920,721 included no more than 8% from any one customer.
Inventories	Inventories. Inventories are stated at the lower of cost (first-in, first-out basis) or net realizable value. We reduce 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 June 30, 2023 and March 31, 2023 inventory consisted of the following:   Schedule of inventory                     June 30, 2023     March 31, 2023   Raw materials   $ 1,504,256     $ 1,456,473   Finished goods     422,535       493,729   Total gross inventories     1,926,791       1,950,202   Less reserve for obsolescence     (60,000 )     (51,000 ) Total net inventories   $ 1,866,791     $ 1,899,202
Property and Equipment	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 months ended June 30, 2023 and 2022 was $15,776 and $12,091, respectively. 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 expense as incurred and major additions, replacements and improvements are capitalized.
Long-Lived Assets	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	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. We review the carrying value of our 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	Income Taxes. We account 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 we achieve sufficient, sustained income in the future, we may conclude that some or all of the valuation allowance should be reversed. We are required to make many subjective assumptions and judgments regarding our income tax exposures. At June 30, 2023, we 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	Revenue Recognition. We record revenue at a single point in time, when control is transferred to the customer. 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. As presented on the Statement of Operations our revenue is disaggregated between product revenue and service revenue. As it relates specifically to product revenue, we do not believe further disaggregation is necessary as substantially all of our product 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.
Research and Development Expenses	Research and Development Expenses. We expense research and development costs for products and processes as incurred.
Stock-Based Compensation	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, we are 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 our statements of operations.   Stock-based compensation expense recognized under ASC 718 for the three months ended June 30, 2023 and 2022 was $13,074 and $12,361, respectively, which consisted of stock-based compensation expense related to grants of employee stock options.
Segment Reporting	Segment Reporting. We have 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 months ended June 30, 2023 and 2022 follows:   Schedule of reporting segments                                                     Three Months Ended June 30, 2023     Three Months Ended June 30, 2022         Product       Service       Total       Product       Service       Total   Net revenue   $ 1,613,552     $ 39,831     $ 1,653,383     $ 1,696,029     $ 458,333     $ 2,154,362   Cost of revenue     770,037       20,621       790,658       869,905       —         869,905   Gross profit     843,515       19,210       862,725       826,124       458,333       1,284,457   Operating income (loss)     (147,098 )     19,210       (127,888 )     (191,431 )     458,333       266,902   Depreciation and amortization     22,250       —         22,250       20,087       —         20,087   Patent and capital expenditures     (499 )     —         (499 )     62,329       —         62,329   Equipment and patents, net   $ 444,658     $ —       $ 444,658     $ 412,258     $ —       $ 412,258

v3.23.2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)	3 Months Ended
	Jun. 30, 2023
Accounting Policies [Abstract]
Schedule of inventory	Schedule of inventory                     June 30, 2023     March 31, 2023   Raw materials   $ 1,504,256     $ 1,456,473   Finished goods     422,535       493,729   Total gross inventories     1,926,791       1,950,202   Less reserve for obsolescence     (60,000 )     (51,000 ) Total net inventories   $ 1,866,791     $ 1,899,202
Schedule of reporting segments	Schedule of reporting segments                                                     Three Months Ended June 30, 2023     Three Months Ended June 30, 2022         Product       Service       Total       Product       Service       Total   Net revenue   $ 1,613,552     $ 39,831     $ 1,653,383     $ 1,696,029     $ 458,333     $ 2,154,362   Cost of revenue     770,037       20,621       790,658       869,905       —         869,905   Gross profit     843,515       19,210       862,725       826,124       458,333       1,284,457   Operating income (loss)     (147,098 )     19,210       (127,888 )     (191,431 )     458,333       266,902   Depreciation and amortization     22,250       —         22,250       20,087       —         20,087   Patent and capital expenditures     (499 )     —         (499 )     62,329       —         62,329   Equipment and patents, net   $ 444,658     $ —       $ 444,658     $ 412,258     $ —       $ 412,258

v3.23.2

BASIC AND DILUTED INCOME AND LOSS PER COMMON SHARE (Tables)	3 Months Ended
	Jun. 30, 2023
Earnings Per Share [Abstract]
Schedule of basic and diluted net income (loss) per share	Schedule of basic and diluted net income (loss) per share                     Three Months Ended       June 30, 2023     June 30, 2022   Net income (loss)   $ (140,453 )   $ 264,601   Weighted-average basic shares outstanding     11,769,543       11,719,543   Effect of dilutive securities     —         301,737   Weighted-average diluted shares     11,769,543       12,021,280   Basic net income (loss) per share   $ (0.01 )   $ 0.02   Diluted net income (loss) per share   $ (0.01 )   $ 0.02   Antidilutive employee stock options     1,049,000       756,263

v3.23.2

COMMITMENTS AND CONTINGENCIES (Tables)	3 Months Ended
	Jun. 30, 2023
Lease Payment [Member]
Defined Benefit Plan Disclosure [Line Items]
Schedule of principal U.S. Bank payment	Schedule of principal U.S. Bank payment           Fiscal Year     Amount   2024     $ 274,160   2025       232,139   Total     $ 506,299
E I D L Payment [Member]
Defined Benefit Plan Disclosure [Line Items]
Schedule of principal U.S. Bank payment	Schedule of principal U.S. Bank payment           Fiscal Year     Amount   2024     $ 2,406   2025       3,331   2026       3,457   Thereafter       149,832   Total     $ 159,026
U S Bank Payment [Member]
Defined Benefit Plan Disclosure [Line Items]
Schedule of principal U.S. Bank payment	Schedule of principal U.S. Bank payment           Fiscal Year     Amount   2024     $ 13,800   2025       18,400   2026       13,800   Total     $ 46,000
U S Bank Payment 1 [Member]
Defined Benefit Plan Disclosure [Line Items]
Schedule of principal U.S. Bank payment	Schedule of principal U.S. Bank payment           Fiscal Year     Amount   2024     $ 17,250   2025       23,000   2026       23,000   Thereafter       31,926   Total     $ 95,176

v3.23.2

SHARE-BASED COMPENSATION (Tables)	3 Months Ended
	Jun. 30, 2023
Equity [Abstract]
Schedule of summarizes stock-based compensation	Schedule of summarizes stock-based compensation                     Three Months Ended       June 30, 2023     June 30, 2022   Cost of sales   $ —       $ 158   Sales and marketing     1,779       1,656   General and administrative     10,253       9,429   Research and development     1,042       1,118   Stock-based compensation expense   $ 13,074     $ 12,361

v3.23.2

ORGANIZATION AND NATURE OF BUSINESS (Details Narrative) - USD ($)	3 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Mar. 31, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Accumulated deficit	$ 21,993,717		$ 21,853,264
Net (loss) income available to shareholders	140,453	$ (264,601)
Share-based compensation	$ 13,075

v3.23.2

Summary of Significant Accounting Policies (Details) - USD ($)	Jun. 30, 2023	Mar. 31, 2023
Accounting Policies [Abstract]
Raw materials	$ 1,504,256	$ 1,456,473
Finished goods	422,535	493,729
Total gross inventories	1,926,791	1,950,202
Less reserve for obsolescence	(60,000)	(51,000)
Total net inventories	$ 1,866,791	$ 1,899,202

v3.23.2

Summary of Significant Accounting Policies (Details 1) - USD ($)	3 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Product Information [Line Items]
Net revenue	$ 1,653,383	$ 2,154,362
Cost of revenue	790,658	869,905
Gross profit	862,725	1,284,457
Operating income (loss)	(127,888)	266,902
Depreciation and amortization	22,250	20,087
Patent and capital expenditures	(499)	62,329
Equipment and patents, net	444,658	412,258
Product [Member]
Product Information [Line Items]
Net revenue	1,613,552	1,696,029
Cost of revenue	770,037	869,905
Gross profit	843,515	826,124
Operating income (loss)	(147,098)	(191,431)
Depreciation and amortization	22,250	20,087
Patent and capital expenditures	(499)	62,329
Equipment and patents, net	444,658	412,258
Service [Member]
Product Information [Line Items]
Net revenue	39,831	458,333
Cost of revenue	20,621	0
Gross profit	19,210	458,333
Operating income (loss)	19,210	458,333
Depreciation and amortization	0	0
Patent and capital expenditures	0	0
Equipment and patents, net	$ 0	$ 0

v3.23.2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)	3 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Mar. 31, 2023
Accounting Policies [Abstract]
Net (loss) income available to shareholders	$ 140,453	$ (264,601)
Cash	130,527
Borrowings	178,736		$ 177,402
Borrowing capacity	1,000,000
Working capital	1,877,566
Working capital decrease	116,211
Cash used in operating activities	46,473	56,032
Federally insured limit	250,000
Cash on deposit	250,000
Accounts receivable	912,617		$ 920,721
Depreciation expense	15,776	12,091
Stock based compensation	$ 13,074	$ 12,361

v3.23.2

BASIC AND DILUTED INCOME AND LOSS PER COMMON SHARE (Details) - USD ($)	3 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Earnings Per Share [Abstract]
Net income (loss)	$ (140,453)	$ 264,601
Weighted-average basic shares outstanding	11,769,543	11,719,543
Effect of dilutive securities	0	301,737
Weighted-average diluted shares	11,769,543	12,021,280
Basic net income (loss) per share	$ (0.01)	$ 0.02
Diluted net income (loss) per share	$ (0.01)	$ 0.02
Antidilutive employee stock options	1,049,000	756,263

v3.23.2

COMMITMENTS AND CONTINGENCIES (Details) - Lease Payment [Member]	Jun. 30, 2023 USD ($)
Defined Benefit Plan Disclosure [Line Items]
2024	$ 274,160
2023	232,139
Total	$ 506,299

v3.23.2

COMMITMENTS AND CONTINGENCIES (Details 1) - E I D L Payment [Member]	Jun. 30, 2023 USD ($)
Defined Benefit Plan Disclosure [Line Items]
2024	$ 2,406
2025	3,331
2026	3,457
Thereafter	149,832
Total	$ 159,026

v3.23.2

COMMITMENTS AND CONTINGENCIES (Details 2) - U S Bank Payment [Member]	Jun. 30, 2023 USD ($)
Defined Benefit Plan Disclosure [Line Items]
2024	$ 13,800
2025	18,400
2026	13,800
Total	$ 46,000

v3.23.2

COMMITMENTS AND CONTINGENCIES (Details 3) - U S Bank Payment 1 [Member]	Jun. 30, 2023 USD ($)
Defined Benefit Plan Disclosure [Line Items]
2024	$ 17,250
2025	23,000
2026	23,000
Thereafter	31,926
Total operating lease payments	$ 95,176

v3.23.2

COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($)			1 Months Ended
	Aug. 04, 2021	Aug. 01, 2020	Nov. 15, 2022	Sep. 30, 2022	Jan. 31, 2022
Debt Instrument [Line Items]
Debt instrument description			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.
U S Bank Payment [Member] | Note Agreement [Member]
Debt Instrument [Line Items]
Face amount				$ 115,004	$ 92,000
Interest rate				6.00%	5.00%
S B A [Member]
Debt Instrument [Line Items]
Proceed from loan	$ 150,000
E I D L [Member]
Debt Instrument [Line Items]
Face amount		$ 150,000
Interest rate		3.75%

v3.23.2

SHARE-BASED COMPENSATION (Details) - USD ($)	3 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Stock-based compensation expense related to grants of employee stock options	$ 13,074	$ 12,361
Cost of Sales [Member]
Stock-based compensation expense related to grants of employee stock options	0	158
Selling and Marketing Expense [Member]
Stock-based compensation expense related to grants of employee stock options	1,779	1,656
General and Administrative Expense [Member]
Stock-based compensation expense related to grants of employee stock options	10,253	9,429
Research and Development Expense [Member]
Stock-based compensation expense related to grants of employee stock options	$ 1,042	$ 1,118

v3.23.2

SHARE-BASED COMPENSATION (Details Narrative) - USD ($)	3 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Equity [Abstract]
Stock options granted	0	0
Unrecognized compensation costs	$ 181,000

v3.23.2

RELATED PARTY TRANSACTION (Details Narrative) - USD ($)	3 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Director [Member]
Related Party Transaction [Line Items]
Consulting fees paid	$ 16,285	$ 13,728

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