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 ~~December~~June 3130, ~~2024~~ 2025

☐

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

For the transition period from __________ to________

Commission file number: 001-11789

ENCISION INC.

(Exact name of registrant as specified in its charter)

Colorado

84-1162056

(State or other jurisdiction of

incorporation or organization)

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

6797 Winchester Circle

Boulder, Colorado 80301

(Address of principal executive offices)

(303) 444-2600

(Registrant’s telephone number)

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

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

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

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

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated Filer ☒		Smaller reporting company ☒
		Emerging growth company ☐

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

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

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

Common Stock no par value (Class) 11,879,645 Shares (outstanding at ~~December~~August 3111, ~~2024~~2025)

ENCISION INC.

FORM 10-Q

For the Three ~~and Nine~~ Months ended ~~December 31~~June 30, ~~2024~~2025

INDEX

		Page Number
PART I.	FINANCIAL INFORMATION	1
ITEM 1 -	Condensed Unaudited Interim Financial Statements:	1
	Condensed Unaudited Balance Sheets as of December 31, 2024 and Audited Balance Sheets as of March 31, 2024	1
	Condensed Unaudited Balance Sheets as of June 30, 2025 and Audited Balance Sheets as of March 31, 2025	1
	Condensed Unaudited Statements of Operations for the Three and Nine months Ended December 31, 2024 and 2023	2
	Condensed Unaudited Statements of Operations for the Three months Ended June 30, 2025 and 2024	2
	Condensed Unaudited Statements of Cash Flows for the Nine months EndedDecember 31, 2024 and 2023	3
	Condensed Unaudited Statements of Cash Flows for the Three months Ended June 30, 2025 and 2024	3
	Notes to Condensed Unaudited Interim Financial Statements	4
ITEM 2 -	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
ITEM 3 -	Quantitative and Qualitative Disclosures About Market Risk	1716
ITEM 4 -	Controls and Procedures	17
PART II.	OTHER INFORMATION	18
ITEM 1 -	Legal Proceedings	18
ITEM 1A -	Risk Factors	18
ITEM 2 -	Unregistered Sales of Equity Securities and Use of Proceeds	18
ITEM 3 -	Defaults Upon Senior Securities	18
ITEM 4 -	Mine Safety Disclosures	19
ITEM 5 -	Other Information	19
ITEM 6 -	Exhibits	19
SIGNATURES		20

PART I FINANCIAL INFORMATION

ITEM 1 - Condensed Interim Financial Statements

Encision Inc.

Condensed Balance Sheets

	December 31, 2024			March 31, 2024
	June 30, 2025			March 31, 2025
	Unaudited			Audited
ASSETS
Current assets:
Cash	$	~~347~~47,~~919~~918		$	42257,~~509~~433
Accounts receivable		~~779~~749,~~900~~426			~~891~~786,~~129~~471
Inventories		1,~~363~~534,~~377~~887			1,~~402~~483,~~338~~182
Prepaid expenses		~~195~~118,~~455~~308			9085,~~298~~679
Total current assets		2,~~686~~450,~~651~~539			2,~~426~~612,~~274~~765
Equipment:
Furniture, fixtures, and equipment, at cost		2,~~675~~591,~~406~~981			2,~~627~~585,~~726~~446
Accumulated depreciation		(2,~~405~~358,~~638~~134	)		(2,~~373~~340,~~722~~689	)
Equipment, net		~~269~~233,~~768~~847			~~254~~244,~~004~~757
Right of use asset, net		~~653~~1,~~249~~199,806			~~900~~568,~~787~~395
Patents, net		~~175~~166,~~233~~708			~~164~~171,~~010~~890
Other assets		7380,~~826~~655			6572,~~641~~892
TOTAL ASSETS		34,~~858~~131,~~727~~555			3,~~810~~670,~~716~~699
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	~~495~~328,~~015~~123		$	346,~~049~~900
Line of credit		~~281~~320,~~527~~440			~~156~~395,~~685~~964
Secured notes		4739,~~469~~802			4244,~~194~~128
Accrued compensation		~~225~~208,~~252~~850			~~184~~180,~~913~~850
Other accrued liabilities		140,593			119,804
Deferred Revenue		2,574			17,401
Accrued lease liability		421,467			370,377
Other accrued liabilities		129,615			160,274
Total current liabilities		1,611,323			1,220,022
Accrued lease liability		248,469			430,398
Total current liabilities		1,277,873			1,575,915
Long-term liability:
Secured notes		~~182~~169,~~067~~997			67177,~~336~~470
Accrued lease liability		~~377~~1,~~952~~061,597			~~696~~266,~~610~~212
Total liabilities		2,~~171~~509,~~342~~467			12,~~983~~019,~~968~~597
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; 11,879,645 and 11,858,627 issued and outstanding at December 31, 2024, and March 31, 2024, respectively		24,405,321			24,371,795
Common stock and additional paid-in capital, no par value: 100,000,000 shares authorized; 11,879,645 and 11,879,645 issued and outstanding at June 30, 2025, and March 31, 2025, respectively		24,428,466			24,416,347
Accumulated (deficit)		(22,~~717~~806,~~936~~378	)		(22,~~545~~765,~~047~~245	)
Total shareholders’ equity		1,~~687~~622,~~385~~088			1,~~826~~651,~~748~~102
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	34,~~858~~131,~~727~~555		$	3,~~810~~670,~~716~~699

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

Encision Inc.

Condensed Statements of Operations

(Unaudited)

	Three Months Ended						~~Nine Months Ended~~
	December 31, 2024			December 31, 2023			December 31, 2024			December 31, 2023
	June 30, 2025			June 30, 2024
NET REVENUE:
Product	$	1,~~457~~492,~~402~~832		$	1,~~561~~591,~~103~~960		$	~~4,703,181~~		$	~~4,927,069~~
Service		~~128~~109,~~179~~896			2038,~~461~~971			~~268,718~~			~~134,269~~
Total revenue		1,~~585~~602,~~581~~728			1,~~581~~630,~~564~~931			~~4,971,899~~			~~5,061,338~~
COST OF REVENUE:
Product		~~667~~666,~~004~~811			~~843~~667,~~216~~635			~~2,217,524~~			~~2,539,708~~
Service		6857,~~287~~458			1120,~~109~~633			~~132,941~~			~~69,057~~
Total cost of revenue		~~735~~724,~~291~~269			~~854~~688,~~325~~268			~~2,350,465~~			~~2,608,765~~
GROSS PROFIT		~~850~~878,~~290~~459			~~727~~942,~~239~~663			~~2,621,434~~			~~2,452,573~~
OPERATING EXPENSES:
Sales and marketing		~~377~~404,~~153~~601			~~413~~423,~~992~~237			~~1,258,870~~			~~1,236,770~~
General and administrative		~~355~~328,~~200~~198			351,~~569~~903			~~1,080,507~~			~~1,106,703~~
Research and development		~~138~~165,~~804~~440			~~151~~139,~~077~~180			~~433,500~~			~~420,351~~
Total operating expenses		~~871~~898,~~157~~239			~~916~~914,~~638~~320			~~2,772,877~~			~~2,763,824~~
OPERATING INCOME (LOSS)		(20,867	)		(189,399	)		(151,443	)		(311,251	)
OPERATING (LOSS) INCOME		(19,780	)		28,343
Interest expense, net		(918,~~508~~009	)		(216,~~065~~369	)		~~(26,475~~	)		~~(52,148~~	)
Other income (expense), net		5,707			3,334			5,028			8,287
Other (expense) income, net		(3,344	)		67
Interest expense and other income (expense), net		(3,801	)		(17,731	)		(21,447	)		(43,861	)
Interest expense and other (expense), income, net		(21,353	)		(6,302	)
(LOSS) BEFORE PROVISION FOR INCOME TAXES		(24,668	)		(207,130	)		(172,890	)		(355,112	)
(LOSS) INCOME BEFORE PROVISION FOR INCOME TAXES		(41,133	)		22,041
Provision for income taxes		—			—			—			—
NET (LOSS)	$	(24,668	)	$	(207,130	)	$	(172,890	)	$	(355,112	)
NET (LOSS) INCOME	$	(41,133	)	$	22,041
Net (loss) per share—basic and diluted	$	(0.00	)	$	(0.02	)	$	(0.01	)	$	(0.03	)
Net (loss) income per share—basic and diluted	$	(0.00	)	$	(0.00	)
Weighted average shares—basic and diluted		11,~~877~~879,~~469~~645			11,~~769~~879,~~543~~145			~~11,875,917~~			~~11,769,543~~

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

Encision Inc.

Condensed Statements of Cash Flows

(Unaudited)

Nine Months Ended	December 31, 2024			December 31, 2023
Three Months Ended	June 30, 2025			June 30, 2024
Cash flows (used in) operating activities:
Net (loss)		(172,890	)		(355,112	)
Net (loss) income	$	(41,133	)	$	22,041
Adjustments to reconcile net (loss) to net cash (used in) operating activities:
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization		5722,~~855~~777			6419,~~357~~322
Stock-based compensation expense related to stock options		34,975			53,306
Stock-based compensation expense		12,119			12,374
Provision for inventory obsolescence, net change		73,~~281~~982			631,~~000~~090
Change in operating assets and liabilities:
Right of use asset, net		(2017,~~030~~955	)		(293,~~664~~456	)
Accounts receivable		~~111~~37,~~230~~046			(274,~~391~~980	)
Inventories		31(55,~~680~~687	)		~~282~~83,~~017~~125
Prepaid expenses and other assets		(~~113~~40,~~343~~393	)		(3021,~~055~~587	)
Accounts payable		~~148~~(33,~~967~~605	)		48(76,~~876~~123	)
Accrued compensation and other accrued liabilities		61(2,~~129~~659	)		615,~~018~~762
Net cash provided by (used in) operating activities		146,854			155,352
Net cash provided by (used in) provided by operating activities		(115,508	)		117,528
Cash flows (used in) investing activities:
Acquisition of property and equipment		(616,~~334~~535	)		(1214,~~051~~144	)
Patent costs		(~~23,509~~150	)		(205,~~177~~397	)
Net cash (used in) investing activities		(846,~~843~~685	)		(3219,~~228~~541	)
Cash flows from financing activities:
Borrowing from line of credit		281,527			—
(Repayments) Borrowings from line of credit		(75,524	)		142,736
(Payments) from options exercised		~~(1,449~~—	)		—(1,449	)
(Paydown) Secured notes		(3611,~~679~~798	)		(~~212~~11,~~851~~339	)
Net cash provided by (used in) financing activities		243,399			(212,851	)
Net cash (used in) provided by financing activities		(87,322	)		129,948
Net increase in cash		305,410			(89,727	)
Net (decrease) increase in cash		(209,515	)		227,935
Cash, beginning of fiscal year		42257,~~509~~433			~~188~~42,~~966~~509
Cash, end of fiscal quarter		~~347~~47,~~919~~918			99270,~~239~~444
Supplemental disclosures of cash flow information:
Cash paid during the year for interest	$	26,475		$	52,148
Cash paid during the period for interest	$	18,009		$	6,369

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

ENCISION INC.

NOTES TO UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS

~~DECEMBER~~JUNE 3130, ~~2024~~2025

(Unaudited)

Note 1. ORGANIZATION AND NATURE OF BUSINESS

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

The Company has an accumulated deficit of $22,~~717~~806,~~936~~378 at ~~December~~June 3130, ~~2024~~2025. AIssuances ~~significant portion~~ of ~~the~~common ~~Company's~~stock ~~operating~~and ~~funds~~warrants ~~has~~have ~~been~~ provided bya ~~issuances~~significant portion of ~~common~~the ~~stock~~Company's ~~and~~operating ~~warrants~~funds, the exercise of stock options to purchase common stock, loans, and (in some periods) operating profits. Shareholders’ equity decreased by $~~139~~29,~~363~~ 014 since March 31, ~~2024~~2025, because of a net loss of $~~172~~41,~~890~~133 and stock-based compensation of $3312,~~526~~119. Should the Company’s liquidity be diminished in the future because of operating losses, the Company may be required to seek additional capital.

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

Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation. The unaudited condensed interim financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles accepted in the United States (GAAP) have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures made are adequate to make the information presented not misleading. The unaudited condensed interim financial statements and notes thereto should be read in conjunction with the financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended March 31, ~~2024~~2025, filed on July 1510, ~~2024~~2025.

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

The Company had a net loss of $2441,~~668~~133 ~~and $172,890~~ for the three ~~and nine~~ months ended ~~December~~June 3130, ~~2024, respectively~~2025. At ~~December~~June 3130, ~~2024~~2025, the Company had cash of $~~347~~47,~~919~~918, current borrowings of $~~281~~320,~~527~~440, and borrowing capacity up to $~~718~~679,~~473~~560, as restricted by eligible accounts receivable, under the line of credit. Working capital was $1,~~075~~172,~~328,~~666 aan ~~decrease~~increase of ~~130~~ $135,~~924~~816 from March 31, ~~2024~~2025. The Company ~~increased~~decreased $~~305~~209,~~410~~515 of cash in the fiscal ~~nine~~three months ended ~~December 31~~June 30, ~~2024~~2025, primarily because of cash ~~generated~~used by operating activities and repayment of borrowings. Management is developing plans to ensure the Company has the working capital necessary to fund operations. The Company increased the pricing of products to mitigate higher material costs. Management concludes that it is probable that cash resources and line of credit will be sufficient to meet cash requirements for twelve months from the issuance of the unaudited condensed financial statements. Therefore, the accompanying unaudited condensed financial statements have been prepared, assuming the Company will continue as a going concern.

Use of Estimates in the Preparation of Financial Statements. Preparing 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, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of sales and expenses during the reporting period. Actual results could differ from those estimates.

ENCISION INC.

NOTES TO UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS

JUNE 30, 2025

(Unaudited)

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

Fair Value of Financial Instruments. The financial instruments consist of cash, trade receivables, payables, secured notes, and an 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 the company 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 ~~December~~June 3130, ~~2024~~2025. The Company ~~believes~~ believes that cash on deposit that exceeds $250,000 with financial institutions is financially sound, and the risk of loss is minimal.

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

Accounts receivables are typically unsecured and are derived from transactions with and from entities in the healthcare industry primarily located in the United States. Accordingly, the Company may be exposed to credit risk generally associated with the healthcare industry. The accounts receivable balance at ~~December~~June 3130, ~~2024~~2025, of of $~~779~~749,~~900~~426 and at March 31, ~~2024~~2025, of $~~891~~786,~~129~~471 included no more than 811% from any one customer.

~~Inventories.~~In ~~Inventories~~July ~~are~~2025, ~~stated~~the atFASB ~~the lower~~issued ofASU ~~cost~~No. ~~(first~~2025-in05, ~~first-out~~Current expected ~~basis)~~credit orlosses ~~net~~(CECL)(Topic ~~realizable~~326) ~~value~~(“ASU 2025-05”). ~~The~~Topic ~~Company~~326, ~~reduces~~Financial ~~inventory~~Instruments—Credit ~~for~~Losses, ~~estimated~~replaces ~~obsolete or unmarketable~~the ~~inventory~~incurred-loss ~~equal~~model towith ~~the~~a ~~difference~~forward-looking ~~between~~current ~~the~~expected ~~cost~~credit ofloss ~~inventory~~model ~~and~~that ~~the~~requires ~~net~~recognition ~~realizable~~of ~~value~~lifetime ~~based~~expected ~~upon~~credit ~~assumptions~~losses on ~~about~~financial ~~future~~assets ~~demand and~~measured ~~market~~at ~~conditions.~~amortized ~~The~~cost ~~company~~and ~~increased~~certain ~~reserves~~off-balance-sheet ~~for~~credit ~~potentially~~exposures ~~obsolete~~(including ortrade ~~unmarketable~~accounts ~~inventory~~receivable ~~$1,815~~ and contract $7assets),~~281~~ ~~during~~using ~~the three~~historical ~~and~~experience, ~~nine~~current ~~months ending December 31~~conditions, ~~2024~~and reasonable and ~~2023,~~supportable ~~respectively~~forecasts. IfThe ~~actual~~company ~~market~~is ~~conditions are less favorable than those projected~~evaluating bythe ~~management,~~impact ~~additional~~of ~~inventory~~adopting ~~write-downs~~Topic ~~may~~326 beon ~~required.~~its Atfinancial ~~December~~statements ~~31, 2024,~~ and ~~March~~related ~~31, 2024, inventory consisted of the following:~~disclosures.

Schedule of inventory
	December 31, 2024		March 31, 2024
Raw materials	$	1,124,724	$	1,044,161
Finished goods		238,653		358,177
Total inventories	$	1,363,377	$	1,402,338

Inventories. Inventories are stated at the lower of cost (first-in, first-out basis) or net realizable value. The Company reduces inventory for estimated obsolete or unmarketable inventory equal to the difference between the cost of inventory and the net realizable value based upon assumptions about future demand and market conditions. The company increased reserves for potentially obsolete or unmarketable inventory $3,982 during the three ending June 30, 2025. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. At June 30, 2025, and March 31, 2025, inventory consisted of the following:

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 expenses for the three and nine months ended December 31, 2024, and 2023, were $15,132 and $45,570, respectively, and $15,372 and $46,612, respectively. The Company uses the straight-line method of depreciation for property and equipment. Leasehold improvements are depreciated over the shorter of the remaining lease term or the estimated useful life of the asset. Maintenance and repairs are expensed as incurred, and significant additions, replacements, and improvements are capitalized.

Schedule of inventory
	June 30, 2025		March 31, 2025
Raw materials	$	1,178,910	$	1,093,530
Finished goods		355,977		389,652
Total inventories	$	1,534,887	$	1,483,182

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 expenses for the three months ended June 30, 2025, and 2024, were $17,445 and $14,144, respectively. The Company uses the straight-line method of depreciation for property and equipment. Leasehold improvements are depreciated over the shorter of the remaining lease term or the asset's estimated useful life. Maintenance and repairs are expensed as incurred, and significant additions, replacements, and improvements are capitalized.

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 the commencement date. ROU assets also include any initial direct costs incurred and any lease payments made at or before the lease commencement date, less lease incentives received. The Company uses the incremental borrowing rate based on the information available at the commencement date to determine the lease liabilities, as the leases do not provide an implicit rate. Lease expense is recognized on a straight-line basis over the lease term.

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

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

~~Income~~ENCISION ~~Taxes~~INC. ~~The~~NOTES ~~Company~~TO ~~accounts~~UNAUDITED ~~for~~CONDENSED ~~income taxes~~INTERIM ~~under~~FINANCIAL ~~the~~STATEMENTS ~~provisions~~JUNE ~~of FASB Accounting Standards Codification (“ASC”) Topic 740~~30, ~~“Accounting for Income Taxes”~~ 2025(~~“ASC 740”~~Unaudited). ASC 740 requires recognition of deferred income tax assets and liabilities for the expected future income tax consequences, based on enacted tax laws, of temporary differences between the financial reporting and tax bases of assets and liabilities. ASC 740 also requires recognition of deferred tax assets for the expected future tax effects of all deductible temporary differences, loss carryforwards, and tax credit carryforwards. Deferred tax assets are then reduced, if deemed necessary, by a valuation allowance for the amount of any tax benefits, which, more likely than not based on current circumstances, are not expected to be realized. As a result, no provision for income tax is reflected in the accompanying statements of operations. Should the Company achieve sufficient, sustained income in the future, the Company may conclude that some or all of the valuation allowance should be reversed. The Company is required to make many subjective assumptions and judgments regarding our income tax exposures. At December 31, 2024, the Company had no unrecognized tax benefits, which would affect the effective tax rate if recognized, and had no accrued interest, or penalties related to uncertain tax positions.

~~Revenue~~Income ~~Recognition~~Taxes. The Company ~~records~~accounts ~~revenue~~for income attaxes aunder ~~single~~the ~~point~~provisions inof ~~time~~FASB ~~when~~Accounting ~~control~~Standards isCodification ~~transferred~~(“ASC”) toTopic ~~the~~740, ~~customer~~“Accounting for Income Taxes” (“ASC 740”). ~~The~~ASC ~~Company~~740 ~~will~~requires ~~continue~~recognition toof ~~apply~~deferred income tax assets and liabilities for the ~~current~~expected ~~business~~future ~~processes,~~income tax ~~policies~~consequences, ~~systems~~based on enacted tax laws, of temporary differences between the financial reporting and ~~controls~~tax tobases ~~support~~of ~~recognition~~assets and ~~disclosure~~liabilities. ASC ~~The~~740 ~~shipping~~also ~~policy~~requires isrecognition ~~Free~~of Ondeferred ~~Board~~tax ~~(FOB)~~assets ~~Shipping~~for ~~Point.~~the Weexpected ~~recognize~~future tax effects of all deductible temporary differences, ~~revenue~~loss ~~from~~carryforwards, ~~sales~~and totax ~~stocking~~credit ~~distributors~~carryforwards. ~~when~~Deferred ~~there~~tax isassets noare ~~right~~then ofreduced, ~~return~~if ~~other~~deemed ~~than~~necessary, by a valuation allowance for ~~normal~~the ~~warranty~~amount ~~claims.~~of ~~The~~any ~~Company~~tax ~~has~~benefits, ~~no ongoing~~which, ~~obligations~~more ~~related~~likely tothan ~~product~~not ~~sales~~based ~~except~~on ~~for~~current ~~normal~~circumstances, ~~warranty~~are ~~obligations~~not expected to be realized. As ~~presented~~a result, inno ~~the~~provision ~~Statement~~for ofincome ~~Operations,~~tax ~~revenue~~ is ~~disaggregated~~reflected ~~between~~in ~~product~~the ~~revenue~~accompanying ~~and~~statements ~~service~~of ~~revenue~~operations. AsShould itthe ~~relates~~Company ~~specifically~~achieve tosufficient, sustained ~~product~~income ~~revenue~~in the future, the Company ~~does~~may ~~not~~conclude ~~believe further~~that ~~disaggregation~~some isor ~~necessary, as substantially~~ all of the ~~product~~valuation ~~revenue~~allowance ~~comes~~should ~~from~~be ~~multiple~~reversed. ~~products~~The ~~within~~Company ais required ~~line~~to ofmake ~~medical devices~~many subjective assumptions and judgments regarding our income tax exposures. ~~The~~At ~~engineering~~June ~~service~~30, ~~contracts~~2025, ~~are~~the ~~billed~~Company onhad ano ~~time~~unrecognized tax ~~and~~benefits, ~~materials~~which ~~basis~~would affect the effective tax rate if recognized, and ~~revenue~~had isno ~~recognized~~accrued ~~over~~interest, ~~time~~or aspenalties ~~the~~related ~~services~~to uncertain ~~are~~tax ~~performed~~positions.

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

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

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

Stock-based compensation expense recognized under ASC 718 for the three ~~and nine~~ months ended ~~December~~June 3130, ~~2024~~2025, and ~~2023~~2024 was $912,~~964~~119 and $3412,~~975~~374 ~~and $27,158 and $53,306,~~ respectively, which consisted of stock-based compensation expense related to grants of employee stock options.

Segment Reporting. InEffective ~~November~~with ~~2023~~the fiscal year ended March 31, 2025, the ~~FASB~~Company ~~issued~~adopted ~~ASU~~Financial ~~No.~~Accounting ~~2023-07, Segment~~Standards ~~Reporting~~Board (~~Topic 280~~“FASB”) Accounting Standards Update (“ASU”) 2023-07”), Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,. ~~requiring companies to disclose~~Adoption ~~segment~~of ~~expense~~the ~~information~~amended ~~based~~guidance ondid ~~what~~not change the ~~chief~~Company’s ~~operating~~conclusion ~~decision~~that ~~maker~~it ~~(CODM)~~operates ~~deems~~two toreportable besegments, ~~material.~~nor ~~These~~did ~~disclosures~~it ~~must~~affect ~~be made~~the ~~both~~Company’s ~~quarterly~~financial ~~and~~position, ~~annually.~~results As of ~~December 31~~operations, ~~2024,~~or ~~the~~cash ~~company is evaluating the adoption of Topic 280~~flows. The ~~Company has concluded that we have two operating segments: product and service. Product designs~~standard, ~~develops~~however, ~~manufactures,~~expands ~~and~~required ~~markets~~disclosures ~~patented surgical instruments.~~related ~~Service~~to ~~performs~~significant ~~electrical~~segment ~~engineering~~expense ~~activities~~categories ~~for~~and ~~external~~interim-period ~~entities~~information.

Operating segments are defined as components of an enterprise about which discrete financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing operating performance. In consideration of ASC 280, Segment Reporting, the Company has concluded it operates two business segments, product and service. The Product segment designs, develops, manufactures and markets patented surgical instruments. The Service segment performs engineering activities for external entities.

Additionally, our CODM (President and Chief Executive Officer) uses net income or loss, as reported in the Statement of Operations, as the profitability measure in making decisions to evaluate our performance, which is the same basis on which he communicates our results and performance to our Board of Directors. The CODM bases all significant decisions regarding the allocation of our resources on the financial information of the Company as a whole. At June 30, 2025, Net long-lived assets totaled $400,555 in the United States.

Information, by segment, for the three months ended June 30, 2025 and 2024 follows:

Schedule of operating segments
	Three Months Ended June 30, 2025								Three Months Ended June 30, 2024
	Product			Service		Total			Product		Service		Total
Net revenue	$	1,492,832		$	109,896	$	1,602,728		$	1,591,960	$	38,971	$	1,630,931
Cost of revenue		666,811			57,458		724,269			667,635		20,633		688,268
Gross profit		826,021			52,438		878,459			924,325		18,338		942,663
Operating income (loss)		(72,218	)		52,438		(19,780	)		10,005		18,338		28,343
Depreciation and amortization		22,777			—		22,777			19,322		—		19,322
Patent and capital expenditures		6,685			—		6,685			19,541		—		19,541
Equipment and patents, net	$	400,555		$	—	$	400,555		$	416,647	$	—	$	416,647

~~Information,~~ENCISION byINC. ~~segment,~~NOTES ~~for~~TO ~~the~~UNAUDITED ~~three~~CONDENSED ~~and~~INTERIM ~~nine~~FINANCIAL ~~months~~STATEMENTS ~~ended~~JUNE ~~December 31~~30, ~~2024~~ ~~and 2023 follows:~~2025(Unaudited)

Schedule of information by segment
	Three Months Ended December 31, 2024								Nine Months Ended December 31, 2024
	Product			Service		Total			Product			Service		Total
Net revenue	$	1,457,402		$	128,179		1,585,581		$	4,703,181		$	268,718		4,971,899
Cost of revenue		667,004			68,287		735,291			2,217,524			132,941		2,350,465
Gross profit		790,398			59,892		850,290			2,485,657			135,777		2,621,434
Operating income (loss)		(80,759	)		59,892		(20,867	)		(287,220	)		135,777		(151,443	)
Depreciation and amortization		15,330			—		15,330			57,855			—		57,855
Patent and capital expenditures		24,923			—		24,923			84,843			—		84,843
Equipment and patents, net	$	445,001		$	—	$	445,001		$	445,001		$	—		445,001

Recently Issued Accounting Pronouncements.

	Three Months Ended December 31, 2023								Nine Months Ended December 31, 2023
	Product			Service		Total			Product			Service		Total
Net revenue	$	1,561,103		$	20,461	$	1,581,564		$	4,927,069		$	134,269	$	5,061,338
Cost of revenue		843,216			11,109		854,325			2,539,708			69,057		2,608,765
Gross profit		717,887			9,352		727,239			2,387,361			65,212		2,452,573
Operating income (loss)		(198,751	)		9,352		(189,399	)		(376,463	)		65,212		(311,251	)
Depreciation and amortization		20,582			—		20,582			64,357			—		64,357
Patent and capital expenditures		15,379			—		15,379			32,228			—		32,228
Equipment and patents, net	$	434,282		$	—	$	434,282		$	434,282		$	—	$	434,282

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires disclosure about the types of costs and expenses included in certain expense captions presented on the income statement. The new disclosure requirements are effective for the Company's annual periods for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted, and may be applied either prospectively or retrospectively. We are currently evaluating the ASU to determine its impact on our consolidated financial statements and disclosures.

ASC Topic 326 (CECL). ASC Topic 326, Financial Instruments—Credit Losses, replaces the incurred-loss model with a forward-looking current expected credit loss model that requires recognition of lifetime expected credit losses on financial assets measured at amortized cost and certain off-balance-sheet credit exposures (including trade accounts receivable and contract assets), using historical experience, current conditions, and reasonable and supportable forecasts. The Company is evaluating the impact of adopting Topic 326 on its consolidated financial statements and related disclosures.

The Company does not believe that issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.

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

The Company reports both basic and diluted net ~~income~~ (loss) income 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) income per share:

Schedule of basic and diluted net income (loss) per share
	Three Months Ended						~~Nine Months Ended~~
	December 31, 2024			December 31, 2023			December 31, 2024			December 31, 2023
	June 30, 2025			June 30, 2024
Net income (loss)	$	(24,668	)	$	(207,130	)	$	(172,890	)	$	(355,112	)
Net (loss) income	$	(41,133	)	$	22,041
Weighted-average basic shares outstanding		11,~~877~~879,~~469~~645			11,~~769~~879,~~543~~145			~~11,875,917~~			~~11,769,543~~
Effect of dilutive securities		—			—31,773			—			—
Weighted-average diluted shares		11,~~877~~879,~~469~~645			11,~~769~~906,~~543~~918			~~11,875,917~~			~~11,769,543~~
Basic net income (loss) per share	$	(0.00	)	$	(0.02	)	$	(0.01	)	$	(0.03	)
Basic net (loss) income per share	$	(0.00	)	$	0.00
Diluted net income (loss) per share	$	(0.00	)	$	(0.02	)	$	(0.01	)	$	(0.03	)
Diluted net (loss) income per share	$	(0.00	)	$	0.00
Antidilutive employee stock options		~~585~~1,~~000~~003,916			~~991~~1,~~000~~044,227			~~585,000~~			~~991,000~~

ENCISION INC.

NOTES TO UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS

JUNE 30, 2025

(Unaudited)

Note 4. COMMITMENTS AND CONTINGENCIES

The Company has a noncancelable lease agreement for our facilities at 6797 Winchester Circle, Boulder, Colorado. The lease expires October 31, ~~2026~~2028.

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

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

Effective ~~November~~August 928, ~~2017~~2023, the Company extended our noncancelable lease agreement through ~~July~~October 31, ~~2024~~2026, and further extended it through October 31, ~~2026~~2028, for the facilities at 6797 Winchester Circle, Boulder, Colorado. Lease expense was $~~357~~384,~~503~~184 for the fiscal year ended March 31, ~~2024~~2025, and $~~329~~357,~~255~~503 for the fiscal year ended March 31, ~~2023~~2024. Lease expense for the ~~nine~~three months ended ~~December~~June 3130, ~~2024~~2025 is $~~289~~94,~~233~~875.

The minimum future lease payment by fiscal year as of ~~December~~June 3130, ~~2024~~2025, is as follows:

Schedule of minimum future lease payment
Fiscal Year		Amount
	2025		102,810
	2026		146,278
	2026		430,398
	2027		422,441
	2027		266,211
	2028		458,393
	Total	$	799,419
	2029		282,954
	Total	$	1,310,066

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

On November 152, ~~2023~~2022, the company entered into a loan and security agreement with Pathward, N.A. (Formerly Crestmark Bank). The loan is due on demand and has no financial covenants. Under the agreement, the company was provided with a line of credit that is not to exceed the lesser of $1,000,000 or 85% of eligible accounts receivable. The interest rate is the prime rate plus 0.5%, with a floor of 6.75%, plus a monthly maintenance fee. Of .04%, 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 balance under the line of credit is fully collateralized by invoices included in our accounts receivable.

The minimum future EIDL payment by fiscal year as of ~~December~~June 3130, ~~2024~~2025, is as follows:

Schedule of minimum future lease payment
Schedule of principal U.S. Bank payment
Fiscal Year		Amount
	2025		1,319
	2026		3,956
	2026		5,275
	2027		5,275
	2028		5,275
	Thereafter		134,508
	2029		5,275
	Total	$	151,652
	Thereafter		129,714
	Total	$	149,495

~~During~~ENCISION ~~December~~INC. ~~2020,~~NOTES ~~The~~TO ~~Company~~UNAUDITED ~~entered~~CONDENSED ~~into~~INTERIM aFINANCIAL ~~note agreement~~STATEMENTS ~~with~~JUNE ~~U.S. Bank for $92~~30,~~000.~~ ~~The note is for five5 years at a 5% interest rate and the proceeds were used to purchase equipment. The note is secured by the equipment.~~2025(Unaudited)

During September 2020, The ~~minimum~~Company ~~future~~entered into a note agreement with U.S. Bank ~~payment~~for by$92,000. The ~~fiscal~~note ~~year~~is for five as5 ofyears ~~December~~at ~~31,~~a ~~2024,~~5% interest rate and the proceeds were used to purchase equipment. The note is assecured ~~follows:~~by the equipment.

The minimum future U.S. Bank payment by fiscal year as of June 30, 2025, is as follows:

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

~~The~~During ~~minimum~~June ~~future~~2022, ~~principal~~the Company entered into a note agreement with U.S. Bank ~~payment~~for ~~by fiscal~~$118,970. ~~year~~The asnote ofis ~~December~~for ~~31,~~five ~~2024,~~years at a 6% interest rate and the proceeds were used to purchase equipment. The note is assecured ~~follows:~~by the equipment.

Schedule of minimum future lease payment
Fiscal Year		Amount
	2025		5,948
	2026		23,794
	2027		23,794
	2028		5,948
	Total	$	59,484

The minimum future principal U.S. Bank payment by fiscal year as of June 30, 2025, is as follows:

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

The Company is subject to regulation by the United States Food and Drug Administration ("FDA"). The FDA provides regulations governing the manufacture and sale of our products and regularly inspects the Company and other manufacturers to determine compliance with these regulations. The Company believes that it was in substantial compliance with all known regulations at ~~December~~June 3130, ~~2024~~2025. FDA inspections are conducted periodically at the discretion of the FDA. The latest inspection by the FDA occurred in October 2019.

Note 5. SHARE-BASED COMPENSATION

The provisions of ASC 718-10-55 requires the measurement and recognition of compensation expense for all share-based payment awards made to our employees and directors, including employee stock options and RSUs, based on estimated fair values. The following table summarizes stock-based compensation expenses related to employee stock options for the three ~~and nine~~ months ended ~~December~~June 3130, ~~2024~~2025, and ~~2023~~2024, which were allocated as follows:

Schedule of stock-based compensation expense

Three Months Ended

~~Nine Months Ended~~

December 31, 2024

December 31, 2023

December 31, 2024

December 31, 2023

June 30, 2025

June 30, 2024

Cost of sales

~~201~~142

—201

~~603~~

—

Sales and marketing

1,~~374~~361

31,~~703~~619

~~4,743~~

~~7,261~~

General and administrative

810,~~308~~327

2010,~~561~~474

~~29,388~~

~~41,068~~

Research and development

81289

~~2,894~~80

~~241~~

~~4,977~~

Stock-based compensation expense

912,~~964~~119

2712,~~158~~374

~~34,975~~

~~53,306~~

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 2590,000 ~~and~~stock ~~435~~options granted 99,~~000~~332 stock options forfeited ~~granted~~ and ~~40,000~~no ~~and~~stock ~~102,000~~options exercised or ~~forfeited~~ during the three ~~and nine~~ months ending ~~December~~June 3130, ~~2024, respectively~~2025. As of ~~December~~June 3130, ~~2024~~2025, approximately $~~158~~150,~~176 of~~298 of total unrecognized compensation costs related to nonvested stock options is expected to be recognized over a period of five years.

ENCISION INC.

NOTES TO UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS

JUNE 30, 2025

(Unaudited)

Note 6. RELATED PARTY TRANSACTION

~~The~~There ~~Company~~were ~~engaged~~no ~~Finance~~related ~~Vision~~party ~~Service,~~transactions ~~Inc., a company owned by board member Robert Fries for consulting services. The company paid $11,850 and $39,519, and none and $32,032~~ during ~~the~~ the three ~~and nine~~ months ending ~~December~~June 3130, ~~2024 and 2023, respectively~~2025.

Except as disclosed above, there were no other related party transactions during the three and nine months ending December 31, 2024.

Note 7. SUBSEQUENT EVENTS

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

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

Certain statements contained in this section on Management’s Discussion and Analysis are not historical facts, including statements about 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, ~~2024~~2025.

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 and 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.

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 can perform electrosurgical procedures more safely, effectively, and economically than is possible using conventional instruments or alternative energy sources.

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

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

When a hospital or surgery center changes to AEM technology, we receive recurring revenue from sales of replacement instruments. We believe that there is no directly competing technology to supplant AEM products. The replacement market of reusable and disposable AEM products in hospitals and surgery centers that use our AEM technology represented over 90% of our product revenue during the three ~~and nine~~ months ended ~~December~~June 3130, ~~2024~~2025. This revenue stream is expected to grow as the base of accounts using AEM technology expands. In addition, we intend to develop more disposable versions of our AEM products in order to meet market demands and expand our sales opportunities.

We have an accumulated deficit of $22,~~717~~806,~~936~~378 at ~~December~~June 3130, ~~2024~~2025. 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 ~~nine~~three months ended ~~December~~June 3130, ~~2024~~2025, we ~~generated~~ used $~~146~~115,~~854~~508 of cash in our operating activities and used $616,~~334~~535 for investments in property and equipment. At ~~December~~June 3130, ~~2024~~2025, we had $~~347~~47,~~919~~ 918 in cash and at March 31, ~~2024~~2025 we had $42257,~~509~~433 in cash available to fund future operations, an ~~increase~~decrease of $~~305~~209,~~410~~515 from March 31, ~~2024~~2025. The ~~increase~~decrease to cash was principally the result of cash ~~generated~~used by operating activities and repayment of borrowing from our line of credit. Our working capital was $1,~~075~~172,~~328~~666 at ~~December~~June 3130, ~~2024~~2025 compared to $1,~~206~~036,~~252~~850 at March 31, ~~2024~~2025.

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 1626 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 who are 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 the fiscal year ~~2025~~2026. Our objectives for the remainder of fiscal year ~~2025~~2026 are to optimize sales execution, expand market awareness of the AEM technology, and maximize the number of additional hospital and surgery center accounts switching to AEM instruments while retaining existing customers. In addition, acceptance of AEM products depends on surgeons’ preference for our instruments, which depends on factors such as ergonomics, quality, and ease of use, in addition to the technological and safety advantages of AEM products. If surgeons prefer other instruments to our instruments, our business results will suffer.

Possibility of Operating Losses: We have an accumulated deficit of $22,~~717~~806,~~936~~378 at ~~December~~June 3130, ~~2024~~2025. 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~~ managers and the independent sales representative network, the need to support the development of refinements to our product line, and the need to increase sustained sales to a level adequate to cover fixed and variable operating costs, we may operate at a net loss. Sustained losses, or our inability to generate sufficient cash flow from operations to fund our obligations, may result in a need to raise additional capital.

Revenue Growth: We expect to generate increased product revenue in the U.S. from sales to new customers and from expanded sales to existing customers as the medical device industry stabilizes and our network of direct and independent sales representatives becomes more efficient. We believe that the visibility and credibility of the independent clinical endorsements for AEM technology will contribute to new accounts and increased product revenue in fiscal year ~~2025~~2026. We also expect to increase market share through promotional programs that place our AEM monitors at no charge in hospitals that commit to standardizing 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 the 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 international sales growth. 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 an increasing sales volume.

Research and Development Expenses: Research and development expenses are expected to increase to support quality improvement efforts and the 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 ~~December~~June 3130, ~~2024~~2025, compared to the quarter ended ~~December~~June 3130, ~~2023~~2024.

Net Product revenue. Net product revenue for the quarter ~~ending~~ended ~~December~~June 3130, ~~2024,~~2025 was $1,~~457~~492,~~402~~832 compared to $1,~~561~~591,~~103~~960 for the quarter ~~ending~~ ~~December~~ended 31June 30, ~~2023~~2024, a decrease of 76%. The decrease in net product revenue is primarily due to a reduction in the sales of disposable products, which suggests a decrease in the number of procedures performed during this period. This reduction in procedural volume has, in turn, lowered the overall demand for our products.

Net Service revenue. Net service revenue for the quarter ended ~~December~~June 3130, ~~2024,~~2025 was $~~128~~109,~~179~~896 compared to $2038,~~461~~971 for the quarter ended ~~December~~ 31June 30, ~~2023~~2024.This ~~The~~ increase was ~~because~~primarily because of ~~the~~ services performed under a Master Services Agreement with Vicarious Surgical Inc.

Gross profit. Gross profit for the quarter ended ~~December~~June 3130, ~~2024,~~2025 of $~~850~~878,~~290~~459 represented ana ~~increase~~decrease of 177% from gross profit of $~~727~~942,~~239~~ 663 for the quarter ended ~~December~~June 3130, ~~2023~~2024. Gross profit on product net revenue as a percentage of sales (gross margin) was 5455% and 4658% for the quarters ended ~~December~~June 3130, ~~2024,~~2025 and ~~2023. This increase is due to a price increase applied to our product line and higher operating~~2024 ~~efficiencies~~respectively.

Sales and marketing expenses: Sales and marketing expenses of $~~377~~404,~~153~~601 for the quarter ended ~~December~~June 3130, ~~2024,~~2025 represented a decrease of 94% from sales and marketing expenses of $~~413~~423,~~992~~237 for the quarter ended ~~December~~June 3130, ~~2023~~2024. The decrease was because of reduced sales ~~commissions~~ ~~earned~~commission payable during the period.

General and administrative expenses General and administrative expenses of $328,198 for the quarter ended June 30, 2025 represented a decrease increase of 7% from general and administrative expenses of $351,903 for the quarter ended June 30, 2024. This decrease was because of reductions in the use of contract services and regulatory expenses.

Research and development expenses. Research and development expenses of $165,440 for the quarter ended June 30, 2025 represented an increase of 19% compared to $139,180 for the quarter ended June 30, 2024. The increase was because of an increase of allocated resources for product development.

~~General~~Net ~~and~~loss. ~~administrative~~Net ~~expenses.~~loss ~~General~~was $41,133 for the ~~and~~quarter ~~administrative~~ended ~~expenses~~June 30, 2025 compared to net income of $~~355~~22,~~200~~041 for the quarter ended ~~December~~June 3130, 2024,. ~~represented~~The andecrease ~~increase~~to ofnet 1%income ~~from general and administrative~~was ~~expenses~~primarily because of ~~$351,569 for~~ the ~~quarter~~reduced ~~ended~~product ~~December~~sales ~~31,~~during ~~2023~~the period.

~~Research~~The ~~and~~results ~~development expenses. Research and development expenses~~ of ~~$138,804~~operations for the ~~quarter~~three months ending June ~~December 31~~30, ~~2024~~2025, ~~represented~~are anot ~~decrease~~necessarily indicative of 8%the ~~compared~~results toof ~~$151,077~~operations for ~~the quarter~~all ~~ending~~or ~~December~~any ~~31,~~part ~~2023.~~of ~~The~~the ~~decrease~~balance ~~was~~of ~~due to a reduction in staff during~~ the ~~period~~fiscal ~~and fluctuating resource allocation~~year.

Net loss. Net loss was $24,668 for the quarter ending December 31, 2024, compared to net loss of $207,130 for the quarter ending December 31, 2023. The decrease in net loss was primarily because of the increase in the gross margin, a result of higher operating efficiencies.

For the nine months ended December 31, 2024, compared to the nine months ended December 31, 2023.

Net Product revenue. Net product revenue for the nine months ending December 31, 2024, was $4,703,181 compared to $4,927,069 for the nine months ending December 31, 2023, a decrease of 5%. The decrease in net product revenue is attributable to decreased demand for our products.

Net Service revenue. Net service revenue for the nine months ending December 31, 2024, was $268,718 compared to $134,269 for the nine months ending December 31, 2023. Net service revenue for the nine months ended December 31, 2023 was for engineering services performed under a Master Services Agreement with Vicarious Surgical Inc.

Gross profit. Gross profit for the nine months ending December 31, 2024, of $2,621,434 represented an increase of 7% from gross profit of $2,452,573 for the nine months ended December 31, 2023. Gross profit on product net revenue as a percentage of sales (gross margin) was 53% for the nine months ending December 31, 2024, and 48% for the nine months ending December 31, 2023. This increase is due to a price increase applied to our product line and higher operating efficiencies.

Sales and marketing expenses. Sales and marketing expenses of $1,258,870 for the nine months ending December 31, 2024, represented an increase of 2% from sales and marketing expenses of $1,236,770 for the nine months ended December 31, 2023.

General and administrative expenses. General and administrative expenses of $1,080,507 for the nine months ending December 31, 2024, represented a decrease of 2% from general and administrative expenses of $1,106,703 for the nine months ending December 31, 2023. The decrease was because of the decrease in outside accountants’ costs.

Research and development expenses. Research and development expenses of $433,500 for the nine months ending December 31, 2024, represented an increase of 3% compared to $420,351 for the nine months ending December 31, 2023. The increase was the result of an increase in allocations.

Net loss. Net loss was $172,890 for the nine months ending December 31, 2024, compared to net loss of $355,112 for the nine months ending December 31, 2023.

The results of operations for the three and nine months ending December 31, 2024, are not necessarily indicative of the results of operations for all or any part of the balance of the fiscal year.

Liquidity and Capital Resources

To date, a significant portion of our operating funds have been provided by issuances of our common stock and warrants, the exercise of stock options to purchase our common stock, loans, and (in some periods) by operating profits. Common stock and additional paid-in capital totaled $24,~~405~~428,~~321~~466 from inception through ~~December 31~~June 30, ~~2024~~2025.

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

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

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

Our operations generated $146,854 of cash during the nine months ending December 31, 2024, on net revenue of $4,971,899. The amounts of cash generated by operations for the nine months ending December 31, 2024, are not necessarily indicative of the expected amounts of cash to be generated from or used in operations in fiscal year 2025. At December 31, 2024, we had $347,919 in cash available to fund future operations and a line of credit for up to $718,473, restricted by eligible account receivables. Our working capital was $1,075,328 at December 31, 2024 compared to $1,206,252 at March 31, 2024. Current liabilities were $1,611,323 at December 31, 2024, compared to $1,220,022 at March 31, 2024. We have a noncancelable lease agreement for our facilities at 6797 Winchester Circle, Boulder, Colorado. The lease expires October 31, 2026.

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

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the 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 to determine the lease liabilities, as our leases do not provide an implicit rate. Lease expense is recognized on a straight-line basis over the lease term.

The minimum future EIDL payment by fiscal year as of December 31, 2024, is as follows:

Fiscal Year		Amount
	2025		1,319
	2026		5,275
	2027		5,275
	2028		5,275
	Thereafter		134,508
	Total	$	151,652

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

The minimum future U.S. Bank payment by fiscal year as of December 31, 2024, is as follows:

Fiscal Year		Amount
	2025		4,600
	2026		13,800
	Total	$	18,400

During July 2022, we entered into a note agreement with U.S. Bank for $118,970. 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.

15On November 2, 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 the 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 balance under the line of credit is fully collateralized by invoices included in our accounts receivable.

~~The~~Our ~~minimum~~operations ~~future~~used ~~principal~~$115,508 Uof cash during the three months ending June 30, 2025, on net revenue of $1,602,728.S. ~~Bank~~The ~~payment~~amounts of cash used by operations for the three months ending June 30, 2025, are not necessarily indicative of the expected amounts of cash to be generated from or used in operations in fiscal year as2026. At June 30, 2025, we had $47,918 in cash available to fund future operations and a line of ~~December~~credit for up to $679,560, restricted by eligible account receivables. Our working capital was $1,172,666 at June 30, 2025 compared to $1,036,850 at March 31, ~~2024~~2025. Current liabilities were $1,277,873 isat asJune ~~follows:~~30, 2025, compared to $1,575,915 at March 31, 2025. We have a noncancelable lease agreement for our facilities at 6797 Winchester Circle, Boulder, Colorado. The lease expires October 31, 2028.

Fiscal Year		Amount
	2025		5,948
	2026		23,794
	2027		23,794
	2028		5,948
	Total	$	59,484

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 the 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 to determine 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.

~~Aside from the line of credit, operating lease, EIDL loan, and U.S. Bank loans, we do not have any material contractual commitments requiring settlement in the future.~~14

As of ~~December~~June 3130, ~~2024~~2025, the following table shows ~~our~~ our contractual obligations for the ~~periods~~period presented:

	Payment due by period
Contractual obligations	Totals		Less than 1 year		1-3 years		3-5 years		More than 5 years
Line of credit	$	~~281~~320,~~527~~440	$	~~281~~320,~~527~~440	$	—	$	—	$	—
Operating lease obligations	$	~~799~~1,~~419~~310,066		~~421~~248,~~467~~469		~~377~~431,~~952~~265		—630,332		—
EIDL loan	$	~~151~~149,~~652~~495		5,275		10,550		10,550		~~125~~123,~~277~~120
U.S. Bank loan	$	1810,~~400~~733		1810,~~400~~733		—		—		—
U.S. Bank loan	$	5949,~~484~~571		23,794		3525,~~690~~777		—		—
Total	$	1,~~310~~840,~~482~~305	$	~~750~~608,~~463~~711	$	~~424~~467,~~192~~592	$	10640,~~550~~882	$	~~125~~123,~~277~~120

Our fiscal year ~~2025~~2026 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~~2026. 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~~June 3130, ~~2024~~2025, net operating ~~loss~~ loss carryforwards totaling approximately $8.92 million are available to reduce taxable income in the future. The net operating loss carryforwards expire, if not previously utilized, at various dates beginning in the fiscal year ending March 31, 2025. We have not paid income taxes since our inception. The Tax Reform Act of 1986 and other income tax regulations contain provisions that 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 assets since inception due to our history of losses. Should we achieve sufficient, sustained income in the future, we may conclude that some or all 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 in 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 ongoing 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 the 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 expenses 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 ~~December~~June 3130, ~~2024~~2025. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the ~~Exchange~~ 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~~ 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 the reporting period ending ~~December~~June 3130, ~~2024~~2025.

Remediation Activities Regarding Material Weakness

As disclosed in our Annual Report on Form 10-K for the March 31, ~~2024~~2025, fiscal year, management determined that our internal control over financial reporting was not effective as of March 31, 2025 for the following reasons (i) wethere ~~had~~is aan ~~material~~inadequate ~~weakness~~segregation ~~over~~of ~~our~~duties ~~entity-level~~consistent with control ~~environment~~objectives as management is comprised of ~~March~~only ~~31,~~two ~~2024~~person, ~~and~~one ~~(ii)~~of ~~our~~which ~~internal~~is ~~control~~our ~~over~~principal ~~financial~~executive ~~reporting~~offers ~~was~~as ~~not~~and ~~effective~~the asother ofis ~~March~~the ~~31,~~principle ~~2024~~financial officer.

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

· We have ~~made~~evaluated ~~changes~~additional inreview ~~our policy regarding how contract revenue~~ and ~~related~~approval ~~costs~~processes ~~are~~for ~~booked.~~key ~~Under~~financial ~~the~~reporting ~~revised~~activities ~~policy,~~to ~~such~~mitigate ~~revenue~~segregation ~~and~~of ~~costs~~duties ~~are now booked in the same month as the related work is performed~~issues.

· We have ~~changed~~expanded ~~our~~documentation ~~policy~~of ~~regarding~~internal ~~reserves~~controls ~~for~~and ~~slow-moving~~policies ~~inventory.~~to ~~Under~~ensure ~~our~~consistency ~~revised~~and ~~policy, we now book additional inventory reserves for all inventory older than 18 months, even if management believes such inventory is still salable~~accountability.

Evaluated opportunities to restructure financial reporting responsibilities as resources allow.

Began evaluating options to hire external consultants to assist with the design and implementation of improved internal control procedures.

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 ~~December~~June 3130, ~~2024~~2025, ~~that~~ that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II.

Item 1.

Legal Proceedings

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

Item 1A.

Risk Factors

In addition to the information set forth in this Form 10-Q, you should carefully consider the risk factors disclosed under the heading “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended March 31, ~~2024~~2025. There have been no material changes to our risk factors from those included in our Annual Report on Form 10-K for the year ended March 31, ~~2024~~2025.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

None.

Issuer Purchases of Equity Securities

We did not repurchase any of our equity securities during the three ~~and nine~~ months ended ~~December~~June 3130, ~~2024~~2025.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

None.

Item 5.

Other Information

Rule 10b5-1 Sales Plans

Our policy governing transactions in our securities by directors, officers, and employees permits our officers, directors, and certain other persons to enter into trading plans complying with Rule 10b5-1 under the Exchange Act. Generally, under these trading plans, the individual relinquishes control over the transactions once the trading plan is put into place and can only put such plans into place while the individual is not in possession of material non-public information. Accordingly, sales under these plans may occur at any time, including possibly before, simultaneously with, or immediately after significant events involving our company.

During the ~~nine~~three months ended ~~December~~June 3130, ~~2024~~2025, none of our directors or ~~executive~~ executive officers had a Rule 10b5-1 plan in effect.

Item 6.

Exhibits

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

3.1	Articles of Incorporation of the Company, as amended. (Incorporated by reference from Registration Statement #333-4118-D dated June 25, 1996).
3.2	Bylaws of the Company. (Incorporated by reference from Current Report on Form 8-K filed on October 30, 2007).
3.3	First Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on May 31, 2017).
4.1	Form of certificate for shares of Common Stock. (Incorporated by reference from Registration Statement #333-4118-D dated June 25, 1996).
4.2	Description of Capital Stock. (Incorporated by reference from Annual Report on Form 10-K filed on June 14, 2019).
10.1	Lease Agreement dated June 3, 2004 between Encision Inc. and DaPuzzo Investment Group, LLC (Incorporated by reference from Quarterly Report on Form 10-QSB filed on November 14, 2004).
10.2	Encision Inc. 2007 Stock Option Plan (Incorporated by reference from Proxy Statement dated June 30, 2007). †
10.3	Encision Inc. First Amended and Restated 2014 Stock Option Plan (Incorporated by reference from Proxy Statement dated July 6, 2020. †
10.4	Employment Agreement, dated November 14, 2016, between Encision Inc. and Gregory J. Trudel (Incorporated by reference to Exhibit 10-1 to our Current Report on Form 8-K filed on November 18, 2016). †
10.5	Fifth Amendment to Office Building Lease dated November 9, 2017 (Incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q filed February 12, 2018).
10.6	PPP Promissory Note dated as of April 17, 2020 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on April 23, 2020).
10.8	Economic Injury Disaster Loan dated as of August 1, 2022 (incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on August 14, 2020).
10.9	US Bank Note dated September 28, 2020 (Incorporated by reference to Exhibit 10.9 to Quarterly Report on Form 10-Q filed August 12, 2022)
10.10	PPP Promissory Note dated as of February 8, 2021 (incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on February 12, 2021.
10.11	Supply Agreement dated August 23, 2021 between Auris Health, Inc. and Encision Inc. (incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on November 15, 2021).+
10.12	New Line of Credit and Security Agreement with Pathward, N.A. dated November 15, 2022 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on November 17, 2022).
31.1	Certification of President and CEO under Rule 13a-14(a) of the Exchange Act (filed herewith).
31.2	Certification of Principal Financial and Accounting Officer under Rule 13a-14(a) of the Exchange Act (filed herewith).
32.1	Certifications of President and CEO and Principal Financial and Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
101	The following materials from Encision Inc.’s Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2023~~2025, 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.

1819

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.
Dated: February 14, 2025
Dated: August XX, 2025
	By:	/s/ Brandon Shepard
		Brandon ShepardController Principal Accounting Officer & Principal Financial Officer
		Brandon Shepard Controller Principal Accounting Officer & Principal Financial Officer

1920

Schedule of minimum future lease payment

Fiscal Year

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