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Item 1. Business

2024-07-15 compared with 2023-06-28 · 502 added, 571 removed, 11 unchanged (99% of the section changed)

Company Overview

Encision Inc.

(“Encision”, “we”,

“us”, “our” or the “Company"), 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.

We believe that our

patented Active Electrode Monitoring (AEM®) Surgical Instruments are changing the marketplace for electrosurgical devices and laparoscopic

instruments by providing a solution to a well-documented hazard unique to laparoscopic surgery.

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.

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, and increased and preventable readmissions.

Our technology helps

to reduce hospital risk and liability.

Our patented AEM technology provides surgeons with

the desired tissue effects of cutting and coagulating tissue in laparoscopic procedures, while preventing stray electrosurgical energy

that can cause complications and even death.

AEM Surgical Instruments are equivalent to conventional instruments in size, shape, ergonomics

and functionality, but they incorporate a proprietary shield and electrically connect to an Active Electrode Monitor to dynamically and

continuously monitor the flow of electrosurgical current, thereby preventing patient injury from stray monopolar energy.

With our “shielded

and monitored” instruments, surgeons are able to perform electrosurgical procedures more safely, effectively and economically than

is possible using conventional instruments.

AEM technology has been recommended and endorsed by

sources from 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.

In May 2020, the Food and Drug Administration issued a Safety

Communication that stated that, "In addition to serving as an ignition source, monopolar energy use can directly result in unintended

patient burns from capacitive coupling and intra-operative insulation failure.”

Business Highlights

Proprietary, Patented Technology

We have developed and launched patented AEM Surgical

Instruments and Monitors that enhance patient safety and patient outcomes in laparoscopic surgical procedures.

We have been issued 16

unexpired patents relating to AEM technology from the United States Patent and Trademark Office, each encompassing multiple claims, and

which have between one and seventeen years remaining.

We also have patents relating to AEM technology issued in Europe, Japan, Canada

and Australia.

Technology Solves a Well Documented Risk in Minimally Invasive Surgery

MIS offers significant benefits for patients by reducing

trauma, hospital stays, recovery times and medical costs.

However, these benefits have not been achieved without the emergence of new

The risk of unintended tissue damage from stray electrosurgical energy has been well documented.

Such injuries can be especially

troubling given that often these injuries are out of the field of view, can go unrecognized at the time of surgery, and can lead to a

cascade of adverse events, including death.

Our patented AEM technology eliminates the risk of stray electrosurgical burns in MIS while

providing surgeons with the tissue effects they desire.

Product Line has been Developed and Launched

Our AEM Surgical Instruments and Monitors have been

engineered to provide a seamless transition for surgeons switching from conventional laparoscopic instruments.

AEM technology has been

integrated into instruments that have the same look, feel and functionality as conventional instruments that surgeons have been using

The AEM product line encompasses a full range of instrument sizes, types and styles favored by surgeons.

While always quality-centric,

we added a new level of customer-centricity with increased marketing focus on our reposable AEM EndoShield® 2 Burn Protection System

(“EndoShield 2”).

The EndoShield 2 can be used for a number of surgical procedures without reprocessing, can easily be used

in any OR room with all prevalent electrosurgical generators, and eliminates a significant barrier to adoption.

Thus, hospitals can make

a complete and smooth conversion to our product line, thereby advancing patient safety in MIS.

Emerging as a Standard of Care

We believe that AEM technology is following a similar

path as previous technological developments in surgery.

Throughout the history of electrosurgery, companies that have developed significant

technological breakthroughs in patient safety have seen their technologies become widely used.

As with “Isolated” electrosurgical

generators in the 1970s and with “REM” technology in the 1980s, AEM technology is receiving the broad endorsements that drove

these previous new technologies to becoming a standard of care.

We believe that it is possible to follow a course similar to that of pulse

oximetry in becoming a standard of care.

Our proprietary AEM technology enhances patient safety in MIS, especially in light of laparoscopic

instruments being in closer proximity with single-port and reduced-port approaches.

As a result, knowledgeable clinicians are now advocating

AEM technology’s use.

Developing Distribution Network is Advancing Utilization of AEM Technology

Our AEM technology, in the hands of a sales network

with broad access to the surgery marketplace, will help to increase utilization and market share.

Historically, our sales and marketing

efforts have been hindered by our small size and limited distribution channels.

While these limitations continue, we improved our sales

network which provided new hospital accounts with AEM technology in our fiscal year ended March 31, 2023.

Our supplier agreements with

Group Purchasing Organizations (“GPOs”) and other key hospitals systems are beginning to expose more hospitals to the benefits

of our AEM technology.

During the year ended March 31, 2020, our proprietary patient safety technology was recognized by the U.S.

of Veterans Affairs and provides us with the opportunity to market our instruments and monitors into VA Medical Centers.

The VA is the

largest medical system in the U.S.

providing service to more than nine million veterans across more than 1,200 facilities.

the year ended March 31, 2020, we were awarded a prestigious Vizient Innovative Technology Contract for monopolar surgical instruments

and monitors.

Vizient represents a diverse membership base that includes academic medical centers, pediatric facilities, community hospitals,

integrated health delivery networks and non-acute health care providers and represents approximately $100 billion in annual medical devices

and supplies purchasing volume.

Market Overview

We believe that our patented AEM technology provides

us with marketing leverage toward gaining an increased share, both in terms of penetrations, as well as increasing our impact per procedure

with AEM instrumentation.

In the 1990s, surgeons began widespread use of minimally

invasive surgical techniques.

The benefits of MIS are substantial and include reduced trauma for the patient, reduced hospital stay, shorter

recovery time and lower medical costs.

With improvements in the surgical laparoscopic camera and in the variety of available instruments,

laparoscopic surgery became popular among general surgeons, gynecologic surgeons and other specialties.

Laparoscopy now accounts for a

large percentage of all surgical procedures performed in the United States.

Approximately 75% of surgeons employ monopolar electrosurgery

for laparoscopy according to INTERactive SURVeys.

There are over 4.4 million laparoscopic procedures performed annually in the United

States, and this number is increasing annually.

except as otherwise stated, market estimates in this section are as reported by

Patient Safety & Quality Healthcare).

A component of the endoscopic surgery products market

includes laparoscopic hand instruments, including scissors, graspers, dissectors, forceps, suction/irrigation devices, clip appliers and

other surgical instruments of various designs, which provide a variety of tissue effects.

Among the laparoscopic hand instruments, approximately

$500 million in sales annually are derived from instruments designed for "monopolar" electrosurgical utility.

This market for

laparoscopic monopolar electrosurgical instruments is the market we are targeting with our innovative AEM Surgical Instruments.

Our proprietary

AEM product line supplants the conventional “non-shielded, non-monitored” electrosurgical instruments commonly used in laparoscopic

When a hospital decides to use our AEM technology,

we make recurring sales to such hospital for replacement instruments.

Sales from reusable and disposable AEM products in hospitals represented

over 90% of our sales in the fiscal year ended March 31, 2023, and we expect this sales stream to grow as new hospitals increasingly adopt

AEM technology and existing hospitals increase usage of AEM instrumentation.

We also expect to increase the value per procedure delivered

to our customers and, therefore, expect the dollars per procedure to increase.

AEM Instruments are competitively priced compared to conventional

(“Encision”, “we”, “us”, “our” or the “Company"), 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.

We believe that our patented Active Electrode Monitoring (AEM®) Surgical Instruments are changing the

marketplace for electrosurgical devices and laparoscopic instruments by providing a solution to a well-documented hazard unique to laparoscopic

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.

The risk of unintended electrosurgical burn injury to the patient in laparoscopic surgery has been well documented.

risk poses a threat to patient safety, including the risk of death, and creates liability exposure for surgeons and hospitals, and increased

and preventable readmissions.

Our technology helps to reduce hospital risk and liability.

patented AEM technology provides surgeons with the desired tissue effects of cutting and coagulating tissue in laparoscopic procedures,

while preventing stray electrosurgical energy that can cause complications and even death.

AEM Surgical Instruments are equivalent to

conventional instruments in size, shape, ergonomics and functionality, but they incorporate a proprietary shield and electrically connect

to an Active Electrode Monitor to dynamically and continuously monitor the flow of electrosurgical current, thereby preventing patient

injury from stray monopolar energy.

With our “shielded and monitored” instruments, surgeons are able to perform electrosurgical

procedures more safely, effectively and economically than is possible using conventional instruments.

technology has been recommended and endorsed by sources from 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.

May 2020, the Food and Drug Administration issued a Safety Communication that stated that, "In addition to serving as an ignition

source, monopolar energy use can directly result in unintended patient burns from capacitive coupling and intra-operative insulation

Patented Technology

have developed and launched patented AEM Surgical Instruments and Monitors that enhance patient safety and patient outcomes in laparoscopic

surgical procedures.

We have been issued 16 unexpired patents relating to AEM technology from the United States Patent and Trademark

Office, each encompassing multiple claims, and which have between one and seventeen years remaining.

We also have patents relating to

AEM technology issued in Europe, Japan, Canada and Australia.

Solves a Well Documented Risk in Minimally Invasive Surgery

offers significant benefits for patients by reducing trauma, hospital stays, recovery times and medical costs.

However, these benefits

have not been achieved without the emergence of new risks.

The risk of unintended tissue damage from stray electrosurgical energy has

been well documented.

Such injuries can be especially troubling given that often these injuries are out of the field of view, can go

unrecognized at the time of surgery, and can lead to a cascade of adverse events, including death.

Our patented AEM technology eliminates

the risk of stray electrosurgical burns in MIS while providing surgeons with the tissue effects they desire.

Line has been Developed and Launched

AEM Surgical Instruments and Monitors have been engineered to provide a seamless transition for surgeons switching from conventional

laparoscopic instruments.

We aim to further develop the market by continuing

to educate healthcare professionals about the benefits of AEM technology to advance patient safety.

We are developing new devices that

integrate AEM technology, which we believe will have high surgeon appeal.

We are also working to improve the reach of our sales network

to key decision makers who purchase or recommend the purchase of laparoscopic instruments and electrosurgical devices.

We are also pursuing

relationships with selected GPOs, hospital systems and integrated delivery networks to assist in promoting the benefits of AEM technology.

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 a full range of instrument sizes, types and styles

favored by surgeons.

While always quality-centric, we added a new level of customer-centricity with increased marketing focus on our

reposable AEM EndoShield® 2 Burn Protection System (“EndoShield 2”).

The EndoShield 2 can be used for a number of surgical

procedures without reprocessing, can easily be used in any OR room with all prevalent electrosurgical generators, and eliminates a significant

barrier to adoption.

Thus, hospitals can make a complete and smooth conversion to our product line, thereby advancing patient safety

as a Standard of Care

believe that AEM technology is following a similar path as previous technological developments in surgery.

Throughout the history of

electrosurgery, companies that have developed significant technological breakthroughs in patient safety have seen their technologies

become widely used.

As with “Isolated” electrosurgical generators in the 1970s and with “REM” technology in the

1980s, AEM technology is receiving the broad endorsements that drove these previous new technologies to becoming a standard of care.

We believe that it is possible to follow a course similar to that of pulse oximetry in becoming a standard of care.

Our proprietary AEM

technology enhances patient safety in MIS, especially in light of laparoscopic instruments being in closer proximity with single-port

and reduced-port approaches.

As a result, knowledgeable clinicians are now advocating AEM technology’s use.

Distribution Network is Advancing Utilization of AEM Technology

AEM technology, in the hands of a sales network with broad access to the surgery marketplace, will help to increase utilization and market

Historically, our sales and marketing efforts have been hindered by our small size and limited distribution channels.

limitations continue, we improved our sales network which provided new hospital accounts with AEM technology in our fiscal year ended

March 31, 2024.

Our supplier agreements with Group Purchasing Organizations (“GPOs”) and other key hospitals systems are

beginning to expose more hospitals to the benefits of our AEM technology.

During the year ended March 31, 2020, our proprietary patient

safety technology was recognized by the U.S.

Department of Veterans Affairs and provides us with the opportunity to market our instruments

and monitors into VA Medical Centers.

The VA is the largest medical system in the U.S.

providing service to more than nine million veterans

across more than 1,200 facilities.

Also, during the year ended March 31, 2020, we were awarded a prestigious Vizient Innovative Technology

Contract for monopolar surgical instruments and monitors.

Vizient represents a diverse membership base that includes academic medical

centers, pediatric facilities, community hospitals, integrated health delivery networks and non-acute health care providers and represents

approximately $100 billion in annual medical devices and supplies purchasing volume.

believe that our patented AEM technology provides us with marketing leverage toward gaining an increased share, both in terms of penetrations,

as well as increasing our impact per procedure with AEM instrumentation.

the 1990s, surgeons began widespread use of minimally invasive surgical techniques.

The benefits of MIS are substantial and include reduced

trauma for the patient, reduced hospital stay, shorter recovery time and lower medical costs.

With improvements in the surgical laparoscopic

camera and in the variety of available instruments, laparoscopic surgery became popular among general surgeons, gynecologic surgeons

and other specialties.

Laparoscopy now accounts for a large percentage of all surgical procedures performed in the United States.

Approximately

75% of surgeons employ monopolar electrosurgery for laparoscopy according to INTERactive SURVeys.

There are over 4.4 million laparoscopic

procedures performed annually in the United States, and this number is increasing annually.

except as otherwise stated, market

estimates in this section are as reported by Patient Safety & Quality Healthcare).

component of the endoscopic surgery products market includes laparoscopic hand instruments, including scissors, graspers, dissectors,

forceps, suction/irrigation devices, clip appliers and other surgical instruments of various designs, which provide a variety of tissue

Among the laparoscopic hand instruments, approximately $500 million in sales annually are derived from instruments designed

for "monopolar" electrosurgical utility.

This market for laparoscopic monopolar electrosurgical instruments is the market we

are targeting with our innovative AEM Surgical Instruments.

Our proprietary AEM product line supplants the conventional “non-shielded,

non-monitored” electrosurgical instruments commonly used in laparoscopic surgery.

a hospital decides to use our AEM technology, we make recurring sales to such hospital for replacement instruments.

Sales from reusable

and disposable AEM products in hospitals represented over 90% of our sales in the fiscal year ended March 31, 2024, and we expect this

sales stream to grow as new hospitals increasingly adopt AEM technology and existing hospitals increase usage of AEM instrumentation.

We also expect to increase the value per procedure delivered to our customers and, therefore, expect the dollars per procedure to increase.

AEM Instruments are competitively priced compared to conventional laparoscopic instruments.

aim to further develop the market by continuing to educate healthcare professionals about the benefits of AEM technology to advance patient

We are developing new devices that integrate AEM technology, which we believe will have high surgeon appeal.

We are also working

to improve the reach of our sales network to key decision makers who purchase or recommend the purchase of laparoscopic instruments and

electrosurgical devices.

We are also pursuing relationships with selected GPOs, hospital systems and integrated delivery networks to

assist in promoting the benefits of AEM technology.

We are seeking increasing international opportunities for AEM technology sales.

We estimate sales outside the U.S.

to be at least as large

as that of the U.S.

We are growing our presence in Australia and New Zealand and are seeking a new presence in the Middle East

As decisions are made at a system level, our intent is to highlight the clinical, economic and safety benefits of using AEM

A number of factors are contributing to a decrease in surgical procedures

that take away from top line results.

COVID resurgences continued to negatively impact surgical procedure volumes.

MarketWatch announced that, “A record share of U.S.

adults said they or a family member delayed medical care last year due to affordability

According to a Gallup poll, thirty-eight percent of Americans said they or a family member avoided treatment over cost in 2022,

a full 12 percentage points higher than the year prior.” Finally, hospitals are struggling to maintain critical staffing levels

to enable them to keep up with even the decreased demand for procedures.

The Technology

Stray Electrosurgical Burn Injury to the Patient

Electrosurgical technology is a valuable and prevalent

resource for surgeons.

Since its introduction in the 1930s, electrosurgical technology has continually evolved and is estimated to be

used in over 75% of all surgeries.

The primary form of electrosurgery, monopolar electrosurgery,

is a standard tool for general surgeons throughout the world.

In monopolar electrosurgery, the surgeon uses an instrument (typically scissors,

grasper/dissectors, spatula blades or suction-irrigation electrodes) to deliver electrical current to patient tissue.

electrode” provides the surgeon with the ability to cut, coagulate or ablate tissue as needed during the surgery.

With the advent

of MIS procedures, surgeons have continued using monopolar electrosurgery as a primary tool for hemostatic incision, coagulation of bleeding

tissues, excision and ablation.

Unfortunately, conventional laparoscopic electrosurgical instruments from competing manufacturers are

susceptible to emitting stray electrical currents during the procedure.

This risk is exacerbated by the fact that laparoscopic camera

systems limit the surgical field of view.

Ninety percent of the instrument may be outside the surgeon's field of view at any given time

during the surgery.

The dangers of stray energy are twofold.

is there the danger created by the burn injury itself, but there is the compounding danger that the burn will go unnoticed during the

surgery and be allowed to manifest post-operatively as fecal peritonitis or other potentially deadly and devastating outcomes.

cases, the surgeon cannot detect stray electrosurgical burns at the time of the procedure because it is out of their field of visualization.

The resulting complication usually presents itself days later in the form of a severe infection or sepsis, which often results in a hospital

readmission and a difficult course of remedial surgeries and prolonged hospital recovery for the patient.

This situation has even resulted

in fatalities.

Stray electrosurgical burn injury can result from

two causes – instrument insulation failure and capacitive coupling.

Instrument insulation failure can be a common occurrence with

laparoscopic instruments.

Conventional active electrodes for laparoscopic surgery are designed with the same basic construction –

a single conductive element and an outer insulation coating.

This insulation can fail during the course of normal use during surgery.

One university study found insulation defects in new disposable instruments before they were used or after limited surgical use.

also possible for instrument insulation to become flawed during the handling, cleaning and sterilization process.

This common insulation

failure can allow electrical currents to "spark" from the instrument to unintended and unseen tissue with potentially serious

consequences for the patient, such as bowel perforations.

Four different studies indicate that the insulation failure rate in reusable

instruments can be as high as one in five.

Capacitive coupling is another way stray electrosurgical energy can cause unintended burns

during laparoscopy.

Capacitive coupling is an electrical phenomenon that occurs when current is induced from the instrument to nearby

tissue or another instrument despite intact insulation.

This potential for capacitive coupling is present in all laparoscopic surgeries

that utilize monopolar electrosurgery devices and are likely to occur outside the surgeon’s field of view.

Conventional, “non-shielded, non-monitored”

laparoscopic instruments are susceptible to causing unintended, unseen burn injuries to the patient in MIS.

Instrument insulation failure

and capacitive coupling are the primary causes of stray electrosurgical burns in laparoscopy and are the two events over which the surgical

team has traditionally had no control.

Although alternative forms to monopolar electrosurgery energy exist, these alternative energies

tend to be less effective, take longer to achieve the desired surgical effect and are costlier.

Encision’s AEM Surgical Instruments

AEM technology eliminates the risk of stray electrical

energy caused by instrument insulation failure and capacitive coupling, and thus prevents unintended burn injuries to patients.

AEM Surgical Instruments are an innovative solution

to stray electrosurgical burns in laparoscopic surgery and are designed with the same look, feel and functionality as conventional instruments.

They direct electrosurgical energy where the surgeon desires, while continuously monitoring the current flow to prevent stray electrosurgical

energy from instrument insulation failure or capacitive coupling.

Whereas conventional instruments are simply a conductive

element with a layer of insulation coating, AEM Surgical Instruments have a patented, multi-layered design with a built-in “shield,”

a concept much like the third-wire ground in standard electrical cords.

The shield in these instruments is electrically connected and

referenced back to an AEM Monitor at the electrosurgical generator.

In the event of a harmful level of stray electrical energy, the monitor

shuts down the power at the source, assuring patient safety.

If instrument insulation failure should occur, the AEM system, while continually

monitoring the instrument, immediately interrupts monopolar output from the electrosurgical generator and alerts the surgical staff.

AEM system protects against capacitive coupling by providing a neutral return path for “capacitive” electrical energy.

energy is continually drained away from the instrument and away from the patient through the protective shield built into all AEM instruments

and the connected AEM Monitor.

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 the integrated AEM design

and includes the full range of instruments that are common in laparoscopic surgery today.

The AEM monitor is compatible with most electrosurgical

estimate sales outside the U.S.

to be at least as large as that of the U.S.

We are growing our presence in Australia and New

Zealand and are seeking a new presence in the Middle East and Europe.

As decisions are made at a system level, our intent is to highlight

the clinical, economic and safety benefits of using AEM technology.

Electrosurgical Burn Injury to the Patient

Electrosurgical

technology is a valuable and prevalent resource for surgeons.

Since its introduction in the 1930s, electrosurgical technology has continually

evolved and is estimated to be used in over 75% of all surgeries.

primary form of electrosurgery, monopolar electrosurgery, is a standard tool for general surgeons throughout the world.

electrosurgery, the surgeon uses an instrument (typically scissors, grasper/dissectors, spatula blades or suction-irrigation electrodes)

to deliver electrical current to patient tissue.

This “active electrode” provides the surgeon with the ability to cut, coagulate

or ablate tissue as needed during the surgery.

With the advent of MIS procedures, surgeons have continued using monopolar electrosurgery

as a primary tool for hemostatic incision, coagulation of bleeding tissues, excision and ablation.

Unfortunately, conventional laparoscopic

electrosurgical instruments from competing manufacturers are susceptible to emitting stray electrical currents during the procedure.

This risk is exacerbated by the fact that laparoscopic camera systems limit the surgical field of view.

Ninety percent of the instrument

may be outside the surgeon's field of view at any given time during the surgery.

dangers of stray energy are twofold.

Not only is there the danger created by the burn injury itself, but there is the compounding danger

that the burn will go unnoticed during the surgery and be allowed to manifest post-operatively as fecal peritonitis or other potentially

deadly and devastating outcomes.

In many cases, the surgeon cannot detect stray electrosurgical burns at the time of the procedure because

it is out of their field of visualization.

The resulting complication usually presents itself days later in the form of a severe infection

or sepsis, which often results in a hospital readmission and a difficult course of remedial surgeries and prolonged hospital recovery

for the patient.

This situation has even resulted in fatalities.

electrosurgical burn injury can result from two causes – instrument insulation failure and capacitive coupling.

Instrument insulation

failure can be a common occurrence with laparoscopic instruments.

Conventional active electrodes for laparoscopic surgery are designed

with the same basic construction – a single conductive element and an outer insulation coating.

This insulation can fail during

the course of normal use during surgery.

One university study found insulation defects in new disposable instruments before they were

used or after limited surgical use.

It is also possible for instrument insulation to become flawed during the handling, cleaning and

sterilization process.

This common insulation failure can allow electrical currents to "spark" from the instrument to unintended

and unseen tissue with potentially serious consequences for the patient, such as bowel perforations.

Four different studies indicate

that the insulation failure rate in reusable instruments can be as high as one in five.

Capacitive coupling is another way stray electrosurgical

energy can cause unintended burns during laparoscopy.

Capacitive coupling is an electrical phenomenon that occurs when current is induced

from the instrument to nearby tissue or another instrument despite intact insulation.

This potential for capacitive coupling is present

in all laparoscopic surgeries that utilize monopolar electrosurgery devices and are likely to occur outside the surgeon’s field

Conventional,

“non-shielded, non-monitored” laparoscopic instruments are susceptible to causing unintended, unseen burn injuries to the

patient in MIS.

Instrument insulation failure and capacitive coupling are the primary causes of stray electrosurgical burns in laparoscopy

and are the two events over which the surgical team has traditionally had no control.

Although alternative forms to monopolar electrosurgery

energy exist, these alternative energies tend to be less effective, take longer to achieve the desired surgical effect and are costlier.

AEM Surgical Instruments

technology eliminates the risk of stray electrical energy caused by instrument insulation failure and capacitive coupling, and thus prevents

unintended burn injuries to patients.

Surgical Instruments are an innovative solution to stray electrosurgical burns in laparoscopic surgery and are designed with the same

look, feel and functionality as conventional instruments.

They direct electrosurgical energy where the surgeon desires, while continuously

monitoring the current flow to prevent stray electrosurgical energy from instrument insulation failure or capacitive coupling.

conventional instruments are simply a conductive element with a layer of insulation coating, AEM Surgical Instruments have a patented,

multi-layered design with a built-in “shield,” a concept much like the third-wire ground in standard electrical cords.

shield in these instruments is electrically connected and referenced back to an AEM Monitor at the electrosurgical generator.

event of a harmful level of stray electrical energy, the monitor shuts down the power at the source, assuring patient safety.

If instrument

insulation failure should occur, the AEM system, while continually monitoring the instrument, immediately interrupts monopolar output

from the electrosurgical generator and alerts the surgical staff.

The AEM system protects against capacitive coupling by providing a

neutral return path for “capacitive” electrical energy.

Capacitive energy is continually drained away from the instrument

and away from the patient through the protective shield built into all AEM instruments and the connected AEM Monitor.

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 the integrated AEM design and includes the full range of instruments that are common in laparoscopic

surgery today.

The AEM monitor is compatible with most electrosurgical generators, and can also be adapted for use in robotic systems.

AEM Surgical Instruments provide enhanced patient safety, require no change in surgeon technique and are cost competitive.

Thus, conversion to AEM Surgical Instruments is easy and economical.

Historical Perspective

We were organized

as a Colorado corporation in 1991 and spent several years developing the AEM monitoring system and protective sheaths to adapt to conventional

electrosurgical instruments.

During this period, we conducted product trials and applied for patents with the United States Patent and

Trademark Office and with International patent agencies.

Our patents relate to the

basic shielding and monitoring technologies that we incorporate into our AEM products.

As of March 31, 2023, we have 16 unexpired United

States patents relating to specific implementations of shielding and monitoring in instruments and continue to add patents as we further

develop our proprietary technology and its applications.

As we evolved, it was clear to us that our “active

electrode monitoring” technology needed to be integrated into the standard laparoscopic instrument design.

As the development program

proceeded, it also became apparent that the merging of electrical and mechanical engineering skills in the instrument development process

for our patented, integrated electrosurgical instruments was a complex and difficult task.

As a result, instruments with integrated AEM

technology were not completed for several years.

Prior to offering a full range of laparoscopic electrosurgical instrumentation, it was

difficult for hospitals to commit to the AEM solution, as we did not have adequate comparable surgical instrument options to match surgeon

With the broad

array of AEM instruments now available, the surgeon has a wide choice of instrument options and does not have to change surgical technique

to use our AEM products.

Since c onversion to AEM technology is transparent to the surgeon, hospitals

can now universally convert to AEM technology, thus providing all of their laparoscopic surgery patients a higher level of safety.

development coincides with the continued expansion of independent endorsements for AEM technology.

Recommendations from the malpractice

insurance and medicolegal communities complement the broad clinical endorsements that AEM technology has garnered over the past few years,

leading to better awareness for the benefits of the technology.

We produce and market a full line of AEM Instruments,

which are “shielded and monitored” to prevent stray electrosurgical burns from insulation failure and capacitive coupling.

Our product line includes a broad range of endo-mechanical instruments (scissors, graspers and dissectors), fixed-tip electrodes and suction-irrigation

These AEM Instruments are available in a wide array of reusable and disposable options.

Also, we have a line of handles that

are used for advanced laparoscopic procedures that incorporate stiffer shafts and ergonomic features.

In addition, we market an AEM monitor

product line that is used in conjunction with AEM Instruments.

Our AEM EndoShield® 2 Burn Protection System can be used for a number

of surgical procedures without reprocessing, reduces the customer’s cost per use significantly, and eliminates a significant barrier

Thus, hospitals can make a complete and smooth conversion to our product line, thereby advancing patient safety in MIS.

EndoShield 2 integrates our patented AEM technology into a disposable smart cord and eliminates the need for a separate AEM monitor.

is changing the marketplace for electrosurgical devices and laparoscopic instruments by providing a solution to a well-documented hazard

unique to laparoscopic surgery.

The 2020 introduction of our AEM 2X enTouch®

Scissors (“2X Scissors”) brought new levels of performance and economy to the surgical scissor market by combining the

best in class performance of our enTouch Disposable Scissors with the value and economy of a multi-use device.

We believe that our 2X Scissors

will have a significant impact on the disposable laparoscopic scissor market.

Our enTouch Disposable Scissors have long been the surgeon

preferred product because of their sharpness and micro-serrations.

Our 2X Scissors provide all those benefits at half the cost per

use and reduce hospital waste and the impact on the environment as well.

The thermochromic technology integrated into 2X Scissors

lets the hospital know when to replace the scissors with new ones and makes tracking their use simple and easy.

2X Scissors work

with hot AEM dissection and have a price point that makes them suitable for cold dissection as well.

2X Scissors should open new

use segments for us and create an opportunity for customers to standardize on our entire portfolio of Active Electrode Monitoring (AEM®)

On April 20, 2020, we entered into a Master Services

Agreement (“MSA”) with Auris Health, Inc.

(“Auris Health”), which is based in Redwood City, CA and a part of Johnson

& Johnson Medical Devices Companies.

The MSA (and the initial related Statement of Work thereunder) were effective as of March 3,

Under the MSA, we and Auris Health collaborated on the development of equipment designed to enable the compatibility of our AEM

technology with monopolar instruments produced by Auris Health.

The MSA had a term of up to three years, but either party could terminate

the MSA sooner upon 10 business days’ prior written notice.

On August 23, 2021, we entered into a Supply Agreement with Auris Health,

On May 5, 2022, the parties mutually agreed to terminate all of our agreements.

In February 2023, we signed a Proof of Concept Services

Agreement with Vicarious Surgical Inc.

Thus, conversion

to AEM Surgical Instruments is easy and economical.

were organized as a Colorado corporation in 1991 and spent several years developing the AEM monitoring system and protective sheaths

to adapt to conventional electrosurgical instruments.

During this period, we conducted product trials and applied for patents with the

United States Patent and Trademark Office and with International patent

Our patents relate to the basic shielding and monitoring technologies that we incorporate

into our AEM products.

As of March 31, 2024, we have 16 unexpired United States patents relating to specific implementations of shielding

and monitoring in instruments and continue to add patents as we further develop our proprietary technology and its applications.

we evolved, it was clear to us that our “active electrode monitoring” technology needed to be integrated into the standard

laparoscopic instrument design.

As the development program proceeded, it also became apparent that the merging of electrical and mechanical

engineering skills in the instrument development process for our patented, integrated electrosurgical instruments was a complex and difficult

As a result, instruments with integrated AEM technology were not completed for several years.

Prior to offering a full range of

laparoscopic electrosurgical instrumentation, it was difficult for hospitals to commit to the AEM solution, as we did not have adequate

comparable surgical instrument options to match surgeon demand.

the broad array of AEM instruments now available, the surgeon has a wide choice of instrument options and does not have to change surgical

technique to use our AEM products.

Since c onversion

to AEM technology is transparent to the surgeon, hospitals can now universally convert to AEM technology,

thus providing all of their laparoscopic surgery patients a higher level of safety.

This development coincides with the continued

expansion of independent endorsements for AEM technology.

Recommendations from the malpractice insurance and medicolegal communities

complement the broad clinical endorsements that AEM technology has garnered over the past few years, leading to better awareness for

the benefits of the technology.

produce and market a full line of AEM Instruments, which are “shielded and monitored” to prevent stray electrosurgical burns

from insulation failure and capacitive coupling.

Our product line includes a broad range of endo-mechanical instruments (scissors, graspers

and dissectors), fixed-tip electrodes and suction-irrigation electrodes.

These AEM Instruments are available in a wide array of reusable

and disposable options.

Also, we have a line of handles that are used for advanced laparoscopic procedures that incorporate stiffer shafts

and ergonomic features.

In addition, we market an AEM monitor product line that is used in conjunction with AEM Instruments.

EndoShield® 2 Burn Protection System can be used for a number of surgical procedures without reprocessing, reduces the customer’s

cost per use significantly, and eliminates a significant barrier to adoption.

Thus, hospitals can make a complete and smooth conversion

to our product line, thereby advancing patient safety in MIS.

The EndoShield 2 integrates our patented AEM technology into a disposable

smart cord and eliminates the need for a separate AEM monitor.

It is changing the marketplace for electrosurgical devices and laparoscopic

instruments by providing a solution to a well-documented hazard unique to laparoscopic surgery.

introduction of our AEM 2X enTouch® Scissors (“2X Scissors”) brought new levels of performance and economy

to the surgical scissor market by combining the best-in-class performance of our enTouch Disposable Scissors with the value and economy

of a multi-use device.

We believe that our 2X Scissors will have a significant impact on the disposable laparoscopic scissor market.

Our enTouch Disposable Scissors have long been the surgeon preferred product because of their sharpness and micro-serrations.

Our 2X Scissors

provide all those benefits at half the cost per use and reduce hospital waste and the impact on the environment as well.

The thermochromic

technology integrated into 2X Scissors lets the hospital know when to replace the scissors with new ones and makes tracking

their use simple and easy.

2X Scissors work with hot AEM dissection and have a price point that makes them suitable for cold dissection

2X Scissors should open new use segments for us and create an opportunity for customers to standardize on our entire portfolio

of Active Electrode Monitoring (AEM®) products.

February 2023, we signed a Proof-of-Concept Services Agreement with Vicarious Surgical Inc.

(“Vicarious”).

The Vicarious robot design intends to maximize visualization, precision,

and control of instruments in robotic-assisted minimally invasive surgery.

Sales and Marketing Overview

We believe that AEM technology can become the standard

of care in laparoscopic surgery worldwide.

Our marketing efforts are focused on building awareness by providing technical education for

Health Care Providers on the dangers of stray electrosurgical energy and in providing clinical and economic evidence to substantiate the

value of AEM technology to hospitals, their staff, and their patients.

We also leverage relationships with prominent hospitals and surgeons

where AEM Technology has increased their level of patient care and improved their overall surgical outcomes.

In addition, there is increasing public interest in

the reduction of medical errors and the advancement of patient safety.

For example, the National Quality Forum and CMS (Centers for Medicare

and Medicaid Services) recognize “patient death or serious disability associated with a burn incurred from any source while being

cared for in a healthcare facility” as a “never-event”.

We believe that the credibility and importance of our technology

is complemented by this expanding public interest in advancing patient safety in new CMS Hospital Quality Metrics.

The Center for Medicare

and Medicaid Services published its Hospital-Acquired Condition Reduction Program, effective October 1, 2014.

At that time, the program

began to levy as much as a 1% penalty on Medicare reimbursements on hospitals in the lower quadrant of performance for selected quality

indicators, including accidental puncture and laceration (“APL”).

An example of an APL includes the use of a cautery device

(electrosurgery) or scissors to dissect a tissue plane that errantly causes an injury to underlying bowels.

To cost effectively expand market coverage, we focus

on optimizing our distribution network comprised of direct and independent sales representatives who are managed and directed by our regional

sales managers throughout the United States.

In some instances, customers have recognized the patient safety risks inherent in monopolar

electrosurgery and have accepted AEM technology as the way to eliminate those risks.

In other instances, we have found selling the concept

behind AEM technology more difficult.

This difficulty is due to several factors, including the necessity to make surgeons, nurses and

hospital risk managers aware of the potential for unintended electrosurgical burns (which exists when conventional instruments are used

during laparoscopic monopolar electrosurgery) and the resulting increased patient injury and medicolegal liability exposure.

Additionally,

we must contend with the overall lack of single purchasing points in the industry (surgeons, hospital personnel, and value analysis committees

have to be in substantial agreement as to the benefits of new technology), and the resulting need to make multiple sales calls on personnel

with the authority to commit to hospital expenditures.

Other challenges include the fact that many hospitals have exclusive contractual

agreements with manufacturers of competing surgical instruments.

Our goal is to optimize a network that has experience

selling into the hospital operating room environment.

We believe that improvement in this network offers us the best opportunity to cost

effectively broaden acceptance of our product line and generate increased and recurring sales.

Additionally, we are pursuing supplier

agreements with the major selected GPOs, hospital systems and integrated delivery networks.

In addition to the efforts to broaden market acceptance

in the United States, we have contracted with independent distributors in Australia and New Zealand to market our products internationally.

We have achieved Conformité Européene (“CE”) marking for our products so that we may sell into the European

The CE marking indicates that a manufacturer has conformed to all of the obligations imposed by European health, safety and

environmental legislation.

While CE certification opens up incremental markets in Europe, our distribution options in the European marketplace

are developing, and sales in international markets are small.

We believe that the expanding awareness for AEM technology

through education and the improved sales network of independent representatives will provide the basis for increased sales and continuing

profitable operations.

However, these measures, or any others that we may adopt, may not result in increased sales or profitable operations.

Research and Development

We aim to continually expand our AEM Instrument product

line to satisfy the evolving needs of surgeons.

For AEM technology to fully become a standard of care, we must satisfy surgeons’

preferred instrument shapes, sizes, styles and functionality with integrated AEM technology.

This commitment includes expanding the styles

of electrosurgical instruments available for MIS applications so that the conversion to AEM technology is transparent to surgeons and

does not require significant change in their current surgical techniques.

We employ full-time engineers and use independent contractors

from time to time in our research and product development efforts.

This group continuously explores ways to broaden and enhance the product

Current research and development efforts are focused primarily on line-extension projects to further expand our AEM Instrument product

offering to increase surgeons’ choices and options in laparoscopic surgery.

Our research and development expenses were $816,119

in fiscal year 2023 and $918,155 in fiscal year 2022.

We expense research and development costs for products and processes as incurred.

Costs that are included in research and development expenses include direct salaries, contractor fees, materials, facility costs and administrative

expenses that relate to research and development.

Manufacturing, Regulatory Affairs

and Quality Assurance

We engage in various manufacturing and assembly activities

at our leased facility in Boulder, Colorado.

These operations include disposable scissor inserts manufacturing and assembly of our AEM

Instrument system as well as fabrication, assembly and test operations for instruments, monitors and accessories.

We also have relationships

with a number of outside suppliers.

Three vendors accounted for approximately 47% of our inventory purchases.

We believe that the use of both internal and external

manufacturing capabilities allows for increased flexibility in meeting our customer delivery requirements and significantly reduces the

need for investment in specialized capital equipment.

We have developed multiple sources of supply where possible.

Our relationship with

our suppliers is generally limited to individual purchase order agreements supplemented, as appropriate, by contractual relationships

to help ensure the availability and low cost of certain products.

All components, materials and sub-assemblies used in our products, whether

produced in-house or obtained from others, are inspected to ensure compliance with our specifications.

All finished products are subject

to our quality assurance and performance testing procedures.

As discussed in the section on Government Regulation,

we are subject to the rules and regulations of the United States Food and Drug Administration (“FDA”).

Our leased facility

of 28,696 square feet contains approximately 15,100 square feet of manufacturing, regulatory affairs and quality assurance space.

facility is designed to comply with the Quality System Regulation (“QSR”), as specified in published FDA regulations.

latest inspection by the FDA occurred in October 2015.

We achieved CE marking in August 2000, which required

prior certification of our quality system and product documentation.

Maintenance of the CE marking status requires periodic audits of

the quality system and technical documentation by our European Notified Body, TUV Rheinland.

The Vicarious

robot design intends to maximize visualization, precision, and control of instruments in robotic-assisted minimally invasive surgery.

and Marketing Overview

believe that AEM technology can become the standard of care in laparoscopic surgery worldwide.

Our marketing efforts are focused on building

awareness by providing technical education for Health Care Providers on the dangers of stray electrosurgical energy and in providing

clinical and economic evidence to substantiate the value of AEM technology to hospitals, their staff, and their patients.

We also leverage

relationships with prominent hospitals and surgeons where AEM Technology has increased their level of patient care and improved their

overall surgical outcomes.

addition, there is increasing public interest in the reduction of medical errors and the advancement of patient safety.

the National Quality Forum and CMS (Centers for Medicare and Medicaid Services) recognize “patient death or serious disability

associated with a burn incurred from any source while being cared for in a healthcare facility” as a “never-event”.

We believe that the credibility and importance of our technology is complemented by this expanding public interest in advancing patient

safety in new CMS Hospital Quality Metrics.

cost effectively expand market coverage, we focus on optimizing our distribution network comprised of direct and independent sales representatives

who are managed and directed by our regional sales managers throughout the United States.

In some instances, customers have recognized

the patient safety risks inherent in monopolar electrosurgery and have accepted AEM technology as the way to eliminate those risks.

other instances, we have found selling the concept behind AEM technology more difficult.

This difficulty is due to several factors, including

the necessity to make surgeons, nurses and hospital risk managers aware of the potential for unintended electrosurgical burns (which

exists when conventional instruments are used during laparoscopic monopolar electrosurgery) and the resulting increased patient injury

and medicolegal liability exposure.

Additionally, we must contend with the overall lack of single purchasing points in the industry (surgeons,

hospital personnel, and value analysis committees have to be in substantial agreement as to the benefits of new technology), and the

resulting need to make multiple sales calls on personnel with the authority to commit to hospital expenditures.

Other challenges include

the fact that many hospitals have exclusive contractual agreements with manufacturers of competing surgical instruments.

goal is to optimize a network that has experience selling into the hospital operating room environment.

We believe that improvement in

this network offers us the best opportunity to cost effectively broaden acceptance of our product line and generate increased and recurring

Additionally, we are pursuing supplier agreements with the major selected GPOs, hospital systems and integrated delivery networks.

addition to the efforts to broaden market acceptance in the United States, we have contracted with independent distributors in Australia

and New Zealand to market our products internationally.

We have achieved Conformité Européene (“CE”) marking

for our products so that we may sell into the European marketplace.

The CE marking indicates that a manufacturer has conformed to all

of the obligations imposed by European health, safety and environmental legislation.

While CE certification opens up incremental markets

in Europe, our distribution options in the European marketplace are developing, and sales in international markets are small.

believe that the expanding awareness for AEM technology through education and the improved sales network of independent representatives

will provide the basis for increased sales and continuing profitable operations.

However, these measures, or any others that we may adopt,

may not result in increased sales or profitable operations.

and Development

aim to continually expand our AEM Instrument product line to satisfy the evolving needs of surgeons.

For AEM technology to fully become

a standard of care, we must satisfy surgeons’ preferred instrument shapes, sizes, styles and functionality with integrated AEM

This commitment includes expanding the styles of electrosurgical instruments available for MIS applications so that the conversion

to AEM technology is transparent to surgeons and does not require significant change in their current surgical techniques.

full-time engineers and use independent contractors from time to time in our research and product development efforts.

This group continuously

explores ways to broaden and enhance the product line.

Current research and development efforts are focused primarily on line-extension

projects to further expand our AEM Instrument product offering to increase surgeons’ choices and options in laparoscopic surgery.

Our research and development expenses were $621,894 in fiscal year 2024 and $816,119 in fiscal year 2023.

We expense research and development

costs for products and processes as incurred.

Costs that are included in research and development expenses include direct salaries, contractor

fees, materials, facility costs and administrative expenses that relate to research and development.

Manufacturing,

Regulatory Affairs and Quality Assurance

engage in various manufacturing and assembly activities at our leased facility in Boulder, Colorado.

These operations include disposable

scissor inserts manufacturing and assembly of our AEM Instrument system as well as fabrication, assembly and test operations for instruments,

monitors and accessories.

We also have relationships with a number of outside suppliers.

Three vendors accounted for approximately 47%

of our inventory purchases.

believe that the use of both internal and external manufacturing capabilities allows for increased flexibility in meeting our customer

delivery requirements and significantly reduces the need for investment in specialized capital equipment.

We have developed multiple

sources of supply where possible.

Our relationship with our suppliers is generally limited to individual purchase order agreements supplemented,

as appropriate, by contractual relationships to help ensure the availability and low cost of certain products.

All components, materials

and sub-assemblies used in our products, whether produced in-house or obtained from others, are inspected to ensure compliance with our

specifications.

All finished products are subject to our quality assurance and performance testing procedures.

discussed in the section on Government Regulation, we are subject to the rules and regulations of the United States Food and Drug Administration

Our leased facility of 28,696 square feet contains approximately 15,100 square feet of manufacturing, regulatory

affairs and quality assurance space.

The facility is designed to comply with the Quality System Regulation (“QSR”), as specified

in published FDA regulations.

Our latest inspection by the FDA occurred in October 2015.

achieved CE marking in August 2000, which required prior certification of our quality system and product documentation.

Maintenance of

the CE marking status requires periodic audits of the quality system and technical documentation by our European Notified Body, TUV Rheinland.

The most recent audit was completed in February 2023.

Patents, Patent Applications and

Intellectual Proprietary Rights

We have invested heavily in an effort to protect our

valuable technology, and, as a result of this effort, we have been issued 16 unexpired relevant patents that together form a significant

intellectual property position.

Our patents relate to the basic shielding and monitoring technologies that we incorporate into our AEM

As of March 31, 2023, we have 16 unexpired United States patents relating to specific implementations of shielding and monitoring

in instruments.

As of March 31, 2023, there are between one and seventeen years remaining on our AEM patents.

We have five patent applications

in process and we have four trademarks.

Our technical progress depends to a significant degree

on our ability to maintain patent protection for products and processes, to preserve our trade secrets and to operate without infringing

the proprietary rights of third parties.

Our policy is to attempt to protect our technology by, among other things, filing patent applications

for technology that we consider important to the development of our business.

The validity and breadth of claims covered in medical technology

patents involve complex legal and factual questions and, therefore, may be highly uncertain.

Even though we hold patented technology,

others might copy our technology or otherwise incorporate our technology into their products.

We require our employees to execute non-disclosure

agreements upon commencement of employment.

These agreements generally provide that all confidential information developed or made known

to the individual by us during the course of the individual's employment is our property and is to be kept confidential and not to be

disclosed to third parties.

The electrosurgical device market is intensely competitive

and tends to be dominated by a relatively small group of large and well-financed companies.

We compete directly for customers with those

companies that currently make conventional electrosurgical instruments.

Larger competitors include Advanced Surgical Technologies Group

(a division of Medtronic plc) and Ethicon Endo-Surgery (a division of Johnson & Johnson).

While we know of no competitor (including

those referenced above) that can provide a continuous solution to stray electrosurgical burns, the manufacturers of conventional (non-monitored,

non-shielded) instruments will resist any loss of market share resulting from the presence of our products in the marketplace.

differentiates us from the competition is that while competitive technologies may somewhat reduce the risk of stray energy burns, only

AEM Technology completely eliminates it.

We also believe that manufacturers of products based

on alternative technology to monopolar electrosurgery are our competitors.

These alternative technologies include other “advanced

energy” technologies such as bipolar electrosurgery, laser surgery and ultrasonic dissector sealers.

Leading manufacturers in these

areas include Advanced Surgical Technologies Group, Gyrus/ACMI (a division of Olympus Corporation and a leader in bi-polar electrosurgery),

Lumenis (laser surgery) and Ethicon Endo-Surgery (a division of Johnson and Johnson, manufacturers of the harmonic scalpel).

that monopolar electrosurgery offers substantial competitive, functional and financial advantages over these alternative energy technologies

and will remain the primary tool for the surgeon, as it has been for decades.

However, the risk exists that these alternative technologies

may gain greater market share and that new competitive techniques may be developed and introduced.

As mentioned in the Sales and Marketing discussion,

the competitive issues involved in selling our AEM product line do not primarily revolve around a comparison of cost or features, but

rather involve generating an awareness of the inherent hazards of electrosurgery and the potential for injury to the patient.

This involves

conceptual selling, rather than just product selling, which results in a longer sales cycle and generally higher sales costs.

endorsements of AEM technology have greatly enhanced the credibility of AEM Instruments.

However, our efforts to increase market awareness

of this technology may not be successful, and our competitors may develop alternative strategies and/or products to counter our marketing

Many of our competitors and potential competitors

have widely-used products and significantly greater financial, technical, product development, marketing and other resources.

to our direct sales force, we utilize a network of independent distributor representatives in selected areas.

In some cases, our options

for independent distribution have conflicting and competing product interests which compromise our ability to make market advances in

certain areas.

We may not be able to compete successfully against current and future competitors, and competitive pressures faced by us

may have a material adverse impact on our business, operating results and financial condition.

Government Regulation

Government regulation in the United States and other

countries is a significant factor in the development and marketing of our products and in our ongoing manufacturing, research and development

The FDA regulates us and our products under a number of statutes, including the Federal Food, Drug and Cosmetics Act (the

Under the FDC Act, medical devices are classified as Class I, II or III on the basis of the controls deemed necessary

to reasonably ensure their safety and effectiveness.

Class I devices are subject to the least extensive controls, as their safety and

effectiveness can be reasonably assured through general controls (e.g., labeling, pre-market notification and adherence to QSR).

II devices, safety and effectiveness can be assured through the use of special controls (e.g., performance standards, post-market surveillance,

patient registries and FDA guidelines).

Class III devices (e.g., life-sustaining or life-supporting implantable devices or new devices

which have been found not to be substantially equivalent to legally marketed devices) require the highest level of control, generally

requiring pre-market approval by the FDA to ensure their safety and effectiveness.

Our products are Class II devices.

If a manufacturer or distributor of medical devices

can establish that a proposed device is "substantially equivalent" to a legally marketed Class I or Class II medical device

or to a Class III medical device for which the FDA has not required a pre-market approval application, the manufacturer or distributor

may seek FDA marketing clearance for the device by filing a 510(k) pre-market notification.

Following submission of the 510(k) notification,

the manufacturer or distributor may not place the device into commercial distribution in the United States until an order has been issued

The FDA's target for issuing such orders is within 90 days of submission, but the process can take significantly longer.

order may declare the FDA's determination that the device is "substantially equivalent" to another legally marketed device and

allow the proposed device to be marketed in the United States.

The FDA may, however, determine that the proposed device is not substantially

equivalent or may require further information, such as additional test data, before deciding regarding substantial equivalence.

determination or request for additional information could delay market introduction and have a material adverse effect on our continued

We have received a favorable 510(k) notification for our AEM monitors and AEM Instruments, all of which are designated as

Class II medical devices.

Labeling and promotional activities are subject to

scrutiny by the FDA and, in certain instances, by the Federal Trade Commission.

The FDA also imposes post-marketing controls on us and

our products, and registration, listing, medical device reporting, post-market surveillance, device tracking and other requirements on

medical devices.

Failure to meet these pervasive FDA requirements or adverse FDA determinations regarding our clinical and preclinical

trials could subject us and/or our employees to injunction, prosecution, civil fines, seizure or recall of products, prohibition of sales

or suspension or withdrawal of any previously granted approvals, which could lead to a material adverse impact on our financial position

and results of operations.

The FDA regulates our quality control and manufacturing

procedures by requiring us and our contract manufacturers to demonstrate compliance with the QSR as specified in published FDA regulations.

The FDA requires manufacturers to register with the FDA, which subjects them to periodic FDA inspections of manufacturing facilities.

If violations of applicable regulations are noted during FDA inspections of our manufacturing facilities or the facilities of our contract

manufacturers, the continued marketing of our products may be adversely affected.

Such regulations are subject to change and depend heavily

on administrative interpretations.

In October 2015, the FDA conducted a QSR inspection of our facilities.

We believe that we have the

internal resources and processes in place to be reasonably assured that we are in compliance with all applicable United States regulations

regarding the manufacture and sale of medical devices.

However, if we were found not to be in compliance with the QSR, in the future,

such findings could result in a material adverse impact on our financial condition, results of operations and cash flows.

Sales of medical devices outside of the United States

are subject to United States export requirements and foreign regulatory requirements.

Legal restrictions on the sale of imported medical

devices vary from country to country.

The time required to obtain approval by a foreign country may be longer or shorter than that required

for FDA approval and the requirements may differ.

Our Certificate of Export from the United States Department of Health and Human Services

has expired and we will seek to renew it.

However, a specific foreign country in which we wish to sell our products may not accept or

continue to accept the Certificate of Export.

Entry into the European Economic Area market also requires prior certification of our quality

system and product documentation.

We achieved CE marking in August 2000, allowing a launch into the European marketplace.

of the CE marking status requires annual audits of the quality system and technical documentation by our European Notified Body, TUV Rheinland.

Patent Applications and Intellectual Proprietary Rights

have invested heavily in an effort to protect our valuable technology, and, as a result of this effort, we have been issued 16 unexpired

relevant patents that together form a significant intellectual property position.

Our patents relate to the basic shielding and monitoring

technologies that we incorporate into our AEM products.

As of March 31, 2024, we have 16 unexpired United States patents relating to

specific implementations of shielding and monitoring in instruments.

As of March 31, 2024, there are between one and seventeen years

remaining on our AEM patents.

We have five patent applications in process, and we have four trademarks.

technical progress depends to a significant degree on our ability to maintain patent protection for products and processes, to preserve

our trade secrets and to operate without infringing the proprietary rights of third parties.

Our policy is to attempt to protect our

technology by, among other things, filing patent applications for technology that we consider important to the development of our business.

The validity and breadth of claims covered in medical technology patents involve complex legal and factual questions and, therefore,

may be highly uncertain.

Even though we hold patented technology, others might copy our technology or otherwise incorporate our technology

into their products.

require our employees to execute non-disclosure agreements upon commencement of employment.

These agreements generally provide that all

confidential information developed or made known to the individual by us during the course of the individual's employment is our property

and is to be kept confidential and not to be disclosed to third parties.

electrosurgical device market is intensely competitive and tends to be dominated by a relatively small group of large and well-financed

We compete directly for customers with those companies that currently make conventional electrosurgical instruments.

competitors include Advanced Surgical Technologies Group (a division of Medtronic plc) and Ethicon Endo-Surgery (a division of Johnson

While we know of no competitor (including those referenced above) that can provide a continuous solution to stray electrosurgical

burns, the manufacturers of conventional (non-monitored, non-shielded) instruments will resist any loss of market share resulting from

the presence of our products in the marketplace.

What clearly differentiates us from the competition is that while competitive technologies

may somewhat reduce the risk of stray energy burns, only AEM Technology completely eliminates it.

also believe that manufacturers of products based on alternative technology to monopolar electrosurgery are our competitors.

These alternative

technologies include other “advanced energy” technologies such as bipolar electrosurgery, laser surgery and ultrasonic dissector

Leading manufacturers in these areas include Advanced Surgical Technologies Group, Gyrus/ACMI (a division of Olympus Corporation

and a leader in bi-polar electrosurgery), Lumenis (laser surgery) and Ethicon Endo-Surgery (a division of Johnson and Johnson, manufacturers

of the harmonic scalpel).

We believe that monopolar electrosurgery offers substantial competitive, functional and financial advantages

over these alternative energy technologies and will remain the primary tool for the surgeon, as it has been for decades.

risk exists that these alternative technologies may gain greater market share and that new competitive techniques may be developed and

mentioned in the Sales and Marketing discussion, the competitive issues involved in selling our AEM product line do not primarily revolve

around a comparison of cost or features, but rather involve generating an awareness of the inherent hazards of electrosurgery and the

potential for injury to the patient.

This involves conceptual selling, rather than just product selling, which results in a longer sales

cycle and generally higher sales costs.

Independent endorsements of AEM technology have greatly enhanced the credibility of AEM Instruments.

However, our efforts to increase market awareness of this technology may not be successful, and our competitors may develop alternative

strategies and/or products to counter our marketing efforts.

of our competitors and potential competitors have widely-used products and significantly greater financial, technical, product development,

marketing and other resources.

In addition to our direct sales force, we utilize a network of independent distributor representatives

in selected areas.

In some cases, our options for independent distribution have conflicting and competing product interests which compromise

our ability to make market advances in certain areas.

We may not be able to compete successfully against current and future competitors,

and competitive pressures faced by us may have a material adverse impact on our business, operating results and financial condition.

regulation in the United States and other countries is a significant factor in the development and marketing of our products and in our

ongoing manufacturing, research and development activities.

The FDA regulates us and our products under a number of statutes, including

the Federal Food, Drug and Cosmetics Act (the “FDC Act”).

Under the FDC Act, medical devices are classified as Class I, II

or III based on the controls deemed necessary to reasonably ensure their safety and effectiveness.

Class I devices are subject to the

least extensive controls, as their safety and effectiveness can be reasonably assured through general controls (e.g., labeling, pre-market

notification and adherence to QSR).

For Class II devices, safety and effectiveness can be assured using special controls (e.g., performance

standards, post-market surveillance, patient registries and FDA guidelines).

Class III devices (e.g., life-sustaining or life-supporting

implantable devices or new devices which have been found not to be substantially equivalent to legally marketed devices) require the

highest level of control, generally requiring pre-market approval by the FDA to ensure their safety and effectiveness.

Our products are

Class II devices.

a manufacturer or distributor of medical devices can establish that a proposed device is "substantially equivalent" to a legally

marketed Class I or Class II medical device or to a Class III medical device for which the FDA has not required a pre-market approval

application, the manufacturer or distributor may seek FDA marketing clearance for the device by filing a 510(k) pre-market notification.

Following submission of the 510(k) notification, the manufacturer or distributor may not place the device into commercial distribution

in the United States until an order has been issued by the FDA.

The FDA's target for issuing such orders is within 90 days of submission,

but the process can take significantly longer.

The order may declare the FDA's determination that the device is "substantially equivalent"

to another legally marketed device and allow the proposed device to be marketed in the United States.

The FDA may, however, determine

that the proposed device is not substantially equivalent or may require further information, such as additional test data, before deciding

regarding substantial equivalence.

Any adverse determination or request for additional information could delay market introduction and

have a material adverse effect on our continued operations.

We have received a favorable 510(k) notification for our AEM monitors and

AEM Instruments, all of which are designated as Class II medical devices.

and promotional activities are subject to scrutiny by the FDA and, in certain instances, by the Federal Trade Commission.

imposes post-marketing controls on us and our products, and registration, listing, medical device reporting, post-market surveillance,

device tracking and other requirements on medical devices.

Failure to meet these pervasive FDA requirements or adverse FDA determinations

regarding our clinical and preclinical trials could subject us and/or our employees to injunction, prosecution, civil fines, seizure

or recall of products, prohibition of sales or suspension or withdrawal of any previously granted approvals, which could lead to a material

adverse impact on our financial position and results of operations.

FDA regulates our quality control and manufacturing procedures by requiring us and our contract manufacturers to demonstrate compliance

with the QSR as specified in published FDA regulations.

The FDA requires manufacturers to register with the FDA, which subjects them

to periodic FDA inspections of manufacturing facilities.

If violations of applicable regulations are noted during FDA inspections of

our manufacturing facilities or the facilities of our contract manufacturers, the continued marketing of our products may be adversely

Such regulations are subject to change and depend heavily on administrative interpretations.

In October 2015, the FDA conducted

a QSR inspection of our facilities.

We believe that we have the internal resources and processes in place to be reasonably assured that

we are in compliance with all applicable United States regulations regarding the manufacture and sale of medical devices.

we were found not to be in compliance with the QSR, in the future, such findings could result in a material adverse impact on our financial

condition, results of operations and cash flows.

of medical devices outside of the United States are subject to United States export requirements and foreign regulatory requirements.

Legal restrictions on the sale of imported medical devices vary from country to country.

The time required to obtain approval by a foreign

country may be longer or shorter than that required for FDA approval and the requirements may differ.

Our Certificate of Export from

the United States Department of Health and Human Services has expired and we will seek to renew it.

However, a specific foreign country

in which we wish to sell our products may not accept or continue to accept the Certificate of Export.

Entry into the European Economic

Area market also requires prior certification of our quality system and product documentation.

We achieved CE marking in August 2000,

allowing a launch into the European marketplace.

Maintenance of the CE marking status requires annual audits of the quality system and

technical documentation by our European Notified Body, TUV Rheinland.

The most recent audit was completed in February 2023.

During our March 31, 2020 quarter, we received a letter

from the FDA that contained a questionnaire regarding Stray Energy and how to prevent patient injuries from Stray Energy during

laparoscopic procedures.

We provided the FDA with extensive information on burns and our program for eliminating them.

A Safety Communication

was released by the FDA on May 29, 2020.

Safety Communication was released by the FDA on May 29, 2020.

It is on the FDA's website at:

2 unchanged sentences

unintended patient burns from capacitive coupling and intra-operative insulation failure.

If a monopolar electrosurgical units (ESU) is

If a monopolar electrosurgical units (ESU)

Do not activate when near or in contact with other instruments.”

Environmental Laws and Regulations

From time to time we receive materials returned from

customers, sales representatives and other sources which are potentially biologically hazardous.

These materials are segregated, and disposed

of in accordance with specific procedures that minimize potential exposure to employees.

The costs of compliance with these procedures

are not significant.

Our operations, in general, do not involve the use of environmentally sensitive materials.

We are covered under comprehensive general liability

insurance policies, which have per occurrence and aggregate limits of $1 million and $2 million, respectively, and a $10 million umbrella

We maintain customary property and casualty, workers’ compensation, employer liability and other commercial insurance policies.

As of March 31, 2023, we employed 31 full-time and

2 part-time individuals, of which 4 full-time and 2 part-time are engaged directly in research, development and regulatory activities,

14 full-time in manufacturing/operations, 7 full-time in marketing and sales, and 6 full-time time in administrative positions.

our employees are covered by a collective bargaining agreement, and we consider our relations with our employees to be good.

Available information

Our internet address is www.encision.com.

including the information contained in our website as part of, or incorporating it by reference into, this document.

We make available,

free of charge, through our website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments

to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after

we electronically file such materials with, or furnish such materials to, the SEC.

Environmental

Laws and Regulations

time to time we receive materials returned from customers, sales representatives and other sources which are potentially biologically

These materials are segregated, and disposed of in accordance with specific procedures that minimize potential exposure to

The costs of compliance with these procedures are not significant.

Our operations, in general, do not involve the use of environmentally

sensitive materials.

are covered under comprehensive general liability insurance policies, which have per occurrence and aggregate limits of $1 million and

$2 million, respectively, and a $10 million umbrella policy.

We maintain customary property and casualty, workers’ compensation,

employer liability and other commercial insurance policies.

of March 31, 2024, we employed 22 full-time and 2 part-time individuals, of which 2 full-time and 2 part-time are engaged directly in

research, development, and regulatory activities, 8 full-time in manufacturing/operations, 7 full-time in marketing and sales, and 5

full-time time in administrative positions.

None of our employees are covered by a collective bargaining agreement, and we consider our

relations with our employees to be good.

internet address is www.encision.com.

We are not including the information contained in our website as part of, or incorporating it by

reference into, this document.

We make available, free of charge, through our website our annual reports on Form 10-K, quarterly reports

on Form 10-Q, current reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d)

of the Exchange Act, as soon as reasonably practicable after we electronically file such materials with, or furnish such materials to,

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business