ENCISION INC 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 21549 Form 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to________ Commission file number: 001-11789 ENCISION INC. (Exact name of registrant as specified in its charter) Colorado 84-1162056 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 6797 Winchester Circle Boulder , Colorado 80301 (Address of principal executive offices) ( 303 ) 444-2600 (Registrant’s telephone number) Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, no par value ECIA OTC Bulletin Board Securities registered under Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, 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) 16,879,645 Shares (outstanding at November 10, 2025) ENCISION INC. FORM 10-Q For the Three and Six Months ended September 30, 2025 INDEX Page Number PART I. FINANCIAL INFORMATION 1 ITEM 1 - Condensed Unaudited Interim Financial Statements: 1 Condensed Unaudited Balance Sheets as of September 30, 2025, and Audited Balance Sheets as of March 31, 2025 1 Condensed Unaudited Statements of Operations for the Three and Six Months Ended September 30, 2025 and 2024 2 Condensed Unaudited Statements of Cash Flows for the Six Months Ended September 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 17 ITEM 4 - Controls and Procedures 18 PART II. OTHER INFORMATION 19 ITEM 1 - Legal Proceedings 19 ITEM 1A - Risk Factors 19 ITEM 2 - Unregistered Sales of Equity Securities and Use of Proceeds 19 ITEM 3 - Defaults Upon Senior Securities 19 ITEM 4 - Mine Safety Disclosures 19 ITEM 5 - Other Information 19 ITEM 6 - Exhibits 20 SIGNATURES 21 i PART I FINANCIAL INFORMATION ITEM 1 - Condensed Interim Financial Statements Encision Inc. Condensed Balance Sheets September 30, 2025 Unaudited March 31, 2025 Audited ASSETS Current assets: Cash $ 71,731 $ 257,433 Accounts receivable 761,947 786,471 Inventories 1,468,863 1,483,182 Prepaid expenses 144,331 85,679 Total current assets 2,446,872 2,612,765 Equipment: Furniture, fixtures and equipment, at cost 2,628,661 2,585,446 Accumulated depreciation ( 2,378,645 ) ( 2,340,689 ) Equipment, net 250,016 244,757 Right of use asset 1,116,454 568,395 Patents, net 161,427 171,890 Other assets 81,990 72,892 TOTAL ASSETS $ 4,056,759 $ 3,670,699 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ 314,815 $ 346,900 Line of credit 31,706 395,964 Secured notes 35,202 44,128 Accrued compensation 199,657 180,850 Deferred Revenue — 17,401 Other accrued liabilities 147,019 160,274 Accrued lease liability 343,172 430,398 Total current liabilities 1,071,571 1,575,915 Long-term liabilities: Secured notes 162,249 177,470 Accrued lease liability 958,152 266,212 Total liabilities 2,191,972 2,019,597 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; 16,879,645 and 11,879,645 issued and outstanding at September 30, 2025, and March 31, 2025, respectively 24,938,998 24,416,347 Accumulated (deficit) ( 23,074,211 ) ( 22,765,245 ) Total shareholders’ equity 1,864,787 1,651,102 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 4,056,759 $ 3,670,699 The accompanying notes to financial statements are an integral part of these unaudited condensed financial statements. 1 Encision Inc. Condensed Statements of Operations (Unaudited) Three Months Ended Six Months Ended September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024 NET REVENUE: Product $ 1,481,802 $ 1,653,820 $ 2,974,634 $ 3,245,779 Service 46,248 101,568 156,144 140,539 Total revenue 1,528,050 1,755,388 3,130,778 3,386,318 COST OF REVENUE: Product 805,734 882,886 1,472,545 1,550,520 Service 24,983 44,020 82,441 64,653 Total cost of revenue 830,717 926,906 1,554,986 1,615,173 GROSS PROFIT 697,333 828,482 1,575,792 1,771,145 OPERATING EXPENSES: Sales and marketing 395,793 458,480 800,394 881,716 General and administrative 358,639 373,405 686,838 725,310 Research and development 201,392 155,515 366,832 294,695 Total operating expenses 955,824 987,400 1,854,064 1,901,721 OPERATING (LOSS) ( 258,491 ) ( 158,918 ) ( 278,272 ) ( 130,576 ) Interest expense, net ( 11,384 ) ( 10,598 ) ( 29,393 ) ( 16,967 ) Other (expense) income, net 2,042 ( 746 ) ( 1,301 ) ( 679 ) Interest expense and other income (expense), net ( 9,342 ) ( 11,344 ) ( 30,694 ) ( 17,646 ) (LOSS) BEFORE PROVISION FOR INCOME TAXES ( 267,833 ) ( 170,262 ) ( 308,966 ) ( 148,222 ) Provision for income taxes — — — — NET (LOSS) $ ( 267,833 ) $ ( 170,262 ) $ ( 308,966 ) $ ( 148,222 ) Net (loss) per share—basic and diluted $ ( 0.02 ) $ ( 0.01 ) $ ( 0.02 ) $ ( 0.01 ) Weighted average shares—basic and diluted 14,187,337 11,875,145 13,033,491 11,875,145 The accompanying notes to financial statements are an integral part of these unaudited condensed financial statements. 2 Encision Inc. Condensed Statements of Cash Flows (Unaudited) Six Months Ended September 30, 2025 September 30, 2024 Cash flows (used in) operating activities: Net (loss) $ ( 308,966 ) $ ( 148,222 ) Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: Depreciation and amortization 48,570 42,525 Stock-based compensation expense related to stock options 22,651 25,011 Provision for potential inventory obsolescence 2,569 83,152 Change in operating assets and liabilities: Right of use asset, net 56,656 ( 6,909 ) Accounts receivable 24,524 74,127 Inventories 11,750 154,520 Prepaid expenses and other assets ( 55,968 ) 15,935 Accounts payable ( 49,487 ) ( 26,678 ) Accrued compensation and other accrued liabilities 5,552 ( 20,762 ) Net cash (used in) provided by operating activities ( 242,149 ) 192,699 Cash flows (used in) investing activities: Acquisition of property and equipment ( 43,215 ) ( 42,559 ) Patent and Trademark costs ( 11,933 ) ( 17,359 ) Net cash (used in) investing activities ( 55,148 ) ( 59,918 ) Cash flows from financing activities: (Repayments) Borrowing from line of credit ( 364,258 ) ( 77,834 ) (Payments) from options exercised — ( 1,449 ) Proceeds from issuance of common stock 500,000 — (Paydown) Draw on Secured notes ( 24,147 ) 134,007 Net cash provided by financing activities 111,595 54,724 Net (decrease) increase in cash ( 185,702 ) 187,505 Cash, beginning of fiscal year 257,433 42,509 Cash, end of six months $ 71,731 $ 230,014 Supplemental disclosures of cash flow information: Cash paid during the year for interest $ 29,393 $ 16,967 The accompanying notes to financial statements are an integral part of these unaudited condensed financial statements. 3 ENCISION INC. NOTES TO UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS SEPTEMBER 30, 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 saves lives of, patients undergoing minimally-invasive surgery. The Company believes that the patented AEM ® (Active Electrode Monitoring) surgical instrument technology is changing the marketplace for electrosurgical devices and instruments by providing a solution to a patient safety risk in laparoscopic surgery. The Company's sales to date have been made principally in the United States. The Company has an accumulated deficit of $ 23,074,211 at September 30, 2025. A significant portion of the Company's operating funds has been provided by issuances of common stock and warrants, the exercise of stock options to purchase common stock, loans, and (in some periods) by operating profits. Shareholders’ equity increased by $ 213,685 since March 31, 2025, because of the issuance of common stock $ 500,000 , net loss of $ 308,966 , and stock-based compensation of $ 22,651 . 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's products in surgically active hospitals and surgery centers in the United States. Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation . The unaudited condensed interim financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles accepted in the United States (“GAAP”) have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures made are adequate to make the information presented not misleading. The unaudited condensed interim financial statements and notes thereto should be read in conjunction with the financial statements and the notes thereto included in the Annual Report on Form 10-K for the fiscal year ended March 31, 2025, filed on July 10, 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 $ 267,833 and $ 308,966 for the three and six months ended September 30, 2025, respectively. At September 30, 2025, the Company had cash of $ 71,731 current borrowings of $ 31,706 and borrowing capacity up to $ 968,294 , as restricted by eligible accounts receivable, under the line of credit. Working capital was $ 1,375,301 , an increase of $ 338,451 from March 31, 2025. The Company realized a decrease in cash of $ 185,702 in the fiscal six months ended September 30, 2025, primarily because of cash used by operating activities. Management concludes that it is probable that cash resources and line of credit will only provide funding for our operations into the first fiscal quarter of 2027. Accordingly, there is substantial doubt as to whether existing cash resources are sufficient to enable the Company to continue its operations for the next 12 months as a going concern. Our management is evaluating and pursuing different strategies to obtain the required funding for our operations. To address the Company’s capital needs, the Company must continue to actively pursue additional equity or debt financing. The Company has been in ongoing discussions with potential investors with respect to such financing. Adequate financing opportunities might not be available to the Company, when and if needed, on acceptable terms or at all. If the Company is unable to obtain additional financing in sufficient amounts or on acceptable terms under such circumstances, the Company’s operating results and prospects will be adversely affected. The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty. Use of Estimates in the Preparation of Financial Statements . The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. Such estimates and assumptions affect the reported amounts of assets and liabilities as well as the 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. 4 ENCISION INC. NOTES TO UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS SEPTEMBER 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, and Economic Injury Disaster Loan (“EIDL”) loan. The carrying values of cash and trade receivables approximate their fair value due to their short maturities. The fair values of the EIDL loan approximates the carrying value based on estimated discounted future cash flows using the current rates at which similar loans would be made. Concentration of Credit Risk . Financial instruments, which potentially subject us to concentrations of credit risk, consist of cash and accounts receivable. From time to time, the amount of cash on deposit with financial institutions may exceed the $ 250,000 federally insured limit. We believe that cash on deposit that exceeds $ 250,000 with financial institutions is financially sound, and the risk of loss is minimal. The Company has no off-balance sheet concentrations of credit risk such as foreign exchange contracts, options contracts, or other foreign hedging arrangements. The Company maintains the majority of cash balances with one financial institution in the form of demand deposits. Accounts receivable are typically unsecured and are derived from transactions with and from entities in the healthcare industry, primarily located in the United States. Accordingly, the Company may be exposed to credit risk generally associated with the healthcare industry. The accounts receivable balance at September 30, 2025, of $ 761,947 and at March 31, 2025, of $ 786,471 included no more than 11% from any one customer. Inventories . Inventories are stated at the lower of cost, determined on a first-in, first-out basis, or net realizable value (“NRV”) in accordance with ASC 330. In addition to the NRV assessment, the Company maintains a stability and obsolescence (“S&O”) allowance for potential excess and obsolete inventory. Under the S&O policy, any stock keeping unit (“SKU”) that has had no transactional activity (sales, usage, transfers, or adjustments) for 18 consecutive months is fully reserved. The 18-month inactivity threshold is based on management’s assessment of historical product turnover and expected lifecycle patterns. Because this allowance represents a change in estimate rather than an NRV write-down, it is reassessed at each reporting date and may be increased, reduced, or reversed prospectively when new information (e.g., renewed demand or usage) becomes available. When subsequent activity demonstrates that an item is again saleable or usable, the related reserve is reversed. If, separate from the S&O methodology, management determines that the estimated NRV of any inventory item is below its recorded cost, the item is written down to NRV in accordance with ASC 330. Such NRV write-downs, once recorded, are not reversed in later periods. Changes in the S&O allowance and any NRV write-downs are recorded in cost of goods sold. At September 30, 2025 and March 31, 2025 S&O and NVR inventory reserves consisted of $ 70,489 and none and $ 67,920 and none respectively. At September 30, 2025, and March 31, 2025 inventory consisted of the following: Schedule of inventory September 30, 2025 March 31, 2025 Raw materials $ 1,196,326 $ 1,093,530 Finished goods 272,537 389,652 Total inventories $ 1,468,863 $ 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 expense for the three and six months ended September 30, 2025, and 2024 was $ 20,511 and $ 37,956 , respectively, and $ 16,295 and $ 30,438 , respectively. The Company uses the straight-line method of depreciation for property and equipment. Leasehold improvements are depreciated over the shorter of the remaining lease term or the estimated useful life of the asset. Maintenance and repairs are expensed as incurred, and major additions, replacements, and improvements are capitalized. Long-Lived Assets . Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. A long-lived asset is considered impaired when estimated future cash flows related to the asset, undiscounted and without interest, are insufficient to recover the carrying amount of the asset. If deemed impaired, the long-lived asset is reduced to its estimated fair value. Long-lived assets to be disposed of are reported at the lower of their carrying amount or estimated fair value less cost to sell. Patents . The costs of applying for patents are capitalized and amortized on a straight-line basis over the lesser of the patent’s economic or legal life (20 years from the date of application in the United States). Capitalized costs are expensed if patents are not issued. The Company reviews the carrying value of patents periodically to determine whether the patents have continuing value, and such reviews could result in the conclusion that the recorded amounts have been impaired. 5 ENCISION INC. NOTES TO UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS SEPTEMBER 30, 2025 (Unaudited) Income Taxes . The Company accounts for income taxes under the provisions of FASB Accounting Standards Codification (“ASC”) Topic 740, “Accounting for Income Taxes” (“ASC 740”). ASC 740 requires recognition of deferred income tax assets and liabilities for the expected future income tax consequences, based on enacted tax laws, of temporary differences between the financial reporting and tax bases of assets and liabilities. ASC 740 also requires recognition of deferred tax assets for the expected future tax effects of all deductible temporary differences, loss carryforwards, and tax credit carryforwards. Deferred tax assets are then reduced, if deemed necessary, by a valuation allowance for the amount of any tax benefits, which, more likely than not, based on current circumstances, are not expected to be realized. As a result, no provision for income tax is reflected in the accompanying statements of operations. Should the Company achieve sufficient, sustained income in the future, the Company may conclude that some or all of the valuation allowance should be reversed. The Company is required to make many subjective assumptions and judgments regarding income tax exposures. At September 30, 2025, the Company had no unrecognized tax benefits, which would affect the effective tax rate if recognized and had no accrued interest, or penalties related to uncertain tax positions. Revenue Recognition . The Company records revenue at a single point in time, when control is transferred to the customer. The Company will continue to apply the current business processes, policies, systems, and controls to support recognition and disclosure. The shipping policy is Free On Board (FOB) Shipping Point. We recognize revenue from sales to stocking distributors when there is no right of return, other than for normal warranty claims. The Company has no ongoing obligations related to product sales, except for normal warranty obligations. As presented on the Statement of Operations, revenue is disaggregated between product revenue and service revenue. As it relates specifically to product revenue, the Company does not believe further disaggregation is necessary as substantially all of the product revenue comes from multiple products within a line of medical devices. The engineering service contracts are billed on a time and materials basis, and revenue is recognized over time as the services are performed. Research and Development Expenses . The Company expenses research and development costs for products and processes as incurred. Stock-Based Compensation . Stock-based compensation is presented in accordance with the guidance of ASC Topic 718, “Compensation – Stock Compensation” (“ASC 718”). Under the provisions of ASC 718, the Company is required to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the statements of operations. Stock-based compensation expense recognized under ASC 718 for the three and six months ended September 30, 2025, and 2024 was $ 10,532 and $ 22,651 , and $ 12,637 and $ 25,011 , respectively, which consisted of stock-based compensation expense related to grants of employee stock options. Segment Reporting . Effective with the fiscal year ended March 31, 2025, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. Adoption of the amended guidance did not change the Company’s conclusion that it operates two reportable segments, nor did it affect the Company’s financial position, results of operations, or cash flows. The standard, however, expands required disclosures related to significant segment expense categories and interim-period 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 CDOM (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 September 30, 2025, net long-lived assets totaled $ 411,443 in the United States. 6 ENCISION INC. NOTES TO UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS SEPTEMBER 30, 2025 (Unaudited) Information, by segment, for the three and six months ended September 30, 2025, and 2024, follows: Schedule of operating segments Three Months Ended September 30, 2025 Six Months Ended September 30, 2025 Product Service Total Product Service Total Net revenue $ 1,481,802 $ 46,248 $ 1,528,050 $ 2,974,634 $ 156,144 $ 3,130,778 Cost of revenue 805,734 24,983 830,717 1,472,545 82,441 1,554,986 Gross profit 676,068 21,265 697,333 1,502,089 73,703 1,575,792 Operating income (loss) ( 279,756 ) 21,265 ( 258,491 ) ( 351,975 ) 73,703 ( 278,272 ) Depreciation and amortization 25,793 — 25,793 48,570 — 48,570 Patent and capital expenditures 36,680 — 36,680 55,148 — 55,148 Equipment and patents, net $ 411,443 $ — $ 411,443 $ 411,443 $ — $ 411,443 Three Months Ended September 30, 2024 Six Months Ended September 30, 2024 Product Service Total Product Service Total Net revenue $ 1,653,820 $ 101,568 $ 1,755,388 $ 3,245,779 $ 140,539 $ 3,386,318 Cost of revenue 882,886 44,020 926,906 1,550,520 64,653 1,615,173 Gross profit 770,934 57,548 828,482 1,695,259 75,886 1,771,145 Operating income (loss) ( 216,466 ) 57,548 ( 158,918 ) ( 206,462 ) 75,886 ( 130,576 ) Depreciation and amortization 23,203 — 23,203 42,525 — 42,525 Patent and capital expenditures 40,377 — 40,377 59,918 — 59,918 Equipment and patents, net $ 435,408 $ — $ 435,408 $ 435,408 $ — $ 435,408 Recently Issued Accounting Pronouncements . 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. The Company is 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. In January 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2025-01, Income Statement—Reporting Comprehensive Income (Subtopic 220-40): Clarifying the Effective Date . The ASU clarifies the effective date of ASU 2024-03, which requires public business entities to disclose certain natural expense categories in the income statement and to provide additional disaggregated information in the notes. ASU 2025-01 confirms that public business entities are required to adopt the guidance for annual reporting periods beginning after December 15, 2026, and for interim periods within annual reporting periods beginning after December 15, 2027. The Company is evaluating the ASU to determine its impact on our consolidated financial statements and disclosures. In May 2025, the FASB issued ASU 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity . The ASU clarifies how to identify the accounting acquirer in a business combination when the legal acquiree is a variable interest entity (“VIE”). For transactions effected primarily by the exchange of equity interests, entities are now required to evaluate the same factors in ASC 805 used for voting interest entity acquisitions, which may result in certain transactions being accounted for as reverse acquisitions. The Company is evaluating the ASU to determine its impact on our consolidated financial statements and disclosures. 7 ENCISION INC. NOTES TO UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS SEPTEMBER 30, 2025 (Unaudited) In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets . The amendments simplify the application of the current expected credit loss (“CECL”) model for current trade receivables and current contract assets arising from revenue transactions under ASC 606. The Company is evaluating the ASU to determine its impact on our consolidated financial statements and 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) per share. Basic net income or loss per common share is computed by dividing net income or loss for the period by the weighted average number of common shares outstanding for the period. Diluted net income or loss per common share is computed by dividing the net income or loss for the period by the weighted average number of common and potential common shares outstanding during the period if the effect of the potential common shares is dilutive. The shares used in the calculation of dilutive potential common shares exclude options to purchase shares where the exercise price was greater than the average market price of common shares for the period. The following table presents the calculation of basic and diluted net income (loss) per share: Schedule of basic and diluted net income (loss) per share Three Months Ended Six Months Ended September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024 Net (loss) $ ( 267,833 ) $ ( 170,262 ) $ ( 308,966 ) $ ( 148,222 ) Weighted-average basic shares outstanding 14,187,337 11,875,145 13,033,491 11,875,145 Effect of dilutive securities — — — — Weighted-average diluted shares 14,187,337 11,875,145 13,033,491 11,875,145 Basic net (loss) per share $ ( 0.02 ) $ ( 0.01 ) $ ( 0.02 ) $ ( 0.01 ) Diluted net (loss) per share $ ( 0.02 ) $ ( 0.01 ) $ ( 0.02 ) $ ( 0.01 ) Antidilutive employee stock options 1,023,916 1,099,000 1,023,916 1,099,000 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, 2028. The Company determines if an arrangement contains a lease at inception according to ASU No. 2016-02, Leases (Topic 842) ("ASU 2016-02"). 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 in determining the lease liabilities, as the leases do not provide an implicit rate. Lease expense is recognized on a straight-line basis over the lease term. 8 ENCISION INC. NOTES TO UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS SEPTEMBER 30, 2025 (Unaudited) Effective June 5, 2025, the Company extended our non-cancelable lease agreement through October 31, 2028, for the facilities at 6797 Winchester Circle, Boulder, Colorado. Lease expense was $ 384,184 for the fiscal year ended March 31, 2025, and $ 357,503 for the fiscal year ended March 31, 2024. Lease expense for the six months ended September 30, 2025, is $ 194,830 . The minimum future lease payment by fiscal year as of September 30, 2025, is as follows: Schedule of minimum future lease payment Fiscal Year Amount 2026 $ 137,536 2027 422,441 2028 458,393 2029 282,954 Total $ 1,301,324 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 2, 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 0.4%, based on the average monthly loan balance. Interest is charged on a minimum loan balance of $300,000, a loan fee of 0.5% at closing and annually, and an exit fee of 3%, 2% and 1% during years one, two, and three, respectively. The minimum future EIDL payment, by fiscal year, as of September 30, 2025, is as follows: Schedule of principal U.S. Bank payment Fiscal Year Amount 2026 $ 2,637 2027 5,275 2028 5,275 2029 5,275 Thereafter 129,234 Total $ 147,696 During September 2020, the Company entered into a note agreement with U.S. Bank for $ 92,000 . The note is for five 5 years at a 5 % interest rate, and the proceeds were used to purchase equipment. The note is secured by the equipment. The minimum future U.S. Bank payment, by fiscal year, as of September 30, 2025, is as follows: Schedule of principal U.S. Bank payment Fiscal Year Amount 2026 6,133 Total $ 6,133 During June 2022, the Company entered into a note agreement with U.S. Bank for $ 115,004 . The note is for five years at a 6 % interest rate, and the proceeds were used to purchase equipment. The note is secured by the equipment. The minimum future principal U.S. Bank payment, by fiscal year, as of September 30, 2025, is as follows: Schedule of principal U.S. Bank payment Fiscal Year Amount 2026 11,897 2027 23,794 2028 7,931 Total $ 43,622 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. 9 ENCISION INC. NOTES TO UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS SEPTEMBER 30, 2025 (Unaudited) The Company is subject to regulation by the United States Food and Drug Administration (“FDA”). The FDA provides regulations governing the manufacture and sale of products and regularly inspects the Company and other manufacturers to determine compliance with these regulations. The Company believes that it was in substantial compliance with all known regulations as of September 30, 2024. FDA inspections are conducted periodically at the discretion of the FDA. The latest inspection by the FDA occurred in October 2019. Note 5. SHARE-BASED COMPENSATION The provisions of ASC 718-10-55 requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors, including employee stock options and RSUs, based on estimated fair values. The following table summarizes stock-based compensation expense related to employee stock options for the three and six months ended September 30, 2025, and 2024, which was allocated as follows: Schedule of stock-based compensation expense Three Months Ended Six Months Ended September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024 Cost of sales $ 115 $ 201 $ 258 $ 402 Sales and marketing 1,284 1,750 2,645 3,369 General and administrative 8,884 10,606 19,210 21,080 Research and development 249 80 538 160 Stock-based compensation expense $ 10,532 $ 12,637 $ 22,651 $ 25,011 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 90,000 stock options granted, 104,332 stock options forfeited, and no stock options exercised during the three and six months ending September 30, 2025, respectively. As of September 30, 2025, approximately $ 144,020 of total unrecognized compensation costs related to nonvested stock options is expected to be recognized over a period of five years. Note 6. RELATED PARTY TRANSACTION In September 2025, the Company entered into a services agreement with Rader Industries LLC (“Rader Industries”), a company owned by Jessica Rader, an immediate family member of the Company’s Chief Executive Officer, Gregory Trudel. Under the terms of the agreement, Rader Industries provides telemarketing and promotional sales campaign services for a two-month period. The contract provides for compensation at an hourly fee of $ 25 per hour, plus 10% of invoiced promotional sales generated by Rader Industries during the contract term. As of September 30, 2025, the Company had paid $ 1,094 to Rader Industries under this agreement. The Company believes the terms of this arrangement are comparable to those that could have been obtained in an arm’s-length transaction. Note 7. SUBSEQUENT EVENTS Management evaluated all of the activity as of the date the unaudited condensed interim financial statements were issued and concluded that no subsequent events have occurred that would require recognition in the financial statements or disclosed in the notes to the unaudited condensed interim financial statements. 10 ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain statements contained in this section on Management’s Discussion and Analysis are not historical facts, including statements about strategies and expectations with respect to new and existing products, market demand, acceptance of new and existing products, marketing efforts, technologies and opportunities, market and industry segment growth, and return on investments in products and markets. These statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and involve substantial risks and uncertainties that may cause actual results to differ materially from those indicated by the forward-looking statements. All forward-looking statements in this section on Management’s Discussion and Analysis are based on information available to us on the date of this document, and we assume no obligation to update such forward-looking statements. Readers of this Form 10-Q are strongly encouraged to review the section entitled “Risk Factors” in the Form 10-K for the fiscal year ended March 31, 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 surgeons may have a patient injury each year from preventable stray energy burns. We believe that the patented Active Electrode Monitoring (“AEM®”) AEM EndoShield™ Burn Protection System is changing the marketplace for electrosurgical devices and laparoscopic instruments by providing a solution to a well-documented hazard unique to laparoscopic surgery. The Center for Medicare and Medicaid Services has published its Hospital-Acquired Condition Reduction Program. The program has begun to levy as much as a 1% penalty on Medicare reimbursements to hospitals in the lower quadrant of performance for selected quality indicators, including accidental puncture and laceration (“APL”). Examples of APL include the use of a cautery device (electrosurgery) or scissors to dissect a tissue plane that errantly causes an injury to underlying bowels. We address market opportunities created by the increase in minimally invasive surgery (“MIS”) and surgeons’ use of electrosurgery devices in these procedures. The product opportunity exists in that monopolar and robotic electrosurgery instruments used in laparoscopic procedures provide excellent clinical results, but are also susceptible to causing inadvertent collateral tissue damage outside the surgeon’s field of view due to insulation failure and capacitive coupling. The risk of unintended electrosurgical burn injury to the patient in laparoscopic surgery has been well documented. This risk poses a threat to patient safety, including the risk of death, and creates liability exposure for surgeons and hospitals, as well as increased and preventable readmissions. The patented AEM technology provides surgeons with the desired tissue effects while capturing stray electrosurgical energy that can cause unintended and unseen tissue injury that may result in death. AEM Surgical Instruments are equivalent to conventional instruments in size, shape, ergonomics, functionality, and competitive pricing, but they incorporate “Active Electrode Monitoring” technology to dynamically and continuously monitor the flow of electrosurgical current, thereby preventing patient injury from stray energy burns. With the “shielded and monitored” instruments, surgeons can perform electrosurgical procedures more safely, effectively, and economically than is possible using conventional instruments or alternative energy sources. The AEM system consists of shielded 5mm AEM Instruments and an AEM monitor. The AEM Instruments are designed to function identically to the conventional 5mm instruments that surgeons are familiar with, but with the added benefit of enhanced patient safety. The entire line of laparoscopic instruments has the integrated AEM design and includes the full range of instruments that are common in laparoscopic surgery today. The AEM monitor is compatible with most electrosurgical generators and can also be adapted for use in robotic systems. AEM Surgical Instruments provide enhanced patient safety, require no change in surgeon technique, and are cost-competitive. Thus, conversion to AEM Surgical Instruments is easy and economical. AEM technology has been recommended and endorsed by many groups involved in MIS. Surgeons, nurses, biomedical engineers, the medicolegal community, malpractice insurance carriers, and electrosurgical device manufacturers advocate the use of AEM technology. We have focused our marketing strategies to date on expanding the market awareness of the AEM technology and our broad independent endorsements, and have continued efforts to improve and expand the AEM technology penetration. 11 When a hospital or surgery center changes to AEM technology, we receive recurring revenue from sales of replacement instruments. We believe that there is no directly competing technology to supplant AEM products. The replacement market of reusable and disposable AEM products in hospitals and surgery centers that use our AEM technology represented over 90% of our product revenue during the three and six months ended September 30, 2024. This revenue stream is expected to grow as the base of accounts using AEM technology expands. In addition, we intend to further develop disposable versions of more of our AEM products in order to meet market demands and expand our sales opportunities. We have an accumulated deficit of $23,074,211 at September 30, 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 implement cost reductions, seek additional capital, or make such other operational changes as may be required. During the six months ended September 30, 2025, we used $242,149 of cash in our operating activities and used $55,148 for investments in property and equipment. At September 30, 2025, we had $71,731 in cash and at March 31, 2025 we had $257,433 in cash available to fund future operations, a decrease of $185,702 from March 31, 2025. The decrease in cash was principally the result of cash used by operating activities. Our working capital was $1,375,301 at September 30, 2025, compared to $1,036,850 at March 31, 2025. The increase in working capital was principally the result of gross proceeds of the private placement of our common stock issued during the period. 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 26 unexpired relevant patents that together form a significant intellectual property position. Our patents relate to the basic shielding and monitoring technologies that we incorporate into our AEM products. Our AEM Surgical Instruments have been engineered to provide a seamless transition for surgeons switching from conventional laparoscopic instruments. AEM technology has been integrated into instruments that have the same look, feel, and functionality as conventional instruments that surgeons have been using for years. The AEM product line encompasses the full range of instrument sizes, types, and styles favored by surgeons. Additionally, we continue to improve quality and add to the product line. These additions include more disposable versions, the introduction of hand-activated instruments, our enhanced scissors, our eEdge™ scissors, our EM3 AEM Monitor, our AEM EndoShield Burn Protection System, and the recent introduction of our AEM 2X enTouch® Scissors. Hospitals can make a complete and smooth conversion to our product line, thereby advancing patient safety in MIS with optimal convenience. Outlook Installed Base of AEM Monitoring Equipment : We believe that sales of our installed base of AEM products will increase as the inherent risks associated with monopolar and robotic laparoscopic electrosurgery become more widely acknowledged and as we focus on increasing our sales efficiency and continue to enhance our product line. We expect that the replacement sales of electrosurgical instruments and accessories will also increase as additional facilities adopt AEM technology. We anticipate that the efforts to improve the productivity of sales representatives carrying the AEM product line, along with the introduction of next-generation products, may provide the basis for increased sales and profitable operations. However, these measures, or any others that we may adopt, may not result in either increased sales or profitable operations. We believe that the unique performance of the AEM technology and our breadth of independent endorsements provide an opportunity for continued market share growth. In our view, market awareness and awareness of the clinical credibility of the AEM technology, as well as awareness of our endorsements, are improving, and we expect this awareness to benefit our sales efforts for the remainder of fiscal year 2026. Our objectives for the remainder of fiscal year 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 $23,074,211 at September 30, 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 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 implement cost reductions, raise additional capital, or make such other operational changes as may be required. 12 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 2026. We also expect to increase market share through promotional programs of placing our AEM monitors at no charge into hospitals that commit to standardize with AEM instruments. However, all of these efforts to increase market share and grow product revenue will depend in part on our ability to expand the efficiency and effective coverage range of our direct and independent sales representatives, as well as maintain and, in some cases, improve the quality of our product offerings. The omission or delay of elective surgeries would negatively impact the extent and timing of revenue growth. Service revenue represents design, development, and product supply revenue from our agreements with strategic partners. We also have longer-term initiatives in place to improve our prospects. We expect that 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 sales growth internationally. Finally, we intend to explore opportunities to capitalize on our proven AEM technology via licensing arrangements and strategic alliances. These efforts to generate additional sales and further the market penetration of our products are longer-term in nature and may not materialize. Even if we are able to successfully develop next-generation products or identify potential international markets or strategic partners, we may not be able to capitalize on these opportunities. Gross Profit and Gross Margins : Gross profit and gross margins can be expected to fluctuate from quarter to quarter as a result of product sales mix, sales volume, and service revenue. Gross margins on products manufactured or assembled by us are expected to improve at higher levels of production and sales. Sales and Marketing Expenses : We continue to refine our domestic and international distribution capability, and we believe that sales and marketing expenses will decrease as a percentage of net sales with increasing sales volume. Research and Development Expenses : Research and development expenses are expected to increase to support quality improvement efforts and development of refinements to our AEM product line and new products, which will further expand options for surgeons and hospitals. Results of Operations For the quarter ended September 30, 2025, compared to the quarter ended September 30, 2024. Net Product revenue. Net product revenue for the quarter ended September 30, 2025, was $1,481,802 compared to $1,653,820 for the quarter ended September 30, 2024, a decrease of 10%. 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 September 30, 2025, was $46,248 compared to $101,568 for the quarter ended September 30, 2024. This decrease was because of a short delay in services performed under a Master Services Agreement with Vicarious Surgical Inc. This decrease resulted from a brief delay in services under the Master Services Agreement with Vicarious Surgical Inc., following a temporary project suspension by the customer. G ross profit . Gross profit for the quarter ended September 30, 2025, of $697,333 represented a decrease of 16% from the gross profit of $828,482 for the quarter ended September 30, 2024. Gross profit declined for the quarter ended September 30, 2025, due to reduced sales and an unfavorable change in product mix, with a lower proportion of higher-margin products in sales. Gross profit on total net revenue as a percentage of sales (gross margin) was 46% for the quarter ended September 30, 2025, and 47% for the quarter ended September 30, 2024. Sales and marketing expenses . Sales and marketing expenses of $395,793 for the quarter ended September 30, 2025, represented a decrease of 14% from $458,480 for the quarter ended September 30, 2024. The decrease was due to reduced trade shows and commission expenses. 13 General and administrative expenses . General and administrative expenses of $358,639 for the quarter ended September 30, 2025, represented a decrease of 4% from general and administrative expenses of $373,405 for the quarter ended September 30, 2024. The decrease was because of decreased outside accountants' costs and reduced insurance expenses. Research and development expenses . Research and development expenses of $201,392 for the quarter ended September 30, 2025, represented an increase of 30% compared to $155,515 for the quarter ended September 30, 2024. The increase was due to an increase in allocated resources for product development. Net loss. Net loss was $267,833 for the quarter ended September 30, 2025, compared to a net loss of $170,262 for the quarter ended September 30, 2024. The increase in net loss for the quarter ended September 30, 2025, was primarily because of reduced sales volume and an unfavorable change in product mix. For the six months ended September 30, 2025, compared to the six months ended September 30, 2024. Net Product revenue. Net product revenue for the six months ended September 30, 2025, was $2,974,634 compared to $3,245,779 for the six months ended September 30, 2024, a decrease of 8%. The decrease in net product revenue is attributable to decreased demand for our products. Net Service revenue. Net service revenue for the six months ended September 30, 2025, was $156,144 compared to $140,539 for the six months ended September 30, 2024, an increase of 11%. Net service revenue for the six months ended September 30, 2025, was for engineering services performed under a Master Services Agreement with Vicarious Surgical Inc. G ross profit . Gross profit for the six months ended September 30, 2025, of $1,575,792 represented a decrease of 11% from gross profit of $1,771,145 for the six months ended September 30, 2024. Gross profit on total net revenue as a percentage of sales (gross margin) was 50% for the six months ended September 30, 2025, and 52% for the six months ended September 30, 2024. Gross profit declined for the six months ended September 30, 2025, due to reduced sales and an unfavorable change in product mix, with a lower proportion of higher-margin products in sales. Sales and marketing expenses . Sales and marketing expenses of $800,394 for the six months ended September 30, 2024, represented a decrease of 9% from sales and marketing expenses of $881,716 for the six months ended September 30, 2024. The decrease was the result of lower commission expenses. General and administrative expenses . General and administrative expenses of $686,838 for the six months ended September 30, 2025, represented a decrease of 5% from general and administrative expenses of $725,310 for the six months ended September 30, 2024. The decrease was because of decreased outside accountants' costs and reduced insurance expenses. Research and development expenses . Research and development expenses of $366,832 for the six months ended September 30, 2025, represented an increase of 24% compared to $294,695 for the six months ended September 30, 2024. The increase was the result of an increase in allocations to product development. Net loss. Net loss was $308,966 for the six months ended September 30, 2025, compared to a net loss of $148,222 for the six months ended September 30, 2024. The increase in net loss for the quarter ended September 30, 2025, was primarily because of reduced sales volume, an unfavorable change in product mix, and increased allocation of resources to the development of new products. The results of operations for the three and six months ended September 30, 2025, are not necessarily indicative of the results of operations for all or any part of the balance of the fiscal year. 14 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 $24,938,998 from inception through September 30, 2025. We expect net losses to continue in connection with our ongoing activities, particularly as we continue to invest in commercialization and new product development. Based on our current planned operations, we do not believe that our current cash and cash equivalents balance of $71,731 as of September 30, 2025, will be sufficient to support our operations beyond the next 12 months from the date of issuance of these financial statements. We currently expect that our cash, cash equivalents, and line of credit will be sufficient to support our operations into the first quarter of fiscal year 2027. As such, there is substantial doubt about the Company’s ability to continue as a going concern. We may seek to utilize additional capital to expand our business, to pursue strategic investments, to take advantage of financing opportunities, or implement other strategies or initiatives. On August 4, 2020, we received $150,000 in loan funding from the U.S. Small Business Administration (“SBA”) under the Economic Injury Disaster Loan (“EIDL”) program administered by the SBA, which program was expanded pursuant to the CARES Act. The EIDL is evidenced by a promissory note, dated August 1, 2021, in the original principal amount of $150,000 with the SBA, the lender. Under the terms of the Note, interest accrues on the outstanding principal at the rate of 3.75% per annum. The term of the Note is thirty years, though it may be payable sooner upon an event of default under the Note. During 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 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. Our operations used $242,149 of cash during the six months ended September 30, 2025, on net revenue of $3,130,778. The amounts of cash used by operations for the six months ended September 30, 2025, are not necessarily indicative of the expected amounts of cash to be generated from or used in operations in fiscal year 2026. As of September 30, 2025, we had $71,731 in cash available to fund future operations and a line of credit for up to $968,294, restricted by eligible accounts receivable. Our working capital was $1,375,301 at September 30, 2025, compared to $1,036,850 at March 31, 2025. Current liabilities were $1,071,571 at September 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. 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 in determining the lease liabilities, as our leases do not provide an implicit rate. Lease expense is recognized on a straight-line basis over the lease term. 15 On August 19, 2025, we completed a private placement of our common stock, issuing 5,000,000 shares at $0.10 per share for gross proceeds of $500,000. We intend to use the proceeds for working capital and general corporate purposes. As of September 30, 2025, the following table shows our contractual obligations for the periods presented: Payment due by period Contractual obligations Totals Less than 1 year 1-3 years 3-5 years More than 5 years Line of credit $ 31,706 $ 31,706 $ — $ — $ — Operating lease obligations 1,301,324 343,172 440,198 517,954 — EIDL loan 147,696 5,275 10,550 10,550 121,321 U.S. Bank loan 6,133 6,133 — — — U.S. Bank loan 43,622 23,794 19,828 — — Total $ 1,530,481 $ 410,080 $ 470,576 $ 528,504 $ 121,321 Our fiscal year 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 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 2026. If the current downward sales trend continues, it will have a material adverse effect on our business viability, financial position, results of operations, and cash flows. Income Taxes As of March 31, 2025, net operating loss carryforwards totaling approximately $8.2 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, 2026. 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 asset since inception due to our history of losses. Should we achieve sufficient, sustained income in the future, we may conclude that some or all of the valuation allowance should be reversed. If some or all of the valuation allowance were reversed, then, to the extent of the reversal, a tax benefit would be recognized, which would result in an increase to net income. Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, sales, and expenses, and related disclosure of contingent assets and liabilities. On an 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. 16 We record revenue at a single point in time, when control is transferred to the customer, which is consistent with past practice. We will continue to apply our current business processes, policies, systems, and controls to support recognition and disclosure. Our shipping policy is FOB Shipping Point. We recognize revenue from sales to stocking distributors when there is no right of return, other than for normal warranty claims. We have no ongoing obligations related to product sales, except for normal warranty obligations. We evaluated the requirement to disaggregate revenue and concluded that substantially all of our revenue comes from multiple products within a line of medical devices. Our engineering service contracts are billed on a time and materials basis, and revenue is recognized over time as the services are performed. We record deferred revenue when funds are received prior to the recognition of the associated revenue. We record a contract liability to deferred revenue, which includes customer prepayments and is included in other accrued liabilities. We provide for the estimated cost of product warranties at the time sales are recognized. While we engage in extensive product quality programs and processes, including actively monitoring and evaluating the quality of our component suppliers, we have experienced some costs related to warranties. The warranty accrual is based on historical experience and is adjusted based on current experience. Should actual warranty experience differ from our estimates, revisions to the estimated warranty liability would be required. We reduce inventory for estimated obsolete or unmarketable inventory equal to the difference between the cost of inventory and the estimated realizable value based on assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. Any write-downs of inventory would reduce our reported net income during the period in which such write-downs were applied. To the extent that our estimates prove to be too high, and we ultimately utilize or sell inventory previously determined to be impaired, we may record a reversal of the provision in the period of such determination. We recognize deferred income tax assets and liabilities for the expected future income tax consequences, based on enacted tax laws, of temporary differences between the financial reporting and tax bases of assets and liabilities. Deferred tax assets are then reduced, if deemed necessary, by a valuation allowance for the amount of any tax benefits, which, more likely than not, based on current circumstances, are not expected to be realized. Should we maintain sufficient, sustained income in the future, we may conclude that all or some of the valuation allowance should be reversed. Property and equipment are stated at cost, with depreciation computed over the estimated useful lives of the assets, generally five to seven years. We use the straight-line method of depreciation for property and equipment. Leasehold improvements are depreciated over the shorter of the remaining lease term or the estimated useful life of the asset. Maintenance and repairs are expensed as incurred, and major additions, replacements, and improvements are capitalized. We amortize our patent costs over their estimated useful lives, which is typically the remaining statutory life. From time to time, we may be required to adjust these useful lives of our patents based on advances in technology, competitor actions, and the like. We review the recorded amounts of patents at each period end to determine if their carrying amount is still recoverable based on our expectations regarding sales of related products. Such an assessment, in the future, may result in a conclusion that the assets are impaired, with a corresponding charge against earnings. We currently estimate forfeitures for stock-based compensation expense related to employee stock options at 40% and evaluate the forfeiture rate quarterly. Other assumptions that are used in calculating stock-based compensation expense include risk-free interest rate, expected life, expected volatility, and expected dividend. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item. 17 ITEM 4. C ontrols and procedures Our management, comprised of our Chief Executive Officer (CEO) and Principal Financial and Accounting Officer (PFAO), evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2025. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Based on that evaluation, and taking the matters described below into account, the Company’s CEO and PFAO have concluded that our disclosure controls and procedures over financial reporting were not effective during the reporting period ending September 30, 2025. Remediation Activities Regarding Material Weakness As disclosed in our Annual Report on Form 10-K for the March 31, 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) there is an inadequate segregation of duties consistent with control objectives as management is comprised of only two person, one of which is our principal executive offers as and the other is the principle financial officer. Management has been actively engaged in remediating the material weaknesses described above. The following remedial actions have been taken: · We have evaluated additional review and approval processes for key financial reporting activities to mitigate segregation of duties issues. · We have expanded documentation of internal controls and policies to ensure consistency and 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 September 30, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 18 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, 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, 2025. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities of the Company during the period covered by this quarterly report, which were not previously reported in a (i) Current Report on Form 8-K or (ii) Quarterly Report on Form 10-Q. Issuer Purchases of Equity Securities We did not repurchase any of our equity securities during the six months ended September 30, 2025. Item 3. Defaults Upon Senior Securities None. Item 4. Mine Safety Disclosures None. Item 5. Other Information During the period ending September 30, 2025, no director or officer adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as each term is defined in Item 408(a) of Regulation S-K. 19 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). 10.13 Eighth Amendment to Office Building Lease dated June 15, 2025 (filed herewith). 10.14 Securities Purchase Agreement dated August 19, 2025 (filed herewith). 31.1 Certification of President and CEO under Rule 13a-14(a) of the Exchange Act (filed herewith). 31.2 Certification of Principal Financial and Accounting Officer under Rule 13a-14(a) of the Exchange Act (filed herewith). 32.1 Certifications of President and CEO and Principal Financial and Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith). 101 The following materials from Encision Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 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. 20 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Encision Inc. November 13, 2025 /s/ Brandon Shepard Date Brandon Shepard Controller, Principal Accounting Officer & Principal Financial Officer 21