What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-06-28 compared with 2022-07-13 · 138 added, 239 removed, 659 unchanged (36% of the section changed)

15 unchanged sentences

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Encision

(the “Company”) as of March 31, 2022, and the related consolidated statement of operations, statements of stockholders’

deficit, and cash flows for each of the year then ended, and the related notes and schedules (collectively referred to as the “financial

statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company

as of March 31, 2022, and the results of its operations and its cash flows for each of the year then ended, in conformity with accounting

principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance

sheet of Encision Inc.

(the “Company”) as of March 31, 2023, and the related consolidated statement of operations, statements

of stockholders’ deficit, and cash flows for each of the year then ended, and the related notes and schedules (collectively referred

to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the

financial position of the Company as of March 31, 2023, and the results of its operations and its cash flows for each of the year then

ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the entity’s

These financial statements are the responsibility

of the entity’s management.

Our responsibility is to express an opinion on these financial statements based on our audit.

We are a public accounting firm

registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with

respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities

and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of

material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of

its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal control over

financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over

financial reporting.

a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required

to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations

of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards

of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements

are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform,

an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal

control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal

control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material

misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures

included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included

evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation

of the financial statements.

Our audit included performing procedures to assess

the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond

to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating

the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

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We have served as the Company’s auditor since 2021.

July 12, 2022

Report of Independent Registered Public Accounting

To the Board of Directors and Shareholders of

Encision Inc.

Boulder, Colorado

Opinion on the

Financial Statements

We have audited

the accompanying balance sheet of Encision Inc.

as of March 31, 2021 and the related statements of operations ,

shareholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “financial

statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of Encision

as of March 31, 2021, and the results of its operations and its cash flows for the year then ended, in conformity with accounting

principles generally accepted in the United States of America.

Basis for Opinion

These financial

statements are the responsibility of the entity’s management.

Our responsibility is to express an opinion on these financial statements

based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)

and are required to be independent with respect to Encision Inc.

in accordance with the U.S.

federal securities laws and the applicable

rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our

audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance

about whether the financial statements are free of material misstatement, whether due to error or fraud.

Encision Inc.

is not required

to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit we are required

to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness

of the entity’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included

performing procedures to assess the risk of material misstatement of the financial statements, whether due to error or fraud, and performing

procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures

in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management,

as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for

Critical Audit Matter

The critical audit matter

communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to

be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and

(2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in

any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below,

providing a separate opinion on the critical audit matter or on the accounts or disclosures to which they relate.

Inventory Valuation

As discussed in Note 1 of

the financial statements, the Company’s balance of inventory was $1,445,134 as of March 31, 2021.

The valuation of inventories requires

management to make significant assumptions and complex judgments about the future salability of the inventory and its net realizable value.

These assumptions include the assessment of net realizable value by inventory category considering future usage and market demand for

their products.

Additionally, management makes qualitative judgments related to discontinued, slow moving and obsolete inventories.

We identified inventory valuation

as a critical audit matter.

Auditing these complex judgments and assumptions involves especially challenging auditor judgment due to the

nature and extent of audit evidence and effort required to address these matters, including the extent of specialized skill or knowledge

The primary procedures we performed to address this critical audit matter

· Gaining an understanding of management’s process and methodology to develop the estimates.

· Evaluating the reasonableness of the significant assumptions used by management including those related

to inventory usage.

· Evaluating management’s historical ability to forecast sales for inventory and to identify slow

moving inventory.

· Comparing management’s assertions regarding future product sales to communication between management

and the board of directors.

· Testing the completeness, accuracy and relevance of the underlying data used in management’s estimate.

· Performing inquiries with appropriate non-financial personnel, including sales and production employees,

regarding obsolete or discontinued inventory models, cancelled sales orders and other factors to corroborate management’s assertions

regarding qualitative judgments about discontinued, slow moving and obsolete inventory.

/s/ Eide Bailly LLP

We have served as the Company’s auditor since 2008.

Denver, Colorado

June 28, 2023

4 unchanged sentences

Current assets:

Accounts receivable, net of allowance for doubtful accounts of

$ 0 at March 31, 2022 and $ 35,000 at March 31, 2021

Inventories, net of reserve for obsolescence of $ 36,000 at March 31, 2022 and

$ 70,000 at March 31, 2021

Accounts receivable

Inventories, net of reserve for obsolescence of $ 51,000 at March 31, 2023 and $ 36,000 at March 31, 2022

Prepaid expenses and other assets

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Accrued lease liability

Unsecured promissory note

Total liabilities

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Extinguishment of debt income

Other income, net

Interest expense, extinguishment of debt income and other income, net

INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES

Other income, (expense) net

Interest expense, extinguishment of debt income and other income, expense, net

(LOSS) BEFORE PROVISION FOR INCOME TAXES

Provision for income taxes

NET INCOME (LOSS)

Net income (loss) per share—basic and diluted

$ ( 323,945 )

Net (loss) per share—basic and diluted

Weighted average shares—basic

4 unchanged sentences

Statements of Shareholders’ Equity

of Common Stock

Common Stock and Additional Paid-in Capital

Total Shareholders’ Equity

Shareholders’

BALANCES AT MARCH 31, 2021

1 unchanged sentence

Compensation expense related to equities

Options exercised

BALANCES AT MARCH 31, 2022

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March 31, 2022

Cash flows (used in) from operating activities:

Net (loss) income

Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:

Cash flows (used in) operating activities:

$ ( 323,945 )

Adjustments to reconcile net (loss) income to net cash (used in) operating activities:

Extinguishment of debt income

2 unchanged sentences

Stock-based compensation expense related to stock options

(Recovery from) provision for doubtful accounts, net change

(Recovery from) doubtful accounts, net change

Provision for (recovery from) for inventory obsolescence, net change

6 unchanged sentences

Accrued compensation and other accrued liabilities

Net cash (used in) provided by operating activities

Net cash (used in) operating activities

Cash flows (used in) investing activities:

1 unchanged sentence

Net cash (used in) investing activities

Cash flows from (used in) financing activities:

(Paydown of) borrowings from credit facility, net change

Proceeds from secured notes

(Paydown of) secured notes

Net payments from exercise of stock options

Proceeds from PPP loans

Net cash (used in) provided by financing activities

Net (decrease) increase in cash

Cash flows provided by (used in) financing activities:

Borrowings from credit facility, net change

Borrowings from (paydown of) secured notes

Net proceeds (payments) from exercise of stock options

Net cash provided by (used in) financing activities

Net (decrease) in cash

Cash, beginning of fiscal year

1 unchanged sentence

Supplemental disclosure of non-cash investing activity information:

Acquisition of property and equipment through secured note payable

Supplemental disclosures of cash flow information:

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to expand the use of our products in surgically active hospitals in the United States.

We had (net loss) and net income available to

shareholders of $( 65,594 )

and $ 584,734

for the fiscal years ended March 31, 2022 and 2021, respectively.

At March 31, 2022, we had $ 949,645

in cash available to fund future operations, and outstanding borrowings of $ 227,300 .

In February 2021, we entered into an unsecured promissory note under the PPP for a principal amount of $ 533,118 .

In 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.

In February 2023, we signed a Supplier Agreement (“Agreement”)

with Human Xtensions (“Human X”).

Under the Agreement, we will perform manufacturing services, which includes procuring materials,

manufacturing, assembling, and testing products pursuant to detailed written specifications for Human X.

Human X develops unmediated surgical

systems that combine the capacity of robotics with the benefits of handheld tools and ergonomic bed mounts.

We had (net loss) available to shareholders of $( 323,945 )

and $( 65,594 ) for the fiscal years ended March 31, 2023 and 2022, respectively.

At March 31, 2023, we had $ 188,966 in cash available to

fund future operations, and outstanding borrowings of $ 227,300 .

In February 2021, we entered into an unsecured promissory note under the

PPP for a principal amount of $ 533,118 .

The PPP was established under the congressionally approved CARES Act.

The term of the PPP loan is for 2 two years with an interest

rate of 1.0 % per year, which will be deferred for the first six months of the term of the loan.

After the initial six-month deferral

period, the loan requires monthly payments of principal and interest until maturity with respect to any portion of the PPP loan

which is not forgiven.

Under the terms of the CARES Act, a PPP loan recipient may apply for, and be granted, forgiveness for

all or a portion of loans granted under the PPP.

During the quarter ended September 30, 2021 we achieved the requirements for

forgiveness of the loan and recognized extinguishment of debt income.

The term of the PPP loan

is for two years with an interest rate of 1.0 % per year, which will be deferred for the first six months of the term of the loan.

the initial six-month deferral period, the loan requires monthly payments of principal and interest until maturity with respect to any

portion of the PPP loan which is not forgiven.

Under the terms of the CARES Act, a PPP loan recipient may apply for, and be granted,

forgiveness for all or a portion of loans granted under the PPP.

During the quarter ended September 30, 2021 we achieved the requirements

for forgiveness of the loan and recognized extinguishment of debt income.

We increased our pricing on products to mitigate somewhat our

higher material costs.

We have a new line of credit for up to $ 1 million, restricted by eligible receivables.

Management concludes that

it is probable that our cash resources and line of credit will be sufficient to meet our cash requirements for twelve months from the

issuance of the financial statements

The accompanying consolidated financial statements

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on past due accounts on a case-by-case basis.

A summary of the activity in our allowance for doubtful accounts is as

Summary of the activity in allowance for doubtful accounts

March 31, 2022

March 31, 2021

Balance, beginning of year

Provision for (recoveries of) estimated losses

Write-off of uncollectible accounts

Balance, end of year

The net accounts receivable balance at March 31, 2023

30 unchanged sentences

for obsolescence is as follows:

Summary of the activity in inventory reserve for obsolescence

Summary of inventory reserve for obsolescence

March 31, 2023

41 unchanged sentences

patents and patent applications as of March 31, 2023, for the next five fiscal years, is as follows:

Schedule of expected annual amortization expense related to patents and patent applications for the next five fiscal years

Schedule of expected annual amortization expense

Other Accrued Liabilities .

100 unchanged sentences

and employee stock options under ASC 718 for fiscal years 2022 and 2021 was allocated as follows:

Schedule of stock-based compensation expense related to employee stock options

Schedule of stock-based compensation expense

March 31, 2023

10 unchanged sentences

performs electrical engineering activities for external entities.

Schedule of service performs electrical engineering activities for external entities

Schedule of operating segments

Year Ended March 31, 2023

12 unchanged sentences

average number of common and potential common shares outstanding during the period if the effect of the potential common shares is dilutive.

Because we had a loss in fiscal year 2022, the shares used in the calculation of dilutive potential common shares exclude options to purchase

Because we had a loss in fiscal years 2023 and 2022, the shares used in the calculation of dilutive potential common shares exclude options

to purchase shares.

The following table presents the calculation of basic and diluted net income

(loss) per share:

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

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

March 31, 2023

1 unchanged sentence

Net income (loss)

$ ( 323,945 )

Weighted-average shares — basic

16 unchanged sentences

Stock Option Plans.

We have a stock option

plan, the 2007 Stock Option Plan, and we adopted our 2014 Equity Incentive Plan (the “Plan,” as summarized below) to promote

our and our shareholders’ interests by helping us to attract, retain and motivate our key employees and associates.

Under the terms

of the Plan, the Board of Directors may grant incentive and non-qualified stock options, stock appreciation rights, restricted stock,

restricted stock units, performance units, and other stock-based awards.

The purchase price of the shares subject to a stock option will

be the fair market value of our common stock on the date the stock option is granted.

Generally, vesting of stock options occurs such

that 20% becomes exercisable on each anniversary of the date of grant for each of the five years following the grant date of such option.

Generally, all stock options must be exercised within five years from the date granted.

The number of common shares reserved for issuance

under the Plan is 1,100,000 shares of common stock, subject to adjustment for dividend, stock split or other relevant changes in our capitalization.

We adopted our 2014 Equity

Incentive Plan (the “Plan,” as summarized below) to promote our and our shareholders’ interests by helping us to attract,

retain and motivate our key employees and associates.

Under the terms of the Plan, the Board of Directors may grant incentive and non-qualified

stock options, stock appreciation rights, restricted stock, restricted stock units, performance units, and other stock-based awards.

purchase price of the shares subject to a stock option will be the fair market value of our common stock on the date the stock option

Generally, vesting of stock options occurs such that 20% becomes exercisable on each anniversary of the date of grant for

each of the five years following the grant date of such option.

Generally, all stock options must be exercised within five years from

the date granted.

The number of common shares reserved for issuance under the Plan is 1,100,000 shares of common stock, subject to adjustment

for dividend, stock split or other relevant changes in our capitalization.

Under ASC 718, the value of each employee stock option

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for each of the fiscal years ended March 31, 2023 and 2022 is as follows:

Summary of stock option activity and related information for equity compensation plans

Summary of stock option activity

STOCK OPTIONS OUTSTANDING

Weighted-Average Exercise Price per Share

BALANCE AT MARCH 31, 2020

Forfeited/expired

Weighted-Average

Exercise Price

BALANCE AT MARCH 31, 2021

1 unchanged sentence

BALANCE AT MARCH 31, 2022

A summary of our stock option activity and related

information for equity compensation plans not approved by security holders for the fiscal year ended March 31, 2022 is as follows:

Summary of RSU activity and related information for equity compensation plans

STOCK OPTIONS OUTSTANDING

Weighted-Average Exercise Price per Share

BALANCE AT MARCH 31, 2020

Forfeited/expired

BALANCE AT MARCH 31, 2023

BALANCE AT MARCH 31, 2022

The following table summarizes information about employee stock options

outstanding and exercisable at March 31, 2023:

Summary of information about employee stock options outstanding and exercisable

Schedule of employee stock options outstanding and exercisable

STOCK OPTIONS OUTSTANDING

STOCK OPTIONS EXERCISABLE

of Exercise Prices

Range of Exercise Prices

Weighted-Average

Remaining Contractual Life (in Years)

Contractual Life

Weighted-Average

3 unchanged sentences

$0.32 - $0.35

$0.38 - $0.50

$0.54 - $1.40

The 1,049,000 options outstanding as of March 31,

3 unchanged sentences

date of the grant.

and Contingencies

Commitments and Contingencies

We have a noncancelable lease agreement for our facilities

25 unchanged sentences

undiscounted cash flows reconciled to the carrying value of the operating lease liabilities as of March 31, 2023:

Schedule of operating lease payment

Schedule of principal U.S.

Total operating lease payments

3 unchanged sentences

Weighted-average discount rate

During January

2021, we canceled our relationship with Crestmark Bank.

We had no borrowings and incurred a $20,000 exit fee.

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, 2020 in the original principal amount of $ 150,000 with the SBA, the lender.

Under the terms of the Note, interest accrues on

the outstanding principal at the rate of 3.75 % per annum.

The term of the Note is thirty years, though it may be payable sooner upon an

event of default under the Note.

Under the Note, we will be obligated to make equal monthly payments of principal and interest of $774

beginning on August 1, 2023 through the maturity date of August 1, 2050.

The Note may be prepaid in part or in full, at any time, without

During January 2021, 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.

On April 17, 2020, we entered into an unsecured

promissory note under the PPP for a principal amount of $ 598,567 .

The PPP was established under the Consolidated Appropriations Act of

2020, enacted December 27, 2020.

Under the terms of the CARES Act, a PPP loan recipient may apply for, and be granted, forgiveness for

all or a portion of loans granted under the PPP.

Such forgiveness will be determined based upon the use of loan proceeds for payroll costs,

rent and utility costs, and the maintenance of employee and compensation levels.

In the quarter that ended December 31, 2020, we achieved

the requirements for forgiveness, and all of the $598,567 was forgiven.

We recognized the forgiveness as extinguishment of debt income

of $ 598,567 .On February 8, 2021, we entered into a second unsecured promissory note under the PPP for a principal amount of $ 533,118 .

On February 8,

2021, we entered into a second unsecured promissory note under the PPP for a principal amount of $ 533,118 .

This was our second PPP loan.

During the quarter that ended September 30, 2021, we achieved the requirements for forgiveness of the second

note and recognized the forgiveness as extinguishment of debt income of $ 533,118 .

During the quarter that ended September 30, 2021, we achieved the requirements for forgiveness of the second note and recognized the forgiveness

as extinguishment of debt income of $ 533,118 .

On November 15, 2022, we entered into a loan and security

agreement with Pathward, N.A.

(formerly Crestmark Bank).

The loan is due on demand and has no financial covenants.

Under the agreement,

we were provided with a line of credit that is not to exceed the lesser of $1,000,000 or 85% of eligible accounts receivable.

rate is prime rate plus 0.5%, with a floor of 6.75%, plus a monthly maintenance fee of 0.4%, based on the average monthly loan balance.

Interest is charged on a minimum loan balance of $300,000, a loan fee of 0.5% at closing and annually, and an exit fee of 3%, 2% and 1%

during years one, two and three, respectively.

The minimum future EIDL payment, by fiscal year, as

of March 31, 2023 is as follows:

Schedule of EIDL payment

Schedule of principal U.S.

The minimum future U.S.

2 unchanged sentences

Schedule of principal U.S.

During September 2022, we entered into a note

agreement with U.S.

Bank for $ 115,004 .

The note is for five 5 years at a 6 % interest rate and the proceeds were used to purchase

The note is secured by the equipment.

The minimum future principal U.S.

Bank payment, by

fiscal year, as of December 31, 2022 is as follows:

Schedule of principal U.S.

We are subject to regulation by the United States

18 unchanged sentences

summarized below:

Schedule of components of income tax expense (benefit)

Schedule of income tax expense (benefit)

March 31, 2023

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are as follows:

Schedule of components of the deferred tax asset

Schedule of deferred income tax asset liability

March 31, 2023

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In fiscal year 2023, we generated sales from over 300 hospitals that have changed to AEM products.

Auris Health contributed 10 % to the total sales.

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

14 unchanged sentences

Subsequent Events

Except for the item that follows, management evaluated

all of our activity and concluded that, as of the date the financial statements were issued, no subsequent events have occurred that would

require recognition in the financial statements or disclosure in the notes to the financial statements.

On August 23, 2021, we entered into a Supply Agreement

with Auris Health, Inc.

On May 5, 2022, the parties mutually agreed to terminate the Supply Agreement.

Management evaluated all of our activity and concluded

that, as of the date the financial statements were issued, no subsequent events have occurred that would require recognition in the financial

statements or disclosure in the notes to the financial statements.

Changes In and Disagreements

1 unchanged sentence

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 8. Financial Statements and Supplementary Data