ENCISION INC

Previous wording

We have an accumulated deficit of $22,208,375 at December 31, 2023. A significant portion of our operating funds have been provided by issuances of our common stock and warrants and the exercise of stock options to purchase our common stock, loans, and (in some periods) by operating profits. Should our liquidity be diminished in the future because of operating losses, we may be required to seek additional capital.

Current wording

We have an accumulated deficit of $22,523,006 at June 30, 2024. 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.

Previous wording

During the nine months ended December 31, 2023, we generated $155,352 of cash in our operating activities and used $12,051 for investments in property and equipment. At December 31, 2023, we had $99,239 in cash and at March 31, 2023 we had $188,966 in cash available to fund future operations, a decrease of $89,727 from March 31, 2023. The decrease to cash was principally the result of a net loss and a paydown of secured notes. The decrease was partially offset by an inventory decrease. Our working capital was $1,643,901 at December 31, 2023 compared to $1,993,777 at March 31, 2023.

Current wording

During the three months ended June 30, 2024, we generated $117,528 of cash in our operating activities and used $14,144 for investments in property and equipment. At June 30, 2024, we had $270,444 in cash and at March 31, 2024 we had $42,509 in cash available to fund future operations, an increase of $227,935 from March 31, 2024. The increase to cash was principally the result of borrowing from our line of credit. Our working capital was $1,324,315 at June 30, 2024 compared to $1,206,252 at March 31, 2024.

Previous wording

Possibility of Operating Losses: We have an accumulated deficit of $22,208,375 at December 31, 2023. A significant portion of our operating funds have been provided by issuances of our common stock and warrants and the exercise of stock options to purchase our common stock, loans, and (in some periods) by operating profits. Should our liquidity be diminished in the future because of operating losses, we may be required to seek additional capital. We have made strides toward improving our operating results but due to the ongoing need to develop, optimize and train our direct sales managers and the independent sales representative network, the need to support the development of refinements to our product line, and the need to increase sustained sales to a level adequate to cover fixed and variable operating costs, we may operate at a net loss. Sustained losses, or our inability to generate sufficient cash flow from operations to fund our obligations, may result in a need to raise additional capital.

Current wording

Possibility of Operating Losses: We have an accumulated deficit of $22,523,006 at June 30, 2024. A significant portion of our operating funds have been provided by issuances of our common stock and warrants and the exercise of stock options to purchase our common stock, loans, and (in some periods) by operating profits. Should our liquidity be diminished in the future because of operating losses, we may be required to seek additional capital. We have made strides toward improving our operating results but due to the ongoing need to develop, optimize and train our direct sales managers and the independent sales representative network, the need to support the development of refinements to our product line, and the need to increase sustained sales to a level adequate to cover fixed and variable operating costs, we may operate at a net loss. Sustained losses, or our inability to generate sufficient cash flow from operations to fund our obligations, may result in a need to raise additional capital.

Previous wording

Net Product revenue. Net product revenue for the quarter ended December 31, 2023 was $1,561,103 compared to $1,683,995 for the quarter ended December 31, 2022, a decrease of 7%. The decrease of net product revenue is because of decreased demand for our products.

Current wording

Net Product revenue. Net product revenue for the quarter ended June 30, 2024 was $1,591,960 compared to $1,613,552 for the quarter ended June 30, 2023, a decrease of 1%. The decrease of net product revenue is because of a slight decrease in demand for our products.

Previous wording

Net Service revenue. Net service revenue for the quarter ended December 31, 2023 was $20,461 compared to none for the quarter ended December 31, 2022.

Current wording

Net Service revenue. Net service revenue for the quarter ended June 30, 2024 was $38,971 compared to $39,831 for the quarter ended June 30, 2023.

Previous wording

Gross profit. Gross profit for the quarter ended December 31, 2023 of $727,239 represented a decrease of 19% from gross profit of $898,244 for the quarter ended December 31, 2022. Gross profit decreased because of lower total revenue and an increase to inventory reserve for the quarter ended December 31, 2023. Gross profit on product net revenue as a percentage of sales (gross margin) was 46% for the quarter ended December 31, 2023 and 53% for the quarter ended December 31, 2022. Gross profit on net revenue decreased because of an increase to inventory reserves.

Current wording

Gross profit. Gross profit for the quarter ended June 30, 2024 of $942,663 represented an increase of 9% from gross profit of $862,725 for the quarter ended June 30, 2023. Gross profit increased because of an increase to sales prices for the quarter ended June 30, 2024. Gross profit on product net revenue as a percentage of sales (gross margin) was 58% for the quarter ended June 30, 2024 and 52% for the quarter ended June 30, 2023. Gross profit on net revenue decreased because of an increase to inventory reserves.

Previous wording

Sales and marketing expenses. Sales and marketing expenses of $413,992 for the quarter ended December 31, 2023 represented a decrease of 17% from sales and marketing expenses of $501,618 for the quarter ended December 31, 2022. The decrease was because of lower commissions.

Current wording

Sales and marketing expenses. Sales and marketing expenses of $423,237 for the quarter ended June 30, 2024 represented a decrease of 2% from sales and marketing expenses of $433,436 for the quarter ended June 30, 2023. The decrease was because of fewer trade shows and promotional equipment.

Previous wording

General and administrative expenses. General and administrative expenses of $351,569 for the quarter ended December 31, 2023 represented a decrease of 2% from general and administrative expenses of $360,525 for the quarter ended December 31, 2022.

Current wording

General and administrative expenses. General and administrative expenses of $351,903 for the quarter ended June 30, 2024 represented a decrease of 10% from general and administrative expenses of $388,757 for the quarter ended June 30, 2023. The decrease was because of lower bad debt expense and outside accountant fees.

Previous wording

Research and development expenses. Research and development expenses of $151,077 for the quarter ended December 31, 2023 represented a decrease of 39% compared to $247,569 for the quarter ended December 31, 2022. The decrease was because of a decrease to compensation and outside services, test materials and tooling.

Current wording

Research and development expenses. Research and development expenses of $139,180 for the quarter ended June 30, 2024 represented a decrease of 17% compared to $168,420 for the quarter ended June 30, 2023. The decrease was because of a decrease to compensation.

Previous wording

*Net loss.*Net loss was $207,130 for the quarter ended December 31, 2023 compared to net loss of $216,334 for the quarter ended December 31, 2022.

Current wording

*Net income.*Net income was $22,041 for the quarter ended June 30, 2024 compared to net loss of $140,453 for the quarter ended June 30, 2023.

Previous wording

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 $24,401,381 from inception through December 31, 2023.

Current wording

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 $24,382,720 from inception through June 30, 2024.

Previous wording

On August 4, 2020, we received $150,000 principal in loan funding from the U.S. Small Business Administration (“SBA”) under the Economic Injury Disaster Loan (“EIDL”) program administered by the SBA, which program was expanded pursuant to the CARES Act. The EIDL is evidenced by a promissory note, dated August 1, 2020 in the original principal amount of $150,000 with the SBA, the lender. Under the terms of the Note, interest accrues on the outstanding principal at the rate of 3.75% per annum. The term of the Note is thirty years, though it may be payable sooner upon an event of default under the Note. The Note may be prepaid in part or in full, at any time, without penalty.

Current wording

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.

Previous wording

Our operations generated $155,352 of cash during thenine months ended December 31, 2023 on net revenue of $5,061,338. The amounts of cash generated by operations for the nine months ended December 31, 2023 are not necessarily indicative of the expected amounts of cash to be generated from or used in operations in fiscal year 2024. At December 31, 2023, we had $99,239 in cash available to fund future operations and a line of credit for up to $1,000,000, restricted by eligible account receivables. Our working capital was $1,643,901 at December 31, 2023 compared to $1,993,777 at March 31, 2023. Current liabilities were $1,061,173 at December 31, 2023 compared to $1,130,826 at March 31, 2023. We have a noncancelable lease agreement for our facilities at 6797 Winchester Circle, Boulder, Colorado. The lease expires October 31, 2026.

Current wording

Our operations generated $117,528 of cash during thethree months ended June 30, 2024 on net revenue of $1,630,931. The amounts of cash generated by operations for the three months ended June 30, 2024 are not necessarily indicative of the expected amounts of cash to be generated from or used in operations in fiscal year 2025 At June 30, 2024, we had $270,444 in cash available to fund future operations and a line of credit for up to $857,264, restricted by eligible account receivables. Our working capital was $1,324,315 at June 30, 2024 compared to $1,206,252 at March 31, 2024. Current liabilities were $1,188,551 at June 30, 2024 compared to $1,220,022 at March 31, 2024. We have a noncancelable lease agreement for our facilities at 6797 Winchester Circle, Boulder, Colorado. The lease expires October 31, 2026.

Previous wording

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

Current wording

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

Previous wording

As of March 31, 2023, net operating loss carryforwards totaling approximately $7.3 million are available to reduce taxable income in the future. The net operating loss carryforwards expire, if not previously utilized, at various dates beginning in the fiscal year ending March 31, 2024. We have not paid income taxes since our inception. The Tax Reform Act of 1986 and other income tax regulations contain provisions which may limit the net operating loss carryforwards available to be used in any given year if certain events occur, including changes in ownership interests. We have established a valuation allowance for the entire amount of our deferred tax asset since inception due to our history of losses. Should we achieve sufficient, sustained income in the future, we may conclude that some or all of the valuation allowance should be reversed. If some or all of the valuation allowance were reversed, then, to the extent of the reversal, a tax benefit would be recognized which would result in an increase to net income.

Current wording

As of March 31, 2024, net operating loss carryforwards totaling approximately $8.9 million are available to reduce taxable income in the future. The net operating loss carryforwards expire, if not previously utilized, at various dates beginning in the fiscal year ending March 31, 2025. We have not paid income taxes since our inception. The Tax Reform Act of 1986 and other income tax regulations contain provisions which may limit the net operating loss carryforwards available to be used in any given year if certain events occur, including changes in ownership interests. We have established a valuation allowance for the entire amount of our deferred tax asset since inception due to our history of losses. Should we achieve sufficient, sustained income in the future, we may conclude that some or all of the valuation allowance should be reversed. If some or all of the valuation allowance were reversed, then, to the extent of the reversal, a tax benefit would be recognized which would result in an increase to net income.