Colorado
|
|
84-1162056
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(State or other jurisdiction of
incorporation or organization)
|
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(I.R.S. Employer Identification No.)
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Large accelerated filer [_]
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Accelerated filer [_]
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Non-accelerated filer [_]
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Smaller reporting company [X]
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(Do not check if a smaller reporting company)
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Emerging growth company [_]
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Common Stock, no par value
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10,683,355 Shares
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(Class)
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(outstanding at January 31, 2018)
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Page
Number
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||||||||
PART I.
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FINANCIAL INFORMATION
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|||||||
ITEM
1
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–
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Condensed Interim Financial Statements:
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||||||
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–
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Condensed Balance Sheets as of
December 31, 2017 and March 31, 2017
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3
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|||||
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–
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Condensed Statements of Operations for the Three and Nine Months Ended December 31, 2017 and 2016
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4
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|||||
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–
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Condensed Statements of Cash Flows for the
Nine Months Ended December 31, 2017 and 2016
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5
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|||||
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–
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Notes to Condensed Interim Financial Statements
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6
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|||||
ITEM 2
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–
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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11
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|||||
ITEM 4
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–
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Controls and Procedures
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17
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|||||
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||||||
PART II.
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OTHER INFORMATION
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|||||||
ITEM 6
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–
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Exhibits
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18
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|||||
SIGNATURE | 19 |
December 31,
2017
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March 31,
2017
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|||||||
ASSETS
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||||||||
Current assets:
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||||||||
Cash and cash equivalents
|
$
|
212,581
|
$
|
45,117
|
||||
Restricted cash
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25,000
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50,000
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||||||
Accounts receivable, net of allowance for doubtful accounts of $14,500 at December 31, 2017 and $33,000 at March 31, 2017
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937,419
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1,042,281
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||||||
Inventories, net of reserve for obsolescence of $30,000 at December 31, 2017 and $50,000 at March 31, 2017
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1,246,835
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1,128,412
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||||||
Prepaid expenses
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143,278
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62,290
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||||||
Total current assets
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2,565,113
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2,328,100
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||||||
Equipment, at cost:
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||||||||
Furniture, fixtures and equipment
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3,007,053
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3,161,687
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||||||
Accumulated depreciation
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(2,630,546
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)
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(2,693,302
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)
|
||||
Equipment, net
|
376,507
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468,385
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||||||
Patents, net of accumulated amortization of $232,970 at December 31, 2017 and $212,345 at March 31, 2017
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268,593
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253,980
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||||||
Other assets
|
18,402
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16,450
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||||||
TOTAL ASSETS
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$
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3,228,615
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$
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3,066,915
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||||
LIABILITIES AND SHAREHOLDERS' EQUITY
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||||||||
Current liabilities:
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||||||||
Accounts payable
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$
|
521,783
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$
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402,914
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||||
Accrued compensation
|
182,443
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267,399
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||||||
Other accrued liabilities
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270,707
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248,130
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||||||
Line of credit
|
––
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275,055
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||||||
Deferred rent
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30,384
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30,384
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||||||
Total current liabilities
|
1,005,317
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1,223,882
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||||||
Long-term liability:
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||||||||
Deferred rent
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17,724
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40,512
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||||||
Total liabilities
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1,023,041
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1,264,394
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||||||
Commitments and contingencies (Note 4)
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||||||||
Shareholders' equity:
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||||||||
Preferred stock, no par value: 10,000,000 shares authorized; none issued and outstanding
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––
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––
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||||||
Common stock and additional paid-in capital, no par value: 100,000,000 shares authorized; 10,683,355 shares issued and outstanding at December 31, 2017 and March 31, 2017
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23,801,466
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23,752,131
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||||||
Accumulated (deficit)
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(21,595,892
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)
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(21,949,610
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)
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||||
Total shareholders' equity
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2,205,574
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1,802,521
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||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
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$
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3,228,615
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$
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3,066,915
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Three Months Ended
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Nine Months Ended
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|||||||||||||||
December 31, 2017
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December 31, 2016
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December 31, 2017
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December 31, 2016
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|||||||||||||
NET REVENUE
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$
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2,190,305
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$
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2,229,870
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$
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6,716,480
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$
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6,657,875
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||||||||
COST OF REVENUE
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956,687
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1,165,414
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2,880,101
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3,394,204
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||||||||||||
GROSS PROFIT
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1,233,618
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1,064,456
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3,836,379
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3,263,671
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||||||||||||
OPERATING EXPENSES:
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||||||||||||||||
Sales and marketing
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569,802
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638,735
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1,745,121
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1,882,337
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||||||||||||
General and administrative
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368,545
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383,106
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1,057,810
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1,087,239
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||||||||||||
Research and development
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223,977
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300,392
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635,165
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880,760
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||||||||||||
Total operating expenses
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1,162,324
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1,322,233
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3,438,096
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3,850,336
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||||||||||||
OPERATING INCOME (LOSS)
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71,294
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(257,777
|
)
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398,283
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(586,665
|
)
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||||||||||
Interest expense, net
|
(15,343
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)
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(15,093
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)
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(44,165
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)
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(44,681
|
)
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||||||||
Other income (expense), net
|
118
|
(1,295
|
)
|
(400
|
)
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18,931
|
||||||||||
Interest expense and other income (expense), net
|
(15,225
|
)
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(16,388
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)
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(44,565
|
)
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(25,750
|
)
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||||||||
INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES
|
56,069
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(274,165
|
)
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353,718
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(612,415
|
)
|
||||||||||
Provision for income taxes
|
––
|
––
|
––
|
––
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||||||||||||
NET INCOME (LOSS)
|
$
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56,069
|
$
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(274,165
|
)
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$
|
353,718
|
$
|
(612,415
|
)
|
||||||
Net income (loss) per share—basic
|
$
|
0.01
|
$
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(0.03
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)
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$
|
0.03
|
$
|
(0.06
|
)
|
||||||
Net income (loss) per share—diluted
|
$
|
0.01
|
$
|
(0.03
|
)
|
$
|
0.03
|
$
|
(0.06
|
)
|
||||||
Weighted average shares—basic
|
10,683,355
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10,678,344
|
10,683,355
|
10,674,548
|
||||||||||||
Weighted average shares—diluted
|
10,707,814
|
10,678,344
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10,702,493
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10,674,548
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Nine Months Ended
|
||||||||
December 31, 2017
|
December 31, 2016
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|||||||
Operating activities:
|
||||||||
Net income (loss)
|
$
|
353,718
|
$
|
(612,415
|
)
|
|||
Adjustments to reconcile net income (loss) to net cash used in operating activities:
|
||||||||
Depreciation and amortization
|
154,150
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168,357
|
||||||
Share-based compensation expense
|
49,335
|
52,411
|
||||||
(Recovery from) provision for doubtful accounts, net
|
(18,500
|
)
|
11,000
|
|||||
(Recovery from) provision for inventory obsolescence, net
|
(20,000
|
)
|
(240,000
|
)
|
||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
123,362
|
(249,823
|
)
|
|||||
Inventories
|
(98,423
|
)
|
834,772
|
|||||
Prepaid expenses and other assets
|
(82,940
|
)
|
(45,741
|
)
|
||||
Accounts payable
|
118,869
|
152,527
|
||||||
Accrued compensation and other accrued liabilities
|
(85,167
|
)
|
(71,081
|
)
|
||||
Net cash generated by (used in) operating activities
|
494,404
|
7
|
||||||
Investing activities:
|
||||||||
Acquisition of property and equipment
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(41,647
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)
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(104,057
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)
|
||||
Patent costs
|
(35,238
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)
|
(21,102
|
)
|
||||
Net cash (used in) investing activities
|
(76,885
|
)
|
(125,159
|
)
|
||||
Financing activities:
|
||||||||
Paydown of credit facility, net change
|
(275,055
|
)
|
(103,821
|
)
|
||||
Change in restricted cash
|
25,000
|
––
|
||||||
Net cash (used in) financing activities
|
(250,055
|
)
|
(103,821
|
)
|
||||
Net increase (decrease) in cash and cash equivalents
|
167,464
|
(228,973
|
)
|
|||||
Cash and cash equivalents, beginning of period
|
45,117
|
292,840
|
||||||
Cash and cash equivalents, end of period
|
$
|
212,581
|
$
|
63,867
|
December 31,
2017
|
March 31,
2017
|
|||||||
Raw materials
|
$
|
967,017
|
$
|
857,345
|
||||
Finished goods
|
309,818
|
321,067
|
||||||
Total gross inventories
|
1,276,835
|
1,178,412
|
||||||
Less reserve for obsolescence
|
(30,000
|
)
|
(50,000
|
)
|
||||
Total net inventories
|
$
|
1,246,835
|
$
|
1,128,412
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
December 31,
2017
|
December 31,
2016
|
December 31,
2017
|
December 31,
2016
|
|||||||||||||
Net income (loss)
|
$
|
56,069
|
$
|
(274,165
|
)
|
$
|
353,718
|
$
|
(612,415
|
)
|
||||||
Weighted-average shares
— basic
|
10,683,355
|
10,678,344
|
10,683,355
|
10,674,548
|
||||||||||||
Effect of dilutive potential common shares
|
24,459
|
—
|
19,
138
|
—
|
||||||||||||
Weighted-average shares — diluted
|
10,707,814
|
10,678,344
|
10,702,493
|
10,674,548
|
||||||||||||
Net income (loss) per share — basic
|
$
|
0.01
|
$
|
(0.03
|
)
|
$
|
0.03
|
$
|
(0.06
|
)
|
||||||
Net income (loss) per share — diluted
|
$
|
0.01
|
$
|
(0.03
|
)
|
$
|
0.03
|
$
|
(0.06
|
)
|
||||||
Antidilutive employee stock options and
RSUs
|
988,077
|
954,286
|
993,398
|
954,286
|
Fiscal Year
|
Amount
|
|||
2018 (three months remaining)
|
$
|
71,259
|
||
2019
|
293,585
|
|||
2020
|
266,550
|
|||
2021
|
343,167
|
|||
2022
|
357,667
|
|||
2023
|
372,167
|
|||
2024
|
386,667
|
|||
2025
|
130,500
|
|||
Total
|
2,221,562
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
December 31,
2017
|
December 31,
2016
|
December 31,
2017
|
December 31,
2016
|
|||||||||||||
Cost of sales
|
$
|
539
|
$
|
819
|
$
|
1,617
|
$
|
2,073
|
||||||||
Sales and marketing
|
3,420
|
3,406
|
10,259
|
9,484
|
||||||||||||
General and administrative
|
11,378
|
12,231
|
34,134
|
36,999
|
||||||||||||
Research and development
|
806
|
1,542
|
3,325
|
3,855
|
||||||||||||
Stock-based compensation expense
|
$
|
16,143
|
$
|
17,998
|
$
|
49,335
|
$
|
52,411
|
Fiscal Year
|
Amount
|
|||
2018 (three months remaining)
|
$
|
71,259
|
||
2019
|
293,585
|
|||
2020
|
266,550
|
|||
2021
|
343,167
|
|||
2022
|
357,667
|
|||
2023
|
372,167
|
|||
2024
|
386,667
|
|||
2025
|
130,500
|
|||
Total
|
2,221,562
|
Payment due by period
|
||||||||||||||||||||
Contractual obligations
|
Totals
|
Less than
1 year
|
1-3 years
|
3-5 years
|
More than
5 years
|
|||||||||||||||
Operating lease obligations
|
$
|
2,221,562
|
$
|
291,448
|
$
|
597,321
|
$
|
722,584
|
610,209
|
101 |
The following materials from Encision Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2017, 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.
|
Encision Inc. | ||
February 12, 2018 | ||
Date
|
/s/ Mala Ray | |
Controller
Principal Accounting Officer &
Principal Financial Officer
|
||
Year
|
Base Rent Rate
(not including NNN and utilities)
|
Monthly Base Rent
(not including NNN and utilities)
|
||||||
Year 1 (August 1, 2019 – July 31, 2020)
|
|
$11.50
|
|
$27,791.67
|
||||
Year 2 (August 1, 2020 – July 31, 2021)
|
|
$12.
00
|
|
$29,
000.00
|
||||
Year 3 (August 1, 2021 – July 31, 2022)
|
|
$12.5
0
|
|
$30,208.33
|
||||
Year 4 (August 1, 2022 – July 31, 2023)
|
|
$13.00
|
|
$31
,
416.67
|
||||
Year 5 (August 1, 2023 – July 31, 2024)
|
|
$13.50
|
|
$32,625
.00
|
A.
|
Improvement Allowance
. Landlord shall provide a tenant improvement allowance of $5.00 per rentable square foot (a total of $145,000.00) ('TI Allowance"). Any costs in excess of the TI Allowance shall be the sole responsibility of Tenant. The parties acknowledge that any pre-existing un·used allowance funds have expired. Tenant is responsible for all costs associated with the design and construction of permanent improvements to the Premises (and Property to the extent required by the City of Boulder,as described in subsection (C) below), and may use the TI Allowance towards payment of these hard and soft costs. Tenant shall provide Landlord with final invoices, lien releases and certificates of occupancy (if required) or other City of Boulder sign offs on a percent completion basis. Provided that no default by Tenant then exists, Landlord shall have thirty (30) days after receipt thereof to remit portions of the TI Allowance owed to Tenant, expect to the extant Landlord reasonably disputes the payment. Any
unused portion of the TI Allowance will expire
January
1, 2020.
|
B.
|
Construction Process; Design Costs
. The terms and conditions stated in subsections (c) and (d) of Section 6 of Amendment Four shall govern use of TI allowance funds and construction, except as expressly modified by this Fifth Amendment. Landlord shall approve the Tenant plans and contractor prior to initiation of construction, work and otherwise subject to the terms for the Lease. In addition to oversight and approval rights, Landlord is entitled to conduct at its own expense, an independent structural review prior to commencement of demolition or construction work and take any additional steps or require reasonable modification of Tenant's proposed plans to ensure that any proposed Tenant Improvement will not jeopardize the structural integrity of the Premises and Building. To the extent Landlord renders services on Tenant's behalf, Landlord shall charge a market rate-construction management fee for any services rendered. The preliminary revised space plan, with one revision, shall be provided at Landlord's sole cost and expense to Tenant (not as part of the TI Allowance).
|
C.
|
City of Boulder Upgrade
. Should Tenant's tenant improvement work trigger the City of Boulder to require additional work to the Premises or Property, as a condition to issuance of any permit Tenant must obtain to complete its tenant improvements, Tenant shall be solely responsible for the cost of such work regardless of whether such work relates to the scope of tenant improvement work contemplated by Tenant. Tenant shall inform Landlord of any additional required work the City of Boulder requires and shall coordinate the completion of such additional work with Landlord.
|
Date: 11-14-17
|
LANDLORD:
6797 Winchester, L.LC
A Delaware Limited Liability Company
By: GOTTSTEIN PROPERTIES, LLC
An Alaska Limited Liability Company
Its Sole Member
By:
/a/ Robert A. Mintz
Robert A. Mintz
Its: Authorized Agent
|
|
Date: 9 Nov 2017
|
TENANT:
ENCISION, INC.
A Colorado Corporation
By:
/s/ Gregory J. Trudel
Gregory J. Trudel
President and CEO
|
1. |
I have reviewed this quarterly report on Form 10-Q of Encision Inc.;
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c) |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d) |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and,
|
5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Dated: February 12, 2018
|
By:
|
/s/ Gregory Trudel | |
Gregory Trudel | |||
President and CEO
|
|||
1. |
I have reviewed this quarterly report on Form 10-Q of Encision Inc.;
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c) |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d) |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and,
|
5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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Dated: February 12, 2018
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By:
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/s/ Mala Ray | |
Mala Ray | |||
Controller, Principal Accounting Officer and
Principal Financial Officer
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· |
the Quarterly Report on Form 10-Q of the Company for the three months ended December 31, 2017 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
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· |
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the period covered by the Report.
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Dated: February 12, 2018
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By:
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/s/ Gregory Trudel | |
Gregory Trudel | |||
President and CEO
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|||
· |
the Quarterly Report on Form 10-Q of the Company for the three months ended December 31, 2017 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
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· |
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the period covered by the Report.
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Dated: February 12, 2018
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By:
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/s/ Mala Ray | |
Mala Ray | |||
Controller, Principal Accounting Officer and
Principal Financial Officer
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