8-K
ENCISION INC (ECIA)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 OR 15(d)
of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November14, 2022
ENCISION, INC.
(Exact name of registrant as specified in its charter)
| Colorado | 001-11789 | 84-1162056 |
|---|---|---|
| (State or other jurisdiction of incorporation) | (Commission File<br> Number) | (I.R.S. Employer Identification<br> No.) |
| 6797 Winchester Circle, Boulder, Colorado | 80301 | |
| --- | --- | |
| (Address<br> of principal executive offices) | (Zip Code) | |
| (303) 444-2600 | ||
| --- | ||
| (Registrant’s<br> telephone number, including area code) | ||
| (Former name or former address, if changed since last report.) | ||
| --- | ||
| Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): | ||
| ☐<br> Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | ||
| ☐<br> Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | ||
| ☐<br> Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | ||
| ☐<br> Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading<br><br> <br>Symbol(s) | Name of each exchange<br><br> <br>on which registered |
|---|---|---|
| Common Stock, no par value | ECIA | OTC Bulletin Board |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not 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. ☐
Item 2.02 Results of Operations
and Financial Condition.
On November 14, 2022, Encision, Inc. issued a press release announcing its second quarter financial results for the quarter ended September 30, 2022. The full text of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
| Item 9.01.<br><br> <br><br><br> <br>(d) Exhibits. | Financial Statements and Exhibits. |
|---|---|
| Exhibit Number<br><br> <br>**** | Description |
| 99.1 | Press Release issued by Encision, Inc. dated November 14, 2022. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURES
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 hereunto duly authorized.
| ENCISION, INC. | |
|---|---|
| (Registrant) | |
| Date: November<br> 14, 2022 | |
| /s/ Mala M Ray | |
| Mala M Ray | |
| Controller | |
| Principal Accounting Officer |
Exhibit 99.1
November 14, 2022
Encision Reports Second Quarter Fiscal Year 2023 Results
Boulder, Colorado, November 10, 2022 -- Encision Inc. (PK:ECIA), a medical device company owning patented Active Electrode Monitoring (AEM®) Technology that prevents dangerous radiant energy burns in minimally invasive surgery, today announced financial results for its fiscal year 2023 second quarter that ended September 30, 2022.
The Company posted quarterly net revenue of $1.70 million for a quarterly net loss of $279 thousand, or $(0.02) per diluted share. These results compare to net revenue of $2.11 million for a quarterly net income of $360 thousand, or $0.03 per diluted share, in the year-ago quarter. Gross margin on net revenue was 49% in the fiscal 2023 second quarter and 45% in the fiscal 2022 second quarter. Gross margin increased in the current year’s second quarter compared to last year’s second quarter due principally to higher operating efficiencies.
The Company posted six months net revenue of $3.86 million for a six months net loss of $15 thousand, or $0.00 per diluted share. These results compare to six months net revenue of $4.12 million for a six months net income of $353 thousand, or $0.03 per diluted share, in the year-ago six months. Net income in the same six months a year ago included extinguishment of debt income of $533 thousand. Gross margin on net revenue was 55% in the fiscal 2023 six months and 48% in the fiscal 2022 six months. Gross margin in the fiscal 2022 six months was higher due to higher margined service revenue.
“The second quarter provided significant challenges for us,” said Gregory Trudel, President and CEO of Encision Inc. “Through the first and second quarters of fiscal year 2023, and fiscal year 2022, COVID resurgences continued to negatively impact procedure volumes. In addition, we encountered serious supply chain issues that curtailed our short-term ability to meet customer demand. We reacted quickly to resolve the issues and have put long-term mitigation in place to minimize potential supply chain turmoil.”
“Material costs continue to increase at record rates and we have taken measures to protect our company viability. On October 1, 2022, we enacted price increases on all of our products. The price adjustment will increase our net product revenue and gross profit margins. We have also made strategic capital investments in our manufacturing capabilities that will help to offset the increasing cost of labor.”
“Encision continues to be positive as we navigate the ups and downs of the pandemic market and the new-normal supply chain turmoil. We continuously look for opportunities to serve our customers with new products, to work smarter, and to drive increased efficiencies. In spite of limited customer access, our sales and marketing efforts are yielding new customers for our new EnTouchâ 2X Scissors and our recently released AEMÒ Shield Disposable Electrodes. We look forward to the contributions that these new products will make as the market bounces back.”
“Service revenue for the six months of fiscal year 2023 resulted from services performed under a Supply Agreement with Auris Health, Inc. (“Auris Health”), a part of the Johnson & Johnson family of companies. Under the agreement, Encision collaborated on the integration of AEM® Technology into monopolar instrumentation produced by Auris Health for advanced surgical applications. On August 23, 2021, we entered into a Supply Agreement with Auris Health. During the first quarter business needs took a different direction and, on May 5, 2022, the parties mutually agreed to terminate all the agreements. We enjoyed collaborating with the team at J&J and we look forward to future opportunities to work together.”
Encision Inc. designs and markets a portfolio of high-performance surgical instrumentation that delivers advances in patient safety with AEM technology, surgical performance, and value to hospitals across a broad range of minimally invasive surgical procedures. Based in Boulder, Colorado, the company pioneered the development and deployment of Active Electrode Monitoring, AEM technology, to eliminate dangerous stray energy burns during minimally invasive procedures. For additional information about all our products, please visit www.encision.com.
In accordance with the safe harbor provisionsof the Private Securities Litigation Reform Act of 1995, the Company notes that statements in this press release and elsewhere that lookforward in time, which include everything other than historical information, involve risks and uncertainties that may cause actual resultsto differ materially from those indicated by the forward-looking statements. Factors that could cause the Company’s actual resultsto differ materially include, among others, its ability to develop new or enhanced products and have such products accepted in the market,its ability to increase net sales through the Company’s distribution channels, its ability to compete successfully against othermanufacturers of surgical instruments, insufficient quantity of new account conversions, insufficient cash to fund operations, delay indeveloping new products and receiving FDA approval for such new products and other factors discussed in the Company’s filings withthe Securities and Exchange Commission. Readers are encouraged to review the risk factors and other disclosures appearing in the Company’sAnnual Report on Form 10-K for the year ended March 31, 2022 and subsequent filings with the Securities and Exchange Commission. We donot undertake any obligation to update publicly any forward-looking statements, whether as a result of the receipt of new information,future events, or otherwise.
CONTACT: Mala Ray, Encision Inc., 303-444-2600, mray@encision.com
Encision Inc.
Unaudited Condensed Statements of Operations
(in thousands, except per share information)
| Three<br> Months Ended | Six<br> Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September<br> 30, 2022 | September<br> 30, 2021 | September<br> 30, 2022 | September<br> 30, 2021 | |||||||||
| Product revenue | $ | 1,704 | $ | 1,895 | $ | 3,400 | $ | 3,613 | ||||
| Service revenue | — | 218 | 459 | 508 | ||||||||
| Total revenue | 1,704 | 2,113 | 3,859 | 4,121 | ||||||||
| Product cost of revenue | 872 | 1,062 | 1,743 | 1,900 | ||||||||
| Service cost of revenue | — | 106 | — | 250 | ||||||||
| Total cost of revenue | 872 | 1,168 | 1,743 | 2,150 | ||||||||
| Gross profit | 832 | 945 | 2,116 | 1,971 | ||||||||
| Operating expenses: | ||||||||||||
| Sales and marketing | 490 | 562 | 993 | 1,090 | ||||||||
| General and administrative | 397 | 340 | 742 | 667 | ||||||||
| Research and development | 223 | 213 | 393 | 390 | ||||||||
| Total operating expenses | 1,110 | 1,115 | 2,128 | 2,147 | ||||||||
| Operating (loss) | (278 | ) | (170 | ) | (12 | ) | (176 | ) | ||||
| Interest expense, extinguishment of debt income and other income, net | (1 | ) | 530 | (3 | ) | 529 | ||||||
| Income (loss) before provision for income taxes | (279 | ) | 360 | (15 | ) | 353 | ||||||
| Provision for income taxes | — | — | — | — | ||||||||
| Net income (loss) | $ | (279 | ) | $ | 360 | $ | (15 | ) | $ | 353 | ||
| Net income (loss) per share—basic and diluted | $ | (0.02 | ) | $ | 0.03 | $ | 0.00 | $ | 0.03 | |||
| Weighted average number of basic shares | 11,752 | 11,611 | 11,735 | 11,595 | ||||||||
| Weighted average number of diluted shares | 11,752 | 11,820 | 11,735 | 11,776 |
Encision Inc.
Unaudited Condensed Balance Sheets
(in thousands)
| September<br> 30, 2022 | March<br> 31, 2022 | |||||
|---|---|---|---|---|---|---|
| ASSETS | ||||||
| Cash | $ | 537 | $ | 950 | ||
| Accounts receivable, net | 915 | 948 | ||||
| Inventories, net | 1,858 | 1,584 | ||||
| Prepaid expenses and other assets | 60 | 120 | ||||
| Total current assets | 3,370 | 3,602 | ||||
| Equipment, net | 354 | 189 | ||||
| Right of use asset | 643 | 786 | ||||
| Patents, net | 176 | 181 | ||||
| Other assets | 44 | 34 | ||||
| Total assets | $ | 4,587 | $ | 4,792 | ||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
| Accounts payable | $ | 433 | $ | 576 | ||
| Secured notes | 44 | 22 | ||||
| Accrued compensation | 177 | 191 | ||||
| Other accrued liabilities | 103 | 125 | ||||
| Accrued lease liability | 371 | 362 | ||||
| Total current liabilities | 1,128 | 1,276 | ||||
| Secured notes | 292 | 206 | ||||
| Accrued lease liability | 394 | 564 | ||||
| Unsecured promissory note | — | — | ||||
| Total liabilities | 1,814 | 2,046 | ||||
| Common stock and additional paid-in capital | 24,317 | 24,275 | ||||
| Accumulated (deficit) | (21,544 | ) | (21,529 | ) | ||
| Total shareholders’ equity | 2,773 | 2,746 | ||||
| Total liabilities and shareholders’ equity | $ | 4,587 | $ | 4,792 |
Encision Inc.
Unaudited Condensed Statements of Cash Flows
(in thousands)
| Six<br> Months Ended | ||||||
|---|---|---|---|---|---|---|
| September 30, 2022 | September 30, 2021 | |||||
| Operating activities: | ||||||
| Net income (loss) | $ | (15 | ) | $ | 353 | |
| Adjustments to reconcile net income (loss) to cash <br>provided by (used in) operating activities: | ||||||
| Extinguishment of debt income | — | (533 | ) | |||
| Depreciation and amortization | 41 | 53 | ||||
| Share-based compensation expense | 25 | 16 | ||||
| Other income from release of accounts payable | — | — | ||||
| (Recovery from) provision for doubtful accounts, net | — | (35 | ) | |||
| Provision for (recovery from) inventory obsolescence, net | 29 | (31 | ) | |||
| Changes in operating assets and liabilities: | ||||||
| Right of use asset, net | (19 | ) | (12 | ) | ||
| Accounts receivable | 33 | 7 | ||||
| Inventories | (303 | ) | (45 | ) | ||
| Prepaid expenses and other assets | 50 | 53 | ||||
| Accounts payable | (143 | ) | 139 | |||
| Accrued compensation and other accrued liabilities | (36 | ) | 183 | |||
| Net cash provided by (used in) operating activities | (338 | ) | 148 | |||
| Investing activities: | ||||||
| Acquisition of property and equipment | (191 | ) | (11 | ) | ||
| Patent costs | (10 | ) | (8 | ) | ||
| Net cash (used in) investing activities | (201 | ) | (19 | ) | ||
| Financing activities: | ||||||
| Net proceeds from options exercised | 16 | 9 | ||||
| Borrowings from credit facility, net change | — | — | ||||
| (Paydown of) secured notes | 110 | (7 | ) | |||
| Net cash generated by financing activities | 126 | 2 | ||||
| Net (decrease) increase in cash | (413 | ) | 131 | |||
| Cash, beginning of period | 950 | 1,474 | ||||
| Cash, end of period | $ | 537 | $ | 1,605 |