Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Dec. 31, 2014 | Jan. 31, 2015 | |
Document and Entity Information | ||
Entity Registrant Name | ENCISION INC | |
Entity Central Index Key | 930775 | |
Document Type | 10-Q | |
Document Period End Date | 31-Dec-14 | |
Amendment Flag | FALSE | |
Current Fiscal Year End Date | -28 | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 10,673,225 | |
Document Fiscal Year Focus | 2015 | |
Document Fiscal Period Focus | Q3 |
Balance_Sheets
Balance Sheets (USD $) | Dec. 31, 2014 | Mar. 31, 2014 |
Current assets: | ||
Cash and cash equivalents | $688,302 | $1,689,580 |
Accounts receivable, net of allowance for doubtful accounts of $13,000 at December 31, 2014 and $8,000 at March 31,2014 | 1,013,714 | 863,220 |
Inventories, net of reserve for obsolescence of $220,000 at December 31, 2014 and $560,000 at March 31, 2014 | 2,087,785 | 2,224,228 |
Prepaid expenses | 212,523 | 65,387 |
Total current assets | 4,002,324 | 4,842,415 |
Equipment, at cost: | ||
Furniture, fixtures and equipment | 2,954,766 | 3,641,037 |
Customer-site equipment | 954,695 | 1,016,265 |
Accumulated depreciation | -3,056,877 | -3,552,079 |
Equipment, net | 852,584 | 1,105,223 |
Patents, net of accumulated amortization of $236,756 at December 31, 2014 and $215,969 at March 31, 2014 | 257,383 | 248,971 |
Other assets | 17,512 | 14,127 |
TOTAL ASSETS | 5,129,803 | 6,210,736 |
Current liabilities: | ||
Accounts payable | 581,349 | 666,159 |
Accrued compensation | 304,824 | 264,595 |
Other accrued liabilities | 419,781 | 408,549 |
Lease payable - short term | 67,057 | |
Deferred rent - short term | 30,384 | 30,384 |
Line of credit | 83,500 | |
Total current liabilities | 1,419,838 | 1,436,744 |
Lease payable - long term | 54,619 | |
Deferred rent - long term | 108,877 | 131,664 |
Total liabilities | 1,528,715 | 1,623,027 |
Commitments and contingencies | ||
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; 10,673,225 shares issued and outstanding at December 31, 2014 and March 31, 2014 | 23,592,034 | 23,545,080 |
Accumulated (deficit) | -19,990,946 | -18,957,371 |
Total shareholders' equity | 3,601,088 | 4,587,709 |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $5,129,803 | $6,210,736 |
Balance_Sheets_Parenthetical
Balance Sheets (Parenthetical) (USD $) | Dec. 31, 2014 | Mar. 31, 2014 |
Condensed Balance Sheets | ||
Accounts receivable, allowance for doubtful accounts (in dollars) | $13,000 | $8,000 |
Inventories, reserve for obsolescence (in dollars) | 220,000 | 560,000 |
Accumulated amortization | $236,756 | $215,969 |
Preferred stock, par value | $0 | $0 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock and additional paid-in capital, par value | $0 | $0 |
Common stock and additional paid-in capital, shares authorized | 100,000,000 | 100,000,000 |
Common stock and additional paid-in capital, shares issued | 10,673,225 | 10,673,225 |
Common stock and additional paid-in capital, shares outstanding | 10,673,225 | 10,673,225 |
Statements_of_Operations
Statements of Operations (USD $) | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | |
Revenue, Net [Abstract] | ||||
NET REVENUE | $2,608,408 | $2,715,505 | $7,364,011 | $8,042,818 |
COST OF REVENUE | 1,392,805 | 1,291,990 | 3,850,951 | 3,754,244 |
GROSS PROFIT | 1,215,603 | 1,423,515 | 3,513,060 | 4,288,574 |
OPERATING EXPENSES: | ||||
Sales and marketing | 791,113 | 600,896 | 2,174,627 | 2,265,873 |
General and administrative | 433,636 | 360,867 | 1,184,700 | 1,068,977 |
Research and development | 353,447 | 363,652 | 1,026,495 | 1,067,388 |
Total operating expenses | 1,578,196 | 1,325,415 | 4,385,822 | 4,402,238 |
OPERATING INCOME (LOSS) | -362,593 | 98,100 | -872,762 | -113,664 |
Interest expense, net | -1,593 | -12,663 | -6,634 | -35,669 |
Other income (expense), net | -52,661 | -52,891 | -154,179 | -179,368 |
Interest (expense) and other income, net | -54,254 | -65,554 | -160,813 | -215,037 |
LOSS BEFORE PROVISION FOR INCOME TAXES | -416,847 | 32,546 | -1,033,575 | -328,701 |
Provision for income taxes | 0 | |||
NET LOSS | ($416,847) | $32,546 | ($1,033,575) | ($328,701) |
Net loss per share-basic and diluted (in dollars per share) | ($0.04) | $0 | ($0.10) | ($0.04) |
Weighted Average Number of Shares Outstanding, Basic | 10,673,225 | 8,616,110 | 10,673,225 | 8,346,435 |
Weighted Average Number of Shares Outstanding, Diluted | 10,673,225 | 8,619,727 | 10,673,225 | 8,346,435 |
Statements_of_Cash_Flows
Statements of Cash Flows (USD $) | 9 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Cash flows from operating activities: | ||
Net loss | ($1,033,575) | ($328,701) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 293,726 | 361,040 |
Stock-based compensation expense related to stock options | 46,954 | 44,557 |
Provision for estimated losses | 5,000 | 1,000 |
Provision for inventory obsolescence, net change after impairment of inventory | 116,501 | 29,000 |
Change in operating assets and liabilities: | ||
Accounts receivable | -155,494 | -75,626 |
Inventories | 19,942 | 243,252 |
Prepaid expenses and other assets | -150,521 | -48,437 |
Accounts payable | -84,810 | -437,437 |
Accrued compensation and other accrued liabilities | -93,002 | 32,671 |
Net cash (used in) operating activities | -1,035,279 | -178,681 |
Cash flows from investing activities: | ||
Acquisition of property and equipment | -20,300 | -359,247 |
Patent costs | -29,199 | -30,468 |
Net cash (used in) investing activities | -49,499 | -389,715 |
Cash flows from financing activities: | ||
Borrowings from credit facility | 83,500 | |
Proceeds from the issuance of common stock | 1,970,500 | |
Cost of the issuance of common stock | -7,974 | |
Net cash provided by financing activities | 83,500 | 1,962,526 |
Net decrease in cash and cash equivalents | -1,001,278 | 1,394,130 |
Cash and cash equivalents, beginning of period | 1,689,580 | 126,224 |
Cash and cash equivalents, end of period | $688,302 | $1,520,354 |
ORGANIZATION_AND_NATURE_OF_BUS
ORGANIZATION AND NATURE OF BUSINESS | 9 Months Ended |
Dec. 31, 2014 | |
Description of Business | |
Description of Business | Note 1. ORGANIZATION AND NATURE OF BUSINESS |
Encision Inc. 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. We believe that our 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. Our sales to date have been made principally in the United States. | |
We have an accumulated deficit of $19,990,946 at December 31, 2014. Operating funds have been provided primarily by issuances of our common stock and warrants, a line of credit, and the exercise of stock options to purchase our common stock. Should our liquidity be diminished in the future because of operating losses, we may be required to seek additional capital in the future. | |
Our strategic marketing and sales plan is designed to expand the use of our products in surgically active hospitals and surgery centers in the United States. | |
SUMMARY_OF_SIGNIFICANT_ACCOUNT
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
Summary of Significant Accounting Policies | ||||||||
Summary of Significant Accounting Policies | Note 2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||||||
Basis of Presentation. The condensed interim financial statements included herein have been prepared by us, 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 we believe that the disclosures made are adequate to make the information presented not misleading. The condensed interim financial statements and notes thereto should be read in conjunction with the financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2014, filed on June 26, 2014. | ||||||||
The accompanying 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. | ||||||||
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 disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and expense during the reporting period. Actual results could differ from those estimates. | ||||||||
Cash and Cash Equivalents. For purposes of reporting cash flows, we consider all cash and highly liquid investments with an original maturity of six months or less to be cash equivalents. | ||||||||
Fair Value of Financial Instruments. Our financial instruments consist of cash and cash equivalents, short-term trade receivables, payables and a line of credit. The carrying values of cash and cash equivalents, short-term trade receivables, payables and line of credit approximate their fair value due to their short maturities. | ||||||||
Concentration of Credit Risk. Financial instruments, which potentially subject us to concentrations of credit risk, consist of cash and cash equivalents, accounts receivable and a line of credit. The amount of cash on deposit with financial institutions exceeds the $250,000 federally insured limit at December 31, 2014. We believe that cash on deposit that exceeds $250,000 with financial institutions is financially sound and the risk of loss is minimal. | ||||||||
We have no significant off-balance sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements. We maintain the majority of our 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, we may be exposed to credit risk generally associated with the healthcare industry. We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. The net accounts receivable balance at December 31, 2014 of $1,013,714 included 9% from one customer. The net accounts receivable balance at March 31, 2014 of $863,220 included no more than 5% from any one customer. | ||||||||
Warranty Accrual. We provide for the estimated cost of product warranties at the time sales are recognized and include it as other accrued liabilities. While we engage in extensive product quality programs and processes, including actively monitoring and evaluating the quality of our component suppliers, our warranty obligation is based upon historical experience and is also affected by product failure rates and material usage incurred in correcting a product failure. Should actual product failure rates or material usage costs differ from our estimates, revisions to the estimated warranty liability would be required. | ||||||||
Inventories. Inventories are stated at the lower of cost (first-in, first-out basis) or market. We reduce inventory for estimated obsolete or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon 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. At December 31, 2014 and March 31, 2014, inventory consisted of the following: | ||||||||
December 31, 2014 | March 31, 2014 | |||||||
Raw materials | $ | 1,396,294 | $ | 1,498,867 | ||||
Finished goods | 911,491 | 1,285,361 | ||||||
Total gross inventories | 2,307,785 | 2,784,228 | ||||||
Less reserve for obsolescence | (220,000 | ) | (560,000 | ) | ||||
Total net inventories | $ | 2,087,785 | $ | 2,224,228 | ||||
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. 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. | ||||||||
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. We review the carrying value of our 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. | ||||||||
Income Taxes. We account 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 we achieve sufficient, sustained income in the future, we may conclude that some or all of the valuation allowance should be reversed. We are required to make many subjective assumptions and judgments regarding our income tax exposures. At December 31, 2014, we 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. Revenue from product sales is recorded when we ship the product and title has passed to the customer, provided that we have evidence of a customer arrangement and can conclude that collection is probable. 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. Revenue from engineering services is recognized when the service is performed. | ||||||||
Research and Development Expenses. We expense 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, companies are 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 our statements of operations. | ||||||||
Stock-based compensation expense recognized under ASC 718 for the three and nine months ended December 31, 2014 was $17,018 and $46,954, respectively, and for the three and nine months ended December 31, 2013 was $16,486 and $44,557, respectively, which consisted of stock-based compensation expense related to grants of employee stock options and restricted stock units (“RSUs”). | ||||||||
Segment Reporting. We have concluded that we have one operating segment. | ||||||||
Recent Accounting Pronouncements. We have reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial condition or the results of our operations. | ||||||||
BASIC_AND_DILUTED_INCOME_AND_L
BASIC AND DILUTED INCOME AND LOSS PER COMMON SHARE | 9 Months Ended | |||||||||||||
Dec. 31, 2014 | ||||||||||||||
BASIC AND DILUTED INCOME AND LOSS PER COMMON SHARE | ||||||||||||||
BASIC AND DILUTED INCOME AND LOSS PER COMMON SHARE | Note 3.BASIC AND DILUTED INCOME AND LOSS PER COMMON SHARE | |||||||||||||
We report 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 and RSUs 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 loss per share: | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
Net income (loss) | $ | (416,847 | ) | $ | 32,546 | $ | (1,033,575 | ) | $ | (328,701 | ) | |||
Weighted-average shares — basic | 10,673,225 | 8,616,110 | 10,673,225 | 8,346,435 | ||||||||||
Effect of dilutive potential common shares | — | 3,617 | — | — | ||||||||||
Weighted-average shares — diluted | 10,673,225 | 8,619,727 | 10,673,225 | 8,346,435 | ||||||||||
Net income (loss) per share — basic | $ | (0.04 | ) | $ | 0 | $ | (0.10 | ) | $ | (0.04 | ) | |||
Net income (loss) per share — diluted | $ | (0.04 | ) | $ | 0 | $ | (0.10 | ) | $ | (0.04 | ) | |||
Antidilutive employee stock options and RSUs | 599,924 | 617,000 | 599,924 | 627,000 | ||||||||||
COMMITMENTS_AND_CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended | ||||
Dec. 31, 2014 | |||||
Commitments and Contingencies | |||||
Commitments and Contingencies | Note 4.COMMITMENTS AND CONTINGENCIES | ||||
Effective December 1, 2013, we extended our noncancelable lease agreement through July 31, 2019 for our facilities at 6797 Winchester Circle, Boulder, Colorado. The lease includes $172,176 of leasehold improvements granted by the landlord. The $172,176 was recorded on our condensed balance sheets as leasehold improvements and deferred rent. The leasehold improvements are being amortized over the lesser of the lease term or the assets life and the deferred rent is being amortized against rent expense over the lease term. The minimum future lease payment, by fiscal year, as of December 31, 2014 is as follows: | |||||
Fiscal Year | Amount | ||||
2015 (Three months remaining) | 65,125 | ||||
2016 | 268,672 | ||||
2017 | 276,732 | ||||
2018 | 285,034 | ||||
2019 | 293,585 | ||||
2020 | 99,800 | ||||
Total | $ | 1,288,948 | |||
We paid off our capital equipment lease with General Electric Capital Corporation and, at December 31, 2014, have no balance remaining. | |||||
Included in our furniture, fixtures and equipment balance is leased equipment that was acquired, under the provisions of a long-term capital lease, during the quarter ended September 30, 2013. The equipment had an original cost of $177,547 and has a net book value of $66,467 at December 31, 2014. | |||||
On May 19, 2014, we signed an amendment to our credit facility agreement with Silicon Valley Bank, effective May 10, 2014. The terms of the credit facility include a line of credit for $2,000,000 for one year at an interest rate calculated at the prime rate plus 1.25%, subject to increase upon a default. Our borrowing under the credit facility is limited by our eligible receivables and inventory at the time of borrowing. The credit facility is secured by all tangible and intangible assets, whether now owned or hereafter acquired, wherever located. At December 31, 2014, we had $83,500 of borrowings from our line of credit and, under our eligible receivables and inventory limit, we had $926,000 available to borrow. | |||||
Aside from the operating lease, we do not have any material contractual commitments requiring settlement in the future. | |||||
We are subject to regulation by the United States Food and Drug Administration (“FDA”). The FDA provides regulations governing the manufacture and sale of our products and regularly inspects us and other manufacturers to determine compliance with these regulations. We believe that we were in substantial compliance with all known regulations at December 31, 2014. FDA inspections are conducted periodically at the discretion of the FDA. Our latest inspection by the FDA occurred in December 2012. | |||||
SHAREBASED_COMPENSATION
SHARE-BASED COMPENSATION | 9 Months Ended | |||||||||||||
Dec. 31, 2014 | ||||||||||||||
Defined Contribution Employee Benefit Plan | ||||||||||||||
Defined Contribution Employee Benefit Plan | 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 our 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, RSUs and employee stock purchases for the three and nine months ended December 31, 2014 and 2013, which was allocated as follows: | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
Cost of sales | $ | 491 | $ | 345 | $ | 1,473 | $ | 1,035 | ||||||
Sales and marketing | 2,770 | 2,438 | 8,307 | 6,234 | ||||||||||
General and administrative | 12,996 | 12,186 | 34,891 | 30,344 | ||||||||||
Research and development | 761 | 1,517 | 2,283 | 6,944 | ||||||||||
Stock-based compensation expense | $ | 17,018 | $ | 16,486 | $ | 46,954 | $ | 44,557 | ||||||
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 30,000 and 95,000 stock options granted during the three and nine months ended December 31, 2014, respectively. There were 15,000 and 30,000 stock options forfeited during the three and nine months ended December 31, 2014, respectively. Share-based compensation cost for RSUs is measured based on the closing fair market value of the Company’s common stock on the date of grant. There were 14,286 and 24,924 RSUs granted during the three and nine months ended December 31, 2014, respectively. | ||||||||||||||
As of December 31, 2014, $291,000 of total unrecognized compensation costs related to nonvested stock options is expected to be recognized over a period of five years. | ||||||||||||||
RELATED_PARTY_TRANSACTION
RELATED PARTY TRANSACTION | 9 Months Ended |
Dec. 31, 2014 | |
Related Party Transaction | |
Related Party Transaction | Note 6.RELATED PARTY TRANSACTION |
We paid consulting fees of $20,880 and $64,553 to an entity owned by one of our directors during the three and nine months ended December 31, 2014, respectively, and $18,623 and $52,644 during the three and nine months ended December 31, 2013. | |
We have an employment agreement with Roger C. Odell, an employee. The employment agreement began January 2013 and continues until January 2016. We have accrued a liability for the employment agreement of $120,000 at December 31, 2014 and March 31, 2014. | |
SUBSEQUENT_EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Dec. 31, 2014 | |
Subsequent Events | |
Subsequent Events | Note 7.SUBSEQUENT EVENTS |
We evaluated all of our activity and concluded that no subsequent events have occurred that would require recognition in our financial statements or disclosed in the notes to our financial statements. | |
SUMMARY_OF_SIGNIFICANT_ACCOUNT1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
Summary of Significant Accounting Policies | ||||||||
Basis of Presentation | Basis of Presentation. The condensed interim financial statements included herein have been prepared by us, 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 we believe that the disclosures made are adequate to make the information presented not misleading. The condensed interim financial statements and notes thereto should be read in conjunction with the financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2014, filed on June 26, 2014. | |||||||
The accompanying 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. | ||||||||
Use of Estimates in the Preparation of Financial Statements | 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 disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and expense during the reporting period. Actual results could differ from those estimates. | |||||||
Cash and Cash Equivalents | Cash and Cash Equivalents. For purposes of reporting cash flows, we consider all cash and highly liquid investments with an original maturity of six months or less to be cash equivalents. | |||||||
Fair Value of Financial Instruments | Fair Value of Financial Instruments. Our financial instruments consist of cash and cash equivalents, short-term trade receivables, payables and a line of credit. The carrying values of cash and cash equivalents, short-term trade receivables, payables and line of credit approximate their fair value due to their short maturities. | |||||||
Concentration of Credit Risk | Concentration of Credit Risk. Financial instruments, which potentially subject us to concentrations of credit risk, consist of cash and cash equivalents, accounts receivable and a line of credit. The amount of cash on deposit with financial institutions exceeds the $250,000 federally insured limit at December 31, 2014. We believe that cash on deposit that exceeds $250,000 with financial institutions is financially sound and the risk of loss is minimal. | |||||||
We have no significant off-balance sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements. We maintain the majority of our 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, we may be exposed to credit risk generally associated with the healthcare industry. We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. The net accounts receivable balance at December 31, 2014 of $1,013,714 included 9% from one customer. The net accounts receivable balance at March 31, 2014 of $863,220 included no more than 5% from any one customer. | ||||||||
Warranty Accrual | Warranty Accrual. We provide for the estimated cost of product warranties at the time sales are recognized and include it as other accrued liabilities. While we engage in extensive product quality programs and processes, including actively monitoring and evaluating the quality of our component suppliers, our warranty obligation is based upon historical experience and is also affected by product failure rates and material usage incurred in correcting a product failure. Should actual product failure rates or material usage costs differ from our estimates, revisions to the estimated warranty liability would be required. | |||||||
Inventories | Inventories. Inventories are stated at the lower of cost (first-in, first-out basis) or market. We reduce inventory for estimated obsolete or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon 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. At December 31, 2014 and March 31, 2014, inventory consisted of the following: | |||||||
December 31, 2014 | March 31, 2014 | |||||||
Raw materials | $ | 1,396,294 | $ | 1,498,867 | ||||
Finished goods | 911,491 | 1,285,361 | ||||||
Total gross inventories | 2,307,785 | 2,784,228 | ||||||
Less reserve for obsolescence | (220,000 | ) | (560,000 | ) | ||||
Total net inventories | $ | 2,087,785 | $ | 2,224,228 | ||||
Property and Equipment | 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. 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. | |||||||
Long-Lived Assets | 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 | 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. We review the carrying value of our 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. | |||||||
Income Taxes | Income Taxes. We account 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 we achieve sufficient, sustained income in the future, we may conclude that some or all of the valuation allowance should be reversed. We are required to make many subjective assumptions and judgments regarding our income tax exposures. At December 31, 2014, we 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 | Revenue Recognition. Revenue from product sales is recorded when we ship the product and title has passed to the customer, provided that we have evidence of a customer arrangement and can conclude that collection is probable. 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. Revenue from engineering services is recognized when the service is performed. | |||||||
Research and Development Expenses | Research and Development Expenses. We expense research and development costs for products and processes as incurred. | |||||||
Stock-Based Compensation | 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, companies are 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 our statements of operations. | |||||||
Stock-based compensation expense recognized under ASC 718 for the three and nine months ended December 31, 2014 was $17,018 and $46,954, respectively, and for the three and nine months ended December 31, 2013 was $16,486 and $44,557, respectively, which consisted of stock-based compensation expense related to grants of employee stock options and restricted stock units (“RSUs”) | ||||||||
Segment Reporting | Segment Reporting. We have concluded that we have one operating segment. | |||||||
Recent Accounting Pronouncements | Recent Accounting Pronouncements. We have reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial condition or the results of our operations. | |||||||
SUMMARY_OF_SIGNIFICANT_ACCOUNT2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
Summary of Significant Accounting Policies | ||||||||
Schedule of inventory | ||||||||
December 31, 2014 | March 31, 2014 | |||||||
Raw materials | $ | 1,396,294 | $ | 1,498,867 | ||||
Finished goods | 911,491 | 1,285,361 | ||||||
Total gross inventories | 2,307,785 | 2,784,228 | ||||||
Less reserve for obsolescence | (220,000 | ) | (560,000 | ) | ||||
Total net inventories | $ | 2,087,785 | $ | 2,224,228 | ||||
BASIC_AND_DILUTED_INCOME_AND_L1
BASIC AND DILUTED INCOME AND LOSS PER COMMON SHARE (Tables) | 9 Months Ended | |||||||||||||
Dec. 31, 2014 | ||||||||||||||
BASIC AND DILUTED INCOME AND LOSS PER COMMON SHARE | ||||||||||||||
Schedule of calculation of basic and diluted net income (loss) per share | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
Net income (loss) | $ | (416,847 | ) | $ | 32,546 | $ | (1,033,575 | ) | $ | (328,701 | ) | |||
Weighted-average shares — basic | 10,673,225 | 8,616,110 | 10,673,225 | 8,346,435 | ||||||||||
Effect of dilutive potential common shares | — | 3,617 | — | — | ||||||||||
Weighted-average shares — diluted | 10,673,225 | 8,619,727 | 10,673,225 | 8,346,435 | ||||||||||
Net income (loss) per share — basic | $ | (0.04 | ) | $ | 0 | $ | (0.10 | ) | $ | (0.04 | ) | |||
Net income (loss) per share — diluted | $ | (0.04 | ) | $ | 0 | $ | (0.10 | ) | $ | (0.04 | ) | |||
Antidilutive employee stock options and RSUs | 599,924 | 617,000 | 599,924 | 627,000 | ||||||||||
COMMITMENTS_AND_CONTINGENCIES_
COMMITMENTS AND CONTINGENCIES (Tables) | 9 Months Ended | ||||
Dec. 31, 2014 | |||||
Commitments and Contingencies | |||||
Schedule of minimum future lease payments, by fiscal year | Fiscal Year | Amount | |||
2015 (Three months remaining) | 65,125 | ||||
2016 | 268,672 | ||||
2017 | 276,732 | ||||
2018 | 285,034 | ||||
2019 | 293,585 | ||||
2020 | 99,800 | ||||
Total | $ | 1,288,948 | |||
SHAREBASED_COMPENSATION_Tables
SHARE-BASED COMPENSATION (Tables) | 9 Months Ended | |||||||||||||
Dec. 31, 2014 | ||||||||||||||
Defined Contribution Employee Benefit Plan | ||||||||||||||
Schedule of stock-based compensation expense related to employee stock options | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
Cost of sales | $ | 491 | $ | 345 | $ | 1,473 | $ | 1,035 | ||||||
Sales and marketing | 2,770 | 2,438 | 8,307 | 6,234 | ||||||||||
General and administrative | 12,996 | 12,186 | 34,891 | 30,344 | ||||||||||
Research and development | 761 | 1,517 | 2,283 | 6,944 | ||||||||||
Stock-based compensation expense | $ | 17,018 | $ | 16,486 | $ | 46,954 | $ | 44,557 | ||||||
ORGANIZATION_AND_NATURE_OF_BUS1
ORGANIZATION AND NATURE OF BUSINESS (Details) (USD $) | Dec. 31, 2014 | Mar. 31, 2014 |
Description of Business | ||
Accumulated deficit | $19,990,946 | $18,957,371 |
SUMMARY_OF_SIGNIFICANT_ACCOUNT3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $) | 9 Months Ended | 12 Months Ended |
Dec. 31, 2014 | Mar. 31, 2014 | |
item | item | |
Concentration of credit risk | ||
Federally insured limit | $250,000 | |
Number of financial institutions which maintain a majority of the entity's cash balances | 1 | |
Net accounts receivable | 1,013,714 | 863,220 |
Number of major customers | 1 | |
Inventories | ||
Raw materials | 1,396,294 | 1,498,867 |
Finished goods | 911,491 | 1,285,361 |
Total gross inventories | 2,307,785 | 2,784,228 |
Less reserve for obsolescence | -220,000 | -560,000 |
Total net inventories | 2,087,785 | 2,224,228 |
Accounts receivable | ||
Concentration of credit risk | ||
Net accounts receivable | $1,013,714 | $863,220 |
Accounts receivable | Customer concentration risk | ||
Concentration of credit risk | ||
Number of major customers | 1 | |
Accounts receivable | Customer concentration risk | One customer | ||
Concentration of credit risk | ||
Concentration risk (as a percent) | 9.00% | |
Maximum | Accounts receivable | Customer concentration risk | ||
Concentration of credit risk | ||
Concentration risk (as a percent) | 5.00% | |
Maximum | Accounts receivable | Customer concentration risk | One customer | ||
Concentration of credit risk | ||
Concentration risk (as a percent) | 5.00% |
SUMMARY_OF_SIGNIFICANT_ACCOUNT4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) | 9 Months Ended |
Dec. 31, 2014 | |
Minimum | |
Property and Equipment | |
Estimated useful lives of assets | 5 years |
Maximum | |
Property and Equipment | |
Estimated useful lives of assets | 7 years |
SUMMARY_OF_SIGNIFICANT_ACCOUNT5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 3) (USD $) | 9 Months Ended |
Dec. 31, 2014 | |
Income Taxes | |
Provision for income taxes | $0 |
Unrecognized tax benefits | 0 |
Amount of income tax related interest or penalties assessed or recorded | 0 |
Sales Recognition | |
Obligations related to product sales | $0 |
Patents | |
Patents | |
Economic or legal life | 20 years |
SUMMARY_OF_SIGNIFICANT_ACCOUNT6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 4) (USD $) | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | |
segment | ||||
Stock-Based Compensation | ||||
Stock-based compensation expense related to grants of employee stock options | $17,018 | $16,486 | $46,954 | $44,557 |
Segment Reporting | ||||
Number of operating segments | 1 |
BASIC_AND_DILUTED_INCOME_AND_L2
BASIC AND DILUTED INCOME AND LOSS PER COMMON SHARE (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | |
BASIC AND DILUTED INCOME AND LOSS PER COMMON SHARE | ||||
Net income (loss) | ($416,847) | $32,546 | ($1,033,575) | ($328,701) |
Weighted-average shares - basic (in shares) | 10,673,225 | 8,616,110 | 10,673,225 | 8,346,435 |
Effect of dilutive potential common shares | 3,617 | |||
Weighted-average shares - diluted (in shares) | 10,673,225 | 8,619,727 | 10,673,225 | 8,346,435 |
Net loss per share-basic (in dollars per share) | ($0.04) | $0 | ($0.10) | ($0.04) |
Antidilutive employee stock options and RSUs (in shares) | -0.04 | 0 | -0.1 | -0.04 |
COMMITMENTS_AND_CONTINGENCIES_1
COMMITMENTS AND CONTINGENCIES (Details) (USD $) | 0 Months Ended | ||
19-May-14 | Mar. 31, 2014 | Dec. 31, 2014 | |
Minimum future capital equipment lease payments | |||
Less current portion | ($67,057) | ||
Long term portion | 54,619 | ||
Line of credit | |||
Credit facility agreement | |||
Maximum borrowing capacity | 2,000,000 | ||
Term | 1 year | ||
Variable rate basis | prime rate | ||
Variable rate margin (as a percent) | 1.25% | ||
Amount of borrowings | 83,500 | ||
Amount available to borrow under eligible receivables and inventory limit | 926,000 | ||
Facilities at 6797 Winchester Circle, Boulder, Colorado | |||
Commitments and contingencies | |||
Leasehold improvements | 172,176 | ||
Minimum future lease payments, by fiscal year | |||
2015 (six months remaining) | 65,125 | ||
2016 | 268,672 | ||
2017 | 276,732 | ||
2018 | 285,034 | ||
2019 | 293,585 | ||
2020 | 99,800 | ||
Total | 1,288,948 | ||
Equipment leases with General Electric Capital Corporation | |||
Minimum future capital equipment lease payments | |||
Original cost of lease equipment acquired | 177,547 | ||
Net book value of lease equipment acquired | $66,467 |
SHAREBASED_COMPENSATION_Detail
SHARE-BASED COMPENSATION (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | |
Stock-based compensation expense related to employee stock options and employee stock purchases | ||||
Stock-based compensation expense | $17,018 | $16,486 | $46,954 | $44,557 |
Unrecognized compensation costs related to nonvested stock options | ||||
Stock options granted during the period (in shares) | 30,000 | 95,000 | ||
Stock options forfeited during the period (in shares) | 15,000 | 30,000 | ||
Total unrecognized compensation costs related to nonvested stock options | 291,000 | 291,000 | ||
Expected period for recognition of compensation costs related to nonvested stock options | 5 years | |||
Restricted Stock Units (RSUs) [Member] | ||||
Stock-based compensation expense related to employee stock options and employee stock purchases | ||||
Share-based compensation expense (in shares) | 14,286 | 24,924 | ||
Cost of sales | ||||
Stock-based compensation expense related to employee stock options and employee stock purchases | ||||
Stock-based compensation expense | 491 | 345 | 1,473 | 1,035 |
Sales and marketing | ||||
Stock-based compensation expense related to employee stock options and employee stock purchases | ||||
Stock-based compensation expense | 2,770 | 2,438 | 8,307 | 6,234 |
General and administrative | ||||
Stock-based compensation expense related to employee stock options and employee stock purchases | ||||
Stock-based compensation expense | 12,996 | 12,186 | 34,891 | 30,344 |
Research and development | ||||
Stock-based compensation expense related to employee stock options and employee stock purchases | ||||
Stock-based compensation expense | $761 | $1,517 | $2,283 | $6,944 |
RELATED_PARTY_TRANSACTION_Deta
RELATED PARTY TRANSACTION (Details) (USD $) | 3 Months Ended | 9 Months Ended | |||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | |
Related party transaction | |||||
Accrued liabilities for employment agreement | $120,000 | $120,000 | $120,000 | ||
Director | |||||
Related party transaction | |||||
Consulting fees paid | $20,880 | $18,623 | $64,553 | $52,644 |