Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Sep. 30, 2015 | Oct. 30, 2015 | |
Document and Entity Information | ||
Entity Registrant Name | ENCISION INC | |
Entity Central Index Key | 930,775 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2015 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --03-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 10,673,225 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q2 |
Condensed Balance Sheets
Condensed Balance Sheets - USD ($) | Sep. 30, 2015 | Mar. 31, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 113,193 | $ 258,656 |
Accounts receivable, net of allowance for doubtful accounts of $11,000 at September 30, 2015 and $11,500 at March 31, 2015 | 870,773 | 965,355 |
Inventories, net of reserve for obsolescence of $262,000 at September 30, 2015 and $240,000 at March 31, 2015 | 1,974,197 | 2,337,654 |
Prepaid expenses | 124,407 | 109,678 |
Total current assets | 3,082,570 | 3,671,343 |
Equipment, at cost: | ||
Furniture, fixtures and equipment | 3,906,155 | 3,917,386 |
Accumulated depreciation | (3,268,609) | (3,140,453) |
Equipment, net | 637,546 | 776,933 |
Patents, net of accumulated amortization of $165,157 at September 30, 2015 and $153,494 at March 31, 2015 | 256,274 | 257,356 |
Other assets | 15,792 | 20,135 |
TOTAL ASSETS | 3,992,182 | 4,725,767 |
Current liabilities: | ||
Accounts payable | 463,748 | 675,411 |
Accrued compensation | 234,294 | 262,195 |
Other accrued liabilities | 270,010 | 324,926 |
Deferred rent - short term | 30,384 | 30,384 |
Total current liabilities | 998,436 | 1,292,916 |
Long-term liabilities: | ||
Line of credit | 64,000 | |
Deferred rent - long term | 86,088 | 101,280 |
Total liabilities | $ 1,084,524 | $ 1,458,196 |
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 September 30, 2015 and March 31, 2015 | $ 23,645,283 | $ 23,607,688 |
Accumulated (deficit) | (20,737,625) | (20,340,117) |
Total shareholders' equity | 2,907,658 | 3,267,571 |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ 3,992,182 | $ 4,725,767 |
Condensed Balance Sheets (Paren
Condensed Balance Sheets (Parenthetical) - USD ($) | Sep. 30, 2015 | Mar. 31, 2015 |
Condensed Balance Sheets | ||
Accounts receivable, allowance for doubtful accounts (in dollars) | $ 11,000 | $ 11,500 |
Inventories, reserve for obsolescence (in dollars) | 262,000 | 240,000 |
Accumulated amortization | $ 165,157 | $ 153,494 |
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 |
Condensed Statements of Operati
Condensed Statements of Operations - USD ($) | 3 Months Ended | 6 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Revenue, Net. | ||||
NET REVENUE | $ 2,300,436 | $ 2,279,346 | $ 4,754,761 | $ 4,755,603 |
COST OF REVENUE: | ||||
COST OF REVENUE | 1,120,006 | 1,203,847 | 2,400,547 | 2,458,146 |
GROSS PROFIT | 1,180,430 | 1,075,499 | 2,354,214 | 2,297,457 |
OPERATING EXPENSES: | ||||
Sales and marketing | 629,847 | 700,942 | 1,326,189 | 1,383,515 |
General and administrative | 366,581 | 380,636 | 733,245 | 751,063 |
Research and development | 305,616 | 357,627 | 589,654 | 673,048 |
Total operating expenses | 1,302,044 | 1,439,205 | 2,649,088 | 2,807,626 |
OPERATING LOSS | (121,614) | (363,706) | (294,874) | (510,169) |
Interest expense, net | (16,681) | (2,255) | (17,400) | (5,041) |
Other expense, net | (46,013) | (48,409) | (85,234) | (101,518) |
Interest expense and other expense, net | (62,694) | (50,664) | (102,634) | (106,559) |
LOSS BEFORE PROVISION FOR INCOME TAXES | (184,308) | (414,370) | (397,508) | (616,728) |
Provision for income taxes | 0 | |||
NET LOSS | $ (184,308) | $ (414,370) | $ (397,508) | $ (616,728) |
Net loss per share-basic and diluted (in dollars per share) | $ (0.02) | $ (0.04) | $ (0.04) | $ (0.06) |
Weighted average shares-basic and diluted (in shares) | 10,673,225 | 10,673,225 | 10,673,225 | 10,673,225 |
Condensed Statements of Cash Fl
Condensed Statements of Cash Flows - USD ($) | 6 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Cash flows from operating activities: | ||
Net loss | $ (397,508) | $ (616,728) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 162,035 | 195,361 |
Share-based compensation expense | 37,595 | 29,936 |
Provision for doubtful accounts, net | (500) | |
Provision for inventory obsolescence, net | 22,000 | 86,501 |
Change in operating assets and liabilities: | ||
Accounts receivable | 95,082 | 73,019 |
Inventories | 341,457 | 20,636 |
Prepaid expenses and other assets | (10,386) | (143,502) |
Accounts payable | (211,663) | (121,296) |
Accrued compensation and other accrued liabilities | (98,009) | (126,664) |
Net cash (used in) operating activities | (59,897) | (602,737) |
Cash flows from investing activities: | ||
Acquisition of property and equipment | (10,985) | (21,918) |
Patent costs | (10,581) | (26,030) |
Net cash (used in) investing activities | (21,566) | (47,948) |
Cash flows from financing activities: | ||
Paydown of credit facility | (64,000) | |
Net cash provided by financing activities | (64,000) | |
Net decrease in cash and cash equivalents | (145,463) | (650,685) |
Cash and cash equivalents, beginning of period | 258,656 | 1,689,580 |
Cash and cash equivalents, end of period | $ 113,193 | $ 1,038,895 |
ORGANIZATION AND NATURE OF BUSI
ORGANIZATION AND NATURE OF BUSINESS | 6 Months Ended |
Sep. 30, 2015 | |
ORGANIZATION AND NATURE OF BUSINESS | |
ORGANIZATION AND NATURE 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 $20,737,625 at September 30, 2015. 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 ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Sep. 30, 2015 | |
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, 2015, filed on June 19, 2015. 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 three 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 may exceed the $250,000 federally insured limit at September 30, 2015. 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 September 30, 2015 of $870,773 included 3% from one customer. The net accounts receivable balance at March 31, 2015 of $965,355 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 September 30, 2015 and March 31, 2015, inventory consisted of the following: September 30, 2015 March 31, 2015 Raw materials $ $ Finished goods Total gross inventories Less reserve for obsolescence Total net inventories $ $ 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 September 30, 2015, 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 six months ended September 30, 2015 was $20,161 and $37,595, respectively, and for the three and six months ended September 30, 2014 was $15,723 and $29,936, 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. The Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09 (Revenue from Contracts with Customers), which is effective for annual reporting periods beginning after December 15, 2017. We have not yet assessed the impact, if any, of adopting this standard. The Financial Accounting Standards Board has also issued Accounting Standards Update 2014-15, Presentation of Financial Statements — Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (the ASU), which provides guidance on determining when and how to disclose going concern uncertainties in the financial statements. The ASU requires management to perform an assessment every reporting period (including interim periods) to determine whether there is substantial doubt about a company’s ability to continue as a going concern and to provide related footnote disclosures. The ASU also defines that substantial doubt exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued (or available to be issued). The ASU applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. We are currently evaluating this new guidance and the related impact on the financial statements. In July 2015, the FASB issued Accounting Standards Update 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory, (“ASU 2015-11”). ASU 2015-11 affects reporting entities that measure inventory using first-in, first-out (FIFO) or average cost. Specifically, ASU 2015-11 requires that inventory be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. ASU 2015-11 is effective for fiscal years beginning after December 15, 2016. Early adoption is permitted. The Company does not expect ASU 2015-11 to have an impact on its financial statements. |
BASIC AND DILUTED INCOME AND LO
BASIC AND DILUTED INCOME AND LOSS PER COMMON SHARE | 6 Months Ended |
Sep. 30, 2015 | |
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 Six Months Ended September 30, 2015 September 30, 2014 September 30, 2015 September 30, 2014 Net loss $ (184,308) $ (414,370) $ (397,508) $ (616,728) Weighted-average shares — basic Effect of dilutive potential common shares — — — — Weighted-average shares — diluted Net income (loss) per share — basic $ (0.02) $ (0.04) $ (0.04) $ (0.06) Net income (loss) per share — diluted $ (0.02) $ (0.04) $ (0.04) $ (0.06) Antidilutive employee stock options and RSUs |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Sep. 30, 2015 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | Note 4. COMMITMENTS AND CONTINGENCIES Effective December 1, 2014, 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 September 30, 2015 is as follows: Fiscal Year Amount 2016 (six months remaining) $ 134,336 2017 2018 2019 2020 Total $ On May 29, 2015, we signed an amendment to our credit facility agreement with Silicon Valley Bank. The terms of the credit facility include a line of credit for $2,000,000 for one year, until May 29, 2016, at an interest rate calculated at the prime rate plus 1.25%, subject to increase upon a default. The liquidity ratio covenant limits our borrowing under the credit facility by a ratio of at least 2.0 to 1.0 of our eligible receivables plus cash, minus accounts payable that are over sixty days, at the time of borrowing. As of September 30, 2015, we had no borrowings from the credit facility and, under our liquidity ratio limit, had an additional approximately $463,000 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 September 30, 2015. FDA inspections are conducted periodically at the discretion of the FDA. Our latest inspection by the FDA occurred in December 2012. |
SHARE-BASED COMPENSATION
SHARE-BASED COMPENSATION | 6 Months Ended |
Sep. 30, 2015 | |
SHARE-BASED COMPENSATION | |
SHARE-BASED COMPENSATION | 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 six months ended September 30, 2015 and 2014, which was allocated as follows: Three Months Ended Six Months Ended September 30, 2015 September 30, 2014 September 30, 2015 September 30, 2014 Cost of sales $ 652 $ 491 $ 1,143 $ 982 Sales and marketing General and administrative Research and development Stock-based compensation expense $ $ $ $ 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 100,000 and 139,000 stock options granted during the three and six months ended September 30, 2015, respectively. There were no stock options forfeited during the three and six months ended September 30, 2015. 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 20,000 and 20,000 RSUs granted during the three and six months ended September 30, 2015, respectively. As of September 30, 2015, $276,000 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 | 6 Months Ended |
Sep. 30, 2015 | |
RELATED PARTY TRANSACTION | |
RELATED PARTY TRANSACTION | Note 6. RELATED PARTY TRANSACTION We paid consulting fees of $19,260 and $41,726 to an entity owned by one of our directors during the three and six months ended September 30, 2015, respectively, and $17,796 and $43,673 during the three and six months ended September 30, 2014, respectively. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 6 Months Ended |
Sep. 30, 2015 | |
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 ACCOUN13
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Sep. 30, 2015 | |
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, 2015, filed on June 19, 2015. 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 three 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 may exceed the $250,000 federally insured limit at September 30, 2015. 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 September 30, 2015 of $870,773 included 3% from one customer. The net accounts receivable balance at March 31, 2015 of $965,355 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 September 30, 2015 and March 31, 2015, inventory consisted of the following: September 30, 2015 March 31, 2015 Raw materials $ $ Finished goods Total gross inventories Less reserve for obsolescence Total net inventories $ $ |
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 September 30, 2015, 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 six months ended September 30, 2015 was $20,161 and $37,595, respectively, and for the three and six months ended September 30, 2014 was $15,723 and $29,936, 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. The Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09 (Revenue from Contracts with Customers), which is effective for annual reporting periods beginning after December 15, 2017. We have not yet assessed the impact, if any, of adopting this standard. The Financial Accounting Standards Board has also issued Accounting Standards Update 2014-15, Presentation of Financial Statements — Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (the ASU), which provides guidance on determining when and how to disclose going concern uncertainties in the financial statements. The ASU requires management to perform an assessment every reporting period (including interim periods) to determine whether there is substantial doubt about a company’s ability to continue as a going concern and to provide related footnote disclosures. The ASU also defines that substantial doubt exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued (or available to be issued). The ASU applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. We are currently evaluating this new guidance and the related impact on the financial statements. In July 2015, the FASB issued Accounting Standards Update 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory, (“ASU 2015-11”). ASU 2015-11 affects reporting entities that measure inventory using first-in, first-out (FIFO) or average cost. Specifically, ASU 2015-11 requires that inventory be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. ASU 2015-11 is effective for fiscal years beginning after December 15, 2016. Early adoption is permitted. The Company does not expect ASU 2015-11 to have an impact on its financial statements. |
SUMMARY OF SIGNIFICANT ACCOUN14
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 6 Months Ended |
Sep. 30, 2015 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of inventory | September 30, 2015 March 31, 2015 Raw materials $ $ Finished goods Total gross inventories Less reserve for obsolescence Total net inventories $ $ |
BASIC AND DILUTED INCOME AND 15
BASIC AND DILUTED INCOME AND LOSS PER COMMON SHARE (Tables) | 6 Months Ended |
Sep. 30, 2015 | |
BASIC AND DILUTED INCOME AND LOSS PER COMMON SHARE | |
Schedule of calculation of basic and diluted net loss per share | Three Months Ended Six Months Ended September 30, 2015 September 30, 2014 September 30, 2015 September 30, 2014 Net loss $ (184,308) $ (414,370) $ (397,508) $ (616,728) Weighted-average shares — basic Effect of dilutive potential common shares — — — — Weighted-average shares — diluted Net income (loss) per share — basic $ (0.02) $ (0.04) $ (0.04) $ (0.06) Net income (loss) per share — diluted $ (0.02) $ (0.04) $ (0.04) $ (0.06) Antidilutive employee stock options and RSUs |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 6 Months Ended |
Sep. 30, 2015 | |
COMMITMENTS AND CONTINGENCIES | |
Schedule of minimum future lease payments, by fiscal year | The minimum future lease payment, by fiscal year, as of September 30, 2015 is as follows: Fiscal Year Amount 2016 (six months remaining) $ 134,336 2017 2018 2019 2020 Total $ |
SHARE-BASED COMPENSATION (Table
SHARE-BASED COMPENSATION (Tables) | 6 Months Ended |
Sep. 30, 2015 | |
SHARE-BASED COMPENSATION | |
Schedule of stock-based compensation expense related to employee stock options | Three Months Ended Six Months Ended September 30, 2015 September 30, 2014 September 30, 2015 September 30, 2014 Cost of sales $ 652 $ 491 $ 1,143 $ 982 Sales and marketing General and administrative Research and development Stock-based compensation expense $ $ $ $ |
ORGANIZATION AND NATURE OF BU18
ORGANIZATION AND NATURE OF BUSINESS (Details) - USD ($) | Sep. 30, 2015 | Mar. 31, 2015 |
ORGANIZATION AND NATURE OF BUSINESS | ||
Accumulated deficit | $ 20,737,625 | $ 20,340,117 |
SUMMARY OF SIGNIFICANT ACCOUN19
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) | 6 Months Ended | 12 Months Ended |
Sep. 30, 2015USD ($)item | Mar. 31, 2015USD ($)item | |
Concentration of credit risk | ||
Federally insured limit | $ 250,000 | |
Number of financial institutions which maintain a majority of the entity's cash balances | item | 1 | |
Net accounts receivable | $ 870,773 | $ 965,355 |
Number of major customers | item | 1 | |
Inventories | ||
Raw materials | 1,386,462 | $ 1,547,733 |
Finished goods | 849,735 | 1,029,921 |
Total gross inventories | 2,236,197 | 2,577,654 |
Less reserve for obsolescence | (262,000) | (240,000) |
Total net inventories | 1,974,197 | 2,337,654 |
Accounts receivable | ||
Concentration of credit risk | ||
Net accounts receivable | $ 870,773 | $ 965,355 |
Accounts receivable | Customer concentration risk | ||
Concentration of credit risk | ||
Number of major customers | item | 1 | |
Accounts receivable | Customer concentration risk | One customer | ||
Concentration of credit risk | ||
Concentration risk (as a percent) | 3.00% | |
Maximum | Accounts receivable | Customer concentration risk | ||
Concentration of credit risk | ||
Concentration risk (as a percent) | 5.00% |
SUMMARY OF SIGNIFICANT ACCOUN20
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) | 6 Months Ended |
Sep. 30, 2015 | |
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 ACCOUN21
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 3) | 6 Months Ended |
Sep. 30, 2015USD ($) | |
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 ACCOUN22
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 4) | 3 Months Ended | 6 Months Ended | ||
Sep. 30, 2015USD ($) | Sep. 30, 2014USD ($) | Sep. 30, 2015USD ($)segment | Sep. 30, 2014USD ($) | |
Stock-Based Compensation | ||||
Stock-based compensation expense related to grants of employee stock options | $ | $ 20,161 | $ 15,723 | $ 37,595 | $ 29,936 |
Segment Reporting | ||||
Number of operating segments | 1 |
BASIC AND DILUTED INCOME AND 23
BASIC AND DILUTED INCOME AND LOSS PER COMMON SHARE (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
BASIC AND DILUTED INCOME AND LOSS PER COMMON SHARE | ||||
Net loss | $ (184,308) | $ (414,370) | $ (397,508) | $ (616,728) |
Weighted-average shares - basic (in shares) | 10,673,225 | 10,673,225 | 10,673,225 | 10,673,225 |
Weighted-average shares - diluted (in shares) | 10,673,225 | 10,673,225 | 10,673,225 | 10,673,225 |
Net income (loss) per share-basic (in dollars per share) | $ (0.02) | $ (0.04) | $ (0.04) | $ (0.06) |
Net income (loss) per share-diluted (in dollars per share) | $ (0.02) | $ (0.04) | $ (0.04) | $ (0.06) |
Antidilutive employee stock options and RSUs (in shares) | 718,924 | 570,638 | 718,924 | 570,638 |
COMMITMENTS AND CONTINGENCIES24
COMMITMENTS AND CONTINGENCIES (Details) | May. 29, 2015USD ($) | Dec. 31, 2014USD ($) | Sep. 30, 2015USD ($) | Mar. 31, 2015USD ($) | Dec. 01, 2014USD ($) |
Commitments and contingencies | |||||
Leasehold improvements granted by the landlord included in lease | $ 172,176 | ||||
Credit facility agreement | |||||
Amount of borrowings | $ 64,000 | ||||
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 | $ 0 | ||||
Amount available to borrow under eligible receivables and inventory limit | 463,000 | ||||
Debt Instrument Borrowing Base Ratio | 2 | ||||
Period of outstanding accounts payable balances excluded from the calculation of the borrowing base ratio under the terms of the debt agreement | 60 days | ||||
Facilities at 6797 Winchester Circle, Boulder, Colorado | |||||
Commitments and contingencies | |||||
Leasehold improvements granted by the landlord included in lease | $ 172,176 | ||||
Minimum future lease payments, by fiscal year | |||||
2016 (six months remaining) | 134,336 | ||||
2,017 | 276,732 | ||||
2,018 | 285,034 | ||||
2,019 | 293,585 | ||||
2,020 | 99,800 | ||||
Total | $ 1,089,487 |
SHARE-BASED COMPENSATION (Detai
SHARE-BASED COMPENSATION (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Stock-based compensation expense related to employee stock options and employee stock purchases | ||||
Stock-based compensation expense | $ 20,161 | $ 15,723 | $ 37,595 | $ 29,936 |
Unrecognized compensation costs related to nonvested stock options | ||||
Stock options granted during the period (in shares) | 100,000 | 139,000 | ||
Stock options forfeited during the period (in shares) | 0 | |||
Total unrecognized compensation costs related to nonvested stock options | $ 276,000 | $ 276,000 | ||
Expected period for recognition of compensation costs related to nonvested stock options | 5 years | |||
Restricted Stock Units (RSUs) | ||||
Unrecognized compensation costs related to nonvested stock options | ||||
Granted (in shares) | 20,000 | 20,000 | ||
Cost of sales | ||||
Stock-based compensation expense related to employee stock options and employee stock purchases | ||||
Stock-based compensation expense | $ 652 | 491 | $ 1,143 | 982 |
Sales and marketing | ||||
Stock-based compensation expense related to employee stock options and employee stock purchases | ||||
Stock-based compensation expense | 3,117 | 3,110 | 5,911 | 5,537 |
General and administrative | ||||
Stock-based compensation expense related to employee stock options and employee stock purchases | ||||
Stock-based compensation expense | 15,184 | 11,257 | 28,448 | 21,895 |
Research and development | ||||
Stock-based compensation expense related to employee stock options and employee stock purchases | ||||
Stock-based compensation expense | $ 1,208 | $ 865 | $ 2,093 | $ 1,522 |
RELATED PARTY TRANSACTION (Deta
RELATED PARTY TRANSACTION (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Director | ||||
Related party transaction | ||||
Consulting fees paid | $ 19,260 | $ 17,796 | $ 41,726 | $ 43,673 |