Company: ECIA
Filing Date: 2025-07-10
Form Type: 10-K
Source: 0001079973-25-001132
Chunk: 10

Company: ENCISION INC
Filing Date: 2025-07-10
Form: 10-K
Item: Item 1
Chunk 10
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 so that the conversion to AEM technology is transparent to surgeons and
does not require a significant change in their current surgical techniques. We employ full-time engineers and use independent contractors
from time to time in our research and product development efforts. This group continuously explores ways to broaden and enhance the product
line. Current research and development efforts are focused primarily on line-extension projects to further expand our AEM Instrument product
offering to increase surgeons’ choices and options in laparoscopic surgery. Our research and development expenses were $593,152
in fiscal year 2025 and $621,894 in fiscal year 2024. We expense research and development costs for products and processes as incurred.
Costs that are included in research and development expenses include direct salaries, contractor fees, materials, facility costs and administrative
expenses that relate to research and development.

Manufacturing,
Regulatory Affairs and Quality Assurance

We engage in various manufacturing and assembly
activities at our leased facility in Boulder, Colorado. These operations include disposable scissor inserts manufacturing and assembly
of our AEM Instrument system as well as fabrication, assembly and test operations for instruments, monitors and accessories. We also have
relationships with a number of outside suppliers. Three vendors accounted for approximately 54% of our inventory purchases.

We believe that the use of both internal and
external manufacturing capabilities allows for increased flexibility in meeting our customer delivery requirements and significantly reduces
the need for investment in specialized capital equipment. We have developed multiple sources of supply where possible. Our relationship
with our suppliers is generally limited to individual purchase order agreements supplemented, as appropriate, by contractual relationships
to help ensure the availability and low cost of certain products. All components, materials and sub-assemblies used in our products, whether
produced in-house or obtained from others, are inspected to ensure compliance with our specifications. All finished products are subject
to our quality assurance and performance testing procedures.

As discussed in the section on Government Regulation,
we are subject to the rules and regulations of the United States Food and Drug Administration (“FDA”). Our leased facility
of 28,696 square feet contains approximately 15,100 square feet of manufacturing, regulatory affairs and quality assurance space. The
facility is designed to comply with the Quality System Regulation (“QSR”), as specified in published FDA regulations. Our
latest inspection by the FDA occurred in October 2015.

We achieved CE marking in August 2000, which
required prior certification of our quality system and product documentation. Maintenance of the CE marking status requires periodic