Company: ECIA
Filing Date: 2025-07-10
Form Type: 10-K
Source: 0001079973-25-001132
Chunk: 41

Company: ENCISION INC
Filing Date: 2025-07-10
Form: 10-K
Item: Item 1
Chunk 41
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 $5,000 as part of Secured notes ,a current liability,
and the balance of $151,685 is presented as a part of Long-term liability in the accompanying March 31, 2025 financial statements. 

2.       Summary
of Significant Accounting Policies

Use of Estimates in the Preparation of Financial
Statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States
(“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, cash equivalents, short-term trade receivables, payables, line of credit, Economic Injury Disaster
Loan (“EIDL”) loan and secured notes. The carrying values of cash, cash equivalents, trade receivables, payables, line of
credit approximate their fair value due to their short maturities. The fair values of the EIDL Loan approximates the carrying value based
on estimated discounted future cash flows using the current rates at which similar loans would be made, which is considered a Level 2
as described below.

The accounting guidance defines fair value, establishes
a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value
on either a recurring or nonrecurring basis. Fair value is defined as an exit price, representing the amount that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based
measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a
basis for considering such assumptions, the accounting guidance establishes a three- tier fair value hierarchy, which prioritizes the
inputs used in measuring fair value as follows: 

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Level 1: Observable inputs such as
quoted prices in active markets;

Level 2: Inputs, other than the quoted
prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs in which