To date, a significant portion of our operating funds have been provided by issuances of our common stock and warrants, a line of credit, and the exercise of stock options to purchase our common stock. During the quarter ended December 31, 2018, we issued 875,000 shares of our common stock in exchange for $350,000. Common stock and additional paid in capital totaled $24,204,546$24,209,471 from inception through December 31, 2018.

On July 31, 2018, we signed a new line of credit agreement with Bank of America Merrill Lynch. The facility provides for up to $1 million revolving line of credit. The interest rate is a rate per year equal to the LIBOR Daily Floating Rate plus 2.75 percentage points. There is a minimum quarterly EBITDA covenant and a minimum Collateral Coverage ratio of 2. Minimum Collateral Coverage is the ratio of gross accounts receivable plus inventory to the line of credit commitment. As of December 31, 2018,June 30, 2019, we had no borrowings from the credit facility and had an additional $1 million available to borrow. For the quarter ended December 31, 2018,June 30, 2019, we were not in compliance with the minimum quarterly EBITDA covenant.

On August 9, 2019, we entered into a loan and security agreement with Crestmark Bank, which replaced the Bank of America Merrill Lynch credit agreement. The loan is due on demand and has no financial covenants. Under the agreement, we were provided with a line of credit that is not to exceed the lesser of $1,000,000 or 85% of eligible accounts receivable. The interest rate is prime rate plus 1.5%, with a floor of 6.75%, plus a monthly maintenance fee of 0.4%, based on the average monthly loan balance. Interest is charged on a minimum loan balance of $500,000, a loan fee of 1% annually, and an exit fee of 3%, 2% and 1% during years one, two and three, respectively.

Our operations generated $127,309used $290,988 of cash during the ninethree monthsended December 31, 2018 June 30, 2019 on net revenue of $6,718,257.$1,928,575. Cash was principally used forby the net loss, accounts payable, accrued compensation and other accrued liabilities and increased by accounts payable. inventories. The amounts of cash generatedused by operations for the ninethree months ended December 31, 2018June 30, 2019 are not indicative of the expected amounts of cash to be generated from or used in operations in fiscal year 2019. During the nine months ended December 31, 2018,To reduce our costs and cash usage, w we invested $9,982have implemented a reduction of personnel and departmental spending in the acquisitionexcess of property$1 million annualized. e have implemented a reduction of personnel and equipment.departmental spending in excess of $1 million annualized. At December 31, 2018,June 30, 2019, we had $602,000$135,569 in cash, cash equivalents and restricted cash available to fund future operations. Our working capital was $2,098,367$1,573,620 at December 31, 2018June 30, 2019 compared to $1,575,681$1,908,748 at March 31, 2018.2019. The increasedecrease of working capital at December 31, 2018June 30, 2019 was the result of an increaseour loss and a decrease to cash from issuing common stock, and partially offset by an increase to accounts payable. inventories. Current liabilities were $1,048,622$1,093,592 at December 31, 2018June 30, 2019 compared to $1,038,485$1,001,265 at March 31, 2018.

Effective November 9, 2017,2018, we extended our noncancelable lease agreement through July 31, 2024 for our facilities at 6797 Winchester Circle, Boulder, Colorado. The lease includes base rent abatement for the first two months, or $55,583, and $145,000 of leasehold improvements granted by the landlord. At

In February 2016, the startFASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which modified lease accounting for both lessees and lessors to increase transparency and comparability by recognizing lease assets and lease liabilities by lessees for those leases classified as operating leases under previous accounting standards and disclosing key information about leasing arrangements. Within the opening balances for the fiscal year beginning April 1, 2019, we will recognize leased assets and corresponding liabilities in other long-term assets of $1,214,983. The primary impact for us was the balance sheet recognition of right-of-use (“ROU”) assets and lease liabilities for operating leases as a lessee.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease on August 1, 2019, the $145,000 will be recorded on our condensed balance sheets as leasehold improvements and deferred rent. The leasehold improvements will be amortizedpayments over the lesser of the lease term at commencement date. ROU assets also include any initial direct costs incurred and any lease payments made at or before the assets life andlease commencement date, less lease incentives received. We use our incremental borrowing rate based on the deferred rent will be amortized against rentinformation available at the commencement date in determining the lease liabilities as our leases do not provide an implicit rate. Lease expense is recognized on a straight-line basis over the lease term.

The minimum future lease payment, by fiscal year, as of December 31, 2018June 30, 2019 is as follows:

Aside from the operating lease, we do not have any material contractual commitments requiring settlement in the future.

As of December 31, 2018,June 30, 2019, the following table shows our contractual obligations for the periods presented:

Our fiscal year 20192020 operating plan is focused on increasing new accounts, retaining existing customers, growing revenue, increasing gross profits and conserving cash. We are investing in research and development efforts to develop next generation versions of the AEM product line. We have invested in manufacturing property and equipment to manufacture disposable scissors inserts internally and to reduce our cost of product revenue. We cannot predict with certainty the expected revenue, gross profit, net income or loss and usage of cash, cash equivalents or restricted cash for fiscal year 2019. 2020. If we are unable to manage our business operations in line with budget expectations, it could have a material adverse effect on our business viability, financial position, results of operations and cash flows.

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, sales and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to bad debts, inventories, sales returns, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect the more significant judgments and estimates used in the preparation of our financial statements.

We record revenue at a single point in time, when control is transferred to the customer, which is consistent with past practice. We will continue to apply our current business processes, policies, systems and controls to support recognition and disclosure. 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. We evaluated the requirement to disaggregate revenue, and concluded that substantially all of ourits revenue comes from multiple products within a line of medical devices.

We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. If the financial condition of our customers were to deteriorate, thus resulting in an impairment of their ability to make payments, additional allowances would be required, which would increase our expenses during the periods in which any such allowances were made. The amount recorded as a provision for bad debts in each period is based upon our assessment of the likelihood that we will be paid on our outstanding receivables, based on customer-specific as well as general considerations. To the extent that our estimates prove to be too high, and we ultimately collect a receivable previously determined to be impaired, we may record a reversal of the provision in the period of such determination.

We provide for the estimated cost of product warranties at the time sales are recognized. While we engage in extensive product quality programs and processes, including actively monitoring and evaluating the quality of our component suppliers, we have experienced some costs related to warranties. The warranty accrual is based on historical experience and is adjusted based on current experience. Should actual warranty experience differ from our estimates, revisions to the estimated warranty accrualliability would be required.

We reduce inventory for estimated obsolete or unmarketable inventory equal to the difference between the cost of inventory and the estimated realizable value based on 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. Any write-downs of inventory would reduce our reported net income during the period in which such write-downs were applied. To the extent that our estimates prove to be too high, and we ultimately utilize or sell inventory previously determined to be impaired, we may record a reversal of the provision in the period of such determination.

We recognize 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. 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. Should we maintain sufficient, sustained income in the future, we may conclude that all or some of the valuation allowance should be reversed.