2. LIQUIDITY

The Company generated net losses before tax of $3.2 million and $2.6 million for the six months ended June 30, 2016 and 2015, respectively, and $1.3 million and $1.5 million for the three months ended June 30, 2016 and 2015, respectively. Net cash used in operating activities was $325,000 and $1.5 million for the six months ended June 30, 2016 and 2015, respectively. At June 30, 2016 the Company had $6.6 million of cash. In addition, the Company continues to reduce expenses, with the goal of increasing positive cash flow from operations.

The Company has a credit facility with Opus Bank, established in the third quarter of 2015, which provides additional liquidity. The credit facility includes term loans plus a line of credit that have a combined borrowing limit of $10 million, all of which were fully utilized as of June 30, 2016. The term loans expire September 1, 2019 and the line of credit expires September 1, 2018 unless renewed. The Company relies on the term loans and line of credit for working capital purposes. (See Note 8.)

The Company completed a preferred stock offering in November 2015 and raised approximately $4.7 million after expenses. An additional preferred stock offering was completed in July, 2016, which raised approximately $1.4 million after expenses. (See Note 17.) The preferred stock is redeemable at the Company’s option after five years, and is not subject to conversion, mandatory redemption or sinking fund provisions. Management believes that with the proceeds of the preferred stock offerings and the Opus Bank financing, the Company has adequate sources of cash to fund its anticipated cash requirements from operations through the next 12 months.