RESTRUCTURING

In 2016 and 2017, we were not able to sustain the level of sales and profitability recognized in 2015. Due to our financial performance in 2016 and 2017, including net losses of $16.9 million and $11.3 million, respectively, and total cash used of $18.0 million and $5.9 million, respectively, we believe that substantial doubt about our ability to continue as a going concern existed at December 31, 2016 and 2017.

As a result, we evaluated actions to mitigate the substantial doubt about our ability to continue as a going concern. Our evaluation considered both quantitative and qualitative information, including our current financial position and liquid resources, and obligations due or anticipated within the next year. With $16.6 million in cash and no debt obligations as of December 31, 2016, we focused our efforts on reducing our overall operating expenses in an effort to return to profitability. Consequently, in February 2017, we announced a corporate restructuring initiative with a goal of significantly reducing annual operating costs from 2016 levels. The initiative included an organizational consolidation of management and oversight functions in order to streamline and better align the organization into more focused, efficient, and cost-effective reporting relationships, and involved headcount reductions and office closures. This initiative was designed to return the Company to profitability and mitigate the substantial doubt that existed at December 31, 2016 about our ability to continue as a going concern. The restructuring actions taken in 2017 resulted in a net decrease in operating expenses through December 31, 2017 of $8.4 million, including restructuring and asset impairment charges of $1.8 million in 2017 and impairment charges of $0.9 million in 2016.

While the substantial doubt about our ability to continue as a going concern continued to exist at December 31, 2017, we had $10.8 million in cash and no debt obligations at the end of the year. Consequently, considering both quantitative and qualitative information, we continue to believe that the combination of our restructuring actions, current financial position, liquid resources, obligations due or anticipated within the next year, executive reorganization, and implementation of our sales channel strategy will return us to profitability in 2018 and effectively mitigates the substantial doubt about our ability to continue as a going concern.

The actions taken in the first quarter of 2017 included closing our offices in Rochester, Minnesota, New York, New York, and Arlington, Virginia and reduced our staff by 20 employees, primarily located in these offices. During the second quarter of 2017, we fully exited the New York and Arlington facilities and took additional actions to improve our operating efficiencies. These actions reduced our staff by an additional 17 production and administrative employees in our Solon location.

During the year ended December 31, 2017 we recorded net restructuring expenses totaling approximately $1.7 million, consisting of approximately $0.8 million for severance and related benefits, approximately $0.7 million related to the facility closings, and approximately $0.2 million primarily related to fixed asset and prepaid expenses write-offs.

Our restructuring liabilities consist of one-time termination costs for severance and benefits to former employees and estimated ongoing costs related to long-term operating lease obligations. The recorded value of the termination severance and benefits to employees approximates fair value, as the remaining obligation is based on the arrangements made with the former employees, and these obligations will be completely satisfied in less than 12 months. The recorded value of the ongoing lease obligations is based on the remaining lease term and payment amount, net of estimated sublease income, discounted to present value. Changes in subsequent periods resulting from a revision to either the timing or the amount of estimated cash flows over the future period are measured using the credit adjusted, risk-free rate that was used to measure the restructuring liabilities initially. The current portion of the ongoing lease obligations is included within the caption, “Accrued liabilities” and the long term portion of the ongoing lease obligations comprises the caption, “Other liabilities” in the Consolidated Balance Sheets as of December 31, 2017. We estimated that we would receive a total of approximately $1.2 million in sublease payments to offset our remaining lease obligations, which extend until June 2021, of approximately $1.7 million. We expect to incur insignificant additional costs over the remaining life of our lease obligations, but we do not anticipate further major restructuring activities in the near future. The following is a reconciliation of the beginning and ending balances of our restructuring liability:



	Severance and Related Benefits			Facilities			Other			Total
Balance at January 1, 2017	$	—		$	—		$	—		$	—
Additions	$	770		$	830		$	186		$	1,786
Accretion of lease obligations	$	—		$	31		$	—		$	31
Adjustment of lease obligations				$	(155	)	$	—		$	(155	)
Write-offs				$	9		$	(95	)	$	(86	)
Payments	$	(708	)	$	(375	)	$	(91	)	$	(1,174	)
Balance at December 31, 2017	$	62		$	340		$	—		$	402