critical accounting policies revenue recognition we generate our revenue from three different types of contractual arrangements : cost-plus-fee contracts , fixed price contracts and cost reimbursable grants . costs consist primarily of actual internal labor charges and external subcontractor costs incurred plus an allocation of applied fringe benefits , overhead and general and administrative expenses as defined in the contract . revenues on cost-plus-fee contracts are recognized in an amount equal to the costs incurred during the period plus an estimate of the applicable fee earned . the estimate of the applicable fee earned is determined by reference to the contract : if the contract defines the fee in terms of risk-based milestones and specifies the fees to be earned upon the completion of each milestone , then the fee is recognized when the related milestones are earned under the “ milestone method of revenue recognition ” . otherwise , we compute fee income earned in a given period by using a proportional performance method based on costs incurred during the period as compared to total estimated project costs and application of the resulting fraction to the total project fee specified in the contract . under the milestone method of revenue recognition , substantive milestone payments , including milestone payments for fees , contained in research and development arrangements under our contracts with the u.s. government are recognized as revenue when : ( i ) the milestones are achieved ; ( ii ) no further performance obligations with respect to the milestone exist ; ( iii ) collection is reasonably assured ; and ( iv ) substantive effort was necessary to achieve the milestone . milestones are considered substantive if all of the following conditions are met : ( 1 ) it is commensurate with either our performance to meet the milestone or the enhancement of the value of the delivered item or items as a result of a specific outcome resulting from our performance to achieve the milestone , ( 2 ) it relates solely to past performance , and ( 3 ) the value of the milestone is reasonable relative to all the deliverables and payment terms ( including other potential milestone consideration ) within the arrangement . if a milestone is deemed not to be substantive , the company recognizes the portion of the milestone payment as revenue that correlates to work already performed ; the remaining portion of the milestone payment is deferred and recognized as revenue as the company completes its performance obligations . for fixed price contracts with the u.s. government without substantive milestones as described above , revenue is recognized under the percentage-of-completion method in accordance with the applicable accounting guidance for long term contracts . the percentage-of completion method recognizes income as the contract progresses ; recognition of revenue and profits generally related to the costs incurred in providing the services required under the contract . the use of the percentage-of completion method depends on the ability to make reasonable dependable estimates . the fact that circumstances may necessitate frequent revision of estimates does not indicate that the estimates are unreliable for the purpose for which they are used . estimating is an integral part of our business activities , and we may have to revise estimates on contracts continually as the work progresses . 39 we analyze each cost reimbursable grant to determine whether we should report such reimbursements as revenue or as an offset to our expenses incurred . in 2011 and 2010 , we recorded approximately $ 0.7 million and $ 2.9 million , respectively , of costs reimbursed by the government as an offset to research and development expenses . our revenue-generating contracts may include multiple elements , including one or more of up-front license fees , research payments , and milestone payments . in these situations , we allocate the total contract price to the multiple elements based on their relative fair values and recognize revenue for each element according to its characteristics . as revenue is recognized in accordance with the terms of the contracts , related amounts are recorded as unbilled accounts receivable , the primary component of “ other receivables ( including unbilled receivables ) ” in our consolidated balance sheets . as specific contract invoices are generated and sent to our customers , invoiced amounts are transferred out of unbilled accounts receivable and into billed accounts receivable . invoicing frequency and payment terms for cost-plus-fee contracts with our customers are defined within each contract , but are typically monthly invoicing with 30 to 60 day payment cycles . at december 31 , 2011 , unbilled accounts receivable were $ 3.0 million . research and development expenses research and development costs are expensed as incurred ; advance payments are deferred and expensed as performance occurs . research and development costs include salaries , facilities expense , overhead expenses , material and supplies , pre-clinical expense , clinical trials and related clinical manufacturing expenses , stock-based compensation expense , contract services and other outside services . share-based payments we have a long-term incentive plan ( the “ ltip ” ) under which options to purchase shares of our common stock may be granted to employees , consultants and directors at a price no less than the quoted market value on the date of grant . the ltip also provides for awards in the form of stock appreciation rights , restricted or unrestricted stock awards , stock-equivalent units or performance-based stock awards . we account for share-based awards to employees and non-employee directors pursuant to fasb asc topic 718 , compensation – stock compensation , which requires that compensation cost resulting from share-based payment transactions be recognized in the financial statements at fair value over the service period . story_separator_special_tag 41 research and development expenses for the years ended december 31 , 2011 and 2010 were attributable to research programs as follows : replace_table_token_3_th for the year ended december 31 , 2011 , research and development expenses increased $ 0.3 million from the prior year . this change was primarily due to the increased technical activity and the achievement of key technical milestones on our sparvax program and the completion of the phase i valortim ® dose escalation clinical trial partially offset by a decrease in development expenses related to the clinical nerve agent protectants program as a result of the december 31 , 2010 shut down of the protexia ® program . general and administrative expenses general and administrative functions include executive management , finance and administration , government affairs and regulations , corporate development , human resources , legal , and compliance . for each function , we may incur expenses such as salaries , supplies and third-party consulting and other external costs and non-cash expenditures such as expense related to stock option and restricted share awards . an allocation of facilities , utilities and other administrative overhead is also included in general and administrative expenses . expenses associated with general and administrative functions were approximately $ 14.3 million and $ 18.0 million for the years ended december 31 , 2011 and 2010 , respectively . the decrease for the year ended december 31 , 2011 from the prior year period was a result of a $ 3.0 million reduction in bad debt expense , a property loss insurance reimbursement of $ 1.4 million partially offset by an increase in non-cash stock compensation expenses as well as taxes and other expenses . the bad debt expenses in 2010 consisted primarily of provisions associated with an invoice to our u.s. government customer for the work at avecia as well as the wind down of the third generation anthrax vaccine program . depreciation and intangible amortization ( including impairment charges ) depreciation and amortization expenses were approximately $ 0.5 million and $ 5.7 million for the years ended december 31 , 2011 and 2010 , respectively . these expenses are lower in 2011 primarily as a result of the impairment charge taken in december 2010 of $ 4.6 million with the closing of our canadian operations . other income ( expense ) other income ( expense ) primarily consists of income on our investments , interest expense on our debt and other financial obligations , changes in market value of our derivative financial instruments , and foreign currency transaction gains or losses . we incurred interest expense of approximately $ 0.1 million and $ 5.9 million for the years ended december 31 , 2011 and 2010 , respectively . interest expense for 2011 primarily relate to the settlement with avecia for termination of a subcontract agreement with that organization . interest expense for 2010 relates primarily to interest on our then-outstanding convertible notes , including the amortization of the debt discount arising from the allocation of fair value to the warrants issued in connection with such notes . in november and december 2010 , our outstanding 10 % convertible notes were converted into shares of common stock ( with one note being redeemed for cash ) . gain on sale of assets held for sale of $ 0.8 million was the result of the sale of land and buildings associated with our canadian operations , which were closed in 2010 . 42 the change in the fair value of our derivative instruments was a decrease of our liability of approximately $ 7.1 million for the year ended december 31 , 2011 compared to an increase of our liability of approximately $ 5.5 million for the year ended december 31 , 2010. the fair value of these derivative instruments is estimated using the black-scholes option pricing model . the decrease in fair value realized as of december 31 , 2011 was primarily the result of the decrease in pharmathene 's stock price from $ 4.23 per share on december 31 , 2010 to $ 1.27 per share on december 31 , 2011. liquidity and capital resources overview our primary cash requirements for 2012 are to fund our operations ( including our research and development programs ) and support our general and administrative activities . our future capital requirements will depend on many factors , including , but not limited to , timing , amount and profitability of sales of st-246 , if any ; the progress of our research and development programs ; the progress of pre-clinical and clinical testing ; the time and cost involved in obtaining regulatory approval ; the cost of filing , prosecuting , defending and enforcing any patent claims and other intellectual property rights ; changes in our existing research relationships ; competing technological and marketing developments ; our ability to establish collaborative arrangements and to enter into licensing agreements and contractual arrangements with others ; and any future change in our business strategy . these cash requirements could change materially as a result of shifts in our business and strategy . during 2011 and the first quarter 2012 , we implemented certain cost reduction activities that we believe will reduce our net operating cash needs for 2012 and 2013 significantly as compared to 2010 and 2011. as a result we currently anticipate that our current cash on hand and collection of accounts receivables at december 31 , 2011 as well as cash to be collected from 2012 contract revenue under contracts currently in place will be sufficient to meet pharmathene 's ongoing expenses and capital requirements through 2012 and into year 2013. since our inception , we have not generated positive cash flows from operations . to bridge the gap between payments made to us under our government contracts and grants and our operating and capital needs , we have had to rely on a variety of financing sources , including the issuance of equity

sources and uses of cash cash , restricted cash and cash equivalents were approximately $ 11.3 million and $ 11.9 million at december 31 , 2011 and 2010 , respectively . the $ 0.6 million decrease at december 31 , 2011 was primarily due to a combination of a loss from operations of $ 11.7 million , of which $ 3.0 million were noncash , substantially offset by net proceeds of $ 5.8 million from a registered direct public offering of common stock and warrants , as well as $ 1.8 million related to the sale of assets in canada . in april , july and november 2010 , we completed various public offerings of common stock and warrants . in november and december 2010 , our outstanding 10 % convertible notes were converted into shares of common stock ( with one note being redeemed for cash ) . operating activities net cash used in operating activities was approximately $ 7.8 million and $ 14.9 million for the years ended december 31 , 2011 and 2010 , respectively . in 2011 , pharmathene received an insurance recovery of $ 1.4 million , which has been recorded as an offset to operating expenses .


 Write a concise suspicious activity report of the following text delimited by triple backquotes. Return your response as a formal report which covers the key points highlighting the location,dates,entity names and account holder information in chronological order of the text.
     ```sources and uses of cash cash , restricted cash and cash equivalents were approximately $ 11.3 million and $ 11.9 million at december 31 , 2011 and 2010 , respectively . the $ 0.6 million decrease at december 31 , 2011 was primarily due to a combination of a loss from operations of $ 11.7 million , of which $ 3.0 million were noncash , substantially offset by net proceeds of $ 5.8 million from a registered direct public offering of common stock and warrants , as well as $ 1.8 million related to the sale of assets in canada . in april , july and november 2010 , we completed various public offerings of common stock and warrants . in november and december 2010 , our outstanding 10 % convertible notes were converted into shares of common stock ( with one note being redeemed for cash ) . operating activities net cash used in operating activities was approximately $ 7.8 million and $ 14.9 million for the years ended december 31 , 2011 and 2010 , respectively . in 2011 , pharmathene received an insurance recovery of $ 1.4 million , which has been recorded as an offset to operating expenses .
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 Suspicious Activity Report : critical accounting policies revenue recognition we generate our revenue from three different types of contractual arrangements : cost-plus-fee contracts , fixed price contracts and cost reimbursable grants . costs consist primarily of actual internal labor charges and external subcontractor costs incurred plus an allocation of applied fringe benefits , overhead and general and administrative expenses as defined in the contract . revenues on cost-plus-fee contracts are recognized in an amount equal to the costs incurred during the period plus an estimate of the applicable fee earned . the estimate of the applicable fee earned is determined by reference to the contract : if the contract defines the fee in terms of risk-based milestones and specifies the fees to be earned upon the completion of each milestone , then the fee is recognized when the related milestones are earned under the “ milestone method of revenue recognition ” . otherwise , we compute fee income earned in a given period by using a proportional performance method based on costs incurred during the period as compared to total estimated project costs and application of the resulting fraction to the total project fee specified in the contract . under the milestone method of revenue recognition , substantive milestone payments , including milestone payments for fees , contained in research and development arrangements under our contracts with the u.s. government are recognized as revenue when : ( i ) the milestones are achieved ; ( ii ) no further performance obligations with respect to the milestone exist ; ( iii ) collection is reasonably assured ; and ( iv ) substantive effort was necessary to achieve the milestone . milestones are considered substantive if all of the following conditions are met : ( 1 ) it is commensurate with either our performance to meet the milestone or the enhancement of the value of the delivered item or items as a result of a specific outcome resulting from our performance to achieve the milestone , ( 2 ) it relates solely to past performance , and ( 3 ) the value of the milestone is reasonable relative to all the deliverables and payment terms ( including other potential milestone consideration ) within the arrangement . if a milestone is deemed not to be substantive , the company recognizes the portion of the milestone payment as revenue that correlates to work already performed ; the remaining portion of the milestone payment is deferred and recognized as revenue as the company completes its performance obligations . for fixed price contracts with the u.s. government without substantive milestones as described above , revenue is recognized under the percentage-of-completion method in accordance with the applicable accounting guidance for long term contracts . the percentage-of completion method recognizes income as the contract progresses ; recognition of revenue and profits generally related to the costs incurred in providing the services required under the contract . the use of the percentage-of completion method depends on the ability to make reasonable dependable estimates . the fact that circumstances may necessitate frequent revision of estimates does not indicate that the estimates are unreliable for the purpose for which they are used . estimating is an integral part of our business activities , and we may have to revise estimates on contracts continually as the work progresses . 39 we analyze each cost reimbursable grant to determine whether we should report such reimbursements as revenue or as an offset to our expenses incurred . in 2011 and 2010 , we recorded approximately $ 0.7 million and $ 2.9 million , respectively , of costs reimbursed by the government as an offset to research and development expenses . our revenue-generating contracts may include multiple elements , including one or more of up-front license fees , research payments , and milestone payments . in these situations , we allocate the total contract price to the multiple elements based on their relative fair values and recognize revenue for each element according to its characteristics . as revenue is recognized in accordance with the terms of the contracts , related amounts are recorded as unbilled accounts receivable , the primary component of “ other receivables ( including unbilled receivables ) ” in our consolidated balance sheets . as specific contract invoices are generated and sent to our customers , invoiced amounts are transferred out of unbilled accounts receivable and into billed accounts receivable . invoicing frequency and payment terms for cost-plus-fee contracts with our customers are defined within each contract , but are typically monthly invoicing with 30 to 60 day payment cycles . at december 31 , 2011 , unbilled accounts receivable were $ 3.0 million . research and development expenses research and development costs are expensed as incurred ; advance payments are deferred and expensed as performance occurs . research and development costs include salaries , facilities expense , overhead expenses , material and supplies , pre-clinical expense , clinical trials and related clinical manufacturing expenses , stock-based compensation expense , contract services and other outside services . share-based payments we have a long-term incentive plan ( the “ ltip ” ) under which options to purchase shares of our common stock may be granted to employees , consultants and directors at a price no less than the quoted market value on the date of grant . the ltip also provides for awards in the form of stock appreciation rights , restricted or unrestricted stock awards , stock-equivalent units or performance-based stock awards . we account for share-based awards to employees and non-employee directors pursuant to fasb asc topic 718 , compensation – stock compensation , which requires that compensation cost resulting from share-based payment transactions be recognized in the financial statements at fair value over the service period . story_separator_special_tag 41 research and development expenses for the years ended december 31 , 2011 and 2010 were attributable to research programs as follows : replace_table_token_3_th for the year ended december 31 , 2011 , research and development expenses increased $ 0.3 million from the prior year . this change was primarily due to the increased technical activity and the achievement of key technical milestones on our sparvax program and the completion of the phase i valortim ® dose escalation clinical trial partially offset by a decrease in development expenses related to the clinical nerve agent protectants program as a result of the december 31 , 2010 shut down of the protexia ® program . general and administrative expenses general and administrative functions include executive management , finance and administration , government affairs and regulations , corporate development , human resources , legal , and compliance . for each function , we may incur expenses such as salaries , supplies and third-party consulting and other external costs and non-cash expenditures such as expense related to stock option and restricted share awards . an allocation of facilities , utilities and other administrative overhead is also included in general and administrative expenses . expenses associated with general and administrative functions were approximately $ 14.3 million and $ 18.0 million for the years ended december 31 , 2011 and 2010 , respectively . the decrease for the year ended december 31 , 2011 from the prior year period was a result of a $ 3.0 million reduction in bad debt expense , a property loss insurance reimbursement of $ 1.4 million partially offset by an increase in non-cash stock compensation expenses as well as taxes and other expenses . the bad debt expenses in 2010 consisted primarily of provisions associated with an invoice to our u.s. government customer for the work at avecia as well as the wind down of the third generation anthrax vaccine program . depreciation and intangible amortization ( including impairment charges ) depreciation and amortization expenses were approximately $ 0.5 million and $ 5.7 million for the years ended december 31 , 2011 and 2010 , respectively . these expenses are lower in 2011 primarily as a result of the impairment charge taken in december 2010 of $ 4.6 million with the closing of our canadian operations . other income ( expense ) other income ( expense ) primarily consists of income on our investments , interest expense on our debt and other financial obligations , changes in market value of our derivative financial instruments , and foreign currency transaction gains or losses . we incurred interest expense of approximately $ 0.1 million and $ 5.9 million for the years ended december 31 , 2011 and 2010 , respectively . interest expense for 2011 primarily relate to the settlement with avecia for termination of a subcontract agreement with that organization . interest expense for 2010 relates primarily to interest on our then-outstanding convertible notes , including the amortization of the debt discount arising from the allocation of fair value to the warrants issued in connection with such notes . in november and december 2010 , our outstanding 10 % convertible notes were converted into shares of common stock ( with one note being redeemed for cash ) . gain on sale of assets held for sale of $ 0.8 million was the result of the sale of land and buildings associated with our canadian operations , which were closed in 2010 . 42 the change in the fair value of our derivative instruments was a decrease of our liability of approximately $ 7.1 million for the year ended december 31 , 2011 compared to an increase of our liability of approximately $ 5.5 million for the year ended december 31 , 2010. the fair value of these derivative instruments is estimated using the black-scholes option pricing model . the decrease in fair value realized as of december 31 , 2011 was primarily the result of the decrease in pharmathene 's stock price from $ 4.23 per share on december 31 , 2010 to $ 1.27 per share on december 31 , 2011. liquidity and capital resources overview our primary cash requirements for 2012 are to fund our operations ( including our research and development programs ) and support our general and administrative activities . our future capital requirements will depend on many factors , including , but not limited to , timing , amount and profitability of sales of st-246 , if any ; the progress of our research and development programs ; the progress of pre-clinical and clinical testing ; the time and cost involved in obtaining regulatory approval ; the cost of filing , prosecuting , defending and enforcing any patent claims and other intellectual property rights ; changes in our existing research relationships ; competing technological and marketing developments ; our ability to establish collaborative arrangements and to enter into licensing agreements and contractual arrangements with others ; and any future change in our business strategy . these cash requirements could change materially as a result of shifts in our business and strategy . during 2011 and the first quarter 2012 , we implemented certain cost reduction activities that we believe will reduce our net operating cash needs for 2012 and 2013 significantly as compared to 2010 and 2011. as a result we currently anticipate that our current cash on hand and collection of accounts receivables at december 31 , 2011 as well as cash to be collected from 2012 contract revenue under contracts currently in place will be sufficient to meet pharmathene 's ongoing expenses and capital requirements through 2012 and into year 2013. since our inception , we have not generated positive cash flows from operations . to bridge the gap between payments made to us under our government contracts and grants and our operating and capital needs , we have had to rely on a variety of financing sources , including the issuance of equity

