10 since we shipped our first products in 2002 , the company has evolved into a community of dedicated employees that create , develop , make , market , advertise , and promote products and ideas that allow couples to have a fuller sexual experience of themselves and each other . we are focused on building , developing and marketing our liberator brand of bedroom adventure gear products . since inception , we have spent over $ 8 million in print advertising , building awareness of the liberator brand primarily through magazine advertisements . we now intend to broaden our marketing reach by advertising on selected cable television and radio channels , and through expanded internet advertising . in addition to the liberator shapes , we also produce a line of casual foam-based furniture that we sell under the studio oneup “ jaxx ” brand . these products are produced as a by-product from the manufacturing of liberator products , as we re-purpose the scrap foam created from the cutting of the cushions . the studio oneup products are offered directly to consumers through our web site www.studiooneup.com , to e-merchants under drop-ship agreements where we ship directly to their customers , and to other resellers . we are currently housed in a 140,000 sq . ft. vertically integrated manufacturing facility on eight acres in a suburb of atlanta , georgia . since our first sale in may 2002 , we have grown to include 108 employees , with our products being sold directly to consumers and through hundreds of domestic resellers and on-line affiliates and six international resellers . the following information should be read together with the consolidated financial statements and notes thereto included elsewhere herein . critical accounting policies and estimates our consolidated financial statements included under item 8 in this report have been prepared in accordance with u.s. generally accepted accounting principles ( gaap ) . our significant accounting policies are described in the notes to our consolidated financial statements . the preparation of financial statements in accordance with gaap requires that we make estimates and assumptions that affect the amounts reported in our financial statements and their accompanying notes . we have identified certain policies that we believe are important to the portrayal of our financial condition and results of operations . these policies require the application of significant judgment by our management . we base our estimates on our historical experience , industry standards , and various other assumptions that we believe are reasonable under the circumstances . actual results could differ from these estimates under different assumptions or conditions . an adverse effect on our financial condition , changes in financial condition , and results of operations could occur if circumstances change that alter the various assumptions or conditions used in such estimates or assumptions . our critical accounting policies include those listed below . revenue recognition . to recognize revenue , four basic criteria must be met : 1 ) there is evidence that an arrangement exists ; 2 ) delivery has occurred ; 3 ) the fee is fixed or determinable ; and 4 ) collectability is reasonably assured . revenue from sales transactions where the buyer has the right to return the product is recognized at the time of sale only if ( 1 ) the seller 's price to the buyer is substantially fixed or determinable at the date of sale ; ( 2 ) the buyer has paid the seller , or the buyer is obligated to pay the seller and the obligation is not contingent on resale of the product ; ( 3 ) the buyer 's obligation to the seller would not be changed in the event of theft or physical destruction or damage of the product ; ( 4 ) the buyer acquiring the product for resale has economic substance apart from that provided by the seller ; ( 5 ) the seller does not have significant obligations for future performance to directly bring about resale of the product by the buyer ; and ( 6 ) the amount of future returns can be reasonably estimated . we recognize revenue upon determination that all criteria for revenue recognition have been met . the criteria are usually met at the time title passes to the customer , which usually occurs upon shipment . revenue from shipments where title passes upon delivery is deferred until the shipment has been delivered . net sales are comprised of the total product sales billed during the period plus amounts paid for shipping and handling , less the actual returns , customer allowances , and customer discounts . allowance for doubtful account . we maintain an allowance for doubtful accounts to reflect our estimate of current and past due receivable balances that may not be collected . the allowance for doubtful accounts is based upon our assessment of the collectability of specific customer accounts , the aging of accounts receivable and our history of bad debts . we believe that the allowance for doubtful accounts is adequate to cover anticipated losses in the receivable balance under current conditions . however , significant deterioration in the financial condition of our customers , resulting in an impairment of their ability to make payments , could materially change these expectations and an additional allowance may be required . inventories . we value inventory at the lower of cost or market on an item-by-item basis and establish reserves equal to all or a portion of the related inventory to reflect situations in which the cost of the inventory is not expected to be recovered . this requires us to make estimates regarding the market value of our inventory , including an assessment for excess and obsolete inventory . story_separator_special_tag gross margin as a percentage of sales increased slightly from 30 % for the year ended june 30 , 2009 to 33 % for the year ended june 30 , 2010. the improvement in gross margin was primarily the result of a selling price increase that was implemented in january 2010 in both the direct and wholesale channels . this impact of the price increase was partially offset by more frequent consumer promotions offering “ free ” or significantly reduced shipping and handling , which accounts for the decrease in the other category revenue and gross profit . because product gross profit margins for all products in a given distribution channel are comparable , we analyze and manage our business based on changes in distribution channels and not by product mix . total operating expenses for the year ended june 30 , 2010 were 39 % of net sales , or $ 4,304,656 , compared to 40 % of sales , or $ 4,117,313 , for the year ended june 30 , 2009. operating expenses increased 5 % from fiscal 2009 to fiscal 2010. this increase in operating expenses was primarily the result of a 23 % increase in general and administrative expense which was primarily the result of higher personnel related costs . the increase in general and administrative expense was partially offset by a decrease in advertising and promotion expense of $ 182,358 , or a 21 % decrease . advertising and promotion expenses were reduced during fiscal 2010 as part of a plan to improve the targeting , timing and effectiveness of advertising spending . other income ( expense ) decreased from ( $ 2,586,234 ) to ( $ 409,695 ) in fiscal 2010. expense related to the issuance of the convertible note payable to acquire majority control of wes consulting , inc. during the first quarter of fiscal 2010 totaled $ 192,167. this item consists of the discounted face value of the $ 250,000 convertible note payable to hope capital , which is net of the value of the embedded derivative . interest expense and financing costs during fiscal 2010 decreased by 29 % from $ 314,719 in fiscal 2009 to $ 222,071 in fiscal 2010. the decrease was primarily the result of lower interest rates on lower average interest bearing debt balances . no expense or benefit from income taxes was recorded in the twelve months ended june 30 , 2010 or 2009. we do not expect any u.s. federal or state income taxes to be recorded for the current fiscal year because of available net operating loss carry-forwards . we had a net loss of $ 1,033,952 , or ( $ 0.02 ) per diluted share , for the twelve months ended june 30 , 2010 compared with a net loss of $ 3,587,103 , or $ ( 0.07 ) per diluted share , for the twelve months ended june 30 , 2009. story_separator_special_tag plan to reduce discretionary expense levels to be better in line with current revenue levels . furthermore , our plan of operation in the next twelve months continues a strategy for growth within our existing lines of business with an on-going focus on growing domestic sales . we estimate that the operational and strategic development plans we have identified will require approximately $ 2,300,000 of funding . we expect to invest approximately $ 500,000 for additional inventory of sexual wellness products and $ 1,800,000 on sales and marketing programs , primarily sexual wellness advertising in magazines and on cable television . we will also be exploring the opportunity to acquire other compatible businesses . 14 we plan to finance the required $ 2,300,000 with a combination of cash flow from operations as well as cash on hand and cash raised through equity and debt financings . if our business plans and cost estimates are inaccurate and our operations require additional cash or if we deviate from our current plans , we could be required to seek debt financing for particular projects or for ongoing operational needs . this indebtedness could harm our business if we are unable to obtain additional financing on reasonable terms . in addition , any indebtedness we incur in the future could subject us to restrictive covenants limiting our flexibility in planning for , or reacting to changes in , our business . if we do not comply with such covenants , our lenders could accelerate repayment of our debt or restrict our access to further borrowings , which in turn could restrict our operating flexibility and endanger our ability to continue operations . off-balance sheet arrangements as of june 30 , 2010 , we did not have any significant off-balance sheet debt nor did we have any transactions , arrangements , obligations ( including contingent obligations ) or other relationships with any unconsolidated entities or other persons that have or are reasonably likely to have a material current or future effect on our financial condition , changes in financial condition , results of operations , liquidity , capital expenditures , capital resources , or significant components of revenue or expenses material to investors . inflation during early fiscal 2009 , we experienced increases in various product raw material costs , transportation costs and the cost of petroleum based raw materials and packaging supplies used in our business , which were associated with higher oil and fuel costs . we currently believe petroleum related raw material and product cost pricing pressures have stabilized and will remain relatively constant throughout fiscal 2011 , although there is no assurance this will occur . we do not believe current inflation rates will have a material impact on our future operations or profitability . variability of results we have experienced significant quarterly fluctuations in operating results and anticipate that these fluctuations may continue in future periods . as described in previous paragraphs , operating results have fluctuated as a result of changes in sales levels to consumers and wholesalers ,

liquidity and capital resources our primary sources of liquidity and capital resources are the availability of borrowings under our credit facility and through sales of debt and equity securities . the loss from operations decreased to $ 624,257 during fiscal 2010 as compared to a loss from operations of $ 1,000,869 in the prior fiscal year . at june 30 , 2010 , increases in accounts receivable , consisting primarily of amounts due from our wholesale customers , required $ 216,442 in cash during fiscal 2010 compared to requiring $ 16,710 in fiscal 2009. at june 30 , 2010 , increases in inventory required $ 208,448 in cash during fiscal 2010 compared to $ 552,400 of cash provided in fiscal 2009. the increase in inventory in fiscal 2010 was primarily related to increasing sales demand and management 's continued efforts to reduce delivery lead times to customers . 13 at june 30 , 2010 , decreases in accounts payable required $ 668,707 in cash during fiscal 2010 compared to providing $ 633,674 in cash during fiscal 2009. at june 30 , 2010 , increases in accrued payroll and related expenses provided $ 129,802 in cash compared to $ 16,916 in the prior fiscal year . the increase in accrued payroll and related expenses is primarily due to the timing of the pay day at the end of the fiscal year relative to the end of the pay period and the accrual of $ 76,838 in deferred compensation expense . operating activities required $ 1,661,640 of our cash flow in fiscal 2010. this compares with net cash provided by operating activities of $ 252,097 in fiscal 2009. cash used in investing activities in fiscal 2010 was $ 189,178 compared to $ 352,392 in fiscal 2009 and consisted of capital expenditures for machinery , equipment and software .


 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.
     ```liquidity and capital resources our primary sources of liquidity and capital resources are the availability of borrowings under our credit facility and through sales of debt and equity securities . the loss from operations decreased to $ 624,257 during fiscal 2010 as compared to a loss from operations of $ 1,000,869 in the prior fiscal year . at june 30 , 2010 , increases in accounts receivable , consisting primarily of amounts due from our wholesale customers , required $ 216,442 in cash during fiscal 2010 compared to requiring $ 16,710 in fiscal 2009. at june 30 , 2010 , increases in inventory required $ 208,448 in cash during fiscal 2010 compared to $ 552,400 of cash provided in fiscal 2009. the increase in inventory in fiscal 2010 was primarily related to increasing sales demand and management 's continued efforts to reduce delivery lead times to customers . 13 at june 30 , 2010 , decreases in accounts payable required $ 668,707 in cash during fiscal 2010 compared to providing $ 633,674 in cash during fiscal 2009. at june 30 , 2010 , increases in accrued payroll and related expenses provided $ 129,802 in cash compared to $ 16,916 in the prior fiscal year . the increase in accrued payroll and related expenses is primarily due to the timing of the pay day at the end of the fiscal year relative to the end of the pay period and the accrual of $ 76,838 in deferred compensation expense . operating activities required $ 1,661,640 of our cash flow in fiscal 2010. this compares with net cash provided by operating activities of $ 252,097 in fiscal 2009. cash used in investing activities in fiscal 2010 was $ 189,178 compared to $ 352,392 in fiscal 2009 and consisted of capital expenditures for machinery , equipment and software .
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 Suspicious Activity Report : 10 since we shipped our first products in 2002 , the company has evolved into a community of dedicated employees that create , develop , make , market , advertise , and promote products and ideas that allow couples to have a fuller sexual experience of themselves and each other . we are focused on building , developing and marketing our liberator brand of bedroom adventure gear products . since inception , we have spent over $ 8 million in print advertising , building awareness of the liberator brand primarily through magazine advertisements . we now intend to broaden our marketing reach by advertising on selected cable television and radio channels , and through expanded internet advertising . in addition to the liberator shapes , we also produce a line of casual foam-based furniture that we sell under the studio oneup “ jaxx ” brand . these products are produced as a by-product from the manufacturing of liberator products , as we re-purpose the scrap foam created from the cutting of the cushions . the studio oneup products are offered directly to consumers through our web site www.studiooneup.com , to e-merchants under drop-ship agreements where we ship directly to their customers , and to other resellers . we are currently housed in a 140,000 sq . ft. vertically integrated manufacturing facility on eight acres in a suburb of atlanta , georgia . since our first sale in may 2002 , we have grown to include 108 employees , with our products being sold directly to consumers and through hundreds of domestic resellers and on-line affiliates and six international resellers . the following information should be read together with the consolidated financial statements and notes thereto included elsewhere herein . critical accounting policies and estimates our consolidated financial statements included under item 8 in this report have been prepared in accordance with u.s. generally accepted accounting principles ( gaap ) . our significant accounting policies are described in the notes to our consolidated financial statements . the preparation of financial statements in accordance with gaap requires that we make estimates and assumptions that affect the amounts reported in our financial statements and their accompanying notes . we have identified certain policies that we believe are important to the portrayal of our financial condition and results of operations . these policies require the application of significant judgment by our management . we base our estimates on our historical experience , industry standards , and various other assumptions that we believe are reasonable under the circumstances . actual results could differ from these estimates under different assumptions or conditions . an adverse effect on our financial condition , changes in financial condition , and results of operations could occur if circumstances change that alter the various assumptions or conditions used in such estimates or assumptions . our critical accounting policies include those listed below . revenue recognition . to recognize revenue , four basic criteria must be met : 1 ) there is evidence that an arrangement exists ; 2 ) delivery has occurred ; 3 ) the fee is fixed or determinable ; and 4 ) collectability is reasonably assured . revenue from sales transactions where the buyer has the right to return the product is recognized at the time of sale only if ( 1 ) the seller 's price to the buyer is substantially fixed or determinable at the date of sale ; ( 2 ) the buyer has paid the seller , or the buyer is obligated to pay the seller and the obligation is not contingent on resale of the product ; ( 3 ) the buyer 's obligation to the seller would not be changed in the event of theft or physical destruction or damage of the product ; ( 4 ) the buyer acquiring the product for resale has economic substance apart from that provided by the seller ; ( 5 ) the seller does not have significant obligations for future performance to directly bring about resale of the product by the buyer ; and ( 6 ) the amount of future returns can be reasonably estimated . we recognize revenue upon determination that all criteria for revenue recognition have been met . the criteria are usually met at the time title passes to the customer , which usually occurs upon shipment . revenue from shipments where title passes upon delivery is deferred until the shipment has been delivered . net sales are comprised of the total product sales billed during the period plus amounts paid for shipping and handling , less the actual returns , customer allowances , and customer discounts . allowance for doubtful account . we maintain an allowance for doubtful accounts to reflect our estimate of current and past due receivable balances that may not be collected . the allowance for doubtful accounts is based upon our assessment of the collectability of specific customer accounts , the aging of accounts receivable and our history of bad debts . we believe that the allowance for doubtful accounts is adequate to cover anticipated losses in the receivable balance under current conditions . however , significant deterioration in the financial condition of our customers , resulting in an impairment of their ability to make payments , could materially change these expectations and an additional allowance may be required . inventories . we value inventory at the lower of cost or market on an item-by-item basis and establish reserves equal to all or a portion of the related inventory to reflect situations in which the cost of the inventory is not expected to be recovered . this requires us to make estimates regarding the market value of our inventory , including an assessment for excess and obsolete inventory . story_separator_special_tag gross margin as a percentage of sales increased slightly from 30 % for the year ended june 30 , 2009 to 33 % for the year ended june 30 , 2010. the improvement in gross margin was primarily the result of a selling price increase that was implemented in january 2010 in both the direct and wholesale channels . this impact of the price increase was partially offset by more frequent consumer promotions offering “ free ” or significantly reduced shipping and handling , which accounts for the decrease in the other category revenue and gross profit . because product gross profit margins for all products in a given distribution channel are comparable , we analyze and manage our business based on changes in distribution channels and not by product mix . total operating expenses for the year ended june 30 , 2010 were 39 % of net sales , or $ 4,304,656 , compared to 40 % of sales , or $ 4,117,313 , for the year ended june 30 , 2009. operating expenses increased 5 % from fiscal 2009 to fiscal 2010. this increase in operating expenses was primarily the result of a 23 % increase in general and administrative expense which was primarily the result of higher personnel related costs . the increase in general and administrative expense was partially offset by a decrease in advertising and promotion expense of $ 182,358 , or a 21 % decrease . advertising and promotion expenses were reduced during fiscal 2010 as part of a plan to improve the targeting , timing and effectiveness of advertising spending . other income ( expense ) decreased from ( $ 2,586,234 ) to ( $ 409,695 ) in fiscal 2010. expense related to the issuance of the convertible note payable to acquire majority control of wes consulting , inc. during the first quarter of fiscal 2010 totaled $ 192,167. this item consists of the discounted face value of the $ 250,000 convertible note payable to hope capital , which is net of the value of the embedded derivative . interest expense and financing costs during fiscal 2010 decreased by 29 % from $ 314,719 in fiscal 2009 to $ 222,071 in fiscal 2010. the decrease was primarily the result of lower interest rates on lower average interest bearing debt balances . no expense or benefit from income taxes was recorded in the twelve months ended june 30 , 2010 or 2009. we do not expect any u.s. federal or state income taxes to be recorded for the current fiscal year because of available net operating loss carry-forwards . we had a net loss of $ 1,033,952 , or ( $ 0.02 ) per diluted share , for the twelve months ended june 30 , 2010 compared with a net loss of $ 3,587,103 , or $ ( 0.07 ) per diluted share , for the twelve months ended june 30 , 2009. story_separator_special_tag plan to reduce discretionary expense levels to be better in line with current revenue levels . furthermore , our plan of operation in the next twelve months continues a strategy for growth within our existing lines of business with an on-going focus on growing domestic sales . we estimate that the operational and strategic development plans we have identified will require approximately $ 2,300,000 of funding . we expect to invest approximately $ 500,000 for additional inventory of sexual wellness products and $ 1,800,000 on sales and marketing programs , primarily sexual wellness advertising in magazines and on cable television . we will also be exploring the opportunity to acquire other compatible businesses . 14 we plan to finance the required $ 2,300,000 with a combination of cash flow from operations as well as cash on hand and cash raised through equity and debt financings . if our business plans and cost estimates are inaccurate and our operations require additional cash or if we deviate from our current plans , we could be required to seek debt financing for particular projects or for ongoing operational needs . this indebtedness could harm our business if we are unable to obtain additional financing on reasonable terms . in addition , any indebtedness we incur in the future could subject us to restrictive covenants limiting our flexibility in planning for , or reacting to changes in , our business . if we do not comply with such covenants , our lenders could accelerate repayment of our debt or restrict our access to further borrowings , which in turn could restrict our operating flexibility and endanger our ability to continue operations . off-balance sheet arrangements as of june 30 , 2010 , we did not have any significant off-balance sheet debt nor did we have any transactions , arrangements , obligations ( including contingent obligations ) or other relationships with any unconsolidated entities or other persons that have or are reasonably likely to have a material current or future effect on our financial condition , changes in financial condition , results of operations , liquidity , capital expenditures , capital resources , or significant components of revenue or expenses material to investors . inflation during early fiscal 2009 , we experienced increases in various product raw material costs , transportation costs and the cost of petroleum based raw materials and packaging supplies used in our business , which were associated with higher oil and fuel costs . we currently believe petroleum related raw material and product cost pricing pressures have stabilized and will remain relatively constant throughout fiscal 2011 , although there is no assurance this will occur . we do not believe current inflation rates will have a material impact on our future operations or profitability . variability of results we have experienced significant quarterly fluctuations in operating results and anticipate that these fluctuations may continue in future periods . as described in previous paragraphs , operating results have fluctuated as a result of changes in sales levels to consumers and wholesalers ,

