we base our estimates on historical experience and 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 . revenue recognition effective july 1 , 2018 , we adopted new revenue recognition guidance issued by the fasb related to contracts with customers . under asu 2014-09 , ( topic 606 )  revenue from contracts with customers ,  we recognize revenue from the sales of products and services by applying the following steps : ( 1 ) identify the contract with a customer ; ( 2 ) identify the performance obligations in the contract ; ( 3 ) determine the transaction price ; ( 4 ) allocate the transaction price to each performance obligation in the contract ; and ( 5 ) recognize revenue when each performance obligation is satisfied . we utilized the modified retrospective method of adoption and there was no impact on our financial statements as a result of adopting topic 606 for the year ended june 30 , 2019. we primarily sell finished products and recognize revenue at point of sale or delivery and the timing of revenue recognition has not changed with the adoption of the new guidance . however , we also perform services when we are engaged to design a product for a customer and there is more judgment involved in determining the amount and timing of revenue recognition under those types of contracts . in order to disclose the amount of revenue related to these services , where more judgment is required , we have added nre & prototypes to our net sales table included under management 's discussion and analysis of financial condition and results of operations of this report , which in our prior reports had been reflected in medical device and services . in fiscal 2019 , the revenue from nre and prototypes represents approximately 1 % of total revenue . returns of our product for credit are not material ; accordingly , we do not establish a reserve for product returns at the time of sale . estimated losses on product development services cost and revenue estimates related to the product development service portions of development and supply contracts are reviewed and updated quarterly . an expected loss on development service contracts is recognized immediately in cost of sales . owing to the complexity of many of the contracts we have undertaken , the cost estimation process requires significant judgment . it is based upon the knowledge and experience of our project managers , engineers , and finance professionals . factors that are considered in estimating the cost of work to be completed and ultimate profitability of the fixed price product development portion of development and supply contracts include the nature and complexity of the work to be performed , availability and productivity of labor , the effect of change orders , the availability of materials , performance of subcontractors , and expected costs for specific regulatory approvals . 14 warranties most of our products are sold with a warranty that provides for repairs or replacement of any defective parts for a period , generally one to two years , after the sale . at the time of the sale , we accrue an estimate of the cost of providing the warranty based on prior experience with such factors as return rates and repair costs , which factors are reviewed quarterly . warranty expenses , including changes of estimates , are included in cost of sales in our statements of operations . inventories inventories are stated at the lower of cost ( first-in , first-out method ) or net realizable value . reductions to estimated net realizable value are recorded , and charged to cost of sales , when indicated based on a formula that compares on-hand quantities to both historical usage and estimated demand over the ensuing 12 months from the measurement date . accounts receivable trade receivables are stated at their original invoice amounts , less an allowance for doubtful portions of such accounts . management determines the allowance for doubtful accounts based on facts and circumstances related to specific accounts , and on historical experience related to the age of accounts . trade receivables are written off when deemed uncollectible . recoveries of trade receivables previously reserved are offset against the allowance when received . deferred costs deferred costs reflect costs incurred related to non-recurring engineering services under the terms of the related development and supply contracts . these costs get recorded to cost of sales in the period that the revenue is recognized . investments investments consist of marketable equity securities of publicly held companies . the investments were made to realize a reasonable return , although there is no assurance that positive returns will be realized . investments are marked to market at each measurement date , with unrealized gains and losses , net of income taxes , presented as adjustments to accumulated other comprehensive income or loss . during fiscal 2019 , we invested in the common stock of a public company that is listed on the over-the-counter market and is thinly traded . this investment was subject to an independent valuation as of june 30 , 2019. long-lived assets we review the recoverability of long-lived assets , consisting of equipment and leasehold improvements , when events or changes in circumstances occur that indicate carrying values may not be recoverable . story_separator_special_tag finally , our other revenue decreased $ 357,000 in fiscal 2019 compared to the prior fiscal year due to revenue generated from our fineline and esd divisions of $ 358,000 and $ 10,000 , respectively , in fiscal 2018. due to declining sales of fineline , we sold the division in may 2018. additionally , and as indicated previously , in april 2017 we made a conscious decision to disband our esd division due to poor performance . at june 30 , 2019 , we had a backlog of $ 17.7 million compared with a backlog of $ 12.3 million at june 30 , 2018. our backlog represents firm purchase orders received and acknowledged from our customers and does not include all revenue expected to be generated from existing customer contracts . our entire backlog at june 30 , 2019 is expected to be delivered during fiscal 2020. we have experienced , and may continue to experience , variability in our new order bookings due to , among other reasons , the launch of new products , the timing of customer orders based on end-user demand and customer inventory levels . we do not typically experience seasonal fluctuations in our shipments and revenues . 17 cost of sales and gross margin replace_table_token_6_th cost of sales in fiscal 2019 increased $ 2.9 million , or 20 % , from fiscal 2018 , primarily due to the increase in product costs , consistent with the 21 % increase in net sales . during fiscal 2018 , we accrued $ 83,000 for losses from the development services portion of certain contracts compared to none in fiscal 2019. under-absorption of manufacturing costs decreased by $ 156,000 for fiscal 2019 compared to fiscal 2018 , due primarily to adjustments to our standard labor and overhead rates at the beginning of fiscal 2019 in anticipation of higher manufacturing volumes . costs related to inventory and warranty charges increased $ 48,000 in fiscal 2019 compared to 2018 , due primarily to an accrual in the amount of $ 63,000 for a previously announced product recall related to legacy batteries . operating expenses replace_table_token_7_th selling expenses consist of salaries and other personnel-related expenses related to our business development department , as well as trade show attendance , advertising and marketing expenses , and travel and related costs incurred in generating and maintaining customer relationships . selling expenses increased $ 57,000 , or 16 % , compared to fiscal 2018 , primarily related to increased personnel expenses in the amount of $ 178,000 as well as recruiting expense of $ 40,000 offset by decreases in the amount of $ 156,000 due to the sale of the fineline division during the fourth quarter of fiscal 2018. general and administrative expenses ( g & a ) consist of salaries and other personnel-related expenses for corporate , accounting , finance and human resource personnel , as well as costs for outsourced information technology services , professional fees , directors ' fees and costs associated with being a public company . the $ 205,000 increase in g & a expenses from fiscal 2018 to 2019 is due primarily to $ 120,000 in increased fiscal 2019 bonus accruals and $ 59,000 in severance expense . the fiscal 2018 asset impairment charges relate to the impairment of our investment in monogram in the amount of $ 800,000 as well as impairment of goodwill and intangible assets in the amount of $ 229,000 related to fineline , which was impaired during the second quarter of fiscal 2018 in conjunction with an impairment analysis . research and development costs consist of salaries and other personnel-related costs of our product development and engineering personnel , related professional and consulting fees , and costs related to intellectual property , laboratory usage , materials , and travel and related costs incurred in the development and support of our products . 18 although the majority of our research and development costs relate to sustaining activities related to products we currently manufacture and sell , we have created a product roadmap to develop future products . research and development costs represent between 34 % and 39 % of total operating expenses and are expected to increase in the future as we continue to invest in product development . the amount spent on projects under development is summarized below ( in thousands ) : replace_table_token_8_th  ( 1 ) costs incurred related to customer contracts are included in costs of sales and deferred costs and are not included in research and development costs . other income ( expense ) interest and dividend income our interest and dividend income includes $ 183,000 of interest related to our investment in a hotel through the participation agreement more fully described in note 6 to the financial statements contained elsewhere in this report as well as $ 83,000 of interest and dividend income earned from our interest bearing money market accounts and portfolio of equity investments . gain on sale of investments during the quarter ended december 31 , 2018 , we liquidated one of the stocks in our portfolio of equity investments receiving proceeds of $ 1.9 million and recording a gain on the sale in the amount of $ 356,000. interest expense interest expense consists primarily of interest expense related to the term loan from minnesota bank & trust ( mbt ) described more fully in note 7 to the financial statements contained elsewhere in this report and capital lease obligations for leased equipment . income taxes the effective tax rate for the years ended june 30 , 2019 and 2018 was 24 % and 38 % , respectively . the decrease in the fiscal 2019 effective tax rate is due to the benefit of applying the new federal corporate income tax rate of 21 % to the full fiscal year . the fiscal 2018 rate represents a blended rate for the rates in existence before and after the december 22 , 2017 adoption of

liquidity and capital resources the following table is a summary of our statements of cash flows and cash and working capital as of and for the fiscal years ended june 30 , 2019 and 2018 : replace_table_token_9_th cash flows from operating activities cash provided by operating activities during fiscal 2019 was $ 3.3 million and relates primarily to our net income of $ 4.1 million , non-cash depreciation and amortization in the amount of $ 438,000 and the non-cash decrease in the deferred income taxes of $ 1.4 million , offset by an increase in inventory in the amount of $ 1.8 million due to projected increased sales , and an increase in accounts receivable of $ 1.1 million . cash provided by operating activities during fiscal 2018 relates primarily to our net income of $ 1.6 million and non-cash asset impairment charge of $ 1.0 million , the non-cash decrease in deferred income taxes of $ 391,000 , and non-cash depreciation and amortization and stock compensation expense of $ 557,000 and $ 194,000 , respectively , offset by an increase in inventory in the amount of $ 1.3 million due to projected increased demand from our largest customer . offsetting the use of cash for inventory purchases , our accounts receivable decreased by $ 569,000 and our income taxes payable increased by $ 123,000. cash flows from investing activities net cash used in investing activities in fiscal 2019 was $ 1.2 million . during the 2019 fiscal year , we invested $ 3.0 million in the purchase of marketable equity securities and generated $ 1.9 million in proceeds from sales of marketable equity securities under the direction of the investment committee of our board , made capital expenditures in the amount of $ 1.4 million primarily for manufacturing equipment and collected $ 1.2 million from the loan participation described more fully in note 6 to the financial statements contained elsewhere in this report . net cash used in investing activities in fiscal 2018 was $ 4.1 million and related to the $ 1,150,000 participation agreement and the additional $ 350,000 investment made in monogram .


 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 the following table is a summary of our statements of cash flows and cash and working capital as of and for the fiscal years ended june 30 , 2019 and 2018 : replace_table_token_9_th cash flows from operating activities cash provided by operating activities during fiscal 2019 was $ 3.3 million and relates primarily to our net income of $ 4.1 million , non-cash depreciation and amortization in the amount of $ 438,000 and the non-cash decrease in the deferred income taxes of $ 1.4 million , offset by an increase in inventory in the amount of $ 1.8 million due to projected increased sales , and an increase in accounts receivable of $ 1.1 million . cash provided by operating activities during fiscal 2018 relates primarily to our net income of $ 1.6 million and non-cash asset impairment charge of $ 1.0 million , the non-cash decrease in deferred income taxes of $ 391,000 , and non-cash depreciation and amortization and stock compensation expense of $ 557,000 and $ 194,000 , respectively , offset by an increase in inventory in the amount of $ 1.3 million due to projected increased demand from our largest customer . offsetting the use of cash for inventory purchases , our accounts receivable decreased by $ 569,000 and our income taxes payable increased by $ 123,000. cash flows from investing activities net cash used in investing activities in fiscal 2019 was $ 1.2 million . during the 2019 fiscal year , we invested $ 3.0 million in the purchase of marketable equity securities and generated $ 1.9 million in proceeds from sales of marketable equity securities under the direction of the investment committee of our board , made capital expenditures in the amount of $ 1.4 million primarily for manufacturing equipment and collected $ 1.2 million from the loan participation described more fully in note 6 to the financial statements contained elsewhere in this report . net cash used in investing activities in fiscal 2018 was $ 4.1 million and related to the $ 1,150,000 participation agreement and the additional $ 350,000 investment made in monogram .
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 Suspicious Activity Report : we base our estimates on historical experience and 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 . revenue recognition effective july 1 , 2018 , we adopted new revenue recognition guidance issued by the fasb related to contracts with customers . under asu 2014-09 , ( topic 606 )  revenue from contracts with customers ,  we recognize revenue from the sales of products and services by applying the following steps : ( 1 ) identify the contract with a customer ; ( 2 ) identify the performance obligations in the contract ; ( 3 ) determine the transaction price ; ( 4 ) allocate the transaction price to each performance obligation in the contract ; and ( 5 ) recognize revenue when each performance obligation is satisfied . we utilized the modified retrospective method of adoption and there was no impact on our financial statements as a result of adopting topic 606 for the year ended june 30 , 2019. we primarily sell finished products and recognize revenue at point of sale or delivery and the timing of revenue recognition has not changed with the adoption of the new guidance . however , we also perform services when we are engaged to design a product for a customer and there is more judgment involved in determining the amount and timing of revenue recognition under those types of contracts . in order to disclose the amount of revenue related to these services , where more judgment is required , we have added nre & prototypes to our net sales table included under management 's discussion and analysis of financial condition and results of operations of this report , which in our prior reports had been reflected in medical device and services . in fiscal 2019 , the revenue from nre and prototypes represents approximately 1 % of total revenue . returns of our product for credit are not material ; accordingly , we do not establish a reserve for product returns at the time of sale . estimated losses on product development services cost and revenue estimates related to the product development service portions of development and supply contracts are reviewed and updated quarterly . an expected loss on development service contracts is recognized immediately in cost of sales . owing to the complexity of many of the contracts we have undertaken , the cost estimation process requires significant judgment . it is based upon the knowledge and experience of our project managers , engineers , and finance professionals . factors that are considered in estimating the cost of work to be completed and ultimate profitability of the fixed price product development portion of development and supply contracts include the nature and complexity of the work to be performed , availability and productivity of labor , the effect of change orders , the availability of materials , performance of subcontractors , and expected costs for specific regulatory approvals . 14 warranties most of our products are sold with a warranty that provides for repairs or replacement of any defective parts for a period , generally one to two years , after the sale . at the time of the sale , we accrue an estimate of the cost of providing the warranty based on prior experience with such factors as return rates and repair costs , which factors are reviewed quarterly . warranty expenses , including changes of estimates , are included in cost of sales in our statements of operations . inventories inventories are stated at the lower of cost ( first-in , first-out method ) or net realizable value . reductions to estimated net realizable value are recorded , and charged to cost of sales , when indicated based on a formula that compares on-hand quantities to both historical usage and estimated demand over the ensuing 12 months from the measurement date . accounts receivable trade receivables are stated at their original invoice amounts , less an allowance for doubtful portions of such accounts . management determines the allowance for doubtful accounts based on facts and circumstances related to specific accounts , and on historical experience related to the age of accounts . trade receivables are written off when deemed uncollectible . recoveries of trade receivables previously reserved are offset against the allowance when received . deferred costs deferred costs reflect costs incurred related to non-recurring engineering services under the terms of the related development and supply contracts . these costs get recorded to cost of sales in the period that the revenue is recognized . investments investments consist of marketable equity securities of publicly held companies . the investments were made to realize a reasonable return , although there is no assurance that positive returns will be realized . investments are marked to market at each measurement date , with unrealized gains and losses , net of income taxes , presented as adjustments to accumulated other comprehensive income or loss . during fiscal 2019 , we invested in the common stock of a public company that is listed on the over-the-counter market and is thinly traded . this investment was subject to an independent valuation as of june 30 , 2019. long-lived assets we review the recoverability of long-lived assets , consisting of equipment and leasehold improvements , when events or changes in circumstances occur that indicate carrying values may not be recoverable . story_separator_special_tag finally , our other revenue decreased $ 357,000 in fiscal 2019 compared to the prior fiscal year due to revenue generated from our fineline and esd divisions of $ 358,000 and $ 10,000 , respectively , in fiscal 2018. due to declining sales of fineline , we sold the division in may 2018. additionally , and as indicated previously , in april 2017 we made a conscious decision to disband our esd division due to poor performance . at june 30 , 2019 , we had a backlog of $ 17.7 million compared with a backlog of $ 12.3 million at june 30 , 2018. our backlog represents firm purchase orders received and acknowledged from our customers and does not include all revenue expected to be generated from existing customer contracts . our entire backlog at june 30 , 2019 is expected to be delivered during fiscal 2020. we have experienced , and may continue to experience , variability in our new order bookings due to , among other reasons , the launch of new products , the timing of customer orders based on end-user demand and customer inventory levels . we do not typically experience seasonal fluctuations in our shipments and revenues . 17 cost of sales and gross margin replace_table_token_6_th cost of sales in fiscal 2019 increased $ 2.9 million , or 20 % , from fiscal 2018 , primarily due to the increase in product costs , consistent with the 21 % increase in net sales . during fiscal 2018 , we accrued $ 83,000 for losses from the development services portion of certain contracts compared to none in fiscal 2019. under-absorption of manufacturing costs decreased by $ 156,000 for fiscal 2019 compared to fiscal 2018 , due primarily to adjustments to our standard labor and overhead rates at the beginning of fiscal 2019 in anticipation of higher manufacturing volumes . costs related to inventory and warranty charges increased $ 48,000 in fiscal 2019 compared to 2018 , due primarily to an accrual in the amount of $ 63,000 for a previously announced product recall related to legacy batteries . operating expenses replace_table_token_7_th selling expenses consist of salaries and other personnel-related expenses related to our business development department , as well as trade show attendance , advertising and marketing expenses , and travel and related costs incurred in generating and maintaining customer relationships . selling expenses increased $ 57,000 , or 16 % , compared to fiscal 2018 , primarily related to increased personnel expenses in the amount of $ 178,000 as well as recruiting expense of $ 40,000 offset by decreases in the amount of $ 156,000 due to the sale of the fineline division during the fourth quarter of fiscal 2018. general and administrative expenses ( g & a ) consist of salaries and other personnel-related expenses for corporate , accounting , finance and human resource personnel , as well as costs for outsourced information technology services , professional fees , directors ' fees and costs associated with being a public company . the $ 205,000 increase in g & a expenses from fiscal 2018 to 2019 is due primarily to $ 120,000 in increased fiscal 2019 bonus accruals and $ 59,000 in severance expense . the fiscal 2018 asset impairment charges relate to the impairment of our investment in monogram in the amount of $ 800,000 as well as impairment of goodwill and intangible assets in the amount of $ 229,000 related to fineline , which was impaired during the second quarter of fiscal 2018 in conjunction with an impairment analysis . research and development costs consist of salaries and other personnel-related costs of our product development and engineering personnel , related professional and consulting fees , and costs related to intellectual property , laboratory usage , materials , and travel and related costs incurred in the development and support of our products . 18 although the majority of our research and development costs relate to sustaining activities related to products we currently manufacture and sell , we have created a product roadmap to develop future products . research and development costs represent between 34 % and 39 % of total operating expenses and are expected to increase in the future as we continue to invest in product development . the amount spent on projects under development is summarized below ( in thousands ) : replace_table_token_8_th  ( 1 ) costs incurred related to customer contracts are included in costs of sales and deferred costs and are not included in research and development costs . other income ( expense ) interest and dividend income our interest and dividend income includes $ 183,000 of interest related to our investment in a hotel through the participation agreement more fully described in note 6 to the financial statements contained elsewhere in this report as well as $ 83,000 of interest and dividend income earned from our interest bearing money market accounts and portfolio of equity investments . gain on sale of investments during the quarter ended december 31 , 2018 , we liquidated one of the stocks in our portfolio of equity investments receiving proceeds of $ 1.9 million and recording a gain on the sale in the amount of $ 356,000. interest expense interest expense consists primarily of interest expense related to the term loan from minnesota bank & trust ( mbt ) described more fully in note 7 to the financial statements contained elsewhere in this report and capital lease obligations for leased equipment . income taxes the effective tax rate for the years ended june 30 , 2019 and 2018 was 24 % and 38 % , respectively . the decrease in the fiscal 2019 effective tax rate is due to the benefit of applying the new federal corporate income tax rate of 21 % to the full fiscal year . the fiscal 2018 rate represents a blended rate for the rates in existence before and after the december 22 , 2017 adoption of

