if billings for the sale of equipment exceed the amount of contract proceeds allocated to the equipment unit , revenue is deferred . we recognize recurring service revenue over the period the service is performed and revenue from equipment sales at the time equipment is placed in service . we recognize revenue when the following four basic criteria have been met : ( 1 ) persuasive evidence that an arrangement exists , ( 2 ) delivery has occurred or services were rendered , ( 3 ) the fee is either fixed or determinable and ( 4 ) collectability is reasonably assured . amounts billed which do not meet such criteria are deferred until all four criteria have been met . stock-based compensation under the fair value recognition provisions of the authoritative guidance , stock-based compensation cost granted to employees is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service or performance period , which is the vesting period . stock options and warrants issued to consultants and other non-employees as compensation for services to be provided to us are accounted for based upon the fair value of the services provided or the estimated fair value of the option or warrant , whichever can be more clearly determined . we currently use the black-scholes option pricing model to determine the fair value of stock options . the determination of the fair value of stock-based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as assumptions regarding a number of complex and subjective variables . these variables include our expected stock price volatility over the term of the awards , the expected term of the award , the risk-free interest rate and any expected dividends . compensation cost associated with grants of restricted stock units are also measured at fair value . we evaluate the assumptions used to value restricted stock units on a quarterly basis . when factors change , including the market price of the stock , share-based compensation expense may differ significantly from what has been recorded in the past . if there are any modifications or cancellations of the underlying unvested securities , we may be required to accelerate , increase or cancel any remaining unearned share-based compensation expense . income taxes the preparation of consolidated financial statements in conformity with gaap requires management to make estimates and assumptions that affect the reported amount of tax-related assets and liabilities and income tax expense . these estimates and assumptions are based on the requirements of the financial accounting standards board ( “ fasb ” ) accounting standards codification ( “ asc ” ) relating to accounting for uncertainty in income taxes . our policy is to classify interest and penalties related to unrecognized income tax benefits as a component of income tax expense . 11 we assess whether previously unrecognized tax benefits may be recognized when the tax position is ( 1 ) more likely than not of being sustained based on its technical merits , ( 2 ) effectively settled through examination , negotiation or litigation , or ( 3 ) settled through actual expiration of the relevant tax statutes . implementation of this requirement requires the exercise of significant judgment . recognizing deferred tax assets will increase tax benefits and increase net income . impairment of intangible assets we account for goodwill in accordance with fasb 's authoritative guidance which requires that goodwill and certain intangible assets are not amortized , but are subject to an annual impairment test . we complete our goodwill impairment test on an annual basis , during the fourth quarter of our fiscal year , or more frequently , if changes in facts and circumstances indicate that impairment in the value of goodwill recorded on our balance sheet may exist . for purposes of testing the impairment of goodwill , we have one reporting unit . our methodology for testing goodwill impairment consists of one , and possibly two steps . in step one of the goodwill impairment test , we compare our carrying amount ( including goodwill ) of our entity-wide reporting unit and auxilio 's fair value based on market capitalization . we evaluated how this market capitalization measure compared to the performance based multiples of revenue and earnings methods and feel it most accurately reflects the company 's valuation given our recent revenue growth accompanied by losses which causes performance based metrics to portray the company at an unrealistic value . our market capitalization is based on the closing price of our common stock as quoted on the otcbb multiplied by our outstanding shares of common stock . there was no impairment of goodwill as a result of the annual impairment tests completed during the fourth quarters of 2012 and 2011. excluding goodwill , we have no intangible assets deemed to have indefinite lives . at december 31 , 2012 , the fair value of auxilio , based on our market capitalization , was approximately $ 18.8 million , exceeding our book value of negative $ 378,000. the second step of the impairment test , which compares the implied fair value of the goodwill with the book value , was not required since we passed step one . new customer implementation costs we ordinarily incur additional costs to implement our services for new customers . these costs are comprised primarily of additional labor and support , with the efforts going to identify , map and record all existing devices and support arrangements for all subject devices . once this effort is complete , it need not be repeated . this ordinarily takes one to six months to complete , depending on the size of the new customer . story_separator_special_tag these costs are expensed as incurred , and have a negative impact on our statements of operations and cash flows during the implementation phase . derivative liabilities the company 's derivative warrants and additional investment rights liabilities are measured at fair value using the black-scholes valuation model which takes into account , as of the measurement date , factors including the current exercise price , the term of the instrument , the current price of the underlying stock and its expected volatility , expected dividends on the stock and the risk-free interest rate for the term of the item . these derivative liabilities are revalued at each reporting period and changes in fair value are recognized currently in the consolidated statements of operations under the caption “ change in fair value of derivative liabilities . ” the above listing is not intended to be a comprehensive list of all of our accounting policies . in many cases , the accounting treatment of a particular transaction is specifically dictated by gaap , with no need for management 's judgment in its application . there are also areas in which management 's judgment in selecting any available alternative would not produce a materially different result . please see our audited financial statements and notes thereto which begin on page f-1 of this annual report on form 10-k , which contain accounting policies and other disclosures required by gaap and please refer to the disclosures in note 1 of our financial statements for a summary of our significant accounting policies . 12 results of operations year ended december 31 , 2012 compared to the year ended december 31 , 2011 net revenue revenues consist of equipment sales and ongoing service fees . net revenue increased by $ 13,801,402 to $ 35,647,021 for the year ended december 31 , 2012 , as compared to the same period in 2011. service revenue in 2012 totaled approximately $ 30,500,000 compared to approximately $ 19,800,000 in 2011. of this increase , approximately $ 10,700,000 was a result of the addition of eight new recurring revenue contracts between july 2011 and august 2012. another $ 1,000,000 of the increase was due to the expansion of services at existing customers . partially offsetting these increases was a decrease in revenue of approximately $ 700,000 at existing customers , where there was a reduction in unit price and sales volume . we anticipate this trend to continue as we renew our customers ' contracts but anticipate overall revenue growth as a result of the expansion of our customer base . equipment sales for the year ended december 31 , 2012 were approximately $ 5,200,000 as compared to approximately $ 2,100,000 for the same period in 2011. of this increase , approximately $ 3,000,000 was from large copier equipment conversions at three customers , of which approximately $ 1,600,000 was from an arrangement whereby we are contractually limited to billing for the equipment at our cost . we limit our revenue recognition of delivered equipment to the extent of funds received for such equipment , and thus only recognized revenue for equipment to the extent of our direct cost for this contract . cost of revenue cost of revenue consists of document imaging equipment , parts , supplies and salaries expense for field services personnel . cost of revenue was $ 31,018,117 for the year ended december 31 , 2012 , as compared to $ 19,131,257 for the same period in 2011. the increase in the cost of revenue for 2012 is attributed primarily to the addition of eight new recurring revenue contracts between july 2011 and august 2012 and an increase in our operational support costs to prepare for the growth . we incurred approximately $ 3,100,000 in additional staffing and approximately $ 500,000 in additional one-time travel related costs in connection with new staff training and the implementation of new customers . service and supply costs increased by approximately $ 4,900,000 primarily as a result of our new customers . equipment costs , which includes equipment provided under the recurring service contracts and equipment sold , increased by approximately $ 3,300,000 in 2012 , primarily as a result of the increase in copier equipment conversions at our customers ' locations . we expect higher cost of revenues at the start of our engagement with most new customers . in addition to the costs associated with implementing our services , we absorb our new customer 's legacy contracts with third-party vendors . as we implement our programs , we strive to improve upon these legacy contracts thus reduce costs over the term of the contract . we anticipate this trend to continue but anticipate an overall increase in the cost of revenues as a result of the expansion of our customer base . sales and marketing sales and marketing expenses include salaries , commissions and expenses of sales and marketing personnel , travel and entertainment , and other selling and marketing costs . sales and marketing expenses were $ 2,604,783 for the year ended december 31 , 2012 , as compared to $ 1,830,538 for the same period in 2011. we incurred sales commissions to employees totaling approximately $ 490,000 in 2012 compared to $ 130,000 in 2011. also included in sales and marketing costs in 2012 is a non-cash charge of approximately $ 350,000 in connection with restricted stock units granted to channel partners for marketing and placement services . this compares to approximately $ 80,000 paid in 2011 for the same services . general and administrative general and administrative expenses , which include personnel costs for finance , administration , information systems , and general management , as well as facilities expenses , professional fees , and other administrative costs , increased by $ 294,203 to $ 3,654,716 for the year ended december 31 , 2012. salary expense increased approximately $ 300,000 in 2012 and was primarily due to additional office staff needed to handle the increase in

liquidity and capital resources at december 31 , 2012 , our cash and cash equivalents were $ 2,190,972 and our negative working capital was $ 661,457. our principal cash requirements were for operating expenses , including equipment , supplies , employee costs , and capital expenditures and funding of the operations . our primary sources of cash were from service and equipment sale revenues , commercial line of credit borrowings , the exercise of options and warrants and the sale of common stock in compliance with applicable federal and state securities laws . during the year ended december 31 , 2012 , cash used for operating activities was $ 29,601 as compared to $ 2,023,052 for the same period in 2011. the difference in cash from operating activities in 2011 was primarily due to the costs incurred to implement our new recurring revenue contracts , more aggressive sales and marketing efforts to obtain new clients and legal and consulting fees in connection with the development of operational training tools , statutory filings , the drafting and adoption of the new stock incentive plan and investor relations . we expect to continue to establish recurring revenue contracts to new customers throughout 2013. since we expect higher cost of revenues at the start of our engagement with most new customers , we may seek additional financing , which may include debt and or equity financing or funding through third party agreements .


 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 at december 31 , 2012 , our cash and cash equivalents were $ 2,190,972 and our negative working capital was $ 661,457. our principal cash requirements were for operating expenses , including equipment , supplies , employee costs , and capital expenditures and funding of the operations . our primary sources of cash were from service and equipment sale revenues , commercial line of credit borrowings , the exercise of options and warrants and the sale of common stock in compliance with applicable federal and state securities laws . during the year ended december 31 , 2012 , cash used for operating activities was $ 29,601 as compared to $ 2,023,052 for the same period in 2011. the difference in cash from operating activities in 2011 was primarily due to the costs incurred to implement our new recurring revenue contracts , more aggressive sales and marketing efforts to obtain new clients and legal and consulting fees in connection with the development of operational training tools , statutory filings , the drafting and adoption of the new stock incentive plan and investor relations . we expect to continue to establish recurring revenue contracts to new customers throughout 2013. since we expect higher cost of revenues at the start of our engagement with most new customers , we may seek additional financing , which may include debt and or equity financing or funding through third party agreements .
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 Suspicious Activity Report : if billings for the sale of equipment exceed the amount of contract proceeds allocated to the equipment unit , revenue is deferred . we recognize recurring service revenue over the period the service is performed and revenue from equipment sales at the time equipment is placed in service . we recognize revenue when the following four basic criteria have been met : ( 1 ) persuasive evidence that an arrangement exists , ( 2 ) delivery has occurred or services were rendered , ( 3 ) the fee is either fixed or determinable and ( 4 ) collectability is reasonably assured . amounts billed which do not meet such criteria are deferred until all four criteria have been met . stock-based compensation under the fair value recognition provisions of the authoritative guidance , stock-based compensation cost granted to employees is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service or performance period , which is the vesting period . stock options and warrants issued to consultants and other non-employees as compensation for services to be provided to us are accounted for based upon the fair value of the services provided or the estimated fair value of the option or warrant , whichever can be more clearly determined . we currently use the black-scholes option pricing model to determine the fair value of stock options . the determination of the fair value of stock-based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as assumptions regarding a number of complex and subjective variables . these variables include our expected stock price volatility over the term of the awards , the expected term of the award , the risk-free interest rate and any expected dividends . compensation cost associated with grants of restricted stock units are also measured at fair value . we evaluate the assumptions used to value restricted stock units on a quarterly basis . when factors change , including the market price of the stock , share-based compensation expense may differ significantly from what has been recorded in the past . if there are any modifications or cancellations of the underlying unvested securities , we may be required to accelerate , increase or cancel any remaining unearned share-based compensation expense . income taxes the preparation of consolidated financial statements in conformity with gaap requires management to make estimates and assumptions that affect the reported amount of tax-related assets and liabilities and income tax expense . these estimates and assumptions are based on the requirements of the financial accounting standards board ( “ fasb ” ) accounting standards codification ( “ asc ” ) relating to accounting for uncertainty in income taxes . our policy is to classify interest and penalties related to unrecognized income tax benefits as a component of income tax expense . 11 we assess whether previously unrecognized tax benefits may be recognized when the tax position is ( 1 ) more likely than not of being sustained based on its technical merits , ( 2 ) effectively settled through examination , negotiation or litigation , or ( 3 ) settled through actual expiration of the relevant tax statutes . implementation of this requirement requires the exercise of significant judgment . recognizing deferred tax assets will increase tax benefits and increase net income . impairment of intangible assets we account for goodwill in accordance with fasb 's authoritative guidance which requires that goodwill and certain intangible assets are not amortized , but are subject to an annual impairment test . we complete our goodwill impairment test on an annual basis , during the fourth quarter of our fiscal year , or more frequently , if changes in facts and circumstances indicate that impairment in the value of goodwill recorded on our balance sheet may exist . for purposes of testing the impairment of goodwill , we have one reporting unit . our methodology for testing goodwill impairment consists of one , and possibly two steps . in step one of the goodwill impairment test , we compare our carrying amount ( including goodwill ) of our entity-wide reporting unit and auxilio 's fair value based on market capitalization . we evaluated how this market capitalization measure compared to the performance based multiples of revenue and earnings methods and feel it most accurately reflects the company 's valuation given our recent revenue growth accompanied by losses which causes performance based metrics to portray the company at an unrealistic value . our market capitalization is based on the closing price of our common stock as quoted on the otcbb multiplied by our outstanding shares of common stock . there was no impairment of goodwill as a result of the annual impairment tests completed during the fourth quarters of 2012 and 2011. excluding goodwill , we have no intangible assets deemed to have indefinite lives . at december 31 , 2012 , the fair value of auxilio , based on our market capitalization , was approximately $ 18.8 million , exceeding our book value of negative $ 378,000. the second step of the impairment test , which compares the implied fair value of the goodwill with the book value , was not required since we passed step one . new customer implementation costs we ordinarily incur additional costs to implement our services for new customers . these costs are comprised primarily of additional labor and support , with the efforts going to identify , map and record all existing devices and support arrangements for all subject devices . once this effort is complete , it need not be repeated . this ordinarily takes one to six months to complete , depending on the size of the new customer . story_separator_special_tag these costs are expensed as incurred , and have a negative impact on our statements of operations and cash flows during the implementation phase . derivative liabilities the company 's derivative warrants and additional investment rights liabilities are measured at fair value using the black-scholes valuation model which takes into account , as of the measurement date , factors including the current exercise price , the term of the instrument , the current price of the underlying stock and its expected volatility , expected dividends on the stock and the risk-free interest rate for the term of the item . these derivative liabilities are revalued at each reporting period and changes in fair value are recognized currently in the consolidated statements of operations under the caption “ change in fair value of derivative liabilities . ” the above listing is not intended to be a comprehensive list of all of our accounting policies . in many cases , the accounting treatment of a particular transaction is specifically dictated by gaap , with no need for management 's judgment in its application . there are also areas in which management 's judgment in selecting any available alternative would not produce a materially different result . please see our audited financial statements and notes thereto which begin on page f-1 of this annual report on form 10-k , which contain accounting policies and other disclosures required by gaap and please refer to the disclosures in note 1 of our financial statements for a summary of our significant accounting policies . 12 results of operations year ended december 31 , 2012 compared to the year ended december 31 , 2011 net revenue revenues consist of equipment sales and ongoing service fees . net revenue increased by $ 13,801,402 to $ 35,647,021 for the year ended december 31 , 2012 , as compared to the same period in 2011. service revenue in 2012 totaled approximately $ 30,500,000 compared to approximately $ 19,800,000 in 2011. of this increase , approximately $ 10,700,000 was a result of the addition of eight new recurring revenue contracts between july 2011 and august 2012. another $ 1,000,000 of the increase was due to the expansion of services at existing customers . partially offsetting these increases was a decrease in revenue of approximately $ 700,000 at existing customers , where there was a reduction in unit price and sales volume . we anticipate this trend to continue as we renew our customers ' contracts but anticipate overall revenue growth as a result of the expansion of our customer base . equipment sales for the year ended december 31 , 2012 were approximately $ 5,200,000 as compared to approximately $ 2,100,000 for the same period in 2011. of this increase , approximately $ 3,000,000 was from large copier equipment conversions at three customers , of which approximately $ 1,600,000 was from an arrangement whereby we are contractually limited to billing for the equipment at our cost . we limit our revenue recognition of delivered equipment to the extent of funds received for such equipment , and thus only recognized revenue for equipment to the extent of our direct cost for this contract . cost of revenue cost of revenue consists of document imaging equipment , parts , supplies and salaries expense for field services personnel . cost of revenue was $ 31,018,117 for the year ended december 31 , 2012 , as compared to $ 19,131,257 for the same period in 2011. the increase in the cost of revenue for 2012 is attributed primarily to the addition of eight new recurring revenue contracts between july 2011 and august 2012 and an increase in our operational support costs to prepare for the growth . we incurred approximately $ 3,100,000 in additional staffing and approximately $ 500,000 in additional one-time travel related costs in connection with new staff training and the implementation of new customers . service and supply costs increased by approximately $ 4,900,000 primarily as a result of our new customers . equipment costs , which includes equipment provided under the recurring service contracts and equipment sold , increased by approximately $ 3,300,000 in 2012 , primarily as a result of the increase in copier equipment conversions at our customers ' locations . we expect higher cost of revenues at the start of our engagement with most new customers . in addition to the costs associated with implementing our services , we absorb our new customer 's legacy contracts with third-party vendors . as we implement our programs , we strive to improve upon these legacy contracts thus reduce costs over the term of the contract . we anticipate this trend to continue but anticipate an overall increase in the cost of revenues as a result of the expansion of our customer base . sales and marketing sales and marketing expenses include salaries , commissions and expenses of sales and marketing personnel , travel and entertainment , and other selling and marketing costs . sales and marketing expenses were $ 2,604,783 for the year ended december 31 , 2012 , as compared to $ 1,830,538 for the same period in 2011. we incurred sales commissions to employees totaling approximately $ 490,000 in 2012 compared to $ 130,000 in 2011. also included in sales and marketing costs in 2012 is a non-cash charge of approximately $ 350,000 in connection with restricted stock units granted to channel partners for marketing and placement services . this compares to approximately $ 80,000 paid in 2011 for the same services . general and administrative general and administrative expenses , which include personnel costs for finance , administration , information systems , and general management , as well as facilities expenses , professional fees , and other administrative costs , increased by $ 294,203 to $ 3,654,716 for the year ended december 31 , 2012. salary expense increased approximately $ 300,000 in 2012 and was primarily due to additional office staff needed to handle the increase in

