we consider an accounting estimate to be critical to the consolidated financial statements if ( i ) the estimate is complex in nature or requires a high degree of judgment and ( ii ) different estimates and assumptions were used , the results could have a material impact on the consolidated financial statements . on an ongoing basis , we evaluate our estimates and the application of our policies . we base our estimates on historical experience , current conditions and on various other assumptions that we believe are 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 under different assumptions or conditions . we consider our critical accounting policies to be those related to revenue recognition and gross-to-net adjustments , inventory costing and recoverability , recognized loss on purchase commitments , impairment of long-lived assets , milestone rights liability , clinical trial expenses , stock-based compensation and accounting for income taxes . these critical accounting policies are also considered significant accounting policies and are more fully described in note 2 — summary of significant accounting policies of the notes to consolidated financial statements included in part ii , item 8 — financial statements and supplementary data . revenue recognition – net revenue – commercial product sales – on january 1 , 2018 , we adopoted accounting standards codification ( “ asc ” ) topic 606 - revenue from contracts with customers ( “ the new revenue guidance ” ) . we recognize revenue on product sales when the customer obtains control of the company 's product , in an amount that reflects the consideration which the company expects to be entitled in exchange for those goods or services . product revenues are recorded net of applicable reserves for variable consideration , including discounts , rebates , allowances and fees . for further detail refer to note 2 – summary of significant accounting policies . prior to janaury 1 , 2018 , we invoiced our customers upon shipment of afrezza to them and record an accounts receivable , with a corresponding liability for deferred revenue equal to the gross invoice price net of estimated gross-to-net adjustments . we were required to reliably estimate returns in a very narrow range in order to recognize revenue upon shipment . while we can currently estimate returns within a range , it is not sufficiently precise to meet the requirements . accordingly , we defered recognition of revenue and the related estimated discounts and allowances on afrezza product shipments until the right of return no longer existed , which occurs at the earlier of the time afrezza is dispensed through patient prescriptions or expiration of the right of return . through december 31 , 2017 , we recognized revenue based on afrezza prescriptions dispensed , as estimated by syndicated data provided by a third party . we also analyzed additional data points to ensure that such third-party data is reasonable , including data related to inventory movements within the channel and ongoing prescription demand . in addition , the costs of afrezza associated with the deferred revenue were recorded as deferred costs until such time as the related deferred revenue is recognized . as of december 31 , 2017 , prior to the adoption of topic 606 , the ending balance for net deferred revenue , was $ 3.0 million on the company 's consolidated balance sheets , which is presented net of $ 1.5 million in gross-to-net revenue adjustments . 39 revenue recognition – collaborations and ser vices — we enter into licensing or research ag reements under which we license certain rights to our prod uct candidates to third parties or provi de research services to third-parties . the terms of these arrangements may include but are not limited to , payme nt to us of one or more of the following : nonrefundable , up-front license fees ; development , regulatory , and commercial milestone payments ; payments for manufacturing supply services we provide ; and royalties on net sales of licensed products and sublicens es of the rights . as part of the accounting for these arrangements , we must develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract . we use key assumptions to determine the stand-alone sell ing price , which may include development timelines , reimbursement rates for personnel costs , discount rates , and probabilities of technical and regulatory success . given th at significant estimates depend on the development plan , these estimates could change and impact the revenue re cognition . consideration received that does not meet the requirements to satisfy the revenue recognition criteria is recorded as deferred revenue i n the accompanying consol idated balance sheets based on our best estimate of when such revenue will be recognized . current deferred revenue consists of amounts that are expected to be recognized as revenue in the next 12 months . amounts that we expect will not be recognized within the next 12 months are classified as long-term deferred revenue . inventory costing and recoverability — we determine the cost of inventory using the first-in , first-out or fifo method . we capitalize inventory costs associated with our product 's based on judgement that future economic benefits are expected to be realized . inventories are stated at the lower of cost or net realizable value . we analyzed our inventory levels to identify inventory that may expire or has a cost basis in excess of its estimated realizable value . story_separator_special_tag this decrease is due primarily to distribution fees paid to integrated commercialization solutions direct ( “ ics ” ) in 2016 as part of an interim agreement that enabled us to distribute product in all necessary jurisdictions while we obtained the necessary licenses . this agreement was terminated in december 2016 and therefore these fees did not recur in 2017. net revenue from collaborations and services for the year ended december 31 , 2017 decreased by $ 171.7 million from the prior year , primarily because the sanofi license agreement was terminated in 2016 , which resulted in us recognizing previously deferred revenue from sanofi , including upfront and milestone payments . revenue – other for the year ended december 31 , 2017 represents $ 1.7 million from sales of bulk insulin to a third party and $ 0.6 million from a sale of intellectual property . revenue – other for the year ended december 31 , 2016 represents $ 0.9 million from sales of bulk insulin to a third party . expenses the following table provides a comparison of the expense categories for the years ended december 31 , 2017 and 2016 ( dollars in thousands ) : replace_table_token_8_th 44 cost of goods sold includes the costs related to afrezza product dispensed by pharmacies to patients as well as the following costs , which are recorded as expense s in the period in which they are incurred , rather than as a portion of the inventory cost : current year manufacturing costs in excess of costs capitalized into inventory , the impact of an annual revaluation of inventory and deferred costs of commercial sa les to standard cost , write-offs of inventory and deferred costs of commercial sales . the increase in cost of goods sold of $ 0.1 million for the year ended december 31 , 2017 compared to the prior year is primarily due to increases of $ 2.8 million in inventory write- offs related to obsolescence and $ 1.6 million in cost of goods attributable to greater commercial product sales . these increases were offset by a decrease of $ 4.5 million related to a reduction in current year manufacturing costs in excess of costs capitalized into inventory ( resulting from the reduction in work force in the fourth quarter of 2016 ) . costs of revenue - collaboration represents the costs of product manufactured and sold to sanofi , as well as certain direct costs associated with a firm purchase commitment entered into in connection with the collaboration with sanofi for the year ended december 31 , 2016. during the year ended december 31 , 2017 , we did not recognize any collaboration product costs . during the year ended december 31 , 2016 , we recognized $ 33.0 million of collaboration product costs , which consists of $ 13.5 million in afrezza manufacturing costs for product sold to sanofi , and $ 19.5 million related to the cost of bulk insulin sold to sanofi . research and development expenses decreased for the year ended december 31 , 2017 by $ 0.8 million , or 5 % compared with the prior year , primarily due to a $ 3.6 million decrease in research and development workforce costs in the fourth quarter of 2016 and an fda submission fee for label expansion of $ 1.0 million incurred in 2016. these decreases were offset by a $ 2.5 million increase in clinical trial expenses , a $ 0.7 million increase in expenses incurred for research and development related to manufacturing automation and improvements , and a $ 0.2 million increase in travel expenses . selling expenses increased for the year ended december 31 , 2017 by $ 25.1 million , or 119 % , compared to the prior year , primarily due to a full year of marketing afrezza in 2017 using an internal sales force , versus marketing afrezza for a partial year in 2016 using a contracted sales force . this resulted in a $ 16.0 million increase in expense related to the transition and build-out of our internal sales-force , which was offset by a $ 7.7 million decrease in spending on contracted sales efforts . in addition , there was a $ 5.0 million increase in product advertising expense , primarily attributed to television advertisements , a $ 3.9 million increase in expenses for marketing and branding , a $ 3.5 million increase in travel expenses , a $ 1.0 million increase in expenses related to promotional materials , a $ 0.5 million increase in facilities expense , and a $ 0.3 million increase in sponsorship expense . in order to conform to the 2017 presentation above , we reclassified approximately $ 3.6 million of personnel costs related to afrezza medical affair activities from general administrative expenses to selling expenses in 2017 and $ 1.2 million in 2016. this resulted in a change in selling expenses from $ 42.6 million in 2017 and $ 19.9 million in 2016 , as previously reported in our annual report on form 10-k filed on march 6 , 2017 , to $ 46.1 million for the year ended december 31 , 2017 and $ 20.0 million for the year ended december 31 , 2016. general and administrative expense increased for the year ended december 31 , 2017 by $ 2.9 million , or 11 % , compared to the prior year , primarily due to increases in salaries of $ 2.6 million related to new executives hired in late 2016 and 2017 , a $ 1.5 million increase in professional fees , primarily related to recapitalization transactions , a $ 1.4 million increase in expense for consulting services related to accounting , human resources , and business development , a $ 0.7 million increase in expenses for performance bonuses , a $ 0.5 million increase in expenses associated with executive recruitment and relocation , and a $ 0.2 million increase in expenses for software infrastructure . these

liquidity and capital resources to date , we have funded our operations through the sale of equity securities and convertible debt securities , borrowings under the mann group loan arrangement , under which we can no longer borrow as we have used all amounts available for borrowing , borrowings under the facility agreement with deerfield , receipt of upfront , and milestone payments under the sanofi license agreement , and borrowings under the sanofi loan facility which terminated in 2016. as of december 31 , 2018 , we had $ 101.7 million principal amount of outstanding debt , consisting of : $ 18.7 million principal amount of senior convertible notes bearing interest at 5.75 % per annum and maturing on october 23 , 2021 , all of which is convertible ; the following amounts under the facility financing obligation with deerfield which are partially convertible as further described below : o $ 9.0 million principal amount due and payable in july 2019 and bearing interest at 9.75 % per annum . interest is payable in cash quarterly in arrears on the last business day of march , june , september and december of each year ; o $ 2.5 million principal amount due and payable in may 2019 and bearing interest at 8.75 % per annum . interest is payable in cash quarterly in arrears on the last business day of march , june , september and december of each year ; and $ 71.5 million principal amount of indebtedness under the mann group loan arrangement bearing interest at a fixed rate of 5.84 % per annum compounded quarterly beginning april 1 , 2018 and maturing on july 1 , 2021 , all of which is convertible at a conversion price per share of $ 4.00. interest is due and payable quarterly in arrears on the first day of each calendar quarter for the preceding quarter , except that interest payments are subject to deferral under a subordination agreement with deerfield until our payment obligations to deerfield have been satisfied in full .


 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 to date , we have funded our operations through the sale of equity securities and convertible debt securities , borrowings under the mann group loan arrangement , under which we can no longer borrow as we have used all amounts available for borrowing , borrowings under the facility agreement with deerfield , receipt of upfront , and milestone payments under the sanofi license agreement , and borrowings under the sanofi loan facility which terminated in 2016. as of december 31 , 2018 , we had $ 101.7 million principal amount of outstanding debt , consisting of : $ 18.7 million principal amount of senior convertible notes bearing interest at 5.75 % per annum and maturing on october 23 , 2021 , all of which is convertible ; the following amounts under the facility financing obligation with deerfield which are partially convertible as further described below : o $ 9.0 million principal amount due and payable in july 2019 and bearing interest at 9.75 % per annum . interest is payable in cash quarterly in arrears on the last business day of march , june , september and december of each year ; o $ 2.5 million principal amount due and payable in may 2019 and bearing interest at 8.75 % per annum . interest is payable in cash quarterly in arrears on the last business day of march , june , september and december of each year ; and $ 71.5 million principal amount of indebtedness under the mann group loan arrangement bearing interest at a fixed rate of 5.84 % per annum compounded quarterly beginning april 1 , 2018 and maturing on july 1 , 2021 , all of which is convertible at a conversion price per share of $ 4.00. interest is due and payable quarterly in arrears on the first day of each calendar quarter for the preceding quarter , except that interest payments are subject to deferral under a subordination agreement with deerfield until our payment obligations to deerfield have been satisfied in full .
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 Suspicious Activity Report : we consider an accounting estimate to be critical to the consolidated financial statements if ( i ) the estimate is complex in nature or requires a high degree of judgment and ( ii ) different estimates and assumptions were used , the results could have a material impact on the consolidated financial statements . on an ongoing basis , we evaluate our estimates and the application of our policies . we base our estimates on historical experience , current conditions and on various other assumptions that we believe are 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 under different assumptions or conditions . we consider our critical accounting policies to be those related to revenue recognition and gross-to-net adjustments , inventory costing and recoverability , recognized loss on purchase commitments , impairment of long-lived assets , milestone rights liability , clinical trial expenses , stock-based compensation and accounting for income taxes . these critical accounting policies are also considered significant accounting policies and are more fully described in note 2 — summary of significant accounting policies of the notes to consolidated financial statements included in part ii , item 8 — financial statements and supplementary data . revenue recognition – net revenue – commercial product sales – on january 1 , 2018 , we adopoted accounting standards codification ( “ asc ” ) topic 606 - revenue from contracts with customers ( “ the new revenue guidance ” ) . we recognize revenue on product sales when the customer obtains control of the company 's product , in an amount that reflects the consideration which the company expects to be entitled in exchange for those goods or services . product revenues are recorded net of applicable reserves for variable consideration , including discounts , rebates , allowances and fees . for further detail refer to note 2 – summary of significant accounting policies . prior to janaury 1 , 2018 , we invoiced our customers upon shipment of afrezza to them and record an accounts receivable , with a corresponding liability for deferred revenue equal to the gross invoice price net of estimated gross-to-net adjustments . we were required to reliably estimate returns in a very narrow range in order to recognize revenue upon shipment . while we can currently estimate returns within a range , it is not sufficiently precise to meet the requirements . accordingly , we defered recognition of revenue and the related estimated discounts and allowances on afrezza product shipments until the right of return no longer existed , which occurs at the earlier of the time afrezza is dispensed through patient prescriptions or expiration of the right of return . through december 31 , 2017 , we recognized revenue based on afrezza prescriptions dispensed , as estimated by syndicated data provided by a third party . we also analyzed additional data points to ensure that such third-party data is reasonable , including data related to inventory movements within the channel and ongoing prescription demand . in addition , the costs of afrezza associated with the deferred revenue were recorded as deferred costs until such time as the related deferred revenue is recognized . as of december 31 , 2017 , prior to the adoption of topic 606 , the ending balance for net deferred revenue , was $ 3.0 million on the company 's consolidated balance sheets , which is presented net of $ 1.5 million in gross-to-net revenue adjustments . 39 revenue recognition – collaborations and ser vices — we enter into licensing or research ag reements under which we license certain rights to our prod uct candidates to third parties or provi de research services to third-parties . the terms of these arrangements may include but are not limited to , payme nt to us of one or more of the following : nonrefundable , up-front license fees ; development , regulatory , and commercial milestone payments ; payments for manufacturing supply services we provide ; and royalties on net sales of licensed products and sublicens es of the rights . as part of the accounting for these arrangements , we must develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract . we use key assumptions to determine the stand-alone sell ing price , which may include development timelines , reimbursement rates for personnel costs , discount rates , and probabilities of technical and regulatory success . given th at significant estimates depend on the development plan , these estimates could change and impact the revenue re cognition . consideration received that does not meet the requirements to satisfy the revenue recognition criteria is recorded as deferred revenue i n the accompanying consol idated balance sheets based on our best estimate of when such revenue will be recognized . current deferred revenue consists of amounts that are expected to be recognized as revenue in the next 12 months . amounts that we expect will not be recognized within the next 12 months are classified as long-term deferred revenue . inventory costing and recoverability — we determine the cost of inventory using the first-in , first-out or fifo method . we capitalize inventory costs associated with our product 's based on judgement that future economic benefits are expected to be realized . inventories are stated at the lower of cost or net realizable value . we analyzed our inventory levels to identify inventory that may expire or has a cost basis in excess of its estimated realizable value . story_separator_special_tag this decrease is due primarily to distribution fees paid to integrated commercialization solutions direct ( “ ics ” ) in 2016 as part of an interim agreement that enabled us to distribute product in all necessary jurisdictions while we obtained the necessary licenses . this agreement was terminated in december 2016 and therefore these fees did not recur in 2017. net revenue from collaborations and services for the year ended december 31 , 2017 decreased by $ 171.7 million from the prior year , primarily because the sanofi license agreement was terminated in 2016 , which resulted in us recognizing previously deferred revenue from sanofi , including upfront and milestone payments . revenue – other for the year ended december 31 , 2017 represents $ 1.7 million from sales of bulk insulin to a third party and $ 0.6 million from a sale of intellectual property . revenue – other for the year ended december 31 , 2016 represents $ 0.9 million from sales of bulk insulin to a third party . expenses the following table provides a comparison of the expense categories for the years ended december 31 , 2017 and 2016 ( dollars in thousands ) : replace_table_token_8_th 44 cost of goods sold includes the costs related to afrezza product dispensed by pharmacies to patients as well as the following costs , which are recorded as expense s in the period in which they are incurred , rather than as a portion of the inventory cost : current year manufacturing costs in excess of costs capitalized into inventory , the impact of an annual revaluation of inventory and deferred costs of commercial sa les to standard cost , write-offs of inventory and deferred costs of commercial sales . the increase in cost of goods sold of $ 0.1 million for the year ended december 31 , 2017 compared to the prior year is primarily due to increases of $ 2.8 million in inventory write- offs related to obsolescence and $ 1.6 million in cost of goods attributable to greater commercial product sales . these increases were offset by a decrease of $ 4.5 million related to a reduction in current year manufacturing costs in excess of costs capitalized into inventory ( resulting from the reduction in work force in the fourth quarter of 2016 ) . costs of revenue - collaboration represents the costs of product manufactured and sold to sanofi , as well as certain direct costs associated with a firm purchase commitment entered into in connection with the collaboration with sanofi for the year ended december 31 , 2016. during the year ended december 31 , 2017 , we did not recognize any collaboration product costs . during the year ended december 31 , 2016 , we recognized $ 33.0 million of collaboration product costs , which consists of $ 13.5 million in afrezza manufacturing costs for product sold to sanofi , and $ 19.5 million related to the cost of bulk insulin sold to sanofi . research and development expenses decreased for the year ended december 31 , 2017 by $ 0.8 million , or 5 % compared with the prior year , primarily due to a $ 3.6 million decrease in research and development workforce costs in the fourth quarter of 2016 and an fda submission fee for label expansion of $ 1.0 million incurred in 2016. these decreases were offset by a $ 2.5 million increase in clinical trial expenses , a $ 0.7 million increase in expenses incurred for research and development related to manufacturing automation and improvements , and a $ 0.2 million increase in travel expenses . selling expenses increased for the year ended december 31 , 2017 by $ 25.1 million , or 119 % , compared to the prior year , primarily due to a full year of marketing afrezza in 2017 using an internal sales force , versus marketing afrezza for a partial year in 2016 using a contracted sales force . this resulted in a $ 16.0 million increase in expense related to the transition and build-out of our internal sales-force , which was offset by a $ 7.7 million decrease in spending on contracted sales efforts . in addition , there was a $ 5.0 million increase in product advertising expense , primarily attributed to television advertisements , a $ 3.9 million increase in expenses for marketing and branding , a $ 3.5 million increase in travel expenses , a $ 1.0 million increase in expenses related to promotional materials , a $ 0.5 million increase in facilities expense , and a $ 0.3 million increase in sponsorship expense . in order to conform to the 2017 presentation above , we reclassified approximately $ 3.6 million of personnel costs related to afrezza medical affair activities from general administrative expenses to selling expenses in 2017 and $ 1.2 million in 2016. this resulted in a change in selling expenses from $ 42.6 million in 2017 and $ 19.9 million in 2016 , as previously reported in our annual report on form 10-k filed on march 6 , 2017 , to $ 46.1 million for the year ended december 31 , 2017 and $ 20.0 million for the year ended december 31 , 2016. general and administrative expense increased for the year ended december 31 , 2017 by $ 2.9 million , or 11 % , compared to the prior year , primarily due to increases in salaries of $ 2.6 million related to new executives hired in late 2016 and 2017 , a $ 1.5 million increase in professional fees , primarily related to recapitalization transactions , a $ 1.4 million increase in expense for consulting services related to accounting , human resources , and business development , a $ 0.7 million increase in expenses for performance bonuses , a $ 0.5 million increase in expenses associated with executive recruitment and relocation , and a $ 0.2 million increase in expenses for software infrastructure . these

