” results of operations for the years ended december 31 , 2017 and december 31 , 2016 revenues were $ 16,524,225 for the year ended december 31 , 2017 compared to $ 15,652,168 for the same period in 2016. the increase was primarily a result of a general increase in number of customers , partially offset by a large $ 2.7 million single international order that occurred during the 2016 period . cost of sales . cost of sales was $ 6,290,879 for the year ended december 31 , 2017 compared to $ 5,970,058 for the same period in 2016. the increase is a result of increased costs due to higher sales volume and includes $ 87,749 for the year ended 2017 compared to $ 17,282 for the year ended 2016 , respectively , to cost of sales for inventory reserve allowance to adjust the net realizable carrying value of inventory on hand , offset by reductions in material costs from higher volume purchases and more favorable pricing of raw materials and systems components in 2017 compared to 2016. gross profit . gross profit was $ 10,233,346 for the year ended december 31 , 2017 compared to $ 9,682,110 for the same period in 2016. the gross profit margin was 61.9 % for the years ended december 31 , 2017 and 2016. operating expenses . net operating expense was $ 8,926,829 for the year ended december 31 , 2017 compared to $ 7,555,784 for the same period in 2016 , an increase of $ 1,371,045. the year over year increases were due to expanding staffing levels , annual increases in payroll and benefits for staff of $ 546,046 , sales and marketing expansion of $ 417,000 , new research and development work of $ 200,000 , and it infrastructure upgrades of $ 53,000 , as well as additional costs associated with our becoming a public company , sec registration and up-listing to nasdaq plus increased investor relations totaling $ 170,000. income tax ( benefit ) expense . income tax benefit was ( $ 2,505,292 ) for the year ended december 31 , 2017 , reflecting a reversal of our previously established valuation allowance , partially offset by the effect of a change in the federal income tax rate applied to our deferred tax assets and miscellaneous state income taxes . income tax expense was $ 204,890 for the year ended december 31 , 2016 , reflecting miscellaneous state income taxes . other income ( expense ) . other income ( expense ) was ( $ 549,527 ) for the year ended december 31 , 2017 as compared to $ 26,448 for the year ended december 31 , 2016. the change was primarily attributable to the write-down of our investment in mrec . net income . net income was $ 3,262,282 for the year ended december 31 , 2017 compared to $ 2,050,022 for the same period in 2016. the increase in net income resulted from an increase in revenues and an increase in income tax benefit , partially offset by an increase in operating expenses and an increase in other expense as noted in each respective section . 22 adjusted earnings before interest , taxes , depreciation and amortization ( aebitda ) explanation and use of non-gaap financial measures : earnings before interest , income taxes , depreciation and amortization and before other non-operating costs and income ( “ ebitda ” ) and adjusted ebitda are non-gaap measures . adjusted ebitda also includes non-cash stock option expense . other companies may calculate adjusted ebitda differently . the company calculates its adjusted ebitda to eliminate the impact of certain items it does not consider to be indicative of its performance and its ongoing operations . adjusted ebitda is presented herein because management believes the presentation of adjusted ebitda provides useful information to the company 's investors regarding the company 's financial condition and results of operations and because adjusted ebitda is frequently used by securities analysts , investors and other interested parties in the evaluation of companies in the company 's industry , several of which present ebitda and a form of adjusted ebitda when reporting their results . adjusted ebitda has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of the company 's results as reported under u.s. gaap . adjusted ebitda should not be considered as an alternative for net ( loss ) income , cash flows from operating activities and other consolidated income or cash flows statement data prepared in accordance with u.s. gaap or as a measure of profitability or liquidity . a reconciliation of net income to adjusted ebitda is provided in the following table : replace_table_token_2_th story_separator_special_tag for capitalized labor and overhead . the company routinely evaluates the carrying value of inventory and provides reserves for slow moving or potentially obsolete inventory , when appropriate and reduces inventory to the lower of cost or market to reflect estimated net realizable value . as of december 31 , 2017 and 2016 , inventory reserves were $ 105,031 and $ 17,282 , respectively . investments in other companies minority investments in other companies are accounted for under the cost method of accounting because we do not have the ability to exercise significant influence over the companies ' operations . under the cost method of accounting , investments in private companies are carried at cost and are only adjusted for other-than-temporary declines in fair value and distribution of earnings . management regularly evaluates the recoverability of its investment based on the investee company 's performance and financial position . during the year ended december 31 , 2017 , we recognized an impairment loss of $ 613,241. during the year ended december 31 , 2016 , we did not recognize any losses due to other-than-temporary declines of the value of the investments . story_separator_special_tag if a tax benefit meets this criterion , it is measured and recognized based on the largest amount of benefit that is cumulatively greater than 50 % likely to be realized . management does not believe that there are any uncertain tax positions at december 31 , 2017 or 2016. the company is potentially subject to tax audits for its united states federal and arizona state income tax returns for tax years ended 2015 to 2017 and 2014 to 2017 , respectively ; however , earlier years may be subject to audit under certain circumstances . tax audits by their very nature are often complex and can require several years to complete . the tax cuts and jobs act ( the “ act ” ) was enacted on december 22 , 2017. the act reduces the u.s federal corporate tax rate from 35 % to 21 % . accordingly , the company has modified the value of the deferred tax assets and liabilities including the net operating loss carryover at december 31 , 2017. prior to enactment of the new tax reform , the company had total net deferred tax assets of $ 5,463,000 at december 31 , 2017. taking the new tax reform into consideration , the total net deferred tax assets was $ 2,710,000 at december 31 , 2017. we remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future , which is generally 21 % . however , we are still analyzing certain aspects of the act and refining our calculation , which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts . the amount recorded related to the remeasurement of our deferred tax balance was an expense of $ 1,376,000. the expense is included as a component of income tax expense . stock based compensation the company calculates the cost of awards of equity instruments based on the grant date fair value of the awards using the black-scholes-merton option pricing valuation model , which incorporates various assumptions including volatility , expected term and risk-free interest rates the expected term of the options is the estimated period of time until exercise and is determined using the sec 's safe harbor rules as we do not have sufficient historical experience of similar awards . expected stock price volatility is based on historical volatility of the company 's stock . the risk-free interest rate is based on the implied yield available on united states treasury zero-coupon issues with an equivalent remaining term . the estimated fair value of stock-based compensation awards and other options is amortized on a straight-line basis over the relevant vesting period . as share-based compensation expense is recognized based on awards ultimately expected to vest , it is reduced for estimated forfeitures . the company has elected to recognize forfeitures as they occur rather than estimating them at the time of grant . recent accounting pronouncements in may 2014 , the financial accounting standards board ( “ fasb ” ) issued guidance for revenue recognition for contracts , superseding the previous revenue recognition requirements , along with most existing industry-specific guidance . the guidance requires an entity to review contracts in five steps : 1 ) identify the contract , 2 ) identify performance obligations , 3 ) determine the transaction price , 4 ) allocate the transaction price , and 5 ) recognize revenue . the new standard will result in enhanced disclosures regarding the nature , amount , timing and uncertainty of revenue arising from contracts with customers . in august 2015 , the fasb issued guidance approving a one-year deferral , making the standard effective for reporting periods beginning after december 15 , 2017 , with early adoption permitted only for reporting periods beginning after december 15 , 2016. the adoption of this accounting standard will not have a material impact on the company 's financial position or results of operations . 26 in february 2016 , the fasb issued asu no . 2016-02 – “ leases ( topic 842 ) ” , which requires leases to put most leases on their balance sheets by recognizing lease assets and lease liabilities for those leases classified as operating leases under previous guidance . this asu will be effective for the company on january 1 , 2019 , with early adoption permitted . the company is currently in the process of assessing the impact of this asu on its financial statements . in january 2016 , the fasb issued asu 2016-01 , financial instruments - overall ( subtopic 825-10 ) : recognition and measurement of financial assets and financial liabilities ( “ asu 2016-01 ” ) , which requires that equity investments , except for those accounted for under the equity method or those that result in consolidation of the investee , be measured at fair value , with subsequent changes in fair value recognized in net income . however , an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment , if any , plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer . asu 2016-01 also impacts the presentation and disclosure requirements for financial instruments . asu 2016-01 is effective for public business entities for annual periods , and interim periods within those annual periods , beginning after december 15 , 2017. early adoption is permitted only for certain provisions . as the company wrote-down its investment in modern round to fair value in 2017 , the company believes that the adoption of asu 2016-01 will not have a material impact on its financial statements , however , the company will change from the cost method of accounting . we implemented all new accounting standards that are in effect and that may impact our financial statements . off-balance sheet

liquidity and capital resources . liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements . the company had $ 5,080,445 and $ 3,703,579 cash and cash equivalents as of december 31 , 2017 and 2016 , respectively . working capital was $ 5,710.483 and $ 5,268,654 as of december 31 , 2017 and 2016 , respectively . net cash provided by operating activities was $ 2,652,101 and $ 1,754,880 for the year ended december 31 , 2017 and 2016 , respectively , resulting from an increase in net income and significant changes in working capital . net cash used in investing activities was $ 133,831 and $ 830,334 for the year ended december 31 , 2017 and 2016 , respectively . investing activities in 2017 consisted entirely of purchases of property and equipment , while investing activities in 2016 also including the investment in mrec and the asset purchase of a tool shop . net cash used in financing activities was $ 1,141,404 and $ 537,987 for the year ended december 31 , 2017 and 2016 , respectively . financing activities in 2017 consisted primarily of repurchases of stock options , warrants and treasury stock , while financing activities in 2016 consisted primarily of the repurchase of stock options .


 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 . liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements . the company had $ 5,080,445 and $ 3,703,579 cash and cash equivalents as of december 31 , 2017 and 2016 , respectively . working capital was $ 5,710.483 and $ 5,268,654 as of december 31 , 2017 and 2016 , respectively . net cash provided by operating activities was $ 2,652,101 and $ 1,754,880 for the year ended december 31 , 2017 and 2016 , respectively , resulting from an increase in net income and significant changes in working capital . net cash used in investing activities was $ 133,831 and $ 830,334 for the year ended december 31 , 2017 and 2016 , respectively . investing activities in 2017 consisted entirely of purchases of property and equipment , while investing activities in 2016 also including the investment in mrec and the asset purchase of a tool shop . net cash used in financing activities was $ 1,141,404 and $ 537,987 for the year ended december 31 , 2017 and 2016 , respectively . financing activities in 2017 consisted primarily of repurchases of stock options , warrants and treasury stock , while financing activities in 2016 consisted primarily of the repurchase of stock options .
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 Suspicious Activity Report : ” results of operations for the years ended december 31 , 2017 and december 31 , 2016 revenues were $ 16,524,225 for the year ended december 31 , 2017 compared to $ 15,652,168 for the same period in 2016. the increase was primarily a result of a general increase in number of customers , partially offset by a large $ 2.7 million single international order that occurred during the 2016 period . cost of sales . cost of sales was $ 6,290,879 for the year ended december 31 , 2017 compared to $ 5,970,058 for the same period in 2016. the increase is a result of increased costs due to higher sales volume and includes $ 87,749 for the year ended 2017 compared to $ 17,282 for the year ended 2016 , respectively , to cost of sales for inventory reserve allowance to adjust the net realizable carrying value of inventory on hand , offset by reductions in material costs from higher volume purchases and more favorable pricing of raw materials and systems components in 2017 compared to 2016. gross profit . gross profit was $ 10,233,346 for the year ended december 31 , 2017 compared to $ 9,682,110 for the same period in 2016. the gross profit margin was 61.9 % for the years ended december 31 , 2017 and 2016. operating expenses . net operating expense was $ 8,926,829 for the year ended december 31 , 2017 compared to $ 7,555,784 for the same period in 2016 , an increase of $ 1,371,045. the year over year increases were due to expanding staffing levels , annual increases in payroll and benefits for staff of $ 546,046 , sales and marketing expansion of $ 417,000 , new research and development work of $ 200,000 , and it infrastructure upgrades of $ 53,000 , as well as additional costs associated with our becoming a public company , sec registration and up-listing to nasdaq plus increased investor relations totaling $ 170,000. income tax ( benefit ) expense . income tax benefit was ( $ 2,505,292 ) for the year ended december 31 , 2017 , reflecting a reversal of our previously established valuation allowance , partially offset by the effect of a change in the federal income tax rate applied to our deferred tax assets and miscellaneous state income taxes . income tax expense was $ 204,890 for the year ended december 31 , 2016 , reflecting miscellaneous state income taxes . other income ( expense ) . other income ( expense ) was ( $ 549,527 ) for the year ended december 31 , 2017 as compared to $ 26,448 for the year ended december 31 , 2016. the change was primarily attributable to the write-down of our investment in mrec . net income . net income was $ 3,262,282 for the year ended december 31 , 2017 compared to $ 2,050,022 for the same period in 2016. the increase in net income resulted from an increase in revenues and an increase in income tax benefit , partially offset by an increase in operating expenses and an increase in other expense as noted in each respective section . 22 adjusted earnings before interest , taxes , depreciation and amortization ( aebitda ) explanation and use of non-gaap financial measures : earnings before interest , income taxes , depreciation and amortization and before other non-operating costs and income ( “ ebitda ” ) and adjusted ebitda are non-gaap measures . adjusted ebitda also includes non-cash stock option expense . other companies may calculate adjusted ebitda differently . the company calculates its adjusted ebitda to eliminate the impact of certain items it does not consider to be indicative of its performance and its ongoing operations . adjusted ebitda is presented herein because management believes the presentation of adjusted ebitda provides useful information to the company 's investors regarding the company 's financial condition and results of operations and because adjusted ebitda is frequently used by securities analysts , investors and other interested parties in the evaluation of companies in the company 's industry , several of which present ebitda and a form of adjusted ebitda when reporting their results . adjusted ebitda has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of the company 's results as reported under u.s. gaap . adjusted ebitda should not be considered as an alternative for net ( loss ) income , cash flows from operating activities and other consolidated income or cash flows statement data prepared in accordance with u.s. gaap or as a measure of profitability or liquidity . a reconciliation of net income to adjusted ebitda is provided in the following table : replace_table_token_2_th story_separator_special_tag for capitalized labor and overhead . the company routinely evaluates the carrying value of inventory and provides reserves for slow moving or potentially obsolete inventory , when appropriate and reduces inventory to the lower of cost or market to reflect estimated net realizable value . as of december 31 , 2017 and 2016 , inventory reserves were $ 105,031 and $ 17,282 , respectively . investments in other companies minority investments in other companies are accounted for under the cost method of accounting because we do not have the ability to exercise significant influence over the companies ' operations . under the cost method of accounting , investments in private companies are carried at cost and are only adjusted for other-than-temporary declines in fair value and distribution of earnings . management regularly evaluates the recoverability of its investment based on the investee company 's performance and financial position . during the year ended december 31 , 2017 , we recognized an impairment loss of $ 613,241. during the year ended december 31 , 2016 , we did not recognize any losses due to other-than-temporary declines of the value of the investments . story_separator_special_tag if a tax benefit meets this criterion , it is measured and recognized based on the largest amount of benefit that is cumulatively greater than 50 % likely to be realized . management does not believe that there are any uncertain tax positions at december 31 , 2017 or 2016. the company is potentially subject to tax audits for its united states federal and arizona state income tax returns for tax years ended 2015 to 2017 and 2014 to 2017 , respectively ; however , earlier years may be subject to audit under certain circumstances . tax audits by their very nature are often complex and can require several years to complete . the tax cuts and jobs act ( the “ act ” ) was enacted on december 22 , 2017. the act reduces the u.s federal corporate tax rate from 35 % to 21 % . accordingly , the company has modified the value of the deferred tax assets and liabilities including the net operating loss carryover at december 31 , 2017. prior to enactment of the new tax reform , the company had total net deferred tax assets of $ 5,463,000 at december 31 , 2017. taking the new tax reform into consideration , the total net deferred tax assets was $ 2,710,000 at december 31 , 2017. we remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future , which is generally 21 % . however , we are still analyzing certain aspects of the act and refining our calculation , which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts . the amount recorded related to the remeasurement of our deferred tax balance was an expense of $ 1,376,000. the expense is included as a component of income tax expense . stock based compensation the company calculates the cost of awards of equity instruments based on the grant date fair value of the awards using the black-scholes-merton option pricing valuation model , which incorporates various assumptions including volatility , expected term and risk-free interest rates the expected term of the options is the estimated period of time until exercise and is determined using the sec 's safe harbor rules as we do not have sufficient historical experience of similar awards . expected stock price volatility is based on historical volatility of the company 's stock . the risk-free interest rate is based on the implied yield available on united states treasury zero-coupon issues with an equivalent remaining term . the estimated fair value of stock-based compensation awards and other options is amortized on a straight-line basis over the relevant vesting period . as share-based compensation expense is recognized based on awards ultimately expected to vest , it is reduced for estimated forfeitures . the company has elected to recognize forfeitures as they occur rather than estimating them at the time of grant . recent accounting pronouncements in may 2014 , the financial accounting standards board ( “ fasb ” ) issued guidance for revenue recognition for contracts , superseding the previous revenue recognition requirements , along with most existing industry-specific guidance . the guidance requires an entity to review contracts in five steps : 1 ) identify the contract , 2 ) identify performance obligations , 3 ) determine the transaction price , 4 ) allocate the transaction price , and 5 ) recognize revenue . the new standard will result in enhanced disclosures regarding the nature , amount , timing and uncertainty of revenue arising from contracts with customers . in august 2015 , the fasb issued guidance approving a one-year deferral , making the standard effective for reporting periods beginning after december 15 , 2017 , with early adoption permitted only for reporting periods beginning after december 15 , 2016. the adoption of this accounting standard will not have a material impact on the company 's financial position or results of operations . 26 in february 2016 , the fasb issued asu no . 2016-02 – “ leases ( topic 842 ) ” , which requires leases to put most leases on their balance sheets by recognizing lease assets and lease liabilities for those leases classified as operating leases under previous guidance . this asu will be effective for the company on january 1 , 2019 , with early adoption permitted . the company is currently in the process of assessing the impact of this asu on its financial statements . in january 2016 , the fasb issued asu 2016-01 , financial instruments - overall ( subtopic 825-10 ) : recognition and measurement of financial assets and financial liabilities ( “ asu 2016-01 ” ) , which requires that equity investments , except for those accounted for under the equity method or those that result in consolidation of the investee , be measured at fair value , with subsequent changes in fair value recognized in net income . however , an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment , if any , plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer . asu 2016-01 also impacts the presentation and disclosure requirements for financial instruments . asu 2016-01 is effective for public business entities for annual periods , and interim periods within those annual periods , beginning after december 15 , 2017. early adoption is permitted only for certain provisions . as the company wrote-down its investment in modern round to fair value in 2017 , the company believes that the adoption of asu 2016-01 will not have a material impact on its financial statements , however , the company will change from the cost method of accounting . we implemented all new accounting standards that are in effect and that may impact our financial statements . off-balance sheet

