if we do update one or more forward-looking statements , no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements . recent developments reverse stock split on january 29 , 2014 , we effected a 1-for-14 reverse stock split of our common stock . no fractional shares of our common stock will be issued as a result of the reverse stock split . in the event the reverse stock split leaves a stockholder with a fraction of a share , the number of shares due to the stockholder will be rounded up to the nearest whole share . unless otherwise indicated , all share and per share numbers set forth in this annual report on form 10-k have been adjusted to give effect to the reverse stock split and are subject to the foregoing adjustments for fractional shares . 20 conversion of promissory notes in exchange for equity securities on december 16 , 2013 , we entered into a note conversion agreement with each of thomas girschweiler , a director and stockholder of the company , and walter villiger , an affiliate of the company . the noteholders hold , as of december 31 , 2013 , an aggregate $ 14.1 million of our indebtedness , including $ 10.6 million principal amount of outstanding promissory notes and approximately $ 3.5 million of accrued and unpaid interest under secured convertible multi-draw term loan facility agreements entered into with each of the noteholders on january 11 , 2008 , which we refer to as the facility agreements . pursuant to the note conversion agreements , the noteholders have agreed to convert the outstanding indebtedness into equity securities on substantially similar terms and in connection with the company 's next offer and sale of its equity for cash ( a “ qualified financing ” ) . the entire outstanding indebtedness of the notes , including all accrued and unpaid interest through the date of the conversion , will convert into substantially identical securities of the company issued in the qualified financing , at a conversion price equal to the per security offering price in the qualified financing in consideration for the cancellation of the entire principal amount of indebtedness and accrued interest thereon , and the release of all related security interests . on february 11 , 2014 , mr. girschweiler and mr. villiger assigned their respective rights and obligations under the promissory notes , the facility agreements and the note conversion agreements to entities wholly-owned and controlled by the noteholders , namely wavi holding ag in the case of mr. villiger and taurus4757 gmbh in the case of mr. girschweiler . nasdaq capital market application on december 16 , 2013 , we filed an application to list our common stock on the nasdaq capital market . we can not assure you that we will be able to comply with the standards necessary in order to obtain a listing of our common stock on the nasdaq capital market . overview management 's discussion and analysis provides additional insight into the company and is provided as a supplement to , and should be read in conjunction with , our audited financial statements and accompanying footnotes thereto . our proprietary hypothermosol® frs , cryostor® , and generic bloodstor® biopreservation media products and savsu® 's precision thermal packaging products are marketed to the biobanking , drug discovery , and regenerative medicine markets , including hospital-based stem cell transplant centers , pharmaceutical companies , cord blood and adult stem cell banks , hair transplant centers , and suppliers of cells to the drug discovery , toxicology testing and diagnostic markets . all of our products are serum-free and protein-free , fully defined , and are manufactured under cgmp using usp/multicompendial or the highest available grade components . our patented biopreservation media products are formulated to reduce preservation-induced , delayed-onset cell damage and death . our platform enabling technology provides our customers significant shelf life extension of biologic source material and final cell products , and also greatly improved post-preservation cell , tissue , and organ viability and function . we believe that our products have been incorporated into the manufacturing , storage , shipping , freezing , and clinical delivery processes of over 100 hospital-approved or clinical trial stage regenerative medicine applications . the discoveries made by our scientists and consultants relate to how cells , tissues , and organs respond to the stress of hypothermic storage , cryopreservation , and the thawing process . these discoveries enabled the formulation of truly innovative biopreservation media products that protect biologic material from preservation-related cellular injury , much of which is not apparent immediately after return to normothermic body temperature . our product formulations have demonstrated remarkable reduction in apoptotic ( programmed ) and necrotic ( pathologic ) cell death mechanisms and are enabling the clinical and commercial development of dozens of innovative regenerative medicine products . 21 our mission we strive to be the leading provider of biopreservation tools for cells , tissues , and organs ; to facilitate basic and applied research and commercialization of new therapies by maintaining the health and function of biologic source material and finished products during the preservation process . our strategies to achieve this objective include : utilize existing sales , distribution and manufacturing infrastructure . extensive network . we have developed a broad direct sales and distribution network for our products which we utilize to expand sales to existing customers and to gain additional customers . highly technical sales team . our sales team is highly trained and are considered thought leaders in the area of biopreservation . we are able to provide highly relevant data and assist our customers with a consultative selling approach . high degree of customer satisfaction . story_separator_special_tag the upfront fee of $ 500,000 was recognized as revenue during 2013 and $ 109,167 in deferred revenue associated with this customer was recognized as all future performance obligations associated with the previous license agreements were cancelled with the agreement signed in the first quarter of 2013. cost of sales . cost of sales consists of raw materials , labor and overhead expenses . cost of sales in 2013 increased compared to 2012 due to the significant increase in sales of both core and contract manufacturing products . gross margin . gross margin as a percentage of revenue increased in 2013 compared to 2012 due primarily to the increase in core product sales , offset by increased contract manufacturing services , which has a higher cost of sales , compared to core product sales . gross margin in 2013 also includes the impact of recognition of significant license revenue during the year with no associated costs . revenue concentration . in 2013 and 2012 , we derived approximately 49 % and 46 % , respectively , of our revenue from our relationship with our contract manufacturing customer , which we commenced deliveries to in the second quarter of 2012. in addition , in 2013 , we derived approximately 14 % of our revenue from one other customer , janssen research & development , llc , which included license revenue and core product revenue . no other customer accounted for more than 10 % of revenue in 2013 or 2012. revenue from customers located in foreign countries represented 9 % and 11 % of total revenue during the years ended december 31 , 2013 and 2012 , respectively . 24 operating expenses our operating expenses for the years ended december 31 , 2013 and 2012 were : replace_table_token_3_th research and development . research and development expenses consist primarily of salaries and other personnel-related expenses , consulting and other outside services , laboratory supplies , and other costs . we expense all research and development costs as incurred . research and development expenses increased in 2013 compared to 2012 due primarily to higher spending on consulting and patent related legal expenses , offset by a reduction in personnel related costs . sales and marketing . sales and marketing expenses consist primarily of salaries , trade association sponsorships , and other personnel-related expenses , consulting , trade shows and advertising . the increase in sales and marketing expenses in 2013 compared to 2012 was primarily due to increased personnel costs related to additions to the sales and marketing team . the additional team members were added to continue focus on our sales and marketing of our core products . general and administrative expenses . general and administrative expenses consist primarily of salaries , bonuses and other personnel-related expenses , non-cash stock-based compensation for administrative personnel and non-employee members of the board of directors , professional fees , such as accounting and legal , corporate insurance and facilities costs . general and administrative expenses were higher in 2013 compared to 2012 due to approximately $ 380,000 in higher corporate costs , including fees for directors , investor relations , shareholder communication and legal fees . general and administrative expenses in 2013 also included higher personnel costs for existing and new team members . other income ( expenses ) interest expense . the increase in interest expense in 2013 compared to 2012 was due to a higher average debt balance . amortization of deferred financing costs . amortization of deferred financing costs represents the cost of warrants issued which are being amortized over the life of the debt . 25 story_separator_special_tag font-weight : bold `` > critical accounting policies and significant judgments and estimates management 's discussion and analysis of our financial condition and results of operations is based on our financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states . the preparation of financial statements requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as reported revenues and expenses during the reporting periods . on an ongoing basis , we evaluate estimates , including , but not limited to those related to accounts receivable allowances , determination of fair value of share-based compensation , contingencies , income taxes , and expense accruals . we base our estimates on historical experience and on other factors that we believes 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 materially from these estimates under different assumptions or conditions . share-based compensation we account for share-based compensation by estimating the fair value of share-based compensation using the black-scholes option pricing model on the date of grant . we utilize assumptions related to stock price volatility , stock option term and forfeiture rates that are based upon both historical factors as well as management 's judgment . non-cash compensation expense is recognized on a straight-line basis over the applicable requisite service period of one to four years , based on the fair value of such share-based awards on the grant date . income taxes we follow the asset and liability method of accounting for income taxes . under this method , deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and on the expected future tax benefits to be derived from net operating loss carryforwards measured using current tax rates . a valuation allowance is established if it is more likely than not that some portion or all of the deferred tax assets will not be realized . we have not recorded any liabilities for uncertain tax positions or any related interest and penalties . our

liquidity and capital resources we have been unable to generate sufficient income from operations in order to meet our operating needs and have an accumulated deficit of approximately $ 57 million at december 31 , 2013. of this amount , approximately $ 19 million has accumulated since the merger of the company in 2002. we believe our current cash and cash provided by operations will satisfy our working capital requirements , debt obligations and capital expenditures for the foreseeable future ; however , we have filed a registration statement with the sec to permit us to conduct a public offering of our common stock and warrants to purchase our common stock . if the public offering is completed , we intend to use the net proceeds thereof for general corporate purposes , including working capital . there can be no assurance that the public offering will be completed . our future capital requirements and the adequacy of our available funds will depend on many factors , including future profitable operations , debt repayment , and competing technological and market developments . our working capital factors , such as inventory turnover and days sales outstanding , fluctuate on a quarterly basis and , on an interim basis during the year , may require an influx of short-term working capital . the company will continuously assess the most appropriate method of financing the company 's short and long term operations .


 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 we have been unable to generate sufficient income from operations in order to meet our operating needs and have an accumulated deficit of approximately $ 57 million at december 31 , 2013. of this amount , approximately $ 19 million has accumulated since the merger of the company in 2002. we believe our current cash and cash provided by operations will satisfy our working capital requirements , debt obligations and capital expenditures for the foreseeable future ; however , we have filed a registration statement with the sec to permit us to conduct a public offering of our common stock and warrants to purchase our common stock . if the public offering is completed , we intend to use the net proceeds thereof for general corporate purposes , including working capital . there can be no assurance that the public offering will be completed . our future capital requirements and the adequacy of our available funds will depend on many factors , including future profitable operations , debt repayment , and competing technological and market developments . our working capital factors , such as inventory turnover and days sales outstanding , fluctuate on a quarterly basis and , on an interim basis during the year , may require an influx of short-term working capital . the company will continuously assess the most appropriate method of financing the company 's short and long term operations .
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 Suspicious Activity Report : if we do update one or more forward-looking statements , no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements . recent developments reverse stock split on january 29 , 2014 , we effected a 1-for-14 reverse stock split of our common stock . no fractional shares of our common stock will be issued as a result of the reverse stock split . in the event the reverse stock split leaves a stockholder with a fraction of a share , the number of shares due to the stockholder will be rounded up to the nearest whole share . unless otherwise indicated , all share and per share numbers set forth in this annual report on form 10-k have been adjusted to give effect to the reverse stock split and are subject to the foregoing adjustments for fractional shares . 20 conversion of promissory notes in exchange for equity securities on december 16 , 2013 , we entered into a note conversion agreement with each of thomas girschweiler , a director and stockholder of the company , and walter villiger , an affiliate of the company . the noteholders hold , as of december 31 , 2013 , an aggregate $ 14.1 million of our indebtedness , including $ 10.6 million principal amount of outstanding promissory notes and approximately $ 3.5 million of accrued and unpaid interest under secured convertible multi-draw term loan facility agreements entered into with each of the noteholders on january 11 , 2008 , which we refer to as the facility agreements . pursuant to the note conversion agreements , the noteholders have agreed to convert the outstanding indebtedness into equity securities on substantially similar terms and in connection with the company 's next offer and sale of its equity for cash ( a “ qualified financing ” ) . the entire outstanding indebtedness of the notes , including all accrued and unpaid interest through the date of the conversion , will convert into substantially identical securities of the company issued in the qualified financing , at a conversion price equal to the per security offering price in the qualified financing in consideration for the cancellation of the entire principal amount of indebtedness and accrued interest thereon , and the release of all related security interests . on february 11 , 2014 , mr. girschweiler and mr. villiger assigned their respective rights and obligations under the promissory notes , the facility agreements and the note conversion agreements to entities wholly-owned and controlled by the noteholders , namely wavi holding ag in the case of mr. villiger and taurus4757 gmbh in the case of mr. girschweiler . nasdaq capital market application on december 16 , 2013 , we filed an application to list our common stock on the nasdaq capital market . we can not assure you that we will be able to comply with the standards necessary in order to obtain a listing of our common stock on the nasdaq capital market . overview management 's discussion and analysis provides additional insight into the company and is provided as a supplement to , and should be read in conjunction with , our audited financial statements and accompanying footnotes thereto . our proprietary hypothermosol® frs , cryostor® , and generic bloodstor® biopreservation media products and savsu® 's precision thermal packaging products are marketed to the biobanking , drug discovery , and regenerative medicine markets , including hospital-based stem cell transplant centers , pharmaceutical companies , cord blood and adult stem cell banks , hair transplant centers , and suppliers of cells to the drug discovery , toxicology testing and diagnostic markets . all of our products are serum-free and protein-free , fully defined , and are manufactured under cgmp using usp/multicompendial or the highest available grade components . our patented biopreservation media products are formulated to reduce preservation-induced , delayed-onset cell damage and death . our platform enabling technology provides our customers significant shelf life extension of biologic source material and final cell products , and also greatly improved post-preservation cell , tissue , and organ viability and function . we believe that our products have been incorporated into the manufacturing , storage , shipping , freezing , and clinical delivery processes of over 100 hospital-approved or clinical trial stage regenerative medicine applications . the discoveries made by our scientists and consultants relate to how cells , tissues , and organs respond to the stress of hypothermic storage , cryopreservation , and the thawing process . these discoveries enabled the formulation of truly innovative biopreservation media products that protect biologic material from preservation-related cellular injury , much of which is not apparent immediately after return to normothermic body temperature . our product formulations have demonstrated remarkable reduction in apoptotic ( programmed ) and necrotic ( pathologic ) cell death mechanisms and are enabling the clinical and commercial development of dozens of innovative regenerative medicine products . 21 our mission we strive to be the leading provider of biopreservation tools for cells , tissues , and organs ; to facilitate basic and applied research and commercialization of new therapies by maintaining the health and function of biologic source material and finished products during the preservation process . our strategies to achieve this objective include : utilize existing sales , distribution and manufacturing infrastructure . extensive network . we have developed a broad direct sales and distribution network for our products which we utilize to expand sales to existing customers and to gain additional customers . highly technical sales team . our sales team is highly trained and are considered thought leaders in the area of biopreservation . we are able to provide highly relevant data and assist our customers with a consultative selling approach . high degree of customer satisfaction . story_separator_special_tag the upfront fee of $ 500,000 was recognized as revenue during 2013 and $ 109,167 in deferred revenue associated with this customer was recognized as all future performance obligations associated with the previous license agreements were cancelled with the agreement signed in the first quarter of 2013. cost of sales . cost of sales consists of raw materials , labor and overhead expenses . cost of sales in 2013 increased compared to 2012 due to the significant increase in sales of both core and contract manufacturing products . gross margin . gross margin as a percentage of revenue increased in 2013 compared to 2012 due primarily to the increase in core product sales , offset by increased contract manufacturing services , which has a higher cost of sales , compared to core product sales . gross margin in 2013 also includes the impact of recognition of significant license revenue during the year with no associated costs . revenue concentration . in 2013 and 2012 , we derived approximately 49 % and 46 % , respectively , of our revenue from our relationship with our contract manufacturing customer , which we commenced deliveries to in the second quarter of 2012. in addition , in 2013 , we derived approximately 14 % of our revenue from one other customer , janssen research & development , llc , which included license revenue and core product revenue . no other customer accounted for more than 10 % of revenue in 2013 or 2012. revenue from customers located in foreign countries represented 9 % and 11 % of total revenue during the years ended december 31 , 2013 and 2012 , respectively . 24 operating expenses our operating expenses for the years ended december 31 , 2013 and 2012 were : replace_table_token_3_th research and development . research and development expenses consist primarily of salaries and other personnel-related expenses , consulting and other outside services , laboratory supplies , and other costs . we expense all research and development costs as incurred . research and development expenses increased in 2013 compared to 2012 due primarily to higher spending on consulting and patent related legal expenses , offset by a reduction in personnel related costs . sales and marketing . sales and marketing expenses consist primarily of salaries , trade association sponsorships , and other personnel-related expenses , consulting , trade shows and advertising . the increase in sales and marketing expenses in 2013 compared to 2012 was primarily due to increased personnel costs related to additions to the sales and marketing team . the additional team members were added to continue focus on our sales and marketing of our core products . general and administrative expenses . general and administrative expenses consist primarily of salaries , bonuses and other personnel-related expenses , non-cash stock-based compensation for administrative personnel and non-employee members of the board of directors , professional fees , such as accounting and legal , corporate insurance and facilities costs . general and administrative expenses were higher in 2013 compared to 2012 due to approximately $ 380,000 in higher corporate costs , including fees for directors , investor relations , shareholder communication and legal fees . general and administrative expenses in 2013 also included higher personnel costs for existing and new team members . other income ( expenses ) interest expense . the increase in interest expense in 2013 compared to 2012 was due to a higher average debt balance . amortization of deferred financing costs . amortization of deferred financing costs represents the cost of warrants issued which are being amortized over the life of the debt . 25 story_separator_special_tag font-weight : bold `` > critical accounting policies and significant judgments and estimates management 's discussion and analysis of our financial condition and results of operations is based on our financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states . the preparation of financial statements requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as reported revenues and expenses during the reporting periods . on an ongoing basis , we evaluate estimates , including , but not limited to those related to accounts receivable allowances , determination of fair value of share-based compensation , contingencies , income taxes , and expense accruals . we base our estimates on historical experience and on other factors that we believes 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 materially from these estimates under different assumptions or conditions . share-based compensation we account for share-based compensation by estimating the fair value of share-based compensation using the black-scholes option pricing model on the date of grant . we utilize assumptions related to stock price volatility , stock option term and forfeiture rates that are based upon both historical factors as well as management 's judgment . non-cash compensation expense is recognized on a straight-line basis over the applicable requisite service period of one to four years , based on the fair value of such share-based awards on the grant date . income taxes we follow the asset and liability method of accounting for income taxes . under this method , deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and on the expected future tax benefits to be derived from net operating loss carryforwards measured using current tax rates . a valuation allowance is established if it is more likely than not that some portion or all of the deferred tax assets will not be realized . we have not recorded any liabilities for uncertain tax positions or any related interest and penalties . our

