section 107 of the jobs act provides that an “ emerging growth company ” can take advantage of the extended transition period provided in section 7 ( a ) ( 2 ) ( b ) of the securities act of 1933 , as amended , or the securities act , for complying with new or revised accounting standards . in other words , an “ emerging growth company ” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies . we are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements provided by the jobs act . subject to certain conditions set forth in the jobs act , as an “ emerging growth company , ” we intend to rely on certain of these exemptions from , without limitation , ( i ) providing an auditor 's attestation report on our system of internal controls over financial reporting pursuant to section 404 ( b ) of the sarbanes-oxley act and ( ii ) complying with any requirement that may be adopted by the public company accounting oversight board ( pcaob ) regarding mandatory audit firm rotation or a supplement to the auditor 's report providing additional information about the audit and the financial statements , known as the auditor discussion and analysis . we will remain an “ emerging growth company ” until the earliest of ( a ) the last day of our fiscal year following the fifth anniversary of the ipo , ( b ) the last day of the first fiscal year in which our annual gross revenues exceed $ 1.07 billion , ( c ) the last day of our fiscal year in which we are deemed to be a “ large accelerated filer ” as defined in rule 12b-2 under the securities exchange act of 1934 , or exchange act ( which would occur if the market value of our equity securities that is held by non-affiliates exceeds $ 700 million as of the last business day of our most recently completed second fiscal quarter ) , or ( d ) the date on which we have issued more than $ 1 billion in nonconvertible debt during the preceding three-year period . 15 for the year ended december 31 , 2018 for the year ended december 31 , 2018 compared to the year ended december 31 , 2017 revenues revenues for the years ended december 31 , 2018 and 2017 were $ 15,289,400 and $ 14,201,836 , respectively , consisted of metal goods and soft goods sold to customers . revenues increased in 2018 over 2017 by $ 1,087,564 , or 7.7 % , primarily due to wide acceptance of our products in the tools industry and receipt of recurring sales orders for metal goods and soft goods from our existing customers and new customers , and introduction and sale of new soft goods products to our customers . cost of goods sold cost of goods sold for the years ended december 31 , 2018 and 2017 was $ 11,794,206 and $ 10,234,838 , respectively . cost of goods sold increased in 2018 over 2017 by $ 1,559,368 or 15.2 % , primarily due to the increase in materials cost of steel and plastics polyester to manufacture metal goods and soft goods and increase in labor cost in china . cost of goods sold as a percentage of revenues in 2018 was 77.1 % as compared to cost of goods sold as a percentage of revenues in 2017 of 72.1 % . we expect to reverse the trend and reduce our cost of goods sold as a percentage of revenue as we achieve operational efficiencies in production and work with automated state of the art factories to manufacture our product lines . operating expenses operating expenses consist of selling , general and administrative expenses , litigation expense , and research and development costs . selling , general and administrative expenses ( the “ sg & a expenses ” ) for the years ended december 31 , 2018 and 2017 were $ 6,937,704 and $ 6,070,868 , respectively . sg & a expenses increased in 2018 over 2017 by $ 866,836 or 14 % , primarily due to hiring additional employees , independent contractors and consultants to grow the company . sg & a expense in 2018 as a percentage of revenues was 45.4 % as compared to sg & a expense in 2017 as a percentage of revenues was 42.7 % . we expect our sg & a expense will continue to increase as the company plans to bring professional management team and staff on board , expend cash to raise capital for new products development , and acquire a new warehouse/storage facility to expand its operations and maintain finished products inventory on hand . litigation expense for the years ended december 31 , 2018 and 2017 was $ 1,192,488 and $ 0 , respectively . litigation expense consisted of a cash award of $ 252,950 and issuance of shares of common stock reflecting 7 % ownership stake in us to edwin minassian in satisfaction of the judgments . we have recorded the litigation expense of $ 1,192,488 and have satisfied the judgments by payment of $ 252,950 and by issuing him shares of common stock reflecting a 7 % ownership stake in us . research and development costs ( the “ r & d ” ) for the years ended december 31 , 2018 and 2017 were $ 1,816,389 and $ 1,675,093 , respectively . story_separator_special_tag however , the company can not assure that it will be able to raise additional capital on acceptable terms , or at all . subject to the foregoing , management believes that the company has sufficient capital and liquidity to fund its operations for at least one year from the date of issuance of the accompanying financial statements . story_separator_special_tag 0 ; text-align : justify `` > on may 2 , 2018 , the company conducted a confidential private placement of its securities in which the company offered to sell a maximum 140,000 units to certain accredited investors , with each such unit consisting of ( i ) one half of a share of the company 's class b convertible preferred stock , par value of $ 0.0001 per share , and ( ii ) one half of a warrant to purchase one half of a share of the company 's common stock , par value $ 0.0001 per share . each unit will be sold at a price of $ 5.00 per unit . each warrant has an initial exercise price of $ 12.00 per share , subject to adjustment , and is exercisable for a period of five years from the date of issuance . the company sold all 140,000 units for gross proceeds of $ 700,000 , and received cash proceeds of $ 587,957 on may 15 , 2018 , net of commissions and fees of $ 74,574 earned by the placement agent on capital raise , $ 33,469 in legal fees , and $ 4,000 in escrow fees . the company issued to the underwriter 3,500 placement agent warrants at their fair value of $ 12,527 . 18 august 2018 financing pursuant to the terms of august 2018 financing , the company executed six ( 6 ) promissory notes , unsecured , with original issuance debt discount of 15 % , for a cumulative principal sum of $ 862,500 on september 4 , 2018. the company promised to pay the note holders the principal sum of $ 862,500 on earlier of ( i ) the third trading day after the closing of the company 's initial public offering , and ( ii ) november 30 , 2018 or such earlier date as these promissory notes are required or permitted to be repaid . on closing of this offering , on september 5 , 2018 , the company received cash proceeds of $ 652,579 , net of commission and fees of $ 62,850 earned by the placement agent on capital raise , $ 30,571 in legal fees , and $ 4,000 in escrow fees . in addition , the company issued to the six note holders 18,750 shares of class b convertible preferred stock valued at $ 120,394 , and 7,500 warrants to the placement agent , valued at their fair value of $ 26,843. on october 19 , 2018 , the holders of these notes agreed to convert all amounts due to them into unregistered class a units at a per unit conversion price equal to 80 % of the per unit purchase price of a class a unit in the company 's initial public offering . initial public offering on november 14 , 2018 , the company consummated its ipo whereby it sold a total of 2,670,000 class a units , each unit consisting of one share of common stock , par value $ 0.0001 per share , and a series a warrant to purchase one share of common stock and a series b warrant to purchase one share of common stock , on an offer price of $ 5.00 for each unit of a share and a series a warrant and a series b warrant ( “ class a unit ” ) . the company received net proceeds from the ipo of $ 12,415,500 after deducting underwriting discounts and commission of $ 934,500. the company incurred $ 743,765 in expenses related to the ipo . $ 3,657,507 of the proceeds were allocated to warrant derivative on our balance sheet as a result of our series b warrant issuance which were deemed to be a derivative liability . november 2018 private transactions concurrent with the closing of the ipo on november 14 , 2018 , the following private transactions were consummated in accordance with the related agreements ( see notes 6 , 7 , 8 and 9 of the financial statements ) , all in transactions exempt from registration under section 4 ( a ) ( 2 ) of the securities act of 1933 , as amended : ( a ) 1,366,768 unregistered class a units were issued upon the conversion of outstanding shares of class b convertible preferred stock at a conversion price of $ 3.50 per class a unit . ( b ) 42,105 unregistered shares of common stock were issued upon conversion of the $ 200,000 principal amount of a promissory note due to an officer at a conversion price of $ 4.75 per share . ( c ) 1,726,678 unregistered class a units were issued upon conversion of outstanding convertible debt instruments ( consisting of all principal amounts and accrued and unpaid interest through the date of the ipo ) at a conversion price of $ 5.00 per unit . ( d ) 136,863 unregistered shares of common stock were issued upon conversion of $ 650,100 of accrued and unpaid salaries to officers and directors at a conversion price of $ 4.75 per share . ( e ) 215,625 unregistered class a units issued upon the conversion of outstanding principal amount of unsecured promissory notes at a conversion price of $ 4.00 per unit . on december 17 , 2018 , pursuant to the underwriting agreement dated november 8 , 2018 , by and between the company and the underwriters , the underwriters agreed to partially exercise the over-allotment option to purchase an additional 25,000 shares of common stock , par value $ 0.0001 , at a price of $ 4.98

cash flows net cash flows used in operating activities for the year ended december 31 , 2018 was $ 8,243,414 , attributable to a net loss of $ 27,651,412 , offset by depreciation expense of $ 120,723 , amortization of original issuance of debt discount and debt issuance cost and non-cash inducement cost for debt conversion of $ 5,278,132 , change in the fair value of warrant derivative of $ 14,336,425 , stock-based litigation settlement expense of $ 939,538 , stock-based compensation expense of $ 557,042 , stock issued in lieu of deferred salaries of $ 650,100 and net increase in operating assets of $ 1,154,073 , and net decrease in liabilities of $ 1,319,889. the company offered cash discounts to its customers and factors to accelerate payments of accounts receivable . in addition , the company negotiated extended payment terms with its suppliers , vendors and related parties to conserve its cash . net cash flows used in operating activities for the year ended december 31 , 2017 was $ 1,429,468 , attributable to net loss of $ 5,941,457 , offset by depreciation expense of $ 119,627 , amortization of original issuance of debt discount and debt issuance cost of $ 1,089,204 , stock-based compensation expense of $ 112,215 , and net increase in operating assets of $ 326,576 , and net increase in liabilities of $ 3,517,519 . 17 there was no net cash used by investing activities for the year ended december 31 , 2018. net cash used by investing activities for the year ended december 31 , 2017 was $ 69,926 , attributable to cash paid for purchase of property and equipment .


 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.
     ```cash flows net cash flows used in operating activities for the year ended december 31 , 2018 was $ 8,243,414 , attributable to a net loss of $ 27,651,412 , offset by depreciation expense of $ 120,723 , amortization of original issuance of debt discount and debt issuance cost and non-cash inducement cost for debt conversion of $ 5,278,132 , change in the fair value of warrant derivative of $ 14,336,425 , stock-based litigation settlement expense of $ 939,538 , stock-based compensation expense of $ 557,042 , stock issued in lieu of deferred salaries of $ 650,100 and net increase in operating assets of $ 1,154,073 , and net decrease in liabilities of $ 1,319,889. the company offered cash discounts to its customers and factors to accelerate payments of accounts receivable . in addition , the company negotiated extended payment terms with its suppliers , vendors and related parties to conserve its cash . net cash flows used in operating activities for the year ended december 31 , 2017 was $ 1,429,468 , attributable to net loss of $ 5,941,457 , offset by depreciation expense of $ 119,627 , amortization of original issuance of debt discount and debt issuance cost of $ 1,089,204 , stock-based compensation expense of $ 112,215 , and net increase in operating assets of $ 326,576 , and net increase in liabilities of $ 3,517,519 . 17 there was no net cash used by investing activities for the year ended december 31 , 2018. net cash used by investing activities for the year ended december 31 , 2017 was $ 69,926 , attributable to cash paid for purchase of property and equipment .
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 Suspicious Activity Report : section 107 of the jobs act provides that an “ emerging growth company ” can take advantage of the extended transition period provided in section 7 ( a ) ( 2 ) ( b ) of the securities act of 1933 , as amended , or the securities act , for complying with new or revised accounting standards . in other words , an “ emerging growth company ” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies . we are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements provided by the jobs act . subject to certain conditions set forth in the jobs act , as an “ emerging growth company , ” we intend to rely on certain of these exemptions from , without limitation , ( i ) providing an auditor 's attestation report on our system of internal controls over financial reporting pursuant to section 404 ( b ) of the sarbanes-oxley act and ( ii ) complying with any requirement that may be adopted by the public company accounting oversight board ( pcaob ) regarding mandatory audit firm rotation or a supplement to the auditor 's report providing additional information about the audit and the financial statements , known as the auditor discussion and analysis . we will remain an “ emerging growth company ” until the earliest of ( a ) the last day of our fiscal year following the fifth anniversary of the ipo , ( b ) the last day of the first fiscal year in which our annual gross revenues exceed $ 1.07 billion , ( c ) the last day of our fiscal year in which we are deemed to be a “ large accelerated filer ” as defined in rule 12b-2 under the securities exchange act of 1934 , or exchange act ( which would occur if the market value of our equity securities that is held by non-affiliates exceeds $ 700 million as of the last business day of our most recently completed second fiscal quarter ) , or ( d ) the date on which we have issued more than $ 1 billion in nonconvertible debt during the preceding three-year period . 15 for the year ended december 31 , 2018 for the year ended december 31 , 2018 compared to the year ended december 31 , 2017 revenues revenues for the years ended december 31 , 2018 and 2017 were $ 15,289,400 and $ 14,201,836 , respectively , consisted of metal goods and soft goods sold to customers . revenues increased in 2018 over 2017 by $ 1,087,564 , or 7.7 % , primarily due to wide acceptance of our products in the tools industry and receipt of recurring sales orders for metal goods and soft goods from our existing customers and new customers , and introduction and sale of new soft goods products to our customers . cost of goods sold cost of goods sold for the years ended december 31 , 2018 and 2017 was $ 11,794,206 and $ 10,234,838 , respectively . cost of goods sold increased in 2018 over 2017 by $ 1,559,368 or 15.2 % , primarily due to the increase in materials cost of steel and plastics polyester to manufacture metal goods and soft goods and increase in labor cost in china . cost of goods sold as a percentage of revenues in 2018 was 77.1 % as compared to cost of goods sold as a percentage of revenues in 2017 of 72.1 % . we expect to reverse the trend and reduce our cost of goods sold as a percentage of revenue as we achieve operational efficiencies in production and work with automated state of the art factories to manufacture our product lines . operating expenses operating expenses consist of selling , general and administrative expenses , litigation expense , and research and development costs . selling , general and administrative expenses ( the “ sg & a expenses ” ) for the years ended december 31 , 2018 and 2017 were $ 6,937,704 and $ 6,070,868 , respectively . sg & a expenses increased in 2018 over 2017 by $ 866,836 or 14 % , primarily due to hiring additional employees , independent contractors and consultants to grow the company . sg & a expense in 2018 as a percentage of revenues was 45.4 % as compared to sg & a expense in 2017 as a percentage of revenues was 42.7 % . we expect our sg & a expense will continue to increase as the company plans to bring professional management team and staff on board , expend cash to raise capital for new products development , and acquire a new warehouse/storage facility to expand its operations and maintain finished products inventory on hand . litigation expense for the years ended december 31 , 2018 and 2017 was $ 1,192,488 and $ 0 , respectively . litigation expense consisted of a cash award of $ 252,950 and issuance of shares of common stock reflecting 7 % ownership stake in us to edwin minassian in satisfaction of the judgments . we have recorded the litigation expense of $ 1,192,488 and have satisfied the judgments by payment of $ 252,950 and by issuing him shares of common stock reflecting a 7 % ownership stake in us . research and development costs ( the “ r & d ” ) for the years ended december 31 , 2018 and 2017 were $ 1,816,389 and $ 1,675,093 , respectively . story_separator_special_tag however , the company can not assure that it will be able to raise additional capital on acceptable terms , or at all . subject to the foregoing , management believes that the company has sufficient capital and liquidity to fund its operations for at least one year from the date of issuance of the accompanying financial statements . story_separator_special_tag 0 ; text-align : justify `` > on may 2 , 2018 , the company conducted a confidential private placement of its securities in which the company offered to sell a maximum 140,000 units to certain accredited investors , with each such unit consisting of ( i ) one half of a share of the company 's class b convertible preferred stock , par value of $ 0.0001 per share , and ( ii ) one half of a warrant to purchase one half of a share of the company 's common stock , par value $ 0.0001 per share . each unit will be sold at a price of $ 5.00 per unit . each warrant has an initial exercise price of $ 12.00 per share , subject to adjustment , and is exercisable for a period of five years from the date of issuance . the company sold all 140,000 units for gross proceeds of $ 700,000 , and received cash proceeds of $ 587,957 on may 15 , 2018 , net of commissions and fees of $ 74,574 earned by the placement agent on capital raise , $ 33,469 in legal fees , and $ 4,000 in escrow fees . the company issued to the underwriter 3,500 placement agent warrants at their fair value of $ 12,527 . 18 august 2018 financing pursuant to the terms of august 2018 financing , the company executed six ( 6 ) promissory notes , unsecured , with original issuance debt discount of 15 % , for a cumulative principal sum of $ 862,500 on september 4 , 2018. the company promised to pay the note holders the principal sum of $ 862,500 on earlier of ( i ) the third trading day after the closing of the company 's initial public offering , and ( ii ) november 30 , 2018 or such earlier date as these promissory notes are required or permitted to be repaid . on closing of this offering , on september 5 , 2018 , the company received cash proceeds of $ 652,579 , net of commission and fees of $ 62,850 earned by the placement agent on capital raise , $ 30,571 in legal fees , and $ 4,000 in escrow fees . in addition , the company issued to the six note holders 18,750 shares of class b convertible preferred stock valued at $ 120,394 , and 7,500 warrants to the placement agent , valued at their fair value of $ 26,843. on october 19 , 2018 , the holders of these notes agreed to convert all amounts due to them into unregistered class a units at a per unit conversion price equal to 80 % of the per unit purchase price of a class a unit in the company 's initial public offering . initial public offering on november 14 , 2018 , the company consummated its ipo whereby it sold a total of 2,670,000 class a units , each unit consisting of one share of common stock , par value $ 0.0001 per share , and a series a warrant to purchase one share of common stock and a series b warrant to purchase one share of common stock , on an offer price of $ 5.00 for each unit of a share and a series a warrant and a series b warrant ( “ class a unit ” ) . the company received net proceeds from the ipo of $ 12,415,500 after deducting underwriting discounts and commission of $ 934,500. the company incurred $ 743,765 in expenses related to the ipo . $ 3,657,507 of the proceeds were allocated to warrant derivative on our balance sheet as a result of our series b warrant issuance which were deemed to be a derivative liability . november 2018 private transactions concurrent with the closing of the ipo on november 14 , 2018 , the following private transactions were consummated in accordance with the related agreements ( see notes 6 , 7 , 8 and 9 of the financial statements ) , all in transactions exempt from registration under section 4 ( a ) ( 2 ) of the securities act of 1933 , as amended : ( a ) 1,366,768 unregistered class a units were issued upon the conversion of outstanding shares of class b convertible preferred stock at a conversion price of $ 3.50 per class a unit . ( b ) 42,105 unregistered shares of common stock were issued upon conversion of the $ 200,000 principal amount of a promissory note due to an officer at a conversion price of $ 4.75 per share . ( c ) 1,726,678 unregistered class a units were issued upon conversion of outstanding convertible debt instruments ( consisting of all principal amounts and accrued and unpaid interest through the date of the ipo ) at a conversion price of $ 5.00 per unit . ( d ) 136,863 unregistered shares of common stock were issued upon conversion of $ 650,100 of accrued and unpaid salaries to officers and directors at a conversion price of $ 4.75 per share . ( e ) 215,625 unregistered class a units issued upon the conversion of outstanding principal amount of unsecured promissory notes at a conversion price of $ 4.00 per unit . on december 17 , 2018 , pursuant to the underwriting agreement dated november 8 , 2018 , by and between the company and the underwriters , the underwriters agreed to partially exercise the over-allotment option to purchase an additional 25,000 shares of common stock , par value $ 0.0001 , at a price of $ 4.98

