readers are cautioned not to place undue reliance on these forward-looking statements , which speak only as of the date on which they are made . the company undertakes no obligation to update or revise any forward-looking statements . these forward-looking statements include statements of management 's plans and objectives for our future operations and statements of future economic performance , information regarding our expansion and possible results from expansion , our expected growth , our capital budget and future capital requirements , the availability of funds and our ability to meet future capital needs , the realization of our deferred tax assets , and the assumptions described in this report underlying such forward-looking statements . actual results and developments could differ materially from those expressed in or implied by such statements due to a number of factors , including , without limitation , those described in the context of such forward-looking statements , our expansion and acquisition strategy , our ability to achieve operating efficiencies , industry pricing and technology trends , evolving industry standards , regulatory matters , general economic and business conditions , the strength and financial resources of our competitors , our ability to find and retain skilled personnel , the political and economic climate in which we conduct operations and the risk factors described from time to time in our other documents and reports filed with the securities and exchange commission ( the `` commission `` ) . additional factors that could cause actual results to differ materially from the forward-looking statements include , but are not limited to : 1 ) our ability to successfully develop , manufacture and deliver our products on a timely basis and in the prescribed condition ; 2 ) our ability to compete effectively with other companies in the same industry ; 3 ) our ability to raise sufficient capital in order to effectuate our business plan ; and 4 ) our ability to retain our key executives . critical accounting policies our discussion and analysis of our financial condition and results of operations are based on our financial statements , which have been prepared in accordance with u.s. generally accepted accounting principles . the preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods . on an on-going basis , we evaluate our estimates and judgments , including those related to revenue , receivable , inventory , and accrued expenses . we base our estimates on historical experience , known trends and events and various other factors that we believe to be 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 . changes in estimates are recorded in the period in which they become known . we believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements . revenue recognition in accordance with the asc topic 605 , “ revenue recognition ” , the company recognizes revenue when persuasive evidence of an arrangement exists , transfer of title has occurred or services have been rendered , the selling price is fixed or determinable and collectability is reasonably assured . the company 's revenue is principally derived from three primary sources : sales of energy saving flow control equipment , provision of energy project management and sub-contracting services , and provision of energy-saving reconstruction projects . 37 ( a ) sale of products the company derives a majority of its revenues from the sale of energy saving flow control equipment . generally , the energy saving flow control equipment is manufactured and configured to customer requirements . the company typically produces the energy saving flow control equipment for customers during a period from one to six months . when the company completes the production in accordance with the customer 's specification , the customer is required to inspect the finished products for quality and suitability , to its full satisfaction , then the company makes delivery to the customer the company recognizes revenue from the sale of such finished products upon delivery to the customers , when the title and risk of loss are fully transferred to the customers . the company records its revenues , net of value added taxes ( “ vat ” ) . the company is subject to vat which is levied on the majority of the products at the rate of 17 % on the invoiced value of sales . ( b ) service revenue service revenue is derived from energy-saving technical services , project management or sub-contracting services that are not an element of the arrangement for the sale of products . these services are generally billed on a time-cost plus basis , for the period of service which is generally from two to three months . revenue is recognized , net of business taxes when the service is rendered and accepted by the customers . ( c ) interest income interest income is recognized on a time apportionment basis , taking into account the principal amounts outstanding and the interest rates applicable . accounts receivable and allowance for doubtful accounts accounts receivable are recorded at the invoiced amount , do not bear interest and are due within the contractual payment terms , generally 30 to 90 days from shipment . story_separator_special_tag the cost of service revenues decreased by $ 2,681,829 or 50.72 % for the year ended december 31 , 2011 compared to the cost of revenues for the year ended december 31 , 2010. the gross margin for services was $ 1,425,962 and $ 2,541,489 , or 35.37 % and 32.46 % , for the years ended december 31 , 2011 and 2010 , respectively . the increase in gross margin is due to the significant increase in gross margin of energy conservation technology services . cost of projects there was no project revenue for the year ended december 31 , 2011 , therefore there was no cost of projects recognized during the year . operating expenses the total operating expenses were $ 1,454,151 and $ 1,234,597 , or 9.74 % and 4.87 % of total revenues , for the year ended december 31 , 2011 and 2010 , respectively . the total operating expenses increased by $ 219,554 or 17.78 % for the year ended december 31 , 2011 compared to the year ended december 31 , 2010. the increase of operating expenses is primarily due to the company receiving its land use rights for the new facility located in yinzhou district industrial park and starting to pay the land use rights tax . the company also starts to pay the nasdaq listing fees . there was also an increase in legal and professional fees , and ir fees during the year .. sales and marketing expenses the total sales and marketing expenses were $ 101,586 and $ 81,885 , or 0.68 % and 0.32 % of total revenues , for the years ended december 31 , 2011 and 2010 , respectively . the sales and marketing expenses increased by $ 19,701 or 24.06 % . the increase in sales and marketing is due to the increase in traveling expenses incurred by the sales staff in order to explore more business opportunities for the company . general and administrative expenses general and administrative expenses were $ 1,352,565 and $ 1,152,712 , or 9.05 % and 4.54 % of total revenue , for the year ended december 31 , 2011 and 2010 , respectively . the general and administrative expenses increased by $ 199,853 or 17.34 % . the increase in general and administrative expenses was caused by the increase in bank loan guarantee fee , legal and professional fees and investor relations fees . income from operations as a result of the foregoing , our income from operations was $ 2,717,928 or 18.21 % of total revenues , for the year ended december 31 , 2011 , as compared to $ 5,603,175 or 22.08 % of total revenues , for the year ended december 31 , 2010 , a decrease of $ 2,885,247 or 51.49 % . other income ( expenses ) for the year ended december 31 , 2011 , interest income was $ 5,838 as compared to $ 1,007 for the year ended december 31 , 2010. in 2011 , interest expense was $ 375,773 , a decrease of $ 146,880 as compared to $ 522,653 for the year ended december 31 , 2010. the company issued $ 960,000 of convertible notes at beginning of 2010 , which incurred a non-cash interest expenses of $ 396,072 for the year ended december 31 , 2010. the debt discount on convertible notes was fully discount in february 2011 and there was only $ 70,271 non-cash interest expenses for the year 2011 . 44 i ncome tax expenses for the years ended december 31 , 2011 and 2010 , income tax expenses were $ 301,533 and $ 778,765 respectively . the decrease of income tax expenses of $ 477,232 or 61.28 % is due to the decrease in income before tax . nengfa energy is entitled to a two-year exemption from corporate income tax till the year ended december 31 , 2011. the new income tax rate will be 25 % from 2012 onwards . as of december 31 , 2011 , the company 's operations in the united states of america incurred $ 2,660,710 of cumulative net operating losses , which can be carried forward to offset future taxable income . the net operating loss carried forwards begin to expire in 2031 , if unutilized . the company has provided for a full valuation allowance against the deferred tax assets of $ 904,641 on the expected future tax benefits from the net operating loss carried forwards as the management believes it is more likely than not that these assets will not be realized in the future . net income as a result of the foregoing , we recorded net income of $ 2,046,460 , a 13.70 % profit margin on revenue for the year ended december 31 , 2011 , as compared to net income of $ 4,302,764 , a16.96 % profit margin on revenues , for the year ended december 31 , 2010. the net income for the year ended december 31 , 2011 decreased by $ 2,256,304 , a decrease of 52.44 % , compared to the year ended december 31 , 2010. the decrease in net income was mainly due to the increase in operating expenses and the decrease in revenues . story_separator_special_tag times new roman , times , serif ; margin : 0pt 0 ; text-align : justify ; text-indent : 0.5in `` > in november ,2011 , the company obtained another short-term bank borrowing of $ 2,573,871 ( equivalent to rmb 16,350,000 ) , from a commercial bank in china , bank of jilin , due 15 december 2012 , with interest rate at 1.4 times of the bank of china benchmark lending rate , monthly payable , which is guaranteed by mr. gang li ( the company 's ceo ) and a guarantee company in shenyang city , the prc . in november ,2011 , the company obtained a bank note of $ 3,148,466 ( equivalent to rmb 20,000,000 ) from a commercial

liquidity and capital resources operating activities for the year ended december 31 , 2011 , net cash provided by operating activities was $ 2,488,573. this was primarily attributable to our net income of $ 2,046,460 , adjusted by non-cash items of depreciation and amortization of $ 588,278 , reversal of allowance for doubtful account of $ 930 , and non-cash interest expenses of $ 70,271. the increase in cash flow in 2011 were due primarily the decrease in inventories by $ 271,495 , decrease in prepayments and other receivables by $ 393,503 , increase in accounts payable by $ 1,466,017 , and increase in other payables and accrued liabilities by $ 357,650.these were partially off-set by the increase in accounts and retention receivable by $ 2,673,870 ( excluding the non-cash transaction of $ 7,830,649 which represented the prepayment for construction in progress in lieu of accounts receivable ) and $ 32,161 decrease in income tax payable in this year . the decrease in accounts and retention receivable of $ 4 , 589,393 , a decrease of 28.79 % over the accounts and retention receivables balance at december 31 , 2010 are mainly due to the transfer of accounts receivable due from two customers amounting to $ 7.8 million on a non-recourse basis to an independent project management company in the prc as the prepayment for construction cost . 45 the company is highly aware of the risk of default , and as a result , we actively monitor accounts receivable with aging above 1 year and those accounting for about 15 % of the total accounts receivable , thus there is no significant credit risk . the company will consider an allowance for doubtful accounts for any estimated losses resulting from the inability of its customers to make required payments .


 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 operating activities for the year ended december 31 , 2011 , net cash provided by operating activities was $ 2,488,573. this was primarily attributable to our net income of $ 2,046,460 , adjusted by non-cash items of depreciation and amortization of $ 588,278 , reversal of allowance for doubtful account of $ 930 , and non-cash interest expenses of $ 70,271. the increase in cash flow in 2011 were due primarily the decrease in inventories by $ 271,495 , decrease in prepayments and other receivables by $ 393,503 , increase in accounts payable by $ 1,466,017 , and increase in other payables and accrued liabilities by $ 357,650.these were partially off-set by the increase in accounts and retention receivable by $ 2,673,870 ( excluding the non-cash transaction of $ 7,830,649 which represented the prepayment for construction in progress in lieu of accounts receivable ) and $ 32,161 decrease in income tax payable in this year . the decrease in accounts and retention receivable of $ 4 , 589,393 , a decrease of 28.79 % over the accounts and retention receivables balance at december 31 , 2010 are mainly due to the transfer of accounts receivable due from two customers amounting to $ 7.8 million on a non-recourse basis to an independent project management company in the prc as the prepayment for construction cost . 45 the company is highly aware of the risk of default , and as a result , we actively monitor accounts receivable with aging above 1 year and those accounting for about 15 % of the total accounts receivable , thus there is no significant credit risk . the company will consider an allowance for doubtful accounts for any estimated losses resulting from the inability of its customers to make required payments .
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 Suspicious Activity Report : readers are cautioned not to place undue reliance on these forward-looking statements , which speak only as of the date on which they are made . the company undertakes no obligation to update or revise any forward-looking statements . these forward-looking statements include statements of management 's plans and objectives for our future operations and statements of future economic performance , information regarding our expansion and possible results from expansion , our expected growth , our capital budget and future capital requirements , the availability of funds and our ability to meet future capital needs , the realization of our deferred tax assets , and the assumptions described in this report underlying such forward-looking statements . actual results and developments could differ materially from those expressed in or implied by such statements due to a number of factors , including , without limitation , those described in the context of such forward-looking statements , our expansion and acquisition strategy , our ability to achieve operating efficiencies , industry pricing and technology trends , evolving industry standards , regulatory matters , general economic and business conditions , the strength and financial resources of our competitors , our ability to find and retain skilled personnel , the political and economic climate in which we conduct operations and the risk factors described from time to time in our other documents and reports filed with the securities and exchange commission ( the `` commission `` ) . additional factors that could cause actual results to differ materially from the forward-looking statements include , but are not limited to : 1 ) our ability to successfully develop , manufacture and deliver our products on a timely basis and in the prescribed condition ; 2 ) our ability to compete effectively with other companies in the same industry ; 3 ) our ability to raise sufficient capital in order to effectuate our business plan ; and 4 ) our ability to retain our key executives . critical accounting policies our discussion and analysis of our financial condition and results of operations are based on our financial statements , which have been prepared in accordance with u.s. generally accepted accounting principles . the preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods . on an on-going basis , we evaluate our estimates and judgments , including those related to revenue , receivable , inventory , and accrued expenses . we base our estimates on historical experience , known trends and events and various other factors that we believe to be 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 . changes in estimates are recorded in the period in which they become known . we believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements . revenue recognition in accordance with the asc topic 605 , “ revenue recognition ” , the company recognizes revenue when persuasive evidence of an arrangement exists , transfer of title has occurred or services have been rendered , the selling price is fixed or determinable and collectability is reasonably assured . the company 's revenue is principally derived from three primary sources : sales of energy saving flow control equipment , provision of energy project management and sub-contracting services , and provision of energy-saving reconstruction projects . 37 ( a ) sale of products the company derives a majority of its revenues from the sale of energy saving flow control equipment . generally , the energy saving flow control equipment is manufactured and configured to customer requirements . the company typically produces the energy saving flow control equipment for customers during a period from one to six months . when the company completes the production in accordance with the customer 's specification , the customer is required to inspect the finished products for quality and suitability , to its full satisfaction , then the company makes delivery to the customer the company recognizes revenue from the sale of such finished products upon delivery to the customers , when the title and risk of loss are fully transferred to the customers . the company records its revenues , net of value added taxes ( “ vat ” ) . the company is subject to vat which is levied on the majority of the products at the rate of 17 % on the invoiced value of sales . ( b ) service revenue service revenue is derived from energy-saving technical services , project management or sub-contracting services that are not an element of the arrangement for the sale of products . these services are generally billed on a time-cost plus basis , for the period of service which is generally from two to three months . revenue is recognized , net of business taxes when the service is rendered and accepted by the customers . ( c ) interest income interest income is recognized on a time apportionment basis , taking into account the principal amounts outstanding and the interest rates applicable . accounts receivable and allowance for doubtful accounts accounts receivable are recorded at the invoiced amount , do not bear interest and are due within the contractual payment terms , generally 30 to 90 days from shipment . story_separator_special_tag the cost of service revenues decreased by $ 2,681,829 or 50.72 % for the year ended december 31 , 2011 compared to the cost of revenues for the year ended december 31 , 2010. the gross margin for services was $ 1,425,962 and $ 2,541,489 , or 35.37 % and 32.46 % , for the years ended december 31 , 2011 and 2010 , respectively . the increase in gross margin is due to the significant increase in gross margin of energy conservation technology services . cost of projects there was no project revenue for the year ended december 31 , 2011 , therefore there was no cost of projects recognized during the year . operating expenses the total operating expenses were $ 1,454,151 and $ 1,234,597 , or 9.74 % and 4.87 % of total revenues , for the year ended december 31 , 2011 and 2010 , respectively . the total operating expenses increased by $ 219,554 or 17.78 % for the year ended december 31 , 2011 compared to the year ended december 31 , 2010. the increase of operating expenses is primarily due to the company receiving its land use rights for the new facility located in yinzhou district industrial park and starting to pay the land use rights tax . the company also starts to pay the nasdaq listing fees . there was also an increase in legal and professional fees , and ir fees during the year .. sales and marketing expenses the total sales and marketing expenses were $ 101,586 and $ 81,885 , or 0.68 % and 0.32 % of total revenues , for the years ended december 31 , 2011 and 2010 , respectively . the sales and marketing expenses increased by $ 19,701 or 24.06 % . the increase in sales and marketing is due to the increase in traveling expenses incurred by the sales staff in order to explore more business opportunities for the company . general and administrative expenses general and administrative expenses were $ 1,352,565 and $ 1,152,712 , or 9.05 % and 4.54 % of total revenue , for the year ended december 31 , 2011 and 2010 , respectively . the general and administrative expenses increased by $ 199,853 or 17.34 % . the increase in general and administrative expenses was caused by the increase in bank loan guarantee fee , legal and professional fees and investor relations fees . income from operations as a result of the foregoing , our income from operations was $ 2,717,928 or 18.21 % of total revenues , for the year ended december 31 , 2011 , as compared to $ 5,603,175 or 22.08 % of total revenues , for the year ended december 31 , 2010 , a decrease of $ 2,885,247 or 51.49 % . other income ( expenses ) for the year ended december 31 , 2011 , interest income was $ 5,838 as compared to $ 1,007 for the year ended december 31 , 2010. in 2011 , interest expense was $ 375,773 , a decrease of $ 146,880 as compared to $ 522,653 for the year ended december 31 , 2010. the company issued $ 960,000 of convertible notes at beginning of 2010 , which incurred a non-cash interest expenses of $ 396,072 for the year ended december 31 , 2010. the debt discount on convertible notes was fully discount in february 2011 and there was only $ 70,271 non-cash interest expenses for the year 2011 . 44 i ncome tax expenses for the years ended december 31 , 2011 and 2010 , income tax expenses were $ 301,533 and $ 778,765 respectively . the decrease of income tax expenses of $ 477,232 or 61.28 % is due to the decrease in income before tax . nengfa energy is entitled to a two-year exemption from corporate income tax till the year ended december 31 , 2011. the new income tax rate will be 25 % from 2012 onwards . as of december 31 , 2011 , the company 's operations in the united states of america incurred $ 2,660,710 of cumulative net operating losses , which can be carried forward to offset future taxable income . the net operating loss carried forwards begin to expire in 2031 , if unutilized . the company has provided for a full valuation allowance against the deferred tax assets of $ 904,641 on the expected future tax benefits from the net operating loss carried forwards as the management believes it is more likely than not that these assets will not be realized in the future . net income as a result of the foregoing , we recorded net income of $ 2,046,460 , a 13.70 % profit margin on revenue for the year ended december 31 , 2011 , as compared to net income of $ 4,302,764 , a16.96 % profit margin on revenues , for the year ended december 31 , 2010. the net income for the year ended december 31 , 2011 decreased by $ 2,256,304 , a decrease of 52.44 % , compared to the year ended december 31 , 2010. the decrease in net income was mainly due to the increase in operating expenses and the decrease in revenues . story_separator_special_tag times new roman , times , serif ; margin : 0pt 0 ; text-align : justify ; text-indent : 0.5in `` > in november ,2011 , the company obtained another short-term bank borrowing of $ 2,573,871 ( equivalent to rmb 16,350,000 ) , from a commercial bank in china , bank of jilin , due 15 december 2012 , with interest rate at 1.4 times of the bank of china benchmark lending rate , monthly payable , which is guaranteed by mr. gang li ( the company 's ceo ) and a guarantee company in shenyang city , the prc . in november ,2011 , the company obtained a bank note of $ 3,148,466 ( equivalent to rmb 20,000,000 ) from a commercial

