The following Management's Discussion and Analysis of Financial Condition and Results of Operations, as well as other sections in this Quarterly Report on Form 10-Q for the quarter endedMarch 31, 2022 (the "Quarterly Report"), should be read in conjunction with our unaudited interim consolidated financial statements and related notes thereto included elsewhere herein and the consolidated financial statements and notes thereto for the year endedDecember 31, 2021 and the related Management's Discussion and Analysis of Financial Condition and Results of Operation, both of which are contained in our Annual Report on Form 10-K for the year endedDecember 31, 2021 (the "Annual Report") filed with theSecurities and Exchange Commission ("SEC") onMarch 23, 2022 . In addition to historical financial information, some of the information contained in the following discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts, including statements regarding our future results of operations and financial position, business strategy, current and prospective products, product approvals, research and development costs, current and prospective collaborations, timing and likelihood of success, plans and objectives of management for future operations and future results of current and anticipated products, are forward-looking statements. These statements involve known and unknown risks, uncertainties, assumptions and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
Overview
We are a commercial-stage medical technology company focused on providing innovative soft-tissue reconstruction solutions that optimize clinical outcomes by prioritizing the preservation and restoration of the patient's own anatomy. Our growing product portfolio is purposefully designed to leverage the patient's natural healing response while minimizing long-term exposure to permanent synthetic materials. We are committed to delivering our advanced technologies with a strong economic value proposition to assist surgeons and institutions in providing next-generation soft-tissue repair solutions to more patients worldwide. Our first portfolio of products, the OviTex Reinforced Tissue Matrix ("OviTex"), addresses unmet needs in hernia repair and abdominal wall reconstruction by combining the benefits of biologic matrices and polymer materials while minimizing their shortcomings, at a cost-effective price. Our OviTex products have received 510(k) clearance from theU.S. Food and Drug Administration ("FDA"), which clearance was obtained and is currently held by Aroa Biosurgery Ltd. ("Aroa"), our exclusive manufacturer and supplier. Interim results of our single arm, multicenter post-market clinical study, which we refer to as our BRAVO study, were recently published in theJournal of Clinical Medicine . The interim analysis of patients reaching 12-month follow-up suggests that OviTex is safe and clinically effective for treatment of ventral hernias. The recurrence rate was 2.7% at 12 months. Twenty-four month follow-up has been completed for all possible patients in our BRAVO study, and the recurrence rate remains below 5%. Final analysis is underway and full results will be presented in a future peer-reviewed publication. Our second portfolio of products, the OviTex PRS Reinforced Tissue Matrix ("OviTex PRS"), addresses unmet needs in plastic and reconstructive surgery. InApril 2019 , our OviTex PRS products received 510(k) clearance from the FDA, which clearance was obtained by Aroa and is currently held by us. We began commercialization of our OviTex products inthe United States inJuly 2016 . Our OviTex portfolio consists of multiple products for hernia repair and abdominal wall reconstruction, inguinal hernia repair and hiatal hernia repair. In addition, to address the significant increase in the number of robotic-assisted hernia repairs over the last several years, we have designed an OviTex product line for use in laparoscopic and robotic-assisted surgery ("OviTex LPR"), which we began commercializing inNovember 2018 . OviTex PRS is indicated for use in implantation to reinforce soft tissue where weakness exists in patients requiring soft tissue repair or reinforcement in plastic and reconstructive surgery. We commenced a limited launch inMay 2019 and have gathered clinical feedback from our initial surgeon users. Based on this feedback, we expanded our commercial launch inJune 2020 and expect to continue to expand our surgeon network. We have also engaged in discussions
with 17 Table of Contents
the FDA regarding an Investigational Device Exemption protocol to study the safety and effectiveness of our OviTex PRS product for an indication in breast reconstruction surgery. The FDA has stated that a premarket approval, rather than a 510(k) clearance, will be required for such an indication. We market our products through a single direct sales force, predominantly inthe United States augmented by distributors in certain European countries. We have invested in our direct sales and marketing infrastructure to expand our presence and to promote awareness and adoption of our products. As ofMarch 31, 2022 , we had 53 sales territories inthe United States . As part of our commercial strategy, we plan to continue to invest in our commercial organization by hiring additional account managers, clinical development specialists and administrative support staff to support and service new accounts for soft tissue reconstruction procedures. Additionally, we believe we can enhance the productivity of our sales force by improving customer segmentation and targeting, leveraging digital channels to engage customers and utilizing engagement analytics to support development. We announced, inNovember 2021 , that we entered into a distribution agreement withNext Science Technologies Pty Limited ("Next Science"), a medical technology company, granting us the exclusive rights to sell and market Next Science's proprietary antimicrobial surgical wash with XBIO® technology across theU.S. plastic reconstructive market. We commenced private label marketing of the solution for plastic surgery in early 2022. Next Science's XBIO Technology delivers an advanced option for surgical infection control by addressing the biofilms that make bacteria more resistant to traditional antimicrobial agents, disinfectants and host immune defenses. We believe the infection control solution will expand our service offerings and diversify our supplier base as we continue to create a soft-tissue restoration portfolio. We are currently devoting research and development resources to develop additional versions of our OviTex hernia product lines, including self-adhering technology to further enhance product compatibility in robotic procedures, as well as additional versions of our OviTex PRS product lines. We are also working to develop new product features and designs for both our existing OviTex and OviTex PRS products. Additionally, we are exploring new packaging technology to increase the shelf life of our OviTex and OviTex PRS products. We intend to continue to make investments in research and development efforts to develop improvements and enhancements. We are also assessing strategic partnerships with medical device companies whereby we may enter into distribution, product development and/or licensing agreements for products complimentary to, or related to, existing and future products in our distribution channel, which could result in the payment of low single digit royalties or other product acquisition costs. Our products are manufactured by Aroa at their FDA registered and ISO 13485 compliant facility inAuckland, New Zealand . We maintain our Aroa License for the exclusive supply of ovine rumen and manufacture of our reinforced tissue matrices under which we purchase product from Aroa at a fixed cost equal to 27% of our net sales of licensed products. This revenue sharing arrangement allows us to competitively price our products and pass along cost savings to our customers. The vast majority of our revenue to date has been generated by the sale of our OviTex products. Our revenue increased by$2.4 million , or 40%, from$5.9 million for the three months endedMarch 31, 2021 to$8.2 million for the three months endedMarch 31, 2022 . Our net loss increased by$2.7 million , or 34%, from$8.1 million for the three months endedMarch 31, 2021 to$10.9 million for the three months endedMarch 31, 2022 . We have not been profitable since inception and as ofMarch 31, 2022 , we had an accumulated deficit of$240.8 million . We expect to incur losses for the foreseeable future.
Business Update Regarding COVID-19
Our business, results of operations and commercial operations have been impacted by the ongoing COVID-19 pandemic and the emergence of variants of COVID-19. We continue to closely monitor developments related to the ongoing COVID-19 pandemic and our decisions will continue to be driven by the health and well-being of our employees, our customers, and their patients while maintaining operations to support our customers and their patients in the near-term. These developments include: 18 Table of Contents
Surgery Deferrals: We believe our revenue was impacted during the first quarter
of 2022, mostly in January and
resurgences and lower surgical procedural volumes. The extent of future
elective surgery deferrals and the timing and extent of the economic impact of
the pandemic on us, and the pace at which the economy recovers therefrom,
? cannot be determined at this time, particularly in light of recent surges and
the continued emergence of new variants. Further, the reallocation of hospital
resources to treat COVID-19 may continue to cause a financial strain on
healthcare systems and reduce procedural volumes. We continue to work closely
with our hospital and physician customers and suppliers to navigate through
this unforeseen event while maintaining flexible operations to respond to the
changing environment.
Operations: Our sales, marketing and research and development efforts have
continued since the outbreak of the pandemic. As access to hospitals continues
to evolve throughout this pandemic and vary from hospital to hospital and state
to state, our sales team has continued to adapt to changing conditions within
their regions. Most of our sales professionals have used a virtual selling
program, which includes virtual sales calls with physicians, peer-to-peer
discussions with key opinion leaders, physician webinars and sales professional
? training to supplement our in-person sales and marketing programs. We expect to
continue to adapt our sales and marketing strategies as we continue to gain
better visibility into the effects of the ongoing COVID-19 pandemic on our
business. As Aroa is located and headquartered in
COVID-19 mitigation efforts have to date been effective, our manufacturing and
supply chain has largely been uninterrupted. However, it could be disrupted in
the future because of the pandemic due to staffing shortages, production
slowdowns or stoppages, travel and shipping restrictions or disruptions in
delivery systems.
Product Development: We continue to evaluate the timing and scope of planned
? next generation product development and commercialization initiatives in light
of the ongoing COVID-19 pandemic, and we plan to continue to prioritize and
invest in our critical R&D and clinical programs. Q1 2022 Results. During January and February, we experienced increased
volatility in demand for our products as COVID-19 cases and hospitalizations
increased. We saw improvement in our business during March. The timing, extent
? and continuation of any increase in procedures, any corresponding increase in
sales of our products, and whether there could be a future decrease in the
current level of procedures being performed, remain uncertain and are subject
to a variety of factors, including:
A material increase in COVID-19 cases in one or more locations, including as a
o result of the emergence of new variants of COVID-19, may result in an increase
in COVID-19 hospitalizations and a corresponding decrease in elective procedures in such impacted locations.
The perceived safety of COVID-19 vaccines and boosters, the speed of COVID-19
o vaccine distribution and administration, the timing and extent to which the
vaccination process will affect the progression of the virus, and the efficacy
of such vaccines against the new variants of the virus.
o Government vaccine mandates could affect our ability to retain or hire
employees.
Government restrictions on elective procedures may change over time and may
o vary in different geographic locations due to localized increases or decreases
in the number of COVID-19 cases.
Patients electing to defer or avoid treatment for elective procedures due to
o concerns about being exposed to COVID-19, loss of employer-sponsored health
insurance related to unemployment or other reasons.
Hospitals may reserve increased space, personal protective equipment and staff
for potential COVID-19 patients, especially if the number of COVID-19 cases in
o a particular region spike or a new variant of COVID-19 emerges in such region,
limiting the space and resources allocated to inpatient and outpatient elective procedures. 19 Table of Contents
Hospitals may experience staffing shortages due to normal turnover and due to
o COVID-19, which could reduce the number of elective procedures that can be
performed at hospitals with staffing shortages.
Hospitals may continue to preserve cash and may not immediately replenish their
o inventories of our products, which would impact our future sales and revenues
and make it difficult to accurately predict our inventory requirements.
We continue to closely monitor local, regional and global COVID-19 surges as well as new variants of the virus for an impact on procedures during the second quarter of 2022 and beyond.
Outlook. There remains uncertainty and lack of visibility regarding our
near-term revenue growth prospects and product development plans due to the
rapidly evolving environment and continued uncertainties resulting from the
ongoing COVID-19 pandemic. While certain regions are experiencing a reduction
? in COVID-19 cases and a relaxing of governmental restrictions, at this time,
the full extent of the impact of the ongoing COVID-19 pandemic on our business,
financial condition and results of operations is uncertain and cannot be
predicted with reasonable accuracy and will depend on future developments that
are also uncertain, such as the potential development of new variants of
COVID-19, and the future geographic scope of COVID-19.
Components of Our Results of Operations
Revenue
Substantially all of our revenue consists of direct sales of our products to hospital accounts inthe United States . Depending on the terms of our agreements with our customers, we recognize revenue related to product sales either when control transfers, which generally occurs when the product is shipped to the customer, or when the product is utilized in a surgical procedure in the case of consignment agreements. Fees charged to customers for shipping are recognized as revenue. Recent revenue growth has been driven by increasing revenue from product sales due to our expanding customer base, although it is unclear at this point what long-term effect the ongoing COVID-19 pandemic will have on our ability to continue to generate revenue and expand our customer base.
Cost of Revenue (excluding amortization of intangible assets)
Cost of revenue primarily consists of the costs of licensed products, charges related to excess and obsolete inventory adjustments, current royalties and costs related to shipping. We purchase product from Aroa at a fixed cost equal to 27% of our net sales of licensed products. The initial term of our Aroa License terminates on the later of (i)August 3, 2022 , or (ii) the expiration of the last patent covering bovine and ovine products, with an option to extend for an additional ten-year period. We expect our cost of revenue to increase in absolute dollars as, and to the extent, our sales volume grows, although it is unclear at this point what long-term effect, if any, the ongoing COVID-19 pandemic will have on product demand which could lead to additional charges to excess and obsolete inventory.
Amortization of Intangible Assets
Amortization of intangible assets relates to the amortization of capitalized milestone amounts paid or probable to be paid to Aroa related to license fees or commercialization rights after future economic benefit has been established for a product. These capitalized milestone amounts relate to regulatory clearances, the receipt of certain supply quantities of product, and amounts based upon aggregate net sales thresholds within a specified territory and are amortized over the remaining useful life of the intellectual property.
Gross Profit and Gross Margin
Our gross profit is calculated by subtracting our cost of revenue and amortization of intangible assets from our revenue. We calculate our gross margin percentage as our gross profit divided by our revenue. Our gross profit has been, and we
20 Table of Contents expect it will continue to be, affected by a variety of factors, including sales volume, current and potential royalties and excess and inventory obsolescence costs. Our gross profit may increase to the extent our revenue grows.
Sales and Marketing Expenses
Sales and marketing expenses consist of market research and commercial activities related to the sale of OviTex and OviTex PRS, salaries and related benefits, sales commissions and stock-based compensation for employees focused on these efforts. Other significant sales and marketing expenses include costs incurred with post-market clinical studies, conferences and trade shows, promotional and marketing activities, as well as travel and training expenses. Over time we expect our sales and marketing expenses to increase in absolute dollars as we continue to expand our commercial organization to both drive and support our planned growth in revenue. It is unclear at this point, however, what long-term effect, if any, the ongoing COVID-19 pandemic will have on these expansion plans. We expect our sales and marketing expenses to decrease as a percentage of revenue primarily as, and to the extent, our revenue grows.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation for personnel in executive, finance, information technology and administrative functions. General and administrative expenses also include professional service fees for legal, accounting, consulting, investor and public relations, insurance costs and direct and allocated facility-related costs.
We expect that our general and administrative expenses will increase in absolute dollars as we execute our growth initiatives and expand our business and headcount to support these initiatives. It is unclear at this point, however, what long-term effect, if any, the ongoing COVID-19 pandemic will have on these expansion plans. We expect our general and administrative expenses to decrease as a percentage of revenue primarily as, and to the extent, our revenue grows.
Research and Development Expenses
Research and development expenses consist primarily of product research, engineering, product development, regulatory compliance and clinical development. These expenses include salaries and related benefits, including stock-based compensation for employees focused on these efforts, consulting services, costs associated with our preclinical studies, costs incurred with our manufacturing partner under development agreements related to technology transfer, laboratory materials and supplies and an allocation of related facilities costs. We expense research and development costs as they are incurred. We expect that our research and development expenses in absolute dollars will increase in the future as we develop new products and enhance existing products although it is unclear at this point what long-term effect, if any, the ongoing COVID-19 pandemic will have on these development plans. We expect research and development expenses as a percentage of revenue to vary over time depending on the level and timing of new product development initiatives.
Interest Expense
Interest expense consists of cash interest related to our credit facilities, non-cash interest attributable to the amortization of final payment fees and the amortization of deferred financing costs related to our indebtedness.
Other (Expense) Income
Other (expense) income consists primarily of miscellaneous tax expenses and foreign currency exchange gains and losses offset by income earned on our cash and cash equivalents.
21 Table of Contents Results of Operations
Comparison of the Three Months Ended
Three Months Ended March 31, Change 2022 2021 Dollar Percentage (in thousands, except percentages) Revenue $ 8,231$ 5,877 $ 2,354 40 % Cost of revenue (excluding amortization of intangible assets) 3,156 2,336 820 35 Amortization of intangible assets 76
76 - - Gross profit 4,999 3,465 1,534 44 Gross margin 61 % 59 % Operating expenses: Sales and marketing 9,378 6,299 3,079 49 General and administrative 3,458 2,756 702 25 Research and development 2,007 1,679 328 20 Total operating expenses 14,843 10,734 4,109 38 Loss from operations (9,844) (7,269) (2,575) 35 Other (expense) income: Interest expense (911) (889) (22) 2 Other (expense) income (107) 22 (129) (586) Total other expense (1,018) (867) (151) 17 Net loss$ (10,862) $ (8,136) $ (2,726) 34 % Revenue Revenue increased by$2.4 million , or 40%, to$8.2 million for the three months endedMarch 31, 2022 from$5.9 million for the three months endedMarch 31, 2021 . The increase in revenue was primarily driven by an increase in unit sales of our products due to the expansion of our commercial organization, an increase in the average selling price for OviTex PRS, increased penetration within existing customer accounts and stronger international sales. During the three months endedMarch 31, 2022 , we sold 2,042 units of OviTex as compared to 1,486 units of OviTex during the three months endedMarch 31, 2021 , a 37% increase in unit sales volume. Additionally, we sold 471 units of OviTex PRS during the three months endedMarch 30, 2022 as compared to 270 units during the three months endedMarch 31, 2021 , a 74% increase in unit sales volume.
Cost of Revenue
Cost of revenue (excluding amortization of intangible assets) increased by$0.8 million , or 35%, to$3.2 million for the three months endedMarch 31, 2022 from$2.3 million for the three months endedMarch 31, 2021 . The increase in cost of revenue for the three months endedMarch 31, 2022 was primarily the result of an increase in products purchased to support our higher unit sales and an increase in our excess and obsolete inventory adjustments.
Amortization of Intangible Assets
Amortization of intangible assets was
Gross Margin Gross margin increased to 61% for the three months endedMarch 31, 2022 from 59% for the three months endedMarch 31, 2021 . The increase was primarily due to the decrease in the charge recognized for excess and obsolete inventory adjustments as a percentage of revenue for the three months endedMarch 31, 2022 as compared to the prior year period. 22 Table of Contents Sales and Marketing Sales and marketing expenses increased by$3.1 million , or 49%, to$9.4 million for the three months endedMarch 31, 2022 from$6.3 million for the three months endedMarch 31, 2021 . The increase was primarily due to higher salaries, benefits and commission costs as a result of an expansion of our commercialization activities, higher travel and consulting expenses and additional employee-related costs due to the increase in headcount.
General and Administrative
General and administrative expenses increased by
Research and Development
Research and development expenses increased by
Interest Expense
Interest expense remained relatively flat and was
Other (Expense) Income
Other expense increased$0.1 million , or 586%, to expense of$0.1 million for the three months endedMarch 31, 2022 from$22,000 of income for the three months endedMarch 31, 2021 . The increase was primarily due to an increase in miscellaneous taxes and lower interest income.
Liquidity and Capital Resources
Overview
As ofMarch 31, 2022 , we had cash and cash equivalents of$33.0 million , working capital of$38.0 million and an accumulated deficit of$240.8 million . As ofDecember 31, 2021 , we had cash and cash equivalents of$43.9 million , working capital of$48.5 million and an accumulated deficit of$229.9 million . We have incurred operating losses since our inception, and we anticipate that our operating losses will continue in the near term as we seek to invest in our sales and marketing initiatives to support our growth in existing and new markets and in additional research and development activities. As ofMarch 31, 2022 , we had$30.0 million of borrowings outstanding under our credit facility (the "OrbiMed Credit Facility") withOrbiMed Royalty Opportunities IP, LP ("OrbiMed"). The OrbiMed Credit Facility matures inNovember 2023 and requires that we maintain a minimum cash balance of$2.0 million . Based on our current business plan, we believe that our existing cash resources will be sufficient to meet our capital requirements and fund our operations for at least the next 12 months from the issuance of this Quarterly Report. If these sources are insufficient to satisfy our liquidity requirements, we may seek to sell common or preferred equity or debt securities or enter into a new credit facility. InDecember 2020 , we entered into an Equity Distribution Agreement (the "Equity Agreement") withPiper Sandler & Co (the "Agent") in connection with the establishment of an at-the-market offering program under which it may sell up to an aggregate of$50.0 million of shares of our common stock, from time to time through the Agent as sales agent. No sales were made under the Equity Agreement during the three months endedMarch 31, 2022 . If we raise additional funds by issuing equity or equity-linked securities, our stockholders would experience dilution and any new equity securities could have rights, preferences and privileges superior to those of holders of our common stock. Debt financing, if available, may involve covenants restricting our operations or our 23 Table of Contents ability to incur additional debt. We cannot be assured that additional equity, equity-linked or debt financing will be available on terms favorable to us or our stockholders, or at all, including as a result of market volatility following the COVID-19 pandemic or other factors. If we are unable to obtain adequate financing, we may be required to delay the development, commercialization and marketing of our products.
Cash Flows
The following table summarizes our sources and uses of cash for each of the periods presented: Three Months Ended March 31, (in thousands) 2022 2021
Cash used in operating activities$ (10,430) $ (8,585) Cash used in investing activities (336) (22) Cash (used in) provided by financing activities (146) 36 Effect of exchange rate on cash (3) 6 Net decrease in cash and cash equivalents$ (10,915)
$ (8,565) Operating Activities
During the three months endedMarch 31, 2022 , we used$10.4 million of cash in operating activities, resulting from our net loss of$10.9 million and the change in operating assets and liabilities of$1.6 million , offset by non-cash charges of$2.1 million . Our non-cash charges were comprised of stock-based compensation expense of$0.9 million , our excess and obsolete inventory charge of$0.8 million , noncash interest expense of$0.2 million and depreciation and amortization expense of$0.2 million . The change in our operating assets and liabilities was primarily related to an increase in our inventory and a decrease in accrued expenses and other current and long-term liabilities partially offset by an increase in accounts payable. During the three months endedMarch 31, 2021 , we used$8.6 million of cash in operating activities, resulting from our net loss of$8.1 million and the change in operating assets and liabilities of$2.0 million , offset by non-cash charges of$1.6 million . Our non-cash charges were comprised of stock-based compensation expense of$0.7 million , our excess and obsolete inventory charge of$0.6 million , noncash interest expense of$0.2 million and depreciation and amortization expense of$0.1 million . The change in our operating assets was primarily related to an increase in our inventory and a decrease in accrued expenses and other current liabilities.
Investing Activities
During the three months ended
During the three months ended
Financing Activities
During the three months ended
During the three months ended
Indebtedness InNovember 2018 , we entered into the OrbiMed Credit Facility, which consists of up to$35.0 million in term loans (the "OrbiMed Term Loans"). The OrbiMed Term Loans consist of two tranches, a$30.0 million Tranche 1 ("Tranche 1") 24
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and a
Pursuant to the OrbiMed Credit Facility, we provided a first priority security interest in all existing and future acquired assets, excluding intellectual property and certain other assets, owned by us. The OrbiMed Credit Facility contains a negative pledge on intellectual property owned by us. The OrbiMed Credit Facility also contains customary indemnification obligations and customary events of default, including, among other things, (i) non-payment, (ii) breach of warranty, (iii) non-performance of covenants and obligations, (iv) default on other indebtedness, (v) judgments, (vi) change of control, (vii) bankruptcy and insolvency, (viii) impairment of security, (ix) key permit events, (x) key person events, (xi) regulatory matters, and (xii) key contracts. In addition, we must maintain a minimum cash balance of$2.0 million . If an event of default occurs under the OrbiMed Credit Facility, we may become obligated to immediately pay all outstanding principal and interest and all other due and unpaid obligations at the current rate in effect plus 3%. The OrbiMed Term Loans mature onNovember 16, 2023 and bear interest at a rate equal to 7.75% plus the greater of one-month LIBOR or 2.0%. We are required to make 60 monthly interest payments beginning onNovember 30, 2018 with the entire principal payment due at maturity. The OrbiMed Term Loans have a prepayment penalty equal to 10.0% of the prepaid principal amount prior to the second anniversary of the OrbiMed Term Loans, 5.0% of the prepaid principal amount after the second anniversary but prior to the third anniversary and 2.5% of the prepaid principal amount after the third anniversary. We are also required to pay an exit fee at the time of maturity or prepayment event equal to 10% of all principal borrowings and an administration fee equal to$10,000 on the last day of each quarter until all obligations have been paid in full.
Contractual Obligations and Commitments
As of
Critical Accounting Policies and Significant Judgments and Estimates
The Critical Accounting Policies and Significant Judgements and Estimates included in our Annual Report have not materially changed.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of theSEC .
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