You should read the following discussion and analysis of our financial condition
and results of operations together with our condensed consolidated financial
statements and the related notes included in this Quarterly Report on Form 10-Q
and those in our Annual Report on Form 10-K for the year ended December 31,
2019. Some of the information contained in this discussion and analysis or set
forth elsewhere in this report, including statements related to our expectations
regarding the potential impacts of the COVID-19 pandemic on our business,
financial condition, and results of operations, and information with respect to
our products, plans and strategy for our business and related financing,
includes forward-looking statements that involve risks and uncertainties,
including statements regarding our expected financial results in future periods.
The words "anticipates," "believes," "could," "estimates," "expects," "intends,"
"may," "might," "plans," "potential," "predicts," "projects," "seeks," "should,"
"target," "will," "would" and similar expressions are intended to identify
forward-looking statements, although not all forward-looking statements contain
these identifying words. We may not actually achieve the plans, intentions or
expectations disclosed in our forward-looking statements and you should not
place undue reliance on our forward-looking statements. You should read the
"Risk Factors" section of this Quarterly Report on Form 10-Q for a discussion of
important factors that could cause actual results to differ materially from the
results described in or implied by the forward-looking statements contained in
the following discussion and analysis. We do not assume any obligation to update
any forward-looking statements.
Termination of Merger with Illumina, Inc.
On January 2, 2020, we, Illumina and Merger Subsidiary entered into the
Termination Agreement. As part of the Termination Agreement, Illumina paid us a
$98.0 million Reverse Termination Fee, from which we paid our financial advisor
associated fees of $6 million in April 2020. In addition, Illumina paid us the
final Continuation Advances of $34 million during the first quarter of 2020.
However, pursuant to the Termination Agreement, in the event that, on or prior
to September 30, 2020, we entered into a definitive agreement providing for, or
consummated, a Change of Control Transaction (as defined in the Termination
Agreement), then we may have been required to repay the Reverse Termination Fee
(without interest) to Illumina in connection with the consummation of such
Change of Control Transaction. No such definitive agreement was entered into nor
was a Change of Control Transaction consummated as of September 30, 2020. The
$98.0 million in cash we received from Illumina for the reverse termination fee
was recorded as a short-term liability as of September 30, 2020 and, on October
1, 2020, after the contingency clauses lapsed, it was subsequently recognized as
a gain and will be reflected in the fourth quarter of 2020 as Other Income.
In addition, up to the $52.0 million of Continuation Advances paid to us are
repayable without interest to Illumina if, within two years of March 31, 2020,
we enter into a Change of Control Transaction or raise at least $100 million in
a single equity or debt financing (that may have multiple closings), with the
amount repayable dependent on the amount raised by us.
Senior Management
Our President and Chief Executive Officer Christian O. Henry was appointed
effective September 14, 2020, succeeding Dr. Michael Hunkapiller who announced
his retirement, which will be effective at the end of the year. Our Chief
Financial Officer Susan G. Kim was appointed effective September 28, 2020,
succeeding Susan K. Barnes who retired on August 7, 2020. Also, our Vice
President and Chief Accounting Officer Eric E. Schaefer was appointed effective
May 26, 2020, and our Chairman of the Board Dr. John F. Milligan was appointed
effective September 14, 2020.
Business Overview
We design, develop and manufacture sequencing systems to help scientists resolve
genetically complex problems. Based on our novel Single Molecule, Real-Time
(SMRT®) sequencing technology, our products enable: de novo genome assembly to
finish genomes in order to more fully identify, annotate and decipher genomic
structures; full-length transcript analysis to improve annotations in reference
genomes, characterize alternatively spliced isoforms in important gene families,
and find novel genes; targeted sequencing to more comprehensively characterize
genetic variations; and real-time kinetic information for epigenome
characterization. Our technology provides high accuracy, ultra-long reads,
uniform coverage and the ability to simultaneously detect epigenetic changes.
PacBio® sequencing systems, including consumables and software, provide a simple
and fast end-to-end workflow for SMRT sequencing.
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Our current products include the Sequel II instrument and SMRT Cell 8M, which
together are capable of sequencing up to approximately eight million DNA
molecules simultaneously, and the previous generation Sequel instrument and
Sequel SMRT Cell 1M, which together are capable of sequencing up to
approximately one million DNA molecules simultaneously. In October 2020, we
launched the Sequel IIe System, which has increased computational capacity, and
is designed to enable customers to generate PacBio HiFi reads more efficiently.
Our customers and our scientific collaborators have published numerous
peer-reviewed articles in journals including Nature, Science, Cell, PNAS and The
New England Journal of Medicine highlighting the power and applications of SMRT
sequencing in projects such as finishing genomes, structural variation
discovery, isoform transcriptome characterization, rare mutation discovery and
the identification of chemical modifications of DNA related to virulence and
pathogenicity. Our research and development efforts are focused on developing
new products and further improving our existing products including continuing
chemistry and sample preparation improvements to increase throughput and expand
our supported applications. By providing access to genetic information that was
previously inaccessible, we enable scientists to confidently increase their
understanding of biological systems.
COVID-19 Update
The COVID-19 pandemic and efforts to control its spread have significantly
curtailed the movement of people, goods, and services worldwide, including in
the regions in which we sell our products and services and conduct our business
operations. The financial results for the three and nine months ended September
30, 2020 were impacted negatively as many of our customers in multiple regions
around the world shut down operations for various periods of time in efforts to
curb the spread of the COVID-19 pandemic. This resulted in lower product
revenues for the three and nine months ended September 30, 2020 as compared to
the same periods of 2019. A significant number of our customer sites that had
shut down due to COVID-19 have re-opened. In addition, a significant number of
customers have delayed purchases or difficulties obtaining funding for capital
expenditures due to the negative impact of the pandemic on their businesses.
This dynamic continues to negatively impact the recognition of revenue related
to the sale of our Sequel and Sequel II instruments. The negative impacts of
COVID-19 on our customers will likely continue to adversely impact our revenues
during the fourth quarter of 2020. Due to the uncertain scope and duration of
the pandemic, we cannot reasonably estimate the future impact to our operations
and financial results.
In response to local stay-at-home orders and in alignment with CDC
recommendations, we have limited our manufacturing and commercial operations
based in Menlo Park, California. We will, however, continue to provide
consumables, instruments and support to scientists at government, academic, and
commercial labs that remain open. To aid in containing the spread of COVID-19,
we have implemented remote-work options and are limiting employee travel as much
as possible. We are monitoring this rapidly evolving situation.
Even after the COVID-19 pandemic has subsided, we may continue to experience an
adverse impact to our business as a result of its global economic impact,
including any recession that has occurred or may occur in the future.
Specifically, difficult macroeconomic conditions, decreases in discretionary
capital spending, increased and prolonged unemployment or a decline in consumer
confidence as a result of the COVID-19 pandemic could have a continuing adverse
effect on the demand for some of our products. Such economic disruption could
have a material adverse effect on our business, results of operations and
liquidity. The degree of impact of COVID-19 on our business will depend on
several factors, such as the duration and the extent of the pandemic, as well as
actions taken by governments, businesses and consumers in response to the
pandemic, all of which continue to evolve and remain uncertain at this time. See
the Risk Factors section for further discussion of the possible impact of the
COVID-19 pandemic on our business.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations
are based upon our unaudited Financial Statements, which have been prepared in
accordance with the rules and regulations of the SEC. The preparation of these
Financial Statements requires us to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses. On an ongoing
basis, we evaluate our critical accounting policies and estimates. We base our
estimates on historical experience and on various other assumptions 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.
We adopted ASU 2016-13 Financial Instruments - Credit Losses (Topic 326):
Measurement of Credit Losses on Financial Instruments on January 1, 2020, using
the modified retrospective method. Please see "Recently Adopted Accounting
Standards" in the Note 3. Summary of Significant Accounting Policies of Item 1.
Financial Statements.
Except as noted above, there have been no other material changes to our
significant accounting policies as discussed in our Annual Report on Form 10-K
for the year ended December 31, 2019.
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Results of Operations
Comparison of the three months ended September 30, 2020 and 2019
Three Months Ended September 30, $ Change % Change
(in thousands, except percentages) 2020 2019
(unaudited)
Revenue:
Product revenue $ 15,749 $ 18,484 $ (2,735) (15%)
Service and other revenue 3,333 3,431 (98) (3%)
Total revenue 19,082 21,915 (2,833) (13%)
Cost of Revenue:
Cost of product revenue 9,228 12,188 (2,960) (24%)
Cost of service and other revenue 2,790 2,813 (23) (1%)
Total cost of revenue 12,018 15,001 (2,983) (20%)
Gross profit 7,064 6,914 150 2%
Operating Expense:
Research and development 16,467 14,962 1,505 10%
Sales, general and administrative 14,772 20,066 (5,294) (26%)
Total operating expense 31,239 35,028 (3,789) (11%)
Operating loss (24,175) (28,114) 3,939 14%
Interest expense - (664) 664 100%
Other income, net 467 (345) 812 235%
Net loss $ (23,708) $ (29,123) $ 5,415 19%
Revenue
Total revenue for the three months ended September 30, 2020 was $19.1 million
compared to $21.9 million for the same period during 2019.
Product revenue of $15.7 million for the three months ended September 30, 2020
consisted primarily of $7.7 million from instrument revenue and $8.0 million
from consumables revenue, compared to total product revenue of $18.5 million for
the same period during 2019, consisting of $11.6 million from instrument revenue
and $6.9 million of consumables revenue. The decrease in instrument sales was
primarily attributable to a lower number of instrument shipments and
installations due to COVID-19 as discussed above. The increase in consumable
sales was primarily attributable to higher Sequel II consumables sales. The
negative impact of COVID-19 on our customers will likely continue to adversely
impact our revenues during the fourth quarter of 2020.
Service and other revenue of $3.3 million and $3.4 million for the three months
ended September 30, 2020 and 2019, respectively, was primarily derived from
product maintenance agreements sold on our installed instruments.
Gross Profit
Gross profit for the three months ended September 30, 2020 was $7.1 million,
resulting in a gross margin of 37.0%, compared to gross profit of $6.9 million,
resulting in a gross margin of 31.5% for the same period during 2019.
Cost of product revenue was $9.2 million for the three months ended September
30, 2020, compared to cost of product revenue of $12.2 million for the same
period during 2019. The decrease of $3.0 million in cost of product revenue was
primarily attributable to our incurring $2.8 million of product transition costs
including inventory reserves taken in connection with the transition from Sequel
to Sequel II during the three months ended September 30, 2019, partially offset
by lower factory production in the three months ended September 30, 2020
resulting in under-absorbed overhead.
Cost of service and other revenue for the three months ended September 30, 2020
was $2.8 million, compared to $2.8 million for the same period during 2019.
Research and Development Expense
During the three months ended September 30, 2020, research and development
expense increased by $1.5 million, or 10%, compared to the same period during
2019. The increase in research and development expense was primarily driven by
higher chip development costs. Research and development expense included
stock-based compensation expense of $2.1 million and $1.9 million during the
three months ended September 30, 2020 and 2019, respectively.
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Sales, General and Administrative Expense
During the three months ended September 30, 2020, sales, general and
administrative expense decreased by $5.3 million, or 26%, compared to the same
period during 2019. The decrease in sales, general and administrative expense
was primarily attributable to $3.6 million in merger related expenses during the
three months ended September 30, 2019, which did not recur during the three
months ended September 30, 2020, and a decrease of $1.4 million in patent
litigation expenses incurred during the three months ended September 30, 2020 as
compared to the same period in 2019. Sales, general and administrative expense
included stock-based compensation expense of $2.2 million and $1.7 million
during the three months ended September 30, 2020 and 2019, respectively.
Interest Expense
Interest expense for the three months ended September 30, 2020 decreased $0.7
million compared to the same period in 2019, as the debt agreement with
Deerfield entered into in February 2013 (the "Facility Agreement") matured in
February 2020.
Other Income
The $98.0 million in cash we received from Illumina for the Reverse Termination
Fee was recorded as a short-term liability as of September 30, 2020. On October
1, 2020, the contingency clauses lapsed and, as a result, we expect to recognize
a gain of $98 million in our fourth quarter of 2020 financial results.
Comparison of the nine months ended September 30, 2020 and 2019
Nine Months Ended September 30, $ Change % Change
(in thousands, except 2020 2019
percentages)
(unaudited)
Revenue:
Product revenue $ 41,798 $ 53,191 $ (11,393) (21%)
Service and other revenue 9,959 9,770 189 2%
Total revenue 51,757 62,961 (11,204) (18%)
Cost of Revenue:
Cost of product revenue 22,874 32,786 (9,912) (30%)
Cost of service and other
revenue 7,718 8,531 (813) (10%)
Total cost of revenue 30,592 41,317 (10,725) (26%)
Gross profit 21,165 21,644 (479) (2%)
Operating Expense:
Research and development 46,727 45,357 1,370 3%
Sales, general and
administrative 54,846 58,915 (4,069) (7%)
Total operating expense 101,573 104,272 (2,699) (3%)
Operating loss (80,408) (82,628) 2,220 3%
Gain from Continuation
Advances from Illumina 34,000 -
Interest expense (267) (1,933) 1,666 86%
Other income, net 1,143 518 625 121%
Net loss $ (45,532) $ (84,043) $ 38,511 46%
Revenue
Total revenue for the nine months ended September 30, 2020 was $51.8 million,
compared to $63.0 million for the same period during 2019.
Product revenue of $41.8 million for the nine months ended September 30, 2020
consisted of $20.7 million from sales of Sequel and Sequel II instruments and
$21.1 million from sales of consumables, compared to total product revenue of
$53.2 million for the same period during 2019, consisting of $29.9 million from
sales of Sequel and Sequel II instruments and $23.3 million from sales of
consumables. The decrease in instrument sales was primarily attributable to a
lower number of instrument shipments and installations due to COVID-19 as
discussed above. The decrease in consumable sales was primarily attributable to
lower utilization of the installed base of instruments due to COVID-19 as
discussed above. The negative impact of COVID-19 on our customers will likely
continue to adversely impact our revenues during the fourth quarter of 2020.
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Service and other revenue of $10.0 million and $9.8 million for the nine months
ended September 30, 2020 and 2019, respectively, was primarily derived from
product maintenance agreements sold on our installed instruments.
Gross Profit
Gross profit for the nine months ended September 30, 2020 was $21.2 million,
resulting in a gross margin of 41.9%, compared to gross profit of $21.6 million,
resulting in a gross margin of 34.4% for the same period during 2019. Gross
margin for the nine months ended September 30, 2019 was negatively impacted by
product transition costs, including inventory reserves taken in connection with
the transition from Sequel to Sequel II.
Cost of product revenue was $22.9 million for the nine months ended September
30, 2020, compared to cost of product revenue of $32.8 million for the same
period during 2019. Cost of product revenue decreased by $10.0 million for the
nine months ended September 30, 2020 compared to the same period in 2019
primarily resulting from lower product shipments. In addition, during the nine
months ended September 30, 2019, we incurred product transition costs including
an inventory reserve taken in connection with the transition from Sequel to
Sequel II.
Cost of service and other revenue for the nine months ended September 30, 2020
was $7.7 million, compared to $8.5 million for the same period during 2019.
Research and Development Expense
During the nine months ended September 30, 2020, research and development
expense increased by $1.4 million, or 3%, compared to the same period during
2019. The increase in research and development expense was primarily driven by
higher chip development costs. Research and development expense included
stock-based compensation expense of $5.3 million and $5.8 million during the
nine months ended September 30, 2020 and 2019, respectively.
Sales, General and Administrative Expense
During the nine months ended September 30, 2020, sales, general and
administrative expense decreased by $4.1 million, or 7%, compared to the same
period during 2019. The decrease in sales, general and administrative expense
was primarily attributable to the acquisition-related legal fees of $12.8
million incurred for the nine months ended September 30, 2019, partially offset
by $6.0 million merger advisory fee incurred in the first quarter of 2020; an
increase of $1.2 million in salary and bonus expenses for the nine months ended
September 30, 2020, an increase of $1.2 million in litigation expenses for the
nine months ended September 30, 2020. Sales, general and administrative expense
included stock-based compensation expense of $5.2 million and $5.3 million
during the nine months ended September 30, 2020 and 2019, respectively.
Interest Expense
Interest expense for the nine months ended September 30, 2020 decreased $1.7
million compared to the same period in 2019, as the Facility Agreement matured
in February 2020.
Liquidity and Capital Resources
Liquidity
Cash, cash equivalents and investments at September 30, 2020 totaled $208.6
million, compared to $49.1 million at December 31, 2019. The increase was
attributable to the proceeds from our public offering of common stock completed
in August 2020, as well as the Reverse Termination Fee and Continuation Advances
we received from Illumina, partially offset by cash used in operations and a
$16.0 million repayment of debt in the first quarter of 2020. We believe that
our existing cash, cash equivalents and investments will be sufficient to fund
our projected operating requirements for at least the next 12 months from the
date of filing of this Quarterly Report on Form 10-Q for the quarter ended
September 30, 2020. However, the potential economic or other disruptions caused
by the COVID-19 pandemic could have a material adverse effect on our business,
results of operations and liquidity. We will continue to monitor our operating
expenses and cash flows in response to the evolving market conditions.
On January 2, 2020, we and Illumina mutually agreed to terminate the Merger
Agreement. As part of the Termination Agreement, up to $52.0 million of the
Continuation Advances that we received from Illumina are repayable without
interest to Illumina if, within two years of March 31, 2020, we enter into, or
consummate a Change of Control Transaction or raise at least $100 million in a
single equity or debt financing (may have multiple closings), with the amount
repayable dependent on the amount raised by us.
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Factors that may affect our capital needs include, but are not limited to,
whether we will have to repay the Continuation Advances; the pace of adoption of
our products which affects the sales of our products and services; our ability
to obtain new collaboration and customer arrangements; the progress of our
research and development programs; initiation or expansion of research programs
and collaborations; the purchase of patent licenses; future acquisitions;
manufacturing costs, service costs, the impact of product quality, litigation
costs, including the costs involved in preparing, filing, prosecuting, defending
and enforcing intellectual property rights; costs of developing new and enhanced
products; and other factors.
We expect to raise additional capital in the future. To the extent that we raise
additional funds through the sale of equity or convertible debt, the issuance of
such securities will result in dilution to our stockholders. There can be no
assurance that such funds will be available on favorable terms, or at all,
particularly in light of restrictions under the Termination Agreement. If
adequate funds are not available, we may be required to obtain funds by entering
into collaboration, licensing or debt agreements on unfavorable terms. If we are
unable to raise funds on favorable terms, or at all, we may have to reduce our
cash burn rate and may not be able to support our commercialization efforts, or
to increase or maintain the level of our research and development activities. If
we are unable to generate sufficient cash flows or to raise adequate funds to
finance our forecasted expenditures, we may have to make significant changes to
our operations, including delaying or reducing the scope of, or eliminating some
or all of, our development programs. We also may have to reduce sales,
marketing, engineering, customer support or other resources devoted to our
existing or new products or cease operations. If our cash, cash equivalents and
investments are insufficient to fund our projected operating requirements, and
we are unable to raise capital, it would have a material adverse effect on our
business, financial condition and results of operations.
Operating Activities
Our primary uses of cash in operating activities are for the development of
ongoing product enhancements and future products, manufacturing, and support
functions related to our sales, general and administrative activities.
We had $33.8 million of cash provided from operating activities for the nine
months ended September 30, 2020, compared to cash usage of $60.1 million from
operating activities for the same period in 2019.
Cash provided by operating activities for the nine months ended September 30,
2020 was due to the $98.0 million Reverse Termination Fee received from
Illumina, non-cash items such as stock-based compensation of $12.3 million and
depreciation of $4.8 million, partially offset by a net loss of $45.5 million
and a gain from Continuation Advances from Illumina of $34.0 million, which is
considered to be a financing activity. The change in net operating assets and
liabilities was primarily attributed to a decrease of $3.4 million in accounts
receivable, partially offset by an increase of $3.0 million in inventory.
Cash used in operating activities for the nine months ended September 30, 2019
was due primarily to a net loss of $84.0 million, offset by non-cash items such
as stock-based compensation of $12.5 million and depreciation of $5.5 million.
The change in net operating assets and liabilities was primarily attributed to
an increase of $1.4 million in accounts receivable, partially offset by an
increase of $4.9 million in accrued expenses and a decrease of $2.3 million in
inventory.
Investing Activities
Our investing activities consist primarily of capital expenditures and
investment purchases, sales and maturities. We used $120.8 million of cash for
investing activities for the nine months ended September 30, 2020, compared to
receiving cash of $65.5 million from investing activities for the same period in
2019.
Cash used in investing activities for the nine months ended September 30, 2020
was due primarily to net purchases of investments of $119.9 million and
purchases of property and equipment of $1.0 million.
Cash provided in investing activities for the nine months ended September 30,
2019 was due primarily to net maturities of investments of $68.2 million.
Financing Activities
Cash provided from financing activities was $126.0 million and $8.4 million for
the nine months ended September 30, 2020 and 2019, respectively.
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Cash provided by financing activities during the nine months ended September 30,
2020 stemmed from the net proceeds of $93.8 million from our August 2020
underwritten public equity offering after deducting underwriter commissions and
paid offering expenses, $34.0 million of Continuation Advances from Illumina and
proceeds of $14.2 million from the issuance of common stock through our equity
compensation plans, partially offset by $16.0 million we repaid for the
remaining outstanding principal to Deerfield upon the maturity of the Facility
Agreement.
Cash provided by financing activities during the nine months ended September 30,
2019 was due to $8.4 million from the issuance of common stock through our
equity compensation plans.
Capital Resources
In June 2020, we filed a shelf registration statement on Form S-3 with the SEC
pursuant to which we may, from time to time, sell up to an aggregate of $250.0
million of our common stock, preferred stock, depository shares, warrants,
units or debt securities. On July 14, 2020, the registration statement was
declared effective by the SEC, which allows us to access the capital markets for
the three-year period following this effective date.
In August 2020 we entered into an underwriting agreement, relating to the public
offering of 19,430,000 shares of our common stock, $0.001 par value per share,
at a price to the public of $4.47 per share. Under the terms of the underwriting
agreement, we also granted the underwriters a 30-day option to purchase up to an
additional 2,914,500 shares of our common stock, which was subsequently
exercised in full, and the offering including the sale of shares of common stock
subject to the underwriters' option, closed in August 2020. In total, we sold
22.3 million shares of our common stock. We paid a commission equal to 6% of the
gross proceeds from the sale of shares of our common stock. The total net
proceeds to us from the offering after deducting the underwriting discount were
approximately $93.9 million, excluding approximately $0.3 million of offering
expenses, $0.2 million of which was unpaid as of September 30, 2020. As a
result, $150.1 million remains available under the current shelf registration.
However, the Termination Agreement currently limits our ability to issue
additional securities or incur indebtedness as up to the $52.0 million of
Continuation Advances paid to us are repayable without interest to Illumina if,
within two years of March 31, 2020, we enter into a Change of Control
Transaction or raise at least $100 million in a single equity or debt financing
(that may have multiple closings), with the amount repayable dependent on the
amount raised by us.
Off-Balance Sheet Arrangements
As of September 30, 2020, we did not have any off-balance sheet arrangements.
In the ordinary course of business, we enter into standard indemnification
arrangements. Pursuant to these arrangements, we indemnify, hold harmless, and
agree to reimburse the indemnified parties for losses suffered or incurred by
the indemnified party in connection with any trade secret, copyright, patent or
other intellectual property infringement claim by any third party with respect
to its technology, or from claims relating to our performance or non-performance
under a contract, any defective products supplied by us, or any acts or
omissions, or willful misconduct, committed by us or any of our employees,
agents or representatives. The term of these indemnification agreements is
generally perpetual after the execution of the agreement. The maximum potential
amount of future payments we could be required to make under these agreements is
not determinable because it involves claims that may be made against us in
future periods but have not yet been made. To date, we have not incurred costs
to defend lawsuits or settle claims related to these indemnification agreements.
We also enter and have entered into indemnification agreements with our
directors and officers that may require us to indemnify them against liabilities
that arise by reason of their status or service as directors or officers, except
as prohibited by applicable law. In addition, we may have obligations to hold
harmless and indemnify third parties involved with our fundraising efforts and
their respective affiliates, directors, officers, employees, agents or other
representatives against any and all losses, claims, damages and liabilities
related to claims arising against such parties pursuant to the terms of
agreements entered into between us and such third parties in connection with
such fundraising efforts. To the extent that such indemnification obligations
apply to the lawsuits described in "Note 6. Commitments and Contingencies" in
Part I, Item 1 of this Form 10-Q, any associated expenses incurred are included
within the related accrued litigation expense amounts. No additional liability
associated with such indemnification agreements has been recorded as of
September 30, 2020.
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