Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 7A. Quantitative and Qualitative Disclosures about Market Risks
Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in the price of ZEC, interest rates, and foreign exchange rates.
ZEC Price Risk
We are exposed to risk in the price of ZEC, a digital asset that is a material portion of the assets on our balance sheet. The price of ZEC has been subject to dramatic price fluctuations and is highly volatile. In the twelve months ended December 31, 2025, ZEC has traded between approximately $26.14 and $736.51. Any increase or decrease in the fair value of ZEC will require us to recognize unrealized gains or losses, which could be material to our financial results for the applicable reporting period, which may create significant volatility in our reported earnings. Any decrease in reported earnings or increased volatility of such earnings could have a material adverse effect on the market price of our securities. As ZEC will constitute a substantial part of our balance sheet, if we are unable to generate revenue or secure equity or debt financing in a timely manner, on favorable terms, or at all, we may be required to sell ZEC to satisfy these obligations. Any such sale of ZEC may have a material adverse effect on our operating results, financial condition and future prospects, and could impair our ability to secure additional equity or debt financing in the future.
60
Table of Contents
Interest Rate Risk
We are exposed to interest rate risk in the ordinary course of our business. Our cash and cash equivalents are held in highly liquid, readily available checking and money market accounts. As a result, these amounts are not materially affected by changes in interest rates and we do not believe that a 10% change in interest rate would materially impact these amounts.
Foreign Currency Exchange Risk
All of our employees and the majority of our major operations are currently located in the United States. We contract for manufacturing operations outside the United States through contract manufacturing organizations. The functional currency of our foreign subsidiary in Australia is the Australian dollar, and the R&D Tax Incentive payment is received from the Australian government in Australian dollars, although the majority of the Australian subsidiary’s contracts are denominated in U.S. dollars. We have also engaged in contracts with contractors or other vendors in a currency other than the U.S. dollar, including the British pound. As a result, we are subject to foreign currency risks with respect to the Australian dollar and the British pound which could have the effect of increasing our expenses or reducing the amounts collected under the R&D Tax Incentive from the amounts recorded at the time of the transaction.