Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk.
Interest rate risk
Our cash and cash equivalents as of December 31, 2022 consisted of $12,961,936 in bank deposits and money market funds that presently earn very little interest. We believe such interest-earning instruments carry a
low degree of interest rate risk. The goals of our investment policy are liquidity and capital preservation; we do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our
interest rate exposure. We believe that we do not have any material exposure to changes in the fair value of these assets as a result of changes in interest rates due to the short-term nature of our cash and cash equivalents.
Foreign currency exchange risk
As we expand internationally, our results of operations and cash flows may become increasingly subject to fluctuations due to changes in foreign currency exchange rates. Our functional currency is the U.S. dollar,
and our revenue is denominated primarily in U.S. dollars. For the years ended December 31, 2022 and 2021, all our sales were in U.S. dollars. Our expenses are generally denominated in the currencies in which our operations are located, which is
primarily in the United States. A 10% change in exchange rates would not result in a material change in fair value of our cash and accounts receivable in 2022. As our operations in countries outside of the United States grow, our results of
operations and cash flows may be subject to fluctuations due to changes in foreign currency exchange rates, which could harm our business in the future. To date, we have not entered into any material foreign currency hedging contracts, although
we may do so in the future.
Concentration of credit risk
Substantially all of our cash and cash equivalents were held at Silicon Valley Bank (SVB), and the amounts frequently exceeded federally insured limits. On March 10, 2023, the Federal Deposit Insurance Corporation
(FDIC) announced that SVB had been closed by the California Department of Financial Protection and Innovation. The United States Department of the Treasury announced in a joint statement with the Federal Reserve and FDIC that depositors of SVB
will have access to all of their money starting March 13, 2023, including funds exceeding federally insured limits. As a result we did not experience any losses with respect to our funds that had been deposited with SVB. We are exposed to credit
risk in the event of default by the financial institutions holding our cash and cash equivalents. If we are unable to access our cash and cash equivalents as needed, our financial position and ability to operate our business will be adversely
affected.
Emerging Growth Company Status
We are an emerging growth company, as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act
until such time as those standards apply to private companies. We have elected not to take advantage of such extended transition period, which means that we will adopt a new standard when a standard is issued or revised.
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