Item 7A. Quantitative and Qualitative Disclosures About Market Risk
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Interest Rates Risk
We are exposed to risk related to changes in interest rates. As of December 31, 2021 and 2020, we had cash and cash equivalents consisting primarily of $33,618 thousand and $6,586 thousand in money market funds. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. Due to the short-term nature and the low risk profile of our interest-bearing accounts, an immediate 10% change in interest rates would not have a material effect on the fair market value of our cash and cash equivalents or on our financial position or results of operations.
As of December 31, 2021, we had financial debt outstanding of CHF 618 thousand ($694 thousand), guaranteed by the Swiss Federal Authority, at a zero percent interest rate, and we are therefore not exposed to interest rate risk with respect to the cost of servicing and repaying debt.
Foreign Currency
We have operations in the U.S., Switzerland and Spain. The functional currency of each foreign reporting entity is the local currency. We are exposed to foreign currency exchange risk as the functional currency financial statements of foreign reporting entities are translated to U.S. dollars. The assets and liabilities of our foreign operations having a functional currency other than the U.S. dollar are translated into U.S. dollars at the exchange rate prevailing at the balance sheet date, and at the average exchange rate for the reporting period for revenue and expense accounts. The cumulative foreign currency translation adjustment is recorded as a component of accumulated other comprehensive loss in shareholders’ equity. The reported results of our foreign reporting entities will be influenced by their translation into U.S. dollars. Our primary currency translation exposure is related to operation in Switzerland, and a hypothetical 10% strengthening or weakening in the USD-CHF exchange rate would increase or decrease net loss for the year ended December 31, 2021 by approximately $587 thousand.
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