Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
We are exposed to market risk
related to changes in interest rates on our cash and cash equivalents and the Oaktree Loan. We do not utilize derivative financial instruments
or other market risk-sensitive instruments to manage our exposure to interest rate changes.
We believe our interest rate
risk related to our cash and cash equivalents is not material as our risk is that interest rates fall. Based on the current interest rates,
we do not have a significant downside risk of a drop in interest rates.
The interest rate risk related
to the Oaktree Loan is based on the Secured Overnight Financing Rate (“SOFR”) plus an interest rate spread of 6.5% per annum.
A hypothetical increase of 100 basis points in SOFR would impact our interest expense by $1,075,000 per annum based on the outstanding
balance under the Oaktree Loan as of March 31, 2025.
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