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 June 30, 2025.
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