Ivanhoe Electric Inc. 10-Q

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion and analysis of our financial condition and results of operations together with the condensed interim consolidated financial statements and related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q (this “Quarterly Report”) and with our audited consolidated financial statements and the related notes for the fiscal year ended December 31, 2023 included in Part II of our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission (the “SEC”) on February 26, 2024 (the “2023 Form 10-K”). S pecial Note Regarding Forward-Looking Statements This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended, (the "Exchange Act"), that involve risks and uncertainties, including statements based on our current expectations, assumptions, estimates and projections about future events, our business, our financial condition, results of operations and prospects, our industry and the regulatory environment in which we operate. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. Those statements include, but are not limited to, statements with respect to: estimated calculations of mineral reserves and resources at our properties including changes in those estimated calculations, anticipated results and timing of exploration activities, timing of studies for advancing or developing our properties, plans and objectives, industry trends, our requirements for additional capital, treatment under applicable government regimes for permitting or attaining approvals, government regulation, environmental risks, title disputes or claims, synergies of potential future acquisitions, the projected, forecast or anticipated economic parameters of our mineral projects (including capital cost, operating cost, net present value, internal rate of return and other parameters), and our anticipated uses of the net proceeds from our initial public offering or other offerings of our securities. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “could,” “should,” “would,” “achieve,” “budget,” “scheduled,” “forecasts,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” the negative of these terms and other comparable terminology. These forward-looking statements may include projections of our future financial performance, our anticipated growth strategies and anticipated trends in our industry. All forward-looking statements speak only as of the date on which they are made. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions concerning future events that are difficult to predict. Therefore, actual future events or results may differ materially from these statements. We believe that the factors that could cause our actual results to differ materially from those expressed or implied by forward-looking statements include the following: our mineral projects are all at the exploration stage and are subject to the significant risks and uncertainties associated with mineral exploration; the initial assessment for our Santa Cruz Project is only an early stage study of its potential economic viability and future studies and actual economic outcomes may vary greatly from those set forth in the initial assessment; we have no mineral reserves, other than at the San Matias project; we have a limited operating history on which to base an evaluation of our business and prospects; we depend on our material projects for our future operations; our mineral resource and reserve calculations and economic projections relating to our properties are only estimates; actual capital costs, operating costs, production and economic returns at any future mine may differ significantly from those we have anticipated or projected; the title to some of the mineral properties may be uncertain or defective; our business is subject to changes in the prices of copper, gold, silver, nickel, cobalt, vanadium and platinum group metals; we have claims and legal proceedings against one of our subsidiaries; our business is subject to significant risk and hazards associated with future mining operations; we may fail to identify attractive acquisition candidates or joint ventures with strategic partners or be unable to successfully integrate acquired mineral properties; we may fail to successfully manage joint ventures and are reliant on our joint venture partners to comply with their obligations; our business is extensively regulated by the United States and foreign governments as well as local governments; the requirements that we obtain, maintain and renew environmental, construction and mining permits are often a costly and time-consuming process; our non-U.S. operations are subject to additional political, economic and other uncertainties not generally associated with domestic operations; our activities may be hindered, delayed or have to cease as a result of climate change effects, including increased and excessive heating and the potential for forest fires at many of our properties; and our operations may be impacted by the COVID-19 pandemic, including impacts to the availability of our workforce, government orders that may require temporary suspension of operations, and the global economy. You should carefully consider these risks, as well as the additional risks described in other documents we file with the SEC. We also operate in a very competitive and rapidly changing industry. New risks emerge from time to time and it is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in, or implied by, any forward-looking statements. 15 These factors should not be construed as exhaustive and should be read in conjunction with the risks described under the heading “Risk Factors” in our 2023 Form 10-K. Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, are disclosed under “Risk Factors” in the 2023 Form 10-K. These risks and uncertainties, as well as other risks of which we are not aware or which we currently do not believe to be material, may cause our actual future results to be materially different than those expressed in our forward-looking statements. We caution you not to place undue reliance on these forward-looking statements. We do not undertake any obligation to make any revisions to these forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events, except as required by law. Business Overview We are a United States domiciled company that combines advanced mineral exploration technologies with electric metals exploration projects predominantly located in the United States. We use our accurate and powerful Typhoon™ geophysical surveying system, together with advanced data analytics provided by our 94.3% owned subsidiary, Computational Geosciences Inc. (“CGI”), to accelerate and de-risk the mineral exploration process as we seek to discover new deposits of critical metals that may otherwise be undetectable by traditional exploration technologies. We believe the United States is significantly underexplored and has the potential to yield major new discoveries of critical metals. Our mineral exploration efforts focus on copper as well as other metals including nickel, vanadium, cobalt, platinum group elements, gold and silver. Through the advancement of our portfolio of electric metals exploration projects, headlined by the Santa Cruz Project in Arizona and the Tintic Project in Utah, as well as other exploration projects in the United States, we intend to support the United States' supply chain independence by finding and delivering critical metals necessary for the electrification of the economy. We also operate a 50/50 joint venture with Saudi Arabian Mining Company Ma’aden ("Ma'aden") to explore for minerals on ~48,500 km 2 of underexplored Arabian Shield in Saudi Arabia. Finally, in addition to our mineral projects, we also own a 90.0% controlling interest in VRB Energy Inc. ("VRB") which is primarily engaged in the design, manufacture, installation, and operation of vanadium redox flow energy storage systems. At our Santa Cruz Project in Arizona, we are evaluating the potential for a high-grade modern underground copper mining operation. In September 2023, we completed the Initial Assessment & Technical Report Summary for the Santa Cruz Project (the "IA"), which outlines a potential 5.9 million tonnes per year underground mining operation, supported by 105.2 million tonnes of modeled mill feed with an average grade of 1.58% copper from the Santa Cruz and East Ridge Deposits, resulting in an estimated 20-year mine life. We are advancing further studies for an underground copper mining operation with a focus on minimizing the surface footprint of the mine while at the same time incorporating leading technologies to improve efficiencies and costs. We are designing a technologically advanced mine that we expect to result in low carbon dioxide emissions per pound of copper produced and be a leading example of responsibly produced domestic copper. Key considerations that will influence our decision making include, but are not limited to, using clean and renewable energy in our future mining operations, optimizing and minimizing our water utilization, minimizing our environmental footprint, ensuring workforce diversity and hiring from local communities, health, safety and environmental performance, support of local cultural heritage and biodiversity protection. References to our mineral projects refers to our interests in such projects which may be a direct ownership interest in mineral titles (including through subsidiary entities), a right to acquire mineral titles through an earn-in or option agreement, or, in the case of our investments in publicly listed companies in Canada, through our ownership of the equity of those companies that have an interest in such mineral projects. Our shares of common stock are listed on the NYSE American and the TSX under the ticker symbol “IE”. Segments We account for our business in three business segments – (i) critical metals, (ii) data processing and software licensing services and (iii) energy storage systems. Significant Components of Results of Operations Revenue, Cost of Sales and Gross Profit We have not generated any revenue from our mining projects because they are in the exploration stage. We do not expect to generate any revenue from our mining projects for the foreseeable future. 16 We generate revenue from our technology businesses CGI and VRB, which are included in the data processing and energy storage systems business segments, respectively. CGI generates revenue from the sale of data processing services to the mining and oil and gas industries. In prior years, CGI has also generated revenue from software licensing. VRB generates revenue from developing, manufacturing and selling vanadium redox flow energy storage systems. Exploration Expenses Exploration expenses include topographical, geological, geochemical and geophysical studies, exploratory drilling, trenching, sampling and activities in relation to identifying a mineral resource and then evaluating the technical feasibility and commercial viability of extracting the mineral resource, as well as value-added taxes in relation to these direct exploration and evaluation costs incurred in foreign jurisdictions where recoverability of those taxes is uncertain. Exploration expenses also include salaries, benefits and non-cash stock-based compensation expenses of the employees performing these activities. Exploration expenses also include payments under earn-in and option agreements where the option right is with respect to ownership interests in legal entities owning the underlying mineral project in the exploration project phase. Through our earn-in and option agreements, we have the right (and in some cases, the obligation) to fund and conduct exploration on the underlying mineral project prior to determining whether to acquire a minority or majority ownership interest through further funding the costs of such exploration and, in some cases, through direct payments to the owners of the project. In the event we cease making expenditures on an exploration mineral project or fail to incur the agreed level of exploration expenditures, we will not obtain an ownership right beyond any which may have been acquired as of the date of termination. Included in exploration expenses are exploration costs that we incur in relation to generating new projects. These activities may or may not proceed to earn-in agreements depending on our evaluation. These are categorized as “Project generation and other”. General and Administrative Expenses Our general and administrative expenses consist of salaries and benefits, stock-based compensation, professional and consultant fees, insurance and other general administration costs. Three Months Ended March 31, 2024 Compared to the Three Months Ended March 31, 2023 For the three months ended March 31, 2024 we recorded a net loss attributable to common stockholders of $55.5 million ($0.46 per share), compared to $36.1 million ($0.39 per share) for the three months ended March 31, 2023, which was an increase of $19.4 million. Significant contributors to this increase for the three months ended March 31, 2024 included an increase of $17.1 million in exploration expenditures, an increase of $2.0 million in general and administrative expenses, an increase of $2.4 million in the share of loss of equity method investees and a decrease of $0.3 million in revenue compared to the three months ended March 31, 2023. Exploration expenses were $43.6 million for the three months ended March 31, 2024, an increase of $17.1 million from $26.6 million for the three months ended March 31, 2023. Exploration expenses consisted of the following: 17 Three months ended March 31, (In thousands) 2024 2023 Exploration Expenses: Santa Cruz, USA $ 27,837 $ 14,682 Tintic, USA 3,520 1,121 San Matias, Colombia (Cordoba) 3,518 4,658 Hog Heaven, USA 3,307 638 Carolina, USA 895 238 Bitter Creek, USA 658 27 White Hill, USA 237 491 Lincoln, USA 130 295 Generative exploration and other 3,541 4,409 Total $ 43,643 $ 26,559 During the three months ended March 31, 2024, exploration expenditures largely focused on activities at: • the Santa Cruz Project where $27.8 million of exploration expenditure was incurred in the three months ended March 31, 2024 compared to $14.7 million incurred in the three months ended March 31, 2023. Activities during the three months ended March 31, 2024 at Santa Cruz were focused on a program of infill resource drilling, geotechnical, hydrological, and metallurgical drilling along with advancing permitting and technical studies required to support a prefeasibility study; • the San Matias Project where $3.5 million of exploration expenditure was incurred by Cordoba Minerals for the three months ended March 31, 2024 focused on preparations for detailed engineering design of the Alacran mine; • the Tintic Project where $3.5 million of exploration expenditure was incurred in the three months ended March 31, 2024 compared to $1.1 million incurred in the three months ended March 31, 2023. Activities during the three months ended March 31, 2024 were focused on diamond drilling in the Mammoth area; and • the Hog Heaven Project where $3.3 million of exploration expenditure was incurred in the three months ended March 31, 2024 compared to $0.6 million incurred in the three months ended March 31, 2023. Activities during the three months ended March 31, 2024 were focused on diamond drilling in the Flathead Mine area. General and administrative expenses were $12.6 million for the three months ended March 31, 2024, an increase of $2.0 million from $10.6 million for the three months ended March 31, 2023. Contributing to the increase, was a $2.0 million increase in salaries due to the payment of $1.8 million in short term cash bonuses awarded during the three months ended March 31, 2024. There were no short term incentive awards paid in the three months ended March 31, 2023. This increase was offset by a $0.5 million decrease in directors and officers insurance expenses for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 due to reduced insurance premiums. Share of loss of equity method investees was $3.0 million for the three months ended March 31, 2024, an increase of $2.4 million from $0.6 million for the three months ended March 31, 2023. The increase in loss was due to our $2.1 million share of the loss from the Ma'aden joint venture three months ended March 31, 2024. The Ma'aden joint venture was formed in July 2023. CGI’s software licensing and data processing services to the mining and oil and gas industries represented 100.0% of our revenue for the three months ended March 31, 2024 ($0.4 million) and 100.0% for the three months ended March 31, 2023 ($0.7 million). VRB generated no revenue during these periods. 18 Three Months Ended March 31, 2024 Three Months Ended March 31, 2023 Percentage Change (In thousands) Software licensing and data processing services: Revenue $ 360 $ 679 (47) % Cost of sales (100) (184) (46) % Gross profit $ 259 $ 495 (48) % CGI’s revenue for the three months ended March 31, 2024 was $0.4 million, a decrease of $0.3 million from $0.7 million for the three months ended March 31, 2023. The decrease in CGI’s revenue was a result of less data processing services being performed. CGI’s gross profit for the three months ended March 31, 2024 was $0.3 million, a decrease of $0.2 million from $0.5 million for the three months ended March 31, 2023. The percentage decrease in CGI's gross profit was consistent with the decrease in revenue. Stock-Based Compensation During the three months ended March 31, 2024, we granted 1.8 million stock options to certain directors, officers and employees of the Company at an exercise price of $13.50. The fair value of the option grant was determined using the Black-Scholes option-pricing model as $3.46 per share. Liquidity, Capital Resources and Capital Requirements Cash Resources We have recurring net losses and negative operating cash flows and we expect that we will continue to operate at a loss for the foreseeable future. We generate revenue from our technology businesses. We have not generated any revenue from our mining projects and do not expect to generate any revenue from our mining projects for the foreseeable future. We have funded our operations primarily through the sale of our equity and convertible securities. At March 31, 2024 and December 31, 2023, we had cash and cash equivalents of $179.4 million and $205.0 million, respectively, and a working capital of $152.6 million and $176.8 million, respectively. Of the total cash and cash equivalents at March 31, 2024 and December 31, 2023, $30.2 million and $20.7 million, respectively, was not available for the general corporate purposes of the Company as these amounts were held by non-wholly-owned subsidiaries. As at May 8, 2024, we believe that we will have sufficient cash resources to carry out our business plans for at least the next 12 months, after which we expect to need additional financing to further advance our projects and conduct our business. We have based these estimates on our current assumptions which may require future adjustments based on our ongoing business decisions as well as, in particular, exploration success at our mineral projects. Accordingly, we may require additional cash resources earlier than we currently expect or we may need to curtail currently planned activities. Our significant operational expenses include the payments that we anticipate making under the various earn-in and option agreements to which we are a party. These agreements are structured to provide us with flexibility whereby our ability to continue to explore on a mineral project is contingent on funding agreed specified levels over specified time intervals. We may seek additional financing at any time through debt, equity, project specific debt, and/or other means, including asset sales. Our continued operations are dependent on our ability to obtain additional financing or to generate future cash flows. However, there can be no assurance that we will be successful in our efforts to raise additional capital on terms favorable to us, or at all. Cash Balances as of March 31, 2024 The table below discloses the amounts of cash disaggregated by currency denomination as of March 31, 2024 in each jurisdiction that our affiliated entities are domiciled. 19 Currency by Denomination (in USD Equivalents) US dollars Canadian dollars Chinese Renminbi Colombian Pesos Other Total (In thousands) Jurisdiction of Entity: USA $ 145,427 $ 476 $ — $ — $ — $ 145,903 Colombia — — — 22,207 — 22,207 Singapore 4,652 — — — — 4,652 Canada 2,537 745 — — — 3,283 France 1,904 — — — — 1,905 China — — 394 — — 394 British Virgin Islands 355 — — — — 355 Other 74 227 — — 361 662 Total $ 154,949 $ 1,449 $ 394 $ 22,207 $ 362 $ 179,361 Our subsidiary VRB, domiciled in the Cayman Islands, is subject to certain foreign exchange restrictions with respect to its People's Republic of China ("PRC") subsidiaries. There are foreign exchange policies in the PRC that limit the amount of capital that can be directly transmitted offshore from VRB’s PRC subsidiaries to VRB. Since their incorporation, these PRC subsidiaries have had accumulated losses and have not declared or paid any dividends or made any distribution of earnings. There were no cash transfers to or from our PRC subsidiaries in the form of intercompany loans during the three months ended March 31, 2024. Refer to Note 17 of our consolidated financial statements in our 2023 Form 10-K which outlines other restrictions on transfers of net assets from our consolidated subsidiaries to the Company. Convertible Bond — VRB. In 2021, VRB issued a convertible bond for gross proceeds of $24.0 million. The bond has a five-year term and interest accrues at a rate of 8% per annum. Prior to the maturity date, the convertible bond will be automatically converted into equity of VRB upon an equity financing or sale event, at a price per share equal to the lower of (A) the transaction price of the equity financing or sale event, and (B) the valuation cap price of $158.0 million divided by the total shares outstanding at the time of the event. If no equity financing or sale event occurs, VRB must repay the outstanding principal and interest on maturity. Cash Flows The following table presents our sources and uses of cash for the periods indicated: Three Months Ended March 31, 2024 2023 Net cash (used in) provided by: Operating activities (49,959) (30,019) Investing activities (1,467) (2,666) Financing activities 26,000 3 Effect of foreign exchange on cash (256) 17 Total change in cash (25,682) (32,665) Operating activities. Net cash used in operating activities for all periods presented largely was spent on our exploration expenses and our general and administrative costs. We do not generate adequate cash from operations to cover our operating expenses and therefore rely on our financing activities to provide the cash resources to fund our operating and investing activities. 20 The net cash used in operating activities for the three months ended March 31, 2024 of $50.0 million primarily was the result of $43.0 million of cash exploration expenditures and $9.9 million of cash general and administrative costs. The net cash used in operating activities for the three months ended March 31, 2023 of $30.0 million primarily was the result of $25.6 million of cash exploration expenditures and $6.4 million of cash general and administrative costs. Investing activities. Our investing activities generally relate to acquisitions of mineral property interests, purchases of public company shares in companies that we may partner with and capital expenditures at our projects. To date, due to our mining projects being in the exploration stage we have not incurred material capital expenditures. Net cash used in investing activities for the three months ended March 31, 2024 of $1.5 million was mainly attributable to $0.3 million related to payments for mineral interests, $0.7 million for the purchases of property, plant and equipment and $0.7 million for the purchase of investments that are subject to significant influence. In addition, we acquired cash of $0.2 million when we commenced consolidating SNC in March 2024. Financing activities. During the three months ended March 31, 2024, there were no significant financing activities as we continued to fund our operations with the proceeds from our September 2023 public offering. Our subsidiary, Cordoba raised $26 million during three months ended March 31, 2024 in relation to financing its Alacran project through its strategic arrangement with JCHX. Contractual Obligations As of March 31, 2024, there have been no material changes, outside the ordinary course of business, in our contractual obligations since December 31, 2023. Refer to Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 26, 2024, for information regarding our contractual obligations. Off Balance Sheet Arrangements As of March 31, 2024, we were not involved in any off-balance sheet arrangements that have or are reasonably likely to have a material effect on our financial condition, results of operations, or liquidity. Related Party Transactions See Note 12 of our consolidated financial statements for the three months ended March 31, 2024. Critical Accounting Estimates Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as the disclosure of contingent assets and liabilities as of the date of our financial statements. Below are the accounting matters that we believe are critical to our financial statements due to the degree of uncertainty regarding the estimates or assumptions involved and the magnitude of the asset, liability, revenue, expense, gain or loss being reported. Actual results may vary from our estimates in amounts that may be material to the financial statements. An accounting estimate is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact our financial statements. We base our assumptions and estimates on historical experience and various other sources that we believe to be reasonable under the circumstances. Actual results may differ from the estimates we calculate due to changes in circumstances, global economics and politics and general business conditions. A summary of our significant accounting policies are detailed in Note 3 to our consolidated financial statements included in our 2023 Form 10-K. We have outlined below those policies identified as being critical to the understanding of our business and results of operations and that require the application of significant management judgment in developing estimates. Recoverable value of exploration mineral interests 21 We review and evaluate exploration mineral interests for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The recoverability of our exploration mineral interests and intangible assets did not involve significant estimation in the periods presented as circumstances did not indicate the carrying amount of our assets may not be recoverable. However, the recoverability of our recorded mineral interests is subject to market factors that could significantly affect the recoverability of our assets, such as commodity prices, results of exploration activities that may affect our intentions to continue under option or earn-in agreements and geopolitical circumstances, particularly in Colombia. By nature, significant changes in these factors are reasonably possible to occur periodically, which could materially impact our financial statements. Stock-based compensation Compensation expense for options granted to employees, directors and certain service providers is determined based on estimated fair values of the options at the time of grant using the Black-Scholes option pricing model, which takes into account, as of the grant date, the fair market value of the shares, expected volatility, expected life, expected dividend yield and the risk-free interest rate over the expected life of the option. The use of the Black-Scholes option pricing model requires input estimation of the expected life of the option and volatility, which can have a significant impact on the valuation model and resulting expense recorded. In March 2024, we granted 1.8 million stock options to certain directors, officers and employees of the Company at an exercise price of $13.50 per share. The fair value of the option grants was determined using the Black-Scholes option-pricing model as $3.46. The following assumptions were used to compute the fair value of the options granted: March 11, 2024 Grant Date Risk-free interest rate 4.2% Dividend yield nil Estimated volatility 61.6% Expected option life 4 years The risk-free interest rate assumption was based on the U.S. treasury constant maturity yield at the date of the grant over the expected life of the option. No dividends are expected to be paid. We calculated the estimated volatility based on the historical volatility of a group of peer companies’ common stock and a group of relevant stock market indices over the expected option life as we only commenced publicly trading in June 2022. The computation of expected option life was determined based on a reasonable expectation of the option life prior to the option being exercised or forfeited. Income taxes We make estimates and judgments in determining the provision for income tax expense, deferred tax assets and liabilities and liabilities for unrecognized tax benefits, including interest and penalties. We are subject to income tax laws in many jurisdictions, including the United States, Canada, Colombia, Peru, Australia, the Ivory Coast and the PRC. We report income tax in accordance with U.S. GAAP, which requires the establishment of deferred tax accounts for all temporary differences between the financial reporting and tax bases of assets and liabilities, using currently enacted tax rates. In addition, deferred tax accounts must be adjusted to reflect new rates if enacted into law. Realization of deferred tax assets is contingent on the generation of future taxable income. As a result, we consider whether it is more likely than not that all or a portion of such assets will be realized during periods when they are available, and if not, we provide a valuation allowance for amounts not likely to be recognized. In determining our valuation allowance, we have not assumed future taxable income from sources other than the reversal of existing temporary differences. The extent to which a valuation allowance is warranted may vary as a result of changes in our estimates of future taxable income. In addition to the potential generation of future taxable income through the establishment of economic feasibility, development and operation of mines on our exploration assets, estimates of future taxable income could change in the event of disposal of assets, the identification of tax-planning strategies or changes in tax laws that would allow the benefits of future deductible temporary differences in certain entities or jurisdictions to be offset against future taxable temporary differences in other entities or jurisdictions. We recognize the effect of uncertain income tax positions if those positions are more likely than not of being sustained. The amount recognized is subject to estimates and our judgment with respect to the likely outcome of each uncertain tax position. The amount that is ultimately incurred for an individual uncertain tax position or for all uncertain tax positions in the aggregate could differ from the amount recognized. We had no uncertain tax positions as of March 31, 2024. 22 Item 3. Quantitative and Qualitative Disclosures about Market Risk. Not Applicable.