Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We have operations both within the U.S. and abroad and we are exposed to market risks in the ordinary course of our business. These risks include fluctuations in interest rates and foreign currency exchange rates, and to a lesser extent, inflation risk.
Interest rate fluctuation risk
Our exposure to market risk for changes in interest rates relates primarily to our short-term investment portfolio. The primary objective of our short-term investment portfolio is to preserve principal while at the same time maximizing the income we receive from our investments without significantly increasing risk. At December 31, 2024 and 2023, we had cash and cash equivalents, restricted cash and short-term investments of $357.2 million and $495.7 million, respectively, which consisted of cash, money market funds, U.S. Treasury securities, U.S. Government Agency securities, and highly rated investment grade corporate debt securities.
Under the Amended Loan Agreement, we had a $30.0 million term loan outstanding as of December 31, 2024 which is subject to the movement in interest rates. The principal amount outstanding under the Term Loans will accrue interest at a floating per annum rate equal to (i) the greater of (a) 1-month term Chicago Mercantile Exchange (“CME”) Term Secured Overnight Financing Rate (“SOFR”) on the last business day of the month that immediately precedes the month in which the interest will accrue and (b) three and one-half percent (3.50%) plus (ii) five and one-quarter percent (5.25%), subject to an agreed upon floor of 8.75%.
Due to the short-term maturities of our cash equivalents and short-term investments, and the amount of principle outstanding under the Amended Loan Agreement with Oxford, an immediate 100 basis point change in interest rates would not have a material effect on our financial condition.
Foreign currency exchange risk
Most of our operating expenses are denominated in U.S. dollars and, as a result, we have not experienced significant foreign currency transaction gains and losses to date. We have limited foreign currency exposure associated with our operating expenses. Our exposures are primarily limited to fluctuations in the Euro, Great British Pound and Japanese Yen. We do not anticipate that foreign currency transaction gains or losses will be significant at our current level of operations. However, our operations may become subject to more significant fluctuations in foreign currency exchange rates in the future if we continue to contract with vendors outside of the U.S. and expand our operations internationally.
Inflation risk
To date, we do not believe that inflation has had a material effect on our business, financial condition, results of operations or future prospects. However, if current inflationary pressures are sustained for a prolonged period of time, the cost projections associated with our development plans may be impacted as well as the success of businesses from which we procure services, which could harm our business, results of operations, financial condition or future prospects.
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