Item 3. Quantitative and Qualitative Disclosures About Market Risk
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
As of June 30, 2026 we had cash and cash equivalents of $27.8 million. As of June 30, 2026 we had short-term and long-term available-for-sale investments of $513.5 million. Our cash and cash equivalents are held in bank deposits and money market funds. Our investments are held in U.S. government treasury securities. The primary objective of our investment activities is to preserve principal while at the same time maximizing yields without significantly increasing risk. Due to the nature of our investments and their limited duration until maturity, we do not believe we have material exposure to changes in their fair value due to fluctuations in interest rates. Declines in interest rates, however, would reduce our future interest income as securities mature and are re-invested in lower yielding instruments.
Concentration of Credit Risk
We maintain our bank deposits and other cash equivalents with high-quality financial institutions. Although deposits may exceed federally insured limits, we have not experienced any losses related to these balances. Our cash equivalents and investment portfolio is limited to high-credit-quality instruments, and we believe our credit risk exposure is minimal.
Derivative Warrant Risk
We are exposed to equity price risk with respect to certain of our outstanding warrants. The fair value of warrants classified as liabilities is remeasured at each reporting date, with changes in fair value recognized in our condensed consolidated statements of operations. The valuation of these instruments is sensitive to changes in:
● The price of our publicly traded common stock warrants;
● Our common stock price;
● Expected volatility;
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● Risk-free interest rates; and
● Remaining contractual term.
A hypothetical 10% increase in the price of our publicly traded common stock warrants and the price of our common stock as of June 30, 2026, would have resulted in an increase in the fair value of our warrant liabilities of approximately $8.0 million, with a corresponding impact to other income and expense. Because these instruments are measured at fair value, volatility in the price of our publicly traded common stock warrants or our common stock price may result in non-cash gains or losses in future periods.
Foreign Currency Risk
We have limited foreign currency exposure related to transactions denominated in currencies other than the U.S. dollar, primarily associated with operating costs, international vendor relationships and sales of collaborative research, materials and quantum computers. A hypothetical 10% change in applicable foreign currency exchange rates would not have had a material impact on our results of operations or financial condition as of June 30, 2026.
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