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Item 3 — Quantitative and Qualitative Disclosures About Market Risk
Skywater Technology Inc · 10-Q · Q2 FY2026 · Period ended Jun 28, 2026
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Market risk is the risk of loss arising from adverse changes in market rates and prices. as of June 28, 2026, our market risks relate to potential changes in the fair value of our debt due to fluctuations in applicable market interest rates. In the future, our market risk exposure generally will be limited to those risks that arise in the normal course of business, as we do not engage in speculative, non-operating transactions, nor do we utilize financial instruments or derivative instruments for trading purposes.
Credit Risk
Financial instruments that potentially subject us to credit risk are cash and cash equivalents, accounts receivable, and contract assets. Cash balances are maintained in financial institutions, which at times exceed federally insured limits. We monitor the financial condition of the financial institutions in which our accounts are maintained and have not experienced any losses in such accounts. We perform ongoing credit evaluations as to the financial condition of our customers with respect to trade receivables and contract assets. Generally, no collateral is required as a condition of sale. Our consideration of the need for an allowance for credit losses is based upon current market conditions and other factors.
Interest Rate Risk
At June 28, 2026, the outstanding balance of our Revolver was $192.3 million, which bore interest at a variable rate. At June 28, 2026, the rate in effect was 8.0%. Based on the outstanding balance of our Revolver at June 28, 2026, a 100 basis point increase in the interest rate would have increased interest expense by $1.9 million annually.
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