Item 7A. Quantitative and Qualitative Disclosures about Market Risk

We do not use derivative financial instruments in our investment portfolio and have no foreign exchange contracts.

Our financial instruments consist of cash, cash equivalents, short-term and long-term investments, accounts receivable, accounts payable, accrued expenses, debt and long-term obligations. We consider investments that, when purchased, have a remaining maturity of 90 days or less to be cash equivalents.The primary objectives of our investment strategy are to preserve principal, maintain proper liquidity to meet operating needs and maximize yields. To minimize our exposure to an adverse shift in interest rates, we invest in cash equivalents, short-term and long-term marketing securities. We do not believe that a 10% change in interest rates would have a material impact on the fair value of our investment portfolio or our interest income.

As of December 31, 2017, we had outstanding debt recorded on our consolidated balance sheet of $566.2 million, net of deferred financing costs and unamortized debt discount totaling $185.0 million, related to our Convertible Senior Notes. As the interest rates are fixed and the notes are not carried at fair value, changes in interest rates do not affect the value of our debt.

Our business is subject to risks, including, but not limited to: unique economic conditions, changes in political climate, differing tax structures, other regulations and restrictions, and foreign exchange rate volatility. We are primarily exposed to currency exchange rate fluctuations related to our subsidiary operation in Canada and, to a lesser extent, Europe. Currently, the majority of our sales outside of the U.S. are transacted in U.S. dollars and are not subject to material foreign currency fluctuations. We expect that as we establish our commercial operations in Europe during 2018 that our business will become more susceptible to foreign exchange rate volatility, primarily related to the Euro and the British Pound.

Fluctuations in foreign currency rates could affect our sales, cost of goods and operating margins and could result in exchange losses. In addition, currency devaluations can result in a loss if we hold deposits of that currency. A hypothetical 10% increase or decrease in foreign currencies that we transact in would not have a material adverse impact on our cash flows, financial condition or results of operations.