References to the "Company," "us," "our" or "we" refer to Welsbach Technology
Metals Acquisition Corp. The following discussion and analysis of our financial
condition and results of operations should be read in conjunction with our
audited financial statements and related notes included herein.
Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Report
including, without limitation, statements under this "Management's Discussion
and Analysis of Financial Condition and Results of Operations" regarding the
Company's financial position, business strategy and the plans and objectives of
management for future operations, are forward- looking statements. When used in
this Report, words such as "anticipate," "believe," "estimate," "expect,"
"intend" and similar expressions, as they relate to us or the Company's
management, identify forward-looking statements. Such forward-looking statements
are based on the beliefs of management, as well as assumptions made by, and
information currently available to, the Company's management. Actual results
could differ materially from those contemplated by the forward- looking
statements as a result of certain factors detailed in our filings with the SEC.
All subsequent written or oral forward-looking statements attributable to us or
persons acting on the Company's behalf are qualified in their entirety by this
paragraph.
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the financial statements and the
notes thereto contained elsewhere in this Report. Certain information contained
in the discussion and analysis set forth below includes forward-looking
statements that involve risks and uncertainties.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with our audited
consolidated financial statements and the notes related thereto which are
included in "Item 8. Consolidated Financial Statements and Supplementary Data"
of this Annual Report on Form 10-K. Certain information contained in the
discussion and analysis set forth below includes forward-looking statements. Our
actual results may differ materially from those anticipated in these
forward-looking statements as a result of many factors, including those set
forth under "Cautionary Note Regarding Forward-Looking Statements and Risk
Factor Summary," "Item 1A. Risk Factors" and elsewhere in this Annual Report on
Form 10-K.
Overview
We are a blank check company formed for the purpose of effecting a merger,
capital stock exchange, asset acquisition, stock purchase, reorganization, or
similar business combination with one or more target businesses. We intend to
effectuate our business combination using cash from the proceeds of our initial
public offering and the sale of the placement units that occurred simultaneously
with the completion of our initial public offering, our capital stock, debt or a
combination of cash, stock and debt.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete a business
combination will be successful.
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Recent Developments
On October 19, 2022, the Company formed WTMA Merger Subsidiary Corp., as a
direct and wholly owned subsidiary of the Company incorporated in Delaware to be
the Merger Sub under the Merger Agreement entered into by the Company on October
31, 2022.
Merger Agreement
On October 31, 2022, the Company entered into the Merger Agreement by and among
the Company, Merger Sub and WaveTech.
The Merger & Consideration
The Merger Agreement provides that, among other things and upon the terms and
subject to the conditions thereof, the following transactions will occur:
i. prior to the effective time of the Merger, each share of the Series A
preferred stock of WaveTech, par value $0.01 per share will be converted into
one share of common stock of WaveTech, par value $0.01 per share;
ii. at the closing of the transactions contemplated by the Merger Agreement, upon
the terms and subject to the conditions of the Merger Agreement and in
accordance with DGCL, Merger Sub will merge with and into WaveTech, the
separate corporate existence of Merger Sub will cease and WaveTech shall
continue as the surviving corporation and a wholly owned subsidiary of WTMA;
iii. as a result of the Merger, among other things, all outstanding shares of
capital stock of WaveTech (after giving effect to the WaveTech Preferred
Conversion) (other than (A) treasury shares, (B) dissenting shares and
(C) shares of capital stock of WaveTech subject to stock awards) will be
canceled and converted into the right to receive newly issued shares of
common stock, par value $0.0001 per share, of the Company determined based
on a pre-money enterprise valuation of WaveTech of $150.0 million and a
$10.00 price per share of the Company Common Stock; and
iv. the Company will immediately be renamed WaveTech Group Inc.
Registration Rights Agreement
At the closing of the Business Combination, the Sponsor and certain other
investors party thereto will enter into a registration rights agreement with the
Company, pursuant to which, among other things, (i) the Company's existing
registrant rights agreement will be terminated, (ii) the Company will file with
the U.S. Securities and Exchange Commission a registration statement on Form S-1
registering the resale, pursuant to Rule 415 under the Securities Act of 1933,
of certain shares of the Company Common Stock and certain other equity
securities of the Company held by the Holders as soon as practicable, but in any
event within thirty (30) days after the Closing; (iii) the Holders will be
entitled to certain demand registration rights in connection with an
underwritten shelf takedown offering, in each case subject to certain
limitations set forth in the Registration Rights Agreement; and (iv) the Holders
have certain piggy-back registration rights, in each case subject to certain
limitations set forth in the Registration Rights Agreement.
The foregoing summary of the Registration Rights Agreement does not purport to
be complete and is subject to, and qualified in its entirety by, the form of the
Registration Rights Agreement, a copy was filed as Exhibit 10.1 to the Current
Report on Form 8-K filed with the SEC November 1, 2022 and incorporated by
reference herein.
Sponsor Support and Lock-up Agreement
On October 31, 2022, the Company and WaveTech entered into a Sponsor Support and
Lock-up Agreement, with the Sponsors pursuant to which the Sponsors agreed to,
among other things, (i) vote in favor of the Merger Agreement and the
transactions contemplated thereby, in each case, subject to the terms and
conditions contemplated by the Sponsor Support and Lock-up Agreement and (ii)
vote against and withhold consent with respect to any merger, purchase of all or
substantially all of the Company's assets or other business combination
transaction (other than the Merger Agreement and the Business Combination).
20
Under the Sponsor Support and Lock-up Agreement, the Sponsors also agreed not
to, without the prior written consent of WaveTech and the board of directors of
the Company (i) sell, offer to sell, contract or agree to sell, hypothecate,
pledge, grant any option to purchase or otherwise dispose of or agree to dispose
of, directly or indirectly, file (or participate in the filing of) a
registration statement with the SEC (other than the Form S-4) or establish or
increase a put equivalent position or liquidate or decrease a call equivalent
position within the meaning of Section 16 of the Securities Exchange Act of
1934, with respect to any Subject Sponsor Shares, (ii) enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of any Subject Sponsor Shares owned by such
Sponsor or (iii) publicly announce any intention to effect any transaction
specified in clause (i) or (ii), in each case, until the earlier of (a) 180 days
after the Closing and (b) the date on which the closing price per share of the
Company Common Stock equals or exceeds $12.50 (subject to adjustment) for any
twenty (20) trading days within any thirty (30) consecutive trading day period.
The foregoing summary of the Sponsor Support and Lock-up Agreement does not
purport to be complete and is subject to, and qualified in its entirety by, the
Sponsor Support and Lock-up Agreement, a copy was filed as Exhibit 10.2 to the
Current Report on Form 8-K filed with the SEC November 1, 2022 and incorporated
by reference herein.
Shareholder Support and Lock-up Agreement
On October 31, 2022, the Company and the Sponsor entered into a Shareholder
Support and Lock-up Agreement with WaveTech and certain stockholders of
WaveTech. Pursuant to the Shareholder Support and Lock-up Agreement, the Company
Stockholders agreed to, among other things, provide written consent or vote at
any called meeting with respect to the outstanding shares of WaveTech capital
stock held by the Company Stockholders adopting the Merger Agreement and related
transactions and approving the Business Combination.
Under the Shareholder Support and Lock-up Agreement, the Company
Stockholders also agreed not to, without the prior written consent of WaveTech
and the board of directors of the Company (i) sell, offer to sell, contract or
agree to sell, hypothecate, pledge, grant any option to purchase or otherwise
dispose of or agree to dispose of, directly or indirectly, file (or participate
in the filing of) a registration statement with the SEC (other than the Form
S-4) or establish or increase a put equivalent position or liquidate or decrease
a call equivalent position within the meaning of Section 16 of the Exchange Act,
with respect to any shares of the Company Common Stock owned by such Company
Stockholder immediately after the Closing, (ii) enter into any swap or other
arrangement that transfers to another, in whole or in part, any of the economic
consequences of ownership of any Subject Stockholder Shares owned by such
Company Stockholder or (iii) publicly announce any intention to effect any
transaction specified in clause (i) or (ii), in each case, until the earlier of
(a) 180 days after the Closing and (b) the date on which the closing price per
share of the Company Common Stock equals or exceeds $12.50 (subject to
adjustment) for any twenty (20) trading days within any thirty (30) consecutive
trading day period.
The foregoing summary of the Shareholder Support and Lock-up Agreement does not
purport to be complete and is subject to, and qualified in its entirety by, the
Shareholder Support and Lock-up Agreement, a copy was filed as Exhibit 10.3 to
the Current Report on Form 8-K filed with the SEC November 1, 2022 and
incorporated by reference herein.
Results of Operations
We have neither engaged in any operations nor generated any operating revenues
to date. Our only activities for the year ended December 31, 2022 were in
connection with the search for a prospective initial Business Combination. We do
not expect to generate any operating revenues until after the completion of our
initial Business Combination, at the earliest. We expect to generate
non-operating income in the form of interest income from the proceeds of the IPO
placed in the U.S. based trust account established at the consummation of WTMA's
IPO. We expect that we will incur increased expenses as a result of being a
public company (for legal, financial reporting, accounting and auditing
compliance), as well as for due diligence expenses in connection with searching
for, and completing, a Business Combination.
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For the year ended December 31, 2022, we had a net loss of $2,390,719, which
primarily consists of operating expenses of $3,131,190, Delaware franchise taxes
of $200,000 and provision for income taxes of $180,688, offset by interest and
dividend earned on marketable securities held in the Trust Account in total of
$1,121,159.
For the year ended December 31, 2021, we had a net loss of $68,604, which
primarily consists of operating expenses of $7,865 and accrual of Delaware
franchise taxes of $60,750, offset by interest earned on marketable securities
held in the Trust Account of $11.
Liquidity and Capital Resources
On December 30, 2021, the Company consummated the IPO of 7,500,000 units, each
Unit containing one share of common stock and one right to receive 1/10 of one
share of common stock upon the consummation of the Business Combination,
generating gross proceeds of $75,000,000, which is discussed in Note 3 to the
consolidated financial statements.
Simultaneously with the closing of the IPO, the Company consummated the sale of
347,500 private placement units at a price of $10.00 per Private Placement Unit
in a private placement to the Company's sponsor, Welsbach Acquisition Holdings
LLC generating gross proceeds of $3,475,000 which is described in Note 4 to the
consolidated financial statements.
The Company granted the underwriters a 45-day option to purchase up to 1,125,000
Units to cover Over-allotment, if any. On January 14, 2022, the underwriters
partially exercised the option and purchased 227,686 additional Units,
generating gross proceeds of $2,276,860.
Upon the closing of the Over-allotment on January 14, 2022, the Company
consummated a private sale of an additional 4,554 Private Placement Units at a
price of $10.00 per Private Placement Unit, generating gross proceeds of
$45,540. As of January 14, 2022, a total of $77,276,860 of the net proceeds from
the IPO (including the Over-allotment Units) and the sale of Private Placement
Units has been placed in the Trust Account. As the over-allotment option was
only partially exercised, 224,328 shares of Common stock purchased by the
Initial Stockholders have been forfeited for no consideration.
Offering costs for the IPO amounted to $4,663,218, consisting of $1,500,000 of
underwriting fees, $2,625,000 of deferred underwriting fees payable (which are
held in the Trust Account) and $538,219 of other costs.
$2,704,690 of deferred underwriting fee payable is contingent upon the
consummation of a Business Combination by March 30, 2023, subject to the terms
of the Underwriting Agreement
For the year ended December 31, 2022, cash used in operating activities was
$976,309. Net cash used in investing activities was $3,523,983 and net cash
provided by financing activities was $3,822,399 mainly reflecting the proceeds
of our IPO and subsequent deposit into the trust account
For the year ended December 31, 2021, cash used in operating activities was
$260,825. Net cash used in investing activities was $75,000,000 and net cash
provided by financing activities was $76,461,781 mainly reflecting the proceeds
of our IPO and subsequent deposit into the trust account.
At December 31, 2022, we had cash and marketable securities held in the trust
account of $79,645,156. We intend to use substantially all of the funds held in
the trust account, including any amounts representing interest earned on the
trust account (less income taxes payable), to complete our business combination.
To the extent that our capital stock or debt is used, in whole or in part, as
consideration to complete our Business Combination, the remaining proceeds held
in the Trust Account will be used as working capital to finance the operations
of the target business or businesses, make other acquisitions and pursue our
growth strategies. The Company had withdrawn $298,414 from the trust account to
pay franchise and income taxes.
22
At December 31, 2022, we had operating cash of $309,881 and restricted cash of
$213,182 (excess permitted withdrawal) outside of the trust account. We have
used and intend to continue to use the funds held outside the trust account
primarily to identify and evaluate target businesses, perform business due
diligence on prospective target businesses, travel to and from the offices,
plants or similar locations of prospective target businesses or their
representatives or owners, review corporate documents and material agreements of
prospective target businesses, and structure, negotiate and complete a business
combination.
We monitor the adequacy of our working capital in order to meet the expenditures
required for operating our business prior to our initial business combination.
However, if our estimates of the costs of identifying a target business,
undertaking in-depth due diligence and negotiating an initial business
combination are less than the actual amount necessary to do so, we may have
insufficient funds available to operate our business prior to our business
combination. Moreover, we may need to obtain additional financing either to
complete our Business Combination or because we become obligated to redeem a
significant number of our public shares upon completion of our business
combination, in which case we may issue additional securities or incur debt in
connection with such business combination. If we are unable to complete our
initial Business Combination because we do not have sufficient funds available
to us, we will be forced to cease operations and liquidate the trust account.
We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business. However, if our estimate of
the costs of identifying a target business, undertaking in-depth due diligence
and negotiating a Business Combination are less than the actual amount necessary
to do so, we may have insufficient funds available to operate our business prior
to our Business Combination. Moreover, we may need to obtain additional
financing either to complete our Business Combination or because we become
obligated to redeem a significant number of our public shares upon consummation
of our Business Combination, in which case we may issue additional securities or
incur debt in connection with such Business Combination.
Related Party Transactions
Promissory Note - Related Party
On June 25, 2021, the Sponsor agreed to loan the Company an aggregate of up to
$300,000 to cover expenses related to the IPO pursuant to a promissory note.
This loan was non-interest bearing and was payable at the consummation of the
IPO. As of December 31, 2021, the outstanding balance on the Note has been
repaid in full, and borrowings under the promissory note are no longer
available.
Related Party Loans
In addition, in order to finance transaction costs in connection with a Business
Combination, certain of the Company's officers and directors may, but are not
obligated to, loan the Company funds as may be required. If the Company
completes a Business Combination, the Company would repay the Working Capital
Loans out of the proceeds of the Trust Account released to the Company.
Otherwise, the Working Capital Loans would be repaid only out of funds held
outside the Trust Account. In the event that a Business Combination does not
close, the Company may use a portion of proceeds held outside the Trust Account
to repay the Working Capital Loans but no proceeds held in the Trust Account
would be used to repay the Working Capital Loans. Except for the foregoing, the
terms of such Working Capital Loans, if any, have not been determined and no
written agreements exist with respect to such loans. The Working Capital Loans
would either be repaid upon consummation of a Business Combination, without
interest, or, at the lender's discretion, up to $1.5 million of such Working
Capital Loans may be convertible into units of the post Business Combination
entity at a price of $10.00 per unit. These units would be identical to the
Private Placement Units.
On September 30, 2022, the Company issued a first promissory note in the
principal amount of $772,769 to the Sponsor in connection with the Extension.
The First Promissory Note bears no interest and shall be payable upon the
earlier to occur of (i) upon consummation of the Company's initial business
combination out of the proceeds of the Trust Account released to the Company's
or (ii) at the Sponsor's discretion, converted, in full or in part, upon
consummation of the Company's business combination into additional private units
at a price of $10.00 per unit.
23
On December 30, 2022, the Company issued a second promissory note in the
principal amount of $772,769 to the Sponsor in connection with the Extension.
The Second Promissory Note bears no interest and shall be payable upon the
earlier to occur of (i) upon consummation of the Company's initial business
combination out of the proceeds of the Trust Account released to the Company's
or (ii) at the Sponsor's discretion, converted, in full or in part, upon
consummation of the Company's business combination into additional private units
at a price of $10.00 per unit.
The promissory note would either be repaid upon consummation of a Business
Combination, without interest, or, at the lender's discretion, convertible into
private units of the post-Business Combination entity at a price of $10.00 per
unit. The conversion feature was analyzed under ASC 470-20, "Debt with
Conversion or Other Options", the note did not include any premium or discounts.
The conversion option did not include elements that would require bifurcation
under ASC 815-40, "Derivatives and Hedging." The convertible note payable and
conversion feature does not meet the requirements for classification under ASC
480 and as a result is not required to be accounted for as a liability under ASC
480. In this case, the conversion feature embedded within the convertible
promissory note does not require bifurcation and as a result remains embedded
within the debt instrument because the convertible promissory note conversion
feature does not meet the definition of a derivative as it fails the net
settlement requirement. The embedded conversion feature does qualify as equity
under ASC 815-40 as the exercise contingency is not based on an observable
market or index unrelated to the issuer, the instrument meets the
fixed-for-fixed criteria under ASC 815-40-15, meets the requirements for equity
classification pursuant to ASC 815-40-25-1 and 25-2 and does not meet the
definition of a derivative as it fails the net settlement requirement. Based on
this analysis, the scope exception would apply, and the embedded conversion
feature would fail to satisfy the third bifurcation condition within ASC
815-15-25-1.
As of December 31, 2022, there was a $1,545,537 balance outstanding under the
Promissory Notes.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of December 31, 2022. We do not participate in
transactions that create relationships with entities or financial partnerships,
often referred to as variable interest entities, which would have been
established for the purpose of facilitating off-balance sheet arrangements. We
have not entered into any off-balance sheet financing arrangements, established
any special purpose entities, guaranteed any debt or commitments of other
entities, or purchased any non-financial assets.
Contractual obligations
We do not have any long-term debt, capital lease obligations or operating lease
obligations.
The underwriters were paid a cash underwriting discount of $0.20 per Unit on the
offering, or $1,545,537 in the aggregate at the closing of the IPO and the
over-allotment option. In addition, the underwriters are entitled to a deferred
underwriting commissions of $0.35 per unit, or $2,704,690 from the closing of
the IPO.
The Company issued a first promissory note in the principal amount of $772,769
to the Sponsor. The First Promissory Note bears no interest and shall be payable
upon the earlier to occur of (i) upon consummation of the Company's initial
business combination out of the proceeds of the Trust Account released to the
Company's or (ii) at the Sponsor's discretion, converted, in full or in part,
upon consummation of the Company's business combination into additional private
units at a price of $10.00 per unit.
The Company issued a second promissory note in the principal amount of $772,769
to the Sponsor. The Second Promissory Note bears no interest and shall be
payable upon the earlier to occur of (i) upon consummation of the Company's
initial business combination out of the proceeds of the Trust Account released
to the Company's or (ii) at the Sponsor's discretion, converted, in full or in
part, upon consummation of the Company's business combination into additional
private units at a price of $10.00 per unit.
As of December 31, 2022, there was a $1,545,537 balance outstanding under the
Promissory Notes
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Common Stock Subject to Possible Redemption
We account for our common stock subject to possible redemption in accordance
with the guidance in Accounting Standards Codification Topic 480 "Distinguishing
Liabilities from Equity." Common stock subject to mandatory redemption is
classified as a liability instrument and is measured at fair value.
Conditionally redeemable common stock (including common stock that features
redemption rights that are either within the control of the holder or subject to
redemption upon the occurrence of uncertain events not solely within our
control) is classified as temporary equity. At all other times, common stock is
classified as stockholders' equity. Our common stock features certain redemption
rights that are considered to be outside of our control and subject to
occurrence of uncertain future events. Accordingly, common stock subject to
possible redemption is presented as temporary equity, outside of the
stockholders' equity section of our consolidated balance sheets. The Company
recognizes changes in redemption value immediately as they occur and adjusts the
carrying value of redeemable common stock to equal the redemption value at the
end of each reporting period. Increases or decreases in the carrying amount of
redeemable common stock are affected by charges against additional paid in
capital and accumulated deficit.
Net Loss per Share of Common Stock
The Company computes loss per share in accordance with ASC 260-10-45 "Earnings
per Share", which requires presentation of both basic and diluted loss per share
on the face of the statement of operations. The Company's public common shares
have a redemption right, which differ from the common shares that the sponsors
hold. Accordingly, the Company has effectively two classes of shares, which are
referred to as public common shares and Founder Shares. Income and losses are
shared pro rata between the two classes of shares. Net loss per share is
computed by dividing net loss by the weighted average number of shares of common
stock outstanding during the period, excluding shares of common stock subject to
forfeiture by the Sponsor. Accretion associated with the common stock subject to
possible redemption is excluded from earnings per share as the redemption value
approximates fair value. At December 31, 2022, the Company did not have any
dilutive securities and/or other contracts that could, potentially, be exercised
or converted into shares of common stock and then share in the earnings of the
Company. As a result, diluted loss per share is the same as basic loss per share
for the period presented.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on the
accompanying consolidated financial statements.
Factors That May Adversely Affect Our Results of Operations
Our results of operations and our ability to complete an initial business
combination may be adversely affected by various factors that could cause
economic uncertainty and volatility in the financial markets, many of which are
beyond our control. Our business could be impacted by, among other things,
downturns in the financial markets or in economic conditions, increases in oil
prices, inflation, increases in interest rates, supply chain disruptions,
declines in consumer confidence and spending, the ongoing effects of the
COVID-19 pandemic, including resurgences and the emergence of new variants, and
geopolitical instability, such as the military conflict in the Ukraine. We
cannot at this time fully predict the likelihood of one or more of the above
events, their duration or magnitude or the extent to which they may negatively
impact our business and our ability to complete an initial business combination.
JOBS Act
On April 5, 2012, the Jumpstart our Business Startup Act of 2012 was signed into
law. The JOBS Act contains provisions that, among other things, relax certain
reporting requirements for qualifying public companies. We will qualify as an
"emerging growth company" and under the JOBS Act will be allowed to comply with
new or revised accounting pronouncements based on the effective date for private
(not publicly traded) companies. We are electing to delay the adoption of new or
revised accounting standards, and as a result, we may not comply with new or
revised accounting standards on the relevant dates on which adoption of such
standards is required for non-emerging growth companies. As such, our
consolidated financial statements may not be comparable to companies that comply
with public company effective dates.
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Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an auditor's attestation report on our system of
internal control over financial reporting pursuant to Section 404 of the
Sarbanes-Oxley Act of 2022, (ii) provide all of the compensation disclosure that
may be required of non-emerging growth public companies under the Dodd-Frank
Wall Street Reform and Consumer Protection Act, (iii) comply with any
requirement that may be adopted by the PCAOB regarding mandatory audit firm
rotation or a supplement to the auditor's report providing additional
information about the audit and the consolidated financial statements (auditor
discussion and analysis) and (iv) disclose certain executive compensation
related items such as the correlation between executive compensation and
performance and comparisons of executive compensation to median employee
compensation. These exemptions will apply for a period of five years following
the completion of our IPO or until we are no longer an "emerging growth
company," whichever is earlier.
Critical Accounting Policies
The preparation of consolidated financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the consolidated financial statements, and income and
expenses during the periods reported. Actual results could materially differ
from those estimates.
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