References to the "Company," "our," "us" or "we" refer to Forbion European
Acquisition Corp. The following discussion and analysis of the Company's
financial condition and results of operations should be read in conjunction with
the unaudited condensed 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.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We have
based these forward-looking statements on our current expectations and
projections about future events. These forward-looking statements are subject to
known and unknown risks, uncertainties and assumptions about us that may cause
our actual results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity, performance or
achievements expressed or implied by such forward-looking statements. In some
cases, you can identify forward-looking statements by terminology such as
"anticipate," "believe," "continue," "could," "estimate," "expect," "intend,"
"may," "might," "plan," "possible," "potential," "predict," "project," "should,"
"would" or the negative of such terms or other similar expressions. Factors that
might cause or contribute to such a discrepancy include, but are not limited to,
those described in our other Securities and Exchange Commission ("SEC") filings.
Overview
We are a blank check company incorporated as a Cayman Islands exempted company
on August 9, 2021. We were incorporated for the purpose of effecting a merger,
share exchange, asset acquisition, share purchase, reorganization or similar
Business Combination with one or more businesses or entities (the "Business
Combination").
Our sponsor is Forbion Growth Sponsor FEAC I B.V., a Cayman Islands limited
liability company (the "Sponsor"). The registration statement for our IPO was
declared effective on December 9, 2021. On December 14, 2021, we commenced the
IPO of 11,000,000 units (or 12,650,000 units if the underwriters' over-allotment
option is exercised in full) at $10.00 per unit (the "Units"), which is
discussed in Note 3. Each Unit consists of one Class A ordinary
share and one-third of one redeemable warrant (the "Public Warrants"). Each
whole warrant entitles the holder to purchase one Class A ordinary share at a
price of $11.50 per share. On December 15, 2021, the underwriters exercised
their full over-allotment option and purchased the additional Units available to
them. The aggregate Units sold in the IPO and subsequent over-allotment were
12,650,000 and generated gross proceeds of $126,500,000.
Simultaneously with the consummation of the IPO, we consummated the private
placement of 4,700,000 warrants (or 5,195,000 warrants when the underwriters'
over-allotment option was fully exercised on December 15, 2021) (the "Private
Placement Warrants") to the Sponsor, at a price of $1.50 per Private Placement
Warrant in a private placement. The sale of the Private Placement Warrants in
connection with the IPO and subsequent over-allotment option exercise generated
gross proceeds of $7,792,500.
Our transaction costs related to the IPO amounted to $5,793,160 consisting of
$1,800,000 of underwriting commissions, $3,150,000 of deferred underwriting
commissions, and $843,160 of other offering costs. The underwriters' exercise of
their full over-allotment option generated an additional $907,500 in transaction
costs for aggregate transaction costs of $6,700,660 consisting of $2,130,000 of
underwriting commissions, $3,727,500 of deferred underwriting commissions and
$843,160 of other offering costs. In addition, $1,641,236 of cash was held
outside of the Trust Account (as defined below) and is available for working
capital purposes.
On December 15, 2021, the underwriters fully exercised the over-allotment option
and purchased an additional 1,650,000 Units for additional gross proceeds of
$16,500,000. Simultaneously with the exercise of the over-allotment option, the
Sponsor purchased an additional 495,000 Private Placement Warrants for
additional gross proceeds of $742,500, which was already included in the Trust
Account and shown as a Deposit in Advance in these unaudited condensed financial
statements.
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The underwriters' exercise of their full over-allotment option generated an
additional $907,500 in transaction costs for aggregate transaction costs of
$6,700,660 consisting of $2,130,000 of underwriting commissions, $3,727,500 of
deferred underwriting commissions and $843,160 of other offering costs.
Following the closing of the exercise of the underwriters' full over-allotment
option, an additional $16,170,000 was placed in the Trust Account for aggregate
proceeds in the Trust Account of $129,662,500 ($10.25 per Unit). As a result of
the underwriters' over-allotment option exercise, 412,500 Founder Shares are no
longer subject to forfeiture.
Our management has broad discretion with respect to the specific application of
the net proceeds of the IPO and the sale of Private Placement Warrants, although
substantially all of the net proceeds are intended to be applied generally
toward consummating a Business Combination.
We must complete one or more initial Business Combinations having an aggregate
fair market value of at least 80% of the net assets held in the Trust Account
(as defined below) (excluding the deferred underwriting commissions and taxes
payable on the interest earned on the Trust Account) at the time of signing a
definitive agreement in connection with the initial Business Combination.
However, we will complete the initial Business Combination only if the
post-Business Combination company in which its public shareholders own shares
will own or acquire 50% or more of the outstanding voting securities of the
target or is otherwise not required to register as an investment company under
the Investment Company Act (the "Investment Company Act"). There is no assurance
that we will be able to complete a Business Combination successfully.
Following the closing of the IPO on December 14, 2021, $113,492,500 from the net
proceeds of the sale of the Units in the IPO and the sale of the Private
Placement Warrants was deposited into a trust account (the "Trust Account").
This amount was comprised of $10.25 per Unit for the 11,000,000 Units sold in
the IPO in additional to a $742,500 Deposit in Advance from the Sponsor related
to the underwriters' exercise of the full over-allotment option which took place
the following day on December 15, 2021. Following the closing of the IPO and the
exercise of the underwriters' full over-allotment option, $129,662,500 ($10.25
per Unit) was held in the Trust Account and will only be invested in United
States "government securities" within the meaning of Section 2(a)(16) of the
Investment Company Act having a maturity of 185 days or less or in money market
funds meeting certain conditions under Rule 2a-7 promulgated under the
Investment Company Act which invest only in direct U.S. government treasury
obligations. Pursuant to the trust agreement, the trustee is not permitted to
invest in other securities or assets. Except with respect to interest earned on
the funds held in the Trust Account that may be released to us to pay its income
taxes, if any, our amended and restated memorandum and articles of association,
as discussed below and subject to the requirements of law and regulation, will
provide that the proceeds from the Public Offering and the sale of the Private
Placement Warrants held in the Trust Account will not be released from the Trust
Account (1) to us, until the completion of the initial Business Combination, or
(2) to our public shareholders, until the earliest of (a) the completion of the
initial Business Combination, and then only in connection with those Class A
ordinary shares that such shareholders properly elected to redeem, subject to
the limitations described herein, (b) the redemption of any public shares
properly tendered in connection with a shareholder vote to amend our amended and
restated memorandum and articles of association (A) to modify the substance or
timing of our obligation to provide holders of the Class A ordinary shares the
right to have their shares redeemed in connection with the initial Business
Combination or to redeem 100% of the public shares if we do not complete the
initial Business Combination within Combination Period or (B) with respect to
any other provision relating to the rights of holders of the Class A ordinary
shares, and (c) the redemption of the public shares if we have not consummated
our Business Combination within Combination Period, subject to applicable law.
Public shareholders who redeem their Class A ordinary shares in connection with
a shareholder vote described in clause (b) in the preceding sentence shall not
be entitled to funds from the Trust Account upon the subsequent completion of an
initial Business Combination or liquidation if we have not consummated an
initial Business Combination within Combination Period, with respect to such
Class A ordinary shares so redeemed. The funds held in the Trust Account could
become subject to the claims of our creditors, if any, which could have priority
over the claims of our public shareholders. As it is expected that we are and
will continuously be considered a Dutch tax resident, any redemption proceeds
(including interest income on the trust account) distributed to our shareholders
in excess of the paid-up capital for Dutch tax purposes may be subject to 15%
Dutch dividend withholding tax.
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We will provide holders (the "Public Shareholders") of our Class A ordinary
shares, par value $0.0001, sold in the IPO (the "Public Shares"), with the
opportunity to redeem all or a portion of their Public Shares upon the
completion of a Business Combination either (i) in connection with a general
meeting called to approve the Business Combination or (ii) by means of a tender
offer. The decision as to whether we will seek shareholder approval of a
proposed Business Combination or conduct a tender offer will be made by us,
solely in our discretion, and will be based on a variety of factors such as the
timing of the transaction and whether the terms of the transaction would require
us to seek shareholder approval under applicable law or stock exchange listing
requirement.
We will provide our public shareholders with the opportunity to redeem all or a
portion of their Class A ordinary shares upon the completion of the initial
Business Combination, regardless of whether such shareholder votes on such
proposed Business Combination, and if they do vote, regardless of whether they
vote for or against such proposed Business Combination, at
a per-share price, payable in cash, equal to the aggregate amount then on
deposit in the Trust Account calculated as of two business days prior to the
consummation of the initial Business Combination, including interest earned on
the funds held in the Trust Account and not previously released to us to pay our
income taxes, if any, divided by the number of then-outstanding public shares,
subject to the limitations described herein. The amount in the Trust Account is
initially anticipated to be $10.25 per public share.
The per share amount that we will distribute to investors who properly redeem
their shares will not be reduced by the deferred underwriting commissions we
will pay to the underwriters. The redemption rights will include the requirement
that a beneficial holder must identify itself in order to validly redeem its
shares. There will be no redemption rights upon the completion of the initial
Business Combination with respect to our warrants. Further, we will not proceed
with redeeming the public shares, even if a public shareholder has properly
elected to redeem its shares if a Business Combination does not close.
We have amended and restated memorandum and articles of association provides
that we will have only 18 months from the closing of the Public Offering (or up
to 24 months from the closing of the IPO if we extend the period of time to
consummate a Business Combination, subject to the Sponsor depositing additional
funds in the Trust Account) (the "Combination Period") to consummate our initial
Business Combination. If we have not consummated an initial Business Combination
within Combination Period, we will: (i) cease all operations except for the
purpose of winding up; (ii) as promptly as reasonably possible but not more than
ten business days thereafter, redeem the public shares, at a per-share price,
payable in cash, equal to the aggregate amount then on deposit in the Trust
Account, including interest earned on the funds held in the Trust Account and
not previously released to us to pay our income taxes, if any (less up to
$100,000 of interest to pay dissolution expenses) divided by the number of the
then-outstanding public shares, which redemption will completely extinguish
public shareholders' rights as shareholders (including the right to receive
further liquidation distributions, if any); and (iii) as promptly as reasonably
possible following such redemption, subject to the approval of our remaining
shareholders and its board of directors, liquidate and dissolve, subject in the
case of clauses (ii) and (iii), to our obligations under Cayman Islands law to
provide for claims of creditors and the requirements of other applicable law.
There will be no redemption rights or liquidating distributions with respect to
our warrants, which will expire worthless if we fail to consummate an initial
Business Combination within Combination Period.
The Sponsor and each member of its management team have entered into an
agreement with Company, pursuant to which they have agreed to (i) waive their
redemption rights with respect to their Founder Shares (ii) to waive their
redemption rights with respect to their Founder Shares and public shares in
connection with a shareholder vote to approve an amendment to our amended and
restated memorandum and articles of association (A) that would modify the
substance or timing of our obligation to provide holders of the Class A ordinary
shares the right to have their shares redeemed in connection with the initial
Business Combination or to redeem 100% of the public shares if we do not
complete the initial Business Combination within Combination Period or (B) with
respect to any other provision relating to the rights of holders of the Class A
ordinary shares and (iii) waive their rights to liquidating distributions from
the Trust Account with respect to any Founder Shares they hold if we fail to
consummate an initial Business Combination within Combination Period (although
they will be entitled to liquidating distributions from the Trust Account with
respect to any public shares they hold if we fail to complete the initial
Business Combination within the prescribed time frame).
We have until 18 months from the closing of the Public Offering to complete a
Business Combination. However, if we anticipate that we may not be able to
consummate a Business Combination within 18 months, we may extend the period of
time to consummate a Business Combination by up to two additional three-month
periods (for a total of 24 months to complete a Business Combination (the
"Combination Period"). In order to extend the time available for us to
consummate a Business Combination, the Sponsor or its affiliate or designees
must deposit into the Trust Account, for each additional three-month period,
$1,265,000 ($0.10 per Public Share in either case), on or prior to the date of
the applicable deadline.
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Our Sponsor has agreed that it will be liable to us if and to the extent any
claims by a third party (other than our independent auditors) for services
rendered or products sold to us, or a prospective target business with which we
have discussed entering into a transaction agreement, reduce the amount of funds
in the Trust Account to below (1) $10.25 per public share or (2) such lesser
amount per public share held in the Trust Account as of the date of the
liquidation of the Trust Account due to reductions in the value of the trust
assets, in each case net of the interest which may be withdrawn to pay taxes,
except as to any claims by a third party who executed a waiver of any and all
rights to seek access to the Trust Account and except as to any claims under our
indemnity of the underwriter of the Public Offering against certain liabilities,
including liabilities under the Securities Act. Moreover, in the event that an
executed waiver is deemed to be unenforceable against a third party, the Sponsor
will not be responsible to the extent of any liability for such third-party
claims. We have not independently verified whether the Sponsor has sufficient
funds to satisfy its indemnity obligations and believe that the Sponsor's only
assets are securities of us and, therefore, the Sponsor may not be able to
satisfy those obligations. We have not asked the Sponsor to reserve for such
obligations.
Results of Operations
As of September 30, 2022, we had not commenced any operations. All activity
through September 30, 2022 relates to our formation, IPO and identifying a
business combination target. We have neither engaged in any operations nor
generated any revenues to date. We will not generate any operating revenues
until after the completion of our initial Business Combination, at the earliest.
We will generate non-operating income in the form of interest income on cash and
cash equivalents from the proceeds derived from the IPO. We expect to 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.
For the three and nine months ended September 30, 2022, we had a net income of
$72,671 and net loss of $589,142, which consisted of operating costs of $523,264
and $1,339,615 and interest income of $595,935 and $750,473, respectively.
For the period from August 9, 2021 (inception) to September 30, 2021, we had net
loss of $10,741, which consisted of formation costs.
Liquidity, Capital Resources and Going Concern
Our liquidity needs up to December 14, 2021 had been satisfied through a payment
from the Sponsor of $25,000 (see Note 5) for the Founder Shares to cover certain
offering costs and the loan under an unsecured promissory note from the Sponsor
of up to $500,000. At September 30, 2022, we had $456,995 in our operating bank
account and working capital of approximately $110,000, which mainly consisted of
the portion of proceeds of the sale of the Private Placement Warrants not held
in the Trust Account. In addition, in order to finance transaction costs in
connection with a Business Combination, our Sponsor or an affiliate of the
Sponsor or certain of our officers and directors may, but are not obligated to,
provide our Working Capital Loans, as defined below (see Note 5). As of
September 30, 2022 and December 31, 2021, there were no amounts outstanding
under any Working Capital Loans.
In connection with our assessment of going concern considerations in accordance
with FASB ASC205-40, Presentation of Financial Statements-Going Concern",
management has determined that we have and will continue to incur significant
costs in pursuit of its acquisition plans which raises substantial doubt about
our ability to continue as a going concern. Moreover, we may need to obtain
additional financing either to complete our initial Business Combination or
because we become obligated to redeem a significant number of our Public Shares
upon consummation of our initial Business Combination, in which case we may
issue additional securities or incur debt in connection with such Business
Combination. Subject to compliance with applicable securities laws, we would
only complete such financing simultaneously with the completion of our initial
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 Accounts. In addition,
following our initial Business Combination, if cash on hand is insufficient, we
may need to obtain additional financing in order to meet our obligations.
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Further, management has determined that if we are unable to complete a Business
Combination by June 14, 2023 (the "Combination Period"), then we will cease all
operations except for the purpose of liquidating. The date for mandatory
liquidation and subsequent dissolution as well as our working capital deficit
raise substantial doubt about our ability to continue as a going concern. No
adjustments have been made to the carrying amounts of assets or liabilities
should we be required to liquidate after the Combination Period. We intend to
complete a Business Combination before the mandatory liquidation date.
Risks and Uncertainties
Management is currently evaluating the impact of the COVID-19 pandemic, rising
interest rates, inflation and the Russia-Ukraine war and has concluded that
while it is reasonably possible that any of these could have a negative effect
on our financial position, results of operations and/or search for a target
company, the specific impact is not readily determinable as of the date of these
unaudited condensed financial statements. The unaudited condensed financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Related Party Transactions
Founder Shares
On August 12, 2021, Forbion European Sponsor LLP paid $25,000, or approximately
$0.009 per share, to cover certain offering costs in consideration for 2,875,000
Class B ordinary shares (the "Founder Shares"), par value $0.0001. On
November 23, 2021, Forbion European Sponsor LLP transferred 2,875,000 Class B
ordinary shares to the Sponsor in exchange for $25,000, or approximately $0.009
per share. On December 9, 2021, we issued 287,500 Class B ordinary shares to the
Sponsor resulting from a 1.1 for 1 share dividend. Up to 412,500 Founder Shares
are subject to forfeiture by the Sponsor depending on the extent to which the
underwriters' over-allotment option is exercised. Prior to the Business
Combination, only holders of Class B ordinary shares will be able to vote on the
appointment of directors and to continue us in a jurisdiction outside the Cayman
Islands. On December 15, 2021, the underwriters fully exercised their
over-allotment and as a result, 412,500 Founder Shares are no longer subject to
forfeiture.
Promissory Note - Related Party
On August 12, 2021, Forbion European Sponsor LLP agreed to loan us up to
$500,000 to be used for a portion of the expenses of the Public Offering. These
loans are non-interest bearing, unsecured and are due at the earlier of
December 31, 2021 or the closing of the Public Offering. The loan was repaid out
of the offering proceeds not held in the Trust Account. There were no
outstanding balances under the promissory note as of September 30, 2022 and
December 31, 2021.
Working Capital Loans
In order to finance transaction costs in connection with an intended Business
Combination, the Sponsor or an affiliate of the Sponsor, or certain of our
officers and directors may, but are not obligated to, loan our funds as may be
required ("Working Capital Loans"). If we complete the initial Business
Combination, we may repay the Working Capital Loans out of the proceeds of the
Trust Account released to us. Otherwise, the Working Capital Loans may be repaid
only out of funds held outside the Trust Account. In the event that the initial
Business Combination does not close. We may use a portion of the working capital
held outside the Trust Account to repay the Working Capital Loans but no
proceeds from the Trust Account would be used to repay the Working Capital
Loans. Up to $1,500,000 of such Working Capital Loans may be convertible into
warrants of the post-Business Combination entity at a price of $1.50 per warrant
at the option of the lender. The warrants would be identical to the Private
Placement Warrants. As of September 30, 2022 and December 31, 2021, we had no
borrowings under the Working Capital Loans.
Related Party Extension Loans
We may extend the period of time to consummate a Business Combination by up to
two additional three-month periods (for a total of 24 months to complete a
Business Combination). In order to extend the time available for us to
consummate a Business Combination, the Sponsor or its affiliates or designees
must deposit into the trust account, for each additional three-month period,
$1,265,000, ($0.10 per Public Share in either case), on or prior to the date of
the applicable deadline. Any such payments would be made in the form
of a non-interest bearing, unsecured promissory note. Such notes would either be
paid upon consummation of a Business Combination, or, at the relevant insider's
discretion, converted upon consummation of a Business Combination into
additional Private Placement Warrants at a price of $1.50 per Private Placement
Warrant. The Sponsor and its affiliates or designees are not obligated to fund
the trust account to extend the time for us to complete a Business Combination.
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Office Space, Secretarial and Administrative Services
Commencing on the date that our securities are first listed on the NASDAQ
through the earlier of consummation of the initial Business Combination and the
liquidation, we agreed to pay the Sponsor a total of $10,000 per month for
office space, utilities, secretarial and administrative support and to reimburse
the Sponsor for any out-of-pocket expenses related to identifying, investigating
and completing an initial Business Combination. For the three and nine months
ended September 30, 2022, we expensed $30,000 and $90,000 in administrative
support services. At September 30, 2022 and December 31, 2021, we had accrued
$30,000 and $7,097, respectively, in administrative fees payable to the Sponsor
which are included in due to related party on the condensed balance sheets.
Additionally, the Sponsor has agreed to pay an annual salary of $25,000 to each
of the independent Board Members for services rendered prior to or in connection
with the completion of the Business Combination. Board members are entitled to
reimbursement for any out-of-pocket expenses related to identifying,
investigating, negotiating and completing the Business Combination as well. For
the three and nine months ended September 30, 2022, we expensed $18,904 and
$56,096 for services rendered by the independent Board Members. At September 30,
2022 and December 31, 2021, we had accrued approximately $19,110 and $3,699,
respectively, in compensation expense to the independent board members in due to
related party on the condensed balance sheets.
Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations,
operating lease obligations, purchase obligations or long-term liabilities other
than the deferred commission fees, legal fees and related party payables of
$3,727,500, $408,368 and $49,110, respectively, payable upon the consummation of
a business combination.
Critical Accounting Policies and Estimates
Ordinary Shares Subject to Redemption
We account for our ordinary shares subject to possible redemption in accordance
with the guidance in ASC Topic 480 "Distinguishing Liabilities from Equity."
Ordinary shares subject to mandatory redemption (if any) are classified as a
liability instrument and measured at fair value. Conditionally redeemable
ordinary shares (including ordinary shares that feature 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) are classified as
temporary equity. At all other times, ordinary shares are classified as
shareholders' equity. Our Class A ordinary shares feature certain redemption
rights that are considered to be outside of our control and subject to the
occurrence of uncertain future events. Accordingly, 12,650,000 Class A ordinary
shares subject to possible redemption are presented at redemption value as
temporary equity, outside of the shareholders' equity section of our balance
sheet.
We recognize changes in redemption value immediately as they occur and adjusts
the carrying value of Class A ordinary shares to equal the redemption value at
the end of each reporting period. Increases or decreases in the carrying amount
of redeemable ordinary shares are affected by charges against additional paid in
capital and accumulated deficit.
Net Loss Per Ordinary Share
We comply with the accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share." Net loss per ordinary share is computed by dividing net
loss by the weighted average number of shares of ordinary shares outstanding
during the period, excluding ordinary shares subject to forfeiture. At
September 30, 2022, we did not have any dilutive securities and other contracts
that could, potentially, be exercised or converted into ordinary shares and then
share in the earnings of us. As a result, diluted loss per ordinary share is the
same as basic loss per ordinary share for the periods presented.
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Recent Accounting Pronouncements
In August 2020, the FASB issued ASU Topic 2020-06, "Debt-Debt with Conversion
and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in
Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments
and Contracts in an Entity's Own Equity" ("ASU 2020-06"), which simplifies
accounting for convertible instruments by removing major separation models
required under current US GAAP. ASU 2020-06 also removes certain settlement
conditions that are required for equity-linked contracts to qualify for scope
exception, and it simplifies the diluted earnings per share calculation in
certain areas. ASU 2020-06 is effective January 1, 2022 and should be applied on
a full or modified retrospective basis, with early adoption permitted beginning
on January 1, 2021. We adopted ASU 2020-06 effective January 1, 2021. The
adoption of ASU 2020-06 did not have an impact on our unaudited condensed
financial statements.
Management does not believe that any other recently issued, but not effective,
accounting standards, if currently adopted, would have a material effect on the
accompanying unaudited condensed financial statements.
Off-Balance Sheet Arrangements
As of September 30, 2022 and December 31, 2021, we did not have
any off-balance sheet arrangements.
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