ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
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.
Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Annual
Report on Form 10-K including, without limitation, statements under "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" regarding our financial position, business strategy and the plans
and objectives of management for future operations, are forward looking
statements. When used in this Annual Report on Form 10-K, words such as "may,"
"should," "could," "would," "expect," "plan," "anticipate," "believe,"
"estimate," "continue," or the negative of such terms or other similar
expressions, as they relate to us or our 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, our management. No assurance can be given that results in any
forward-looking statement will be achieved and actual results could be affected
by one or more factors, which could cause them to differ materially. The
cautionary statements made in this Annual Report should be read as being
applicable to all forward-looking statements whenever they appear in this Annual
Report on Form 10-K. For these statements, we claim the protection of the safe
harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act. Actual results could differ materially from those
contemplated by the forward-looking statements as a result of certain factors,
including but not limited to, those detailed in our filings with the Securities
and Exchange Commission. All subsequent written or oral forward-looking
statements attributable to us or persons acting on our behalf are qualified in
their entirety by this paragraph.
Overview
We are a blank check company incorporated on February 2, 2021 as a Cayman
Islands exempted company 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 Target Global Sponsor Ltd., a Cayman Islands company limited by
shares (the "Sponsor"). The registration statement for our initial public
offering was declared effective on December 8, 2021. On December 13, 2021, we
commenced our initial public offering (the "IPO") of 20,000,000 units at $10.00
per unit. Transaction costs related to the IPO amounted to $12,535,264
consisting of $4,000,000 of underwriting commissions, $7,000,000 of deferred
underwriting commissions (including the portion of the deferred underwriting
commission subsequently waived by BofA, on January 10, 2023), $510,000 in value
of the over-allotment option, and $1,025,264 of other offering costs.
Simultaneously with the consummation of the IPO, we consummated the private
placement of 6,666,667 warrants (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
generated gross proceeds of $10,000,000.
On December 29, 2021, the underwriters partially exercised their over-allotment
option, resulting in an additional 1,489,658 Units issued for gross proceeds of
$14,896,580.
Upon the closing of the IPO on December 13, 2021, and the subsequent close of
the partial over-allotment option on December 29, 2021, a total of $219,194,512
from the net proceeds of the sale of the Units in the IPO and over-allotment and
the sale of the Private Placement Warrants was deposited into a trust account
(the "Trust Account") and will be invested only in U.S. government securities,
within the meaning set forth in 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 Rule2a-7promulgated under the Investment Company Act which
invest only in direct U.S. government treasury obligations. Except with respect
to interest earned on the funds held in the Trust Account that may be released
to us to pay taxes, if any, the proceeds from the IPO and the sale of the
Private Placement Warrants will not be released from the Trust Account until the
earliest of (i) the completion of the initial Business Combination, (ii) the
redemption of our public shares if we are unable to complete the initial
Business Combination within 24 months from the closing of the IPO, subject to
applicable law, or (iii) the redemption of our public shares properly submitted
in connection with a shareholder vote to amend our amended and restated
memorandum and articles of association to (A) modify the substance or timing of
our obligation to allow redemption in connection with the initial Business
Combination or to redeem 100% of its public shares if we have not consummated an
initial Business Combination within 18 months from the closing of the IPO (or up
to 24 months from the closing of the IPO if we extend the period of time to
consummate a business combination) or (B) with respect to any other material
provisions relating to shareholders' rights or pre-initial Business Combination
activity. The proceeds deposited 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.
Our amended and restated memorandum and articles of association provides that we
will have only 18 months from the closing of the IPO (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 the initial Business
Combination. If we have not consummated an initial Business Combination within
the 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,
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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 board
of directors, liquidate and dissolve, subject in the case of (ii) and (iii)
above, 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 the Combination Period.
Liquidity, Capital Resources and Going Concern
As of December 31, 2022, we had cash outside the Trust Account of $394,251,
available for working capital needs, and working deficit of $279,234. Until
consummation of our Business Combination, we will be using the funds held
outside the Trust Account, and any additional working capital loans from the
initial shareholders, our officers and directors, or their respective
affiliates, or other third parties, for identifying and evaluating prospective
acquisition candidates, performing business due diligence on prospective target
businesses, traveling to and from the offices, plants or similar locations of
prospective target businesses, reviewing corporate documents and material
agreements of prospective target businesses, selecting the target business to
acquire and structuring, negotiating and consummating our initial Business
Combination.
Our liquidity needs up to December 31, 2022 had been satisfied through a payment
from the Sponsor of $25,000 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. As of December 31, 2022, we had $500,000 borrowing outstanding under
the promissory note.
In addition, in order to finance transaction costs in connection with a Business
Combination, the Sponsor, initial shareholders, officers, directors or their
affiliates may, but are not obligated to, provide us Working Capital Loans. As
of December 31, 2022, there were no amounts outstanding under any Working
Capital Loans.
We have until 18 months from the closing of the IPO (which happened on
December 8, 2021) to complete a Business Combination. However, if we anticipate
that we may not be able to consummate a Business Combination within 18 months
(through June 8, 2023), 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. However, if we are unable to
complete a business combination within the Combination Period, we will redeem
100% of the outstanding public shares for a pro rata portion of the funds held
in the Trust Account, 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, divided by the number of then outstanding public
shares, subject to applicable law and as further described in our registration
statement, and then seek to dissolve and liquidate. In connection with the our
assessment of going concern considerations in accordance with the authoritative
guidance FASB Accounting Standards Update ("ASU") Topic 2014-15, "Disclosure of
Uncertainties About an Entity's Ability to Continue as a Going Concern", our
management has determined that potential liquidity and capital shortage as
described above and a mandatory liquidation, and subsequent dissolution, should
we be unable to complete a business combination, raise substantial doubt about
our ability to continue as a going concern. No adjustments have been made to the
carrying amounts of assets and liabilities should we be required to liquidate
after June 8, 2023.
Risks and Uncertainties and Factors That May Adversely Affect our Results of
Operations
Our management is currently evaluating the impact of the current global economic
uncertainty, the ongoing impact of the COVID-19 pandemic, rising interest rates,
rising inflation, increases in energy prices, supply chain disruptions and the
Russia-Ukraine armed conflict (including the impact of any sanctions imposed in
response thereto) 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 financial statements. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty. 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.
Results of Operations
As of December 31, 2022, we had not commenced any operations. All activity for
the period from February 2, 2021 (inception) through December 31, 2022 relates
to our formation and the IPO. 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 generate non-operating income in the form of interest income on investment
held in trust account 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 year ended December 31, 2022, we had net income of $1,963,401, which
consisted of income from investments held in the Trust Account and operating
account of $3,030,633 and change in fair value of overallotment liability of
$30,207, offset by general and administrative expenses of $1,097,439.
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For the period from February 2, 2021 (inception) through December 31, 2021, we
had net loss of $111,991, which consisted of general and administrative expenses
of approximately $181,531, offset by the income from investments held in the
Trust Account and operating account of approximately $9,540 and change in fair
value of overallotment liability of approximately $60,000.
Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations,
operating lease obligations, purchase obligations or long-term liabilities.
Office Space, Secretarial and Administrative Services
Commencing on December 9, 2021, through the earlier of consummation of our
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. We incurred $120,000 of administrative support fees for
the year ended December 31, 2022. For the period from February 2, 2021
(inception) through December 31, 2021, we accrued $7,419 due to related party
for the administrative support services.
Registration Rights
The holders of the Founder Shares, Private Placement Warrants, Class A ordinary
shares underlying the Private Placement Warrants and any warrants that may be
issued upon conversion of Working Capital Loans and extension loans (and any
Class A ordinary shares issuable upon the exercise of the Private Placement
Warrants and warrants that may be issued upon conversion of Working Capital
Loans and extension loans) are entitled to registration rights pursuant to a
registration and shareholder rights agreement. The holders of these securities
are entitled to make up to three demands, excluding short form demands, that we
register such securities. In addition, the holders have certain "piggy back"
registration rights with respect to registration statements filed subsequent to
our completion of the initial Business Combination. We will bear the expenses
incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriters had a 45-day option from the date of the IPO to purchase up to
an additional 3,000,000 Units to cover over-allotments, if any. On December 29,
2021, the underwriters partially exercised their over-allotment option,
resulting in an additional 1,489,658 Units issued for gross proceeds of
$14,598,648.
The underwriters were paid underwriting commissions of $0.20 per unit, or
$4,000,000 in aggregate, upon the closing of the IPO. Following the exercise of
the underwriters' over-allotment option on December 29, 2021, the underwriters
earned an additional $297,932 for an aggregate of $4,297,932 in underwriting
commissions related to the IPO and over-allotment.
In addition, $7,000,000 was payable to the underwriters for deferred
underwriting commissions (including the portion of the deferred underwriting
commissions subsequently waived by BofA on January 10, 2023). Following the
exercise of the underwriters' over-allotment option on December 29, 2021, the
underwriters earned an additional $521,380 for an aggregate of $7,521,380 in
deferred underwriting commissions related to the IPO and over-allotment. On
January 10, 2023, BofA executed a waiver letter confirming BofA's resignation
and waiver of its entitlement to the payment of deferred underwriting commission
in the amount of $3,760,690. The remaining balance of $3,760,690 owing to UBS
has not been waived and remains due and payable from the amounts held in the
Trust Account solely in the event that we complete a Business Combination,
subject to the terms of the underwriting agreement.
Forward Purchase Agreements
We entered into two forward purchase agreements (the "Forward Purchase
Agreements") with Target Global Selected Opportunities, LLC - Series Selenium
("TGSO Series Selenium") on November 8, 2021, pursuant to which TGSO Series
Selenium agreed to purchase (1) an aggregate of 2,500,000 forward purchase
shares for $10.00 per share (the "firm forward purchase shares"), or an
aggregate amount of $25,000,000 and (2) in addition, an aggregate of up to
2,500,000 forward purchase shares for $10.00 per share (the "additional forward
purchase shares"), or an aggregate maximum amount of up to $25,000,000, in each
case in a private placement that may close simultaneously with the closing of
the Business Combination. On May 11, 2022, all of TGSO Series Selenium's rights
and obligations under the Forward Purchase Agreements (including the obligation
to purchase the Forward Purchase Shares) were transferred in full to Target
Global Selected Opportunities, LLC - Series Selenium 3 (the "FPA Purchaser") in
accordance with Section 4(c) of the Forward Purchase Agreements.
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Critical Accounting Policies
Offering Costs Associated with IPO
Deferred offering costs consist of underwriting, legal, accounting and other
expenses incurred through the balance sheet date that are directly related to
the IPO. We comply with the requirements of the ASC340-10-S99-1.Offering costs
are allocated ratably with the redeemable and non-redeemable shares they are
allocated to. Upon closing of the IPO on December 13, 2021, offering costs
associated with warrant liabilities are expensed, and offering costs associated
with the Class A ordinary shares are charged to temporary equity. We incurred
offering costs amounting to $12,964,576 as a result of the IPO consisting of
$4,297,932 of underwriting commissions, $7,521,380 of deferred underwriting
commissions (including the portion of the deferred underwriting commission
subsequently waived by BofA on January 10, 2023), and $1,145,264 of other
offering costs.
Ordinary Shares Subject to Possible Redemption
We account for 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'
deficit. 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, 21,489,658 Class A ordinary shares subject
to possible redemption are presented at redemption value as temporary equity,
outside of the shareholders' deficit section of our balance sheets.
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 Income (Loss) Per Share
Net income (loss) per share is computed by dividing net income (loss) by the
weighted average number of ordinary shares outstanding during the period,
excluding ordinary shares subject to forfeiture by the Sponsor. Weighted average
shares were reduced for the effect of an aggregate of 750,000 ordinary shares
that are subject to forfeiture if the over-allotment option is not exercised by
the underwriters. At December 31, 2022 and 2021, we did not have any dilutive
securities and other contracts that could, potentially, be exercised or
converted into ordinary shares and then share in our earnings. As a result,
diluted income (loss) per share is the same as basic income (loss) per share for
the period presented.
Recent Accounting Pronouncements
Our management does not believe that any recently issued, but not effective,
accounting standards, if currently adopted, would have a material effect on our
financial statements.
Off-Balance Sheet Arrangements
As of December 31, 2022 and 2021, we did not have any off-balance sheet
arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
Emerging Growth Company Status
We are an "emerging growth company" as defined in Section 2(a) of the Securities
Act of 1933, as amended, (the "Securities Act"), as modified by the Jumpstart
our Business Startups Act of 2012, (the "JOBS Act"), and may take advantage of
certain exemptions from various reporting requirements that are applicable to
other public companies that are not emerging growth companies including, but not
limited to, not being required to comply with the auditor attestation
requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure
obligations regarding executive compensation in our periodic reports and proxy
statements, and exemptions from the requirements of holding a nonbinding
advisory vote on executive compensation and shareholder approval of any golden
parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies
from being required to comply with new or revised financial accounting standards
until private companies (that is, those that have not had a Securities Act
registration statement declared effective or do not have a class of securities
registered under the Exchange Act) are required to comply with the new or
revised financial accounting standards. The JOBS Act provides that a company can
elect to opt out of the extended transition period and comply with the
requirements that apply to non-emerging growth companies but any such election
to opt out is irrevocable. We have elected not to opt out of such extended
transition period which means that when a standard is issued or revised and it
has different application dates for public or private companies, us, as an
emerging growth company, can adopt the new or revised standard at the time
private companies adopt the new or revised standard. This may make comparison of
our financial statements with another public company which is neither an
emerging growth company nor an emerging growth company which has opted out of
using the extended transition period difficult or impossible because of the
potential differences in accounting standards used.
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