References to the "Company," "our," "us" or "we" refer to FS Development 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 of 1933, as amended (the
"Securities Act"), 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 "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions. Such statements include, but are not limited
to, possible business combinations and the financing thereof, and related
matters, as well as all other statements other than statements of historical
fact included in this Form 10-Q. 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 in Delaware on June 25, 2020 for the
purpose of effecting a merger, capital stock exchange, asset acquisition, stock
purchase, reorganization or similar business combination with one or more
businesses (the "Business Combination"). Our sponsor is FS Development Holdings,
LLC, a Delaware limited liability company (our "Sponsor").
Our registration statements for our initial public offering (the "Initial Public
Offering") became effective on August 11, 2020. On August 14, 2020, we
consummated the Initial Public Offering of 12,075,000 shares of Class A common
stock, including the issuance of 1,575,000 shares of Class A common stock as a
result of the underwriter's exercise in full of its over-allotment option,
(each, a "Public Share" and collectively, the "Public Shares") at $10.00 per
share, generating gross proceeds of approximately $120.8 million, and incurring
offering costs of approximately $7.1 million, inclusive of approximately
$4.2 million in deferred underwriting commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement ("Private Placement") of 441,500 shares of Class A common
stock (each, a "Private Placement Share" and collectively, the "Private
Placement Shares"), at a price of $10.00 per Private Placement Share to our
Sponsor, generating proceeds of approximately $4.4 million.
Upon the closing of the Initial Public Offering and the Private
Placement, approximately $120.8 million ($10.00 per share) of the net proceeds
of the sale of the Public Shares in the Initial Public Offering and of the
Private Placement Shares in the Private Placement were placed in a trust account
("Trust Account") located in the United States at JP Morgan Chase Bank, N.A.
with Continental Stock Transfer & Trust Company acting as trustee, and are
invested only in U.S. "government securities" within the meaning of Section
2(a)(16) of the Investment Company Act of 1940, as amended (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, as
determined by the Company, until the earlier of: (i) the completion of a
Business Combination and (ii) the distribution of the Trust Account.
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If we are unable to complete a Business Combination within 24 months from the
closing of the Initial Public Offering, or August 14, 2022 (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,
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 taxes (less up to $100,000 of interest to pay
dissolution expenses), divided by the number of then outstanding Public Shares,
which redemption will completely extinguish Public Stockholders' rights as
stockholders (including the right to receive further liquidating distributions,
if any), and (iii) as promptly as reasonably possible following such redemption,
subject to the approval of the remaining stockholders and the board of
directors, liquidate and dissolve, subject in each case to our obligations under
Delaware law to provide for claims of creditors and the requirements of other
applicable law.
Proposed Business Combination
On October 15, 2020, we entered into an agreement and plan of merger (the
"Merger Agreement") by and among the Company, FSG Merger Sub Inc., a Delaware
corporation ("Merger Sub"), Gemini Therapeutics, Inc., a Delaware corporation
("Gemini") and Shareholder Representative Services LLC, a Colorado limited
liability company, in its capacity as the representative, agent and
attorney-in-fact of the securityholders of Gemini. The Merger Agreement
provides, among other things, that Merger Sub will merge with and into Gemini,
with Gemini surviving as a wholly owned subsidiary of the Company (the
"Merger"). In connection with the Business Combination, FS Development will be
renamed "Gemini Therapeutics, Inc." The Merger Agreement also calls for
additional agreements, including, among others, Subscription Agreements,
Non-Redemption Letter Agreements, and Gemini Support Agreements. Parent Support
Agreements, Registration Rights Agreement, Lock-Up Agreement and Voting
Agreement. For additional information about the Merger Agreement and the
ancillary documents executed or to be executed in connection therewith, see Note
7 to the "Notes to Unaudited Condensed Financial Statements" included in this
Report.
Results of Operations
Our entire activity since inception through September 30, 2020 related to our
formation, the preparation for the Initial Public Offering, and since the
closing of the Initial Public Offering, the search for a prospective initial
Business Combination and activities in connection with the proposed Business
Combination with Gemini. We have neither engaged in any operations nor generated
any revenues to date. We will not generate any operating revenues until after
completion of our initial Business Combination. We will generate non-operating
income in the form of interest income on cash and cash equivalents. 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 months ended September 30, 2020, we had net loss of approximately
$499,000, which consisted of approximately $451,000 in general and
administrative costs and $50,000 of franchise tax expense, which was partially
offset by approximately $1,000 gain on the investments held in the Trust
Account.
For the period from June 25, 2020 (inception) through September 30, 2020, we had
net loss of approximately $501,000, which consisted of approximately $452,000 in
general and administrative costs and $50,000 of franchise tax expense, which was
partially offset by approximately $1,000 gain on the investments held in the
Trust Account.
Liquidity and Capital Resources
As of September 30, 2020, we had $1.4 million in its operating bank account,
working capital of approximately $1.1 million and cash equivalents held in the
Trust Account of approximately $120.8 million. Interest income on the balance in
the Trust Account may be used by us to pay franchise and income tax obligations.
Through September 30, 2020, we have not withdrawn any interest earned on the
Trust Account to pay franchise and income tax obligations. We intend to use
substantially all of the funds held in the Trust Account to complete the initial
Business Combination and to pay our expenses relating thereto. To the extent
that our capital stock or debt is used, in whole or in part, as consideration to
complete the initial 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.
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Our liquidity needs to date have been satisfied through the $25,000 capital
contribution to purchase Founder Shares (as defined below) by our Sponsor, the
loan proceeds under the promissory note of $200,000 from our Sponsor (the
"Note") to cover our offering costs in connection with the Initial Public
Offering, and the net proceeds from the consummation of the Private Placement
not held in the Trust Account. The Note was fully repaid on August 14, 2020. In
addition, in order to finance transaction costs in connection with a Business
Combination, our Sponsor or an affiliate of our Sponsor, or certain of our
officers and directors may, but are not obligated to, provide the Company
Working Capital Loans. As of September 30, 2020, there were no amounts
outstanding under any Working Capital Loans.
Based on the foregoing, management believes that we will have sufficient working
capital and borrowing capacity from our Sponsor or an affiliate of our Sponsor,
or our officers and directors to meet our needs through the earlier of the
consummation of a Business Combination or one year from this filing. Over this
time period, we will be using these funds for paying existing accounts payable,
identifying and evaluating prospective initial Business Combination candidates,
performing due diligence on prospective target businesses, paying for travel
expenditures, selecting the target business to merge with or acquire, and
structuring, negotiating and consummating the Business Combination.
We continue to evaluate the impact of the COVID-19 pandemic and have concluded
that the specific impact is not readily determinable as of the date of the
balance sheet. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
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 an agreement to pay Administrative Services Agreement fees to our
Sponsor that total $10,000 per month for office space, secretarial and
administrative services provided to members of our management team. As of
September 30, 2020, the Company paid $20,000 to our Sponsor as part of the
Administrative Services Agreement and recognized $20,000 in the statement of
operations for the three months ended September 30, 2020 and for the period from
June 25, 2020 (inception) through September 30, 2020.
Critical Accounting Policies
This management's discussion and analysis of our financial condition and results
of operations is based on our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of our financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses and the disclosure of contingent assets and liabilities in
our financial statements. On an ongoing basis, we evaluate our estimates and
judgments, including those related to fair value of financial instruments and
accrued expenses. We base our estimates on historical experience, known trends
and events and various other factors that we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions. The Company has identified the following as its
critical accounting policies:
Class A Common Stock Subject to Possible Redemption
Class A common stock subject to mandatory redemption (if any) is classified as a
liability instrument and is measured at fair value. Conditionally redeemable
Class A common stock (including Class A 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 the Company's control)
is classified as temporary equity. At all other times, Class A common stock is
classified as stockholders' equity. Our Class A common stock features certain
redemption rights that are considered to be outside of our control and subject
to the occurrence of uncertain future events. Accordingly, at September 30,
2020, 11,258,033 shares of Class A common stock subject to possible redemption
are presented as temporary equity, outside of the stockholders' equity section
of the Company's unaudited condensed balance sheet.
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Net Income (Loss) Per Common Share
Net income (loss) per share is computed by dividing net income (loss) by the
weighted-average number of common stock outstanding during the periods. Our
unaudited condensed statements of operations include a presentation of income
(loss) per share for common stock subject to redemption in a manner similar to
the two-class method of income (loss) per share. Net income (loss) per common
share, basic and diluted for Class A common stock is calculated by dividing the
interest earned on cash equivalents held in the Trust Account of approximately
$1,000 for the three months ended September 30, 2020 and for the period from
June 25, 2020 (inception) through September 30, 2020, net of applicable taxes
available to be withdrawn from the Trust Account of approximately $1,000 for the
three months ended September 30, 2020 and for the period from June 25, 2020
(inception) through September 30, 2020, resulting in net income of $0 for the
three months ended September 30, 2020 and for the period from June 25, 2020
(inception) through September 30, 2020, by the weighted average number of Class
A common stock outstanding for each period. Net loss per share, basic and
diluted for Class B common stock is calculated by dividing the net loss of
approximately $499,000 and $501,000 for the three months ended September 30,
2020 and for the period from June 25, 2020 (inception) through September 30,
2020, respectively, less income attributable to Class A common stock of $0 for
each period, by the weighted average number of Class B common stock outstanding
for the period.
Recent Accounting Pronouncements
Our 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 financial statements.
Off-Balance Sheet Arrangements
As of September 30, 2020, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.
Inflation
We do not believe that inflation had a material impact on our business, revenues
or operating results during the period presented.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" and
under the JOBS Act are 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 a result, the financial statements may not
be comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates.
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 controls over financial reporting pursuant to Section 404, (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 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 the CEO's compensation to median
employee compensation. These exemptions will apply for a period of five years
following the completion of our Initial Public Offering or until we are no
longer an "emerging growth company," whichever is earlier.
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