FRAZIER LIFESCIENCES ACQUISITION CORPORATION

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FRAZIER LIFESCIENCES ACQUISITION : Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

05/24/2021 | 05:28pm EDT
References to the "Company," "Frazier Lifesciences Acquisition Corporation"
"our," "us" or "we" refer to Frazier Lifesciences Acquisition Corporation. The
following discussion and analysis of the Company's 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
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, and Section 21E of 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. Factors that might cause or contribute to such a discrepancy
include, but are not limited to, those described in our other SEC filings.
Overview
We are a blank check company incorporated on October 7, 2020 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, which we refer to throughout this Annual
Report on Form
10-K
as our initial business combination. We have generated no operating revenues to
date and we do not expect that we will generate operating revenues until we
consummate our initial business combination. Our Sponsor is Frazier Lifesciences
Sponsor LLC, a Cayman Islands exempted limited company.
The registration statement for our Initial Public Offering was declared
effective on December 8, 2020. On December 11, 2020, we consummated the Initial
Public Offering of 13,800,000 units at $10.00 per unit, generating gross
proceeds of $138 million, and incurring offering costs of approximately
$8.11 million, inclusive of approximately $4.83 million in deferred underwriting
commissions. Each unit consists of one Class A ordinary share and
one-third
of one redeemable warrant. Each whole public warrant entitles the holder to
purchase one Class A ordinary share at a price of $11.50 per share, subject to
adjustment.
Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement of 501,000 private placement units at a price of $10.00
per private placement unit to the sponsor, generating gross proceeds of
approximately $5.01 million. Each private placement unit is identical to the
public units sold in the Initial Public Offering, subject to certain limited
exceptions.
Upon the closing of the Initial Public Offering and private placement,
$138 million of the net proceeds of the Initial Public Offering and certain of
the proceeds of the private placement were placed in a trust account, located in
the United States at J.P. Morgan Chase Bank, N.A., with Continental Stock
Transfer & Trust Company acting as trustee, and will only be invested in U.S.
government securities, within the meaning set forth in Section 2(a)(16) of the
Investment Company Act, with a maturity of 180 days or less or in any open-ended
investment company that holds itself out as a money market fund selected by us
meeting the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule
2a-7
of the Investment Company Act, as determined by us, until the earlier of:
(i) the completion of a business combination and (ii) the distribution of the
assets held in the trust account. Our management has broad discretion with
respect to the specific application of the net proceeds of the Initial Public
Offering and the private placement, although substantially all of the net
proceeds are intended to be applied toward consummating a business combination.
If we are unable to complete a business combination within 24 months from the
closing of the Initial Public Offering, or December 11, 2022, 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,

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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 for our income 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 shareholders'
rights as shareholders (including the right to receive further liquidating
distributions, if any), subject to applicable law, and (iii) as promptly as
reasonably possible following such redemption, subject to the approval of our
remaining shareholders and our board of directors, proceed to commence a
voluntary liquidation and thereby a formal dissolution of our company, subject
in each case to our obligations under Cayman Islands law to provide for claims
of creditors and the requirements of other applicable law.
Liquidity and Capital Resources
As of March 31, 2021, we had approximately $1.2 million in cash and working
capital of approximately $1.4 million.
Our liquidity needs up to March 31, 2021 had been satisfied through a
contribution of $25,000 from our sponsor to cover for certain expenses on behalf
of us in exchange for the issuance of the founder shares, the loan of
approximately $83,000 pursuant to the note issued to our sponsor, and the
proceeds from the consummation of the private placement not held in the trust
account. We fully repaid the note to our sponsor on December 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 us working capital
loans. To date, there were no amounts outstanding under any working capital
loan.
Based on the foregoing, management believes that it will have sufficient working
capital and borrowing capacity to meet its 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.
Management continues to evaluate the impact of the
COVID-19
pandemic and has concluded that the specific impact is not readily determinable
as of the date of the financial statements. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Results of Operations
Our entire activity since inception up to March 31, 2021 was in preparation for
our formation, and since our Initial Public Offering, our activity has been
limited to the search for a prospective initial Business Combination. We will
not be generating any operating revenues until the closing and completion of our
initial Business Combination at the earliest.
For the three months ended March 31, 2021, we had a net income of approximately
$2.8 million, which consisted of approximately $207,000 in general and
administrative expenses, $30,000 in administrative expenses - related party,
offset by approximately $3.1 million in change in fair value of derivative
warrant liabilities, and approximately $4,000 in net gain from investments held
in Trust Account.
Related Party Transactions
Founder Shares
On October 7, 2020, our sponsor paid $25,000 to cover certain expenses and
offering costs on our behalf in consideration of 2,875,000 Class B ordinary
shares, par value $0.0001 per share. Prior to the consummation of the Initial
Public Offering, our sponsor transferred 30,000 founder shares to each of our
directors other than the Chairman, as adjusted by the share
sub-division.
On December 8, 2020, we effected a share
sub-division,
resulting in there being an aggregate of 3,450,000 founder shares outstanding.
The founder shares will automatically convert into Class A ordinary shares at
the time of our initial business combination and are subject to certain transfer
restrictions. Our sponsor had agreed to forfeit up to 450,000 founder shares to
the extent that the over-allotment option was not exercised in full by the
underwriters. On December 10, 2020, the underwriters exercised the
over-allotment option in full; thus, these founder shares were no longer subject
to forfeiture.

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The initial shareholders agreed, subject to limited exceptions, not to transfer,
assign or sell any of their founder shares until the earlier to occur of:
(A) one year after the completion of the initial business combination or
(B) subsequent to the initial business combination, (x) if the last sale price
of the Class A ordinary shares equals or exceeds $12.00 per share (as adjusted
for share splits, share dividends, reorganizations, recapitalizations and the
like) for any 20 trading days within any
30-trading
day period commencing at least 150 days after the initial business combination,
or (y) the date on which we complete a liquidation, merger, share exchange or
other similar transaction that results in all of our shareholders having the
right to exchange their ordinary shares for cash, securities or other property.
Private Placement Units
Concurrently with the closing of the Initial Public Offering, our sponsor
purchased 501,000 private placement units at a price of $10.00 per private
placement unit, generating proceeds of approximately $5.01 million in the
private placement.
The private placement units are substantially similar to the public units,
except for certain differences in the warrants included in the private placement
units. Unlike the public warrants, the private warrants, if held by the sponsor
or its permitted transferees, (i) may be exercised for cash or on a cashless
basis, (ii) are not subject to being called for redemption (except in certain
circumstances when the public warrants are called for redemption and a certain
price per Class A Ordinary Share threshold is met) and (iii) are subject to
certain limited exceptions including the Class A Ordinary Shares issuable upon
exercise of the private placement warrants, will be subject to transfer
restrictions until 30 days following the consummation of the initial business
combination. If the private placement warrants are held by holders other than
the sponsor or its permitted transferees, the private placement warrants will be
redeemable by us in all redemption scenarios and exercisable by holders on the
same basis as the public warrants. The private placement warrants have been
issued pursuant to the private placement units purchase agreement and the
private placement warrants are governed by the warrant agreement.
Our sponsor agreed, subject to limited exceptions, not to transfer, assign or
sell any of its private placement units until 30 days after the completion of
the initial business combination.
Related Party Loans
On October 7, 2020, our sponsor agreed to loan us an aggregate of up to $300,000
to cover expenses related to the Initial Public Offering pursuant to a
promissory note (the "Note"). This loan was
non-interest
bearing and payable on the earlier of December 31, 2021 or the completion of the
Initial Public Offering. Our sponsor paid an aggregate of approximately $83,000
to cover for expenses on our behalf under the Note. On December 14, 2020, we
repaid the note in full.
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, loan us funds as may be
required. If we complete a business combination, we would repay the working
capital loans out of the proceeds of the trust account released to us.
Otherwise, the working capital loans would be repaid only out of funds held
outside the trust account. In the event that a business combination is not
completed, we may use a portion of the 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. The units would be identical to the
private placement units. To date, we had no outstanding borrowings under any
working capital loans under this arrangement.

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Administrative Services Agreement
Commencing on the effective date of the Initial Public Offering in December 2020
through the earlier of our consummation of a business combination and our
liquidation, we agreed to pay our sponsor a total of $10,000 per month for
office space, utilities and secretarial and administrative support. During the
three months ended March 31, 2021, we recognized approximately $30,000 in
expenses in connection with the aforementioned arrangements with the related
parties on the Statements of Operations. There was approximately $30,000 and
$7,000 included in accrued expenses as of March 31, 2021 and December 31, 2020,
respectively.
Private Placement of Ordinary Shares
Our sponsor has indicated an interest to purchase up to an aggregate of
2,500,000 of our Class A ordinary shares (for $10.00 per share or $25 million in
the aggregate) in a private placement that would occur concurrently with the
consummation of our initial business combination. The capital from such private
placement would be used as part of the consideration to the sellers in our
initial business combination, and any excess capital from such private placement
would be used for working capital in the post-transaction company. However,
because indications of interest are not binding agreements or commitments to
purchase, our sponsor may determine not to purchase any such shares, or to
purchase fewer shares than it has indicated an interest in purchasing. We are
not under any obligation to sell any such shares. Such investment would be made
on terms and conditions determined at the time of the business combination.
Contractual Obligations
Registration and Shareholder Rights
The holders of founder shares, private placement units and warrants that may be
issued upon conversion of working capital loans, if any, will be entitled to
registration rights (in the case of the founder shares, only after conversion of
such shares into Class A ordinary shares) pursuant to a registration and
shareholder rights agreement to be entered into upon consummation of the Initial
Public Offering. These holders will be entitled to certain demand and
"piggyback" registration and shareholder rights. However, the registration and
shareholder rights agreement provides that we will not permit any registration
statement filed under the Securities Act to become effective until the
termination of the applicable
lock-up
period for the securities to be registered. We will bear the expenses incurred
in connection with the filing of any such registration statements.
Underwriting Agreement
We granted the underwriters a
45-day
option from the date of the final prospectus relating to the Initial Public
Offering to purchase up to 1,800,000 additional units to cover over-allotments,
if any, at $10.00 per unit, less underwriting discounts and commissions. The
underwriters exercised this option in full on December 11, 2020.
The underwriters were entitled to underwriting discounts of $0.20 per unit, or
approximately $2.76 million in the aggregate, paid upon the closing of the
Initial Public Offering. An additional fee of $0.35 per unit, or approximately
$4.83 million in the aggregate will be payable to the underwriters for deferred
underwriting commissions. The deferred underwriting commissions will become
payable to the underwriters 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.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States 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 financial statements, and income and expenses during the periods
reported. Actual results could materially differ from those estimates. We have
identified the following as our critical accounting policies:

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Class A Ordinary Shares Subject to Possible Redemption
We account for our Class A ordinary shares subject to possible redemption in
accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from
Equity." Shares of Class A ordinary shares subject to mandatory redemption (if
any) are classified as liability instruments and are measured at fair value.
Shares of conditionally redeemable Class A ordinary shares (including Class A
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, shares of Class A ordinary shares are classified as shareholders'
equity. Our Class A ordinary shares features certain redemption rights that are
considered to be outside of our control and subject to the occurrence of
uncertain future events. Accordingly, at March 31, 2021 and December 31, 2020,
12,528,001 and 12,246,192 shares of Class A ordinary shares subject to possible
redemption are presented as temporary equity, respectively, outside of the
shareholders' equity section of the accompanying unaudited condensed balance
sheets
Derivative Warrant liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate all of our financial instruments, including
issued stock purchase warrants, to determine if such instruments are derivatives
or contain features that qualify as embedded derivatives, pursuant to ASC 480
and ASC
815-15.
The classification of derivative instruments, including whether such instruments
should be recorded as liabilities or as equity, is
re-assessed
at the end of each reporting period.
The 4,600,000 issued in connection with the Initial Public Offering (the "Public
Warrants") and the 167,000 Private Placement Warrants are recognized as
derivative liabilities in accordance with ASC
815-40.
Accordingly, we recognize the warrant instruments as liabilities at fair value
and adjusts the instruments to fair value at each reporting period. The
liabilities are subject to
re-measurement
at each balance sheet date until exercised, and any change in fair value is
recognized in our statement of operations. The fair value of the Public Warrants
issued in connection with the Public Offering and Private Placement Warrants
were initially measured at fair value using a Monte Carlo simulation model and
subsequently, the fair value of the Private Placement Warrants have been
estimated using a Monte Carlo simulation model each measurement date. The fair
value of Public Warrants issued in connection with the Initial Public Offering
have subsequently been measured based on the listed market price of such
warrants.
Net Income per Ordinary Shares
We comply with accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share." Net income (loss) per common share is computed by dividing
net income by the weighted average number of shares of ordinary shares
outstanding during the period. We have not considered the effect of the warrants
sold in the Initial Public Offering and Private Placement to purchase an
aggregate of 4,767,000 of our ordinary shares in the calculation of diluted loss
per share, since the exercise of the warrants are contingent upon the occurrence
of future events and the inclusion of such warrants would be anti-dilutive.
Our unaudited condensed statement of operations includes a presentation of
income per share for ordinary shares subject to redemption in a manner similar
to the
two-class
method of income per share. Net income per ordinary share, basic and diluted for
Class A ordinary shares are calculated by dividing the interest income earned on
investment securities held in the Trust Account, net of applicable taxes
available to be withdrawn from the Trust Account, which was approximately $4,000
for the three months ended March 31, 2021, by the weighted average number of
Class A ordinary shares outstanding for the period. Net income per ordinary
share, basic and diluted for Class B ordinary shares is calculated by dividing
the net income of approximately $2.8 million, less income attributable to
Class A ordinary shares, by the weighted average number of Class B ordinary
shares outstanding for the period.
Recent Issued Accounting Standards
Our management does not believe that any recently issued, but not yet effective,
accounting standards updates, if currently adopted, would have a material effect
on the accompanying financial statement.
Off-Balance
Sheet Arrangements
As of March 31, 2021, we did not have any
off-balance
sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation
S-K.

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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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