SEC Filing | Freeline Therapeutics

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6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

OF THE SECURITIES EXCHANGE ACT OF 1934

For the month of May 2023

(Commission File No. 001-39431)

Freeline Therapeutics Holdings plc

(Exact Name of Registrant as Specified in Its Charter)

Sycamore House

Gunnels Wood Road

Stevenage, Hertfordshire SG1 2BP

United Kingdom

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F ☒ Form 40-F ☐

This Report on Form 6-K (other than the information contained in the press release furnished as Exhibit 99.1 to this Report on Form 6-K) shall be deemed to be incorporated by reference into the registration statement on Form F-3 (File No. 333-259444) and registration statements on Form S-8 (File Nos. 333-242129, 333-242133, 333-259852 and 333-265634) of Freeline Therapeutics Holdings plc and to be a part thereof from the date on which this report is filed, to the extent not superseded by documents or reports subsequently filed or furnished.

The information contained in the press release furnished as Exhibit 99.1 to this Report on Form 6-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any of the Company’s filings under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof, except as shall be expressly set forth by specific reference in any such filing.

INDEX


PART I
		Page
ITEM 1.	Financial Statements
	A. Unaudited Condensed Consolidated Balance Sheets	F-1
	B. Unaudited Condensed Consolidated Statements of Operations	F-2
	C. Unaudited Condensed Consolidated Statements of Comprehensive Loss	F-3
	D. Unaudited Condensed Consolidated Statements of Shareholders’ Equity	F-4
	E. Unaudited Condensed Consolidated Statements of Cash Flows	F-5
	Notes to Unaudited Condensed Consolidated Financial Statements	F-7

ITEM 2.	Special Note Regarding Forward-Looking Statements	1
	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3
	Risk Factors	13

PART II

ITEM 3.	Exhibits	15

FREELINE THERAPEUTICS HOLDINGS PLC

Unaudited Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

(expressed in U.S. Dollars, unless otherwise stated)


	March 31,			December 31,
	2023			2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	55,415		$	47,279
Prepaid expenses and other current assets		8,454			6,235
Assets held for sale		—			14,113
Total current assets		63,869			67,627
NON-CURRENT ASSETS:
Property and equipment, net		9,347			9,007
Operating lease right of use assets		5,435			6,014
Other non-current assets		2,715			3,993
Total assets	$	81,366		$	86,641
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	12,453		$	10,058
Accrued expenses and other current liabilities		7,538			7,908
Operating lease liabilities, current		2,750			2,663
Liabilities related to assets held for sale		—			10,337
Total current liabilities		22,741			30,966
NON-CURRENT LIABILITIES:
Operating lease liabilities, non-current		2,639			3,261
Total liabilities	$	25,380		$	34,227
Commitments and contingencies (Note 12)
SHAREHOLDERS’ EQUITY:
Ordinary shares, £0.00001 par value, 400,000,000 shares authorized as of March 31, 2023 and December 31, 2022; 65,152,924 and 65,113,575 issued and outstanding as of March 31, 2023 and December 31, 2022, respectively		—			—
Deferred shares, £0.00001 par value; 127,686 and 118,263 shares authorized, issued and outstanding as of March 31, 2023 and December 31, 2022, respectively		—			—
Deferred shares, £100,000 par value; 1 authorized, issued and outstanding as of March 31, 2023 and December 31, 2022		137			137
Additional paid-in capital		501,754			500,781
Accumulated other comprehensive loss		(1,718	)		(3,151	)
Accumulated deficit		(444,187	)		(445,353	)
Total shareholders’ equity		55,986			52,414
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	81,366		$	86,641

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-1

FREELINE THERAPEUTICS HOLDINGS PLC

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except share and per share amounts)

(expressed in U.S. Dollars, unless otherwise stated)


	For the Three Months Ended March 31,
	2023			2022
OPERATING EXPENSES:
Research and development	$	10,893		$	19,948
General and administrative		8,052			8,223
Restructuring expense		1,137			—
Total operating expenses		20,082			28,171
LOSS FROM OPERATIONS:		(20,082	)		(28,171	)
OTHER INCOME (EXPENSE), NET:
Gain on sale of Freeline Therapeutics GmbH		20,279			—
Other income, net		664			990
Interest income, net		206			84
Benefit from R&D tax credit		261			386
Total other income, net		21,410			1,460
Net income (loss) before income taxes		1,328			(26,711	)
Income tax expense		(162	)		(22	)
Net income (loss)	$	1,166		$	(26,733	)
Net income (loss) per share:
Basic		0.02			(0.63	)
Diluted		0.02			(0.63	)
Weighted average ordinary shares outstanding:
Basic		65,130,907			42,644,340
Diluted		65,763,794			42,644,340

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-2

FREELINE THERAPEUTICS HOLDINGS PLC

Unaudited Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

(expressed in U.S. Dollars, unless otherwise stated)


	For the Three Months Ended March 31,
	2023		2022
Net income (loss)	$	1,166	$	(26,733	)
Other comprehensive income (loss):
Foreign currency translation adjustment		1,278		(2,730	)
Comprehensive income (loss)	$	2,444	$	(29,463	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-3

FREELINE THERAPEUTICS HOLDINGS PLC

Unaudited Condensed Consolidated Statements of Shareholders’ Equity

(in thousands, except share amounts)

(expressed in U.S. Dollars, unless otherwise stated)


	ORDINARY £0.00001 PAR VALUE					DEFERRED SHARES £0.00001 PAR VALUE				DEFERRED SHARES £0.001 PAR VALUE				DEFERRED SHARES £100,000 PAR VALUE				ADDITIONAL PAID-IN CAPITAL		ACCUMULATED OTHER COMPREHENSIVE GAIN (LOSS)			ACCUMULATED
	SHARES			AMOUNT		SHARES		AMOUNT		SHARES		AMOUNT		SHARES		AMOUNT		AMOUNT		AMOUNT			DEFICIT			EQUITY
Balance at December 31, 2021		35,854,591		$	—		112,077	$	—		—	$	—		1	$	137	$	467,213	$	9,472		$	(356,381	)	$	120,441
Vesting of restricted share units		27,175			—		—		—		—		—		—		—		—		—			—			—
Forfeiture of ordinary shares		(3,399	)		—		3,399						—		—		—		—		—			—			—
Issuance of ordinary shares, net of issuance cost of $2,200		26,466,946			—		—		—		—		—		—		—		26,208		—			—			26,208
Non-cash share-based compensation		—			—		—		—		—		—		—		—		1,376		—			—			1,376
Unrealized loss on foreign currency translation		—			—		—		—		—		—		—		—		—		(2,730	)		—			(2,730	)
Net loss		—			—		—		—		—		—		—		—		—		—			(26,733	)		(26,733	)
Balance at March 31, 2022		62,345,313		$	—		115,476	$	—		—	$	—		1	$	137	$	494,797	$	6,742		$	(383,114	)	$	118,562


Balance at December 31, 2022		65,113,575		$	—		118,263	$	—		—	$	—		1	$	137	$	500,781	$	(3,151	)	$	(445,353	)	$	52,414
Vesting of restricted share units		48,772			—		—		—		—		—		—		—		—		—			—			—
Forfeiture of ordinary shares		(9,423	)		—		9,423						—		—		—		—		—			—			—
Non-cash share-based compensation		—			—		—		—		—		—		—		—		973		—			—			973
Release of cumulative foreign currency translation adjustment, upon sale of Freeline Therapeutics GmbH		—			—		—		—		—		—		—		—		—		155			—			155
Unrealized gain on foreign currency translation		—			—		—		—		—		—		—		—		—		1,278			—			1,278
Net income		—			—		—		—		—		—		—		—		—		—			1,166			1,166
Balance at March 31, 2023		65,152,924		$	—		127,686	$	—		—	$	—		1	$	137	$	501,754	$	(1,718	)	$	(444,187	)	$	55,986

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-4

FREELINE THERAPEUTICS HOLDINGS PLC

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

(expressed in U.S. Dollars, unless otherwise stated)


	For the Three Months Ended March 31,
	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	1,166		$	(26,733	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization		320			541
Non-cash share-based compensation expense		973			1,376
Loss on disposal of property and equipment		—			71
Gain on sale of Freeline Therapeutics GmbH		(20,279	)		—
Changes in components of operating assets and liabilities
Prepaids and other current assets		(2,198	)		(1,635	)
Other non-current assets		—			(308	)
Operating lease right of use assets		711			2,418
Accounts payable		2,091			4,194
Accrued expenses and other current liabilities		(423	)		(6,413	)
Operating lease liabilities, net		(802	)		(95	)
Net cash used in operating activities		(18,441	)		(26,584	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(392	)		(526	)
Proceeds from the sale of Freeline Therapeutics GmbH, net of cash transferred with sale of $1,015		24,203			—
Net cash provided by (used in) investing activities		23,811			(526	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of ordinary shares		—			25,245
Net cash provided by financing activities		—			25,245
Effect of exchange rate changes on cash, cash equivalents and restricted cash		1,136			(2,718	)
Net increase (decrease) in cash, cash equivalents and restricted cash		6,506			(4,583	)
Cash, cash equivalents and restricted cash
Beginning of period		48,909			119,063
End of period	$	55,415		$	114,480
SUPPLEMENTAL DISCLOSURE OF NON-CASH FLOW INFORMATION:
Commitment shares issued to Lincoln Park Capital Fund, LLC		—			963
Property and equipment unpaid and accrued		50			—

F-5

The following table provides a reconciliation of the cash, cash equivalents and restricted cash balances as of each of the periods shown above:


	For the Three Months Ended March 31,
	2023		2022
Cash and cash equivalents	$	55,415	$	113,098
Long-term restricted cash		—		1,382
Total cash, cash equivalents and restricted cash	$	55,415	$	114,480

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-6

FREELINE THERAPEUTICS HOLDINGS PLC

Notes to Unaudited Condensed Consolidated Financial Statements

Nature of the Business

Freeline Therapeutics Holdings plc (the “Company”) is a clinical-stage biotechnology company developing transformative adeno-associated virus (“AAV”) vector-mediated gene therapies for patients suffering from chronic debilitating diseases. The Company is headquartered in the United Kingdom (“U.K.”) and has operations in the United States (“U.S.”). The Company is a public limited company incorporated pursuant to the laws of England and Wales.

Going Concern

In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Product candidates currently under development require significant additional research and development efforts, including clinical testing and regulatory approval, prior to any commercialization. These efforts require significant amounts of capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize revenue from any product sales.

The Company has funded its operations primarily with proceeds from the sale of its equity securities. As of March 31, 2023, the Company had unrestricted cash and cash equivalents of $55.4 million. The Company has incurred recurring losses since its inception, with the exception of the gain on the sale of Freeline Therapeutics GmbH in the three months ended March 31, 2023. The Company had net income of $1.2 million and net loss of $26.7 million for the three months ended March 31, 2023 and 2022, respectively. In addition, the Company had an accumulated deficit of $444.2 million as of March 31, 2023.

The net cash provided by operating and investing activities was $5.4 million for the three months ended March 31, 2023. The Company expects to continue to incur significant expenses and generate operating losses for the foreseeable future. These conditions indicate that there is substantial doubt regarding the Company's ability to continue as a going concern for at least 12 months from the issuance date of these unaudited condensed consolidated financial statements.

As a result, the Company will need additional funding to support its continuing operations. There can be no assurances, however, that additional funding will be available on favorable terms, or at all. If adequate funds are not available, the Company will be required to reduce spending and potentially delay, limit, reduce or terminate its product research and development efforts in order to enable it to meet its obligations as they fall due for the foreseeable future.

The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Accordingly, the unaudited condensed consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

F-7

Summary of Significant Accounting Policies

The Company’s significant accounting policies are described in Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements as of and for the year ended December 31, 2022 in the Annual Report on Form 20-F. There have been no material changes to the significant accounting policies during the three months ended March 31, 2023.

Sale of Freeline Therapeutics GmbH

On February 8, 2023, the Company sold its German subsidiary, Freeline Therapeutics GmbH, and certain intellectual property rights to Ascend Gene & Cell Therapies pursuant to a definitive agreement entered into in November 2022 for an aggregate cash purchase price of $25.0 million, subject to purchase price adjustments and a license back for certain intellectual property rights assigned to Ascend. The Subsidiary Sale did not meet the criteria for reporting discontinued operations as there was not a strategic shift that has had, or will have, a major effect on the Company's operations. The Company recognized a gain on the Subsidiary Sale of $20.3 million in its unaudited condensed consolidated statement of operations. Upon the closing of the Subsidiary Sale, the cumulative foreign currency translation losses totaling $0.2 million were released to earnings and included in the gain on the Subsidiary Sale.

In connection with the Subsidiary Sale, the Company and Ascend also entered into a transition services agreement (the "Transition Services Agreement"), pursuant to which Ascend will provide certain services in the area of development and manufacturing to the Company. The Company agreed to utilize, and Ascend agreed to make exclusively available to the Company, no fewer than 15 full-time employee equivalents ("FTEs" (as defined in the Transition Services Agreement)), per annum for a guarantee period of 18 months following the Transition Services Agreement’s effective date. The Company also agreed to pay Ascend a guaranteed minimum of approximately $7.9 million in respect of FTE costs during such period, $2.6 million of which was paid in the three months ended March 31, 2023 and recorded as prepaid expenses. The Company will make minimum guaranteed payments of $4.8 million and $3.1 million for the years ending December 31, 2023 and 2024, respectively. The Transition Services Agreement will terminate three years after its effective date, unless earlier terminated by Freeline with 90 days' written notice, effective from the end of the 18-month guarantee period at the earliest, in accordance with its terms..

Concurrently with the closing of the Subsidiary Sale, the Company and Ascend entered into an intellectual property deed of assignment and license (the "IP Agreement"), pursuant to which the Company assigned certain intellectual property rights pertaining to the business of Freeline Therapeutics GmbH to Ascend, including certain patents and know-how related to chemistry, manufacturing and controls capabilities and technologies. Ascend granted a non-exclusive, royalty-free, perpetual, irrevocable, worldwide license back to the Company of the assigned rights necessary to develop or commercialize its current product candidates. There was no value assigned or recorded for the license back to the Company as the license is considered in-process research and development and had no alternative future use.

The table below sets forth the book value of the Freeline Therapeutics GmbH assets and liabilities sold along with the calculation of the gain on sale based on the cash consideration received.

F-8


	(in thousands)
Book value of assets sold
Cash and cash equivalents	$	1,015
Prepaid expenses and other current assets		414
Property and equipment, net		5,470
Operating lease right of use assets		8,455
Other non-current assets		3
Amounts attributable to assets sold		15,357
Book value of liabilities sold
Accounts payable		230
Accrued expenses and other current liabilities		1,430
Operating lease liabilities, current		869
Operating lease liabilities, non-current		8,044
Amounts attributable to liabilities sold		10,573
Total identifiable net assets sold		4,784
Accumulated other comprehensive loss		(155	)
Consideration, inclusive of cash transferred		25,218
Gain on sale of Freeline Therapeutics GmbH	$	20,279

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):


	March 31,		December 31,
	2023		2022
U.K. R&D tax credit	$	1,527	$	1,230
Prepaid tax		225		1,373
Insurance		1,044		1,702
Prepaid manufacturing costs		467		456
Prepaid transition services (note 3)		2,036		—
Other current assets		3,155		1,474
	$	8,454	$	6,235

Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):


	March 31,			December 31,
	2023			2022
Office equipment and computers	$	822		$	751
Furniture & Fixtures		2,689			2,584
Laboratory equipment		3,366			3,140
Leasehold improvements		7,934			7,549
		14,811			14,024
Less: accumulated depreciation		(5,464	)		(5,017	)
	$	9,347		$	9,007

Depreciation and amortization expense was $0.3 million and $0.5 million for the three months ended March 31, 2023 and 2022, respectively.

F-9

Other Non-current Assets

Other non-current assets consisted of the following (in thousands):


	March 31,		December 31,
	2023		2022
Deferred offering costs	$	2,182	$	2,133
Restricted cash		—		1,327
Deferred tax asset		533		533
	$	2,715	$	3,993

Restricted cash consisted of collateral deposits for the office space leased by the Company's former wholly owned subsidiary, Freeline Therapeutics GmbH. This collateral was released upon the sale of Freeline Therapeutics GmbH in the three months ended March 31, 2023.

Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities consisted of the following (in thousands):


		March 31,				December 31,
		2023				2022