UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
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(I.R.S. Employer |
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of August 1, 2023, the registrant had
Table of Contents
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PART I. |
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Item 1. |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
20 |
Item 3. |
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Item 4. |
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PART II. |
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Item 1. |
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Item 1A. |
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Item 2. |
Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, or Quarterly Report, contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding the transactions contemplated by the Agreement and Plan of Merger, or the Merger Agreement, dated as of July 14, 2023, by and among us, Korro Bio, Inc., or Korro Bio, and our wholly owned subsidiary, Frequency Merger Sub, Inc., or Merger Sub, pursuant to which Merger Sub will merge with and into Korro Bio, with Korro Bio surviving as our direct, wholly owned subsidiary, and the surviving corporation of the merger, or the Merger, the combined company following the Merger, our expectations regarding future funding needs and expenses, and our business strategy, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of important factors that could cause actual results to differ materially from those in the forward-looking statements, including the risks, uncertainties and assumptions described under the sections in this Quarterly Report titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These forward-looking statements are subject to numerous risks, including, without limitation, that the failure to complete, or delays in completing, the Merger could expose us to operational and financial risks.
Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur, and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report will prove to be accurate. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances, or otherwise.
You should read this Quarterly Report and the documents that we reference in this Quarterly Report completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
2
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
Frequency Therapeutics, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
(unaudited)
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June 30, 2023 |
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December 31, 2022 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term marketable securities |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Right of use assets |
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Restricted cash |
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Other long-term assets |
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Total assets |
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$ |
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$ |
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Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses |
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Lease liabilities, current portion |
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Term loan, current portion |
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Total current liabilities |
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Lease liabilities, net of current portion |
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Term loan, net of current portion |
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Other long-term liabilities |
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Total liabilities |
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Stockholders’ equity: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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( |
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Accumulated deficit |
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( |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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See accompanying notes.
3
Frequency Therapeutics, Inc.
Consolidated Statements of Operations
(in thousands, except share and per share amounts)
(unaudited)
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Three Months Ended |
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Six Months Ended |
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2023 |
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2022 |
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2023 |
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2022 |
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Operating expenses: |
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Research and development |
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$ |
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$ |
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$ |
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$ |
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General and administrative |
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Total operating expenses |
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Loss from operations |
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( |
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( |
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Interest income |
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Interest expense |
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( |
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( |
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( |
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Other income (expense), net |
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( |
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( |
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Loss before income taxes |
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( |
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( |
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( |
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( |
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Income tax |
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( |
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( |
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( |
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( |
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Net loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Net loss per share attributable to common stockholders-basic and diluted |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Weighted-average shares of common stock outstanding-basic and diluted |
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See accompanying notes.
4
Frequency Therapeutics, Inc.
Consolidated Statements of Comprehensive Loss
(in thousands)
(unaudited)
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Three Months Ended |
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Six Months Ended |
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2023 |
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2022 |
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2023 |
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2022 |
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Net loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Other comprehensive gain (loss): |
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Unrealized gain (loss) on marketable securities and money market funds |
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( |
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( |
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Total other comprehensive gain (loss) |
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( |
) |
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( |
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Comprehensive loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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See accompanying notes.
5
Frequency Therapeutics, Inc.
Consolidated Statements Stockholders’ Equity
(in thousands, except share and per share amounts)
(unaudited)
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Common |
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Common |
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Additional |
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Accumulated other |
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Accumulated |
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Total stockholders’ |
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Balance, March 31, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Stock-based compensation expense |
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- |
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- |
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- |
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- |
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Other comprehensive loss |
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- |
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- |
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- |
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( |
) |
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- |
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( |
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Net loss |
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- |
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- |
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- |
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- |
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( |
) |
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( |
) |
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Balance, June 30, 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Balance, March 31, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Stock-based compensation expense |
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- |
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- |
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- |
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- |
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Issuance of common stock pursuant to restricted stock units |
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- |
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- |
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- |
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Other comprehensive gain |
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- |
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- |
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- |
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- |
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Net loss |
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- |
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- |
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- |
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- |
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( |
) |
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( |
) |
Balance, June 30, 2023 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Common |
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Common |
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Additional |
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Accumulated other |
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Accumulated |
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Total stockholders’ |
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Balance, December 31, 2021 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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Stock-based compensation expense |
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- |
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- |
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- |
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- |
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Purchase of common stock under Employee Stock Purchase Plan |
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- |
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- |
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- |
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Issuance of common stock, net |
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- |
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- |
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- |
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Issuance of common stock pursuant to restricted stock units |
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- |
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- |
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- |
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- |
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- |
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Other comprehensive loss |
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- |
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- |
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- |
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( |
) |
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- |
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( |
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Net loss |
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- |
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- |
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- |
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- |
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( |
) |
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( |
) |
Balance, June 30, 2022 |
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( |
) |
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( |
) |
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Balance, December 31, 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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Stock-based compensation expense |
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- |
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- |
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- |
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- |
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Purchase of common stock under Employee Stock Purchase Plan |
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- |
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- |
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- |
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Issuance of common stock, net |
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- |
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- |
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- |
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- |
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- |
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Issuance of common stock pursuant to restricted stock units |
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1 |
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- |
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- |
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- |
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Other comprehensive gain |
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- |
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- |
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- |
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- |
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Net loss |
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- |
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- |
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- |
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- |
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( |
) |
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( |
) |
Balance, June 30, 2023 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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See accompanying notes.
6
Frequency Therapeutics, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
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Six Months Ended |
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2023 |
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2022 |
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Cash flows from operating activities: |
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Net loss |
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$ |
( |
) |
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$ |
( |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
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Stock-based compensation |
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Depreciation expense |
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Non-cash lease expense |
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Non-cash interest (income) expense |
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( |
) |
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Changes in operating assets and liabilities: |
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Prepaid expenses and other current assets |
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Accounts payable |
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( |
) |
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Lease liabilities |
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( |
) |
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( |
) |
Accrued expenses |
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( |
) |
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( |
) |
Net cash used in operating activities |
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( |
) |
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( |
) |
Cash flows from investing activities: |
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Sale of property and equipment |
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Purchase of property and equipment |
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( |
) |
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( |
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Purchase of marketable securities |
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( |
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( |
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Redemption of marketable securities |
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Net cash provided by (used in) investing activities |
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( |
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Cash flows from financing activities: |
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Proceeds from issuance of common stock, net |
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Proceeds from Employee Stock Purchase Plan |
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Repayment of Term Loan |
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( |
) |
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Net cash (used in) provided by financing activities |
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( |
) |
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Net decrease in cash, cash equivalents and restricted cash |
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( |
) |
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( |
) |
Cash, cash equivalents, and restricted cash at beginning of period |
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Cash, cash equivalents, and restricted cash at end of period |
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$ |
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$ |
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See accompanying notes
7
Frequency Therapeutics, Inc.
Notes to Unaudited Consolidated Financial Statements
(Amounts in thousands, except share and per share amounts)
1. Organization and basis of presentation
Organization
Frequency Therapeutics, Inc., together with its wholly owned subsidiaries, Frequency Therapeutics, PTY, LTD, and Frequency Therapeutics Securities Corporation (the Company) headquartered in Lexington, Massachusetts, was incorporated in as a Delaware corporation. The Company is a preclinical-stage regenerative medicine company focused on developing therapeutics to activate a person’s innate regenerative potential to restore function. On February 13, 2023, the Company announced a restructuring of the business which included the discontinuation of its hearing program and a downsizing of personnel by approximately
Liquidity and capital resources
The Company has funded its operations primarily with proceeds from private and public securities financings, a term loan, and amounts received under a collaboration agreement. The Company has incurred recurring losses since its inception. In addition, as of June 30, 2023, the Company had an accumulated deficit of $
Basis of presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting standards set by the Financial Accounting Standards Board (FASB). The FASB sets generally accepted accounting principles (GAAP) that the Company follows to ensure its financial condition, results of operations, and cash flows are consistently reported. References to GAAP issued by the FASB in these notes to the consolidated financial statements are to the FASB Accounting Standards Codification (ASC).
Principles of consolidation
The consolidated financial statements include the accounts of Frequency Therapeutics, Inc. and its wholly owned subsidiaries Frequency Therapeutics Securities Corporation and Frequency Therapeutics PTY, LTD. All intercompany transactions and balances have been eliminated. The significant accounting policies used in preparation of these interim financial statements are consistent with those discussed in Note 2, “Summary of significant accounting policies,” in the Company’s Annual Report on Form 10-K (the Company's Form 10-K).
Unaudited interim financial information
The accompanying consolidated balance sheet as of June 30, 2023 and the consolidated statements of operations, the consolidated statements of comprehensive loss and the consolidated statements of stockholders’ equity for the three and six months ended June 30, 2023 and 2022 and the consolidated statements of cash flows for the six months ended June 30, 2023 and 2022 are unaudited. The unaudited interim consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of June 30, 2023, the results of its operations for the three and six months ended June 30, 2023 and 2022, and cash flows for the six months ended June 30, 2023 and 2022. The financial data and other information disclosed in these notes related to the three and six months ended June 30, 2023 and 2022 are also unaudited. The results for the three and six months ended June 30, 2023 are not necessarily indicative of results to be expected for the year ending December 31, 2023, any other interim periods, or any
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future year or period. The consolidated balance sheet as of December 31, 2022 included herein was derived from the audited consolidated financial statements as of that date. These unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2022 included in the Company’s Form 10-K.
2. Recently adopted and issued accounting standards
From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and ado