UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM10-Q

(Mark One)

For the quarterly period ended December 31, 20172018

OR

Commission File Number:001-36370

APPLIED GENETIC

TECHNOLOGIES CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

14193 NW 119^th Terrace

Suite 10

Alachua, Florida 32615

(Address of Principal Executive Offices, Including Zip Code)

(386)462-2204

(Registrant’s Telephone Number, Including Area Code)

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.    Yes   ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically, and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 ofRegulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” inRule 12b-2 of the Exchange Act.

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 inRule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

The number of shares of the registrant’s common stock outstanding as of February 3, 20187, 2019 was 18,104,901.18,165,054.

APPLIED GENETIC TECHNOLOGIES CORPORATION

FORM10-Q

FOR THE QUARTER ENDED DECEMBER 31, 20172018

TABLE OF CONTENTS

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PART I. FINANCIAL INFORMATION

APPLIED GENETIC TECHNOLOGIES CORPORATION

CONDENSED BALANCE SHEETS

(Unaudited)

The accompanying notes are an integral part of the financial statements.

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APPLIED GENETIC TECHNOLOGIES CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

The accompanying notes are an integral part of the financial statements.

4

APPLIED GENETIC TECHNOLOGIES CORPORATION

CONDENSED STATEMENTSSTATEMENT OF CASH FLOWSSTOCKHOLDERS’ EQUITY

(Unaudited)

The accompanying notes are an integral part of the financial statements.

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APPLIED GENETIC TECHNOLOGIES CORPORATION

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

The accompanying notes are an integral part of these Unaudited Condensed Financial Statements.

6

APPLIED GENETIC TECHNOLOGIES CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

Applied Genetic Technologies Corporation (the “Company” or “AGTC”) was incorporated as a Florida corporation on January 19, 1999 and reincorporated as a Delaware corporation on October 24, 2003. The Company is a clinical-stage biotechnology company that uses a proprietary gene therapy platform to develop transformational genetic therapies for patients suffering from rare and debilitating diseases.

In July 2015, the Company entered into a collaboration agreement (the “Collaboration Agreement”) with Biogen MA, Inc., a wholly owned subsidiary of Biogen Inc. (“Biogen”), pursuant to which the Company and Biogen will collaborate to develop, seek regulatory approval for and commercialize gene therapy products to treatX-linked retinoschisis (“XLRS”),X-linked retinitis pigmentosa (“XLRP”), and discovery programs targeting three indications based on the Company’s adeno-associated virus vector technologies. The Collaboration Agreement became effective in August 2015. On December 7, 2018, the Company received notice from Biogen that it had elected to terminate the Collaboration Agreement effective as of March 8, 2019. The Collaboration Agreement and other transactions with Biogen are discussed further in Note 6 to these financial statements.Unaudited Condensed Financial Statements.

The Company has devoted substantially all of its efforts to research and development, including clinical trials. The Company has not completed the development of any products. The Company has generated revenue from collaboration agreements, sponsored research payments and grants, but has not generated product revenue to date and is subject to a number of risks similar to those of other early stage companies in the biotechnology industry, including dependence on key individuals, the difficulties inherent in the development of commercially viable products, the need to obtain additional capital necessary to fund the development of its products, development by the Company or its competitors of technological innovations, risks of failure of clinical studies, protection of proprietary technology, compliance with government regulations and ability to transition to large-scale production of products. As of December 31, 2017,2018, the Company had an accumulated deficit of $97.0$136.5 million. While the Company expects to continue to generate some revenue from partnering, including under the collaboration with Biogen, the Company expects to incur losses for the foreseeable future. The Company has funded its operations to date primarily through public offerings of its common stock, private placements of its preferred stock, and collaborations. At December 31, 2017,2018, the Company had cash and cash equivalents and liquid investments of $119.7$96.1 million.

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Basis of presentation

The accompanying unaudited condensed financial statementsUnaudited Condensed Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and, in the opinion of management, include all adjustments necessary for a fair presentation of the Company’s financial position, results of operations, stockholders’ equity and cash flows for eachthe periods presented.

The adjustments referred to above are of a normal and recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to U.S. Securities and Exchange Commission (“SEC”) rules and regulations for interim reporting.

Certain amounts reported previously have been reclassified to conform to the current period presentation, with no effect on stockholders’ equity or net income (loss) as previously presented. See Note 7 for a discussion on a revision of prior financial results presented related to the recording of our income tax provision for fiscal year 2017.

The Condensed Balance Sheet as of June 30, 20172018 was derived from audited financial statements, but does not include all disclosures required by GAAP. These Unaudited Condensed Financial Statements should be read in conjunction with the audited financial statements included in the Company’s 20172018 Annual Report onForm 10-K as amended, (“June 30, 20172018Form 10-K”). Results of operations for the three and six months ended December 31, 20172018 are not necessarily indicative of the results to be expected for the full year or any other interim period.

Segment reporting

Operating segments are identified as components of an enterprise about which separate discrete financiafinancial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. To date, we have viewed our operations and managed our business as one segment.

Use of estimates

The preparation of financial statements in conformity with GAAP and SEC regulations, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and cash equivalents

Cash consists of funds held in bank accounts. Cash equivalents consist of short-term, highly liquid investments with original maturities of 90 days or less at the time of purchase and generally include money market accounts.

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Investments

The Company’s investments consist of certificates of deposit and debt securities classified asheld-to maturity. Management determines the appropriate classification of debt securities at the time of purchase and reevaluates such designation as of each balance sheet date. Debt securities are classified asheld-to-maturity when the Company has the positive intent and ability to hold the securities to maturity.Held-to-maturity securities are stated at amortized cost, adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion is included in investment income. Interest on securities classified asheld-to-maturity is included in investment income.

The Company uses the specific identification method to determine the cost basis of securities sold.

Investments are considered to be impaired when a decline in fair value is judged to be other-than-temporary. The Company evaluates an investment for impairment by considering the length of time and extent to which market value has been less than cost or amortized cost, the financial condition and near-term prospects of the issuer as well as specific events or circumstances that may influence the operations of the issuer and the Company’s intent to sell the security or the likelihood that it will be required to sell the security before recovery of the entire amortized cost. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded to investment income (expense) and a new cost basis in the investment is established.

Fair value of financial instruments

The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. The Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 820,Fair Value Measurements and Disclosures, establishes a hierarchy of inputs used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances. The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of financial instruments and is not a measure of the investment credit quality. The three levels of the fair value hierarchy are described below:

Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2—Valuations based on quoted prices for similar assets or liabilities in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3—Valuations that require inputs that reflect the Company’s own assumptions that are both significant to the fair value measurement and unobservable.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Revenue recognition

TheEffective July 1, 2018, the Company has primarily generated revenue through collaboration agreements, sponsored research arrangementsadopted the provisions of ASC Topic 606,Revenue from Contracts with nonprofit organizations forCustomers,(“Topic 606”), using the development and commercializationmodified retrospective transition method. Under this method, the Company recorded the cumulative effect of product candidates and revenues from federal research and development grant programs. The Company recognizes revenue when amounts are realized or realizable and earned. Revenue is considered realizable and earned wheninitially applying the following criteria are met: (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred or services have been rendered; (iii) the price is fixed or determinable; and (iv) collectionnew standard to all contracts in process as of the amounts duedate of adoption. This standard applies to all contracts with customers, except for contracts that are reasonably assured.within the scope of other standards.

Amounts received prior to satisfying

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The adoption of the new revenue recognition criteria are recorded asguidance resulted in an increase of $22.6 million in deferred revenue inand accumulated deficit as of July 1, 2018. For the six months ended December 31, 2018, revenue increased by $5.0 million, net income increased by $5.0 million and basic and diluted net income per share increased by $0.28 per share based on revenue recognition under Topic 606 as compared to the Company’s balance sheets. Amounts expected to be recognized asprior revenue within the 12 months following the balance sheet date are classified as current liabilities. The Company recognizes revenue for reimbursements of research and development costsrecognition methodology under collaboration agreements as the services are performed. The Company records these reimbursements as revenue and not as a reduction of research and development expenses, as the Company has the risks and rewards as the principal in the research and development activities.

The Company evaluates the terms of sponsored research agreement grants and federal grants to assess the Company’s obligations and if the Company’s obligations are satisfiedASC 605,Revenue Recognition. These changes were primarily caused by the passage of time,differences in determining and allocating transaction price and recognizing revenue is recognized on a straight-line basis. In situations where theproportional performance of the Company’s obligations has been satisfied when the grant is received, revenue is recognized upon receipt of the grant. Certain grants contain refund provisions. The Company reviews those refund provisions to determine the likelihood of repayment. If the likelihood of repayment of the grant is determined to be remote, the grant is recognized as revenue. If the probability of repayment is determined to be more than remote, the Company records the grant as a deferred revenue liability, until such time that the grant requirements have been satisfied.basis under Topic 606.

Collaboration revenue

On July 1, 2015, the Company entered into a Collaboration Agreement with Biogen. This collaboration is discussed further in Note 6 of notes to the financial statements. The terms of the Collaboration Agreement and other potential collaboration or commercialization agreements the Company may enter into generally contain multiple elements, or deliverables,collaboration agreements which may include, among others, (i)are within the scope of Topic 606, under which the Company licenses or options to obtain licenses,rights to its technology and (ii)certain of the Company’s product candidates and performs research and development activities to be performed on behalfservices for third parties. The terms of the collaborative partner. Payments made under suchthese arrangements typically may include payment of one or more of the following:non-refundable,up-front license fees; option exercise fees; fundingreimbursement of research and/orand development efforts;costs; development, regulatory and commercial milestone payments; and royalties on future product sales.net sales of licensed products.

Multiple elementUnder Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine the appropriate amount of revenue to be recognized for arrangements determined to be within the scope of Topic 606, the Company performs the following five steps: (i) identification of the contract; (ii) determination of whether the promised goods or services are analyzedperformance obligations; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect consideration it is entitled to in exchange for the goods or services it transfers to the customer.

Performance obligations are promises to transfer distinct goods or services to the customer. Promised goods or services are considered distinct when (i) the customer can benefit from the good or service on its own or together with other readily available resources and (ii) the promised good or service is separately identifiable from other promises in the contract. In assessing whether promised good or services are distinct, the Company considers factors such as the stage of development of the underlying intellectual property, the capabilities of the customer to develop the intellectual property on their own or whether the required expertise is readily available.

The Company estimates the transaction price based on the amount expected to be received for transferring the promised goods or services in the contract. The consideration may include both fixed consideration or variable consideration. At the inception of an arrangement that includes variable consideration and at each reporting period, the Company evaluates the amount of potential payment and the likelihood that the payments will be received. The Company utilizes either the most likely amount method or expected amount method to estimate the amount to be received based on which method better predicts the amount expected to be received. If it is probable that a significant revenue reversal would not occur, the variable consideration is included in the transaction price. The Company will assess its revenue generating arrangements in order to determine whether a significant financing component exists and conclude that a significant financing component does not exist in any of its arrangements if: (a) the promised consideration approximates the cash selling price of the promised goods and services or any significant difference is due to factors other than financing; and (b) timing of payment approximates the transfer of goods and services and performance is over a relatively short period of time within the context of the entire term of the contract.

The Company’s contracts will often include development and regulatory milestone payments. At contract inception and at each reporting period, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s control or the customer’s control, such as regulatory approvals, are not included in the transaction price. At the end of each subsequent reporting period, the Companyre-evaluates the probability of achievement of such development milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulativecatch-up basis, which would affect collaboration revenues and earnings in the period of adjustment.

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For arrangements that may include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any royalty revenue resulting from any of the Company’s collaboration arrangements.

The Company allocates the transaction price based on the estimated standalone selling price of the underlying performance obligations or in the case of certain variable consideration to one or more performance obligations. The Company must develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract. The Company utilizes key assumptions to determine the stand-alone selling price, which may include other comparable transactions, pricing considered in negotiating the transaction and the estimated costs to complete the respective performance obligation. Certain variable consideration is allocated specifically to one or more performance obligations in a contract when the terms of the variable consideration relate to the satisfaction of the performance obligation and the resulting amounts allocated to each performance obligation are consistent with the amounts the Company would expect to receive for each performance obligation.

For performance obligations consisting of licenses and other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the deliverables withincombined performance obligation is satisfied over time or at a point in time and, if over time, the agreement can be separated or whether they must be accountedappropriate method of measuring progress for as a single unitpurposes of accounting. Deliverables under an agreement are requiredrecognizing revenue fromnon-refundable,up-front fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. If the license to the Company’s intellectual property is determined to be accounted for as separate units of accounting provided that (i) a delivered item has valuedistinct from the other performance obligations identified in the arrangement, the Company will recognize revenue fromnon-refundable,up-front fees allocated to the license when the license is transferred to the customer on a stand-alone basis; and (ii) if the agreement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item is considered probable and substantially in the control of the vendor. The allocation of consideration amongst the deliverables under the agreement is derived using a “best estimate of selling price” if vendor specific objective evidence and third-party evidence of fair value is not available. If the delivered element does not have stand-alone value or if the fair value of any of the undelivered elements cannot be determined, the arrangement is then accounted for as a single unit of accounting, and the Company recognizescustomer is able to use and benefit from the consideration received under the arrangement as revenue on a straight-line basis over the estimated period of performance.

The Company determines the estimated selling price for deliverables within each agreement using vendor-specific objective evidence, or VSOE, of selling price, if available, third-party evidence, or TPE, of selling price if VSOE is not available, or best estimate of selling price, or BESP, if neither VSOE nor TPE are available. Determining the best estimate of selling price for a deliverable requires significant judgment. The Company uses BESP to estimate the selling price related to licenses to its proprietary technology, since it often does not have VSOE or TPE of selling price for these deliverables. In those circumstances where it utilizes BESP to determine the estimated selling price of a license to our proprietary technology, the Company considers market conditions as well as entity-specific factors, including those factors contemplated in negotiating the agreements as well as internally developed models that include assumptions related to the market opportunity, estimated development costs, probability of success and the time needed to commercialize a product candidate pursuant to the license. In validating its best estimate of selling price, the Company evaluates whether changes in the key assumptions used to determine the best estimate of selling price will have a significant effect on the allocation of arrangement consideration among multiple deliverables.

If the delivered element does not have stand-alone value, the arrangement is then accounted for as a single unit of accounting and the Company recognizes the consideration received under the arrangement as revenue on a straight-line basis over its estimated period of performance. The Company’s anticipated periods of performance, typically the terms of its research and development obligations, are subject to estimates by management and may change over the course of the collaboration agreement. Such changes could have a material impact on the amount of revenue recorded in future periods.

Milestone revenue

The Company appliesreceives payments from its customers based on billing terms established in each contract. Such billings generally have30-day payment terms. Upfront payments and fees are recorded as deferred revenue upon receipt or when due until the milestone method of accountingCompany performs its obligations under these arrangements. Amounts are recorded as accounts receivable when the right to recognize revenue from milestone payments when earned, as evidenced by written acknowledgement from the collaborator or other persuasive evidence that the milestone has been achieved and the payment isnon-refundable, provided that the milestone event is substantive. A milestone event is defined as an event (i) that can only be achieved based in whole or in part on either the Company’s performance or on the occurrence of a specific outcome resulting from the Company’s performance; (ii) for which there is substantive uncertainty at the inception of the arrangement that the event will be achieved; and (iii) that would result in additional payments being due to the Company. Events for which the occurrence is either contingent solely upon the passage of time or the result of a counterparty’s performance are not considered to be milestone events. A milestone event is substantive if all of the following conditions are met: (i) the consideration is commensurate with either the Company’s performance to achieve the milestone, or the enhancement of the value to the delivered item(s) as a result of a specific outcome resulting from the Company’s performance to achieve the milestone; (ii) the consideration relates solely to past performance; and (iii) the consideration is reasonable relative to all the deliverables and payment terms (including other potential milestone consideration) within the arrangement.

The Company assesses whether a milestone is substantive at the inception of the arrangement. If a milestone is deemednon-substantive, the Company accounts for that milestone payment in accordance with the multiple element arrangements guidance and recognizes revenue consistent with the related units of accounting for the arrangement over the related performance period.

No milestone revenues were recognized during the three and six month periods ended December 31, 2017 and December 31, 2016.unconditional.

Income taxes

The Company uses the asset and liability method for accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases. Deferred tax assets and liabilities are measured using enacted rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The Tax CutsCut and Jobs Act of 2017(the “Tax Act”) was signed into lawenacted on December 22, 2017. The law includes significant changes toTax Act contains several key provisions including, among other things, reducing the U.S. federal corporate income tax system, including a Federal corporate rate reduction from 35% to 21%. We have recordedIn addition, federal net operating losses (“NOLs”) will be carried forward indefinitely, but will be subject to an income80% utilization against taxable income. The Company has enacted the reduction in tax benefitrate effective January 1, 2018, which resulted in a decrease to the deferred tax asset and a decrease to the valuation allowance. During the second quarter of $791,000 relating to our alternative minimum tax credit carryforward, which becomes refundable underfiscal 2019, the new law.

For the threemeasurement period provided by SEC Staff Accounting Bulletin 118 closed and six months ended December 31, 2016, the Company did not make any other adjustments to the provisional estimates recorded an income tax provision of $0.6 million and $1.2 million respectively,in prior periods. Although the measurement period has closed, further technical guidance related to the Company’s federal alternative minimum taxable income (“AMTI”) and state income tax in multiple states whereTax Act, including final regulations on a broad range of topics, is expected to be issued. In accordance with Accounting Standards Codification (ASC) 740, the Company is doing business. The Company calculates its AMTI using the alternative minimum tax (“AMT”) system. The Company’s federal income tax liability is the greaterwill recognize any effects of the tax computed usingguidance in the regular tax system or the tax under the AMT system. Corporations are exempt from AMT for all prior years in which their annual gross receipts for the3-yearperiod ending before the current tax year did not exceed $7.5 million. As of June 30, 2017, the Company no longer qualifies for the small company exclusion. The AMT system limits the use of net operating losses used by taxpayers to offset taxable income.that such guidance is issued.

As required by U.S. GAAP, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting themore-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. Any interest and penalties related to uncertain tax positions will be reflected in income tax expense. The

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Company is subject to examination of its income tax returns in the federal and state income tax jurisdictions in which it operates.

The Company’s net deferred On December 28, 2015, the United States Internal Revenue Service, or IRS, notified the Company of an income tax asset decreased by $7.5 million, primarily due to a remeasurementaudit for the tax period ending June 30, 2014. As of deferredJune 30, 2017, the IRS audit was closed and the Company incurred no penalties or payment liabilities for its income tax assets and liabilities to the revised statutory tax rate under the new law. The net deferred tax asset is completely offset by valuation allowances established because realization of the deferred tax benefits are not considered more likely than not as of December 31, 2017.positions.

For the six months ended December 31, 2016,2018, the Company’s $1.2 million of tax expense included an increase in the uncertain tax position liability of $0.4 million$38,000 related to uncertainty in how states may tax income from the Biogen Collaboration Agreement. The full amount ofinterest on the uncertain tax position. The uncertain tax position reflected on the balance sheet within accrued expenses and other liabilitiesliability as of December 31, 2017 is approximately $1 million. This collaboration agreement is described in more detail in Note 6 of the notes to the financial statements.2018 and June 30, 2018 was $1,997,000 and $1,959,000, respectively.

Research and development

Research and development costs include costs incurred in identifying, developing and testing product candidates and generally comprise compensation and related benefits andnon-cash share-based compensation to research related employees; laboratory costs; animal and laboratory maintenance and supplies; rent; utilities; clinical andpre-clinical expenses; and payments for sponsored research, scientific and regulatory consulting fees and testing.

As part of the process of preparing its financial statements, the Company is required to estimate its accrued expenses. This process involves reviewing quotations and contracts, identifying services that have been performed on its behalf and estimating the level of service performed and the associated cost incurred for services for which the Company has not yet been invoiced or otherwise notified of the actual cost. The majority of the Company’s service providers invoice the Company monthly in arrears for services performed or when contractual milestones are met. The Company makes estimates of its accrued expenses as of each balance sheet date in its financial statements based on facts and circumstances known to it at that time. The significant estimates in the Company’s accrued research and development expenses are related to expenses incurred with respect to academic research centers, contract research organizations, and other vendors in connection with research and development activities for which it has not yet been invoiced.

There may be instances in which the Company’s service providers require advance payments at the inception of a contract or in which payments made to these vendors will exceed the level of services provided, resulting in a prepayment of the research and development expense. Such prepayments are charged to research and development expense as and when the service is provided or when a specific milestone outlined in the contract is reached.

Prepayments related to research and development activities were $1.6$1.3 million and $1.5$1.0 million at December 31, 20172018 and June 30, 2017,2018, respectively, and are included within the prepaid and other current assets line item on the unaudited condensed balance sheets.Unaudited Condensed Balance Sheets.

Share-based compensation

The Company accounts for share-based awards issued to employees in accordance with ASC Topic 718, Compensation—Stock Compensation and generally recognizes share-based compensation expense on a straight-line basis over the periods during which the employees are required to provide service in exchange for the award. In addition, the Company issues stock options and restricted shares of common stock tonon-employees in exchange for consulting services and accounts for these in accordance with the provisions of ASCSubtopic 505-50,Equity-Based Payments toNon-employees(“ASC 505-50”). UnderASC 505-50, share-based awards tonon-employees are subject to periodic fair valuere-measurement over their vesting terms.

For purposes of calculating stock-based compensation, the Company estimates the fair value of stock options using a Black-Scholes option-pricing model. The determination of the fair value of share-based payment awards utilizing the Black-Scholes model is affected by the Company’s stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends. TheHistorically, the expected volatility iswas primarily based on the historical volatility of peer company data. For the three and six months ended December 31, 2018, the expected volatility is based on the historical volatility of the company stock price. If the Company had used peer company data whilefor the three and six months ended December 31, 2018, share-based compensation expense for the reporting period would have differed by an insignificant amount. The expected life of the stock options is based on historical and other economic data trended into the future. The risk-free interest rate assumption is based on observed interest rates appropriate for the expected terms of the Company’s stock options. The dividend yield

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assumption is based on the Company’s history and expectation of no dividend payouts. If factors change and the Company employs different assumptions, stock-based compensation expense may differ significantly from what has been recorded in the past. If there is a difference between the assumptions used in determining stock-based compensation expense and the actual factors which become known over time, specifically with respect to anticipated forfeitures, the Company may change the input factors used in determining stock-based compensation costs for future grants. These changes, if any, may materially impact the Company’s results of operations in the period such changes are made.

Net income (loss)loss per share

Basic net earnings (loss)loss per share is calculated by dividing net earnings (loss)loss by the weighted average shares outstanding during the period, without consideration for common stock equivalents. Diluted net earnings (loss)loss per share is calculated by adjusting weighted average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury-stock method. For purposes of the diluted net earnings (loss)loss per share calculation, stock options and warrants are considered to be common stock equivalents. The dilutive impact of stock options and warrants for the three and six month periods ended December 31, 2018 and 2017 totaled 0.2 million shares, compared to 0.3 million and 0.4 million shares for the three and six month periods ended December 31, 2016.shares. The dilutive impact of stock options and warrants have been excluded from the calculation of diluted net loss per share for the for the three and six months ended December 31, 2018 and December 31, 2017, as their effect would be anti-dilutive. Therefore, for the three and six months ended December 31, 2018 and December 31, 2017, basic and diluted net loss per share are the same.

Comprehensive income or loss

Comprehensive income or loss(loss) consists of net income or loss(loss) and changes in equity during a period from transactions and other equity and circumstances generated fromnon-owner sources. The Company’s net income or loss equals comprehensive income or loss for all periods presented.

New accounting pronouncements

Adopted in the current period

Revenue recognition

In May 2014, Topic 606, which replaces the existing accounting standards for revenue recognition with a single comprehensive five-step model. The core principle is to recognize revenue upon the transfer of goods or services to customers at an amount that reflects the consideration expected to be received. It also requires enhanced disclosures about revenue, provides guidance for transactions that were not previously addressed comprehensively, and improves guidance for multiple-element arrangements. The guidance was effective for public companies for annual periods beginning after December 15, 2017 as well as interim periods within those annual periods using either the full retrospective approach or modified retrospective approach. The Company adopted the new standard effective July 1, 2018 using the modified retrospective approach. Refer to Note 6 for the impact of adoption.

Share-Based Compensation

In May 2017, the FASB issued Accounting Standards Update (“ASU”)No. 2017-09,Scope of Modification Accounting, which amends ASC Topic 718,Compensation—Stock Compensation. The amendments in this Update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply

modification accounting in Topic 718. The amendments are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years and early adoption is permitted. The Company is currently in the process of evaluating the impact of adoption of this standard on its financial statements.

In March 2016, the FASB issued ASUNo. 2016-09,Improvements to Employee Share-Based Payment Accounting, which amends Accounting Standards Codification (“ASC”) Topic 718, Compensation—Stock Compensation. The amendments simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, forfeitures, and classification on the statement of cash flows. The amendments are effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years and early adoption is permitted. The Company has adopted this standard for its 2018in the first quarter of fiscal year2019 and it did not have a material effect on its balance sheets, results of operations or cash flows.financial statements.

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To be adopted in future periods

Leases

In February 2016, the Financial Accounting Standards Board (“FASB”)FASB issued Accounting Standards Update (“ASU”)ASUNo. 2016-02,Leases (Topic 842)in order to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet for those leases previously classified as operating leases under GAAP. The standard requires, in most instances, a lessee to recognize on its balance sheet a liability to make lease payments (the lease liability) and also aright-of-use asset representing its right to use the underlying asset for the lease term. The amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those periods, using a modified retrospective approach and early adoption is permitted. The Company is currently in the process of evaluating the impact of adoption of this standard on its financial statements.

Share-Based Compensation

In May 2014,June 2018, the FASB issued ASUNo. 2014-09,2018-07,Revenue from Contracts with Customers Compensation—Stock Compensation (Topic 606), which replaces718): Improvements to Nonemployee Share-Based Payment Accounting. The new standard aligns the existing accounting standards for revenue recognition with a single comprehensive five-step model. The core principle is to recognize revenue upon the transfer of goods or services to customers at an amount that reflects the consideration expected to be received. It also requires enhanced disclosures about revenue, providesmeasurement and classification guidance for transactions that were not previously addressed comprehensively, and improvesshare-based payments to nonemployees with the guidance for multiple-element arrangements.share-based payments to employees, with certain exceptions. Under the guidance, the measurement of equity-classified nonemployee awards will be fixed at the grant date, which may lower their cost and reduce volatility in the income statement. The guidance applies to any entity that either enters into contracts with customers to transfer goods or services or enters into contractsstandard will be effective for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. Since its issuance, the FASB has amended several aspects of the new guidance, including provisions that address revenue recognition associated with the licensing of intellectual property. InCompany on July 2015, the FASB delayed the effective date of this guidance by one year. The guidance1, 2020. Early adoption is now effective for public companies for annual periods beginning after December 15, 2017 as well as interim periods within those annual periods using either the full retrospective approach or modified retrospective approach.permitted. The Company is working through an adoption plan which will include a reviewcurrently in the process of collaboration agreements, applying the five-step model of the new standard and comparing the results to the Company’s current accounting. As part of this, the Company is evaluating the method of adoption and assessing changes that might be necessary to its processes, internal controls and address changes in financial reporting. Effective July 1, 2018, the Company will be revising its revenue recognition accounting policy and expanding revenue disclosures to reflect the requirements of the amended revenue recognition guidance. Because of the nature of the work that remains, at this time the Company is unable to reasonably estimate the impact of adoption of this standard on its consolidated financial statements.

Fair Value Measurement

In August 2018, the FASB issued ASUNo. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The new standard eliminates, adds and modifies certain disclosure requirements for fair value measurement as part of its disclosure framework project. The amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy will no longer be required to be disclosed, but public companies will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. This standard will be effective for the Company on July 1, 2020. Early adoption is permitted. The adoption of this guidance is not expected to have a significant impact on the Company’s financial statements.

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The Company uses stock options and awards of restricted stock to provide long-term incentives for its employees,non-employee directors and certain consultants. The Company has two equity compensation plans under which awards are currently authorized for issuance, the 2013 Employee Stock Purchase Plan and the 2013 Equity and Incentive Plan. No awards have been issued to date under the 2013 Employee Stock Purchase Plan and all of the 128,571 shares previously authorized under this plan remain available for issuance. A summary of the stock option and restricted stock activity for the six months ended December 31, 20172018 and 20162017 is as follows:

For the three and six months ended December 31, 2017,2018, share-based compensation expense related to stock options and restricted stock awarded to employees,non-employee directors and consultants amounted to approximately $1.3$1.1 million and $2.8$2.3 million, respectively, compared to $1.3 million and $2.9$2.8 million, respectively, for the three and six months ended December 31, 2016.2017.

As of December 31, 2017,2018, there was $9.1$6.3 million of unrecognized compensation expense related tonon-vested stock options.options and restricted stock. During the six months ended December 31, 2017, 746,4682018, 987,000 stock options and restricted stock awards were granted to the Company’s employees andnon-employee directors under the 2013 Equity and Incentive Plan. The fair value of each option granted is estimated on the grant date using the Black-Scholes stock option pricing model. The following assumptions were made in estimating fair value:

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Cash in excess of immediate requirements is invested in accordance with the Company’s investment policy that primarily seeks to maintain adequate liquidity and preserve capital.

The following table summarizes the Company’s investments by category as of December 31, 20172018 and June 30, 2017:2018:

A summary of the Company’s debt securities classified asheld-to-maturity is as follows:

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The amortized cost and fair value ofheld-to-maturity debt securities as of December 31, 2017,2018, by contractual maturity, were as follows:

The Company believes that the unrealized losses disclosed above were primarily driven by interest rate changes rather than by unfavorable changes in the credit ratings associated with these securities and as a result, the Company continues to expect to collect the principal and interest due on its debt securities that have an amortized cost in excess of fair value. At each reporting period, the Company evaluates securities for impairment when the fair value of the investment is less than its amortized cost. The Company evaluated the underlying credit quality and credit ratings of the issuers, noting neither a significant deterioration since purchase nor other factors leading to an other-than-temporary impairment. Therefore, the Company believes these losses to be temporary. As of December 31, 2017,2018, the Company did not have the intent to sell any of the securities that were in an unrealized loss position at that date.

5.	Fair Value of Financial Instruments and Investments:

Certain assets and liabilities are measured at fair value in the Company’s financial statements or have fair values disclosed in the notes to the financial statements. These assets and liabilities are classified into one of three levels of a hierarchy defined by GAAP. The Company’s assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability.

The following methods and assumptions were used to estimate the fair value and determine the fair value hierarchy classification of each class of financial instrument included in the table below.

Cash and Cash Equivalents. The carrying value of cash and cash equivalents approximates fair value as maturities are less than three months.

Certificates of Deposit. The Company’s certificates of deposit are placed through an account registry service. The fair value measurement of the Company’s certificates of deposit is considered Level 2 of the fair value hierarchy as the inputs are based on quoted prices for identical assets in markets that are not active. The carrying amounts of the Company’s certificates of deposit reported in the unaudited condensed balance sheetsUnaudited Condensed Balance Sheets approximate fair value.

Debtsecurities—held-to-maturity. The Company’s investments in debt securities classified asheld-to-maturity generally include U.S. Treasury Securities, government agency obligations, and corporate obligations. U.S. Treasury Securities are valued using quoted market prices. Valuation adjustments are not applied. Accordingly, U.S. Treasury Securities are considered Level 1 of the fair value hierarchy. The fair values of U.S. government agency obligations and corporate obligations are generally determined using recently executed transactions, broker quotes, market price quotations where these are available or other observable market inputs for the same or similar securities. As such, the Company classifies its investments in U.S. government agency obligations and corporate obligations within Level 1 or Level 2 of the hierarchy.hierarchy, depending on the information used to determine the fair values.

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The following fair value hierarchy table presents information about each major category of the Company’s financial assets and liabilities measured at fair value on a recurring basis:

Biogen

On July 1, 2015, the Company entered into a Collaboration Agreement (the “Collaboration Agreement”), a Manufacturing License and Technology Transfer Agreement (the “Manufacturing Agreement”), and the Common Stock Purchase Agreement (the “Equity Agreement”) with Biogen (collectively, the “Biogen Agreement”), pursuant to which the Company and Biogen will collaborate to develop, seek regulatory approval for and commercialize gene therapy products to treat XLRS, XLRP, and discovery programs targeting three indications based on the Company’s adeno-associated virus vector technologies. The Collaboration Agreement became effective on August 14, 2015.

Under the Collaboration Agreement, the Company will conduct all development activities through regulatory approval in the United States for the XLRS program (with activities through Phase 1/2 completion beingpre-funded under the agreement and any further activities subject to incremental consideration), and all development activities through the completion of the first in human clinical trial for the XLRP program (with activities through filing the IND beingpre-funded under the agreement and any further activities subject to incremental consideration). In addition, the Collaboration Agreement provides for discovery programs targeting three indications whereby the Company will conduct discovery, research and development activities for those additional drug candidates through the stage of clinical candidate designation, after which, Biogen may exercise an option to continue to develop, seek regulatory approval for and commercialize the designated clinical candidate. In February 2016, the Company announced Biogen’s selection of adrenoleukodystrophy as thenon-ophthalmic indication of the discovery programs. Under the terms of the Collaboration Agreement, the Company, in part through its participation in joint committees with Biogen, will participate in overseeing the development and commercialization of these specific programs.

The Company has granted to Biogen with respect to the XLRS and XLRP programs, and upon exercise of the option for the applicable discovery program, an exclusive, royalty-bearing license, with the right to grant sublicenses, to use adeno-associated virus vector technology and other technology controlled by the Company for the licensed products or discovery programs developed under the Collaboration Agreement.Agreements. Biogen and the Company have also granted each other worldwide licenses, with the right to grant sublicenses, of their respective interests in other intellectual property developed under the collaboration outside of the licensed products or discovery programs.

Activities under Biogen haspre-funded the Collaboration Agreement were evaluated under ASC605-25,Revenue Recognition—Multiple Element Arrangements, as amended byASU 2009-13,Revenue Recognition (“ASC605-25”),Company to determine if they representedconduct all development activities through the completion of a multiple element revenue arrangement. The Collaboration Agreement includes the following significant deliverables:

(1)first in human trial for each of the XLRS program and all development activities through the date that the Investigational New Drug Application (“IND”) becomes effective and the completion of a natural history study for the XLRP programs, exclusive, royalty-bearing licenses, with the right to grant sublicenses, to use adeno-associated virus vector technology and other technology controlled byprogram. In addition, Biogen haspre-funded the Company to conduct discovery, research and development activities for additional drug candidates through the purposestage of researching, developing, manufacturing and commercializing licensed products developed under the arrangement (the “License Deliverables”);

(2)clinical candidate designation for each of the discovery programs exercisable optionstargeting three indications (of which one indication has two development plans at contract inception), after which, Biogen may exercise an option to obtain exclusive licensescontinue to develop, seek regulatory approval for and commercialize any of the designated clinical candidates under such discovery programs (the “Option Deliverables”); and

(3) the performance obligations to conductcandidate. Thepre-funded research and development activities through (a) regulatory approval in the United States, in the case of the XLRS program; (b) completion of the first in human clinical trial, in the case of the XLRP program; and (c) the stage of clinical candidate designation, in the case of each of the discovery programs (the “R&D Activity Deliverables”).

The R&D Activity Deliverables for each program are further segmented by those that arereferred to as“Pre-Funded Activities” and those that are “Post-Funding Development Activities”.Pre-Funded Activities are those R&D activities for which Biogen will reimburse the Company has primary responsibility and the considerationon an FTE basis for any additional expenses related to be received under the agreement was received at the inception of the arrangement. Post-Funding Development Activities (referred to as “development services” throughout these financial statements) are thosedevelopment activities that may occur after thePre-Funded Activities and for which the Company is entitled to additional compensation under the agreement from Biogen. Post Funding Development activities have commenced on the XLRP program and revenue is being generated. Biogen has final decision-making authority for all matters related to the conduct of the Post-Funding Development Activities. Because Biogen is not contractually obligated to continue the programs beyond thePre-Funded Activities, and due to the uncertain outcome of the discovery, research and development activities, the Post-Funding Development Activities are not considered deliverables at the inception of the arrangement and the associated fees and milestones are not included in the allocable arrangement consideration. The Company has determined that the additional fees it could receive under the arrangement for Post-Funding Development Activities are not priced at a significant and incremental discount.

The Company determined that both the License Deliverables and Option Deliverables do not have stand-alone value and do not meet the criteria to be accounted for as separate units of accounting under ASC605-25. The factors considered by18

In February 2016, the Company in making this determination included, among other things,announced Biogen’s selection of adrenoleukodystrophy as the unique and specialized nature of its proprietary technology and intellectual property, and the development stages of each of the XLRS, XLRP and the discovery programs targeting three indications. Accordingly, the License Deliverables under each of the XLRS and XLRP programs and the Option Deliverables under each of the discovery programs have been combined with the initial,Pre-Fundednon-ophthalmic Activities deliverables associated with each related program and as a result, the Company’s separate units of accounting under its collaboration with Biogen, comprise the XLRS program, the XLRP program, and eachindication of the discovery programs. Under the terms of the Collaboration Agreement, the Company, in part through its participation in joint committees with Biogen, will participate in overseeing the development and commercialization of these specific programs.

Pursuant to the Manufacturing Agreement, Biogen may elect an option to receive a manufacturing license for up to six genes for a fixed fee per gene elected. If exercised, the Company becomes eligible to receive certain event milestones and royalties.

Under the Collaboration Agreement, the Company received anon-refundablewas paid an upfront paymentnonrefundable fee of $94.0 million in August 2015of which it recorded as deferred revenue. This upfront payment of $94.0$58.4 million was allocated amongcontractually described as relating to the separate unitsPre-Funded Activities(“Pre-Funded Amounts”) and $35.6 million was contractually described as relating to the access of accounting discussed above using the relative selling price method.licenses. In addition, to the Collaboration Agreement, on July 1, 2015, the Company also entered into an equity agreement with Biogen. Underunder the terms of this equity agreement,the Equity Agreement, Biogen purchased 1,453,957 shares of the Company’s common stock at a purchase price equal toof $20.63 per share, for an aggregate cash purchase price of $30.0 million of which $10.8 million was considered to be allocated consideration as part of the Company also received in August 2015.Collaboration Agreement. The shares issued to Biogen represented approximately 8.1% of the Company’s outstanding common stock on a post-issuance basis, calculated on the number of shares that were outstanding at June 30, 2015, and constitute restricted securities that may not be resold by Biogen other than in a transaction registered under, or pursuant to an exemption from the registration requirements of, the Securities Act of 1933, as amended.

Accounting standards for multiple element arrangements contain a presumption that separate contracts negotiated or entered into at or near to the same time with the same entity were likely negotiated as a package and should be evaluated as a single agreement. The Company determined that the price of $20.63 paid by Biogen included a premium of $7.45 per share over the fair value of the Company’s stock price, calculated based upon the stock price on the date of close of the agreement and adjusted for lack of marketability due to restrictions. Accordingly, the total premium of $10.8 million was also recorded as deferred revenue and, together with the $94.0 million, allocated to the separate units of accounting identified above using the relative selling price method as discussed in Note 2 to these financial statements. The Company will record revenue based on the revenue recognition criteria applicable to each separate unit of accounting. For amounts receivedup-front and initially deferred, the Company will recognize the deferred revenue on a straight-line basis over the estimated service periods in which it is required to perform the research and development activities associated with each unit of accounting. At the inception of the Collaboration Agreement, the Company initially estimated the service periods to range between 2 and 3 years. However, due to certain delays which have extended our estimated period of performance, the estimated service periods are currently anticipated to be between 2 and 4 years from inception of the Collaboration Agreement.

The Company recognized collaboration revenue of $4.8 million and $10.9 million during the three months ended December 31, 2017 and 2016, respectively, and $15.1 million and $22.7 million during the six months ended December 31, 2017 and 2016, respectively, from its collaboration with Biogen. Below is a summary of the components of the collaboration revenue:

As a result of the upfront payment of $94.0 million made by Biogen and the achievement of a $5.0 million milestone in fiscal year 2016 upon dosing the first XLRS patient, the Company became liable to various research partner institutions forsub-license and other payments under existing agreements with such institutions. These agreements obligate the Company to pay to each research partner institution a portion of certain proceeds received from collaboration and other arrangements, including any milestone payments received under such arrangements. Accordingly, the Company recorded total collaboration costs of approximately $12.0 million associated with such obligations, including $636,000 of expense that was settled during that period by the issuance of 40,000 shares of the Company’s common stock to a research partner institution, pursuant to the terms of the existing agreement with that institution. The remainder of thesesub-license and milestone fees were fully paid in cash during the fiscal year ended June 30, 2016.

The Company is also eligible to receive total payments of up to $467.5$472.5 million based on the successful achievement of future milestones under its XLRS and XLRP programs. For XLRS, the Company is eligible to receive up to: (i) $40$45.0 million in milestone payments based upon the successful achievement of clinical milestones (relating to dosing in specified trials), (ii) $155$155.0 million in milestone payments based upon the achievement of regulatory approvals and first commercial sale in specified territories and (iii) $65$65.0 million in milestone payments based upon the achievement of worldwide sales targets. For the XLRS program, the Company has an option to share development costs and profits after the initial clinical trial data are available instead of receiving milestone payments. For XLRP, the Company is eligible to receive up to: (i) $42.5 million in milestone payments based upon successful achievement of clinical milestones (relating to dosing in specified trials), (ii) $102.5 million in milestone payments based upon the achievement of regulatory approvals and first commercial sale in specified territories and (iii) $62.5 million in milestone payments based upon the achievement of worldwide sales targets. For the XLRP program, the Company has an option to share development costs and profits after the initial clinical trial data are available instead of receiving milestone payments. In addition, the Company is eligible to receive payments of up to $592.5 million based on the exercise of the option for and the successful achievement of future milestones under its discovery programs. Each discovery program is categorized as Category A, Category B or Category C depending on the nature of the indication it seeks to address. For Category A, the Company is eligible to receive payments of up to: (i) $20$20.0 million based upon the successful achievement of clinical milestones (relating to dosing in specified trials) and (ii) $70$70.0 million in milestone payments based upon the achievement of regulatory approvals and first commercial sale in specified territories. For Category B, the Company is eligible to receive payments of up to: (i) $27.5 million based upon the successful achievement of clinical milestones (relating to dosing in specified trials) and (ii) $105$105.0 million in milestone payments based upon the achievement of regulatory approvals and first commercial sale in specified territories. For Category C, the Company is eligible to receive payments of up to: (i) $40$40.0 million based upon the successful achievement of clinical milestones (relating to dosing in specified trials) and (ii) $140$140.0 million in milestone payments based upon the achievement of regulatory approvals and first commercial sale in specified territories. Under certain limited circumstances, if there are discovery products from more than one discovery program in any of Category A, Category B or Category C, then the milestone payments under the applicable category shall be payable for the applicable discovery product from each such discovery program to achieve the specified milestones.

Biogen will also pay revenue-based royalties for each licensed product at tiered rates ranging from high singlehigh-single digit tomid-teen percentages of annual net sales of the XLRS or XLRP products and at rates ranging frommid-single digit tolow-teen percentages of annual net sales for the discovery products. The

Prior to 2018, the Company hasreceived a $5.0 million milestone payment related to initial dosing of a XLRS patient. In April 2018, the Company triggered a $2.5 million milestone payment related to the initial dosing of a XLRP patient. In July 2018, the Company triggered a $10.0 million milestone payment related to the treatment of a first patient of second cohort in a Phase 1/2 Clinical XLRP Study.

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On December 7, 2018, the Company received notice from Biogen that Biogen had elected to apply the guidance in ASC605-28 to the milestones. These milestones, if achieved, are substantive as they relate solely to past performance, are commensurate with estimated enhancement of value associated with the achievement of each milestone as a result of the Company’s performance and are reasonable when compared to other consideration amounts payable underterminate the Collaboration Agreement; however, there can be no assurance thatAgreement effective as of March 8, 2019. While the Company will achieve the milestones orrecognize additional revenue as it continues to perform under that the Company will receive the related revenue. Dueagreement prior to the uncertainty surrounding the achievementeffective date of the future milestones, such payments were not considered fixed or determinable at the inceptiontermination of the Collaboration Agreement, and accordingly,the Company will not receive any milestone-based or royalty payments under that agreement after its termination.

Accounting Analysis

For the periods prior to July 1, 2018, the Company applied the provisions of ASC 605 in accounting for this arrangement. Refer to the Company’s Annual Report onForm 10-K for the year ended June 30, 2018, filed with the Securities and Exchange Commission on September 11, 2018, for the accounting analysis under these provisions.

Under ASC 605 and Topic 606, the Company has concluded that the Collaboration Agreement, the Manufacturing Agreement and the Equity Agreement should be recognizedaccounted for as revenue unlessone arrangement as the agreements were with the same party and until they become earned.were negotiated and executed contemporaneously.

The performance obligations and the allocated transaction price as of the date of initial application of Topic 606 are as follows (in thousands):

ThePre-Funded Activities associated with the Discovery Programs amount is comprised of four distinct performance obligations based on the separate development plans for discovery candidates at contract inception. The Company concluded that the delivered license was not distinct from thePre-Funded Activities as Biogen cannot obtain the benefit of the license without the related services. Further, each of the license and relatedPre-Funded Activities performance obligation is considered a distinct performance obligation as each development plan is pursued independent of every other development plan.

The Company concluded that Post-Funded Activities represent customer options that are not ablematerial rights as any services requested by Biogen and provided by the Company are reimbursed at a rate that reflects the estimated standalone selling price for the services. As such, the Company will recognize revenue related to reasonably predictPost-Funded Activities as the services are provided. Through the date of adoption of ASC 606, the Company has recognized revenue of $4.7 million for Post-Funded Activities. The Company recorded revenue of $0.9 million and $2.0 million in the three and six months period ended December 31, 2018 related to Post-Funded Activities.

The Company concluded that the option to receive i) commercial licenses for the Discovery Programs that achieve clinical candidate designation, as defined in the Collaboration Agreement and ii) manufacturing licenses for up to six genes pursuant to the Manufacturing Agreement represent customer options that are not material rights as the exercise price for such options reflects the estimated standalone selling price for such option. As such, the Company will account for such option if and when the remaining milestones will be achieved.options are exercised.

Bionic Sight

On February 2, 2017,As of the Company entered into a strategic research and development collaboration agreement with Bionic Sight, LLC (“Bionic Sight”), to develop therapies for patients with visual deficits and blindness due to retinal disease. Through the AGTC-Bionic Sight collaboration, the companies seek to develop a new optogenetic therapy that leverages AGTC’s deep experience in gene therapy and ophthalmology and Bionic Sight’s innovative neuro-prosthetic device and algorithm for retinal coding.

Under the agreement, AGTC made an initial $2.0 million payment to Bionic Sight for an equity interest in that company. This initial investment represents an approximate 5% equity interest in Bionic Sight. In addition todate of the initial investment, AGTC will contributeapplication of Topic 606, the total transaction price for the Biogen Agreement was $112.3 million which included a $5.0 million milestone payment for initiation of dosing of XLRS and a $2.5 million milestone payment for initiation of dosing of XLRP. The Company used the most-likely method to ongoing researchdetermine the amount of variable consideration in the Biogen Agreement. The Company believes that any estimated amount of variable consideration related to clinical and development support costs through additionalregulatory milestone payments or otherin-kind contributions (AGTC Ongoing R&D Support). The AGTC Ongoing R&D Support payments andin-kind contributions willshould be made over time, upfully constrained as the achievement of such milestones is highly susceptible to the date that Bionic Sight has received both IND clearance from the FDA and receipt of written approval from an internal review board to conduct clinical trials from at least one clinical site for that product (the “IND Trigger”.)

If the IND Trigger is attained, AGTC will receive additional equity, based on the valuation in place at the beginningfactors outside of the agreement, for the AGTC Ongoing R&D Support payments andin-kind contributions, and will be obligated to

purchase additional equity in Bionic Sight for $4.0 million, at apre-determined valuation. Due to the uncertainty of achieving the IND Trigger, the Company is expensing the AGTC Ongoing R&D Support payments andin-kind contributions made under the collaboration agreement. Such amounts are included as a component of research and development expenses in the Company’s financial statements.

control. The Company recorded its initial $2.0 million investment in Bionic Sight using the equity method of accounting for investments, which is recorded as its own line item on the Company’s balance sheets. The ongoing research and development costs and contributions will be recorded as a periodic cost until such time when or if the IND Trigger is achieved.

The collaboration agreement grants to AGTC, subject to achievement by Bionic Sight of certain development milestones, an option to exclusively negotiate for a limited period of time to acquire (i) a majority equity interest in Bionic Sight, (ii) the Bionic Sight assets to which the collaboration agreement relates, or (iii) an exclusive license with respect to the product to which the collaboration agreement relates.

In the fourth quarter of fiscal 2017, we became aware of an immaterial error regarding the calculation of our income tax provision for the first quarter of fiscal 2017. An assessment concluded that the error was not material to any prior period financial statements. As such, in accordance with ASC 250 (SAB No. 108, Considering Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements), the prior period financial statements have been revised (the “Revision”) in the applicable financial statements. Periods not presented herein will be revised, as applicable, in future filings. Although management has determined that the errorcommercial

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milestones and sales-based royalties will be recognized when the related sales occur as they were deemed to relate predominately to the license granted and therefore have also been excluded from the transaction price. The Company willre-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

In the quarter ended September 30, 2018, the Company received a $10.0 million milestone payment related to XLRP which increased the transaction price. Based on an understanding between the parties in the quarter ended September 30, 2018, the Company also reallocated $1.1 million ofPre-Funded Amounts to cover Post-Funded Activities which resulted in a decrease to the transaction price and deferred revenue of $1.1 million in the quarter ended September 30, 2018. Additionally, the Company reallocated $1.8 million of variable consideration betweenPre-Funded Activities associated with Discovery program performance obligations based on changes to the underlying development plans of the product candidates. The total transaction price did not change in the quarter ended December 31, 2018.

The reallocation between Discovery Programs generated an insignificant cumulative catch up adjustment to revenue in the quarter ended September 30, 2018. The cumulativecatch-up adjustment to revenue that relate to changes or reallocations of the transaction price are further discussed in theSummary of Contract Assets and Liabilitiessection below.

The transaction price was allocated to the performance obligations based on the relative estimated standalone selling price of each performance obligation or, in the case of certain variable consideration, to one or more performance obligations. The estimated standalone selling prices for performance obligations, that include a license andPre-Funded Activities, were developed using the estimated selling price of the license and an estimate of the overall effort to perform thePre-Funded Activities. The estimated selling price of the licenses were determined using a discounted cash flow valuation utilizing forecasted revenues and costs for the Company’s product candidate licenses.

The Company will recognize revenue related to the performance obligations which include a license andPre-Funded Activities over the estimated period of the research and development services using a proportional performance model. The Company measures proportional performance based on the costs incurred relative to the total costs expected to be incurred to satisfy the performance obligation. Management believes that recognizing revenue on a proportional performance basis based on costs incurred faithfully depicts the transfer of goods and services to the customer because the customer consumes the Company’s services as such services are performed. The Company will account for the termination of the Collaboration Agreement upon the effective date of the termination. The Company updated its total costs estimated to be incurred to satisfy the performance obligations as of December 31, 2018; however, such estimates do not materialinclude any impact of the termination which is expected to prior periods,occur in the financial statementsthree-month period ended March 31, 2019.

During the three and six months ended December 31, 2018 and 2017, the Company recorded revenue of $5.9 million and $19.9 million, and $4.8 million and $15.1 million, respectively, related to its efforts under the Biogen Agreement. The Company has net accounts receivable balances with Biogen as of December 31, 2018 and June 30, 2018 of $0.9 million and $1.7 million, respectively, related to the Biogen Agreement. As of December 31, 2018, the Company had recorded $20.4 million in deferred revenue related to the Biogen Agreement that will be recognized over the remaining performance period. Absent the termination of the Collaboration Agreement, the Company expects to satisfy its remaining performance obligations under the Biogen Agreement within the next three years. If the Collaboration Agreement is terminated effective March 8, 2019, any remaining deferred revenue will be recognized as revenue.

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The company’s revenue is comprised of the following related to the Biogen Agreement: