UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM10-Q

(Mark One)

For the quarterly period ended September 30, 20182019

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)

Securities registered pursuant to Section 12(g) of the Act: None

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, every Interactive Data File required to be submitted pursuant to Rule 405of RegulationS-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).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” inRule12b-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 inRule12b-2 of the Exchange Act).    Yes  ☐    No  ☒

The number of shares of the registrant’s common stock outstanding as of October 31, 2018November 8, 2019 was 18,133,993.18,218,402.

APPLIED GENETIC TECHNOLOGIES CORPORATION

FORM10-Q

FOR THE QUARTER ENDED September 30, 20182019

TABLE OF CONTENTS

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

APPLIED GENETIC TECHNOLOGIES CORPORATION

CONDENSED BALANCE SHEETS

(Unaudited)

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

3

APPLIED GENETIC TECHNOLOGIES CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

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

4

APPLIED GENETIC TECHNOLOGIES CORPORATION

CONDENSED STATEMENTSTATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

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

5

APPLIED GENETIC TECHNOLOGIES CORPORATION

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

The accompanying notes are an integral part of the financial statements.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 collaboratecollaborated 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, which became effective on March 8, 2019. The Collaboration Agreement and other transactions with Biogen are discussed further in Note 67 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 September 30, 2018,2019, the Company had an accumulated deficit of $132.3$147.1 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. AtAs of September 30, 2018,2019, the Company had cash and cash equivalents and liquid investments of $105.4$71.1 million.

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 (“U.S. 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 each periodthe 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 U.S. GAAP have been condensed or omitted pursuant to U.S. Securities and Exchange Commission (“SEC”) rules and regulations for interim reporting.

The Condensed Balance Sheet as of June 30, 20182019 was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. These Unaudited Condensed Financial Statements should be read in conjunction with the audited financial statements included in the Company’s 20182019 Annual Report onForm10-K (“June 30, 2018 2019Form10-K”). Results of operations for the three months ended September 30, 20182019 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 financial 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 U.S. 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 periods.period. Actual results could differ from those estimates.

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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.

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 tomaturity. Held-to-maturity securities are stated at amortized cost, adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization 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

Effective July 1, 2018, the Company adopted the provisions of ASC Topic 606,Revenue from Contracts with Customers,(“Topic 606”), using the modified retrospective transition method. Under this method, the Company recorded the cumulative effect of initially applying the new standard to all contracts in process as of the date of adoption. This standard applies to all contracts with customers, except for contracts that are within the scope of other standards.

Under 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 performance 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.

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 receives 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 Company performs its obligations under these arrangements. Amounts are recorded as accounts receivable when the right to consideration is unconditional.

Collaboration revenue

To date, the Company’s collaboration revenue has been generated from its collaboration arrangement with Biogen as further described in Note 7, “Collaboration Agreements”.

The Company analyzes its collaboration arrangements to assess whether they are within the scope of ASC 808,Collaborative Arrangements (“ASC 808”) to determine whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities. This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement. For collaboration arrangements within the scope of ASC 808 that contain multiple elements, the Company first determines which elements of the collaboration are deemed to be within the scope of ASC 808 and those that are more reflective of a vendor-customer relationship and therefore within the scope of ASC 606. For elements of collaboration arrangements that are accounted for pursuant to ASC 808, an appropriate recognition method is determined and applied consistently, generally by analogy to ASC 606.

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 Cut and Jobs Act (the “Tax Act”) was enacted on December 22, 2017. The Tax Act contains several key provisions including, among other things, reducing the U.S. federal corporate tax rate from 35% to 21%. In addition, federal net operating losses (“NOLs”) will be carried forward indefinitely but will be subject to an 80% utilization against taxable income. The Company follows the guidance in SEC Staff Accounting Bulletin 118 (SAB 118) which provides additional clarification regarding the application of ASC Topic 740 in situations where the Company does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of the Act for the reporting period in which the Act was enacted. SAB 118 provides for a measurement period beginning in the reporting period that includes the Act’s enactment date and ending when the Company has obtained, prepared, and analyzed the information needed in order to complete the accounting requirements but in no circumstances should the measurement period extend beyond one year from the enactment date. The Company has enacted the reduction in tax rate effective January 1, 2018, which resulted in a decrease to the deferred tax asset and a decrease to the valuation allowance. The Company is in the process of evaluating the Tax Act changes in section 162(m), Internal Revenue Code of 1986, regarding deductions for excessive employee compensation. The Company continues to gather and analyze information, including the definition of an employee contract for stock grants not vested as of the enactment date of the Act. It is the intention of the Company to complete the necessary analysis within the measurement period however the Company anticipates that any adjustment would be a decrease to deferred tax asset and valuation allowance with no impact to income tax expense.

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 $1.0$0.6 million and $1.0$0.7 million at September 30, 20182019 and June 30, 2018,2019, respectively, and are included within the prepaid and other current assets line item on the unaudited condensed balance sheets.in these 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 accountsservices. As noted in the Company’s fiscal year 2019 Annual Report on Form10-K, the Company historically accounted for these in accordance with the provisions of ASC Subtopic505-50,Equity-Based Payments toNon-employees (“ASC505-50”). Under ASC505-50, share-based awards tonon-employees arewere subject to periodic fair valuere-measurement over their vesting terms. As discussed below under “Adopted in the current period” section, in the first fiscal quarter of 2020 the Company adopted ASUNo. 2018-07, “Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting” (“ASU2018-07”). As a result, the accounting fornon-employee awards will be generally consistent with that of employee awards. The measurement date fornon-employee awards is the date of grant without changes in the fair value of the award. Stock-based compensation costs fornon-employees are recognized as expense over the vesting period on a straight-line basis.

For purposes of calculating stock-based compensation, the Company estimatesuses Monte Carlo simulation model to determine the fair value of restricted stock units and Black-Scholes model to determine the fair value of stock options usingoptions. The Monte Carlo simulation model incorporates probability of satisfying a Black-Scholes option-pricing model.market condition and uses transaction details such as the Company’s stock price, contractual terms, maturity, risk free rates, as well as, volatility. The determination of the fair value of share-based payment awards utilizing the Black-Scholes model is affected by the Company’s stock price at the grant date and incorporates a number of assumptions, including expected volatility, expected life,term, risk-free interest rate and expected dividends. Historically, the expected volatility was primarily based on the historical volatility of peer company data. For the three months ended September 30, 2018, the expected volatility is based on the historical volatility of the company stock price. If the Company had used peer company data for the three months ended September 30, 2018, share-based compensation expense for the quarter 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 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.

ASU2016-02 provides a number of optional practical expedients in transition. The Company elected the ‘package of practical expedients’, which permits the Company to (i) not reassess whether any expired or existing contracts are or contain leases (ii) not reassess the lease classification for any expired or existing leases and (iii) not reassess initial direct costs for any existing leases. The Company will continue to differentiate between finance leases (previously referred to as capital leases) and operating leases using classification criteria that are substantially similar to the previous guidance. Adoption of this standard resulted in the recognition of aright-of-use asset and a lease liability on the Company’s July 1, 2019 Unaudited Condensed Balance Sheet of $3.7 million and $5.8 million, respectively. There was no material impact on the Company’s Unaudited Condensed Statement of Operations for the three months ended September 30, 2019. For leases with terms greater than 12 months, the Company records the relatedright-of-use asset and lease liability at the present value of lease payments over the term. As the Company’s leases do not provide readily determinable implicit interest rates, the Company used incremental borrowing rates commensurate with the respective terms of the leases to discount the lease payments. The application of the new standard required netting of unamortized balance of lease incentives and deferred lease obligation to theright-of-use asset at the adoption date. The Company’s operating leases include rental escalation clauses that are factored into the determination of lease payments when appropriate. The Company does not separate lease andnon-lease components of contracts. Refer to Note 63, Leases within these Unaudited Condensed Financial Statements for additional information.

Share-Based Compensation

In June 2018, the FASB issued ASUNo. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. The new standard aligns the measurement and classification guidance for share-based payments to nonemployees with the guidance for 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 Company adopted ASU2018-07 in July 1, 2019 using a cumulative effect adjustment as of the date of adoption. The adoption of this standard did not have an impact on the Company’s financial position or results of operations upon adoption.

To be adopted in future periods

Financial Instruments—Credit Losses

In June 2016, the FASB issued ASUNo. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The new standard requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected and separately measure an allowance for credit losses that is deducted from the amortized cost basis of the financial assets. 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.

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 adoption.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.

Collaborative Arrangements

In November 2018, the FASB issued ASUNo. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606. The new standard clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer. It precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. The guidance amends ASC 808 to refer to theunit-of-account guidance in ASC 606 and requires it to be used only when assessing whether a transaction is in the scope of ASC 606. This standard will be effective for the Company on July 1, 2021. 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 leases certain laboratory and office space under operating leases, which consist of the following:

Alachua, Florida

The Company’s corporate headquarters are located in Alachua, Florida. In January 2016, the Company moved into a newcombined-use facility consisting of approximately 21,500 square feet of laboratory and office space. The initial lease term for this facility is 12 years with options to extend the term of the lease for three additional five-year periods.

Cambridge, Massachusetts

In August 2015, the Company entered into atwo-year lease to occupy approximately 3,000 square feet of laboratory and office space in Cambridge, Massachusetts. On July 31, 2017, the Company entered into a new lease to increase laboratory and office space in Cambridge by approximately 5,000 square feet to a total of approximately 8,000 square feet and extend the term of the lease for an additional seven years, with an option to further extend the lease for one additional three-year term.

In addition, the Company leases certain office equipment under a finance lease.

As part of the Company’s assessment of the lease term, the Company did not elect the hindsight practical expedient, which allows companies to use current knowledge and expectations when determining the likelihood to extend lease options. By not electing this practical expedient, the Company will notre-assess the lease term for any leases identified under ASC 840.

Summary of all lease costs recognized under ASC 842

The following table contains a summary of the lease costs recognized under ASC 842 and other information pertaining to the Company’s operating and finance leases for the three months ended September 30, 2019:

During the three months ended September 30, 2019, 175,000 restricted stock units, which contained a certain market condition, were granted to the Company’s employees under the 2013 Equity and Incentive Plan with weighted average grant date fair value of $2.56. None of the restricted units were vested as of September 30, 2019. The fair value of each option granted was estimated on the grant date using the Monte Carlo simulation pricing model, which incorporated the probability of satisfying the related market condition.

For the three months ended September 30, 2019, share-based compensation expense amounted to approximately $0.8 million, compared to $1.2 million for the three months ended September 30, 2018.

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 summarizesnet carrying amounts of the Company’s investments by category asconsisted of debt securitiesheld-to-maturity (due in one year or less). As of September 30, 20182019, and June 30, 2018:2019 the Company had investments amounting to $54.8 million and $55.3 million, respectively.

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 Liabilities section 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.

If and accumulated deficit for $22.6 million as of July 1, 2018 related towhen, the adoption of Topic 606. The impact ofIND Trigger is attained, AGTC will (i) receive additional equity, based on the adoption of Topic 606 is reflected within the beginning of period balance. Additions include the $10.0 million milestone payment received associated with the XLRP program. Deductions from deferred revenue include revenue recognized related to the deferred revenue balancevaluation in place at the beginning of the periodagreement, for the AGTC Ongoing R&D Support payments andin-kind contributions, and (ii) will be obligated to purchase additional equity in Bionic Sight for $4.0 million, at apre-determined valuation. Thereafter, AGTC will not be obligated to purchase additional equity or make additionalin-kind contributions. The Company has concluded that the AGTC Ongoing R&D Support is within the scope of $4.6 million, revenue recognized relatedASC 606,Revenue from Contracts with Customers, as the services rendered represent a distinct service delivered to additionsa counterparty that meets the definition of a customer. The Company considers these services to deferred revenue inrepresent one combined performance obligation. Given that the quarterconsideration that the Company is entitled to is contingent upon achievement of $8.3 million (of which $7.8 million relatesthe IND Trigger, the consideration is determined to performance in prior quarters) and $1.1 millionbe variable. The Company believes that the amount of variable consideration related to the achievement of the IND Trigger should be fully constrained as the achievement of this event is highly susceptible to factors outside of the Company’s control. The Company evaluates the amount of potential receipt of the variable consideration and the likelihood that was constrainedthe consideration will be received. Utilizing the most likely amount method, and if it is probable that a significant revenue reversal would not occur, the variable consideration is included in the quarter.transaction price. The variable consideration related to Bionic Sight agreement has been fully constrained since the inception of the agreement and no amounts have been recognized as revenue to date. With regard to the obligation to purchase additional equity in Bionic Sight for $4.0 million, the Company concluded that this represents a forward contract to be accounted for within the scope of ASC 321,Investments—Equity Securities. The Company assessed the fair value of this forward contract at inception of the Bionic Sight agreement and determined the value to be de minimis. As the forward contract does not have a readily determinable fair value, the Company has elected to use the measurement alternative for the subsequent measurement of this instrument. Under the measurement alternative, the forward contract will be remeasured to fair value when observable transactions involving the underlying equity securities or impairment of those securities occur. No such observable transactions or impairment involving the underlying equity securities have occurred since the inception of the arrangement.

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.

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 sheet. For the three-month ended September 30, 2019, the Company recorded a reduction of its investment in Bionic Sight of $10,000 and an investment loss on the statement of operations to reflect its equity interest in the net loss of this affiliate. As of September 30, 2019, the amount of the Company’s underlying equity in net assets of Bionic Sight is not representative of the amount at which the investment is carried due to retained losses experienced by Bionic Sight prior to the Company’s investment.

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.

On October 1, 2019, the Company announced that it has entered into a collaboration agreement with Otonomy, Inc. (Otonomy) to develop and commercialize gene therapy for congenital hearing loss. Under the terms of the agreement, both parties intend to share equally (i) all development and commercialization costs, and (ii) amounts received with the respect to the collaboration products sales.

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The following discussion and analysis provides an overview of our financial condition as of September 30, 2018,2019, and results of operations for the three months ended September 30, 20182019 and 2017.2018. This discussion should be read in conjunction with the accompanying Unaudited Condensed Financial Statements and accompanying notes, as well as our Annual Report onForm10-K for the year ended June 30, 20182019, (“June 2018 2019Form10-K”). In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, assumptions and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this report as well as those set forth in Part I, Item 1A, “Risk Factors” of the June 2018 2019Form10-K. Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies and operations, financing plans, potential growth opportunities, potential market opportunities and the effects of competition. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “seeks,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions and the negatives of those terms. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s plans, estimates, assumptions and beliefs only as of the date of this report. Except as required by law, we assume no obligation to update these forward-looking statements publicly or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

As used herein, except as otherwise indicated by context, references to “we,” “us,” “our,” or the “Company” refer to Applied Genetic Technologies Corporation.

Overview

We are 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. Our initial focus is in the field of ophthalmology, where we have active clinical programs inX-linked retinoschisis (XLRS),retinitis pigmentosa (XLRP) and achromatopsia (ACHM) and preclinical programs in optogenetics, Stargardt disease, andX-linkedage-related retinitis pigmentosa (XLRP), and a preclinical program in optogenetics.macular degeneration (AMD). In addition to ophthalmology, we have initiated one preclinical program in otology and three preclinical programs in targeting central nervous system disorders (CNS), including one in adrenoleukodystrophy (ALD) and otology.. With a number of important clinical milestones on the horizon, we believe we are well positioned to advance multiple programs towards pivotal studies. In addition to our product pipeline, we have also developed broad technological capabilities through our collaborations with Synpromics Limited (Synpromics) and the University of Florida, which provide us with expertise in vector design and manufacturing as well as synthetic promoter development and optimization. Finally, our partnership with Biogen, which includes our clinical XLRS and XLRP programs, a discovery program in ALD and two ophthalmology programs, validates our approach and technology.

Since our inception in 1999, we have devoted substantially all of our resources to development efforts relating to ourproof-of-concept programs in ophthalmology andalpha-1 antitrypsin deficiency, or AAT deficiency, an inherited orphan lung disease, including activities to manufacture product in compliance with good manufacturing practices, preparing to conduct and conducting clinical trials of our product candidates, providing general and administrative support for these operations and protecting our intellectual property. We do not have any products approved for sale and have not generated any revenue from product sales. We have funded our operations to date primarily through public offeringsoffering of our common stock, private placementsplacement of our preferred stock, and collaborations. We have also been the recipient, either independently or with our collaborators, of grant funding administered through federal, state, and local governments and agencies, including the United States Food and Drug Administration, or FDA, and by patient advocacy groups such as The Foundation Fighting Blindness, or FFB, and theAlpha-1 Foundation.

We have incurred losses from operations in each year since inception, except for fiscal 2017. Our net income for the three-month period ended September 30, 2018 was $1.2 million while the net loss for the fiscal year ended June 30, 2018 was $21.3 million, compared to2017, in which we reported net income of $0.4 million due in part to the amortization associated with our collaboration agreement with Biogen. For the three months ended September 30, 2019 and 2018, we reported net loss of $1.4$11.6 million for eachand net income of the fiscal years ended June 30, 2017 and 2016,$1.2 million, respectively. Substantially all our net losses resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations. We expect to continue to incur significant operating expenses for at least the next several years and anticipate that such expenses will increase substantially in connection with our ongoing activities, as we: