UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM

10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March~~December 31, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number:

001-36370

APPLIED GENETIC

TECHNOLOGIES CORPORATION

(Exact Name of Registrant as Specified in Its Charter)


Delaware		59-3553710
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

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(b) of the Act:


Title of class	Trading Symbol(s)	Name of exchange on which registered
Common Stock, $0.001 par value	AGTC	Nasdaq Global Market

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 405 of

Regulation S-T (§

(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in

Rule 12b-2

of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒


		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in

Rule 12b-2

of the Exchange Act). Yes ☐ No ☒

The number of shares of the registrant’s common stock outstanding as of ~~May 13, 2021~~February

, 2022 was ~~42,754,792.~~

42,921,319

Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

FORM

10-Q

FOR THE QUARTER ENDED ~~MARCH~~DECEMBER 31, 2021

TABLE OF CONTENTS


		Page
	~~PART I. FINANCIAL INFORMATION~~		3

~~ITEM 1.~~	~~FINANCIAL STATEMENTS (Unaudited)~~		3

	~~Condensed Balance Sheets as of March 31, 2021 and June 30, 2020~~PART I. FINANCIAL INFORMATION		3

ITEM 1.	FINANCIAL STATEMENTS (Unaudited)	3

	Condensed Balance Sheets as of December 31, 2021 and June 30, 2021	3

	Condensed Statements of Operations for the three and ~~nine~~six months ended ~~March~~December 31, 2021 and 2020		4

	Condensed Statements of Stockholders’ Equity for the three and ~~nine~~six months ended ~~March~~December 31, 2021 and 2020		5

	Condensed Statements of Cash Flows for the ~~nine~~six months ended ~~March~~December 31, 2021 and 2020		6

	Notes to Condensed Financial Statements		7

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		17	15

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		27	25

ITEM 4.	CONTROLS AND PROCEDURES		27	25

	PART II. OTHER INFORMATION		27	25

ITEM 1.	LEGAL PROCEEDINGS		27	25

ITEM 1A.	RISK FACTORS		27	25

ITEM 5. 6.	~~OTHER INFORMATION~~EXHIBITS		28

~~ITEM 6.~~	~~EXHIBITS~~		30	26

	SIGNATURE		31	27

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

APPLIED GENETIC TECHNOLOGIES CORPORATION

CONDENSED BALANCE SHEETS

(Unaudited)

In thousands, except per share data
   March 31, 2021 June 30, 2020
ASSETS

Current assets:

Cash and cash equivalents
   $ 89,531 $ 38,463
Investments
   21,496 41,995
Prepaid and other current assets
   1,997 2,506


Total current assets
   113,024 82,964
Property and equipment, net
   4,019 4,311
Intangible assets, net
   1,291 1,098
Investment in Bionic Sight, LLC
   8,021 8,096
Right-of-use assets – operating leases
   3,158 3,422
Right-of-use asset – finance lease
   46 80
Other assets
   107 348


Total assets
   $ 129,666 $ 100,319


LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable
   $ 1,926 $ 1,355
Accrued and other liabilities
   13,504 10,502
Lease liabilities – operating
   1,072 1,058
Lease liability – finance
   51 48


Total current liabilities
   16,553 12,963
Lease liabilities – operating, net of current portion
   3,540 4,070
Lease liability – finance, net of current portion
   —   38
Long-term debt, net of debt discounts and deferred financing fees
   9,929 9,677
Other liabilities
   2,644 2,555


Total liabilities
   32,666 29,303


Stockholders’ equity:

Preferred stock, par value $0.001 per share, 5,000 shares authorized; no shares issued and outstanding
   —   —
Common stock, par value $0.001 per share, 150,000 shares authorized; 42,796 and 25,813 shares issued; 42,755 and 25,793 shares outstanding at March 31, 2021 and June 30, 2020, respectively
   42 25
Additional paid-in capital
   324,302 252,519
Treasury stock at cost; 41 and 20 shares at March 31, 2021 and June 30, 2020, respectively
   (211 ) (88 )
Accumulated deficit
   (227,133 ) (181,440 )


Total stockholders’ equity
   97,000 71,016


Total liabilities and stockholders’ equity
   $ 129,666 $ 100,319


In thousands, except per share data	December 31, 2021			June 30, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	72,771		$	105,052
Investments		—			2,000
Prepaid and other current assets		2,597			2,655

Total current assets		75,368			109,707
Property and equipment, net		4,416			4,658
Intangible assets, net		1,345			1,287
Investment in Bionic Sight, LLC		7,937			8,000
Right-of-use assets—operating leases		3,167			3,167
Right-of-use asset—financing lease		11			34
Other assets		126			113

Total assets	$	92,370		$	126,966

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,674		$	1,879
Accrued and other liabilities		14,486			14,500
Lease liabilities—operating		1,227			1,116
Lease liability—finance		13			38
Current portion of long-term debt		6,714			2,181

Total current liabilities		24,114			19,714
Lease liabilities—operating, net of current portion		3,133			3,418
Long-term debt, net of debt discounts and deferred financing fees		13,538			17,727
Other liabilities		95			299

Total liabilities		40,880			41,158

Stockholders’ equity:
Preferred stock, par value $0.001 per share, 5,000 shares authorized; 0 shares issued and outstanding		0			0—
Common stock, par value $0.001 per share, 150,000 shares authorized; 42,975 and 42,835 shares issued; 42,921 and 42,794 shares outstanding at December 31, 2021 and June 30, 2021, respectively		43			43
Additional paid-in capital		327,235			325,245
Treasury stock at cost; 54 and 41 shares at December 31, 2021 and June 30, 2021, respectively		(256	)		(211	)
Accumulated deficit		(275,532	)		(239,269	)

Total stockholders’ equity		51,490			85,808

Total liabilities and stockholders’ equity	$	92,370		$	126,966

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

Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

   Three Months
Ended March 31, Nine Months
Ended March 31,
In thousands, except per share data
   2021 2020 2021 2020
Revenue:

Collaboration and milestone revenue
   $ —   $ —   $ —   $ 2,297
Grant revenue
   —   —   —   156


Total revenue
   —   —   —   2,453


Operating expenses:

Research and development
   10,960 8,308 34,397 25,325
General and administrative and other
   3,528 3,134 10,268 9,490


Total operating expenses
   14,488 11,442 44,665 34,815


Loss from operations
   (14,488 ) (11,442 ) (44,665 ) (32,362 )


Other income (expense), net:

Investment income, net
   13 281 106 1,063
Interest expense
   (330 ) (2 ) (997 ) (6 )
Other income
   —   6 —   6


Total other income (expense), net
   (317 ) 285 (891 ) 1,063


Loss before provision for income taxes
   (14,805 ) (11,157 ) (45,556 ) (31,299 )
Provision for income taxes
   21 21 62 63


Loss before equity in net losses of an affiliate
   (14,826 ) (11,178 ) (45,618 ) (31,362 )
Equity in net losses of an affiliate
   (25 ) (11 ) (75 ) (27 )


Net loss
   $ (14,851 ) $ (11,189 ) $ (45,693 ) $ (31,389 )


Weighted average shares outstanding:

Basic
   36,751 22,272 29,431 19,558
Diluted
   36,751 22,272 29,431 19,558
Net loss per common share:

Basic
   $ (0.40 ) $ (0.50 ) $ (1.55 ) $ (1.60 )
Diluted
   $ (0.40 ) $ (0.50 ) $ (1.55 ) $ (1.60 )


	Three Months Ended December 31,						Six Months Ended December 31,
In thousands, except per share data	2021			2020			2021			2020
Revenue	$	0		$	0		$	0		$	0

Operating expenses:
Research and development		14,454			11,811			26,779			23,437
General and administrative and other		3,989			3,304			8,089			6,740

Total operating expenses		18,443			15,115			34,868			30,177
Loss from operations		(18,443	)		(15,115	)		(34,868	)		(30,177	)

Other income (expense), net:
Investment income, net		6			29			12			93
Interest expense		(675	)		(335	)		(1,344	)		(667	)

Total other income (expense), net		(669	)		(306	)		(1,332	)		(574	)

Loss before provision for income taxes		(19,112	)		(15,421	)		(36,200	)		(30,751	)
Provision for income taxes		—			20			—			41

Loss before equity in net losses of an affiliate		(19,112	)		(15,441	)		(36,200	)		(30,792	)
Equity in net losses of an affiliate		(32	)		(21	)		(63	)		(50	)

Net loss	$	(19,144	)	$	(15,462	)	$	(36,263	)	$	(30,842	)

Weighted average shares outstanding:
Basic		42,886			25,883			42,855			25,850
Diluted		42,886			25,883			42,855			25,850
Net loss per common share:
Basic	$	(0.45	)	$	(0.60	)	$	(0.85	)	$	(1.19	)
Diluted	$	(0.45	)	$	(0.60	)	$	(0.85	)	$	(1.19	)

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

Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

THREE AND ~~NINE~~SIX MONTHS ENDED ~~MARCH~~DECEMBER 31, 2021 AND 2020

(Unaudited)

Common Stock Treasury Stock
In thousands
Outstanding
Shares Amount Shares Amount Additional
Paid-in
Capital Accumulated
Deficit Totals
Balances at June 30, 2020
25,793 $ 25 20 $ (88 ) $ 252,519 $ (181,440 ) $ 71,016
Share-based compensation expense
—   —   —   —   646 —   646
Shares issued under employee plans and related share repurchases
67 —   21 (123 ) 43 —   (80 )
Net loss
—   —   —   —   —   (15,380 ) (15,380 )

Balances at September 30, 2020
25,860 25 41 (211 ) 253,208 (196,820 ) 56,202
Share-based compensation expense
—   —   —   —   624 —   624
Shares issued under employee plans and related share repurchases
45 —   —   —   158 —   158
Net loss
—   —   —   —   —   (15,462 ) (15,462 )

Balances at December 31, 2020
25,905 25 41 (211 ) 253,990 (212,282 ) 41,522
Issuance of common stock and accompanying warrants, net of issuance costs
16,742 17 —   —   69,244 —   69,261
Share-based compensation expense
—   —   —   —   595 —   595
Shares issued under employee plans and related share repurchases
108 —   —   —   473 —   473
Net loss
—   —   —   —   —   (14,851 ) (14,851 )

Balances at March 31, 2021
42,755 $ 42 41 $ (211 ) $ 324,302 $ (227,133 ) $ 97,000

Common Stock Treasury Stock
In thousands
Outstanding
Shares Amount Shares Amount Additional
Paid-in
Capital Accumulated
Deficit Totals
Balances at June 30, 2019
18,207 $ 18 19 $ (85 ) $ 214,324 $ (135,548 ) $ 78,709
Share-based compensation expense
—   —   —   —   810 —   810
Shares issued under employee plans and related share repurchases
11 —   1 (3 ) 34 —   31
Net loss
—   —   —   —   —   (11,577 ) (11,577 )

Balances at September 30, 2019
18,218 18 20 (88 ) 215,168 (147,125 ) 67,973
Share-based compensation expense
—   —   —   —   689 —   689
Shares issued under employee plans and related share repurchases
1 —   —   —   —   —   —
Net loss
—   —   —   —   —   (8,623 ) (8,623 )

Balances at December 31, 2019
18,219 18 20 (88 ) 215,857 (155,748 ) 60,039
Issuance of common stock, net of issuance costs
7,475 7 —   —   34,804 —   34,811
Share-based compensation expense
—   —   —   —   874 —   874
Shares issued under employee plans and related share repurchases
70 —   —   —   284 —   284
Net loss
—   —   —   —   —   (11,189 ) (11,189 )

Balances at March 31, 2020
25,764 $ 25 20 $ (88 ) $ 251,819 $ (166,937 ) $ 84,819


	Common Stock				Treasury Stock
In thousands	Outstanding Shares		Amount		Shares		Amount			Additional Paid-in Capital		Accumulated Deficit			Totals
Balances at June 30, 2021		42,794	$	43		41	$	(211	)	$	325,245	$	(239,269	)	$	85,808
Share-based compensation expense		—		—		—		—			810		—			810
Shares issued under employee plans and related share repurchases		65		—		13		(45	)		71		—			26
Net loss		—		—		—		—			—		(17,119	)		(17,119	)

Balances at September 30, 2021		42,859		43		54		(256	)		326,126		(256,388	)		69,525
Issuance of common stock, net of issuance costs		56		—		—		—			143		—			143
Share-based compensation expense		—		—		—		—			946		—			946
Shares issued under employee plans and related share repurchases		6		—		—		—			20		—			20
Net loss		—		—		—		—			—		(19,144	)		(19,144	)

Balances at December 31, 2021		42,921	$	43		54	$	(256	)	$	327,235	$	(275,532	)	$	51,490


	Common Stock				Treasury Stock
In thousands	Outstanding Shares		Amount		Shares		Amount			Additional Paid-in Capital		Accumulated Deficit			Totals
Balances at June 30, 2020		25,793	$	25		20	$	(88	)	$	252,519	$	(181,440	)	$	71,016
Share-based compensation expense		—		—		—		—			646		—			646
Shares issued under employee plans and related share repurchases		67		—		21		(123	)		43		—			(80	)
Net loss		—		—		—		—			—		(15,380	)		(15,380	)

Balances at September 30, 2020		25,860		25		41		(211	)		253,208		(196,820	)		56,202
Share-based compensation expense		—		—		—		—			624		—			624
Shares issued under employee plans and related share repurchases		45		—		—		—			158		—			158
Net loss		—		—		—		—			—		(15,462	)		(15,462	)

Balances at December 31, 2020		25,905	$	25		41	$	(211	)	$	253,990	$	(212,282	)	$	41,522

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

Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

   Nine Months Ended March 31,
In thousands
   2021 2020
Operating activities:

Net loss
   $ (45,693 ) $ (31,389 )
Adjustments to reconcile net loss to net cash used in operating activities:

Share-based compensation expense
   1,865 2,373
Depreciation and amortization
   1,123 919
Investment discount accretion, net
   (10 ) (306 )
Amortization of debt discounts and deferred financing fees
   252 —
Reduction in the carrying amount of operating lease right-of-use assets
   264 222
Collaboration revenue from Bionic Sight, LLC
   —   (2,197 )
Equity in net losses of an affiliate
   75 27
Changes in operating assets and liabilities:

Grants receivable
   —   13
Prepaid and other assets
   975 (660 )
Deferred revenue
   —   149
Accounts payable
   571 1,603
Operating lease liabilities
   (516 ) (459 )
Accrued and other liabilities
   3,356 1,851


Cash used in operating activities
   (37,738 ) (27,854 )


Investing activities:

Purchases of property and equipment
   (987 ) (812 )
Purchases of and capitalized costs related to intangible assets
   (363 ) (349 )
Investment in Bionic Sight, LLC
   —   (4,000 )
Maturities of investments
   41,500 63,500
Purchases of investments
   (20,992 ) (33,928 )


Cash provided by investing activities
   19,158 24,411


Financing activities:

Proceeds from the issuance of common stock and accompanying warrants, net of issuance costs
   69,261 34,949
Proceeds from exercises of common stock options
   674 318
Payments for deferred financing fees
   (129 ) —
Taxes paid related to equity awards
   (123 ) (3 )
Principal payments on finance lease
   (35 ) (33 )


Cash provided by financing activities
   69,648 35,231


Net increase in cash and cash equivalents
   51,068 31,788
Cash and cash equivalents, beginning of the period
   38,463 26,703


Cash and cash equivalents, end of the period
   $ 89,531 $ 58,491


Supplemental information:

Costs for intangible assets included in accrued and other liabilities
   $ 27 $ —


	Six Months Ended December 31,
In thousands	2021			2020
Operating activities:
Net loss	$	(36,263	)	$	(30,842	)
Adjustments to reconcile net loss to net cash used in operating activities:
Share-based compensation expense		1,756			1,270
Depreciation and amortization		751			771
Investment discount accretion, net		—			(2	)
Amortization of debt discounts and deferred financing fees		344			167
Reduction in the carrying amount of operating lease right-of-use assets		243			173
Equity in net losses of an affiliate		63			50
Changes in operating assets and liabilities:
Prepaid and other assets		120			623
Accounts payable		(215	)		420
Operating lease liabilities		(417	)		(338	)
Accrued and other liabilities		125			1,400

Cash used in operating activities		(33,493	)		(26,308	)

Investing activities:
Purchases of property and equipment		(821	)		(768	)
Purchases of and capitalized costs related to intangible assets		(131	)		(213	)
Maturities of investments		2,000			27,000
Purchases of investments		—			(18,992	)

Cash provided by investing activities		1,048			7,027
Financing activities:
Proceeds from the issuance of common stock, net of issuance costs		143			—
Proceeds from exercises of common stock options		91			201
Payments for deferred financing fees		—			(129	)
Taxes paid related to equity awards		(45	)		(123	)
Principal payments on a finance lease		(25	)		(23	)

Cash provided by (used in) financing activities		164			(74	)

Net decrease in cash and cash equivalents		(32,281	)		(19,355	)
Cash and cash equivalents, beginning of the period		105,052			38,463

Cash and cash equivalents, end of the period	$	72,771		$	19,108

Supplemental non-cash information:
Costs for purchases of property and equipment included in accounts payable	$	9		$	—
Costs for intangible assets included in accounts payable/accrued and other liabilities		57			33
Right-of-use assets obtained in exchange for new operating lease liabilities		243			—

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

Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

1.	Organization and Operations

General

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 people suffering from rare and debilitating ophthalmic, otologic and central nervous system diseases.

The Company has devoted substantially all of its efforts to research and development activities, including conducting clinical ~~trials. The Company~~trials for its product candidates, and has not completed the development of any products. The Company has generated revenue from collaboration agreements, licensing of its intellectual property, sponsored research agreements 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 product candidates, the risk of failure of ongoing or future clinical studies, the difficulties inherent in the development of commercially viable products, the development by the Company or its competitors of technological innovations, ~~risks of failure of clinical studies,~~the protection of proprietary technology, compliance with government regulations and the ability to transition to large-scale production of products.

Liquidity and Financial Condition

As of ~~March~~December 31, 2021, the Company had (i) an accumulated deficit of ~~$227.1~~$275.5 million and (ii) cash and cash equivalents ~~and liquid investments~~ of ~~$111.0~~ $72.8

million. Management believes that there is ~~sufficient~~presently insufficient funding available to allow the Company to generate data from its ongoing and planned clinical programs and fund currently planned research and discovery ~~programs.~~programs for a period exceeding one year from the date of this filing with the Securities and Exchange Commission. While the Company expects to generate some revenue from ~~partnering,~~collaborations, sponsored research agreements, grants and licensing of its intellectual property, management believes that the Company will incur losses and generate negative operating cash flows for the foreseeable future. As such, these circumstances collectively raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying Unaudited Condensed Financial Statements do not include any adjustments that might result from the outcome of this uncertainty. The Company has funded its operations to date primarily through public offerings of its common stock and warrants to purchase its common stock, private placements of its preferred stock, collateralized borrowing and collaborations.

The ability of an entity to continue as a going concern depends on, among other things, positive cash flows and the availability of suitable financing. Specifically, the Company’s future liquidity needs will be primarily based on: (i) the success and progression of its product candidates; (ii) its repayment obligations under the long-term debt agreement that is described in Note 5 to these Notes to Unaudited Condensed Financial Statements; and (iii) its costs to operate the leased

build-to-suit

manufacturing and quality control facility that is described in Note 8 to these Notes to Unaudited Condensed Financial Statements. To provide the maximum degree of financial flexibility and mitigate the abovementioned going concern risk, management’s near-term plans consider various potential opportunities to fund the Company’s future operations and/or modulate its liquidity needs, such as: (i) raising new capital through equity or debt financings or other sources, including the

“at-the-market

offering” program that is described in Note 7 to these Notes to Unaudited Condensed Financial Statements; (ii) amending the Company’s long-term debt agreement;

(iii) out-licensing the

rights to certain product candidates; (iv) entering into one or more collaborations to offset the costs of the leased manufacturing and quality control facility through third-party cash milestone and other payments; and (v) reducing spending on research and development activities and/or restructuring the Company’s operations. However, management may be unable to successfully execute any of the plans described above, or raise additional funds or enter into such other arrangements when needed on favorable terms, or at all.

2.	Summary of Significant Accounting Policies

Basis of presentation

The accompanying Unaudited Condensed Financial Statements have been prepared assuming that the Company will continue as a going concern and in accordance with (i) U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and (ii) the instructions to Form

10-Q

and Article 8 of Regulation

S-X.

Accordingly, such financial statements do not include all the information and footnotes required by U.S. GAAP for a complete set of financial statements. In the opinion of management, the Unaudited Condensed Financial Statements include all adjustments, consisting of normal recurring accruals and other adjustments, considered necessary for a fair ~~statement~~presentation of the Company’s financial position, results of operations ~~stockholders’ equity~~ and cash flows as of and for the periods presented. The accompanying Condensed Balance Sheet as of June 30, ~~2020~~2021 was derived from the Company’s audited financial statements at that date but does not include all of the footnote disclosures required by U.S. GAAP.

Table of Contents

The Unaudited Condensed Financial Statements should be read in conjunction with the Company’s audited financial statements and related notes included in its Annual Report on

Form 10-K

for the year ended June 30, ~~2020~~2021 (the ~~“2020~~ “2021

Form 10-K”).

The Company’s significant accounting policies are described in Note 2 to the Notes to Financial Statements in the~~2020~~

2021 Form 10-K

and are updated, as necessary, in subsequent Form

10-Q

filings.

The Company’s fiscal year is the twelve-month period from July 1 to June 30. The results of operations for the three and ~~nine~~six months ended ~~March~~December 31, 2021 are not necessarily indicative of the Company’s operating results for the full year ending June 30, ~~2021~~2022 or any subsequent interim ~~period.~~

period within that year.

Management views the Company’s operations and manages its business as ~~one~~1 segment.

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP and guidelines from the ~~U.S.~~ Securities and Exchange Commission 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 amounts of revenue and expenses during reporting periods. Actual results could differ from those estimates.

Income Taxes

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 the more-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. Interest and penalties related to uncertain tax positions are reflected in the provision for income taxes.

The Company’s provision for income taxes was $20,000 and $41,000 for the three and six months ended December 31, 2020, respectively, which was entirely attributable to estimated interest and penalties on uncertain tax positions. There was 0 provision for income taxes during the three and six months ended December 31, 2021 because, among other things, the Company had
no
uncertain tax positions in those reporting periods.

Net income or loss per share

Basic net income or loss per share is calculated by dividing net income or loss by the weighted average shares outstanding during the period, without consideration of common stock equivalents. Diluted net income or loss per share is calculated by adjusting the weighted average shares outstanding for the dilutive effects of common stock equivalents outstanding during the period, determined using the treasury stock method. For purposes of diluted net income or loss per share calculations, warrants to purchase the Company’s common stock, stock options, restricted stock awards, restricted stock units and performance service awards are considered to be common stock equivalents if they are dilutive. The dilutive impact of common stock equivalents for (i) ~~each of~~ the three and ~~nine~~six months ended ~~March~~December 31, 2021 was approximately ~~0.4 million shares and (ii) the three and nine months ended March 31, 2020 was approximately 0.4~~0.1 million shares and 0.2 million shares, respectively, and (ii) the three and six months ended December 31, 2020 was approximately 0.3 million shares and 0.4 million shares, respectively. However, ~~the dilutive impact of~~those common stock equivalents ~~was~~were excluded from the calculations of diluted net loss per share for all periods presented herein because their effects were anti-dilutive.

The ~~abovementioned dilutive impact of~~ common stock equivalents for the three and ~~nine~~six months ended ~~March~~December 31, 2021 excluded certain warrants to purchase the Company’s common stock, which are described atin Note ~~9 in~~7 to these Notes to Unaudited Condensed Financial Statements, because the exercise price of such warrants was greater than the average market price of the Company’s common stock ~~for~~during the related periods.

New Accounting Pronouncements

Adopted during the ~~nine~~six months ended ~~March~~December 31, 2021

~~Fair Value Measurement~~

Financial Instruments—Credit Losses

In ~~August 2018,~~June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) ~~No. 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 the FASB’s disclosure framework project. Under the new standard, the amount and reason for a transfer between Level 1 and Level 2 of the fair value hierarchy (as described at Note 5 in these Notes to Unaudited Condensed Financial Statements) are no longer required to be disclosed, but public companies are required to disclose a range and weighted average of significant unobservable inputs for Level 3 fair value measurements. The Company adopted the new standard on July 1, 2020; however, it did not have a significant impact on the Company’s financial statements.

~~Collaborative Arrangements~~

~~In November 2018, the FASB issued~~ ~~ASU No. 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 Accounting Standards Codification (“ASC”) Topic 606,~~ ~~Revenue from Contracts with Customers~~ (“Topic 606”), when the counterparty is a customer. The new standard also 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 Topic 808, ~~Collaborative Arrangements~~ ~~(“Topic 808”), to refer to~~ ~~the unit-of-account guidance~~ in Topic 606 and requires it to be used only when assessing whether a transaction is in the scope of Topic 606. The Company adopted the new standard on July 1, 2020; however, it did not have a significant impact on the Company’s financial statements.

~~To be adopted in future periods~~

~~Financial Instruments—Credit Losses~~

~~In June 2016, the FASB issued~~ ~~ASU~~

No. 2016-13,

Financial Instruments – Credit Losses (Topic

326): Measurement of Credit Losses on Financial Instruments

. The new standard requires that financial assets measured at amortized cost 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 those financial assets. ~~This~~The Company early adopted the new standard ~~will be effective for the Company~~ on July 1, ~~2023. Early adoption is permitted. Management continues to evaluate the provisions of this new standard and its potential impact;~~2021; however, ~~the adoption thereof is~~it did not ~~expected to~~ have a significant impact on the Company’s financial statements.

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Income Taxes

In December 2019, the FASB issued

ASU No. 2019-12,

Income Taxes (Topic

740): Simplifying the Accounting for Income Taxes

. The new standard includes several provisions that simplify the accounting for income taxes by removing certain exceptions to the general

principles in Topic 740 and increasing consistency and clarity for the users of financial statements. ~~This~~The Company adopted the new standard ~~will be effective for the Company~~ on July 1, ~~2021. Early adoption is permitted. The adoption of this guidance is~~2021; however, it did not ~~expected to~~ have a significant impact on the Company’s financial statements.

Investments – Equity Securities, Investments – Equity Method and Joint Ventures, and Derivatives

and Hedging

In January 2020, the FASB issued

ASU No. 2020-01,

Investments – Equity Securities (Topic 321), Investments – Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815

. The new standard addresses interactions between the guidance to account for certain equity securities under ~~ASC~~Accounting Standards Codification (“ASC”) Topic 321, the guidance to account for investments under the equity method of accounting in ASC Topic 323 and the guidance in ASC Topic 815, which could change how an entity accounts for an equity security under the measurement alternative or a forward contract or purchased option to purchase securities that, upon settlement of the forward contract or exercise of the purchased option, would be accounted for under the equity method of accounting or the fair value option in accordance with ASC Topic 825,

Financial Instruments

. ~~These amendments improve current U.S. GAAP by reducing diversity in practice and increasing comparability of~~The Company adopted the ~~accounting for any such interactions. This~~new standard ~~will be effective for the Company~~ on July 1, ~~2021. Early adoption is permitted. The adoption of this guidance is~~2021; however, it did not ~~expected to~~ have a significant impact on the Company’s financial statements.

3.	Share-based Compensation Plans

The Company uses stock options, performance service awards, restricted stock awards and restricted stock units to provide long-term incentives to its employees, ~~non-employee~~nonemployee directors and certain consultants. The Company has ~~two~~2 equity compensation plans under which awards are currently authorized for issuance: the 2013 Employee Stock Purchase Plan and the 2013 Equity and Incentive Plan. NoNaN awards have been issued to date under the 2013 Employee Stock Purchase Plan and, as such, all of the 128,571 shares previously authorized under that plan remain available for issuance.

Stock Options

Information about the Company’s stock options that do not have performance conditions is provided below.

   Nine Months Ended March 31,
   2021    2020
(In thousands, except per share amounts)
   Shares    Weighted
Average
Exercise
Price    Shares    Weighted
Average
Exercise
Price
Outstanding at the beginning of the period
   3,846    $ 7.82    3,585    $ 9.19
Granted
   1,280    5.26    1,108    3.18
Exercised
   (165 )    4.10    (81 )    3.91
Forfeited
   (539 )    4.38    (339 )    3.97
Expired
   (87 )    10.29    (324 )    11.78





Outstanding at the end of the period
   4,335    $ 7.58    3,949    $ 7.84





Exercisable at the end of the period
   2,757       2,347





Weighted average fair value of options granted during the period
   $ 3.79       $ 2.04


	Six Months Ended December 31,
	2021					2020
(In thousands, except per share amounts)	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Outstanding at the beginning of the period		4,186		$	7.69		3,846		$	7.82
Granted		2,371			3.11		1,237			5.28
Exercised		(30	)		3.07		(57	)		3.55
Forfeited		(262	)		4.22		(407	)		4.43
Expired		(512	)		11.25		(62	)		10.23

Outstanding at the end of the period		5,753		$	5.66		4,557		$	7.45

Exercisable at the end of the period		2,710					2,690

Weighted average fair value of options granted during the period	$	2.19				$	3.81

The fair value of each stock option granted is estimated on the date of grant using a Black-Scholes stock option pricing model. Below are the assumptions that were used when estimating fair value for the periods indicated.

   Nine Months Ended March 31,
Assumption
   2021 2020
Dividend yield
   0.00 % 0.00 %
Expected term
   6.00 to 6.25 years 6.00 to 6.25 years
Risk-free interest rate
   0.30% to 1.08 % 0.47% to 1.90 %
Expected volatility
   82.60 % 71.20 %

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	Six Months Ended December 31,
Assumption	2021			2020
Dividend yield		0.00	%		0.00	%
Expected term		6.00 to 6.25 years			6.00 to 6.25 years
Risk-free interest rate		0.80% to 1.35	%		0.30% to 0.54	%
Expected volatility		82.51	%		82.60	%

In addition to the stock option activity described above, the Company also granted 100,000 performance-based stock options to a senior officer during July 2019 with an exercise price of $3.91. That award: (i) was issued under the 2013 Equity and Incentive Plan; (ii) has a term of ten years; and (iii) includes six separate tranches with performance criteria that will each vest 25% upon their achievement, with the remaining 75% of the tranche vesting on a monthly basis over a period of three years subsequent to achieving the underlying performance objective (assuming continued service by the awardee). Each tranche

represents one-sixth of

the total

award. If any of the performance criteria are not satisfied, that corresponding tranche will be forfeited. As of ~~March~~December 31, 2021, one of the six performance criteria has been met and one criterion will likely never be met. The Company used a Black-Scholes stock option pricing model to estimate the grant date fair value of each option to be $2.58; however, determining the appropriate periodic share-based compensation expense for this award requires management to estimate the likelihood of the achievement of the performance targets.

Restricted Stock Units

During August 2019, 175,500 restricted stock units ~~which included~~with a market-based vesting condition related to the trading price of the Company’s common stock were granted to certain employees under the 2013 Equity and Incentive ~~Plan with~~Plan. Those awards had a weighted average grant date fair value of $2.56. Prior to June 30, 2020, the market condition embedded in the award was met. On August 15, 2021 and 2020, 54,500 and 76,500 restricted stock units vested and ~~through March 31, 2021, a~~the underlying shares were issued to the grantees. A total of ~~25,000 awards have been forfeited. Assuming continuing service by the grantees, the remaining~~44,500 restricted stock units ~~that are outstanding will vest on~~were forfeited through August 15, ~~2021.~~2021 and, subsequent to that date, 0 restricted stock units with market-based vesting conditions remain outstanding. The fair value of each restricted stock unit awarded was estimated on the grant date using a Monte Carlo simulation pricing model, which incorporated the probability of satisfying the related market-based vesting condition.

From May 2021 to July 2021, the Company granted 579,500 restricted stock units to certain employees under the 2013 Equity and Incentive Plan with a weighted average grant date fair value of $4.16. Those awards generally vest in equal amounts on each of the first and second anniversaries of the date of grant, assuming continuing service by the grantee. As of December 31, 2021, 111,000 restricted stock units have been forfeited. The fair value of each restricted stock unit awarded was determined based on the market value of the Company’s common stock on the date of grant and the related expense is being recognized using a graded vesting schedule that is aligned with the grantees’ vesting dates. No additional restricted stock unit awards are expected to be granted under this program.

Share-based compensation expense for the three and ~~nine~~six months ended ~~March~~December 31, 2021 was ~~$0.6~~$0.9 million and ~~$1.9~~$1.8 million, respectively, compared to ~~$0.9~~$0.6 million and ~~$2.4~~$1.3 million for the three and ~~nine~~six months ended ~~March~~December 31, 2020, respectively.

The portion of such expense pertaining to stock options awarded to employees, nonemployee directors and consultants was $1.2 million for each of the six months ended December 31, 2021 and 2020. Share-based compensation expense pertaining to restricted stock awards and restricted stock units awarded to employees and consultants totaled $0.6 million and $0.1 million for the six months ended December 31, 2021 and 2020, respectively.

4.	Investments and Fair Values of Financial Instruments

Cash in excess of immediate requirements is invested in accordance with the Company’s investment policy, which primarily seeks to maintain adequate liquidity and preserve capital. At ~~both March 31, 2021 and~~ June 30, ~~2020,~~2021, the Company’s investments consisted ~~entirely~~ of

a held-to-maturity debt ~~securities~~

security that ~~were due~~matured in ~~one year or less from the respective balance sheet dates.~~

~~The Company’s debt securities~~July 2021 (the $2.0 million amortized cost of that ~~are classified as~~ ~~held-to-maturity~~ ~~are summarized below.~~

In thousands
   March 31, 2021    June 30, 2020
U.S. Treasury securities:

Amortized cost
   $ 21,496    $ 41,995
Gross unrealized gains
   3    54
Gross unrealized losses
   —      (3 )




Fair value of investments
   $ 21,499    $ 42,046

investment approximated its fair value on such date). The Company expects to collect the principal and interest due on its debt securities that have an amortized cost in excess of fair value. At the end of each reporting period, the Company evaluates its securities for impairment, if and when, the fair value of an investment is less than its amortized cost. In the event that the fair value of an investment is less than its amortized cost, the Company will evaluate the underlying credit quality and credit ratings of the issuer. Specifically, the Company believes that the unrealized lossesheld 0 investments at June 30, 2020 that are disclosed in the above table were primarily driven by interest rate changes rather than by unfavorable changes in the credit ratings associated with those securities. The Company does not intend to sell any of its investments before recovering its amortized cost, which may be at maturity.

5.	~~Fair Value of Financial Instruments and Investments~~

December 31, 2021.

The Company is required to disclose information regarding all assets and liabilities reported at fair value that enables an assessment of the inputs used when determining the reported fair values. 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 when pricing an 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 when pricing an 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 when determining the reported fair value of financial instruments and is not a measure of an investment’s 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.

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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 a 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 when determining fair value is greatest for financial 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.

Certain assets and liabilities are measured at fair value in the Company’s financial statements or have fair values disclosed in these Notes to Unaudited Condensed Financial Statements. Such assets and liabilities are classified into one of the three levels of the fair value hierarchy. 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 methods and assumptions described below were used to estimate fair values and determine the fair value hierarchy classification of each class of financial instrument held by the Company.

Cash and Cash Equivalents.

The carrying value of cash and cash equivalents approximates fair value because the maturities thereof are less than three months.

Debt

securities—held-to-maturity.

The Company’s investments in debt securities classified as

held-to-maturity ~~consist~~

have historically consisted of U.S. Treasury securities that ~~are~~were valued using quoted market prices. Valuation adjustments ~~are~~were not applied.

The fair value hierarchy table below provides information about each major category of the Company’s financial assets and liabilities measured at fair value on a recurring basis or disclosed at fair value in these Notes to Unaudited Condensed Financial Statements.

In thousands
   Level 1    Level 2    Level 3    Total Fair
Value
March 31, 2021

Cash and cash equivalents
   $ 89,531    $ —      $ —      $ 89,531
Held-to-maturity investments (U.S. Treasury securities)
   21,499    —      —      21,499








Total assets
   $ 111,030    $ —      $ —      $ 111,030








June 30, 2020

Cash and cash equivalents
   $ 38,463    $ —      $ —      $ 38,463
Held-to-maturity investments (U.S. Treasury securities)
   42,046    —      —      42,046








Total assets
   $ 80,509    $ —      $ —      $ 80,509


In thousands	Level 1		Level 2		Level 3		Total Fair Value
December 31, 2021
Cash and cash equivalents	$	72,771	$	—	$	—	$	72,771

June 30, 2021
Cash and cash equivalents	$	105,052	$	—	$	—	$	105,052
Held-to-maturity investment (U.S. Treasury security)		2,000		—		—		2,000

Total assets	$	107,052	$	—	$	—	$	107,052

The Company’s financial instruments also include its variable-rate borrowing under a debt agreement that is described atin Note ~~6 in~~5 to these Notes to Unaudited Condensed Financial Statements. ~~The Company~~Management believes that the carrying amount of such debt (i.e., ~~$9.9~~$20.3 million and ~~$9.7~~$19.9 million at ~~March~~December 31, 2021 and June 30, ~~2020,~~2021, respectively) reasonably approximates its fair value on those dates because the rate of interest on such borrowing reflects current market rates of interest for similar instruments with comparable maturities and risk profiles. This assessment primarily uses Level 2 inputs under the fair value hierarchy.

Debt

The following discussion of the Company’s debt should be read in conjunction with Note 8 to the Notes to Financial Statements in the~~2020~~

2021 Form 10-K.

On June 30, 2020, the Company entered into a Loan and Security Agreement ~~(the “Loan~~(as amended effective May 13, 2021, the “Amended Loan Agreement”) with several banks and other financial institutions or entities from time to time parties to the Amended Loan Agreement (collectively, referred to as the “Lenders”) and Hercules Capital, Inc., in its capacity as administrative agent and collateral agent for itself and the Lenders.

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The Amended Loan Agreement provides for a term loan in an aggregate principal amount of up to $25.0 million to be delivered in multiple tranches (the “Term Loan”). The first ~~tranche~~two tranches under the Amended Loan Agreement consisted of ~~an initial~~ term loan ~~advance~~advances of $10.0 million on each of June 30, 2020 ~~(the “Closing Date”). Thereafter, subject~~and May 13, 2021. Subject to the Lenders’ investment committee’s sole discretion, the Company ~~had~~has the right to request that the Lenders make additional term loan advances in an aggregate principal amount of up to ~~$15.0 million prior to January 1, 2022.~~

Effective May 13, 2021, the Loan Agreement was amended (the “Amendment”) whereby, among other things, (i) a second term loan advance of $10.0 million was authorized by the Lenders and advanced to the Company on such date and (ii) the period of time to request additional discretionary term loan advances of up to $5.0 million ~~was changed to be~~ prior to April 1, 2022 or, if certain conditions are satisfied, then prior to January 1, 2023. However, there can be no assurances that any additional term loan advances will be funded by the Lenders in the future.

The Amendment also extended (i) the period that the Company will make interest-only payments on outstanding borrowings from December 31, 2021 to March 31, 2022, with the possibility to extend the interest-only period to December 31, 2022 upon the Company’s achievement of certain performance milestones, and (ii) the maturity date of the Term Loan from December 1, 2023 to April 1, 2024; provided that, in the event that the Company meets certain conditions, including achievement of performance milestones, then the Term Loan maturity date will be July 1, 2024. There were no other material changes to the Loan Agreement as a result of the Amendment.

Pursuant to the Amendment, no principal payments are due on the Term Loan until April 1, 2022. Accordingly, as of March 31, 2021, the Company classified the outstanding balance under the Loan Agreement as a long-term liability.

As of March 31, 2021, the Company had not borrowed any amount under the Loan Agreement other than the initial term loan advance on the Closing Date, which resulted in net loan proceeds to the Company of $9.9 million, before consideration of any related debt financing fees. As a result of the Amendment and the Company’s additional borrowing on May 13, 2021, future minimum principal payments of the outstanding term loan advances, excluding certain end of term charges, are now as follows: $2.2 million in the year ending June 30, 2022; $9.3 million in the year ending June 30, 2023; and $8.5 million in the year ending June 30, 2024.

As of both ~~March~~December 31, 2021 and June 30, ~~2020,~~2021, the variable contractual interest rate on the Term Loan was 9.75% per annum and the effective interest rate on the Term Loan was 13.26%. Prior to completing the loan amendment in May 2021, the effective interest rate on the Term Loan was 13.53%.

As of ~~March~~December 31, 2021, the Company was in full compliance with all covenants of the Amended Loan Agreement.

Collaboration Agreements and Contract Liabilities

Bionic Sight,

LLC

On February 2, 2017, 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. 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.

Under the agreement, AGTC made an initial $2.0 million payment ~~to Bionic Sight~~ for ~~an equity interest in that company. This initial investment represented~~ an equity interest of approximately 5% in Bionic Sight. ~~In addition to the initial investment, AGTC contributed ongoing research and development support costs through additional payments and~~ ~~other in-kind contributions~~ ~~(the “AGTC Ongoing R&D Support”). The AGTC Ongoing R&D Support payments~~ ~~and in-kind contributions~~ were made over time and continued until December 2019, the month that Bionic Sight received both Investigational New Drug (“IND”) clearance from the United States Food and Drug Administration (the “FDA”) and receipt of written approval from an internal review board to conduct clinical trials at one clinical site for that product candidate (the “IND Trigger”). Prior to the achievement of the IND Trigger, the Company had incurred approximately $2.2 million of research and development support costs ~~and in-kind contributions,~~ ~~which were reported as research and development expenses in the Company’s financial statements.~~

Upon achievement of the IND Trigger, AGTC was (i) entitled to receive additional equity in Bionic Sight, based on a valuation that was in place at the beginning of the agreement, for the AGTC Ongoing R&D Support payments ~~and in-kind contributions,~~ ~~and (ii) obligated to purchase additional equity in Bionic Sight for $4.0 million based on~~ ~~certain pre-determined valuation~~ ~~criteria. The Company made the $4.0 million payment to Bionic Sight in January 2020 and received the incremental shares during~~During March 2020, ~~upon~~ the ~~execution of a subscription agreement between the parties. The~~ Company’s equity interest in Bionic Sight increased to approximately 15.5% ~~upon~~in connection with (i) AGTC’s purchase of additional equity for $4.0 million and (ii) the ~~issuance~~conversion of certain AGTC-provided research and development support costs

and in-kind contributions,

which aggregated approximately $2.2 million, to an equity interest in Bionic Sight, in each case, consistent with the provisions of the ~~additional shares.~~collaboration agreement. AGTC is not obligated to purchase additional equity in Bionic Sight or make any

additional in-kind contributions

under the agreement.

The Company concluded that the AGTC Ongoing R&D Support was within the scope of Topic 606 because the services rendered represented a distinct service delivered to a counterparty that meets the definition of a customer. The Company further concluded that those services represented one combined performance obligation. Because the consideration that the Company was entitled to was contingent upon achievement of the IND Trigger, that consideration was determined to be variable and the amount was fully constrained until achievement of the IND Trigger. As a result of achieving the IND Trigger, the Company recognized $2.2 million of collaboration revenue during December 2019. With regard to the obligation to purchase additional equity in Bionic Sight, the Company concluded at contract inception that such option represented 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 the inception of the Bionic Sight~~

agreement and determined the value to be de minimis. As the forward contract did not have a readily determinable fair value, the Company elected to use a measurement alternative for all subsequent measurements of the financial instrument. Under such measurement alternative, the forward contract was remeasured at fair value when observable transactions involving the underlying equity securities or impairment of those securities occurred. As noted above, the Company made a supplemental investment of $4.0 million in Bionic Sight and the underlying equity interests were delivered in March 2020, resulting in the settlement of the forward contract at that time. From the inception of the Bionic Sight arrangement and through the settlement date in March 2020, no observable transactions or impairment involving the underlying equity securities had occurred.

The Company recorded its initial investment in Bionic Sight using the equity method of accounting for investments. Upon receipt of additional ~~shares~~equity in March 2020, ~~the Company~~management concluded that equity method accounting ~~was still~~remained appropriate. Because the conversion price used to calculate the number of additional shares that the Company was to receive was based on contractually fixed valuation amounts, the Company assessed whether there was a difference between the cost of the investment and the underlying equity in the net assets of Bionic Sight. The Company concluded that any such difference was not material to the Company’s financial statements and, therefore, recorded its additional investment in Bionic Sight at $6.2 million during March 2020.

Otonomy, Inc.

During October 2019, the Company entered into a strategic collaboration agreement with Otonomy, Inc. (“Otonomy”) to

co-develop

and

co-commercialize

an adeno-associated virus-based gene therapy to restore hearing in patients with sensorineural hearing loss caused by a mutation in the gap junction protein beta 2 gene (“GJB2”) – the most common cause of congenital hearing loss. Mutations in GJB2 account for approximately 30% of

all genetic hearing loss cases. ~~Patients~~People with this mutation can have

severe-to-profound

deafness in both ears that is identified in screening tests routinely performed on newborns. Under the collaboration agreement, the parties began equally sharing the program costs and any proceeds from potential licensing transactions in January 2020 and can include additional genetic hearing loss targets in the future.

Effective January 1, 2022, the Otonomy collaboration agreement was amended to increase Otonomy’s responsibility for the overall development and commercialization of the program, which resulted in (i) a reduction in the Company’s share of future product development costs and (ii) the Company’s potential receipt of future payments, and royalties on any product sales in lieu of equal sharing of any potential profits or proceeds related to the program.

The Company concluded that the Otonomy collaboration agreement is within the scope of ASC Topic 808,

Collaborative Arrangements

(“Topic 808”), which defines collaborative arrangements and addresses the presentation of transactions between the parties in an entity’s statement of operations and the related disclosures. However, Topic 808 does not provide guidance on the recognition of consideration exchanged or accounting for the obligations that may arise between the parties. The Company concluded that ASC Topic 730,

Research and Development,

should be applied by analogy to payments between the parties during the development activities. As such, payments made to or received from Otonomy for development activities are recorded as research and development expenses. For each of the ~~nine~~six months ended ~~March~~December 31, 2021 and 2020, settlement activity between the parties under the Otonomy agreement had an immaterial effect on the Company’s research and development expenses.

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Contract Liabilities

As of ~~March~~December 31, 2021 and June 30, ~~2020,~~2021, accrued and other liabilities on the ~~Condensed Balance Sheets~~Company’s balance sheets included ~~$374,000~~$449,000 and ~~$149,000,~~$374,000, respectively, of deferred ~~revenue, which did not pertain to either the Bionic Sight or Otonomy collaboration agreements.~~revenue. The ~~deferred revenue~~account balance at ~~March~~December 31, 2021 included ~~$225,000~~$75,000 that was billed to a customer but remained uncollected as of such date. The corresponding uncollected account balance at June 30, 2021 was $225,000 (such amount was collected by the Company in July 2021). Management expects that $300,000 of the deferred revenue at December 31, 2021 will be recognized as revenue during the year ending June 30, 2022; however, management is unable to estimate when the Company will satisfy the performance obligations pertaining to its residual deferred revenue at ~~March~~December 31, 2021.

~~Income Taxes~~

Stockholders’ Equity

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 the more-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. Interest and penalties related to uncertain tax positions are reflected in the provision for income taxes.

Income tax expense for the three and nine months ended March 31, 2021 was $21,000 and $62,000, respectively, compared to $21,000 and $63,000 for the three and nine months ended March 31, 2020, respectively. During those periods, income tax expense was primarily attributable to estimated interest and penalties on uncertain tax positions. The Company’s reserve for uncertain tax positions was $2.2 million and $2.1 million on March 31, 2021 and June 30, 2020, respectively, including aggregate interest and penalties of $0.6 million on March 31, 2021 and $0.5 million on June 30, 2020. For the nine months ended March 31, 2021, the Company’s gross unrecognized tax benefits, excluding interest and penalties, was unchanged at $1.6 million. The Company’s liability for uncertain tax positions is included in other long-term liabilities on its Condensed Balance Sheets.

Subsequent to March 31, 2021, the statutes of limitations pertaining to the state tax matters that gave rise to the aforementioned uncertain tax positions expired with no payments being required by the Company and no action taken by any tax authority. As such, the Company’s entire uncertain tax position liability, including accrued interest and penalties, will be reversed. This accounting treatment will favorably affect the Company’s income tax expense or benefit and its annual effective tax rate for the three months and year ending June 30, 2021.

9.	~~Stockholders’ Equity~~

~~February 2021~~

Public Offering of AGTC Equity Securities

On February 1, 2021, the Company closed an underwritten public offering of 16,741,573 shares of its common stock, together with accompanying warrants to purchase 8,370,786 shares of its common stock. The combined offering price of each share of common stock and accompanying warrant was $4.45, generating gross proceeds of $74.5 million, before deducting underwriting discounts, commissions and other offering expenses payable by the Company, which totaled $5.2 million. The Company intends to use the net proceeds from the offering, together with other available funds, to fund ongoing clinical trials in its X-linked retinitis pigmentosa program and ongoing Phase 1/2 clinical trials in its achromatopsia program, and for working capital and other general corporate purposes.

The warrants have an exercise price of $6.00 per share (subject to certain adjustments), are immediately exercisable and expire on February 1, 2026. The warrants are legally detachable from the common stock that was issued on February 1, 2021 and are separately exercisable by the warrant holders. While the warrants are outstanding (but unexercised), the warrant holders will participate in any dividend or other distribution of the Company’s assets to its common stockholders by way of return of capital or otherwise.
~~The~~ As of December 31, 2021, NaNof the warrants have been ~~evaluated~~exercised.

At-The-Market Offering Program

On April 2, 2021, the Company entered into a Controlled Equity Offering
SM
Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”) as sales agent to ~~determine the appropriate accounting and classification pursuant to ASC Topic 480,~~ ~~Distinguishing Liabilities from Equity~~~~, and ASC Topic 815,~~ ~~Derivatives and Hedging~~. Generally, freestanding warrants should be classified as (i) liabilities if the warrant terms allow settlement of the warrant exercise in cash and (ii) equity if the warrant terms only allow settlement insell shares ~~of common stock. Based on the terms~~ of the Company’s ~~warrants, management concluded that they should be classified as equity~~ common stock, from time to time,
through an “at-the-market offering” program
with ~~no subsequent remeasurement as long as~~an aggregate offering amount of up to

$50.0
million. Cantor is entitled to aggregate compensation equal to
3.0%
of the ~~underlying warrant agreements are not modified or amended.~~
~~February 2020 Public Offering~~gross sales price of ~~AGTC Common Stock~~
~~On February 11, 2020,~~the shares sold through it pursuant to the Sales Agreement. During the six months ended December 31, 2021, the Company ~~closed an underwritten public offering~~received net proceeds of ~~6.5 million~~
$143,000 from selling 55,580
shares of its common stock ~~at $5.00 per share, generating gross proceeds of $32.5 million, before deducting underwriting discounts, commissions and other offering expenses payable by~~under the ~~Company. Additionally,~~Sales Agreement; however, neither Cantor nor the ~~underwriters exercised their option~~Company is obligated to ~~purchase an~~sell additional ~~975,000~~ shares of common stock to cover over-allotments. Such transaction closed on February 13, 2020 and generated additional gross proceeds of $4.9 million. Issuance costs totaling $138,000 were unpaid on March 31, 2020 and were includedunder this program in the ~~Company’s accounts payable~~future.

8.	Commitments and Contingencies

Lease Commitment

As of December 31, 2021, the Company had entered into a long-term real property lease agreement that has not yet commenced and, therefore, is not recorded on ~~such date.~~
~~10.~~
~~Contingencies~~
its balance sheets. This lease, which is discussed in Note 3 to the Notes to Financial Statements in the
2021 Form 10-K
under the
heading “Build-To-Suit Manufacturing and
Quality Control Facility in Alachua, Florida,”
requires non-cancelable undiscounted
future base rent payments aggregating

$26.8 million over twenty years
(assuming that the Company does not elect the early termination option). In connection with the new leased facility, the Company had financial commitments for equipment and shared building fit out costs of approximately $6 million as of December 31, 2021.

COVID-19 Pandemic

On January 30, 2020, the World Health Organization ~~(“WHO”~~(the “WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China
(“COVID-19”)
and the risks to the international community as the virus spread globally beyond its point of origin. In March 2020, the WHO classified the
COVID-19
outbreak as a pandemic based on the rapid increase in exposure globally. National, state and local governments in affected regions have implemented, and are likely to continue to implement, safety precautions, including quarantines, border closures, increased border controls, travel restrictions, shelter in place orders and shutdowns, business closures, cancellations of public gatherings and other measures. Organizations and individuals are taking additional steps to avoid or reduce infection, including limiting travel and staying home from work.

The worldwide
spread of COVID-19 led to
a global slowdown of economic activity and decreased demand for a broad variety of goods and services, while also disrupting sales channels and marketing activities and precipitating many corporate bankruptcy filings. As a result of the
COVID-19
outbreak, the Company has experienced delays in enrollment of ~~pediatric patients in the dose escalation portions of certain of~~ its clinical trials ~~for achromatopsia.~~and may continue to see delays as the rise in
COVID-19
and/or related variants causes capacity constraints at various clinical trial sites. The Company could also experience delays resulting from critical
follow-up visits required
under clinical trial protocols, which could increase the cost of

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those trials and also impact their expected timelines. Management’s ability to fully interpret the trial outcomes and the ability of certain
lab-based employees to
perform their jobs
due to stay-at-home orders or
other restrictions
related to COVID-19 could also
result in delays and increase the Company’s operating expenses. Furthermore, third-party vendors, such as raw material suppliers and ~~contracted~~contract manufacturing, testing or research organizations, have also been impacted
by COVID-19
and could ~~also~~continue to be impacted, ~~by COVID-19,~~ which could result in unavoidable delays and/or increases in the Company’s operating costs.

Notwithstanding the rapid development and rollout of certain vaccines, it is ~~unknown~~unknown: (i) how long the

COVID-19

outbreak will continue before the virus, including newly identified strains and variants, is adequately ~~contained,~~contained; (ii) the severity of the ~~virus~~virus; and (iii) the effectiveness of actions to ~~contain~~prevent transmission and treat those who have contracted ~~the virus.~~
COVID-19.
The extent to which the
COVID-19
outbreak may impact the Company’s financial condition, results of operations or cash flows is uncertain; however, as of the date of these financial statements, management is not aware of any specific event or circumstance that would require the Company to update its estimates or judgments, or adjust the carrying values of its assets or liabilities. Because future events are subject to change, management’s best estimates and judgments may require future modification. Therefore, actual results could differ materially from current estimates. Management is closely monitoring the evolving impact of the pandemic on all aspects of the Company’s business and periodically evaluates its estimates, which are adjusted prospectively based on such evaluations.

General

From time to time, the Company may be involved in claims and legal actions that arise in the normal course of business. Management has no reason to believe that the outcome of any such legal actions would have a significant adverse effect on the Company’s financial position, results of operations or cash flows.
~~11.~~
~~Subsequent Events~~
~~At-The-Market~~ ~~Offering Program~~
~~On April 2, 2021, the Company entered into a Controlled Equity Offering~~^SM ~~Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”) as sales agent to sell shares~~

Table of ~~the Company’s common stock, from time to time, through an~~ ~~“at-the-market~~ offering” program having an aggregate offering price of up to $50.0 million. However, the Company is not obligated to sell any shares under the Sales Agreement. Cantor will be entitled to aggregate compensation equal to 3.0% of the gross sales price of the shares sold through it pursuant to the Sales Agreement.
~~Licensing Agreement~~
Effective April 13, 2021, the Company entered into an agreement that licenses certain of its proprietary technology to SparingVision SAS, a genomic medicine company developing vision-saving treatments for ocular diseases. Under the terms of the agreement, SparingVision SAS receives nonexclusive rights to the Company’s proprietary cone-specific promoter technology for use in the development of two ~~non-competing~~ products with an opportunity to obtain rights to use the promoter for one additional product in the future. The Company is entitled to an upfront fee and will be eligible to receive milestone payments for successful clinical development and royalties on future sales on a per product basis (if any products are approved).
~~Build-To-Suit~~ ~~Manufacturing and Quality Control Facility in Alachua, Florida~~
~~On May 13, 2021, the Company entered into a~~ ~~non-cancelable~~ ~~long-term lease for a~~ ~~to-be-constructedbuild-to-suit~~ single story facility of approximately 21,250 square feet in Alachua, Florida (the “Premises”) for office, research and development, laboratory, light pharmaceutical and medical systems manufacturing and fabrication and distribution use. The new facility will be adjacent to the Company’s corporate headquarters. The landlord will be responsible for all permitting, site and infrastructure preparation work and construction of the shell and core of the building and the quality control laboratory portion of the building. The Company will be responsible for completion of the remaining tenant fit out work. The landlord will be responsible for the cost of the base building work and will contribute approximately $6.0 million towards the tenant fit out work, with the Company responsible for all costs in excess of such amount.
The lease will commence upon substantial completion of the Premises, including the tenant fit out work, estimated to be completed in the second half of calendar year 2022 (the “Commencement Date”), and the rent commencement date will occur simultaneous with the Commencement Date. The initial lease term is 20 years from the Commencement Date (the “Term”). Under the lease, the Company will pay annual base rent during the Term (beginning on the Commencement Date) as set forth below.

Lease Months

1-12
   $ —
13-18
   $ 637,500
19-30
   $ 1,253,750
Base rent shall increase 1.5% each lease year (12-month period) thereafter commencing in month 31 for the remainder of the Term.

Contents

During the Term, the Company will also pay its share of operating expenses, taxes and any other expenses payable under the lease. The lease includes three extension options of five years each at an annual base rent rate of the greater of a 1.5% increase from the previous year or pursuant to the increase in the Consumer Price Index for the applicable prior year.

~~In addition, the lease provides the Company with a~~ ~~one-time~~ ~~option to terminate the lease after year 16.5 by providing notice of such termination prior to the end of the 15~~^th ~~lease year and paying a termination fee of $3.3 million. The Company has the further option to expand the facility to double the initial square footage during the first five years of the Term.~~

The lease also includes customary representations, warranties and covenants on behalf of the parties and provides for certain customary mutual indemnities. No security deposit is required upon lease execution, provided that the landlord reserves the right to instate a security deposit if the Company defaults in its lease obligations.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis provides an overview of our financial condition as of ~~March~~December 31, 2021 and our results of operations for the three and ~~nine~~six months ended ~~March~~December 31, 2021 and 2020. This discussion should be read in conjunction with the Unaudited Condensed Financial Statements and related notes included in this Quarterly Report
on Form 10-Q,
as well as our Annual Report on
Form 10-K
for the year ended June 30, ~~2020~~2021 (the ~~“2020~~ “2021
Form 10-K”).
In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates 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 under the heading “Risk Factors” in Part II, Item 1A, and elsewhere in this report, as well as those set forth in Part I, Item 1A, “Risk Factors,” of the ~~2020~~ 2021
Form 10-K.
Forward-looking statements include information concerning our possible or assumed future results of operations, including results and timing of our clinical trials and planned clinical trials, business strategies and operations, financing plans, potential growth opportunities, potential market opportunities and the effects of competition, as well as assumptions relating to the foregoing. 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,” “hopes,” “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,” “AGTC” or the “Company” refer to Applied Genetic Technologies Corporation.

Overview

We are a clinical-stage biotechnology company that uses aour proprietary gene therapy platform technology to develop transformational genetic therapies for people suffering from rare and debilitating diseases. Our initial focus is in the field of ophthalmology, where we have ~~active clinical~~ wholly owned clinical-stage
programs in X-linked retinitis pigmentosa
(“XLRP”), and achromatopsia (“ACHM”) and an optogenetics ~~as well as~~program through our collaboration with Bionic Sight, LLC (“Bionic Sight”). Our preclinical ~~programs~~pipeline includes a program in ~~Stargardt disease and~~ dry
age-related macular degeneration
(“~~AMD”~~dAMD”)~~. In addition to ophthalmology, we have initiated one preclinical program in otology and~~, two ~~preclinical~~ programs targeting central nervous system ~~disorders~~ (“CNS”), disorders, including frontotemporal dementia (“FTD”) and amyotrophic lateral sclerosis (“ALS”)~~. Our optogenetics~~, and a program ~~is being developed~~ in ~~collaboration with Bionic Sight, LLC (“Bionic Sight”) and~~otology through our ~~otology program is being developed in~~ collaboration with Otonomy, Inc. (“Otonomy”). With a number of important ~~potential~~ clinical milestones on the horizon, we believe that we are well positioned to advance multiple programs toward pivotal studies. In addition to our product pipeline, we have also developed broad technological and manufacturing capabilities utilizing both our internal scientific resources and through collaborations with others, such as our efforts with Synpromics Limited, which was acquired by AskBio (a unit of Bayer AG) and provides expertise in synthetic promoter development and optimization, and the University of Florida, which provides us with expertise in vector design and access to novel capsids.
others.

Since our inception, we have devoted substantially all of our resources to the development ~~efforts relating to~~of our ~~proof-of-concept~~clinical and preclinical programs in ophthalmology, otology ~~CNS,~~ and ~~alpha-1 antitrypsin deficiency, an inherited orphan lung disease,~~CNS, including manufacturing product candidates 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. WeTo date, we have funded our operations ~~to date~~ primarily through public offerings of our common stock and warrants to purchase our common stock, private placements of our preferred stock, collateralized borrowing 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 the FDA,~~ and by patient advocacy groups such as The Foundation Fighting ~~Blindness and the Alpha-1 Foundation.~~
Blindness.

We have incurred losses from operations in each year since inception, except for fiscal year 2017, wherein we reported net income of $0.4 million due, in part, to profits from a collaboration agreement that was ultimately terminated in March 2019. For the ~~nine~~six months ended ~~March~~December 31, 2021 and 2020, we reported net losses of ~~$45.7~~$36.3 million and ~~$31.4~~$30.8 million, respectively. Substantially all of our net losses resulted from costs incurred in connection with our research and development programs and general and administrative and other expenses 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:

continue to conduct ~~preclinical studies and~~ clinical trials for our XLRP and ACHM product ~~candidates and preclinical studies for our other ophthalmology, otology and CNS product~~ candidates;

~~continue our research and development efforts, including exploration through early preclinical studies of potential applications of our gene therapy platform in:~~

~~orphan ophthalmology indications;~~

~~non-orphan ophthalmology~~ ~~indications, including AMD and other retinal diseases; and~~

~~other inherited diseases, such as otology and CNS indications;~~

manufacture clinical trial materials and develop larger-scale manufacturing ~~capabilities;~~

capabilities, including the lease of our new
build-to-suit
manufacturing and quality control facility;

continue to develop our gene therapy platform and expand our pipeline by investing in our preclinical product candidates, including those for:

additional orphan and
non-orphan
ophthalmology indications, such as dAMD and other retinal diseases; and

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other inherited diseases in CNS and otology;
seek regulatory approval for our product candidates;
~~further develop our gene therapy platform;~~
add personnel to support our scientific, collaboration, product development and commercialization efforts; and
continue to operate as a public company.
As of ~~March~~December 31, 2021, we had cash and cash equivalents ~~and liquid investments~~ totaling ~~$111.0~~$72.8 million. We do not expect to generate revenue from product sales unless and until we successfully complete development of and obtain regulatory approval for one or more of our product candidates, which we expect will take a number of years and which we believe is subject to significant uncertainty. We believe that our available cash and cash equivalents ~~and investments~~ will be sufficient to allow us to generate data from our ongoing and planned clinical programs and fund currently planned research and discovery programs into calendar year 2023. ~~In order~~We will require substantial additional funding to complete ~~the~~our XLRP Phase 2/3 (“Vista”) trial, move our ACHMB3 product candidate forward, obtain regulatory approval for our lead product candidates, ~~and~~ build the sales, marketing and distribution infrastructure that we believe will be necessary to commercialize our lead product candidates, if approved, ~~we will require substantial additional funding.~~and execute our plan to open and operate a leased current Good Manufacturing Practices (“cGMP”) manufacturing and quality control facility. Also, our current operating plan may change as a result of many factors currently unknown to us, and we may need to seek additional funds sooner than planned, through public or private equity or debt financings, government or other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements, acquisitions or other business development activities, or a combination of these approaches. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms, or at all. Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition and our ability to develop our product candidates and continue our research and development efforts.
Program Updates and Recent Developments
AGTC-501
for the Treatment of XLRP
AGTC-501,
our lead gene therapy development program for the treatment of XLRP, uses an engineered adeno-associated virus (“AAV’) vector to insert a stabilized and functional copy of the Retinitis Pigmentosa GTSase Regulator (“RPGR”) gene into a patient’s photoreceptor cells.
AGTC-501
is comprised of a stabilized RPGR gene and a promoter that was specifically selected due to its ability to drive efficient gene expression in primate rods and cones, maintain photoreceptor function and delay disease progression in preclinical models of disease. In ~~November 2020, we announced~~addition, published
non-human
primate studies have demonstrated that AGTC’s proprietary AAV capsid has as much as twice the transfection efficiency in photoreceptors when compared to capsids used in competing programs.
We are currently conducting multiple clinical trials of
AGTC-501
that are intended to support the potential filing of a ~~modification~~Biologics License Application (“BLA”). The Skyline trial is a 14 patient multi-site, Phase 2 trial in which patients are randomized to either a high or low dose of
AGTC-501
with the primary objective of identifying the proportion of treated eyes that demonstrate improvement from baseline in visual sensitivity and visual acuity as well as a patient’s ability to navigate a mobility maze more successfully under varying light and challenge conditions. The Skyline trial has the same overall design as the Vista clinical trial and is the first trial we are conducting that has the potential to demonstrate a correlation between visual sensitivity and visual acuity with a mobility maze, which is a key secondary/functional endpoint in the Vista trial. We completed enrollment in the Skyline trial in the first quarter of calendar year 2022 and plan to report
3-month
interim results for ~~our XLRP~~the Skyline trial in the second quarter of calendar year 2022.
The Vista trial is a multi-site, Phase 2/3 ~~(“Vista”) and Phase 1/2 Expansion (“Skyline”) trials based on comments received from the FDA. The design of our XLRP Vista~~clinical trial is expected to include approximately 60 patients randomized across three
arms: a low-dose group (the
1.2E+11 vg/mL Group 2 dose from the ongoing Phase 1/2 ~~trial)~~and Skyline trials), a high-dose group (the 1.1E+12 vg/mL Group 5 dose from the ongoing Phase 1/2 ~~trial)~~and Skyline trials) and an untreated control group. The primary endpoint will be improvement in visual sensitivity, defined as having at least a 7 decibel ~~improvement~~increase in visual sensitivity in at
least 5 pre-specified loci at
Month 12. Together with a third-party vendor, we have developed a machine learning algorithm based on the available microperimetry data from our Phase 1/2 dose escalation trial that,
on a patient-by-patient basis, predicts
the loci most likely to improve through evaluation of baseline visual sensitivity. ~~The algorithm was developed using~~Secondary endpoints in the ~~microperimetry data available to date from the Phase 1/2 dose escalation study. Secondary endpoints~~Vista trial include mean change in visual sensitivity, improvements in visual acuity and performance on the mobility maze as well as structural improvements in ~~performance on~~retinal health as measured by changes in the ellipsoid zone (the “EZ”), a ~~visual navigation course.~~defined region within the photoreceptor layer of the retina that degenerates over time and is eventually lost in patients with XLRP. We ~~also~~ plan to ~~include~~complete a masked interim analysis, ~~at Month 6,~~ with ~~that~~the data expected to be released in the ~~fourth quarter~~first half of calendar year ~~2022, which~~2023. The interim analysis, together with data from the Phase 1/2 and Skyline trials, may provide us with the opportunity to ~~adjust~~discuss with the United States Food and Drug Administration (the “FDA”) potential adjustments to the Vista trial, if necessary, tothat may accelerate a potential BLA filing or optimize ~~outcomes.~~
~~In November 2020,~~the outcome of the trial.
To date, we ~~also provided additional~~have released a significant amount of preclinical and clinical data that we believe demonstrate both the safety and biological activity of
AGTC-501.
Most recently, in September 2021, Dr. Paul Yang, Assistant Professor of Ophthalmology at the Casey Eye Institute, Oregon Health & Science University and one of our study investigators, presented data from ~~our XLRP~~the ongoing Phase
16
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1/2 trial at the Fourteenth International Symposium on Retinal Degeneration showing that indicated 2 of 8 evaluable centrally dosed patients in Groups 2 and 4 were responders at Month 12. A third patient, who was a responder at Month 6, fell just below the responder criterion. All eight evaluable patients also showed stable or improving visual acuity. In addition, we ~~provided six-month data~~ for the 11 centrally dosed patients in Groups 5 and 6 and reported that 5 of 11 patients were responders at Month 6. Nine of these patients also had stable or improving visual acuity. If we apply the planned XLRP Vista trial inclusion criteria, 3certain baseline characteristics of the ~~11 patients~~EZ were highly predictive of improved outcomes after treatment. Specifically, the data showed a statistically significant association between improvements in ~~Groups 5~~visual sensitivity as measured by MAIA and ~~6 would be removed from the analysis, and 5 of 8 patients, or 62%, would be considered responders. We do not have a control arm~~improvements in retinal health as measured by improvement in the ~~Phase 1/2 trial, which will be part of our XLRP Vista trial and necessary~~EZ in dose Groups 4 to ~~evaluate efficacy.~~
~~In May 2021, we provided~~ ~~12-month~~ ~~data from our XLRP Phase 1/2 trial from seven patients in Group 5 and four patients in Group~~ 6. ~~One patient in Group 5 and two patients in Group 6 would not meet~~We incorporated these findings into the ~~inclusion~~inclusion/exclusion criteria for the Skyline and Vista ~~trials, resulting in~~clinical trials.
Given the activity and safety data generated to date, we believe that
AGTC-501
is a total of eight patients who were included in the responder analysis. Four of these eight patients (50%) were considered responders, all four of whom met the strict criteria of at least a 7 decibel improvement in at least 5 loci. One additional patient did not meet these criteria but had a statistically significant improvement in retinal sensitivity in the treated eye compared with the untreated eye at 12 months.
potential
best-in-class product

~~Consistent with previously reported~~ ~~6-month~~ data from Groups 2, 4, 5 and 6, assessment of Best Corrected Visual Acuity (“BCVA”) in these groups at 12 months continues to provide supportive evidence of improved visual acuity in these patients; the difference between treated and untreated eyes is statistically significant. We believe that these data, together with the favorable safety profile, have the potential to differentiate our XLRP candidate from competitors.

Data from three of the seven Group 4 patients were available for analysis at Month 24, including two who were responders at Month 12 (one by the 7 decibel change in at least 5 loci response criteria and the other based on improved retinal sensitivity in the treated eye compared with the untreated eye). These two patients are still responders at Month 24 according to the same criteria; the third patient who has reached Month 24 was not a responder at Month 12 or Month 24. To the best of our knowledge, this is the first XLRP gene therapy clinical trial to demonstrate continued durability of response at this time point.

Data from all 28 patients across six dose groups in the Phase 1/2 trial continue to demonstrate a favorable safety profile with no dose-limiting inflammatory responses observed. This safety profile, which has shown no clinically significant inflammation not manageable with steroids, continues to be observed out to 24 months.

~~We believe that we have a~~ ~~best-in-class~~ ~~XLRP product~~

candidate that may provide significant benefits to patients with XLRP. We expect ~~to:~~
to achieve the following milestones, subject to any continuing impact of the
~~present~~ ~~12-month~~COVID-19
pandemic:
provide
3-month interim
Skyline trial results in the second quarter of calendar year 2022;
provide
24-month
results from the ongoing Phase 1/2 clinical trial ~~at the American Academy of Ophthalmology Annual Meeting in November 2021;~~
~~provide Skyline trial results from the~~ ~~3-month~~ ~~masked interim analysis in the fourth quarter of calendar year 2021;~~
~~provide Skyline trial results from the~~ ~~12-month~~ ~~data~~ in the third quarter of calendar year 2022; ~~and~~
provide ~~Vista~~
12-month
Skyline trial results ~~from the~~ ~~6-month~~ ~~masked interim analysis~~ in the ~~fourth~~first quarter of calendar year ~~2022.~~
2023; and
~~As part~~
provide interim Vista trial results in the first half of calendar year 2023.
AGTC-401
and
AGTC-402
for the Treatment of ACHM
We have two gene therapy product candidates in development to treat ACHM. The product candidates use the same engineered AAV vector to insert a stabilized and functional copy of the ~~Skyline trial,~~Cyclic Nucleotide Gated Channel Subunit Beta 3 (CNGB3) gene in the case of
AGTC-401
and a stabilized and functional copy of the Cyclic Nucleotide Gated Channel Subunit Alpha 3 (CNGA3) gene in the case of
AGTC-402.
The product candidates use the same proprietary cone-specific promoter that was designed to maximize gene expression into a patient’s photoreceptor cells. We chose the promoter based on data from preclinical studies that demonstrated an ability to drive efficient gene expression in all three types of primate cone photoreceptors and restore cone photoreceptor function in dog, mouse and sheep models of ACHM.
We are currently conducting two Phase 1/2 clinical trials in ACHM patients at multiple clinical sites that specialize in inherited retinal diseases. The primary objective of these trials is to identify a well-tolerated dose that provides clinical benefit to patients. To date, we ~~intend to dose~~have enrolled a total of 1231 adult and pediatric patients into the ACHMB3 trial and 24 adult and pediatric patients in the ACHMA3 trial and do not currently plan to enroll any additional patients ~~across~~in either trial. We have data from a portion of the patients in these trials up to 24 months after treatment, including our most recent release in February 2022 of
3-month
data for the two highest dose ~~groups. The Skyline trial is intended to evaluate the correlation~~groups of ~~a new mobility navigation course developed for use with retinitis pigmentosa patients, with the primary endpoint of visual sensitivity~~ ~~at pre-specified loci,~~ ~~providing such data within the earliest timeframe. This trial will have the same overall design as the XLRP Vista trial.~~
~~ACHM~~
~~In January 2020, we provided 3-month ACHM data indicating evidence of biologic activity in the dose escalation portions in both our~~ ACHMB3 and ACHMA3 ~~trials,~~pediatric patients that also included updated adult safety data. These data are consistent with the data previously released in adult and pediatric ACHMB3 and ACHMA3 patients.
In the Phase 1/2 dose escalation study of
AGTC-401
in ACHMB3 patients, a total of 21 adults were treated over a
100-fold
dose range in five groups and a total of 10 pediatric patients were treated at the three highest dose groups. Secondary outcome measures evaluating efficacy were assessed by standard visual function tests, such as perimetry. We defined two pediatric patients (17 and 7 years old) in the 1.1E+12 vg/mL dose group as responders based on improvements in ~~light discomfort. In November 2020, we provided 12-month data for~~visual sensitivity. Therefore, of the ~~original~~ three adults and four children (total n=7) in the 1.1E+12 vg/mL dose ~~groups (low, medium and high), as well as 6- to 9-month data at two higher dose groups (higher and highest dose groups). The ACHMB3 trial included an additional~~ group, of four patients at an intermediate dose with 12-month data. In addition, we provided data for six pediatric subjects (three in each study; 11-17 years old) at the first of three planned dose levels. Across all patients evaluated, the safety profile remained favorable. While some patients showed(>50%) are responders based on improvements in ~~at least one measure~~visual sensitivity. These patients also had improvements in quality of ~~visual function, no consistent sustained improvements were observed based on current assessments within the dose groups tested on~~life as measured by a ~~groupwise basis. Anecdotal statements, however, and assessments from patient-reported~~patient reported outcome ~~surveys continued to provide us~~survey developed specifically for patients with ~~confidence that patients were subjectively experiencing improved vision.~~
~~In January 2021, we reported results based on~~ ~~a patient-by-patient analysis~~ ~~of data from both ACHMB3 and ACHMA3 trials. For ACHMB3, this consisted~~ ~~of 12-month data~~ ~~from 15~~ ~~patients, 9-month data~~ ~~from five~~ ~~patients, 6-month data~~ ~~from three patients~~ ~~and 3-month data~~ from three patients for a total of 26 patients across all dose groups. These results reflect a further analysis of certain data discussed in November 2020 together with new data that became available in January 2021. Seven of the 16ACHM.
The two other pediatric patients in the 1.1E+12 vg/mL dose group and three ~~highest dose groups~~pediatric patients ages 7 years and younger in the ~~ACHMB3 trial showed~~3.2E+12 vg/mL dose group (total n=5) could not sufficiently concentrate and consistently complete the visual sensitivity testing. Similar to other trials where endpoints are adapted for young children, we plan to work closely with clinicians and regulators to develop potential adaptations for younger patients for visual sensitivity testing. Despite their inability to complete the tests, we received anecdotal feedback from certain patients that indicate improvements in visual sensitivity. Based on the totality of data generated to date, we believe that the 1.1E+12 vg/mL dose is well tolerated and provides clinical benefit in both adult and pediatric patients.
Subject to receiving feedback from the FDA at an
End-of-Phase
2 meeting planned for the first half of calendar year 2022, we intend to advance the clinical development of
AGTC-401.
Our plan is based on the favorable risk benefit profile of the 1.1E+12 vg/mL dose, which had a generally safe and well tolerated safety profile across all patients and signs of biologic response based on improvements in visual sensitivity and other measures of visual function.
We also reported updated interim
3-month
pediatric results and adult and pediatric safety results for the 24 patients enrolled in ~~the treated area, as measured by static perimetry. No consistent results were seen~~a parallel study of
AGTC-402
targeting CNGA3 mutations in ~~the other dose groups. In a subset of these~~ patients with ~~evaluable multi-focal electroretinograms (“ERGs”), improvements in electrical signaling were measurable in~~ACHMA3. Data from the ~~same treated area.~~
~~For ACHMA3, the new data analysis consisted~~ ~~of 12-month data~~ ~~from 10~~ ~~patients, 9-month data~~ ~~from four~~ ~~patients, 6-month data~~ ~~from one patient and~~ ~~2- or 3-month data~~ ~~from three patients for a total of 18 patients across~~ five dose groups. One additional patient did not have evaluable data. In the 16 patients in the four highest dose groups, three patients showed improvements in visual sensitivity in the treated area, as measured by static perimetry. No consistent results were seen in other dose groups. None of these three patients with improvements in visual sensitivity had evaluable ERGs.
~~We currently plan to focus on completion of enrollment of~~ pediatric patients in the two highest dose groups are consistent with previously reported results, indicating no evidence of clinical improvements, and do not
17
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support further clinical development. Most patients with CNGA3 mutations express a mutant protein that is not typically found in ~~our~~patients with CNGB3 mutations, which we believe may have impacted the results seen in patients that received
AGTC-402.
We will continue to follow the ACHMA3 patients for long-term safety observations.
As previously reported, in both the ACHMB3 and ACHMA3 ~~trials. Our progress was previously hampered by~~ trials, treatment with the ~~COVID-19 pandemic,~~ ~~but patients are now being identified~~ highest dose (3.2 E+12vg/ml) of
AGTC-401
and ~~scheduled for screening at multiple sites. In addition, we have amended the study protocol for these trials~~
AGTC-402,
respectively, led to ~~allow enrollment~~three cases of

~~patients as young as 4 years of age and to include both functional magnetic resonance imaging (“fMRI”) and improved color brightness tests. We are hopeful that these changes, combined with~~ ~~longer follow-up times,~~ ~~will add to the developing body of evidence and support the anecdotal patient-reported outcomes. We expect to~~ ~~report 12-month data~~ ~~from the adult patients~~ severe ocular inflammation in ~~both trials in the second quarter of calendar year 2021, and~~ ~~preliminary 3-month data~~ ~~from the~~ pediatric patients, which were reported as Suspected Unexpected Serious Adverse Reactions, or SUSARs. No new additional SUSARs in ~~both trials are anticipated~~any adult or pediatric patients have been reported and the inflammation in ~~the fourth quarter~~all previously reported SUSARs improved with an adjusted steroid regimen. Two SUSARs (one in ACHMA3 and one in ACHMB3) have since fully resolved and one (ACHMA3) continues to resolve, with all three patients’ best corrected visual acuity returning to baseline. Importantly, we did not see any comparable inflammation in any of ~~calendar year 2021.~~

our XLRP clinical trials.

Build-To-Suit Manufacturing

and Quality Control Facility in Alachua, Florida

In May 2021, we ~~announced that we initiated plans to~~signed
a 20-year lease
for
a build-to-suit 21,250
square foot ~~current Good Manufacturing Practices (“cGMP”)~~cGMP manufacturing and quality control facility adjacent to our existing Florida facility to prepare for late-stage development of our XLRP and ACHM programs. Leasing this cGMP facility is part of our strategy to enable more rapid filing of a ~~Biologics Licensing Application~~BLA and commercial launch of our XLRP candidate upon potential FDA approval. The cGMP facility is also expected to support more rapid advancement of our product pipeline while providing supply chain redundancy, ~~and~~ reducing manufacturing ~~risk.~~risk and enhancing quality controls. We anticipate that
the build-out of
the new manufacturing and quality control facility will be completed during the second half of calendar year 2022.

Additional information regarding our new cGMP manufacturing and quality control facility can be found in Note 118 to the Unaudited Condensed Financial Statements included in this Quarterly Report
on Form ~~10-Q.~~
~~Underwritten Public Offering~~
On February 1, 2021, we closed an underwritten public offering of 16,741,573 shares of our common stock, together with accompanying warrants to purchase 8,370,786 shares of our common stock. The combined offering price of each share of common stock and accompanying warrant was $4.45, generating gross proceeds of $74.5 million, before deducting underwriting discounts, commissions and other offering expenses payable by us, which totaled $5.2 million. The warrants have an exercise price of $6.00 per share (subject to certain adjustments), are immediately exercisable and expire on February 1, 2026.
We intend to use the net proceeds from the offering, together with other available funds, to fund our ongoing Skyline trial and XLRP Vista trial and our ongoing Phase 1/2 clinical trials in our ACHMB3 and ACHMA3 programs, and for working capital and other general corporate purposes.
~~At-The-Market~~ ~~Offering Program~~
~~On April 2, 2021, we entered into a Controlled Equity Offering~~^SM ~~Sales Agreement with Cantor Fitzgerald & Co. as sales agent to sell shares of our common stock, from time to time, through an~~ ~~“at-the-market~~ ~~offering” program having an aggregate offering price of up to $50.0 million. However, we are not obligated to sell any shares~~ 10-Q
under the ~~agreement.~~
~~Long-Term Debt Agreement~~
~~Effective May 13, 2021, our long-term loan agreement was amended (the “Amendment”) whereby, among other things: (i) a term loan advance of $10.0 million was authorized by the lenders~~heading “Lease Commitment.”

Strategic Collaborations and advanced to us on such date; (ii) the period that we will make interest-only payments on outstanding borrowings was extended to March 31, 2022; and (iii) the maturity date of the facility was extended from December 1, 2023 to April 1, 2024. Subject to certain conditions provided in the Amendment, the interest-only period and the maturity date can be further extended. Subject to the lenders’ investment committee’s sole discretion, we have the right to request that the lenders make additional term loan advances in an aggregate principal amount of up to $5.0 million. However, there can be no assurances that any term loan advances will be funded by the lenders in the future.
~~Additional information regarding our long-term loan agreement and the Amendment can be found in Note 6 to the Unaudited Condensed Financial Statements included in this Quarterly Report~~ ~~on Form 10-Q.~~
~~Strategic Collaborations~~
Preclinical Pipeline

Bionic Sight

During February 2017, we entered into a strategic research and development collaboration agreement with 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. The collaboration agreement grants to us, 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 March 2021, Bionic Sight, which has responsibility for conducting the clinical trial, reported promising results in its first two cohorts of patients in the Phase 1/2 retinitis pigmentosa optogenetics study. Bionic Sight reported that these patients, all of whom have complete or near-complete blindness, can now see light and motion, and, in two cases, can detect the direction of motion. The product appears to be safe and well tolerated and Bionic Sight is continuing to enroll patients at higher doses.

Otonomy

During October 2019, we entered into a strategic collaboration agreement with Otonomy
to co-develop and co-commercialize an ~~adeno-associated virus-based~~
AAV-based
gene therapy to restore hearing in patients with sensorineural hearing loss caused by a mutation in the gap junction protein beta 2 gene (“GJB2”) – the most common cause of congenital hearing loss. Mutations in GJB2 account for approximately 30% of all genetic hearing loss cases. Patients with this mutation
can have severe-to-profound deafness in
both ears that is identified in screening tests routinely performed in newborns. Under the collaboration agreement, the parties began equally sharing the program costs and any proceeds from potential licensing transactions in January 2020 and can include additional genetic hearing loss targets in the future.
Effective January 1, 2022, we amended the Otonomy collaboration agreement to increase Otonomy’s responsibility for the overall development and commercialization of the program, which resulted in (i) a reduction in our share of future product development costs and (ii) our potential receipt of future payments, and royalties on any product sales in lieu of equal sharing of any potential profits or proceeds related to the program.

We and Otonomy announced promising preclinical data at the American Society of Gene and Cell Therapy meeting in May 2021, demonstrating the rescue of hearing loss and cochlear morphology in two independent mouse models. Collectively, we are conducting investigational new drug (“IND”)-enabling activities based
on pre-IND meeting
feedback from the FDA, with an IND filing anticipated in the first half of calendar year 2023.

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Additional information regarding the Bionic Sight and Otonomy collaborative agreements can be found in Note 76 to the Unaudited Condensed Financial Statements included in this Quarterly Report
on Form 10-Q.
Preclinical Pipeline
We also have three wholly-owned product candidates in preclinical testing, including
AGTC-701
for the treatment of dAMD,
AGTC-601
for the treatment of FTD and
AGTC-801
for the treatment of ALS.
Critical Accounting Policies and Estimates
Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this Quarterly Report on
Form 10-Q is
based on our financial statements, which have been prepared assuming that the Company will continue as a going concern and in accordance with (i) U.S. generally accepted accounting principles for interim financial information and (ii) the instructions to
Form 10-Q and
Article 8 of
Regulation S-X. The
preparation of those financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, judgments and methodologies, including those related to accrued expenses and share-based compensation. We base our estimates on historical experience, current conditions, known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from our estimates under different assumptions or conditions. Moreover, we may need to change the assumptions underlying our estimates due to risks and uncertainties related to
the COVID-19 pandemic
or otherwise and those changes could have a material adverse effect on our statements of operations, financial condition and cash flows.
During the ~~nine~~six months ended ~~March~~December 31, 2021, there were no significant changes to our critical accounting policies and estimates. For a description of our accounting policies that, in our opinion, involve the most significant application of judgment or involve complex estimations and which could, if different judgments or estimates were made, materially affect our reported results of operations, financial position and cash flows, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in the ~~2020~~
2021 Form 10-K.
New Accounting Pronouncements
Refer to Note 2 to the Unaudited Condensed Financial Statements included in this Quarterly Report on Form
10-Q
for further information about recently issued accounting standards.
Financial Operations Review
Revenue
We ~~primarily~~ generate revenue primarily through: (i) collaboration agreements; (ii) sponsored research arrangements with nonprofit organizations for the development and commercialization of product candidates; ~~and~~ (iii) federal research and development grant ~~programs.~~programs; and (iv) licensing arrangements. However, we did not recognize any revenue during the three and ~~nine~~six months ended ~~March~~December 31, ~~2021.~~2021 or the same periods in the prior year. In the future, we may generate revenue from product sales (if any products are approved), license fees, milestone payments, development services, research and development grants, or from collaboration and royalty payments for the sales of products developed under licenses of our intellectual property. ~~See Note 11 to the Unaudited Condensed Financial Statements included in this Quarterly Report~~ ~~on Form 10-Q~~ ~~for information regarding a license agreement that we entered into in April 2021.~~
We expect that any revenue we generate will fluctuate from quarter to quarter as a result of the timing and amount of license fees, research and development programs, manufacturing efforts and reimbursements, collaboration milestone payments, and the sale of our products, to the extent that any are approved and successfully commercialized. We do not expect to generate revenue from product sales for the foreseeable future, if at all. If we or our collaborators fail to complete the development of our product candidates in a timely manner or obtain regulatory approval for them, our ability to generate future revenue and our results of operations, financial position and cash flows would be materially adversely affected.

Research and development expenses

Research and development expenses consist primarily of costs incurred for the development of our product candidates and include:

employee-related expenses, including salaries, benefits, travel and share-based compensation expense;

expenses incurred under agreements with academic research centers, contract research organizations ~~or CROs,~~ and investigative sites that conduct our clinical trials;

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license and sublicense fees and collaboration expenses;
~~the cost~~
costs of acquiring, developing and manufacturing clinical trial materials; and
facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and other supplies.
Research and development costs are expensed as incurred. Costs for certain development activities are recognized based on an evaluation of the progress toward completion of specific tasks, using information and data provided to us by our vendors and our clinical sites.
We cannot determine with certainty the duration and completion costs of the current or future clinical trials of our product candidates or if, when, or to what extent we will generate revenue from the commercialization and sale of any of our product candidates that obtain regulatory approval. We may never succeed in achieving regulatory approval for any of our product candidates. The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors, including:
the scope, rate of progress and expense of our ongoing clinical trials, as well as any additional clinical trials that we are required to, or decide to, initiate and other research and development activities;
the timing and level of activity as determined by us or jointly with our partners;
the level of funding, if any, received from our partners;
whether or not we elect to cost share with our collaborators;
~~the countries in which trials are conducted;~~
future clinical trial results;
uncertainties in clinical trial enrollment rates or
drop-out
or discontinuation rates of patients;
~~potential additional safety monitoring or other studies requested by regulatory agencies or elected as best practice by us;~~
increased cost and delay associated with manufacturing or testing issues, including ongoing quality assurance, qualifying new vendors and developing
in-house ~~capabilities;~~
capabilities through, among other things, our lease of a new cGMP
build-to-suit
manufacturing and quality control facility;
the countries in which trials are conducted;
potential additional safety monitoring or other studies requested by regulatory agencies or elected as best practice by us;
significant and changing government regulation; and
the timing and receipt of any regulatory approvals.
~~A change~~
Changes in ~~the outcome of~~ any of these variables over time with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we currently anticipate will be required for the completion of clinical development of a product candidate or if we experience significant delays in enrollment in or execution of any of our clinical trials, which could be adversely impacted by the
COVID-19
pandemic, we could be required to expend significant additional financial resources and time on the completion of clinical ~~development.~~
trial activities and development of our product candidates.
From our inception and through ~~March~~December 31, 2021, we have incurred approximately ~~$272.6~~$309.4 million in research and development expenses. We expect our research and development expenses to increase for the foreseeable future as we continue the development of our product candidates, ~~and~~ explore potential applications of our gene therapy platform in other ~~indications.~~
indications and execute our plan to open and operate a leased cGMP manufacturing and quality control facility.

General and administrative and other expenses

General and administrative and other expenses primarily consist of salaries and related costs for personnel, including share-based compensation and travel expenses for our employees in executive, operational, legal, business development, finance and human resource functions. Other general and administrative expenses include costs to support employee training and development, board of directors’ costs, depreciation, insurance, facility-related costs not otherwise included in research and development expenses, professional fees for legal services, ~~including~~ patent-related expenses, and accounting, investor relations, corporate communications and information technology services. We anticipate that our general and administrative and other expenses will continue to increase in the future as we hire additional employees to support our research and development efforts, collaboration arrangements, and the potential commercialization of our product ~~candidates.~~candidates, if approved. Additionally, if and when we believe that regulatory approval of our first product candidate appears likely, we anticipate an increase in payroll and related expenses as a result of our preparation for commercial operations, especially as it relates to the sales and marketing of any such product candidate. Our general and administrative expenses are also expected to increase as we execute our ~~product candidates.~~
plan to open and operate a leased cGMP manufacturing and quality control facility.

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Investment income, net
Investment income, net consists of interest earned on cash and cash
equivalents and held-to-maturity investments in
debt securities. During the three and ~~nine~~six months ended ~~March~~December 31, 2021, investment income, net declined by $23,000 and $81,000, respectively, when compared to the same periods in the prior year, primarily due to a smaller investment portfolio in the current period.
Interest expense
Interest expense during the three and six months ended December 31, 2021 increased by $0.3 million and ~~$1.0~~$0.7 million, respectively, when compared to the ~~comparable~~same periods in the prior year. ~~Such reductions in investment income, net~~These increases were primarily due to ~~lower interest rates in the marketplace.~~
~~Interest expense~~
~~Interest expense~~higher average outstanding balances under our collateralized term loan agreement during the ~~three and nine months ended March 31,~~ 2021 ~~was primarily attributable to the~~periods. Additional information regarding our long-term loan agreement ~~that we entered into on June 30, 2020.~~
~~Provision for income taxes~~
Income tax expense for the three and nine months ended March 31, 2021 was $21,000 and $62,000, respectively, compared to $21,000 and $63,000 for the three and nine months ended March 31, 2020, respectively. During those periods, income tax expense was primarily due to estimated interest and penalties on our uncertain tax positions. Seecan be found in Note 85 to the Unaudited Condensed Financial Statements included in this Quarterly Report
on Form ~~10-Q~~10-Q.
Provision for ~~information regarding significant changes~~income taxes
The provision for income taxes was $20,000 and $41,000 during the three and six months ended December 31, 2020, which was entirely attributable to ~~our~~estimated interest and penalties on uncertain tax positions. There was no provision for income taxes during the three and six months ended December 31, 2021 because, among other things, the Company had no uncertain tax positions ~~subsequent to March 31, 2021 and the corresponding favorable effect on our future income tax expense or benefit.~~
during those reporting periods.
Results of Operations
Comparison of the three months ended ~~March~~December 31, 2021 and 2020
Research and development expenses
The table below summarizes our research and development expenses by product candidate or program for the periods indicated.

   Three Months
Ended March 31,    Increase    % Increase
In thousands
   2021    2020    (Decrease)    (Decrease)
External research and development expenses:

XLRP
   $ 3,201    $ 1,075    $ 2,126    >100 %
ACHM
   1,147    1,622    (475 )    (29 )%
XLRS
   147    224    (77 )    (34 )%
Research and discovery programs
   1,211    438    773    176 %







Total external research and development expenses
   5,706    3,359    2,347    70 %







Internal research and development expenses:

Employee-related costs
   3,051    3,007    44    1 %
Share-based compensation
   280    508    (228 )    (45 )%
Other
   1,923    1,434    489    34 %







Total internal research and development expenses
   5,254    4,949    305    6 %







Total research and development expenses
   $ 10,960    $ 8,308    $ 2,652    32 %








Three Months

Ended December 31,

Increase

% Increase

In thousands

2021

2020

(Decrease)

(Decrease)

External research and development expenses:

XLRP
   $ 4,450    $ 4,869    $ (419 )    (9 )%
ACHM
   1,098    1,212    (114 )    (9 )%
XLRS
   13    59    (46 )    (78 )%
Research and discovery programs
   2,289    516    1,773    >100 %







Total external research and development expenses
   7,850    6,656    1,194    18 %







Internal research and development expenses:

Employee-related costs
   4,214    3,193    1,021    32 %
Share-based compensation
   459    269    190    71 %
Other
   1,931    1,693    238    14 %







Total internal research and development expenses
   6,604    5,155    1,449    28 %







Total research and development expenses
   $ 14,454    $ 11,811    $ 2,643    22 %







External research and development expenses consist of collaboration, licensing, manufacturing, testing and other miscellaneous costs that are directly attributable to our most advanced product candidates and discovery programs. We do not allocate employee-related

costs, including share-based compensation, costs associated with broad technology platform improvements or other indirect costs, to specific programs, as they are deployed across multiple projects under development and, as such, are separately classified as internal research and development expenses in the table above.

Research and development expenses for the three months ended ~~March~~December 31, 2021 and 2020 were ~~$11.0~~$14.5 million and ~~$8.3~~$11.8 million, respectively, an increase of ~~$2.7~~$2.6 million, or ~~32%~~22%. ~~Such~~The increase was primarily attributable to:

$~~2.1 million of increased external spending for our XLRP trials due to our planned manufacturing, clinical site preparation and other activities related to our Skyline trial and XLRP Vista trial;~~

~~$0.8~~1.8 million of increased external spending for our research and discovery programs, which was primarily due to planned material production costs in connection with our preclinical CNS ~~preclinical~~ program targeting FTD; ~~and~~

$~~0.5~~1.0 million of higher employee-related costs that were primarily attributable to new employees that were hired in connection with our strategic operating plans;

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$0.9 million of increased ~~other internal research and development expenses~~external spending for ~~temporary staffing and consultants while we recruit new employees, partially offset by a reduction in laboratory supply costs~~our Skyline trial due to ~~the timing~~planned clinical activities; and
$0.2 million of ~~our needs.~~
higher share-based compensation costs that were primarily due to restricted stock units granted to certain employees from May 2021 to July 2021 (the “2021 RSUs”).
Such increases were partially offset by ~~a $0.5~~$1.3 million ~~decrease in~~of lower external spending for our ~~ACHM trials and~~Vista trial, which was primarily due to a ~~$0.2 million decrease~~year-over-year reduction in ~~our share-based compensation expense.~~manufacturing activities for clinical trial materials. The decrease of $0.1 million in ACHM expenses was primarily due to reduced ~~patient enrollment, patient visits and~~site activity as our two clinical studies have progressed to a point where they are no longer processing new site activations ~~during~~or enrolling new study participants. Additionally, there was a nominal decrease in research and development expenses in connection with the ~~three months ended March 31, 2021 when compared to the prior year, all~~ wind-down
of ~~which reduce~~ our overall clinical programs costs, partially offset by incremental expenses for our mobile vision center. The decline in share-based compensation expense was principally due to the cost attributable to a performance-based stock option award that achieved a milestone during the three months ended March 31, 2020 with no corresponding current year activity.
X-linked retinoschisis, or XLRS,
program.
General and administrative and other expenses
The table below summarizes our general and administrative and other expenses for the periods indicated.

   Three Months
Ended March 31,    Increase    % Increase
In thousands
   2021    2020    (Decrease)    (Decrease)
Employee-related costs
   $ 1,241    $ 1,405    $ (164 )    (12 )%
Share-based compensation
   315    367    (52 )    (14 )%
Legal and professional fees
   329    97    232    >100 %
Other
   1,643    1,265    378    30 %







Total general and administrative and other expenses
   $ 3,528    $ 3,134    $ 394    13 %








Three Months

Ended December 31,

Increase

(Decrease)

% Increase

(Decrease)

In thousands    2021    2020
Employee-related costs    $ 1,367    $ 1,195    $ 172    14 %
Share-based compensation    487    355    132    37 %
Legal and professional fees    164    365    (201 )    (55 )%
Other    1,971    1,389    582    42 %

Total general and administrative and other expenses    $ 3,989    $ 3,304    $ 685    21 %

General and administrative and other expenses for the three months ended ~~March~~December 31, 2021 and 2020 were ~~$3.5~~$4.0 million and ~~$3.1~~$3.3 million, respectively, an increase of ~~$0.4~~$0.7 million, or ~~13%~~21%. Such increase was primarily due toto: (i) compensation for new employees; (ii) incremental share-based compensation costs for the 2021 RSUs; and (iii) higher ~~(i) legal fees resulting from increased reliance on external legal counsel and (ii) recurring~~ operating and business development costs pertaining to ~~normal operations. Such increases~~our recurring operations as we execute our strategic plans. Lower legal fees during the three months ended December 31, 2021 were ~~partially offset by a reduction in employee-related costs~~due to reduced use of ~~$0.2 million that resulted from a lower current year corporate headcount when compared to~~external legal counsel. Total general and administrative and other expenses for the ~~prior year.~~
three months ended December 31, 2021 were consistent with those for the three months ended September 30, 2021.
Comparison of the ~~nine~~six months ended ~~March~~December 31, 2021 and 2020
~~Revenue~~
~~During the nine months ended March 31, 2020, we recognized total revenue of $2.5 million. We did not recognize any revenue during the nine months ended March 31, 2021.~~
During December 2019, Bionic Sight met a milestone related to clearance of filing of an Investigational New Drug application under its collaboration agreement with us and, as a result, we recognized $2.2 million of non-cash collaboration revenue during the nine months ended March 31, 2020 in connection with in-kind contributions made since inception of the Bionic Sight collaboration agreement. Additional information regarding the Bionic Sight collaborative agreement can be found in Note 7 to the Unaudited Condensed Financial Statements included in this Quarterly Report on Form ~~10-Q.~~ ~~During the nine months ended March 31, 2020, we also recorded $0.2 million and $0.1 million of grant revenue and other milestone revenue, respectively.~~

Research and development expenses

The table below summarizes our research and development expenses by product candidate or program for the periods indicated.

   Nine Months
Ended March 31,    Increase    % Increase
In thousands
   2021    2020    (Decrease)    (Decrease)
External research and development expenses:

XLRP
   $ 11,930    $ 2,646    $ 9,284    >100 %
ACHM
   3,997    5,028    (1,031 )    (21 )%
XLRS
   299    664    (365 )    (55 )%
Research and discovery programs
   2,228    1,552    676    44 %







Total external research and development expenses
   18,454    9,890    8,564    87 %







Internal research and development expenses:

Employee-related costs
   9,466    9,301    165    2 %
Share-based compensation
   866    1,183    (317 )    (27 )%
Other
   5,611    4,951    660    13 %







Total internal research and development expenses
   15,943    15,435    508    3 %







Total research and development expenses
   $ 34,397    $ 25,325    $ 9,072    36 %

Six Months

Ended December 31,
   Increase    % Increase
In thousands    2021    2020    (Decrease)    (Decrease)
External research and development expenses:
XLRP    $ 9,101    $ 8,729    $ 372    4 %
ACHM    1,891    2,850    (959 )    (34 )%
XLRS    86    152    (66 )    (43 )%
Research and discovery programs    3,127    1,017    2,110    >100 %

Total external research and development expenses    14,205    12,748    1,457    11 %

Internal research and development expenses:
Employee-related costs    7,930    6,415    1,515    24 %
Share-based compensation    890    586    304    52 %
Other    3,754    3,688    66    2 %

Total internal research and development expenses    12,574    10,689    1,885    18 %

Total research and development expenses    $ 26,779    $ 23,437    $ 3,342    14 %

Research and development expenses for the ~~nine~~six months ended ~~March~~December 31, 2021 and 2020 were ~~$34.4~~$26.8 million and ~~$25.3~~$23.4 million, respectively, an increase of ~~$9.1~~$3.3 million, or ~~36%~~14%. ~~Such~~The increase was primarily attributable to:
$~~9.3 million of increased external spending for our XLRP trials due to our planned manufacturing, clinical site preparation and other activities related to our Skyline trial and XLRP Vista trial;~~
~~$0.7~~2.1 million of increased external spending for our research and discovery programs, which was primarily due to planned material production costs in connection with our preclinical CNS ~~preclinical~~ program targeting FTD; ~~and~~
$~~0.7~~1.7 million of increased ~~other internal research and development expenses~~external spending for ~~temporary staffing and consultants while we recruit~~our Skyline trial due to planned clinical activities;
22
Table of Contents

$1.5 million of higher employee-related costs that were primarily attributable to new employees ~~partially offset by a reduction~~that were hired in ~~laboratory supply~~connection with our strategic operating plans; and
$0.3 million of higher share-based compensation costs that were primarily due to the ~~timing of our needs.~~
2021 RSUs.
Such increases were partially offset ~~by: (i) a $1.0~~by $1.2 million ~~decrease in~~and $0.1 million of lower external spending for our ~~ACHM trials; (ii)~~Vista and ongoing XLRP Phase 1/2 trials, respectively. The decline in the Vista expenses was primarily due to a ~~$0.4 million decrease~~year-over-year reduction in ~~expenses in connection with the wind-down of our~~ ~~X-linked retinoschisis,~~ ~~or XLRS, program; and (iii) a $0.3 million decrease in our share-based compensation expense.~~manufacturing activities for clinical trial materials. The decrease of $1.0 million in ACHM expenses was primarily due to reduced ~~patient enrollment, patient visits and~~site activity as our two clinical studies have progressed to a point where they are no longer processing new site activations ~~during the nine months ended March 31, 2021 when compared to the prior year, all of which reduce our overall clinical programs costs, partially offset by incremental~~or enrolling new study participants. Additionally, there was a nominal decrease in research and development expenses ~~for our mobile vision center. The decline~~ in ~~share-based compensation expense was due to, among other things, the cost attributable to a performance-based stock option award that achieved a milestone during the nine months ended March 31, 2020~~connection with ~~no corresponding current year activity.~~
XLRS program.
General and administrative and other expenses
The table below summarizes our general and administrative and other expenses for the periods indicated.

   Nine Months
Ended March 31,    Increase    % Increase
In thousands
   2021    2020    (Decrease)    (Decrease)
Employee-related costs
   $ 3,675    $ 4,142    $ (467 )    (11 )%
Share-based compensation
   999    1,191    (192 )    (16 )%
Legal and professional fees
   1,238    330    908    >100 %
Other
   4,356    3,827    529    14 %







Total general and administrative and other expenses
   $ 10,268    $ 9,490    $ 778    8 %








Six Months

Ended December 31,
   Increase    % Increase
In thousands    2021    2020    (Decrease)    (Decrease)
Employee-related costs    $ 2,588    $ 2,434    $ 154    6 %
Share-based compensation    866    684    182    27 %
Legal and professional fees    586    909    (323 )    (36 )%
Other    4,049    2,713    1,336    49 %

Total general and administrative and other expenses    $ 8,089    $ 6,740    $ 1,349    20 %

General and administrative and other expenses for the ~~nine~~six months ended ~~March~~December 31, 2021 and 2020 were ~~$10.3~~$8.1 million and ~~$9.5~~$6.7 million, respectively, an increase of ~~$0.8~~$1.3 million, or 8%20%. Such increase was primarily due toto: (i) compensation for new employees; (ii) incremental share-based compensation costs for the 2021 RSUs; and (iii) higher ~~(i) legal fees resulting from increased reliance on external legal counsel and (ii) recurring~~ operating and business development costs pertaining to ~~normal operations. Such increases~~our recurring operations as we execute our strategic plans. Lower legal fees during the six months ended December 31, 2021 were ~~partially offset by a reduction in employee-related costs~~due to reduced use of ~~$0.5 million that resulted from a lower current year corporate headcount when compared to~~external legal counsel. Total general and administrative and other expenses for the ~~prior year.~~
six months ended December 31, 2021 were consistent with those for the six months ended June 30, 2021.

Liquidity and Capital Resources

We have incurred cumulative losses and negative cash flows from operations since our inception and, as of ~~March~~December 31, 2021, we had an accumulated deficit of ~~$227.1~~$275.5 million. It will be several years, if ever, before we have a product candidate ready for commercialization. We expect that our research and development expenses and general and administrative and other expenses will continue to increase and, as a result, we anticipate that we will require additional capital to fund our operations, which we may raise through a combination of equity offerings, debt financings, other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements.

Most recently, we received: (i) ~~$34.8 million~~net proceeds of ~~proceeds~~$143,000 in November 2021 from ~~the issuance of~~selling our common stock ~~net of issuance costs,~~through an
“at-the-market
offering” program that is described in ~~February 2020;~~ Note 7 to the Unaudited Condensed Financial Statements included in this Quarterly Report on Form
10-Q;
(ii) $9.9 million of loan proceeds, net of debt discounts, in ~~June 2020;~~May 2021; and (iii) net proceeds of $69.3 million in February 2021 from the underwritten public offering that is described ~~above under “Recent Developments.” Subsequent~~in Note 7 to ~~March 31, 2021, we received $10.0 million of additional loan proceeds, before any debt discounts and related financing fees and costs, from our existing long-term debt agreement.~~ the Unaudited Condensed Financial Statements included in this Quarterly Report
on Form 10-Q.
Among other things, ~~those~~the May 2021 loan proceeds are expected to partially fund certain equipment and shared building fit out costs, as well as new employee hires, in connection with our lease and operation of a ~~new~~ cGMP
build-to-suit
manufacturing and quality control facility in Alachua, Florida. Importantly, through a tenant improvement allowance and tiered rental rates, we have structured our third-party leasing costs for this facility in a way that will not significantly impact our cash runway until the fiscal year ending June 30, 2024. Additional information regarding our long-term loan agreement and ~~the~~ new manufacturing and quality control facility can be found in Notes 65 and ~~11,~~8, respectively, to the Unaudited Condensed Financial Statements included in this Quarterly Report
on Form ~~10-Q,~~ ~~as well as above under “Recent Developments.”~~
10-Q.

We are closely monitoring ongoing developments in connection with
the COVID-19 pandemic,
which may negatively impact our projected cash position and access to capital. We will continue to assess our cash position and, if circumstances warrant, make appropriate adjustments to our operating plan.

Cash in excess of immediate requirements is invested in accordance with our investment policy, which primarily seeks to maintain adequate liquidity and preserve capital by generally limiting investments to certificates of deposit and investment-grade debt securities that mature within twelve months. As of ~~March~~December 31, 2021, our cash and cash equivalents were held in bank accounts and money market ~~funds, while our investments consisted~~funds.

Table of U.S. Treasury securities, none of which mature more than twelve months after the balance sheet date, consistent with our investment policy that seeks to maintain adequate liquidity and preserve capital.
Contents
Cash flows
The table below sets forth the primary sources and uses of cash for the periods indicated.

   Nine Months
Ended March 31,    Increase    % Increase
In thousands
   2021    2020    (Decrease)    (Decrease)
Net cash provided by (used in):

Operating activities
   $ (37,738 )    $ (27,854 )    $ (9,884 )    (35 )%
Investing activities
   19,158    24,411    (5,253 )    (22 )%
Financing activities
   69,648    35,231    34,417    98 %







Net increase in cash and cash equivalents
   $ 51,068    $ 31,788    $ 19,280    61 %









Six Months

Ended December 31,
   Increase    % Increase
In thousands    2021    2020    (Decrease)    (Decrease)
Cash provided by (used in):
Operating activities    $ (33,493 )    $ (26,308 )    $ (7,185 )    (27 )%
Investing activities    1,048    7,027    (5,979 )    (85 )%
Financing activities    164    (74 )    238    >100 %

Net decrease in cash and cash equivalents    $ (32,281 )    $ (19,355 )    $ (12,926 )    67 %

Operating activities.
For both the ~~nine~~six months ended ~~March~~December 31, 2021 and 2020, cash used in operating activities was primarily the result of research and development expenses and general and administrative and other expenses incurred in conducting normal business operations. Specifically, the cash used in operating activities of ~~$37.7~~$33.5 million during the ~~nine~~six months ended ~~March~~December 31, 2021 was due to a net loss of ~~$45.7~~$36.3 million and unfavorable changes in our operating assets and liabilities of $0.4 million, partially offset
by non-cash items
in our statement of operations of ~~$3.6~~$3.2 million. The cash used in operating activities of $26.3 million during the six months ended December 31, 2020 was due to a net loss of $30.8 million, partially
offset by non-cash items in
our statement of operations of $2.4 million and favorable changes in our operating assets and liabilities of ~~$4.4~~$2.1 million. ~~The cash used in operating activities of $27.9 million during the nine months ended March 31, 2020 was due to a net loss of $31.4 million, partially offset by~~ ~~non-cash items~~ ~~in our statement of operations of $1.0 million and favorable changes in our operating assets and liabilities of $2.5 million.~~
Investing activities.
Cash provided by investing activities of ~~$19.2~~$1.0 million during the ~~nine~~six months ended ~~March~~December 31, 2021 consisted primarily of cash proceeds of ~~$41.5~~$2.0 million from maturities of investments, ~~net of investment purchases of $21.0 million,~~ partially offset by purchases of property and equipment of $1.0 million and intellectual property costs of $0.4 million. Cash provided by investing activities of $24.4 million during the nine months ended March 31, 2020 consisted primarily of cash proceeds of $63.5 million from maturities of investments, net of investment purchases of $33.9 million, partially offset by an equity investment in Bionic Sight of $4.0 million, purchases of property and equipment of $0.8 million and intellectual property costs of ~~$0.3~~$0.1 million.
Cash provided by investing activities of $7.0 million during the six months ended December 31, 2020 consisted primarily of cash proceeds of $27.0 million from maturities of investments, net of investment purchases of $19.0 million, partially offset by purchases of property and equipment of $0.8 million and intellectual property costs of $0.2 million.

Financing activities.

Cash provided by financing activities of ~~$69.6~~$0.2 million during the ~~nine~~six months ended ~~March~~December 31, 2021 ~~included (i)~~consisted of proceeds from issuances of ~~$69.3 million from the issuance of~~our common stock, ~~and accompanying warrants,~~ net of issuance costs, and ~~(ii) proceeds from~~ exercises of common stock options, ~~of $0.7 million. These items were~~ partially offset by (i) payments for taxes related to equity awards and (ii) principal payments on a finance lease. Cash used in financing activities of $0.1 million during the six months ended December 31, 2020 consisted of (i) payments for deferred financing fees and taxes related to equity awards and (ii) principal payments on a finance ~~lease. Cash provided~~lease, partially offset by ~~financing activities of $35.2 million during the nine months ended March 31, 2020 primarily consisted of proceeds of $34.9 million from the issuance of common stock, net of issuance costs, and~~ proceeds from exercises of common stock ~~options of $0.3 million, partially offset by principal payments on a finance lease.~~
options.

Operating capital requirements
~~To date, we~~

We have not generated any revenue from product ~~sales. We~~sales and we do not know when, or if, we will generate ~~any revenue from product sales.~~such revenue. We do not expect to ~~generate~~have significant revenue from product sales unless and until we obtain regulatory approval of and commercialize one of our current or future product candidates. We anticipate that we will continue to generate losses for the foreseeable future as we continue the development of, and seek regulatory approvals for, our product candidates, and begin to commercialize any approved products. We are subject to all of the risks incident in the development of new gene therapy products, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business.

We believe that our available cash and cash equivalents, ~~and investments,~~ which totaled ~~$111.0~~$72.8 million on ~~March~~December 31, 2021, will be sufficient to allow us to generate data from our ongoing and planned clinical programs and fund currently planned research and discovery programs into calendar year 2023. However, we will require substantial additional funding toto: (i) finish our ~~XLRP~~ Vista ~~trial,~~trial; (ii) move our ACHMB3 product candidate forward; (iii) complete the process necessary to seek regulatory approval for our lead product ~~candidates and~~candidates; (iv) build the sales, marketing and distribution infrastructure that we believe will be necessary to commercialize our lead product candidates, if ~~approved.~~
approved; and (v) execute our plan to open and operate a leased cGMP manufacturing and quality control facility.

To provide the maximum degree of financial flexibility, we may consider various potential opportunities to fund future operations and/or modulate liquidity needs including: (i) raising new capital through equity or debt financings or other sources, including our
“at-the-market
offering” program; (ii) amending our long-term debt agreement;
(iii) out-licensing
the rights to certain of our product candidates; (iv) entering into one or more collaborations to offset the costs of our leased manufacturing and quality control facility; and (v) reducing our expenditures on research and development activities and/or restructuring our operations. However, we may be unable to successfully execute any of the plans described above, or raise additional funds or enter into such other arrangements when needed on favorable terms, or at all. Additional information regarding our liquidity and related matters can be found in Note 1 to the Unaudited Condensed Financial Statements included in this Quarterly Report
on Form 10-Q
under the heading ”Liquidity and Financial Condition.”

Table of Contents
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company, as defined by
Rule 12b-2 of
the Securities Exchange Act of 1934, as amended, and are not required to provide this information.
ITEM 4.
CONTROLS AND PROCEDURES
a)
Conclusions Regarding the Effectiveness of Disclosure Controls and Procedures
Our management, with the participation of our ~~Chief Executive Officer~~principal executive officer and ~~Chief Financial Officer,~~principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in
Rules 13a-15e
and
15d-15e
under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this quarterly report. Based on this evaluation, our ~~Chief Executive Officer~~principal executive officer and ~~Chief Financial Officer~~principal financial officer concluded that these disclosure controls and procedures were effective as of ~~March~~December 31, 2021.
b)
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in
Rules 13a-15f and 15d-15f under
the Securities Exchange Act of 1934, as amended) during the quarter ended ~~March~~December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
We are not a party to any pending legal proceedings. However, due to the nature of our business, we may be subject to lawsuits or other claims arising at any particular time in the ordinary course of ~~our~~ business, and we expect that this situation will continue to be the case in the future.
ITEM 1A.
RISK FACTORS
Refer to Part I, Item 1A, “Risk Factors,” of our Annual Report on
Form 10-K for
the year ended June 30, ~~2020~~2021 (the ~~“2020~~ “2021 Form
10-K”)
for information regarding our risk factors. Except as noted below, there have been no material changes in the risk factors included in the ~~2020~~2021 Form
10-K.

~~Third parties~~

We have identified conditions and events that raise substantial doubt about our ability to continue as a going concern.

We may ~~initiate legal proceedings alleging claims~~be forced to amend, delay, limit, reduce or terminate the scope of ~~intellectual property infringement, including claims related~~our clinical and preclinical programs and/or limit or cease our operations if we are unable to obtain additional funding. As of December 31, 2021, we had cash and cash equivalents totaling $72.8 million. We believe that there is presently insufficient funding available to allow us to generate data from our ~~XLRP~~ongoing and planned clinical programs and fund currently planned research and discovery programs for a period exceeding 12 months from the date of filing this Quarterly Report on Form
10-Q.
During such
12-month
period, our future liquidity needs will be primarily based on the: (i) success and progression of our product candidates; (ii) repayment obligations under our long-term debt agreement; and (iii) costs to operate our leased
build-to-suit
manufacturing and quality control facility. We will also require substantial additional funding to: (i) finish our Vista trial; (ii) move our ACHMB3 product candidate forward; (iii) complete the ~~outcome~~process necessary to seek regulatory approval for our lead product candidates; and (iv) build the sales, marketing and distribution infrastructure that we believe will be necessary to commercialize our lead product candidates, if approved. To provide the maximum degree of ~~which~~financial flexibility, we may consider various potential opportunities to fund future operations and/or modulate liquidity needs, including: (i) raising new capital through equity or debt financings or other sources, including our
“at-the-market
offering” program; (ii) amending our long-term debt agreement;
(iii) out-licensing
the rights to certain of our product candidates; (iv) entering into one or more collaborations to offset the costs of our leased manufacturing and quality control facility; and (v) reducing our expenditures on research and development activities and/or restructuring our operations. However, we may be unable to successfully execute any of the plans described above, or raise additional funds or enter into such other arrangements when needed on favorable terms, or at all. The failure to obtain sufficient funds on commercially acceptable terms when needed would ~~be uncertain and could~~ have a material adverse effect on ~~the success~~our business, results of ~~our business.~~
~~Our commercial success depends in part on our avoiding infringement of the patents~~operations and ~~proprietary rights of third parties. There is a substantial amount of litigation, both within~~financial condition and outside the United States, involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, interferences, oppositions and ~~inter partes~~ reexamination proceedings before the United States Patent and Trademark Office and corresponding foreign patent offices. Numerous United States and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are pursuing development candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may be subject to claims of infringement of the patent rights of third parties.
Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents or patent applications with claims to compositions, materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates. Because patent applications can take many years to issue, there may be currently pending patent applications that may later result in issued patents that our product candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies or product candidates infringes upon these patents.
For example, we are aware of a third-party U.S. patent that may be construed to cover our gene therapy compositions for treating XLRP. We are also aware of corresponding international applications owned by such third party, which are counterparts to such U.S. patent. If such third party asserts this U.S. patent or any other patents that may issue from such corresponding international patent applications against us and our XLRP product candidate, we believe that we would have defenses against any such assertion, however, there can be no assurance that any such defenses will be successful. If such patents, or any other third-party patents, were held by a court of competent jurisdiction to cover the manufacturing process of any of our product candidates, any molecules formed during the manufacturing process or any final product itself, and are not held to be invalid or unenforceable, the holders of any such patents may be able to blockjeopardize our ability to ~~commercialize such product candidate, including~~continue our XLRP product candidate, unless we obtained a license under the applicable patents, or until such patents expire. Similarly, if any third-party patents were held by a court of competent jurisdiction to cover aspects of our formulations, methods for manufacture or methods of use, including combination therapy, and are not held to be invalid or unenforceable, the holders of any such patents may be able to blockoperations. These factors raise substantial doubt about our ability to ~~develop and commercialize the applicable product candidate unless we obtained~~continue as a ~~license or until such patent expires. In either case, such a license may not be available on commercially reasonable terms or at all. Even if we were able to obtain a license, it~~ ~~could be non-exclusive, thereby giving~~ ~~our competitors access to the same technologies licensed to us. Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block~~going concern.

Additional information regarding our ability to further develop and commercialize one or more of our product candidates, including our XLRP product candidate. Defense of these claims, regardless of their merit, would involve substantial litigation expense and wouldcontinue as a going concern can be ~~a substantial diversion of employee resources from our business.~~
Infound in Note 1 to the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement. If a license is available from the applicable third party, we may have to pay royalties, upfront fees and other amounts, and/or grant cross-licenses under our intellectual property rights. Further, we may be required to redesign our infringing products so they do not infringe the applicable third-party patents or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.
~~ITEM 5.~~
~~OTHER INFORMATION~~
~~Manufacturing Facility Lease~~
~~On May 13, 2021, the Company entered into a Lease (the “Lease”) with Alachua Foundation Park Holding Company II, LLC, as Landlord, for a~~ ~~to-be-constructedbuild-to-suit~~ single story facility of approximately 21,250 square feet to be known as Foundation Park Building II, 14100 N.W. 113th Terrace, Alachua, Florida (the “Premises”) for office, research and development, laboratory, light pharmaceutical and medical systems manufacturing and fabrication and distribution use. The Landlord will be responsible for all permitting, site and infrastructure preparation work and construction of the shell and core of the building and the quality control laboratory portion of the building. The Company will be responsible for completion of the remaining tenant fit out work. The Landlord will be responsible for the cost of the base building work and will contribute approximately $6.0 million towards the tenant fit out work, with the Company responsible for all costsUnaudited Condensed Financial Statements included in ~~excess of such amount.~~
The Lease will commence upon substantial completion of the Premises, including the tenant fit out work, estimated to be completed in the second half of calendar year 2022 (the “Commencement Date”), and the rent commencement date will occur simultaneous with the Commencement Date, provided that the Company will not pay base rent for the first twelve months of the term of the Lease and reduced rent for the next six months of the term (as further outlined below). The initial lease term is twenty years from the Commencement Date (the “Term”). Under the Lease, the Company will pay annual base rent as set forth below.
this Quarterly Report
on Form 10-Q

Lease Months
   Annual
Base Rent
1-12
   $ —
13-18
   $ 637,500
19-30
   $ 1,253,750
Base rent shall increase 1.5% each lease year (12-month period) thereafter commencing in month 31 for the remainder of the Term.

~~During the Term, the Company will also pay its share of operating expenses, taxes and any other expenses payable~~ under the ~~Lease. The Lease includes three extension options~~heading ”Liquidity and Financial Condition.”

Table of ~~five years each at an annual base rental rate of the greater of a 1.5% increase from the previous year or pursuant to the increase in the Consumer Price Index for the applicable prior year.~~
~~In addition, the Lease provides the Company with a~~ ~~one-time~~ ~~option to terminate the Lease after year 16.5 by providing notice of such termination prior to the end of the 15~~^th ~~Lease year and paying a termination fee of $3.3 million. The Company has the further option to expand the facility to double the initial square footage during the first five years of the Term.~~
The Lease also includes customary representations, warranties and covenants on behalf of the parties and provides for certain customary mutual indemnities. No security deposit is required upon lease execution, provided that the Landlord reserves the right to instate a security deposit if the Company defaults in its Lease obligations.
~~Amendment to Hercules Loan Agreement~~
On May 13, 2021, the Company entered into the First Amendment to Loan and Security Agreement (the “First Amendment”) with the several banks and other financial institutions or entities from time to time parties to the Loan and Security Agreement (collectively, referred to as the “Lenders”), and Hercules Capital, Inc., in its capacity as administrative agent and collateral agent for itself and Lenders, which amends certain terms of the Loan and Security Agreement.
The First Amendment provides for, among other things, (i) a second term loan advance under the Loan Agreement of $10.0 million, which was authorized by the Lenders and advanced to the Company on May 13, 2021, and (ii) an extension of the Company’s option to draw down an additional tranche of up to $5.0 million of the $25.0 million term loan facility provided under the Loan and Security Agreement (the “Term Loan”), subject to the Lenders’ investment committee’s sole discretion, among other customary conditions, to prior to April 1, 2022 or, if certain conditions are satisfied, then prior to January 1, 2023. The First Amendment also (i) extends the interest-only payment period to March 31, 2022, with the possibility to extend the interest-only period to December 31, 2022 upon the Company’s achievement of certain performance milestones, and (ii) extends the maturity date of the Term Loan to April 1, 2024 or, in the event that the Company meets certain conditions, including achievement of certain performance milestones, then July 1, 2024.
~~Departure of Chief Financial Officer and Officer Appointments~~
On May 12, 2021, William A. Sullivan, the Chief Financial Officer and Treasurer of the Company, notified the Company that he will be resigning from his positions, effective June 9, 2021 (the “Termination Date”). On May 13, 2021, the Company appointed Gerald A. Reynolds, age 58, as its Chief Accounting Officer, principal accounting officer and Treasurer, in each case effective on the Termination Date. Susan B. Washer, the Company’s President and Chief Executive Officer will serve as the Company’s principal financial officer effective on the Termination Date.
Mr. Reynolds has served as the Company’s Vice President, Accounting since March 2020. Prior to joining the Company, Mr. Reynolds was Director of External Financial Reporting at Gartner, Inc., a global research and advisory firm, from March 2017 to March 2020. From January 2016 to February 2017, Mr. Reynolds was Vice President of Financial Reporting at WCI Communities, Inc., a lifestyle community developer and luxury homebuilder, and from October 2013 to December 2015 he was Director of Financial Reporting at WCI Communities, Inc. Prior to that, Mr. Reynolds was Director of Financial Reporting at Health Management Associates, Inc., a hospital owner and healthcare services provider to patients in hospitals and other health care facilities in ~~non-urban~~ communities located primarily in the southeastern United States, from May 2005 to April 2013. Mr. Reynolds received a B.B.A. in accounting from Adelphi University and an M.S. in taxation from Long Island University, C.W. Post Campus.
There are no arrangements or understandings between Mr. Reynolds and any other persons pursuant to which he was appointed as principal accounting officer, there are no family relationships among any of the Company’s directors or executive officers and Mr. Reynolds and he has no direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation ~~S-K.~~
Contents

On May 14, 2021, the Company entered into a First Amendment to Employment Agreement with Mr. Sullivan (the “Amendment”). Pursuant to the terms of the Amendment, for six months following the Termination Date, the Company will contribute to the cost of COBRA continuation coverage at the same rate it contributed to Mr. Sullivan’s coverage prior to the Termination Date. In addition, Mr. Sullivan will receive a payment equal to six months of his current base salary and a prorated bonus for the fiscal year ending June 30, 2021. The Amendment also provides that any stock options previously granted to Mr. Sullivan by the Company that are unvested as of the Termination Date will continue to vest through and including December 31, 2021, and Mr. Sullivan will be permitted to exercise any vested stock options held by him until the later to occur of (i) December 31, 2022 and (ii) the date that is 90 calendar days after the date on which the Company issues a press release that reports the ~~six-month~~ ~~masked interim analysis in the XLRP Vista trial.~~

ITEM 6.

EXHIBITS


Exhibit Number		Description

3.1		Fifth Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 1, ~~2014 (File No.~~ ~~001-36370))~~2014)

3.2		Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the SEC on April 1, ~~2014 (File No.~~ ~~001-36370))~~2014)

~~4.1~~10.1#		~~Form~~Employment Agreement, dated as of ~~Common Stock Purchase Warrant~~October 14, 2021, by and between the Company and Susan Schneider (incorporated by reference to Exhibit ~~4.1~~10.1 to the Company’s Current Report on Form 8-K ~~event date January~~ ~~28, 2021,~~ filed with the SEC on ~~January~~ ~~29,~~October 14, 2021 (File No. 001-36370))

10.2#		Employment Agreement, dated November 9, 2021, by and between the Company and Jonathan Lieber (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K/A filed with the SEC on November 12, 2021 (File No. 001-36370))

10.3*#		Employment Agreement, dated November 6, 2021, by and between the Company and Hope R. D’Oyley-Gay

10.4*#		Employment Agreement, dated November 15, 2021, by and between the Company and Abraham Scaria

31.1*		Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*		Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1**		Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.1101.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH*		Inline XBRL Taxonomy Extension Schema Document

101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104*		The ~~following interactive Data Files pursuant to Rule 405~~ ~~of Regulation S-T, formatted~~ ~~in XBRL (eXtensible Business Reporting Language): (a) Condensed Balance Sheets as of March 31, 2021 and June 30, 2020; (b) Condensed Statements of Operations~~cover page for the ~~three~~Company’s Quarterly Report on Form 10-Q has been formatted in Inline XBRL and nine months ended March 31, 2021 and 2020; (c) Condensed Statements of Stockholders’ Equity for the three and nine months ended March 31, 2021 and 2020; (d) Condensed Statements of Cash Flows for the nine months ended March 31, 2021 and 2020; and (e) Notes to such Unaudited Condensed Financial Statements.contained in Exhibit 101

*	Filed herewith.

**	Furnished herewith.

#	Management contract or compensatory plan or arrangement.

Table of Contents
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
APPLIED GENETIC TECHNOLOGIES CORPORATION
(Registrant)
By:
/s/ ~~William A. Sullivan~~
Jonathan I. Lieber
~~William A. Sullivan,~~
Jonathan I. Lieber, Chief Financial Officer

Date: ~~May 17, 2021~~February 14, 2022
31


In thousands, except per share data	March 31, 2021			June 30, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	89,531		$	38,463
Investments		21,496			41,995
Prepaid and other current assets		1,997			2,506

Total current assets		113,024			82,964
Property and equipment, net		4,019			4,311
Intangible assets, net		1,291			1,098
Investment in Bionic Sight, LLC		8,021			8,096
Right-of-use assets – operating leases		3,158			3,422
Right-of-use asset – finance lease		46			80
Other assets		107			348

Total assets	$	129,666		$	100,319

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,926		$	1,355
Accrued and other liabilities		13,504			10,502
Lease liabilities – operating		1,072			1,058
Lease liability – finance		51			48

Total current liabilities		16,553			12,963
Lease liabilities – operating, net of current portion		3,540			4,070
Lease liability – finance, net of current portion		—			38
Long-term debt, net of debt discounts and deferred financing fees		9,929			9,677
Other liabilities		2,644			2,555

Total liabilities		32,666			29,303

Stockholders’ equity:
Preferred stock, par value $0.001 per share, 5,000 shares authorized; no shares issued and outstanding		—			—
Common stock, par value $0.001 per share, 150,000 shares authorized; 42,796 and 25,813 shares issued; 42,755 and 25,793 shares outstanding at March 31, 2021 and June 30, 2020, respectively		42			25
Additional paid-in capital		324,302			252,519
Treasury stock at cost; 41 and 20 shares at March 31, 2021 and June 30, 2020, respectively		(211	)		(88	)
Accumulated deficit		(227,133	)		(181,440	)

Total stockholders’ equity		97,000			71,016

Total liabilities and stockholders’ equity	$	129,666		$	100,319


	Three Months Ended March 31,						Nine Months Ended March 31,
In thousands, except per share data	2021			2020			2021			2020
Revenue:
Collaboration and milestone revenue	$	—		$	—		$	—		$	2,297
Grant revenue		—			—			—			156

Total revenue		—			—			—			2,453

Operating expenses:
Research and development		10,960			8,308			34,397			25,325
General and administrative and other		3,528			3,134			10,268			9,490

Total operating expenses		14,488			11,442			44,665			34,815

Loss from operations		(14,488	)		(11,442	)		(44,665	)		(32,362	)

Other income (expense), net:
Investment income, net		13			281			106			1,063
Interest expense		(330	)		(2	)		(997	)		(6	)
Other income		—			6			—			6

Total other income (expense), net		(317	)		285			(891	)		1,063

Loss before provision for income taxes		(14,805	)		(11,157	)		(45,556	)		(31,299	)
Provision for income taxes		21			21			62			63

Loss before equity in net losses of an affiliate		(14,826	)		(11,178	)		(45,618	)		(31,362	)
Equity in net losses of an affiliate		(25	)		(11	)		(75	)		(27	)

Net loss	$	(14,851	)	$	(11,189	)	$	(45,693	)	$	(31,389	)

Weighted average shares outstanding:
Basic		36,751			22,272			29,431			19,558
Diluted		36,751			22,272			29,431			19,558
Net loss per common share:
Basic	$	(0.40	)	$	(0.50	)	$	(1.55	)	$	(1.60	)
Diluted	$	(0.40	)	$	(0.50	)	$	(1.55	)	$	(1.60	)


	Nine Months Ended March 31,
In thousands	2021			2020
Operating activities:
Net loss	$	(45,693	)	$	(31,389	)
Adjustments to reconcile net loss to net cash used in operating activities:
Share-based compensation expense		1,865			2,373
Depreciation and amortization		1,123			919
Investment discount accretion, net		(10	)		(306	)
Amortization of debt discounts and deferred financing fees		252			—
Reduction in the carrying amount of operating lease right-of-use assets		264			222
Collaboration revenue from Bionic Sight, LLC		—			(2,197	)
Equity in net losses of an affiliate		75			27
Changes in operating assets and liabilities:
Grants receivable		—			13
Prepaid and other assets		975			(660	)
Deferred revenue		—			149
Accounts payable		571			1,603
Operating lease liabilities		(516	)		(459	)
Accrued and other liabilities		3,356			1,851

Cash used in operating activities		(37,738	)		(27,854	)

Investing activities:
Purchases of property and equipment		(987	)		(812	)
Purchases of and capitalized costs related to intangible assets		(363	)		(349	)
Investment in Bionic Sight, LLC		—			(4,000	)
Maturities of investments		41,500			63,500
Purchases of investments		(20,992	)		(33,928	)

Cash provided by investing activities		19,158			24,411

Financing activities:
Proceeds from the issuance of common stock and accompanying warrants, net of issuance costs		69,261			34,949
Proceeds from exercises of common stock options		674			318
Payments for deferred financing fees		(129	)		—
Taxes paid related to equity awards		(123	)		(3	)
Principal payments on finance lease		(35	)		(33	)

Cash provided by financing activities		69,648			35,231

Net increase in cash and cash equivalents		51,068			31,788
Cash and cash equivalents, beginning of the period		38,463			26,703

Cash and cash equivalents, end of the period	$	89,531		$	58,491

Supplemental information:
Costs for intangible assets included in accrued and other liabilities	$	27		$	—


Lease Months
1-12	$	—
13-18	$	637,500
19-30	$	1,253,750
Base rent shall increase 1.5% each lease year (12-month period) thereafter commencing in month 31 for the remainder of the Term.


	Three Months Ended March 31,				Increase			% Increase
In thousands	2021		2020		(Decrease)			(Decrease)
External research and development expenses:
XLRP	$	3,201	$	1,075	$	2,126			>100	%
ACHM		1,147		1,622		(475	)		(29	)%
XLRS		147		224		(77	)		(34	)%
Research and discovery programs		1,211		438		773			176	%

Total external research and development expenses		5,706		3,359		2,347			70	%

Internal research and development expenses:
Employee-related costs		3,051		3,007		44			1	%
Share-based compensation		280		508		(228	)		(45	)%
Other		1,923		1,434		489			34	%

Total internal research and development expenses		5,254		4,949		305			6	%

Total research and development expenses	$	10,960	$	8,308	$	2,652			32	%


	Three Months Ended December 31,				Increase (Decrease)			% Increase (Decrease)
In thousands	2021		2020		Increase (Decrease)			% Increase (Decrease)
Employee-related costs	$	1,367	$	1,195	$	172			14	%
Share-based compensation		487		355		132			37	%
Legal and professional fees		164		365		(201	)		(55	)%
Other		1,971		1,389		582			42	%

Total general and administrative and other expenses	$	3,989	$	3,304	$	685			21	%


Lease Months	Annual Base Rent
1-12	$	—
13-18	$	637,500
19-30	$	1,253,750
Base rent shall increase 1.5% each lease year (12-month period) thereafter commencing in month 31 for the remainder of the Term.


APPLIED GENETIC TECHNOLOGIES CORPORATION (Registrant)

By:		/s/ ~~William A. Sullivan~~ Jonathan I. Lieber
		~~William A. Sullivan,~~ Jonathan I. Lieber, Chief Financial Officer

		Date: ~~May 17, 2021~~February 14, 2022