10-Q
Table of Contents

 

 

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 31, 2021

OR

 

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

Commission File Number: 001-36370

 

 

 

LOGO

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 119th 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 was 42,754,792.

 

 

 


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

FORM 10-Q

FOR THE QUARTER ENDED MARCH 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

     3  
 

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

     4  
 

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

     5  
 

Condensed Statements of Cash Flows for the nine months ended March  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  

ITEM 3.

 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     27  

ITEM 4.

 

CONTROLS AND PROCEDURES

     27  
  PART II. OTHER INFORMATION      27  

ITEM 1.

 

LEGAL PROCEEDINGS

     27  

ITEM 1A.

 

RISK FACTORS

     27  

ITEM 5.

 

OTHER INFORMATION

     28  

ITEM 6.

 

EXHIBITS

     30  
 

SIGNATURE

     31  

 

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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  
  

 

 

   

 

 

 

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

 

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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

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

 

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APPLIED GENETIC TECHNOLOGIES CORPORATION

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

THREE AND NINE MONTHS ENDED MARCH 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  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

 

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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     $ —    

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

 

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APPLIED GENETIC TECHNOLOGIES CORPORATION

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

 

1.

Organization and Operations

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, including clinical trials. The Company has not completed the development of any products. The Company has generated revenue from collaboration agreements, sponsored research and grants, but has not generated product revenue to date and is subject to a number of risks similar to those of other early stage companies in the biotechnology industry, including dependence on key individuals, the difficulties inherent in the development of commercially viable products, the need to obtain additional capital necessary to fund the development of its products, development by the Company or its competitors of technological innovations, risks of failure of clinical studies, protection of proprietary technology, compliance with government regulations and the ability to transition to large-scale production of products.

As of March 31, 2021, the Company had (i) an accumulated deficit of $227.1 million and (ii) cash and cash equivalents and liquid investments of $111.0 million. Management believes that there is sufficient funding available to allow the Company to generate data from its ongoing and planned clinical programs and fund currently planned research and discovery programs. While the Company expects to generate some revenue from partnering, sponsored research, grants and licensing of its intellectual property, management believes that the Company will incur losses for the foreseeable future. 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.

 

2.

Summary of Significant Accounting Policies

Basis of presentation

The accompanying Unaudited Condensed Financial Statements have been prepared 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 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 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.

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 (the “2020 Form 10-K”). The Company’s significant accounting policies are described in Note 2 to the Notes to Financial Statements in the 2020 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 months ended March 31, 2021 are not necessarily indicative of the Company’s operating results for the full year ending June 30, 2021 or any subsequent interim period.

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

 

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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 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 months ended March 31, 2021 was approximately 0.4 million shares and (ii) the three and nine months ended March 31, 2020 was approximately 0.4 million shares and 0.2 million shares, respectively. However, the dilutive impact of common stock equivalents was 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 months ended March 31, 2021 excluded certain warrants to purchase the Company’s common stock, which are described at Note 9 in 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 the related periods.

New Accounting Pronouncements

Adopted during the nine months ended March 31, 2021

Fair Value Measurement

In August 2018, 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 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; however, the adoption thereof is not expected to have a significant impact on the Company’s financial statements.

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

 

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

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 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 accounting for any such interactions. This standard will be effective for the Company on July 1, 2021. Early adoption is permitted. The adoption of this guidance is not expected to have a significant impact on the Company’s financial statements.

 

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 directors and certain consultants. The Company has two equity compensation plans under which awards are currently authorized for issuance: the 2013 Employee Stock Purchase Plan and the 2013 Equity and Incentive Plan. No awards have been issued to date under the 2013 Employee Stock Purchase Plan and, as such, all of the 128,571 shares previously authorized under that plan remain available for issuance.

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     
  

 

 

       

 

 

    

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

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

 

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award. If any of the performance criteria are not satisfied, that corresponding tranche will be forfeited. As of March 31, 2021, one of the six performance criteria has been 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.

During August 2019, 175,500 restricted stock units, which included 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 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, 2020, 76,500 restricted stock units vested and, through March 31, 2021, a total of 25,000 awards have been forfeited. Assuming continuing service by the grantees, the remaining restricted stock units that are outstanding will vest on August 15, 2021. 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.

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

 

4.

Investments

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, the Company’s investments consisted entirely of held-to-maturity debt securities that were due in one year or less from the respective balance sheet dates.

The Company’s debt securities 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  
  

 

 

    

 

 

 

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 losses 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

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.

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.

 

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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 of U.S. Treasury securities that are valued using quoted market prices. Valuation adjustments are 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  
  

 

 

    

 

 

    

 

 

    

 

 

 

The Company’s financial instruments also include its variable-rate borrowing under a debt agreement that is described at Note 6 in these Notes to Unaudited Condensed Financial Statements. The Company believes that the carrying amount of such debt (i.e., $9.9 million and $9.7 million at March 31, 2021 and June 30, 2020, respectively) reasonably approximates its fair value 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.

 

6.

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 Form 10-K.

On June 30, 2020, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with several banks and other financial institutions or entities from time to time parties to the 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.

The 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 consisted of an initial term loan advance of $10.0 million on June 30, 2020 (the “Closing Date”). Thereafter, subject to the Lenders’ investment committee’s sole discretion, the Company had 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 term loan advances will be funded by the Lenders in the future.

 

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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 31, 2021 and June 30, 2020, the variable contractual interest rate on the Term Loan was 9.75% per annum and the effective rate on the Term Loan was 13.53%.

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

 

7.

Collaboration Agreements and Contract Liabilities

Bionic Sight

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 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 the issuance of the additional shares. 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

 

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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 in March 2020, the Company concluded that equity method accounting was still 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 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 proceeds in January 2020 and can include additional genetic hearing loss targets in the future.

The Company concluded that the Otonomy collaboration agreement is within the scope of 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 months ended March 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.

Contract Liabilities

As of March 31, 2021 and June 30, 2020, accrued and other liabilities on the Condensed Balance Sheets included $374,000 and $149,000, respectively, of deferred revenue, which did not pertain to either the Bionic Sight or Otonomy collaboration agreements. The deferred revenue balance at March 31, 2021 included $225,000 that was billed to a customer but remained uncollected as of such date. Management is unable to estimate when the Company will satisfy the performance obligations pertaining to its deferred revenue at March 31, 2021.

 

8.

Income Taxes

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.

 

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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 warrants have been evaluated 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 in shares of common stock. Based on the terms of the Company’s warrants, management concluded that they should be classified as equity with no subsequent remeasurement as long as the underlying warrant agreements are not modified or amended.

February 2020 Public Offering of AGTC Common Stock

On February 11, 2020, the Company closed an underwritten public offering of 6.5 million 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 the Company. Additionally, the underwriters exercised their option to purchase an 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 included in the Company’s accounts payable on such date.

 

10.

Contingencies

COVID-19 Pandemic

On January 30, 2020, the World Health Organization (“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. The Company could also experience delays resulting from critical follow-up visits required under clinical trial protocols, which could increase the cost of 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 manufacturing, testing or research organizations, could also be impacted by COVID-19, which could result in unavoidable delays and/or increases in the Company’s operating costs.

 

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Notwithstanding the rapid development and rollout of certain vaccines, it is unknown how long the COVID-19 outbreak will continue before the virus, including newly identified strains and variants, is adequately contained, the severity of the virus and the effectiveness of actions to contain and treat those who have contracted the virus. 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 OfferingSM Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”) as sales agent to sell shares 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-constructed build-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.

  

 

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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 15th 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.

 

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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 31, 2021 and our results of operations for the three and nine months ended March 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 (the “2020 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 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 a proprietary gene therapy platform 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 programs in X-linked retinitis pigmentosa (“XLRP”), achromatopsia (“ACHM”) and optogenetics, as well as preclinical programs in Stargardt disease and age-related macular degeneration (“AMD”). In addition to ophthalmology, we have initiated one preclinical program in otology and two preclinical programs targeting central nervous system disorders (“CNS”), including frontotemporal dementia (“FTD”) and amyotrophic lateral sclerosis (“ALS”). Our optogenetics program is being developed in collaboration with Bionic Sight, LLC (“Bionic Sight”) and 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 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.

Since our inception, we have devoted substantially all of our resources to development efforts relating to our proof-of-concept programs in ophthalmology, otology, CNS, and alpha-1 antitrypsin deficiency, an inherited orphan lung disease, including manufacturing product in compliance with good manufacturing practices, preparing to conduct and conducting clinical trials of our product candidates, providing general and administrative support for these operations and protecting our intellectual property. We do not have any products approved for sale and have not generated any revenue from product sales. We have funded our operations to date primarily through public 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.

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 months ended March 31, 2021 and 2020, we reported net losses of $45.7 million and $31.4 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;

 

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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;

 

   

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 31, 2021, we had cash and cash equivalents and liquid investments totaling $111.0 million. We do not expect to generate revenue from product sales unless and until we successfully complete development 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 to complete the XLRP Phase 2/3 trial, 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. 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.

Recent Developments

XLRP

In November 2020, we announced a modification to the primary endpoint for our XLRP Phase 2/3 (“Vista”) and Phase 1/2 Expansion (“Skyline”) trials based on comments received from the FDA. The design of our XLRP Vista 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), a high-dose group (the 1.1E+12 vg/mL Group 5 dose from the ongoing Phase 1/2 trial) and an untreated control group. The primary endpoint will be visual sensitivity defined as having at least a 7 decibel improvement 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 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 the microperimetry data available to date from the Phase 1/2 dose escalation study. Secondary endpoints include mean change in visual sensitivity, improvements in visual acuity and improvements in performance on a visual navigation course. We also plan to include a masked interim analysis at Month 6, with that data expected to be released in the fourth quarter of calendar year 2022, which may provide us with the opportunity to adjust the trial, if necessary, to optimize outcomes.

In November 2020, we also provided additional data from our XLRP Phase 1/2 trial 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, 3 of the 11 patients in Groups 5 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 in the Phase 1/2 trial, which will be part of our XLRP Vista trial and necessary 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 the inclusion criteria for the Skyline and Vista trials, resulting in 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.

 

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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:

 

   

present 12-month trial 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 trial results from the 6-month masked interim analysis in the fourth quarter of calendar year 2022.

As part of the Skyline trial, we intend to dose a total of 12 additional patients across two dose groups. The Skyline trial is intended to evaluate the correlation 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, based on improvements in light discomfort. In November 2020, we provided 12-month data for the original three 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 improvements in at least one measure of visual function, no consistent sustained improvements were observed based on current assessments within the dose groups tested on a groupwise basis. Anecdotal statements, however, and assessments from patient-reported outcome surveys continued to provide us 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 16 patients in the three highest dose groups in the ACHMB3 trial showed improvements in visual sensitivity in the treated area, as measured by static perimetry. No consistent results were seen in the other dose groups. In a subset of these patients with evaluable multi-focal electroretinograms (“ERGs”), improvements in electrical signaling were measurable in 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 in our ACHMB3 and ACHMA3 trials. Our progress was previously hampered by the COVID-19 pandemic, but patients are now being identified and scheduled for screening at multiple sites. In addition, we have amended the study protocol for these trials to allow enrollment of

 

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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 in both trials in the second quarter of calendar year 2021, and preliminary 3-month data from the pediatric patients in both trials are anticipated in the fourth quarter of calendar year 2021.

Build-To-Suit Manufacturing and Quality Control Facility in Alachua, Florida

In May 2021, we announced that we initiated plans to lease a build-to-suit 21,250 square foot current Good Manufacturing Practices (“cGMP”) manufacturing and quality control facility adjacent to our 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 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. 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 11 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 OfferingSM 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 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 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

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.

 

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Otonomy

During October 2019, we entered into a strategic collaboration agreement with 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 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 proceeds in January 2020 and can include additional genetic hearing loss targets in the future.

Additional information regarding the Bionic Sight and Otonomy collaborative agreements can be found in Note 7 to the Unaudited Condensed Financial Statements included in this Quarterly Report on Form 10-Q.

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 in accordance with U.S. generally accepted accounting principles for interim financial information and 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 months ended March 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 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 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. However, we did not recognize any revenue during the three and nine months ended March 31, 2021. 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, our results of operations, financial position and cash flows would be materially adversely affected.

 

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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;

 

   

license and sublicense fees and collaboration expenses;

 

   

the cost 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;

 

   

significant and changing government regulation; and

 

   

the timing and receipt of any regulatory approvals.

A change in the outcome of any of these variables 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.

From our inception and through March 31, 2021, we have incurred approximately $272.6 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.

 

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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. 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 our product candidates.

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 months ended March 31, 2021, investment income, net declined by $0.3 million and $1.0 million, respectively, when compared to the comparable periods in the prior year. Such reductions in investment income, net were primarily due to lower interest rates in the marketplace.

Interest expense

Interest expense during the three and nine months ended March 31, 2021 was primarily attributable to the 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. See Note 8 to the Unaudited Condensed Financial Statements included in this Quarterly Report on Form 10-Q for information regarding significant changes to our uncertain tax positions subsequent to March 31, 2021 and the corresponding favorable effect on our future income tax expense or benefit.

Results of Operations

Comparison of the three months ended March 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
  

 

 

    

 

 

    

 

 

    

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

 

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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 31, 2021 and 2020 were $11.0 million and $8.3 million, respectively, an increase of $2.7 million, or 32%. Such 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 million of increased external spending for our research and discovery programs, which was primarily due to planned material production costs in connection with our CNS preclinical program targeting FTD; and

 

   

$0.5 million of increased other internal research and development expenses for temporary staffing and consultants while we recruit new employees, partially offset by a reduction in laboratory supply costs due to the timing of our needs.

Such increases were partially offset by a $0.5 million decrease in external spending for our ACHM trials and a $0.2 million decrease in our share-based compensation expense. The decrease in ACHM expenses was primarily due to reduced patient enrollment, patient visits and new site activations during the three months ended March 31, 2021 when compared to the prior year, all 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.

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
  

 

 

    

 

 

    

 

 

    

General and administrative and other expenses for the three months ended March 31, 2021 and 2020 were $3.5 million and $3.1 million, respectively, an increase of $0.4 million, or 13%. Such increase was primarily due to 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 were partially offset by a reduction in employee-related costs of $0.2 million that resulted from a lower current year corporate headcount when compared to the prior year.

Comparison of the nine months ended March 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.

 

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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
  

 

 

    

 

 

    

 

 

    

Research and development expenses for the nine months ended March 31, 2021 and 2020 were $34.4 million and $25.3 million, respectively, an increase of $9.1 million, or 36%. Such 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 million of increased external spending for our research and discovery programs, which was primarily due to planned material production costs in connection with our CNS preclinical program targeting FTD; and

 

   

$0.7 million of increased other internal research and development expenses for temporary staffing and consultants while we recruit new employees, partially offset by a reduction in laboratory supply costs due to the timing of our needs.

Such increases were partially offset by: (i) a $1.0 million decrease in external spending for our ACHM trials; (ii) a $0.4 million decrease 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. The decrease in ACHM expenses was primarily due to reduced patient enrollment, patient visits and 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 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 with no corresponding current year activity.

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
  

 

 

    

 

 

    

 

 

    

General and administrative and other expenses for the nine months ended March 31, 2021 and 2020 were $10.3 million and $9.5 million, respectively, an increase of $0.8 million, or 8%. Such increase was primarily due to 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 were partially offset by a reduction in employee-related costs of $0.5 million that resulted from a lower current year corporate headcount when compared to the prior year.

 

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Liquidity and Capital Resources

We have incurred cumulative losses and negative cash flows from operations since our inception and, as of March 31, 2021, we had an accumulated deficit of $227.1 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 of proceeds from the issuance of our common stock, net of issuance costs, in February 2020; (ii) $9.9 million of loan proceeds, net of debt discounts, in June 2020; and (iii) net proceeds of $69.3 million in February 2021 from the underwritten public offering that is described above under “Recent Developments.” Subsequent 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. Among other things, those proceeds are expected to fund certain costs in connection with our lease of a new cGMP build-to-suit manufacturing and quality control facility in Alachua, Florida. Additional information regarding our long-term loan agreement and the new manufacturing and quality control facility can be found in Notes 6 and 11, respectively, to the Unaudited Condensed Financial Statements included in this Quarterly Report on Form 10-Q, as well as above under “Recent Developments.”

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 31, 2021, our cash and cash equivalents were held in bank accounts and money market funds, while our investments consisted 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.

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
  

 

 

    

 

 

    

 

 

    

Operating activities. For both the nine months ended March 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 million during the nine months ended March 31, 2021 was due to a net loss of $45.7 million, partially offset by non-cash items in our statement of operations of $3.6 million and favorable changes in our operating assets and liabilities of $4.4 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 million during the nine months ended March 31, 2021 consisted primarily of cash proceeds of $41.5 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 million.

 

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Financing activities. Cash provided by financing activities of $69.6 million during the nine months ended March 31, 2021 included (i) proceeds of $69.3 million from the issuance of 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 deferred financing fees and taxes related to equity awards and (ii) principal payments on a finance lease. Cash provided 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.

Operating capital requirements

To date, we have not generated any revenue from product sales. We do not know when, or if, we will generate any revenue from product sales. We do not expect to generate 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 million on March 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 to finish our XLRP Vista trial, complete the process necessary to seek 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.

 

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 and Chief 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 and Chief Financial Officer concluded that these disclosure controls and procedures were effective as of March 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 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 (the “2020 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 Form 10-K.

 

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Third parties may initiate legal proceedings alleging claims of intellectual property infringement, including claims related to our XLRP product candidate, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.

Our commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties. There is a substantial amount of litigation, both within 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 block our ability to commercialize such product candidate, including 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 block our ability to develop and commercialize the applicable product candidate unless we obtained 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 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 would be a substantial diversion of employee resources from our business.

In 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-constructed build-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 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, 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.

 

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Table of Contents

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 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 15th 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.

 

 

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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))
    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))
    4.1    Form of Common Stock Purchase Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, event date January 28, 2021, filed with the SEC on January 29, 2021 (File No. 001-36370))
  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
101.1*    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 for the three 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.

 

*

Filed herewith.

**

Furnished herewith.

 

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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

  William A. Sullivan, Chief Financial Officer
  Date: May 17, 2021

 

31

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Susan B. Washer, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Applied Genetic Technologies Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  (a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  (b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  (c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  (d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  (b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 17, 2021     By:  

/s/ Susan B. Washer

      Susan B. Washer
      President and Chief Executive Officer
      (Principal Executive Officer)
EX-31.2

Exhibit 31.2

CERTIFICATION

I, William A. Sullivan, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Applied Genetic Technologies Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  (a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  (b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  (c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  (d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  (b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 17, 2021     By:  

/s/ William A. Sullivan

      William A. Sullivan
      Chief Financial Officer
      (Principal Financial Officer)
EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Applied Genetic Technologies Corporation (the “Company”) for the period ended March 31, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company hereby certifies, pursuant to 18 U.S.C. Section 1350, that to her or his knowledge:

 

  (1)

the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

  (2)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: May 17, 2021     By:  

/s/ Susan B. Washer

      Susan B. Washer
      President and Chief Executive Officer
      (Principal Executive Officer)
Date: May 17, 2021     By:  

/s/ William A. Sullivan

      William A. Sullivan
      Chief Financial Officer
      (Principal Financial Officer)

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Applied Genetic Technologies Corporation and will be retained by Applied Genetic Technologies Corporation and furnished to the Securities and Exchange Commission or its staff upon request.