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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
 
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2022
or
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from               to            
Commission file number 001-37418
Sio Gene Therapies Inc.
(Exact name of registrant as specified in its charter)
Delaware   85-3863315
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)
130 West 42nd St., 26th Floor
New York, New York
  10036
(Address of principal executive offices)   (Zip Code)
Registrant’s telephone number, including area code: (877) 746-4891
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class Trading Symbol Name of each exchange on which registered
Common Stock, par value $0.00001 per share SIOX The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   Yes ☐   No  ☒
Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  Yes  ☐   No  ☒
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. (Check one):
Large accelerated filer
Accelerated filer
Non-accelerated filer ý Smaller reporting company ý
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 7(a)(2)(B) of the Securities Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  ☐   No   ☒
The aggregate market value of voting shares of common stock held by non-affiliates of the registrant at the end of the registrant's most recently completed second fiscal quarter ended September 30, 2021 was approximately $117,355,327 based on the last reported sale price of the shares of common stock on The Nasdaq Global Select Market on September 30, 2021 of $2.17 per share.
The number of shares outstanding of the Registrant’s common stock, $0.00001 par value per share, on June 10, 2022, was 73,739,378.



SIO GENE THERAPIES INC.
 
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED MARCH 31, 2022
 
TABLE OF CONTENTS

 
  Page
5
6


3


Summary of the Material Risks Associated with Our Business
Our business is subject to numerous risks and uncertainties that you should be aware of in evaluating our business. These risks include, but are not limited to, the following:
We may not be successful in identifying and implementing any strategic business combination or other transaction and any strategic transactions that we may consummate in the future could have negative consequences.
If we are successful in completing a strategic transaction, we may be exposed to other operational and financial risks.
If a strategic transaction is not consummated, our Board may decide to pursue a dissolution and liquidation. In such an event, the amount of cash available for distribution to our stockholders will depend heavily on the timing of such liquidation as well as the amount of cash that will need to be reserved for commitments and contingent liabilities.
We have a limited operating history and have never generated any product revenues.
Our business, operations and future prospects could continue to be adversely impacted by the effects of health epidemics, including the recent COVID-19 pandemic.
We expect to incur significant losses for the foreseeable future and may never achieve or maintain profitability.
Third-party claims or litigation alleging infringement of patents or other proprietary rights or seeking to invalidate patents or other proprietary rights may delay or prevent the development and commercialization of any future product candidates.
We may not be able to protect our intellectual property rights throughout the world, which could impair our business.
The market price of our common stock has been and is likely to continue to be highly volatile, and you may lose some or all of your investment.
The intended tax effects of our corporate structure prior to and following the Domestication (as defined below) and our corporate reorganization to align our corporate structure with current and future business activity (the "Reorganization"), and intercompany arrangements prior to the Domestication and Reorganization, depend on the application of the tax laws of various jurisdictions and on how we operate our business.
The summary risk factors described above should be read together with the text of the full risk factors below, in the section titled “Risk Factors” in Part I, Item 1A. and the other information set forth in this Annual Report on Form 10-K, including our consolidated financial statements and the related notes, as well as in other documents that we file with the Securities and Exchange Commission. The risks summarized above or described in full below are not the only risks that we face. Additional risks and uncertainties not precisely known to us, or that we currently deem to be immaterial may also harm our business, financial condition, results of operations and future growth prospects.
4


PART I.
Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements are often identified by the use of words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "plan," "project," "will," "would" or the negative or plural of these words or similar expressions or variations, although not all forward-looking statements contain these identifying words. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur and actual results could differ materially from those projected in the forward-looking statements.
The forward-looking statements appearing in a number of places throughout this Annual Report on Form 10-K include, but are not limited to, statements regarding our intentions, beliefs, projections, outlook, analyses or current expectations concerning, among other things:
the timing and outcome of our exploration of potential strategic alternatives;
our anticipated uses of cash, cash runway and future cash position;
the timing, cost and anticipated savings benefits of internal restructurings that we have conducted or may conduct in the future, including headcount reductions;
our public securities’ potential liquidity and trading;
continued service of, or changes required in, our officers or other key personnel;
our ability to obtain, maintain and enforce intellectual property rights;
our estimates regarding our results of operations, financial condition, liquidity, capital requirements, prospects, growth and strategies;
our lack of profitability and the need for additional capital;
the impact of laws and government regulations; and
our ability to maintain and operate our business in light of the COVID-19 pandemic.
We have based these forward-looking statements largely on our current expectations and projections about future events, including economic and financial trends that we believe may affect our financial condition, results of operations, business strategy, nonclinical studies and clinical trials and financial needs. Such forward-looking statements are subject to a number of risks, uncertainties, assumptions and other factors known and unknown that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified herein, and those discussed in the section titled "Risk Factors" set forth in Part I, Item 1A of this Annual Report on Form 10-K and in our other filings with the U.S. Securities and Exchange Commission ("SEC"). These risks are not exhaustive. You should not rely upon forward-looking statements as predictions of future events. Furthermore, such forward-looking statements speak only as of the date of this report. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.
In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements as predictions of future events.
5


In November 2020, Axovant Gene Therapies Ltd. changed its jurisdiction of incorporation from Bermuda to Delaware and changed its corporate name to Sio Gene Therapies Inc., which we refer to collectively as the Domestication. Unless the context requires otherwise, references in this report to "Sio", the "Company," "we," "us," and "our" refer to (i) Axovant Gene Therapies Ltd. and its subsidiaries prior to the Domestication and (ii) Sio Gene Therapies Inc. and its subsidiaries after the Domestication. In addition, all references to “common stock” before the Domestication refer to the common shares of Axovant Gene Therapies Ltd., and all such references after the Domestication refer to the common stock of Sio.
Item 1.        Business
Overview
Historically, we were a clinical-stage company focused on developing gene therapies to radically transform the lives of patients with neurodegenerative diseases. We previously had three clinical-stage programs: AXO-AAV-GM1 for the treatment of GM1 gangliosidosis, AXO-AAV-GM2 for the treatment of GM2 gangliosidosis (including Tay-Sachs and Sandhoff diseases) and AXO-Lenti-PD for the treatment of Parkinson’s disease.
Currently, we are winding down these three clinical-stage programs while also working on one pre-clinical program.
In June 2018, we entered into an exclusive license agreement (the “Oxford Agreement”) with Oxford Biomedica (UK) Ltd. (“Oxford”) pursuant to which we received a worldwide, royalty-bearing, sub-licensable license under certain patents and other intellectual property controlled by Oxford to develop and commercialize AXO-Lenti-PD and related gene therapy products. In February 2022, we provided notice to Oxford to terminate the Oxford Agreement to develop and commercialize AXO-Lenti-PD and related gene therapy product candidates. We determined to terminate the Oxford Agreement and redirect resources to our AXO-AAV-GM1 and -GM2 programs, as well as other strategic initiatives, due to several factors, including the resource requirements and development timelines to reach meaningful value inflection for the program and an increasingly challenging market and regulatory environment for Parkinson’s disease. We will continue to incur immaterial expenses in connection with the Oxford Agreement until its termination becomes effective.
In December 2018, we entered into an exclusive license agreement (the “UMMS Agreement”) with the University of Massachusetts Medical School (“UMMS”) pursuant to which we received a worldwide, royalty-bearing, sub-licensable license under certain patent applications and any patents issuing therefrom, biological materials and know-how controlled by UMMS to develop and commercialize gene therapy product candidates, including AXO-AAV-GM1 and AXO-AAV-GM2, for the treatment of GM1 gangliosidosis and GM2 gangliosidosis (including Tay-Sachs disease and Sandhoff disease). In April 2022, we provided notice to UMMS to terminate the UMMS Agreement. The UMMS Agreement will be formally terminated following the 90-day wind-down/termination notice period. We will continue to conduct clinical operations for the AXO-AAV-GM1 and AXO-AAV-GM2 programs under the UMMS Agreement during the 90-day wind-down/termination period.
In parallel with our decision to terminate the AXO-AAV-GM1 and -GM2 programs, in April 2022, our board of directors approved and we announced the strategic decision to explore and review a range of strategic alternatives focused on maximizing stockholder value from our existing cash and cash equivalents, including a potential sale, merger, business combination or similar transaction. In connection with these actions, and as approved by our board of directors, we began implementing a significant headcount reduction, which we expect to conclude in June 2022. As part of these strategic decisions, we expect to incur aggregate costs estimated to range from approximately $0.9 million to $1.5 million relating to the reduction in headcount, all to be incurred during the fiscal quarter ending June 30, 2022.
While we continue to conduct certain pre-clinical research and development initiatives in gene therapy, we expect to devote substantial time and resources to exploring strategic alternatives. Despite devoting significant efforts to identify and evaluate potential strategic alternatives, there can be no assurance that this strategic review process will result in us pursuing any transaction or that any transaction, if pursued, will be completed on attractive terms or at all. We have not set a timetable for completion of this strategic review process, and our board of directors has not approved a definitive course of action. Additionally, there can be no assurances that any particular course of action, business arrangement or transaction, or series of transactions, will be pursued, successfully consummated or lead to increased stockholder value or that we will make any additional cash distribution to our stockholders. In addition, we expect to incur additional operating expenses associated with the wind-down of the UMMS Agreement and the Oxford Agreement, including clinical trial activities that we will continue to conduct during the wind-down period.

6


The Domestication
We have substantially completed our previously disclosed corporate transformation to align corporate structure and governance with current and future business activity, including significantly reducing the number of our subsidiaries. On November 12, 2020, Axovant Gene Therapies Ltd. ("AGT") discontinued as a Bermuda exempted company pursuant to Section 132G of the Companies Act 1981 of Bermuda, and pursuant to Section 388 of the General Corporation Law of the State of Delaware (the “DGCL”), continued its existence under the DGCL as a corporation named Sio Gene Therapies Inc. ("Sio") organized in the State of Delaware. The Domestication effected a change in our jurisdiction of incorporation, and other changes of a legal nature, including changes in our organizational documents. Our consolidated business, operations, assets and liabilities did not change upon effectiveness of the Domestication. However, following the Domestication, the principal executive offices and registered offices of Sio are located at 130 West 42nd St, 26th Floor, New York, New York 10036, and the telephone number for Sio at its principal executive offices is 1 (877) 746-4891. The fiscal year end of Sio Gene Therapies Inc. following the Domestication remains at March 31. In addition, our directors and executive officers immediately after the Domestication were the same individuals who were directors and executive officers, respectively, immediately prior to the Domestication.
In the Domestication, each of our currently issued and outstanding common shares automatically converted by operation of law, on a one-for-one basis, into shares of Sio common stock. Consequently, upon the effectiveness of the Domestication, each holder of an AGT common share instead holds a share of Sio common stock representing the same proportional equity interest in Sio as that stockholder held in AGT and representing the same class of shares. The number of shares of Sio common stock outstanding immediately after the Domestication is the same as the number of common shares of AGT. outstanding immediately prior to the Domestication. In connection with the Domestication, we adopted a new certificate of incorporation, bylaws and form of common stock certificate, copies of which were filed as Exhibits 3.1, 3.2 and 4.1, respectively, to our Report on Form 8-K12G3 filed with the SEC on November 13, 2020.
Manufacturing
We currently do not own or operate facilities for product manufacturing. We previously engaged with third parties and our license partners to manufacture our program materials, which we expect to cease following termination of the UMMS Agreement and Oxford Agreement and related wind-down activities. We previously hired experienced personnel with gene therapy product formulation and manufacturing expertise.
Competition
The biotechnology and biopharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. We and any future strategic partner will face competition from many different sources, including commercial pharmaceutical and biotechnology enterprises, academic institutions, government agencies and private and public research institutions.
Many of our competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. Our commercial opportunities will be reduced or eliminated if our competitors develop and commercialize similar products that are safer, more effective, have fewer side effects or are less expensive than any products that we and/or our collaborators may develop.
Intellectual Property
Our commercial success depends in part on our ability and the ability of any future strategic partner to obtain and maintain proprietary protection for our future product candidates, novel discoveries, product development technologies and other know-how. Our commercial success also depends on our ability and the ability of any future strategic partner to operate without infringing on the proprietary rights of others. Our policy is to seek to protect our proprietary position by, among other methods, filing U.S. and foreign patents and patent applications related to our proprietary technology, inventions and improvements that are important to the development and implementation of our business. We also rely on trademarks, trade secrets, copyrights, know-how, continuing technological innovation and potential in-licensing and acquisition opportunities where appropriate to develop our proprietary position.
While we aim to seek broad coverage when filing and prosecuting patent applications, there is always a risk that an alteration to the process of obtaining patents or changes to the patent law in the United States or elsewhere may provide sufficient basis for a competitor to challenge or avoid infringement of any patents that might issue. In addition, we cannot provide any assurance that any patents will issue from our or any future strategic partner's pending applications or any future applications or that any future patents that might issue will adequately protect our intellectual property or cover our future product candidates.
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If granted, individual patents are valid for varying periods depending on the date of filing of the patent application or the date of patent issuance and the legal patent term in the countries in which they are obtained. Generally, patents issued from regularly filed applications in the United States are granted a term of 20 years from the earliest non-provisional filing date. In addition, in certain instances, a patent's term can be extended via Patent Term Adjustment ("PTA") to recapture a portion of the U.S. Patent and Trademark Office's (the "USPTO") delay in issuing the patent as well as via Patent Term Extension ("PTE") to recapture a portion of the term effectively lost as a result of the FDA regulatory review period. However, as to the FDA component, the PTE period can be applied to only one patent per approved product, cannot be longer than five years and the total patent term including the PTE period must not exceed 14 years following FDA approval of an NDA or BLA. The duration of foreign patents varies in accordance with provisions of applicable local law, but typically is also 20 years from the earliest non-provisional filing date. The actual protection afforded by a patent varies on a product by product basis, on a claim by claim basis, from country to country and depends upon many factors, including the type of patent, the scope of its coverage, the availability of regulatory-related extensions, the availability of legal remedies in a particular country and the validity and enforceability of the patent. The patent term of a European patent is 20 years from its filing date; however, unlike in the United States, a European patent is not granted PTA for delays at the European Patent Office. However, the European Union does have a compensation program similar to the U.S.’s PTE called Supplementary Patent Certificate ("SPC") that would effectively extend patent protection for term lost during regulatory delay, if any, for up to five years on one patent and the total patent term including the SPC must not exceed 15 years following the EMA granting of marketing authorization.
Furthermore, we may rely upon trade secrets and know-how, continuing technological innovation and future strategic partnerships to develop our competitive position. We seek to protect our proprietary information, in part by using confidentiality agreements with our commercial partners, collaborators, employees and consultants and invention assignment agreements with our employees. We also have or seek confidentiality agreements and invention assignment agreements with selected partners and consultants. These agreements are designed to protect our proprietary information and, in the case of the invention assignment agreements, to grant us ownership of technologies that are developed by our employees or through a relationship with a third party. These agreements may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors. To the extent that our current and future partners, collaborators, employees and consultants use intellectual property owned by others in their work, disputes may arise as to the rights in related or resulting know-how and inventions.
Our commercial success for future product candidates will also depend in part on not infringing the proprietary rights of third parties. It is uncertain whether the issuance of any third-party patent would require us to alter our development or future commercial strategies, or alter our future product candidate(s) or processes, obtain licenses or cease certain activities. Our breach of any license agreements or failure to obtain a license to proprietary rights that we may require to develop or commercialize future product candidate(s) may have an adverse impact on our business.
Government Regulation
In the United States, pharmaceutical and biological products are subject to extensive regulation by the FDA under the Federal Food, Drug, and Cosmetic Act ("FDCA"), and the Public Health Service Act ("PHSA"). The FDCA, PHSA, and other federal and state statutes and regulations, govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, distribution, sampling and import and export of pharmaceutical products. Failure to comply with applicable U.S. requirements may subject a company to a variety of administrative or judicial sanctions, such as FDA refusal to approve pending BLAs, warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties and criminal prosecution. Our remaining clinical activities will also require us to comply with varying regulatory requirements of other countries and jurisdictions regarding quality and safety and governing clinical trials.
In addition, although we do not have any products on the market, our current and future business operations may be subject to additional healthcare regulation and enforcement by the U.S. federal government and by authorities in the states and foreign jurisdictions in which we conduct our business. Such laws include, without limitation, state and federal anti-kickback, fraud and abuse, false claims, privacy and security, price reporting and physician sunshine laws. Some of our pre-commercial activities are subject to some of these laws. If our operations are found to be in violation of any of such laws or any other governmental regulations that apply to us, we may be subject to significant penalties, including, without limitation, administrative, civil and criminal penalties, damages, fines, disgorgement, contractual damages, reputational harm, diminished profits and future earnings, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement, the curtailment or restructuring of our operations, exclusion from participation in federal and state healthcare programs and imprisonment, any of which could adversely affect our ability to operate our business and our financial results.

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We are subject to a variety of financial disclosure and securities trading regulations, both in the United States and in other jurisdictions in which we operate, as a public company in the U.S., including laws relating to the oversight activities of the SEC and the regulations of the Nasdaq Global Select Market ("Nasdaq"), on which our shares of common stock are traded.

We are also subject to various other federal, state, and local laws and regulations, including those related to safe working conditions, and the storage, transportation, or discharge of items that may be considered hazardous substances, hazardous waste, or environmental contaminants.

In addition to the foregoing, state and federal laws regarding environmental protection and hazardous substances, including the Occupational Safety and Health Act, the Resource Conservancy and Recovery Act and the Toxic Substances Control Act, affect our business. These and other laws govern our use, handling and disposal of various biological, chemical and radioactive substances used in, and wastes generated by, our operations. If our operations result in contamination of the environment or expose individuals to hazardous substances, we could be liable for damages and governmental fines. We believe that we are in material compliance with applicable environmental laws and that continued compliance therewith will not have a material adverse effect on our business. We cannot predict, however, how changes in these laws may affect our future operations.

We are subject to the Foreign Corrupt Practices Act of 1977, as amended ("FCPA"). The FCPA prohibits U.S. companies and their representatives from processing, offering, or making payments of money or anything of value to foreign officials with the intent to obtain or retain business or seek a business advantage. In certain countries, the health care professionals we regularly interact with may meet the definition of a foreign government official for the purposes of the FCPA. Our international activities create the risk of unauthorized payments or offers of payments by our employees, consultants and agents, even though they may not always be subject to our control. We discourage these practices by our employees, consultants, and agents. However, our existing safeguards may prove to be less than effective, and our employees, consultants, and agents may engage in conduct for which we might be held responsible. Recently, there has been a substantial increase in anti-bribery law enforcement activity by U.S. regulators, with more frequent and aggressive investigations and enforcement activity by both the Department of Justice and the SEC. A determination that our operations or activities are not, or were not, in compliance with U.S. or foreign laws or regulations could result in the imposition of substantial fines, interruptions of business, loss of suppliers, vendor or other third-party relationships, termination of necessary licenses or permits, and legal or equitable sanctions. Other internal or governmental investigations or legal or regulatory proceedings, including lawsuits brought by private litigants, may also follow as a consequence.

Employees and Human Capital Resources
As of June 3, 2022, we had 12 full-time employees. Our employees are not represented by any collective bargaining unit, and we believe our relations with our employees are good.
We are committed to protecting our employees everywhere we operate. We have taken additional measures during the COVID-19 pandemic, including offering COVID-19 testing, as necessary. As of June 3, 2022, all of our employees are fully-remote workers as we are now a remote-first company.
Corporate Information
We were originally an exempted limited company incorporated under the laws of Bermuda in October 2014 and were named Axovant Gene Therapies Ltd. from March 2019 until November 2020. In November 2020, we became a Delaware corporation in connection with the Domestication and changed our corporate name to Sio Gene Therapies Inc. Our principal executive office is located at 130 West 42nd Street, 26th Floor, New York, New York 10036, and our telephone number is 1 (877) 746-4891.
Available Information
Our website is www.siogtx.com. The contents of, or information accessible through, our website are not part of this Annual Report on Form 10-K, and our website address is included in this document as an inactive textual reference only. We make our filings with the SEC, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports, available free of charge on our website as soon as reasonably practicable after we file such reports with, or furnish such reports to, the SEC. Additionally, the SEC maintains an internet site that contains reports, proxy and information statements and other information. The address of the SEC’s website is www.sec.gov.
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Item 1A.    Risk Factors
You should carefully consider the following risk factors, in addition to the other information contained in this Annual Report on Form 10-K, including the section of this report titled "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties of which we are unaware, or that we currently believe are not material, may also become important factors that adversely affect our business. If any of the events described in the following risk factors and the risks described elsewhere in this report occurs, our business, operating results and financial condition could be seriously harmed and the trading price of our shares of common stock could decline. This Annual Report on Form 10-K also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of factors that are described below and elsewhere in this report. See the section under Part I of this report titled "Cautionary Note Regarding Forward-Looking Statements".
Risks Related to our Strategic Alternative Process
We may not be successful in identifying and implementing any strategic business combination or other transaction and any strategic transactions that we may consummate in the future could have negative consequences.
We continue to evaluate all potential strategic options for the Company, including a merger, reverse merger, sale, wind-down, liquidation and dissolution or other strategic transaction. However, there can be no assurance that we will be able to successfully consummate any particular strategic transaction. The process of continuing to evaluate these strategic options may be very costly, time-consuming and complex and we have incurred, and may in the future incur, significant costs related to this continued evaluation, such as legal and accounting fees and expenses and other related charges. We may also incur additional unanticipated expenses in connection with this process. A considerable portion of these costs will be incurred regardless of whether any such course of action is implemented or transaction is completed. Any such expenses will decrease the remaining cash available for use in our business and may diminish or delay any future distributions to our stockholders. Any delays in identifying a potential counterparty will cause our cash balance to continue to deplete, which could make us less attractive as a strategic counterparty. The continued review of our strategic options may also create continued uncertainty for our employees and this uncertainty may adversely affect our ability to retain key employees and to hire new talent necessary to maintain our ongoing operations or to execute additional potential strategic options, which could have a material adverse effect on our business. Further, the market capitalization of our company is below the value of our cash and cash equivalents. Potential counterparties in a strategic transaction involving our company may place minimal or no value on our remaining assets.
In addition, any strategic business combination or other transactions that we may consummate in the future could have a variety of negative consequences and we may implement a course of action or consummate a transaction that yields unexpected results that adversely affect our business and decrease the remaining cash available for use in our business or the execution of our strategic plan. Our board of directors remains dedicated to diligently deliberating upon and making informed decisions that the directors believe are in the best interests of the Company and its stockholders. However, there can be no assurances that any particular course of action, business arrangement or transaction, or series of transactions, will be pursued, be successfully consummated, lead to increased stockholder value, or achieve the anticipated results. Any failure of such potential transaction to achieve the anticipated results could significantly impair our ability to enter into any future strategic transactions and may significantly diminish or delay any future distributions to our stockholders. In addition, given the recent restructuring of our operations, it may be difficult to evaluate our current business and future prospects on the basis of historical operating performance.
If we are successful in completing a strategic transaction, we may be exposed to other operational and financial risks.
The negotiation and consummation of any strategic transaction may also require more time or greater cash resources than we anticipate and expose us to other operational and financial risks, including:
increased near-term and long-term expenditures;
exposure to unknown liabilities;
higher than expected acquisition or integration costs;
incurrence of substantial debt or dilutive issuances of equity securities to fund future operations;
write-downs of assets or goodwill or incurrence of non-recurring, impairment or other charges;
increased amortization expenses;
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difficulty and cost in combining the operations and personnel of any acquired business with our operations and personnel;
impairment of relationships with key suppliers or customers of any acquired business due to changes in management and ownership;
inability to retain key employees of our company or any acquired business; and
possibility of future litigation.
Any of the foregoing risks could have a material adverse effect on our business, financial condition and prospects.
If a strategic transaction is not consummated, our Board may decide to pursue a dissolution and liquidation. In such an event, the amount of cash available for distribution to our stockholders will depend heavily on the timing of such liquidation as well as the amount of cash that will need to be reserved for commitments and contingent liabilities.
There can be no assurance that a strategic transaction will be completed. If a strategic transaction is not completed, our Board may decide to pursue a dissolution and liquidation. In such an event, the amount of cash available for distribution to our stockholders will depend heavily on the timing of such decision, as with the passage of time the amount of cash available for distribution will be reduced as we continue to fund our operations. In addition, if our Board were to approve and recommend, and our stockholders were to approve, a dissolution and liquidation, we would be required under Delaware corporate law to pay our outstanding obligations, as well as to make reasonable provision for contingent and unknown obligations, prior to making any distributions in liquidation to our stockholders. As a result of this requirement, a portion of our assets may need to be reserved pending the resolution of such obligations and the timing of any such resolution is uncertain. In addition, we may be subject to litigation or other claims related to a dissolution and liquidation. If a dissolution and liquidation were pursued, our Board, in consultation with our advisors, would need to evaluate these matters and make a determination about a reasonable amount to reserve. Accordingly, holders of our common stock could lose all or a significant portion of their investment in the event of a liquidation, dissolution or winding up.
We may become involved in securities class action litigation that could divert management’s attention and harm the company’s business, and insurance coverage may not be sufficient to cover all costs and damages.
In the past, securities class action litigation has often followed certain significant business transactions, such as the sale of a company or announcement of any other strategic transaction, or the announcement of negative events, such as discontinuations of clinical programs. These events may also result in investigations by the SEC. We may be exposed to such litigation or investigation even if no wrongdoing occurred. Litigation and investigations are usually expensive and divert management’s attention and resources, which could adversely affect our business and cash resources and our ability to consummate a potential strategic transaction or the ultimate value our stockholders receive in any such transaction.
Risks Related to Our Business, Financial Position and Capital Requirements
We have a limited operating history and have never generated any product revenues.
We are a clinical-stage company with a limited operating history. Our operations to date have been limited to organizing and staffing our company, raising capital, acquiring product candidates and advancing our product candidates into clinical development. We have not yet demonstrated an ability to successfully complete a registration-enabling pivotal clinical trial, obtain marketing approval, manufacture a clinical-stage or commercial-scale product, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization. We have recently terminated our clinical programs and have focused our efforts largely on identifying a strategic transaction or alternative. While we continue to explore certain pre-clinical research and development initiatives, we may never be successful in developing or commercializing any product candidates, including following consummation of any strategic transaction. Consequently, we have no meaningful operations upon which to evaluate our business and predictions about our future success or viability may not be as accurate as they could be if we had a longer operating history or a history of successfully developing and commercializing pharmaceutical products.
We have never been profitable, have not generated any revenue from product sales, and have no products approved for commercial sale.

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Even if we consummate a strategic transaction with another clinical-stage development company or determine to pursue development of future product candidates, we do not know when those candidates will generate revenue, if at all. Our ability to generate product revenue will depend on a number of factors, including our ability to:
successfully commence and complete clinical trials and obtain regulatory approval for the marketing of product candidates;
establish effective sales, marketing and distribution systems for product candidates;
add operational, financial and management information systems and personnel, including personnel to support our clinical, manufacturing and planned future commercialization efforts and operations as a public company;
initiate and continue relationships with third-party suppliers and manufacturers and have clinical and commercial quantities of product candidates manufactured at acceptable cost and quality levels;
attract and retain an experienced management and advisory team;
raise additional funds when needed and on terms acceptable to us;
achieve broad market acceptance of future products in the medical community and with third-party payors and consumers;
launch commercial sales of future products, whether alone or in collaboration with others;
compete effectively with other biotechnology companies; and
obtain, maintain, expand and protect necessary intellectual property rights.
Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses, or when, or if, we will be able to achieve or maintain profitability. Even if any future product candidates are approved for commercial sale, we anticipate incurring significant costs associated with their commercial launch. If we cannot successfully execute any one of the foregoing, our business may not succeed, and your investment will be adversely affected.
Our business, operations and future prospects could continue to be adversely impacted by the effects of health epidemics, including the recent COVID-19 pandemic.
Our business, operations and future prospects could continue to be adversely impacted by health epidemics wherever we have business operations. For example, the global COVID-19 pandemic and measures introduced by local, state and federal governments to contain the virus and mitigate its public health effects have significantly impacted and may continue to significantly impact our industry and the global economy. These and similar, and perhaps more severe, disruptions in our operations, our industry and the global economy could negatively impact our business, operating results and financial condition.
Our clinical trials have been affected by the COVID-19 pandemic in the past, including emerging variant strains of the virus. Clinical trial progression, dosing, patient enrollment and related activities have been delayed due to concerns among patients about participating in clinical trials during a pandemic. Certain of our patients experienced difficulty following certain aspects of clinical trial protocols due to quarantines that impeded patient movement and interrupted healthcare services. For example, patients in our prior clinical trials for AXO-AAV-GM1 and AXO-AAV-GM2 were infants, often with advanced disease, who may not be able to safely participate in clinical trials for these product candidates during the COVID-19 pandemic or if they have not or are not eligible to receive COVID-19 vaccinations. Additionally, certain elderly patients in previous clinical trials were either unable to, or refused to, participate in clinical assessments at our research sites in the United Kingdom due to the COVID-19 pandemic. These COVID-19 related issues may prolong the time required to conduct any future clinical trials, including following the consummation of a strategic transaction, and/or impact the quality of the data obtained from one or more of such future studies or trials.
While the potential future economic impact caused by, and the duration of, the COVID-19 pandemic is difficult to assess or predict, the COVID-19 pandemic (as well as the invasion of Ukraine by Russia and the related sanctions imposed against Russia) could result in significant and prolonged disruption of global financial markets, which has negatively impacted and may continue to reduce our ability to access capital, limiting the financial resources available to us. These impacts have also been caused by related effects of the COVID-19 pandemic, such as inflationary pressures and stock price volatility, particularly in the biotechnology and drug development sectors. In addition, economic recession or additional market corrections resulting from, among other things, the spread of COVID-19 could materially affect our business and the value of our common stock. These impacts may harm our ability to identify and consummate a strategic transaction on attractive terms or at all. In
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particular, many potential counterparties in any strategic transaction will require additional external financing to realize the benefits from such transaction, which may be difficult to execute as a result of the foregoing factors.
The ultimate impact and evolving effects of the COVID-19 pandemic or a similar health epidemic are highly uncertain and subject to change. While vaccines have become available in many countries and most economies have reopened, we do not yet know the full extent of potential delays or impacts on our business, our clinical trials, healthcare systems or the global economy as a whole. New waves of outbreak or variant strains of the virus have emerged and may result in re-closures or other preventative measures. These effects could harm our operations, and we will continue to monitor the COVID-19 situation closely.
Our corporate restructuring and the associated headcount reduction may not result in anticipated savings, could result in total costs and expenses that are greater than expected and could disrupt our business.
In April 2022, we commenced an organizational restructuring intended to significantly reduce our workforce by June 30, 2022. We may not realize, in full or in part, the anticipated benefits, savings and improvements in our cost structure from our restructuring efforts due to unforeseen difficulties, delays or unexpected costs. If we are unable to realize the expected operational efficiencies and cost savings from the restructuring, our operating results and financial condition would be adversely affected. Due to our limited resources, we may not be able to effectively manage our operations or retain qualified personnel, which may result in weaknesses to our infrastructure and operations, risks that we may be unable to comply with legal and regulatory requirements, risks to our internal controls and disclosure controls, and loss of employees and reduced productivity among remaining employees. The loss of additional personnel may also negatively impact our ability to identify and consummate a strategic transaction.
The restructuring resulted in the loss of institutional knowledge and expertise and the reallocation of and combination of certain roles and responsibilities across the organization, all of which could adversely affect our operations. Further, the restructuring and possible additional cost-containment measures may yield unintended consequences, such as attrition beyond our intended workforce reduction and reduced employee morale. We may be required to rely more heavily on temporary or part-time employees, third party contractors and consultants to assist with managing our operations. These consultants are not our employees and may have commitments to, or consulting or advisory contracts with, other entities that may limit their availability to us. We will have only limited control over the activities of these consultants and can generally expect these individuals to devote only limited time to our activities. Failure of any of these persons to devote sufficient time and resources to our business could harm our business. Employee litigation related to the headcount reduction could be costly and prevent management from fully concentrating on the business.
If our management is unable to successfully manage this transition and restructuring activities, our expenses may be more than expected and we may be unable to implement our business strategy. As a result, our future financial performance, operations, and prospects would be negatively affected.
We expect to incur significant losses for the foreseeable future and may never achieve or maintain profitability.
Investment in pharmaceutical and biological product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that a product candidate will fail to gain regulatory approval or become commercially viable. We have never generated any revenues, and we cannot estimate with precision the extent of our future losses. We do not currently have any products that are available for commercial sale and we may never generate revenue from selling products or achieve profitability. We expect to continue to incur substantial and increasing losses as we identify strategic alternatives and continue exploration of certain pre-clinical research and development initiatives. We are uncertain when or if we will achieve profitability and, if so, whether we will be able to sustain it.
Our ability to produce revenue and achieve profitability is dependent on our ability to identify and consummate a strategic transaction or identify and develop future product candidates, obtain necessary regulatory approvals, and have any such product candidates manufactured and successfully marketed and commercialized. We cannot assure you that we will be profitable even if we successfully commercialize any future product candidates. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Failure to become and remain profitable may adversely affect the market price of our common stock and our ability to raise capital and continue operations.
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In order to meet our long-term operating requirements, including following any strategic transaction, we will need, among other things, additional capital resources. We could use our available capital resources sooner than we currently expect. We continually assess multiple options to obtain additional funding to support our operations, including proceeds from offerings of our equity securities or debt, or transactions involving product development, technology licensing or collaboration arrangements, or other sources of capital. Sources of a sufficient amount of financing may not be available to us on favorable terms, if at all, and our ability to raise additional capital has been, and may continue to be, adversely impacted by, among other things, potentially worsening global economic conditions and the recent disruptions to and volatility in the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may not be able to successfully identify and consummate a strategic transaction or pursue the development of any future product candidate.
Our current or prior employees, independent contractors, principal investigators, consultants, commercial collaborators, manufacturers, service providers and other vendors, or those of our affiliates, may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have an adverse effect on our results of operations.
Our employees and contractors, including any current or prior principal investigators, consultants, commercial collaborators, manufacturers, service providers and other vendors, or those of our affiliates, may engage in fraudulent or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or other unauthorized activities that violate the laws and regulations, including those of the FDA and other similar regulatory bodies that require the reporting of true, complete and accurate information; manufacturing standards; federal, state and foreign healthcare fraud and abuse laws and data privacy; or laws that require the true, complete and accurate reporting of financial information or data. In particular, sales, marketing and other business arrangements in the healthcare industry are subject to extensive laws intended to prevent fraud, kickbacks, self-dealing, bribery, corruption, antitrust violations, and other abusive practices. These laws may restrict or prohibit a wide range of business activities, including research, manufacturing, distribution, pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Activities subject to these laws also involve the improper use or misrepresentation of information obtained in the course of clinical trials, the creation of fraudulent data in nonclinical studies or clinical trials or illegal misappropriation of drug product, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter employee or third-party misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. Additionally, we are subject to the risk that a person or government agency could allege such fraud or other misconduct, even if none occurred. Even though we have ceased clinical development activities for our existing programs, if our employees, independent contractors, principal investigators, consultants, commercial collaborators, manufacturers, service providers or other vendors, or those of our affiliates, are alleged or found to be in violation of any such regulatory standards or requirements, or become subject to a corporate integrity agreement or similar agreement and curtailment of our operations, it could have a significant impact on our business and financial results, including the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, FDA debarment, contractual damages, reputational harm, diminished profits and future earnings, additional reporting requirements and oversight, any of which could adversely affect our ability to operate our business and our results of operations.
Potential product liability lawsuits against us could cause us to incur liabilities and limit commercialization of any products that we may develop.
The prior use of our product candidates in clinical trials exposes us to the risk of product liability claims. Product liability claims might be brought against us by clinical trial patients, health care providers, pharmaceutical companies or others otherwise coming into contact with our prior product candidates. On occasion, large monetary judgments have been awarded in class action lawsuits based on drugs that had unanticipated adverse effects. If we are not successful in defending ourselves against product liability claims, we could incur liability and costs. In addition, regardless of merit or eventual outcome, product liability claims may result in:
impairment of our business reputation and significant negative media attention;
significant costs to defend related litigation;
distraction of management’s attention from our primary business;
difficulty in attracting strategic counterparties or the ability for us to realize anticipated benefits of any strategic transaction;
substantial monetary awards to patients or other claimants; and
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inability to commercialize any future product candidate.
The product liability insurance we currently carry, and any additional product liability insurance coverage we acquire in the future, may not be sufficient to reimburse us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive, and in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. A successful product liability claim or series of claims brought against us could cause our stock price to decline and, if judgments exceed our insurance coverage, could adversely affect our results of operations and business.
We are subject to stringent U.S. and foreign privacy laws, regulations and standards related to data privacy and security. If we fail to comply with such requirements, we may be subject to liabilities that adversely affect our business, operations and financial performance, and/or harm to our reputation.
We are subject to laws and regulations requiring that we take measures to protect the privacy and security of certain information we gather and use in our business. For example, in the U.S., the federal Health Insurance Portability and Accountability Act of 1996 ("HIPAA") and its implementing regulations impose, among other requirements, certain regulatory and contractual requirements regarding the privacy and security of personal health information. In addition to HIPAA, numerous other federal and state laws, including, without limitation, state security breach notification laws, state health information privacy laws and federal and state consumer protection laws, govern the collection, use, and storage of personal information. In addition, in June 2018, California enacted the California Consumer Privacy Act ("CCPA") which took effect on January 1, 2020. The CCPA gives California residents expanded rights to access and require deletion of their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that may increase data breach litigation. Although the CCPA includes exemptions for certain clinical trials data, and HIPAA protected health information, the law may increase our compliance costs and potential liability with respect to other personal information we collect about California residents. The CCPA has prompted a number of proposals for new federal and state privacy legislation that, if passed, could increase our potential liability, increase our compliance costs and adversely affect our business.
We may also be subject to or affected by laws and regulations globally, including regulatory guidance, governing the collection, use, disclosure, security, transfer and storage of personal data, such as information that we collect about patients and healthcare providers in connection with future clinical trials and our other operations in the U.S. and abroad. The global legislative and regulatory landscape for privacy and data protection continues to evolve, and implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future. This evolution may create uncertainty in our business, result in liability or impose additional costs on us. The cost of compliance with these laws, regulations and standards is high and is likely to increase in the future.
Any failure or perceived failure by us to comply with federal, state, or foreign laws or self-regulatory standards could result in negative publicity, diversion of management time and effort and proceedings against us by governmental entities or others. In many jurisdictions, enforcement actions and consequences for noncompliance are rising. As we continue to expand into other foreign countries and jurisdictions, we may be subject to additional laws and regulations that may affect how we conduct business.
Our current and future relationships with investigators, health care professionals, consultants, third-party payors, and customers will be subject to applicable healthcare regulatory laws, which could expose us to penalties.
Our business operations and current and future arrangements with investigators, healthcare professionals, consultants, third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations.
These laws may regulate the business or financial arrangements and relationships through which we conduct our operations, including how we research, market, sell and distribute our products for which we obtain marketing approval. Such laws include:
the federal Anti-Kickback Statute prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, lease, order or recommendation of, any good, facility, item or service, for which payment may be made, in whole or in part, under a federal healthcare program such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the federal Anti-Kickback Statute or specific intent to violate it to have committed a violation; in addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act;
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the federal false claims laws including the civil False Claims Act, which can be enforced through civil whistleblower or qui tam actions, and civil monetary penalties laws, which impose criminal and civil penalties against individuals or entities for knowingly presenting, or causing to be presented to the federal government, claims for payment that are false or fraudulent, knowingly making, using or causing to be made or used, a false record or statement material to a false or fraudulent claim, or knowingly making, or causing to be made, a false statement to avoid, decrease or conceal an obligation to pay money to the federal government; in addition, the government may assert that a claim including items and services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act;
HIPAA imposes criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or making false or fraudulent statements relating to healthcare matters. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation;
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information on health plans, health care clearing houses, and certain health care providers, known as covered entities, and their business associates, defined as independent contractors or agents of covered entities that create, receive or obtain protected health information in connection with providing a service for or on behalf of a covered entity as well as their covered subcontractors;
a number of federal, state and foreign laws, regulations, guidance and standards that impose requirements regarding the protection of health data that are applicable to or affect our operations;
the federal Physician Payments Sunshine Act, which requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to the government information related to payments or other "transfers of value" made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, and requires applicable manufacturers and group purchasing organizations to report annually to the government ownership and investment interests held by the physicians described above and their immediate family members; and
analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, may apply to our business practices, including but not limited to, research, distribution, sales, and marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; and state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government; state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers, marketing expenditures or drug pricing, as well as state and local laws that require the registration of pharmaceutical sales representatives; and state and foreign laws governing the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
Efforts to ensure that our current and future business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations, agency guidance or case law involving applicable healthcare laws. If our operations are found to be in violation of any of these or any other health regulatory laws that may apply to us, we may be subject to significant penalties, including the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, disgorgement, imprisonment, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement, and curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations. Even the mere issuance of a subpoena or the fact of an investigation alone, regardless of the merit, may result in negative publicity, a drop in our stock price, and other harm to our business, financial condition and results of operations.
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Defending against any such actions can be costly, time-consuming and may require significant financial and personnel resources. Therefore, even if we are successful in defending against any such actions that may be brought against us, our business may be impaired.
We rely on third parties to conduct, supervise and monitor the wind-down of our clinical trials, and if those third parties perform in an unsatisfactory manner, it may harm our business.
We rely on CROs and clinical trial sites to ensure the proper and timely conduct of our clinical trials, and we expect to have limited influence over their actual performance.
Nevertheless, we will be responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards and our reliance on the CROs does not relieve us of our regulatory responsibilities.
We and our CROs will be required to comply with Good Laboratory Practices ("GLPs") and cGCPs, which are regulations and guidelines enforced by the FDA and are also required by the competent authorities of the member states of the European Economic Area and comparable foreign regulatory authorities in the form of International Council for Harmonization guidelines for any of our product candidates that are in nonclinical and clinical development. The regulatory authorities enforce cGCPs through periodic inspections of trial sponsors, principal investigators and clinical trial sites. Although we may rely on CROs to conduct our GLP-compliant preclinical studies and GCP-compliant clinical trials, we will remain responsible for ensuring that each of our GLP preclinical studies and GCP clinical trials is conducted in accordance with its investigational plan and protocol and applicable laws and regulations, and our reliance on the CROs does not relieve us of our regulatory responsibilities. Failure by our CROs to properly execute study protocols in accordance with applicable law could also create product liability and healthcare regulatory risks for us as sponsors of those studies.
Our CROs will not be our employees, and we will not control whether or not they devote sufficient time and resources to our clinical and nonclinical programs. These CROs may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials, or other drug development activities which could harm our competitive position. We face the risk of potential unauthorized disclosure or misappropriation of our intellectual property by CROs, which may reduce our trade secret and intellectual property protection and allow our potential competitors to access and exploit our proprietary technology. If our CROs do not successfully carry out their contractual duties or obligations, fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our (or their own) clinical protocols or regulatory requirements or for any other reasons, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize, any product candidate that we develop. As a result, our financial results and the commercial prospects for any product candidate that we develop could be harmed, our costs could increase, and our ability to generate revenues could be delayed.
Risks Related to Our Intellectual Property
If we or any future strategic partners are unable to obtain and maintain patent protection for future products or if the scope of patent protection obtained is not sufficiently broad, we may not be able to compete effectively in certain markets.
We will rely upon a combination of patents, trademarks, trade secret protection and confidentiality agreements with employees, consultants, collaborators, advisors and other third parties to protect intellectual property related to our development programs and any future product candidates. Our success for future programs depends in part on our or any future strategic partner's ability to obtain and maintain patent protection in the United States and other countries for future product candidates. The patent prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner.
Any patent applications that we might in-license or own cannot be enforced against third parties practicing the technology claimed in such applications unless and until a patent issues from such application(s).
It is also possible that we or any future strategic partner will fail to identify patentable aspects of research and development output before it is too late to obtain patent protection. Any patent applications that we might own or in-license may fail to result in issued patents with claims that cover our future product candidates in the United States or in other foreign countries. We may also inadvertently make statements, e.g., to regulatory agencies during the regulatory approval process, that may be inconsistent with positions during prosecution of any future in-licensed or owned patents, which may result in such patents being narrowed, invalidated, or held unenforceable.
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The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation. In addition, the laws of foreign countries may not protect patent rights to the same extent as the laws of the United States. Furthermore, we cannot know with certainty whether we or any strategic partner were the first to make the inventions claimed in any future patents or pending patent applications owned or licensed by us, or whether we will be the first to file for patent protection of such inventions. As a result, the issuance, scope, validity, enforceability and commercial value of any future patent rights are highly uncertain. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of any future patent rights.
The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and patents may be challenged in the courts or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology, or limit the duration of any future patent protection.
Moreover, patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after the first non-provisional filing date. Certain extensions may be available; however, the life of a patent, and the protection it affords, is limited. Given the amount of time required for the development, testing and regulatory review of new product candidates, any future patents protecting such candidates might expire before or shortly after such candidates are commercialized.
The validity, scope and enforceability of any patents can be challenged by third parties.
Litigation or other proceedings to enforce or defend intellectual property rights are often complex in nature, may be expensive and time-consuming, may divert our management’s attention from our core business, and may result in unfavorable results that could limit our ability to prevent third parties from competing with any future product candidates.
We may need to license intellectual property from third parties, and such licenses may not be available or may not be available on commercially reasonable terms.
A third party may hold intellectual property, including patent rights and trade secrets that are important or necessary to the development of any future product candidates. It may be necessary for us to use the patented or proprietary technology of one or more third parties to manufacture or commercialize any future product candidates, in which case we would be required to obtain a license from these third parties on commercially reasonable terms, or our business could be harmed, possibly materially. If any such patents were to be asserted against us, there is no assurance that a court would find in our favor or that, if we choose or are required to seek a license, a license to any such patents would be available to us on acceptable terms or at all.
Third-party claims or litigation alleging infringement of patents or other proprietary rights or seeking to invalidate patents or other proprietary rights may delay or prevent the development and commercialization of any future product candidates.
Our commercial success depends in part on our avoiding infringement and other violations 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, derivation and administrative law proceedings, inter partes review, and post-grant review before the USPTO, as well as oppositions and similar proceedings in foreign jurisdictions. As the biotechnology and pharmaceutical industries expand and more patents are issued, and as we gain greater visibility and market exposure as a public company, the risk increases that our business activities may be subject to claims of infringement of a patent and other proprietary rights of third parties. Third parties may assert that we are infringing their patents or 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 our future 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 any future product candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our or any future strategic partner's technologies infringes upon these patents.
A license may not be available on commercially reasonable terms or at all. In addition, we may be subject to claims that we are infringing other intellectual property rights, such as trademarks or copyrights, or misappropriating the trade secrets of others, and to the extent that our employees, consultants or contractors use intellectual property or proprietary information owned by others in their work for us, disputes may arise as to the rights in the information or resulting know-how and inventions.
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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 infringement or other intellectual property claim against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more licenses from third parties, pay royalties or redesign any affected future product candidates, which may be impossible or require substantial time and monetary expenditure. We cannot predict whether any such license would be available at all or whether it would be available on commercially reasonable terms. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business.
We may not identify relevant third-party patents or may incorrectly interpret the relevance, scope or expiration of a third-party patent, which might adversely affect our ability to develop and market any future products.
We cannot guarantee that patent searches or analyses, including the identification of relevant patents, the scope of patent claims or the expiration of relevant patents, are complete or thorough, nor can we be certain that we have identified each and every third-party patent and pending application in the United States and abroad that is or may be relevant to or necessary for our business in any jurisdiction.
The scope of a patent claim is determined by multiple factors including an interpretation of the law, the written disclosure in a patent and the patent’s prosecution history. Our interpretation of the relevance or the scope of a patent or a pending application may be incorrect, which may negatively impact our business.
If we fail to identify and correctly interpret relevant patents, we may be subject to infringement claims. We cannot guarantee that we will be able to successfully settle or otherwise resolve such infringement claims. If we fail in any such dispute, in addition to being forced to pay damages, we may be temporarily or permanently prohibited from commercializing any future product candidates that are held to be infringing. We might, if possible, also be forced to redesign products, processes, or services so that we no longer infringe the third-party intellectual property rights. Any of these events, even if we were ultimately to prevail, could require us to divert substantial financial and management resources that we would otherwise be able to devote to our business.
If we breach any license or collaboration agreements, it could compromise our business and development efforts.
Disputes may arise between us and any of these counterparties regarding intellectual property rights that are subject to such agreements, including, but not limited to:
the scope of rights granted under an agreement and other interpretation-related issues;
whether and the extent to which our technology and processes infringe on intellectual property of a licensor that is not subject to the agreement;
any right to sublicense patent and other rights to third parties;
any diligence obligations with respect to the use of the licensed technology in relation to development and commercialization of any future product candidates, and what activities satisfy those diligence obligations;
the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by licensors and us and any future partners;
any right to transfer or assign a license; and
the effects of termination.
These or other disputes over intellectual property that we license or acquire in the future may prevent or impair our ability to maintain arrangements on acceptable terms or may impair the value of the arrangement to us. Any such dispute could have an adverse effect on our business.
Any uncured, material breach under such agreements could result in loss of rights to practice any patent rights and other intellectual property licensed under any such agreements and to liability for potential damages.

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We may become involved in lawsuits to protect or enforce patents, the patents of any licensors or our other intellectual property rights, which could be expensive, time consuming and unsuccessful.
Competitors may infringe or otherwise violate our future patents, the patents of licensors or future strategic partners, or our other intellectual property rights. To counter infringement or unauthorized use, we may be required to file legal claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours, any future strategic partner, or any licensor is not valid or is unenforceable or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of such patents at risk of being invalidated or interpreted narrowly and could put patent applications at risk of not issuing. The initiation of a claim against a third party may also cause the third party to bring counter claims against us such as claims asserting that such patents are invalid or unenforceable.
In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, non-enablement, or lack of statutory subject matter. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant material information from the USPTO, or made a materially misleading statement, during prosecution. Third parties may also raise similar validity claims before the USPTO in post-grant proceedings such as ex parte reexaminations, inter partes review, or post-grant review, or oppositions or similar proceedings outside the United States, in parallel with litigation or even outside the context of litigation. The outcome following legal assertions of invalidity and unenforceability is unpredictable. We cannot be certain that there is no invalidating prior art, of which we and the patent examiner were unaware during prosecution. For the patents and patent applications that we may license, we may have limited or no right to participate in the defense of any licensed patents against challenge by a third party. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of any future patent protection on the subject matter of such patents. Such a loss of patent protection could harm our business.
We may not be able to detect or prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States. Any litigation or other proceedings to enforce our intellectual property rights may fail, and even if successful, may result in substantial costs and distract our management and other employees.
Even if we establish infringement, the court may decide not to grant an injunction against further infringing activity and instead award only monetary damages, which may or may not be an adequate remedy. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have an adverse effect on the price of our common stock.
Because of the expense and uncertainty of litigation, we may not be in a position to enforce intellectual property rights against third parties.
Because of the expense and uncertainty of litigation, we may conclude that even if a third party is infringing any patents that may be issued as a result of any pending or future patent applications or other intellectual property rights, the risk-adjusted cost of bringing and enforcing such a claim or action may be too high or not in the best interest of our company or our stockholders. In such cases, we may decide that the more prudent course of action is to simply monitor the situation or initiate or seek some other non-litigious action or solution.
We may not be able to protect our intellectual property rights throughout the world, which could impair our business.
Filing, prosecuting and defending patents covering our future product candidates throughout the world would be prohibitively expensive. Competitors may use our technologies or the technologies of any future strategic partner in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we may obtain patent protection, but where patent enforcement is not as strong as that in the United States. These products may compete with any future products in jurisdictions where we do not have any issued or licensed patents and any future patent claims, or other intellectual property rights may not be effective or sufficient to prevent them from so competing.
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Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of some countries do not favor the enforcement of patents and other intellectual property protection, which could make it difficult for us to stop the infringement of patents generally in some countries. Proceedings to enforce any patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put any patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful.
Furthermore, our or any future strategic partner's efforts to enforce any intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we may develop or license in the future.
Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed.
We expect to continue to collaborate with third parties and any future partner on the development of our future product candidates, and so, we must, at times, share trade secrets with them. We may also conduct joint research and development programs that may require us to share trade secrets under the terms of our collaboration or similar agreements. We will seek to protect our proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, consulting agreements or other similar agreements with our advisors, employees, third-party contractors and consultants prior to beginning research or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose our confidential information, including our trade secrets. Despite the contractual provisions employed when working with third parties, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. Any disclosure, either intentional or unintentional, by our employees, the employees of third parties with whom we share our facilities or third-party consultants and vendors that we engage to perform research, clinical trials or manufacturing activities, or misappropriation by third parties (such as through a cybersecurity breach) of our trade secrets or proprietary information could enable competitors to duplicate or surpass our technological achievements, thus eroding our competitive position. Further, adequate remedies may not exist in the event of unauthorized use or disclosure. Given that our proprietary position is expected to be based, in part, on our know-how and trade secrets, a competitor’s discovery of our trade secrets or other unauthorized use or disclosure would impair our competitive position and may have an adverse effect on our business and results of operations.
In addition, these agreements typically restrict the ability of our advisors, employees, third-party contractors and consultants to publish data potentially relating to our trade secrets, although our agreements may contain certain limited publication rights. Policing unauthorized use of our or our licensors’ intellectual property is difficult, expensive and time-consuming, and we may be unable to determine the extent of any unauthorized use. Moreover, enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. Despite our efforts to protect our trade secrets, our competitors may discover our trade secrets, either through breach of our agreements with third parties, independent development or publication of information by any of our third-party collaborators. A competitor’s discovery of our trade secrets would impair our competitive position and have an adverse impact on our business.
We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of their former employers or other third parties.
We and any future strategic partner employ individuals who were previously employed at other biotechnology or pharmaceutical companies. Although we seek to protect our ownership of intellectual property rights by ensuring that our agreements with our employees, collaborators, and other third parties with whom we do business include provisions requiring such parties to assign rights in inventions to us, we or any future strategic partner may be subject to claims that we, our partner or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed confidential information of our employees’ former employers or other third parties. We or any future partner may also be subject to claims that former employers or other third parties have an ownership interest in patents or patent applications filed by us. Litigation may be necessary to defend against these claims. There is no guarantee of success in defending these claims, and if we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Even if we are successful, litigation could result in substantial cost and be a distraction to our management and other employees. Moreover, any such litigation or the threat thereof may adversely affect our reputation, our ability to form strategic alliances or sublicense our rights to collaborators, engage with scientific advisors or hire employees or consultants, each of which would have an adverse effect on our business, results of operations and financial condition.
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In addition, while it is our policy to require our employees and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own. Our and their assignment agreements may not be self-executing or may be breached, and we may be forced to bring claims against third parties, or defend claims they may bring against us, to determine the ownership of what we regard as our intellectual property.
If we or our licensors fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we and our licensors are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to management.
Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.
Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property. In addition, the uncertainties associated with litigation could compromise our ability to raise the funds necessary to initiate or continue our clinical trials and internal research programs, or in-license needed technology or other future product candidates. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could compromise our ability to compete in the marketplace, including compromising our ability to raise the funds necessary for clinical trials, continue our research programs, license necessary technology from third parties, or enter into development collaborations that would help us commercialize our future product candidates, if approved.
If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
In addition to seeking patents for our future product candidates, we and any future strategic partner may also rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position. We seek to protect our trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets.
If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed.
Any trademarks we have obtained or may obtain may be infringed or successfully challenged, resulting in harm to our business.
We expect to rely on trademarks as one means to distinguish any of our future product candidates that are approved for marketing from the products of our competitors. Once we select new trademarks and apply to register them, our trademark applications may not be approved. Third parties may oppose or attempt to cancel our trademark applications or trademarks, or otherwise challenge our use of the trademarks. In the event that our trademarks are successfully challenged, we could be forced to rebrand our products, which could result in loss of brand recognition and could require us to devote resources to advertising and marketing new brands. Our competitors may infringe our trademarks and we may not have adequate resources to enforce our trademarks.
If we attempt to enforce our trademarks and assert trademark infringement claims, a court may determine that the marks we have asserted are invalid or unenforceable, or that the party against whom we have asserted trademark infringement has superior rights to the marks in question. In this case, we could ultimately be forced to cease use of such trademarks.
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Intellectual property rights do not necessarily address all potential threats to our competitive advantage.
The degree of future protection afforded by our or any future strategic partner's intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect our business, or permit us to achieve or maintain a competitive advantage.
Risks Related to Our Common Stock
We may be treated as a “public shell” company which could have negative consequences, including potential Nasdaq delisting of our common stock.
We may be treated as a “public shell” under the Nasdaq rules and the Securities Act. Although the evaluation of whether a listed company is a public shell company is based on a facts and circumstances determination, a Nasdaq-listed company with no or nominal operations and either no or nominal assets, assets consisting solely of cash and cash equivalents, or assets consisting of any amount of cash and cash equivalents and nominal other assets is generally considered to be a public shell. Listed companies determined to be public shells by Nasdaq may be subject to delisting proceedings or additional and more stringent listing criteria.
If Nasdaq should delist our common stock from trading, a reduction in some or all of the following may occur, each of which could have a material adverse effect on holders of our common stock: the liquidity of our common stock; the market price of our common stock; the number of institutional and general investors that will consider investing in our common stock; the number of investors in general that will consider investing in our common stock; the number of market makers in our common stock; the availability of information concerning the trading prices and volume of our common stock; and the number of broker-dealers willing to execute trades in our common stock. In addition to the foregoing, there are certain consequences under the Securities Act of being a public shell, including the unavailability of Rule 144 thereunder for the resale of restricted securities, the inability to utilize Form S-8 for the registration of employee benefit plan securities; and the inability to utilize Form S-3 under the “baby shelf” rules applicable to companies with a non-affiliate market capitalization of less than $75 million. In addition, the potential determination that we are a shell company or the prospective loss of our listing on Nasdaq could make us less attractive as a partner in any potential strategic transaction.
The price of our common stock currently does not meet the requirements for continued listing on the Nasdaq Global Select Market. If we fail to maintain or regain compliance with the minimum listing requirements, our common stock will be subject to delisting. Our ability to publicly or privately sell equity securities and the liquidity of our common stock could be adversely affected if our common stock is delisted.
The continued listing standards of the Nasdaq Global Select Market ("Nasdaq") require, among other things, that the minimum price of a listed company’s stock be at or above $1.00. If the minimum bid price is below $1.00 for a period of more than 30 consecutive trading days, the listed company will fail to be in compliance with Nasdaq’s listing rules and, if it does not regain compliance within the grace period, will be subject to delisting. The bid price of our common stock has recently closed below the minimum $1.00 per share requirement and on March 16, 2022 we received a notification of noncompliance from Nasdaq. In accordance with Nasdaq’s listing rules, we will be afforded 180 calendar days to regain compliance with the bid price requirement. In order to regain compliance, the bid price of our common stock must close at a price of at least $1.00 per share for a minimum of 10 consecutive trading days.
If we fail to regain compliance with the minimum bid price requirement, or if we fail to meet other continued listing requirements in the future, our common stock will be subject to delisting. Delisting from Nasdaq could adversely affect our ability to consummate a strategic transaction and raise additional financing through the public or private sale of equity securities, and would significantly affect the ability of investors to trade our securities and negatively affect the value and liquidity of our common stock. Delisting could also have other negative results, including the potential loss of confidence by employees and the loss of institutional investor interest.
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Unless our common stock continues to be listed on a national securities exchange, it will become subject to the so-called “penny stock” rules that impose restrictive sales practice requirements.
If we are unable to maintain the listing of our common stock on Nasdaq or another national securities exchange, our common stock could become subject to the so-called “penny stock” rules if the shares have a market value of less than $5.00 per share. The SEC has adopted regulations that define a penny stock to include any stock that has a market price of less than $5.00 per share, subject to certain exceptions, including an exception for stock traded on a national securities exchange. The SEC regulations impose restrictive sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and accredited investors. An accredited investor generally is a person whose individual annual income exceeded $200,000, or whose joint annual income with a spouse exceeded $300,000 during the past two years and who expects their annual income to exceed the applicable level during the current year, or a person with net worth in excess of $1.0 million, not including the value of the investor’s principal residence and excluding mortgage debt secured by the investor’s principal residence up to the estimated fair market value of the home, except that any mortgage debt incurred by the investor within 60 days prior to the date of the transaction shall not be excluded from the determination of the investor’s net worth unless the mortgage debt was incurred to acquire the residence. For transactions covered by this rule, the broker-dealer must make a special suitability determination for the purchaser and must have received the purchaser’s written consent to the transaction prior to the sale. This means that if we are unable to maintain the listing of our common stock on a national securities exchange, the ability of stockholders to sell their common stock in the secondary market could be adversely affected. If a transaction involving a penny stock is not exempt from the SEC’s rule, a broker-dealer must deliver a disclosure schedule relating to the penny stock market to each investor prior to a transaction. The broker-dealer must also disclose the commissions payable to both the broker-dealer and its registered representative, current quotations for the penny stock, and, if the broker-dealer is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market. Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the customer’s account and information on the limited market in penny stocks.
The market price of our common stock has been and is likely to continue to be highly volatile, and you may lose some or all of your investment.
The market price of our common stock has been and is likely to continue to be highly volatile and may be subject to wide fluctuations in response to a variety of factors, including the following:
our ability to identify and consummate a strategic transaction;
inability to obtain additional funding and deterioration of financing conditions in our industry;
our internal restructuring and workforce reduction;
inability to obtain, protect or maintain necessary intellectual property;
adverse regulatory decisions or statements;
changes in the structure of healthcare payment systems;
failure to meet or exceed the estimates and projections of the investment community;
changes in the market valuations of similar companies;
market conditions in the pharmaceutical and biotechnology sectors, and the issuance of new or changed securities analysts’ reports or recommendations;
announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors;
significant lawsuits, including patent or stockholder litigation, and disputes or other developments relating to our proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies;
additions or departures of key personnel;
short sales of our common stock;
sales of shares of our common stock by us or our stockholders in the future;
negative coverage in the media or analyst reports, whether accurate or not;
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issuance of subpoenas or investigative demands, or the public fact of an investigation by a government agency, whether meritorious or not;
our ability to maintain the listing of our common stock on Nasdaq;
trading volume of our common stock;
general economic, industry and market conditions; and
the other factors described in this "Risk Factors" section.
In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies, including in connection with the ongoing COVID-19 pandemic, which has resulted in decreased stock prices for many companies notwithstanding the lack of a fundamental change in their underlying business models or prospects. These fluctuations have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors, including potentially worsening economic conditions and other adverse effects or developments relating to the ongoing COVID-19 pandemic, as well as general economic, political, regulatory and market conditions, may negatively affect the market price of our common stock, regardless of our actual operating performance.
Volatility in our stock price could subject us to securities class action litigation.
In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities and/or the discontinuation of development of a product candidate due to adverse clinical circumstances or results. This risk is especially relevant for us because pharmaceutical companies have experienced significant stock price volatility in recent years. If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.
An active trading market for our common stock may not be sustained.
Although our common stock is listed on Nasdaq, we cannot assure you that an active trading market for our common stock will be sustained. In addition, as a result of Roivant Sciences Ltd. ("RSL") owning approximately 25.2% of our shares of common stock outstanding as of June 9, 2022, trading in our common stock may be less liquid than the stock of companies with broader public ownership. If an active market for our common stock is not sustained, you may not be able to sell your stock quickly or at the market price. An inactive market may also impair our ability to raise capital to continue to fund operations by selling shares of our common stock and may impair our ability to acquire other companies or technologies by using our common stock as consideration.
RSL owns a significant percentage of our shares of common stock and is able to exert significant control over matters subject to stockholder approval.
Based on shares of our common stock outstanding as of June 9, 2022, RSL beneficially owns approximately 25.2% of the voting power of our outstanding shares of common stock and has the ability to substantially influence us through this ownership position. RSL’s interests may not always coincide with our corporate interests or the interests of other stockholders, and RSL may act in a manner with which you may not agree or that may not be in the best interests of our other stockholders. In 2020, RSL closed a transaction with Sumitomo Dainippon Pharma Co., Ltd. ("Sumitomo") that includes a grant to Sumitomo of a right of first refusal with respect to our shares of common stock held by RSL, which could result in RSL taking actions that may not coincide with our corporate interests or the interests of other stockholders, and could impact our ability to undertake certain corporate transactions. RSL recently became a publicly-traded corporation. There may be changes to the management or ownership of RSL that could impact RSL’s interests in a way that may not coincide with our corporate interests or the interests of other stockholders. So long as RSL continues to own a significant amount of our equity, RSL will continue to be able to strongly influence our decisions.
Our organizational and ownership structure may create significant conflicts of interests.
Our organizational and ownership structure involves a number of relationships that may give rise to certain conflicts of interest between us and minority holders of our common stock, on the one hand, and RSL and its shareholders, on the other hand. Certain of our directors and employees have equity interests in RSL and, accordingly, their interests may be aligned with RSL’s interests, which may not always coincide with our corporate interests or the interests of our other stockholders. Further, our other stockholders may not have visibility into the RSL ownership of any of our directors or officers, which may change at any time through acquisition, disposition, dilution, or otherwise. Any change in our directors’ or officers’ RSL ownership could impact the interests of those holders.
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In addition, we are party to certain related party agreements with RSL and its wholly owned subsidiaries, Roivant Sciences, Inc. ("RSI") and Roivant Sciences GmbH ("RSG"). These entities and their shareholders, including certain of our directors and employees, may have interests which differ from our interests or those of the minority holders of our common stock. For example, we are party to an information sharing and cooperation agreement with RSL pursuant to which RSL has granted us a right of first review on any potential dementia-related product or investment opportunity that RSL may consider pursuing. It is possible that we could fail to pursue a product candidate under this agreement and that product candidate is then successfully developed and commercialized by RSL or one of its other subsidiaries or affiliates. Any material transaction between us and RSL, RSI or RSG is subject to our related party transaction policy, which requires prior approval of such transaction by our Audit Committee. To the extent we fail to appropriately deal with any such conflicts of interests, it could negatively impact our reputation and ability to raise additional funds and the willingness of counterparties to do business with us, all of which could have an adverse effect on our business, financial condition, results of operations and cash flows.
Because we do not anticipate paying any cash dividends on shares of our common stock in the foreseeable future, capital appreciation, if any, would be your sole source of gain.
We have never declared or paid any cash dividends on shares of our common stock. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. As a result, capital appreciation, if any, of our common stock would be your sole source of gain on an investment in our common stock for the foreseeable future.
Provisions in our corporate charter documents and under Delaware law may prevent or frustrate attempts by our stockholders to change our management and hinder efforts to acquire a controlling interest in us, and the market price of our common stock may be lower as a result.
There are provisions in our certificate of incorporation and bylaws that may make it difficult for a third party to acquire, or attempt to acquire, control of our company, even if a change of control was considered favorable by you and other stockholders. For example, our board of directors will have the authority to issue up to 10,000,000 shares of preferred stock. The board of directors can fix the price, rights, preferences, privileges, and restrictions of the preferred stock without any further vote or action by our stockholders. The issuance of shares of preferred stock may delay or prevent a change of control transaction. As a result, the market price of our common stock and the voting and other rights of our stockholders may be adversely affected. An issuance of shares of preferred stock may result in the loss of voting control to other stockholders.
Our charter documents will also contain other provisions that could have an anti-takeover effect, including:
stockholders will not be entitled to remove directors other than by a 66 2/3% vote and only for cause;
stockholders cannot call a special meeting of stockholders;
stockholders cannot act by written consent in lieu of a meeting; and
stockholders must give advance notice to nominate directors or submit proposals for consideration at stockholder meetings.
In addition, we are subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law, which regulates corporate acquisitions by prohibiting Delaware corporations from engaging in specified business combinations with particular stockholders of those companies. These provisions could discourage potential acquisition proposals and could delay or prevent a change of control transaction. They could also have the effect of discouraging others from making tender offers for our common stock, including transactions that may be in your best interests. These provisions may also prevent changes in our management or limit the price that investors are willing to pay for our stock.
Our certificate of incorporation and bylaws provide that the Court of Chancery of the State of Delaware or, under certain circumstances, the federal district courts of the United States of America are the exclusive forums for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents.
Our certificate of incorporation and bylaws provide that the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware lacks subject matter jurisdiction, any state court located within the State of Delaware or, if all such state courts lack subject matter jurisdiction, the federal district court for the District of Delaware) is the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law for:
any derivative action or proceeding brought on our behalf;
any action asserting a breach of fiduciary duty;
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any action arising pursuant to the Delaware General Corporation Law, our amended and restated certificate of incorporation, or our amended and restated bylaws; and
any action asserting a claim against us that is governed by the internal-affairs doctrine.
These provisions would not apply to suits brought to enforce a duty or liability created by the Securities Exchange Act of 1934, as amended (the "Exchange Act") or any claim for which the federal district courts of the United States of America have exclusive jurisdiction. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims.
Our stockholders cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock will be deemed to have notice of, and consented to, the provisions of our amended and restated certificate of incorporation described in the preceding sentences.
To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our certificate of incorporation and bylaws further provide that the federal district courts of the United States are the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our certificate of incorporation and bylaws. This may require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.
These exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers and other employees. If a court were to find the exclusive-forum provisions in our amended and restated certificate of incorporation to be inapplicable or unenforceable, we may incur additional costs associated with resolving the dispute in other jurisdictions.
Your rights as a stockholder arise under Delaware law as well as our Delaware certificate of incorporation and bylaws.
The rights of our stockholders arise under our certificate of incorporation and bylaws as well as Delaware law. These organizational documents and Delaware law contain provisions for class actions and derivative actions, which may result in becoming involved in costly litigation, which could harm our business. In addition, our bylaws may generally be amended by our board of directors, as permitted under the provisions of Section 203 of the Delaware General Corporation Law (“DGCL”). Additionally, while the provisions of Section 203 of the DGCL regarding business combination provisions currently apply, there can be no assurance that the rights afforded by Section 203 of the DGCL will not be changed or rescinded by the Delaware legislature or courts in the future.
Future sales of shares of our common stock, or the perception that such sales may occur, could depress our stock price, even if our business is doing well.
As of June 9, 2022, 18,577,380 of our outstanding shares of common stock, representing 25.2% of our shares of common stock, were held by RSL. If RSL, or any of our executive officers or directors, were to sell our common stock, or if the market perceived that RSL or any of our executive officers or directors intend to sell our common stock, it could negatively affect our stock price. Such a decrease in our stock price could also in turn impair our ability to raise capital through the sale of additional equity securities.
Further, we have filed registration statements on Form S-8 under the Securities Act to register the common stock that may be issued under our equity incentive plans from time to time. Stock registered under these registration statements is available for sale in the public market subject to vesting arrangements and exercise of options, as well as Rule 144 in the case of our affiliates. Sales of these shares of common stock may negatively impact our stock price.
In addition, we have filed a "shelf" registration statement on Form S-3 under the Securities Act, allowing us, from time to time, to offer up to $750 million of any combination of registered shares of common stock or preferred stock, debt securities and warrants. We have also entered into a sales agreement with SVB Securities LLC to sell shares of common stock from time to time through an at-the-market equity offering program with an aggregate offering price of up to approximately $35.1 million remaining available to be sold as of June 9, 2022. To the extent we issue new shares of common stock as a result of needing additional capital, such stock could constitute a material portion of our then outstanding shares of common stock and cause dilution to our existing stockholders.
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If we are unable to maintain proper and effective internal controls over financial reporting and disclosure controls and procedures, investor confidence in our company and, as a result, the value of our common stock, may be adversely affected.
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and to protect from fraudulent, illegal or unauthorized transactions. Effective disclosure controls and procedures enable us to make timely and accurate disclosure of financial and non-financial information that we are required to disclose. If we cannot provide effective controls and reliable financial reports and other disclosures, our business and operating results could be harmed. We have in the past discovered, and may in the future discover, areas of our internal controls over financial reporting or disclosure controls and procedures that, even if effective, could be improved. Our recent workforce reduction and any further departures of accounting or finance function employees or consultants may increase the likelihood of future internal controls deficiencies.
We are required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on the effectiveness of our internal control over financial reporting as of the end of each fiscal year. Our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting until our first annual report required to be filed with the SEC following the date we are deemed to be an "accelerated filer," as defined in the Exchange Act.
If material weaknesses or control deficiencies occur or our disclosure controls and procedures are ineffective in the future, we may be unable to report our financial results or make other disclosures accurately on a timely basis, which could cause our reported financial results or other disclosures to be materially misstated and result in the loss of investor confidence and cause the market price of our common stock to decline.
We are a smaller reporting company, and we cannot be certain if the reduced reporting requirements applicable to smaller reporting companies will make our common stock less attractive to investors.
We currently qualify as a "smaller reporting company". For so long as we continue to be a smaller reporting company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not smaller reporting companies, including reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and we also may still qualify as a "non-accelerated filer" which provides for exemption from compliance with the auditor attestation requirements of Section 404.
We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
The intended tax effects of our corporate structure prior to and following the Domestication and our corporate reorganization to align our corporate structure with current and future business activity (the "Reorganization"), and intercompany arrangements prior to the Domestication and Reorganization, depend on the application of the tax laws of various jurisdictions and on how we operate our business.
The Domestication and Reorganization involved the tax authorities and related rules and regulations of multiple international jurisdictions. In connection with the Domestication and Reorganization, we relied on the availability of certain exemptions from tax, and losses and other deductions, in certain such jurisdictions in respect of steps being taken as part of the Domestication and Reorganization, which are complex. If the tax authorities of any such jurisdictions do not agree with such exemptions, losses or deductions, we may be subject to tax charges and liabilities. Following the Domestication and Reorganization, we still have subsidiaries that are domiciled in the U.K., Switzerland and Ireland. Our corporate structure is organized so that we can achieve our business objectives in a tax-efficient manner following the Domestication and Reorganization and control operating expenses. Historically, we have conducted operations prior to the Domestication and Reorganization through subsidiaries in various countries and tax jurisdictions, including the U.K. and Switzerland, in part through intercompany service agreements between RSL and certain of its subsidiaries, our subsidiaries and us. In that case, our corporate structure and intercompany transactions, including the manner in which we developed and used our intellectual property, were organized to achieve our business objectives in a tax-efficient manner and in compliance with applicable transfer pricing rules and regulations. If two or more affiliated companies are located in different countries or tax jurisdictions, the tax laws and regulations of each country generally will require that transfer prices be the same as those between unrelated companies dealing at arms’ length and that appropriate documentation be maintained to support the transfer prices. While we believe that we have operated in compliance with applicable transfer pricing laws, our transfer pricing procedures are not binding on applicable tax authorities. If tax authorities in any of these countries were to successfully challenge our transfer prices as not reflecting arms’ length transactions in historical periods prior to the Domestication and Reorganization, they could require us to adjust our transfer prices and thereby reallocate our income to reflect these revised transfer prices, which could result in a higher tax liability to us. In addition, if the country from which the income is reallocated does not agree with the reallocation, both countries could tax the same income, potentially resulting in double taxation. If tax authorities were to allocate income to a higher tax jurisdiction, subject our income to double taxation or assess interest and penalties, it would increase our consolidated tax liability, which could adversely affect our financial condition, results of operations and cash flows.
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Judgment is required in evaluating our tax positions and determining our provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. For example, our effective tax rates could be adversely affected by changes in foreign currency exchange rates or by changes in the relevant tax, accounting, and other laws, regulations, principles, and interpretations. As we intend to operate in more than one country and taxing jurisdiction, the application of tax laws can be subject to diverging and sometimes conflicting interpretations by tax authorities of these jurisdictions. It is not uncommon for taxing authorities in different countries to have conflicting views, for instance, with respect to, among other things, the manner in which the arm’s length standard is applied for transfer pricing purposes, or with respect to the valuation of intellectual property. In addition, tax laws are dynamic and subject to change as new laws are passed and new interpretations of the law are issued or applied. Moreover, certain relevant tax, accounting and other laws have special application with respect to “affiliated,” “combined” or similar groups, which included RSL and its subsidiaries prior to March 2020, and which may impact the tax liabilities of the companies. We continue to assess the impact of such changes in tax laws on our business and may determine that changes to our structure, practice or tax positions are necessary in light of such changes and developments in the tax laws of other jurisdictions in which we operate. Such changes may nevertheless be ineffective in avoiding an increase in our consolidated tax liability, which could harm our financial condition, results of operations and cash flows.
Changes in our effective tax rate may reduce our net income in future periods.
Our tax position could be adversely impacted by changes in tax rates, tax laws, tax practice, tax treaties or tax regulations or changes in the interpretation thereof by the tax authorities in Ireland, the United States and other jurisdictions for periods following the Domestication and Reorganization, and also Europe (including the U.K. and Ireland), the United States and other jurisdictions for historical periods prior to the Domestication and Reorganization. Such changes may become more likely as a result of recent economic trends in the jurisdictions in which we operate, particularly if such trends continue. If such a situation was to arise, it could adversely impact our tax position and our effective tax rate. Failure to manage the risks associated with such changes, or misinterpretation of the laws providing such changes, could result in costly audits, interest, penalties and reputational damage, which could adversely affect our business, results of our operations and our financial condition.
Our actual effective tax rate may vary from our expectation and that variance may be material. A number of factors may increase our future effective tax rates, including: (1) the jurisdictions in which profits are determined to be earned and taxed; (2) the resolution of issues arising from any future tax audits with various tax authorities; (3) changes in the valuation of our deferred tax assets and liabilities; (4) increases in expenses not deductible for tax purposes, including transaction costs and impairments of goodwill in connection with acquisitions; (5) changes in the taxation of stock-based compensation; (6) changes in tax laws or the interpretation of such tax laws, and changes in generally accepted accounting principles; and (7) challenges to the transfer pricing policies related to our structure prior to the Domestication and Reorganization.
Changes in tax laws in the United States or foreign jurisdictions could materially increase our tax expense.
We are subject to income taxes in the United States and foreign jurisdictions. Changes to income tax laws and regulations, or the interpretation of such laws, in any of the jurisdictions in which we operate could significantly increase our effective tax rate and ultimately reduce our cash flows from operating activities and otherwise have a material adverse effect on our financial condition. Additionally, various levels of government are increasingly focused on tax reform and other legislative actions to increase tax revenue, and President Biden’s campaign proposals included increasing the U.S. corporate income tax rate from 21% to 28%. Further changes in the tax laws of foreign jurisdictions could arise as a result of the base erosion and profit shifting project undertaken by the Organisation for Economic Co-operation and Development, which represents a coalition of member countries and recommended changes to numerous long-standing tax principles. If implemented by taxing authorities, such changes, as well as changes in U.S. federal and state tax laws or in taxing jurisdictions’ administrative interpretations, decisions, policies, and positions, could have a material adverse effect on our business, results of operations, or financial condition.

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General Risk Factors
Our business and operations would suffer in the event of system failures, security breaches or cyber-attacks.
Our computer systems, as well as those of various third parties on which we rely, or may rely on in the future, including our CRO's and other contractors, consultants, and law and accounting firms, may sustain damage from computer viruses, unauthorized access, data breaches, phishing attacks, cybercriminals, natural disasters, terrorism, war and telecommunication and electrical failures. We rely on our third-party providers to implement effective security measures and identify and correct for any such failures, deficiencies or breaches. The risk of a security breach or disruption, particularly through cyber-attacks or cyber intrusion, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. We have experienced phishing attacks in the past, which have not had a material impact on our operations, however, we may in the future experience material system failures or security breaches that could cause interruptions in our operations or result in a material disruption of our development programs. For example, the loss of nonclinical or clinical trial data from completed, ongoing or planned trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure of personal, confidential or proprietary information, we could incur liability, suffer reputational damage, and the further development of our product candidates could be delayed.
If securities or industry analysts cease to publish research or reports about our business, or publish negative reports about our business, our stock price and trading volume could decline.
The trading market for our common stock depends, in part, on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts. If our financial performance fails to meet analyst estimates or one or more of the analysts who cover us downgrade our common stock or change their opinion of our common stock, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.
We have incurred and will continue to incur substantial costs as a result of operating as a public company, and our management has been and will be required to continue to devote substantial time to compliance with our public company responsibilities and corporate governance practices.
As a public company, we have incurred and will continue to incur significant legal, accounting and other expenses. The Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of Nasdaq and other applicable securities rules and regulations impose various requirements on public companies. Our management and other personnel devote a substantial amount of time to compliance with these requirements. Moreover, changing rules and regulations may increase our legal and financial compliance costs and make some activities more time-consuming and more costly. If, notwithstanding our efforts to comply with new or changing laws, regulations and standards, we fail to comply, regulatory authorities may initiate legal proceedings against us, and our business may be harmed.
Further, failure to comply with these laws, regulations and standards may make it more difficult and more expensive for us to obtain directors’ and officers’ liability insurance, which could make it more difficult for us to attract and retain qualified members of our Board of Directors or members of senior management.
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Item 1B.    Unresolved Staff Comments
None.
Item 2.        Properties
Our principal and registered offices are located at 130 West 42nd St., 26th Floor, New York, New York 10036. In November 2021, we entered into a lease agreement for research and development laboratory and related office space in Durham, North Carolina, which expires in December 2024. In August 2020, we entered into a lease agreement for office space in New York, New York that commenced in December 2020 and expires in June 2026. In August 2019, we entered into a lease agreement for office space in Durham, North Carolina, which expires in November 2022.
We believe that all of our facilities are in good condition and are well maintained and that our current arrangements will be sufficient to meet our needs for the foreseeable future and that any required additional space will be available on commercially reasonable terms to meet space requirements if they arise.
Item 3.        Legal Proceedings
From time to time, we may become involved in legal proceedings relating to claims arising from the ordinary course of business. We are not currently a party to any material legal proceedings, and we are not aware of any pending or threatened legal proceeding against us that we believe could have a material adverse effect on our business, operating results or financial condition.
Item 4.        Mine Safety Disclosures
Not applicable.
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PART II.
Item 5.        Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information for Shares of Common Stock
Our shares of common stock began trading on the NYSE under the symbol "AXON" on June 11, 2015. Prior to that date, there was no public market for our shares of common stock. Effective September 6, 2017, we changed our listing to the Nasdaq Global Select Market and began trading under the symbol "AXON". Effective February 14, 2019, we changed our symbol to "AXGT" and effective November 13, 2020, we changed our symbol to "SIOX".
Stockholders
American Stock Transfer & Trust Company is the transfer agent and registrar for our shares of common stock. As of April 30, 2022, we had three holders of record of our shares of common stock. The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.
Dividend Policy
We have never declared or paid cash dividends on our shares of common stock. We anticipate that we will retain all of our future earnings, if any, for use in the operation of our business and do not anticipate paying cash dividends in the foreseeable future. Payment of future dividends, if any, will be at the discretion of our Board of Directors.
Recent Sales of Unregistered Securities
None.
Purchases of Equity Securities by the Issuer and Affiliated Parties
None.
Item 6.        Reserved.
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Item 7.         Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the audited consolidated financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K.
Overview
Historically, we were a clinical-stage company focused on developing gene therapies to radically transform the lives of patients with neurodegenerative diseases. We previously had three clinical-stage programs: AXO-AAV-GM1 for the treatment of GM1 gangliosidosis, AXO-AAV-GM2 for the treatment of GM2 gangliosidosis (including Tay-Sachs and Sandhoff diseases) and AXO-Lenti-PD for the treatment of Parkinson’s disease.
Currently, we are winding down these three clinical-stage programs while also working on one pre-clinical program.
In June 2018, we entered into the Oxford Agreement with Oxford pursuant to which we received a worldwide, royalty-bearing, sub-licensable license under certain patents and other intellectual property controlled by Oxford to develop and commercialize AXO-Lenti-PD and related gene therapy products. In February 2022, we provided notice to Oxford to terminate the Oxford Agreement to develop and commercialize AXO-Lenti-PD and related gene therapy product candidates. We determined to terminate the Oxford Agreement and redirect resources to our AXO-AAV-GM1 and -GM2 programs, as well as other strategic initiatives, due to several factors, including the resource requirements and development timelines to reach meaningful value inflection for the program and an increasingly challenging market and regulatory environment for Parkinson’s disease. We will continue to incur immaterial expenses in connection with the Oxford Agreement until its termination becomes effective.
In December 2018, we entered into the UMMS Agreement with UMMS pursuant to which we received a worldwide, royalty-bearing, sub-licensable license under certain patent applications and any patents issuing therefrom, biological materials and know-how controlled by UMMS to develop and commercialize gene therapy product candidates, including AXO-AAV-GM1 and AXO-AAV-GM2, for the treatment of GM1 gangliosidosis and GM2 gangliosidosis (including Tay-Sachs disease and Sandhoff disease). In April 2022, we provided notice to UMMS to terminate the UMMS Agreement. The UMMS Agreement will be formally terminated following the 90-day wind-down/termination notice period. We will continue to conduct clinical operations for the AXO-AAV-GM1 and AXO-AAV-GM2 programs under the UMMS Agreement during the 90-day wind-down/termination period.
In parallel with our decision to terminate the AXO-AAV-GM1 and -GM2 programs, in April 2022, our board of directors approved and we announced the strategic decision to explore and review a range of strategic alternatives focused on maximizing stockholder value from our existing cash and cash equivalents, including a potential sale, merger, business combination or similar transaction. In connection with these actions, and as approved by our board of directors, we began implementing a significant headcount reduction, which we expect to conclude in June 2022. As part of these strategic decisions, we expect to incur aggregate costs estimated to range from approximately $0.9 million to $1.5 million relating to the reduction in headcount, all to be incurred during the fiscal quarter ending June 30, 2022.
While we continue to conduct certain pre-clinical research and development initiatives in gene therapy, we expect to devote substantial time and resources to exploring strategic alternatives. Despite devoting significant efforts to identify and evaluate potential strategic alternatives, there can be no assurance that this strategic review process will result in us pursuing any transaction or that any transaction, if pursued, will be completed on attractive terms or at all. We have not set a timetable for completion of this strategic review process, and our board of directors has not approved a definitive course of action. Additionally, there can be no assurances that any particular course of action, business arrangement or transaction, or series of transactions, will be pursued, successfully consummated or lead to increased stockholder value or that we will make any additional cash distribution to our stockholders. In addition, we expect to incur additional operating expenses associated with the wind-down of the UMMS Agreement and the Oxford Agreement, including clinical trial activities that we will continue to conduct during the wind-down period.
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The Domestication
We have substantially completed our previously disclosed corporate transformation to align corporate structure and governance with current and future business activity, including significantly reducing the number of our subsidiaries. On November 12, 2020, Axovant Gene Therapies Ltd. ("AGT") discontinued as a Bermuda exempted company pursuant to Section 132G of the Companies Act 1981 of Bermuda, and pursuant to Section 388 of the General Corporation Law of the State of Delaware (the “DGCL”), continued its existence under the DGCL as a corporation named Sio Gene Therapies Inc. ("Sio") organized in the State of Delaware (the "Domestication"). The Domestication effected a change in our jurisdiction of incorporation, and other changes of a legal nature, including changes in our organizational documents. Our consolidated business, operations, assets and liabilities did not change upon effectiveness of the Domestication. However, following the Domestication, the principal executive offices and registered offices of Sio are located at 130 West 42nd St, 26th Floor, New York, New York 10036, and the telephone number for Sio at its principal executive offices is 1-877-746-4891. The fiscal year end of Sio Gene Therapies Inc. following the Domestication remains at March 31. In addition, our directors and executive officers immediately after the Domestication were the same individuals who were directors and executive officers, respectively, immediately prior to the Domestication.
In the Domestication, each of our currently issued and outstanding common shares automatically converted by operation of law, on a one-for-one basis, into shares of Sio common stock. Consequently, upon the effectiveness of the Domestication, each holder of an AGT common share instead holds a share of Sio common stock representing the same proportional equity interest in Sio as that stockholder held in AGT and representing the same class of shares. The number of shares of Sio common stock outstanding immediately after the Domestication is the same as the number of common shares of AGT. outstanding immediately prior to the Domestication. In connection with the Domestication, we adopted a new certificate of incorporation, bylaws and form of common stock certificate, copies of which were filed as Exhibits 3.1, 3.2 and 4.1, respectively, to our Report on Form 8-K12G3 filed with the SEC on November 13, 2020.
COVID-19 Business Update
We are continuing to closely monitor the impact of the global COVID-19 pandemic on our business and operations. We believe that the measures we have previously implemented are appropriate, reflecting both regulatory and public health guidance, to maintain business continuity. We will continue to closely monitor and seek to comply with guidance from governmental authorities and adjust our activities as appropriate.
In the conduct of our business activities during the pandemic, we took actions designed to protect the safety and well-being of patients, healthcare workers and employees. For patients previously enrolled in our clinical trials, we worked closely with clinical trial investigators and site staff to continue treatment in compliance with trial protocols and to uphold trial integrity, while working to observe government and institutional guidelines designed to safeguard the health and safety of patients, clinical trial investigators and site staff. While the COVID-19 pandemic has not resulted in a significant delay to our prior clinical development timelines to-date and has not had a significant impact to our historical operations, the COVID-19 pandemic continues to evolve, including as a result of variants, and could materially impact our strategic goals to explore and review a range of strategic alternatives focused on maximizing stockholder value from our existing cash and cash equivalents, including a potential sale, merger, business combination or similar transaction. The COVID-19 pandemic and related impacts (including inflationary pressures) could result in significant and prolonged disruption of global financial markets, which has negatively impacted and may continue to reduce our ability to access capital, limiting the financial resources available to us.
We do not yet know the full extent of potential impacts on our business, operations, strategic goals, or the global economy as a whole. However, these effects could harm our operations, and we will continue to monitor the COVID-19 situation closely. For additional information about risks and uncertainties related to the COVID-19 pandemic that may impact our business, financial condition and results of operations, see the section titled “Risk Factors” under Part I, Item 1A in this Annual Report on Form 10-K.
Financial Operations Overview
Revenue
We have not generated any revenue from the sale of any products, and we do not expect to generate any revenue unless and until we obtain regulatory approval of and begin to commercialize any product candidates.
Research and Development Expense
Since our inception, our operations have historically primarily been focused on organizing and staffing our company, raising capital, and acquiring, preparing for and advancing our prior product candidates into clinical development. Our research and development expenses include program-specific costs, as well as unallocated internal costs.
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Program-specific costs include:
direct third-party costs, which include expenses incurred under agreements with CROs and contract manufacturing organizations, the cost of consultants who assist with the development of our product candidates on a program-specific basis, investigator grants, sponsored research, manufacturing costs in connection with producing materials for use in conducting nonclinical and clinical studies, and any other third-party expenses directly attributable to the development of our prior product candidates; and
payments for research and development milestones, which include costs incurred under our agreements with UMMS and Oxford.
Unallocated internal costs include:
stock-based compensation expense for research and development personnel;
personnel-related expenses, which include employee-related expenses, such as salaries, benefits and recruiting expenses, for research and development personnel; and
other expenses, which include research and development software costs, travel expenses, laboratory facility rental costs and research and development equipment depreciation expenses, as well as the cost of consultants who assist with our research and development but are not allocated to a specific program.
Our research and development expenses are expected to decrease substantially in the near term, following the previously announced discontinuation of our AXO-AAV-GM1, AXO-AAV-GM2 and AXO-Lenti-PD programs, as well as the significant reduction in workforce that we implemented subsequent to March 31, 2022. These programs are expected to be wound down by June 30, 2022 after which our research and development activities will be concentrated on one preclinical program.
General and Administrative Expense
General and administrative expenses consist primarily of employee-related expenses such as salaries, benefits and travel expenses for our general and administrative personnel; stock-based compensation, including stock-based compensation allocated to us from our affiliate, Roivant Sciences Ltd. ("RSL"), for certain RSL equity instruments granted to certain of our employees (primarily our former CEO (the "RSL Equity Instruments"), who resigned as our CEO in January 2022); non-employee benefit insurance premiums; third-party legal and accounting fees; information technology costs; office rent, fixed asset depreciation and other overhead costs; and consulting services.
During the fiscal year ending March 31, 2023, we anticipate that our general and administrative expenses will decrease primarily as a result of stock-based compensation expense largely associated with the RSL Equity Instruments, for which expensing commenced upon the liquidity event vesting condition being met upon the closing of RSL's business combination with Montes Archimedes Acquisition Corp. ("MAAC") on September 30, 2021.
Results of Operations for the Years Ended March 31, 2022 and March 31, 2021
The following table summarizes our results of operations for the years ended March 31, 2022 and March 31, 2021 (in thousands):
Years Ended March 31,
2022 2021
Operating expenses:
Research and development expenses
(includes $1,286 and $1,583 of stock-based compensation expense for the years ended March 31, 2022 and 2021, respectively) $ 53,399  $ 24,903 
General and administrative expenses
(includes $6,139 and $2,909 of stock-based compensation expense for the years ended March 31, 2022 and 2021, respectively) 18,163  17,294 
Total operating expenses 71,562  42,197 
Interest expense 27  799 
Other expense (income) 39  (10,359)
Income tax expense (benefit) 259  (212)
Net loss $ (71,887) $ (32,425)
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Research and Development Expenses
For the years ended March 31, 2022 and 2021, our research and development expenses consisted of the following (in thousands):
Years Ended March 31,
2022 2021 Change
Program-specific costs:
AXO-AAV-GM1 $ 17,021  $ 4,676  $ 12,345 
AXO-AAV-GM2 10,725  2,231  8,494 
AXO-Lenti-PD 10,571  5,668  4,903 
Unallocated internal costs:
Personnel-related 9,439  7,058  2,381 
Stock-based compensation 1,286  1,583  (297)
Other 4,357  3,687  670 
Total research and development expenses $ 53,399  $ 24,903  $ 28,496 
Research and development expenses were $53.4 million for the year ended March 31, 2022 compared to $24.9 million for the year ended March 31, 2021. The $28.5 million increase was primarily related to:
(i) a $10.8 million increase in AXO-AAV-GM1 program expenses primarily related to clinical trial material manufacturing expenses (not including a milestone payment disclosed in (iii) below) ;
(ii) a $7.0 million increase in AXO-AAV-GM2 program expenses primarily related to non-GMP and GMP manufacturing expenses and clinical trial expenses (not including a milestone payment disclosed in (iii) below); and
(iii) $5.0 million in total milestone payments in the year ended March 31, 2022 under the AXO-AAV-GM1, AXO-AAV-GM2 and AXO-Lenti-PD programs.
General and Administrative Expenses
General and administrative expenses were $18.2 million for the year ended March 31, 2022 and $17.3 million for the year ended March 31, 2021. The increase of $0.9 million was primarily related to an increase of $3.9 million of stock-based compensation expense associated with the RSL Equity Instruments, for which expensing commenced upon the liquidity event vesting condition being met upon the closing of RSL's business combination with MAAC on September 30, 2021. These increases were partially offset by decreases of (i) $1.7 million for rent, depreciation and facility expenses primarily due to the downsizing of our New York office footprint, (ii) $0.7 million for tax, auditing and accounting fees resulting primarily from the simplification of our corporate structure and the domestication of Sio Gene Therapies Inc. from Bermuda to Delaware that was completed in November 2020, and (iii) $0.7 million for stock-based compensation expense unrelated to the RSL Equity Instruments.
Interest Expense
Interest expense was $27 thousand and $0.8 million for the years ended March 31, 2022 and 2021, respectively. The decrease in interest expense during the current year was due to the April 2020 prepayment in full of the $15.7 million outstanding principal balance on our loan and security agreement with Hercules Capital, Inc. ("Hercules").
Other Expense (Income)
Other expense (income) was $39 thousand and $(10.4) million for the years ended March 31, 2022 and 2021, respectively. Other expense for the year ended March 31, 2022 consisted primarily of foreign exchange losses. Other income for the year ended March 31, 2021 included income of approximately $11.3 million associated with gains on our investment in Arvelle Therapeutics B.V. ("Arvelle") that was sold in February 2021, which was partially offset by foreign exchange losses.

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Liquidity and Capital Resources
Sources of Liquidity
Since our initial public offering in June 2015, our operations have been financed primarily through sales of common stock and pre-funded warrants, as well as borrowings under our credit facilities. As of March 31, 2022, we had $63.7 million of cash and cash equivalents available to us, and in April 2020, we prepaid the remaining outstanding principal balance, equal to $15.7 million, together with $0.3 million of accrued interest, fees and other amounts due under our loan and security agreement with Hercules.
Capital Requirements
We have not yet achieved profitability and expect to continue to incur operating and net losses, as well as negative cash flows from operations, for the foreseeable future. We have not generated any revenue to date. Until such time, if ever, as we can generate product substantial revenue, and subject to our pursuit of strategic alternatives, we expect to primarily finance our cash needs using our existing cash.
We expect that our existing cash and cash equivalents of $63.7 million at March 31, 2022 will enable us to fund our current operating plan beyond the twelve-month period following the date that the accompanying consolidated financial statements and footnotes were issued. In order to meet longer operating requirements, including as we continue to explore and pursue strategic alternatives, we will need additional capital resources. We have based these estimates on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Our principal operating focus is currently on pursuing a range of strategic alternatives. We believe we have sufficient cash resources, net of costs which we estimate to incur in relation to such a transaction, to complete a strategic transaction. If we do not complete a strategic transaction, we may consider dissolving the Company and liquidating the assets. In that case, we believe that our cash resources are sufficient to satisfy estimated liabilities and costs of such a process. However, the achievement of a strategic transaction and the associated costs and timing thereof is uncertain and the time, cost and reserves which may be required to be held back for future claims is uncertain so our estimates may prove incorrect.
Our future funding requirements, both near and long-term, will depend on many factors, including, but not limited to, the timing and outcome of our exploration of, and execution upon any, potential strategic alternatives, the cost of obtaining necessary intellectual property and defending potential intellectual property disputes, realization of the anticipated benefits of our headcount reduction, and the costs of operating as a public company.
For the years ended March 31, 2022 and March 31, 2021, we incurred net losses of $71.9 million and $32.4 million, respectively. As of March 31, 2022, our cash and cash equivalents totaled $63.7 million and our accumulated deficit was $863.0 million. We estimate that our current cash and cash equivalents balance is sufficient to support operations beyond the twelve-month period following the date that the accompanying consolidated financial statements were issued. This estimate is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect.
We expect to primarily finance our cash needs using our existing cash. We do not currently have any committed external source of funds. We continually assess multiple options to obtain additional funding to support our operations, including proceeds from offerings of our equity securities or debt financings. To the extent that we raise additional capital through the sale of equity or convertible debt securities, our stockholders’ ownership interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Sources of a sufficient amount of financing may not be available to us on favorable terms, if at all, and our ability to raise additional capital has been, and may continue to be, adversely impacted by, among other things, potentially worsening global economic conditions and the recent disruptions to and volatility in the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic. In addition, extreme price and volume fluctuations in the stock market in general, and the Nasdaq Global Select Market, in particular, have resulted in volatile and sometimes decreased stock prices for many companies, including us. Broad market and industry factors, including worsening economic conditions and other adverse effects or developments relating to the evolving effects of the COVID-19 pandemic, may negatively affect the market price of our common stock, regardless of our actual operating performance, and impact our ability to raise sufficient additional capital on acceptable terms, if at all.

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At-the-Market Equity Offering Program
We have engaged SVB Securities LLC as our agent to sell shares of our common stock from time to time through an at-the-market equity offering program. SVB Securities LLC is entitled to compensation for its services in an amount equal to 3% of the gross proceeds of any of our shares of common stock sold. As of March 31, 2022, we have sold approximately 30.4 million shares of common stock for total proceeds of approximately $92.0 million, net of brokerage fees, under the sales agreement since April 2020.
Cash Flows
The following table sets forth a summary of our cash flows for each of the periods shown (in thousands):
Years Ended March 31,
2022 2021
Net cash used in operating activities $ (60,346) $ (46,589)
Net cash provided by investing activities 3,648  12,386 
Net cash provided by financing activities 1,441  73,621 
Operating Activities
Cash flows from operating activities consist of net loss adjusted for non-cash items, including depreciation and stock-based compensation expenses, as well as the effect of changes in working capital and other activities.
For the year ended March 31, 2022, net cash used in operating activities was $60.3 million and was primarily attributable to a net loss of $71.9 million, which includes costs incurred for research and development activities, including CRO fees, manufacturing, regulatory and other clinical trial costs, as well as our general and administrative expenses, in addition to a decrease of $1.0 million in accrued expenses, which were partially offset by $7.4 million of non-cash stock-based compensation expense, an increase of $2.6 million in accounts payable, as well as a decrease of $2.1 million in prepaid expenses and other current assets.
For the year ended March 31, 2021, net cash used in operating activities was $46.6 million and was primarily attributable to a net loss of $32.4 million, which includes costs incurred for research and development activities, including CRO fees, manufacturing, regulatory and other clinical trial costs, as well as our general and administrative expenses, in addition to other income of $11.3 million associated with gains on our investment in Arvelle, an increase of $4.4 million in prepaid expenses and other current assets and decreases of $3.1 million in accounts payable and $2.1 million in accrued expenses, which were partially offset by $4.5 million of non-cash stock-based compensation expense and $1.5 million of operating lease right-of-use asset amortization expense.
Investing Activities 
For the year ended March 31, 2022, net cash provided by investing activities was $3.6 million, consisting of proceeds of $4.3 million from the sale of our long-term investment in Arvelle that was partially offset by purchases of fixed assets.
For the year ended March 31, 2021, net cash provided by investing activities was $12.4 million, consisting of proceeds of $12.8 million from the sale of our long-term investment in Arvelle that was partially offset by purchases of fixed assets.
Financing Activities
For the year ended March 31, 2022, net cash provided by financing activities was $1.4 million and consisted of net proceeds from the issuance and sale of our shares of common stock under our share sales agreement with SVB Securities LLC.
For the year ended March 31, 2021, net cash provided by financing activities was $73.6 million and consisted primarily of $89.2 million of net proceeds from the issuance and sale of our shares of common stock under our share sales agreement with SVB Securities LLC, partially offset by $15.7 million of principal payments made on long-term debt.

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Contractual Obligations
In October 2019, we entered into an agreement with a third-party to lease office space in Durham, North Carolina under a lease agreement expiring in November 2022, and in August 2020, we entered into a lease agreement with a third-party for an office facility in New York, New York that commenced in December 2020 and expires in June 2026. In November 2021, we entered into a lease agreement for a research and development facility and related office space in Durham, North Carolina with an initial term expiring in December 2024. For the years ended March 31, 2022 and March 31, 2021, we incurred $0.6 million and $1.6 million, respectively, in rent expense under these agreements.. As of March 31, 2022, our real property lease obligations were $2.9 million with $0.8 million expected to be paid within 12 months and the remainder thereafter.
In addition, we have entered into services agreements with third parties for pharmaceutical manufacturing and research activities in the normal course of business, which can generally be terminated by us with 30- or 60-days' written notice, unless otherwise indicated. These cancellable contracts are not included in the total obligations in the preceding paragraph. Further, certain of our manufacturing agreements could require early termination and wind-down payments due from us as a result of the recent termination of our clinical trials.
Recent Accounting Pronouncements
For detailed information regarding recently issued accounting pronouncements and the expected impact on our financial statements, refer to Note 2 "Summary of Significant Accounting Policies," in the accompanying notes to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Critical Accounting Policies and Significant Judgments and Estimates
Our management's discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). The preparation of these consolidated financial statements and accompanying notes requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the dates of the balance sheets and the reported amounts of expenses during the reporting periods. In accordance with U.S. GAAP, we evaluate our estimates and judgments on an ongoing basis. Significant estimates include research and development accruals. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We define our critical accounting policies as those under U.S. GAAP that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations, as well as the specific manner in which we apply those principles.
Our significant accounting policies are more fully described in Note 2, "Summary of Significant Accounting Policies," to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Not all of these significant accounting policies, however, require that we make estimates and assumptions that we believe are "critical accounting estimates." We believe that our estimates relating to research and development accruals have the greatest potential impact on our consolidated financial statements and consider these to be our critical accounting policies and estimates and are "critical accounting estimates."
Research and Development Accruals
Research and development costs are expensed as incurred. Clinical study costs are accrued over the service periods specified in the contracts and adjusted as necessary based upon an ongoing review of the level of effort and costs actually incurred. The Company’s assessment of the completeness of the information is subject to variability and uncertainty. In addition, in certain circumstances, the determination of the nature and amount of services that have been received during the reporting period requires judgment as the timing and pattern of vendor invoicing does not correspond to the level of services provided. Payments for a product license prior to regulatory approval of the product and payments for milestones achieved prior to regulatory approval of the product are expensed in the period incurred as research and development. Milestone payments made in connection with final regulatory approvals are capitalized and amortized to cost of revenue over the remaining useful life of the asset. Research and development costs are charged to expense when incurred and currently primarily consist of the development and regulatory milestones achieved for our AXO-AAV-GM1, AXO-AAV-GM2 and AXO-Lenti-PD gene therapy programs, as well as research and development materials acquired from UMMS and Oxford and expenses from third parties who conduct research and development activities on our behalf. We expense in-process research and development projects acquired as asset acquisitions which have not reached technological feasibility, and which have no alternative future use.
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Item 7A.    Quantitative and Qualitative Disclosures About Market Risk
Market risk is the potential loss arising from adverse changes in market rates and market prices such as interest rates, foreign currency exchange rates, and changes in the market value of equity instruments. As of March 31, 2022, we had cash and cash equivalents of $63.7 million, with cash consisting of non-interest-bearing deposits denominated in the U.S. dollar, Swiss franc and Euro, and cash equivalents consisting of interest-bearing money market fund deposits denominated in the U.S. dollar, which are invested in debt securities issued or guaranteed by the U.S. government and repurchase agreements fully collateralized by U.S. Treasury and U.S. government securities. We have policies requiring us to invest in high-quality issuers, limit our exposure to any individual issuer, and ensure adequate liquidity. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our cash equivalent investments are in the form of money market funds and marketable securities and are invested in U.S. Treasury obligations. Due to the short-term duration of our investment portfolio and the low risk profile of our investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our portfolio.
Item 8.        Financial Statements and Supplementary Data
All financial statements and schedules required to be filed hereunder are listed in the Index to Financial Statements and set forth in Item 15 of this Annual Report on Form 10-K and are incorporated herein by reference.
Item 9.        Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A.    Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision of our principal executive and principal financial officer, we evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2022, the end of the period covered by this report. The term "disclosure controls and procedures" (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), means controls and other procedures of a company that are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure. Based on this evaluation, our principal executive and principal financial officer concluded that our disclosure controls and procedures were effective as of March 31, 2022 at the reasonable assurance level.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of March 31, 2022, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on the results of our evaluation, management concluded that our internal control over financial reporting was effective as of March 31, 2022.
Inherent Limitations on Effectiveness of Controls
Our management, including our principal executive and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Sio Gene Therapies Inc. have been detected.

40


Attestation Report of the Registered Public Accounting Firm
This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm pursuant to the rules of the SEC that permit us to provide only management’s report on internal control over financial reporting in this report, as we were a smaller reporting company as defined in the rules and regulations of the SEC as of March 31, 2022.
Changes in Internal Control over Financial Reporting
No changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B.    Other Information
None.
Item 9C.    Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
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PART III.
Item 10.        Directors, Executive Officers and Corporate Governance
Directors
Our Board of Directors (the "Board") presently has seven members. Each director is elected to serve a one-year term, with all directors subject to annual election. Vacancies on the Board may be filled by the Board or by the stockholders in a general meeting. A director elected to fill a vacancy, including vacancies created by an increase in the number of directors, will serve for the remainder of the full term.
Berndt Modig, Senthil Sundaram, Atul Pande, M.D., Frank Torti, M.D. and Eric Venker, M.D, Pharm.D. are each current directors who were previously elected by our stockholders. David Nassif, J.D. was appointed to the Board in January 2022 and Kristiina Vuori, M.D., Ph.D. was appointed to the Board in October 2020 to fill existing vacancies.
The following table identifies our directors, as well as the position they hold, any committee membership, and their ages as of March 31, 2022:
Name Age Director Since Position Audit Committee Compensation Committee Nominating and Corporate Governance Committee
Frank Torti, M.D. 43 2018 Chairperson
Atul Pande, M.D. 67 2015 Lead Independent Director ü ü
ü*
David Nassif, J.D. 67 2022 Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, General Counsel and Director
Berndt Modig 63 2015 Director ü
ü*
Senthil Sundaram 43 2019 Director
ü*
ü
Eric Venker, M.D., Pharm.D. 35 2020 Director
Kristiina Vuori, M.D., Ph.D. 54 2020 Director ü
_____________
*    Chairperson.
Below is a brief biography of each director.
Frank Torti, M.D.
Dr. Torti has served as Chairperson of the Board since September 2018. Dr. Torti has served as the Vant Chair of Roivant Sciences, Inc., or RSI, which is a wholly owned subsidiary of our affiliate, RSL, since January 2020. In this capacity he is responsible for the biopharmaceutical companies in the Roivant family and serves as Chairperson of the boards of directors of those companies. He previously served as Vant Investment Chair of RSI, from August 2018 to December 2019. Prior to joining RSI, from August 2007 to August 2018, Dr. Torti served as a Partner of New Enterprise Associates, or NEA, specializing in investments in healthcare. Prior to joining NEA, Dr. Torti worked for the Duke University Center for Clinical & Genetic Economics from 2002 to 2005 in various capacities, where he was involved in clinical trials research and economic evaluations of multinational clinical trials. Dr. Torti presently serves as Chairperson of the boards of directors of Arbutus Biopharma Corp., Immunovant Inc., and several private biopharmaceutical companies. He has previously served on the boards of directors of numerous development and commercial stage public and private healthcare companies, including Annexon Biosciences, Inc., Eargo Inc., Galera Therapeutics, Inc., Myovant Sciences Ltd., NeoTract, Inc., Urovant Sciences Ltd, and others. Dr. Torti earned an M.D. from the University of North Carolina School of Medicine, an M.B.A. from Harvard Business School and a B.A. from the University of North Carolina. Our Board of Directors believes that Dr. Torti’s extensive experience in healthcare investing, as well as his operational experience and clinical trial background, qualifies him to serve on the Board.

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Atul Pande, M.D.
Dr. Pande has served as a member of the Board since March 2015 and currently serves as our Lead Independent Director. Dr. Pande has served as Chief Medical Advisor of PureTech Health plc since February 2018, and previously served as its Chief Medical Officer since February 2017 and a Senior Advisor from July 2016 through February 2017. Dr. Pande has also served as President and Chief Executive Officer of Verity BioConsulting LLC, a drug development consulting firm, since 2014. He previously served as Chief Medical Officer of Tal Medical, Inc., a clinical-stage medical device company, from December 2014 to December 2017. From 2007 to April 2014, Dr. Pande was Senior Vice President and Senior Advisor, Pharmaceutical R&D at GlaxoSmithKline plc, a pharmaceutical company. He has also held senior roles at Pfizer Inc., a multinational pharmaceutical company, Parke-Davis/Warner-Lambert, a subsidiary of Pfizer Inc. and Lilly Research Laboratories, a global pharmaceutical research organization and division of Eli Lilly & Co., where he was involved in the development of numerous central nervous system drugs. Dr. Pande is currently a director of Autifony Therapeutics Limited, a biotechnology company, Karuna Therapeutics, Inc., a biopharmaceutical company, Perception Neurosciences, a biopharmaceutical company, and Immunovant Inc., a biopharmaceutical company, and he previously served as a director of Heptares Therapeutics Ltd., a biotechnology company now a part of the Sosei Group. He also serves on the Scientific Advisory Boards of Cennerv Pharma PTE LTD and Centrexion Corporation. Dr. Pande is a fellow of several professional societies, including the American Psychiatric Association. He has published over 50 peer-reviewed scientific papers and numerous abstracts, book chapters and book reviews. Dr. Pande received his MBBS (Bachelor of Medicine, Bachelor of Surgery) and his M.D. from the University of Lucknow, India and completed his research fellowship training in psychiatry at the University of Michigan Medical School and his postgraduate specialty training and psychiatry residency program at Western University. We believe that Dr. Pande’s medical background and significant knowledge of the life sciences industry qualify him to serve on the Board.
David Nassif, J.D.
Mr. Nassif served as the Principal Financial and Accounting Officer, General Counsel of Axovant Gene Therapies Ltd. from July 2019 until November 2020 and as the Chief Financial Officer of Axovant Sciences, Inc. from July 2019 through December 2020, and has served as the Chief Financial Officer and Chief Accounting Officer, General Counsel of Sio Gene Therapies Inc. since November 2020. Mr. Nassif has also served as the Chief Executive Officer and as a member of the Board of Sio Gene Therapies Inc. since January 2022. He served as Executive Vice President and Chief Financial Officer of SteadyMed, Ltd., a specialty pharmaceutical company, from March 2013 (first as a financial consultant and commencing March 2015 on a full-time basis) until June 2019. From May 2011 through September 2014, Mr. Nassif served as the President and Chief Financial Officer of Histogen, Inc., a regenerative medicine company. From May 2007 to February 2010, Mr. Nassif served as the Executive Vice President and Chief Financial Officer of Zogenix, Inc., a specialty pharmaceutical company. Mr. Nassif received a B.Sc. in Finance and Management Information Systems from the University of Virginia with honors and a J.D. from the University of Virginia School of Law. We believe that Mr. Nassif’s extensive experience in leadership roles at biopharmaceutical companies qualify him to serve on the Board.
Berndt Modig
Mr. Modig has served as a member of the Board since March 2015. Since March 2016, Mr. Modig has served as Chief Executive Officer of Pharvaris N.V., a public clinical stage biotechnology company focusing on rare diseases. He served as Chief Financial Officer of Prosensa Holding N.V., a pharmaceutical company, from March 2010 until its acquisition by BioMarin Pharmaceutical Inc. in January 2015. From October 2003 to November 2008, Mr. Modig was Chief Financial Officer at Jerini AG, a pharmaceutical company, where he directed private financing rounds, its initial public offering in 2005, and its acquisition by Shire plc, a biopharmaceutical company acquired by Takeda Pharmaceutical Company, in 2008. Before that, Mr. Modig served as Chief Financial Officer at Surplex AG, a reseller of used industrial equipment, from 2001 to 2003, and as Finance Director Europe of U.S.-based Hayward Industrial Products Inc., a thermoplastic valve manufacturer, from 1999 to 2001. In previous positions, Mr. Modig was a partner in the Brussels-based private equity firm Agra Industria from 1994 to 1999 and a Senior Manager in the Financial Services Industry Group of Price Waterhouse LLP in New York from 1991 to 1994. Mr. Modig currently serves as a director of Pharvaris N.V., a public clinical stage biotechnology company. He also serves as chair of the audit committee and as a director of Centogene N.V., a public biopharmaceutical company. He also previously served on (i) the board of directors of Kiadis Pharma N.V., a public biopharmaceutical company, from June 2016 to April 2021, (ii) the board of directors of Auris Medical Holding Ltd., a pharmaceutical company, from April 2014 to March 2018, and (iii) the board of directors of Affimed N.V., a public biopharmaceutical company, from September 2014 to August 2020. Mr. Modig received his bachelor’s degree in business administration, economics and German from the University of Lund, Sweden and his M.B.A. from INSEAD, Fontainebleau, France and is a Certified Public Accountant (inactive). We believe that Mr. Modig’s extensive international experience in finance and operations, private equity, and mergers and acquisitions qualifies him to serve on the Board.
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Senthil Sundaram
Mr. Sundaram has served as a member of the Board since June 2019. In July 2020, Mr. Sundaram became the Chief Executive Officer and a director of Terns Pharmaceuticals, Inc., a publicly-traded clinical-stage pharmaceutical company. Mr. Sundaram served as the Chief Financial Officer of Nightstar Therapeutics plc, a publicly-traded clinical-stage gene therapy company, from April 2017 to June 2019, when it was acquired by Biogen, Inc., a multinational biotechnology company. While at Nightstar, Mr. Sundaram led a number of private and public offerings, including its initial public offering, and a variety of business development efforts including the M&A process that resulted in the acquisition by Biogen. From February 2013 to April 2017, Mr. Sundaram served in a variety of positions at Intercept Pharmaceuticals, Inc., a biopharmaceutical company, including most recently as its Vice President and head of business development. Prior to joining Intercept, from 2000 to 2013, Mr. Sundaram worked in the healthcare investment banking groups at Lehman Brothers Inc., Barclays Capital Inc., Citigroup Global Markets Inc. and Lazard Ltd. Mr. Sundaram has also served on the board of directors of Social Capital Suvretta Holdings Corp. I since September 2021. Mr. Sundaram earned a B.S. in Computer Engineering and a B.A. in Economics from Brown University. We believe that Mr. Sundaram’s extensive experience in leadership roles at biopharmaceutical companies qualifies him to serve on the Board.
Eric Venker, M.D., Pharm.D.
Dr. Venker has served as a member of the Board since February 2020. Since February 2021, Dr. Venker has served as President, Chief Operating Officer of RSI, having previously served as Chief Operating Officer of RSI since November 2018 and as President of RSI since January 2021. From October 2017 to October 2018, Dr. Venker served as Chief of Staff to RSI’s Chief Executive Officer, and from 2014 to 2015 as an Analyst at RSI. From 2015 to 2017, Dr. Venker was a physician at New York Presbyterian Hospital/Columbia University Medical Center, where he trained in internal medicine, and also served as Chair of the Housestaff Quality Council leading operational initiatives to improve efficiencies. From 2011 to 2015, Dr. Venker was a Clinical Pharmacist at Yale-New Haven Hospital. Dr. Venker also serves on the boards of directors of Arbutus Biopharma Corporation and Immunovant, Inc., each a biopharmaceutical company, as well as several private biopharmaceutical companies. Dr. Venker received his Pharm.D. from St. Louis College of Pharmacy and his M.D. from Yale School of Medicine. We believe that Dr. Venker’s medical background and experience in the biopharmaceutical industry qualify him to serve on the Board.
Kristiina Vuori, M.D., Ph.D.
Dr. Vuori has served as a member of the Board since October 2020. Dr. Vuori has served as President of Sanford Burnham Prebys Medical Discovery Institute, or the Institute, since January 2010. The Institute is a non-profit research organization focused on biomedical research and drug discovery in the areas of cancer, neurodegeneration, diabetes, and infectious, inflammatory, and childhood diseases. In addition, Dr. Vuori has held the Pauline and Stanley Foster Presidential Chair since January 2010 and has served as Professor at the Institute since January 1995. From July 2014 to September 2017, Dr. Vuori served on the board of directors of WebMD Health Corp., an online publisher of health news and information, and since June 2019, has served on the board of directors of Bionano Genomics, Inc., a life sciences instrumentation company. She has served on the board of directors of Forian, Inc., a health data analytics company, since January 2021. She has served on the board of directors of Inhibrx, Inc., a clinical-stage biotechnology company, since October 2021. Additionally, she serves or has served in the past five years on the boards of directors of the American Association for Cancer Research and the California Institute for Regenerative Medicine. Dr. Vuori earned her M.D. and Ph.D. from the University of Oulu, Finland. We believe that that Dr. Vuori’s experience as a physician-scientist in biomedical research and drug discovery and as an educator of research scientists, her experience managing a large non-profit research organization, and her various leadership roles in non-profit, for-profit and public boards qualify her to serve on the Board.
Executive Officer
David Nassif, J.D., age 67, serves as our Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, and General Counsel. Refer to “—Directors—David Nassif, J.D.” for Mr. Nassif’s biography.
Information Regarding the Board of Directors and Corporate Governance
Board Leadership Structure
Dr. Torti currently serves as Chairperson of the Board. The Board believes that Dr. Torti’s role as Chairperson helps ensure that management and the Board act with common purpose and benefit from the extensive executive leadership and operational experience of Dr. Torti. The Board believes that Dr. Torti is well-positioned to act as a bridge between management and the Board, facilitating the regular flow of information. In addition, the Board believes that, under current circumstances, the separation of the offices of Chairperson and Chief Executive Officer will enhance oversight of management and Board function, allowing Mr. Nassif the ability to focus on his primary responsibilities as Chief Executive Officer, enhancing stockholder value and expanding and strengthening our business.
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Our corporate governance guidelines provide that the Board will select its Chairperson in the manner that it determines to be in the best interests of our stockholders. The same person may hold the positions of Chief Executive Officer and Chairperson, or the Board may separate these offices. If the Chairperson is an independent director, the Board may designate the Chairperson as the lead independent director. If the Chairperson is not an independent director, the Board may designate one of the independent directors as the lead independent director. Dr. Pande was designated by the Board as our lead independent director in September 2018. The lead independent director’s duties include among other things: establishing the agenda for meetings of the independent directors and meetings of the non-management directors, as applicable; presiding over meetings of the independent directors and meetings of the non-management directors, as applicable; presiding over any portions of meetings of the Board evaluating the performance of the Board; and coordinating the activities of the other independent directors and perform such other duties the Board may establish or delegate.
At the present time, the Board believes that the current Board members, together with our management, possess the requisite leadership and industry skills, expertise and experiences to effectively oversee our business and affairs. Moreover, the Board prefers to retain the flexibility to select the appropriate leadership structure based upon the existence of various conditions, including, but not limited to, business, financial or other market conditions, affecting us at any given time. Notwithstanding the foregoing, the independent directors of the Board regularly participate in executive sessions at which only independent directors are present.
Role of the Board in Risk Oversight
One of the Board’s key functions is informed oversight of our risk management process. The Board administers this oversight function directly through the Board as a whole, as well as through various Board standing committees that address risks inherent in their respective areas of oversight. The Board believes its current leadership structure, including the appointment of a lead independent director and having a majority or equal number of independent directors on each committee and the Board itself, supports the risk oversight function of the Board.
In particular, the Board is responsible for reviewing, approving and monitoring fundamental financial and business strategies and major corporate actions, assessing major risks facing us and considering ways to address those risks and overseeing the establishment and maintenance of processes and conditions to maintain our integrity. Our Board has received regular updates from the management team on the evolving COVID-19 situation and is involved in strategy decisions related to the impact of COVID-19 on our business. The Audit Committee of the Board has the responsibility to consider and discuss our major financial risk exposures and the steps our management has taken to monitor and control these exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. The Audit Committee of the Board also monitors compliance with certain legal and regulatory requirements, including oversight of related-person transactions, complaint procedures, certain ethical compliance and regulatory and accounting initiatives, and is responsible for oversight of the performance of our internal audit function. The Compensation Committee of the Board assesses and monitors whether any of our compensation policies and programs have the potential to encourage excessive risk-taking. The Nominating and Corporate Governance Committee of the Board monitors the effectiveness of our corporate governance guidelines, including whether they are successful in preventing illegal or improper liability-creating conduct, and monitor compliance with certain regulatory requirements. It is the responsibility of the committee chairs to report findings regarding material risk exposures to the Board as quickly as possible.
The oversight responsibility of the Board and its committees is informed by reports from our management team that are designed to provide visibility to Board about the identification and assessment of key risks and our risk mitigation strategies. At periodic meetings of the Board and its committees, management reports to and seeks guidance from the Board and its committees with respect to the most significant risks that could affect our business, such as legal risks, information security and privacy risks, and financial, tax and audit related risks. In addition, among other matters, management provides the Audit Committee and Nominating and Corporate Governance Committee of the Board periodic reports on our compliance programs and investment policy and practices.
Meetings of the Board of Directors; Attendance at Annual Meeting of Stockholders
During our fiscal year ended March 31, 2022, the Board met 10 times; the Audit Committee met four times; the Compensation Committee met four times; and the Nominating and Corporate Governance Committee met two times. Each Board member attended 75% or more of the aggregate number of meetings of the Board and of the committees on which he or she served that were held during the portion of the last fiscal year for which he or she was a director or committee member.
As required under applicable Nasdaq listing rules, in our fiscal year ended March 31, 2022, our independent directors met in regularly scheduled executive sessions at which only independent directors were present. Dr. Pande and Mr. Modig typically presided over the executive sessions.
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Our policy is that directors are invited to attend the Annual General Meetings of Stockholders. No members of the Board attended our 2021 Annual General Meeting of Stockholders.
Information Regarding Committees of the Board of Directors
The Board has an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. Below is a description of each of these committees. Each committee has the authority to engage legal counsel or other experts or consultants, as it deems appropriate to carry out its responsibilities. Copies of the written charters of such committees, are available on our website at http://investors.siogtx.com/investors/corporate-governance. Information contained on or accessible through this website is not incorporated by reference nor otherwise included in this report, and any references to this website are intended to be inactive textual references only.
Audit Committee
The Audit Committee of the Board was established by the Board in accordance with Section 3(a)(58)(A) of the Exchange Act to oversee our corporate accounting and financial reporting processes and audits of our financial statements. The Board reviews Nasdaq listing standards definition of independence for Audit Committee members on an annual basis and has determined that each member of the Audit Committee satisfies the independence requirements under applicable Nasdaq listing rules and Rule 10A-3 of the Exchange Act.
The Audit Committee is composed of Mr. Modig, Dr. Pande and Mr. Sundaram. The Board has also determined that each of Mr. Modig and Mr. Sundaram qualifies as an “audit committee financial expert,” as defined in applicable Securities and Exchange Commission ("SEC") rules and regulations. The Board made a qualitative assessment of Mr. Modig’s level of knowledge and experience based on a number of factors, including his formal education and experience as a chief financial officer at public reporting companies. In addition to our Audit Committee, Mr. Modig also serves on the audit committees of two other public companies, Kiadis Pharma N.V. and Affimed N.V. Likewise, the Board made a qualitative assessment of Mr. Sundaram’s level of knowledge and experience based on a number of factors, including his experience as a chief financial officer at a public reporting company and investment banker. The Board has determined that this simultaneous service of Mr. Modig does not impair his ability to effectively serve on our Audit Committee.
The principal duties and responsibilities of the Audit Committee include:
recommending and retaining an independent registered public accounting firm to serve as our independent auditors, for purposes of the Companies Act, overseeing our independent auditors’ work and determining our independent auditors’ compensation;
evaluating the performance of and assessing the qualifications of our independent auditors;
approving in advance all audit services and non-audit services to be provided to us by our independent auditors;
monitoring the rotation of partners of the independent auditors on our audit engagement team as required by law;
assessing and taking other appropriate action to oversee the independence of our independent auditors, including reviewing written disclosures from the independent auditors delineating all relationships between the auditors, or their affiliates, and us, or persons in financial oversight roles at Sio, that may reasonably be thought to bear on independence (at least annually, consistent with the Public Company Accounting Oversight Board, or PCAOB, Rule 3526);
reviewing the financial statements proposed to be included in our Annual Report on Form 10-K to be filed with the SEC and recommending to the Board whether such financial statements should be so included;
reviewing and discussing with management and our independent auditors the results of the annual audit and the independent auditor’s review of our quarterly financial statements, including, as appropriate, a review of our disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our periodic reports filed with the SEC;
reviewing and discussing with management and our independent auditors, as appropriate, our guidelines and policies with respect to risk assessment and management, including risks related to our accounting matters, financial reporting and legal and regulatory compliance; and reviewing and discussing with management, as appropriate, insurance programs;
conferring with management and our independent auditors, as appropriate, regarding the scope, adequacy and effectiveness of our internal control over financial reporting;
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coordinating the Board’s oversight of the performance of our internal audit function;
reviewing and approving or rejecting transactions between us and any related persons; and
establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls, auditing or compliance matters and the confidential and anonymous submission by our employees of concerns regarding questionable accounting or auditing matters.
Report of the Audit Committee of the Board of Directors*
The Audit Committee has reviewed and discussed the audited financial statements for our fiscal year ended March 31, 2022 with our management. The Audit Committee has discussed with Ernst & Young LLP, our independent registered public accounting firm, the matters required to be discussed by the applicable requirements of the PCAOB and the SEC. The Audit Committee has also received the written disclosures and the letter from Ernst & Young LLP required by applicable requirements of the PCAOB regarding the independent accountants’ communications with the Audit Committee concerning independence, and has discussed with Ernst & Young LLP the accounting firm’s independence. Based on the foregoing, the Audit Committee has recommended to the Board that the audited financial statements be included in our Annual Report on Form 10-K for our fiscal year ended March 31, 2022 and filed with the SEC.
Respectfully submitted by the members of the Audit Committee of the Board of Directors.
Mr. Senthil Sundaram
Mr. Berndt Modig
Dr. Atul Pande
* The material in this report is not "soliciting material," is not deemed "filed" with the SEC and is not to be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
Compensation Committee
The Compensation Committee is composed of Mr. Modig and Dr. Pande. The Board has determined that Mr. Modig and Dr. Pande are “independent,” as independence is currently defined in applicable Nasdaq listing rules. All members of the Compensation Committee are “non-employee directors,” as defined in Rule 16b-3 under the Exchange Act.
The Compensation Committee of the Board acts on behalf of the Board to, among other things, oversee our compensation strategy, policies, plans and programs and to review and determine the compensation to be paid to our executive officers. In general, the Compensation Committee of the Board performs the same policy- and compensation-setting functions for our subsidiaries and their executive officers as it does for us, and references herein to our personnel, policies, plans and programs include those of our subsidiaries as well. The principal duties and responsibilities of the Compensation Committee include:
reviewing, modifying and approving our overall compensation strategy and policies, including: (1) reviewing and approving corporate goals and objectives relevant to the compensation of our executive officers and other senior management, as appropriate; (2) evaluating and approving, or recommending to the Board for approval, compensation plans and programs advisable for us, including modifications and terminations to those plans and programs; (3) establishing policies with respect to equity compensation arrangements; (4) assessing the adequacy and competitiveness of our executive compensation programs among comparable companies in our industry; (5) reviewing and approving the terms of any employment agreements, severance arrangements, change-of-control protections and any other compensatory arrangement for our executive officers and other senior management, as appropriate; (6) reviewing our practices and policies of employee compensation as they relate to risk management and risk-taking incentives; (7) considering and establishing share ownership guidelines for our executive officers and directors, if deemed appropriate; and (8) evaluating the efficacy of our compensation policy and strategy in achieving expected benefits to us and otherwise furthering our policies;
establishing and approving individual and corporate goals and objectives of our Chief Executive Officer and our other executive officers and senior management and evaluating performance of the Chief Executive Officer and our other executive officers and senior management, as appropriate, in light of these stated objectives;
reviewing and approving the type and amount of compensation to be paid or awarded to Board members;
selecting and retaining compensation consultants, legal counsel and other advisers; and
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adopting, amending, administering, and terminating our equity compensation plans, pension and profit sharing plans, bonus plans, deferred compensation plans and similar programs.
Compensation Committee Processes and Procedures
The Compensation Committee meets at least once annually and with greater frequency if necessary. The agenda for each meeting is usually developed by the Chairperson of the Compensation Committee, in consultation with the Chief Executive Officer and the General Counsel. The Compensation Committee meets regularly in executive session. From time to time, various members of management and other employees as well as outside advisors or consultants may be invited by the Compensation Committee to make presentations, to provide financial or other background information, to provide advice or to otherwise participate in Compensation Committee meetings. The Chief Executive Officer may not participate in, or be present during, the voting or deliberations of the Compensation Committee regarding his compensation. The charter of the Compensation Committee grants the Compensation Committee full access to all books, records, facilities and personnel of Sio.
In addition, under the charter, the Compensation Committee has the authority to obtain, at our expense, advice and assistance from internal or external legal, accounting or other advisors and consultants that any member of the Compensation Committee deems necessary or appropriate in the discharge of his or her responsibilities. If the Compensation Committee chooses to retain or obtain the advice of a compensation consultant, independent legal counsel, or other advisor, it has the direct responsibility for the appointment, compensation and oversight of the work of such party, and we will provide for appropriate funding, as determined by the Compensation Committee, for the payment to such party. In addition, the Compensation Committee has the sole authority to retain and terminate any compensation consultant to assist in its evaluation of executive and director compensation, including the sole authority to approve the consultant’s reasonable fees and other retention terms, all at our expense. Under the charter, the Compensation Committee may select a compensation consultant, legal counsel or other advisor (other than in-house legal counsel and certain other types of advisors) only after taking into consideration all factors relevant to that party’s independence from management, including the six factors prescribed by the SEC and Nasdaq; however, there is no requirement that any advisor be independent.
During the past fiscal year, after taking into consideration the six factors prescribed by the SEC and Nasdaq, the Compensation Committee engaged Radford, a national compensation consulting firm, to provide executive compensation advisory services based, in part, on its reputation and extensive experience in the industry. The Compensation Committee determined that Radford was independent from management and had no conflicts of interest in connection with the advisory services to be provided. Specifically, the Compensation Committee requested that Radford develop a comparative group of companies and perform analyses of competitive performance and compensation levels for that group. Radford has also conducted interviews with members of the Compensation Committee and senior management to learn more about our business operations and strategy, key performance metrics and strategic goals, as well as the labor markets in which we compete. Radford ultimately developed recommendations that were presented to the Compensation Committee for its consideration. Following an active dialogue with Radford, the Compensation Committee approved the recommendations.
The Compensation Committee generally makes adjustments to annual compensation, determines bonuses and equity awards and establishes new performance objectives at one or more meetings held during the first quarter of the year. However, the Compensation Committee also considers matters related to individual compensation, such as compensation for new executive hires, as well as high-level strategic issues, such as the efficacy of our compensation strategy, potential modifications to that strategy and new trends, plans or approaches to compensation, at various meetings throughout the year.
Generally, the Compensation Committee’s process comprises two related elements: the determination of compensation levels and the establishment of performance objectives for the current year. For executives other than the Chief Executive Officer, the Compensation Committee solicits and considers evaluations and recommendations submitted to the Compensation Committee by the Chief Executive Officer. The evaluation of the performance of the Chief Executive Officer is conducted by the Compensation Committee, which determines any adjustments to his compensation as well as awards to be granted. For all executives and directors, the Compensation Committee may review and consider, as appropriate, materials such as financial reports and projections, operational data, tax and accounting information, tally sheets that set forth the total compensation that may become payable to executives in various hypothetical scenarios, executive and director share ownership information, company share performance data, analyses of historical executive compensation levels and current company-wide compensation levels and recommendations of the Compensation Committee’s compensation consultant, including analyses of executive and director compensation paid at other companies identified by the consultant.

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Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee is composed of Dr. Pande, Mr. Sundaram and Dr. Vuori. The Board has determined that Dr. Pande, Mr. Sundaram and Dr. Vuori are “independent,” as independence is currently defined in applicable Nasdaq listing rules. The principal duties and responsibilities of the Nominating and Corporate Governance Committee include:
identifying, reviewing and evaluating candidates to serve as directors, consistent with criteria approved by the Board;
reviewing, evaluating and considering the recommendation for nomination of incumbent directors for re-election to the Board;
reviewing, discussing and assessing the performance of the Board, including Board committees, such assessment to include evaluation of the Board’s contribution as a whole and effectiveness in serving the best interests of Sio and its stockholders, specific areas in which the Board and/or management believe contributions could be improved, overall Board composition and makeup, including the reelection of current Board members, and the independence of directors;
overseeing the Board’s committee structure and operations, evaluating the performance of the members of the committees of the Board, reviewing the composition of such committees, and recommending to the Board the membership of each such committee;
reviewing, discussing and assessing our corporate governance principles;
reviewing our policy statements to determine adherence to our Code of Business Ethics and Conduct; and
overseeing and reviewing the processes and procedures we use to provide accurate, relevant and appropriately detailed information to the Board and its committees on a timely basis.
The Nominating and Corporate Governance Committee believes that candidates for director should have certain minimum qualifications, including the ability to read and understand basic financial statements, being over 21 years of age and having the highest personal integrity and ethics. The Nominating and Corporate Governance Committee also intends to consider such factors as possessing relevant expertise upon which to be able to offer advice and guidance to management, having sufficient time to devote to the affairs of Sio, demonstrated excellence in his or her field, having the ability to exercise sound business judgment, diversity and having the commitment to rigorously represent the long-term interests of our stockholders. However, the Nominating and Corporate Governance Committee retains the right to modify these qualifications from time to time. Candidates for director nominees are reviewed in the context of the current composition of the Board, our operating requirements and the long-term interests of our stockholders. In conducting this assessment, the Nominating and Corporate Governance Committee typically considers diversity, age, skills and such other factors as it deems appropriate, given the current needs of the Board and Sio, to maintain a balance of knowledge, experience and capability.
In the case of incumbent directors whose terms of office are set to expire, the Nominating and Corporate Governance Committee reviews these directors’ overall service to us during their terms, including the number of meetings attended, level of participation, quality of performance and any other relationships and transactions that might impair the directors’ independence. The Nominating and Corporate Governance Committee also takes into account the results of the Board’s self-evaluation, conducted annually on a group and individual basis.
In the case of new director candidates, the Nominating and Corporate Governance Committee also determines whether the nominee is independent for Nasdaq purposes, which determination is based upon applicable Nasdaq listing standards, applicable SEC rules and regulations and the advice of counsel, if necessary. The Nominating and Corporate Governance Committee then uses its network of contacts to compile a list of potential candidates, but may also engage, if it deems appropriate, a professional search firm. The Nominating and Corporate Governance Committee conducts any appropriate and necessary inquiries into the backgrounds and qualifications of possible candidates after considering the function and needs of the Board. The Nominating and Corporate Governance Committee meets to discuss and consider the candidates’ qualifications and then selects a nominee for recommendation to the Board by majority vote.
The Nominating and Corporate Governance Committee will consider director candidates recommended by stockholders. The Nominating and Corporate Governance Committee does not intend to alter the manner in which it evaluates candidates, including the minimum criteria set forth above, based on whether or not the candidate was recommended by a stockholder.

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Stockholder Communications with the Board of Directors
The Board has adopted a formal process by which stockholders may communicate with the Board or any of its directors. Stockholders who wish to communicate with the Board or an individual director may do so by sending written communications to the Board or such director at Sio Gene Therapies Inc., Attn: Corporate Secretary, at 130 West 42nd Street, 26th Floor, New York, New York 10036. The Corporate Secretary will forward each communication to the Legal Department of Sio Gene Therapies Inc., and the communication will be further forwarded to the Board or individual directors to whom the communication is addressed unless the communication contains advertisements or solicitations or is unduly hostile, threatening or similarly inappropriate, in which case the communication will be discarded.
In addition to stockholder communications with directors, any interested person may communicate directly with the presiding director of the Board’s executive sessions or the independent or non-management directors as a group. Persons interested in communicating directly with the independent or non-management directors regarding their concerns or issues may do so by addressing correspondence to a particular director, or to the independent or non-management directors generally, in care of Sio Gene Therapies Inc., Attn: Corporate Secretary, at 130 West 42nd Street, 26th Floor, New York, New York 10036. If no particular director is named, letters will be forwarded, depending upon the subject matter, to the Chairperson of the Audit, Compensation, or Nominating and Corporate Governance Committee.
Please note that the foregoing communication procedure does not apply to (i) stockholder proposals pursuant to Exchange Act Rule 14a-8 and communications made in connection with such proposals or (ii) service of process or any other notice in a legal proceeding.
Code of Business Ethics and Conduct
The Board has adopted a Code of Business Ethics and Conduct, or Code of Conduct, that applies to all of our directors, officers, employees, consultants and independent contractors. The Code of Conduct is available on our website at http://investors.siogtx.com/investors/corporate-governance. Information contained on or accessible through this website is not incorporated by reference nor otherwise included in this report, and any references to this website are intended to be inactive textual references only. If we make any substantive amendments to the Code of Conduct or grant any waiver from a provision of the Code of Conduct to any executive officer or director, we will promptly disclose the nature of the amendment or waiver on our website or otherwise as required by applicable law and Nasdaq listing requirements.
Corporate Governance Guidelines
The Board has adopted Corporate Governance Guidelines to establish the authority and practices to review and evaluate our business operations as needed and to make decisions that are independent of our management. The guidelines are also intended to align the interests of directors and management with those of our stockholders. The Corporate Governance Guidelines set forth the practices that the Board intends to follow with respect to a number of areas, including its composition and selection, role, meetings, committees, access to management and use of outside advisors, Chief Executive Officer evaluation and succession planning, and Board assessment and compensation. The Corporate Governance Guidelines may be viewed at http://investors.siogtx.com/investors/corporate-governance. Information contained on or accessible through this website is not incorporated by reference nor otherwise included in this report, and any references to this website are intended to be inactive textual references only.

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Item 11.        Executive Compensation
Summary Compensation Table
The following table sets forth, for our fiscal years ended March 31, 2022 and 2021, compensation awarded or paid to, or earned by, our principal executive officer and our two next most highly compensated executive officers as of March 31, 2022. These executive officers are referred to herein as our named executive officers.
Name and Principal Position Fiscal Year Salary
Stock Awards (1)
Option Awards(1)
Non-Equity Incentive Plan Compensation(2)
Other Total
David Nassif, J.D. (3)
2021 $ 453,567  $ 423,046  $ 494,608  $ 226,783  $ 19,169 
(4)
$ 1,617,173 
Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and General Counsel 2020 414,000  181,470  225,415  213,728  43,485 
(5)
1,078,098 
Pavan Cheruvu, M.D. (6)
2021 475,453  —  1,411,600  —  13,911 
(7)
1,900,964 
Former Chief Executive Officer 2020 517,500  388,815  483,113  298,080  19,191 
(8)
1,706,699 
Gavin Corcoran, M.D. (9)
2021 276,287  —  505,577  —  11,042 
(10)
792,906 
Former Chief R&D Officer 2020 433,500  146,280  181,989  204,769  17,410 
(11)
983,948 
(1) Amounts reported in this column do not reflect the amounts actually received by our named executive officers. Instead, these amounts reflect the aggregate grant date fair value of each stock option and stock award granted to the named executive officers during the indicated fiscal year, as computed in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 718. Assumptions used in the calculation of these amounts are included in Note 10 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended March 31, 2022. As required by SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. In March 2020, RSL granted RSL performance options and RSL capped value appreciation rights ("RSL CVARs") to Dr. Cheruvu. As of the grant date, the RSL performance options and RSL CVARs performance vesting criteria were deemed not probable of occurring, therefore no stock-based compensation expense was recorded related to these newly awarded RSL instruments. Assuming that the vesting conditions to the RSL performance options and RSL CVARs were met and the performance criteria were deemed probable, the value of such awards as of the grant date would have been $7.7 million. The liquidity-event vesting condition for the RSL equity instruments was met upon the closing of RSL’s business combination with MAAC in September 2021, following which we began recognizing stock-based compensation expense relating to such instruments. The RSL CVARs were amended in March 2022 and expire in March 2026, at which time they will be forfeited unless the RSL stock price exceeds the $11.50 hurdle price on the annual hurdle measurement date of March 30 in any of the next four years. We did not record any additional stock-based compensation expense relating to this modification. Upon his resignation and termination of his service to the Company in February 2022, Dr. Cheruvu forfeited all unvested RSL performance options and all RSL CVARs that did not achieve their applicable service vesting condition, and the remaining RSL equity instruments held by him as of March 31, 2022 remain outstanding.
(2) See "—Annual Cash Bonus".
(3) Mr. Nassif was appointed Chief Executive Officer in January 2022.
(4) Amount includes $19,029 in 401(k) matching contributions.
(5) Amount includes (a) $25,173 for reimbursed temporary housing expenses, as a result of the Company requiring Mr. Nassif to reside in New York City for one year as a condition to his employment; and (b) $18,172 in 401(k) matching contributions.
(6) Dr. Cheruvu resigned as our Chief Executive Officer effective January 2022.
(7) Amount includes $13,713 in 401(k) matching contributions.
(8) Amount includes $18,975 in 401(k) matching contributions.
(9) Dr. Corcoran resigned as our Chief Research and Development Officer effective November 2021.
(10) Amount includes $10,898 in 401(k) matching contributions.
(11) Amount includes $17,194 in 401(k) matching contributions.
Narrative to Summary Compensation Table
We review compensation annually for all employees, including our named executive officers. In setting executive base salaries and bonuses and granting equity incentive awards, we consider compensation for comparable positions in the market, the historical compensation levels of our executives, individual performance as compared to our expectations and objectives, our desire to motivate our employees to achieve short- and long-term results that are in the best interests of our stockholders and a long-term commitment to Sio. We do not target a specific competitive position or a specific mix of compensation among base salary, bonus or long-term incentives.
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The Compensation Committee of the Board has historically determined compensation for our named executive officers. The Compensation Committee typically reviews and discusses management’s proposed compensation with the Chief Executive Officer for all named executive officers other than the Chief Executive Officer. Based on those discussions and its discretion, the Compensation Committee then recommends the compensation for each named executive officer. The Compensation Committee, without members of management present, discusses and ultimately approves the compensation of our named executive officers. For our fiscal years ended March 31, 2022 and 2021, the Compensation Committee retained Radford, a compensation consulting firm, to evaluate and make recommendations with respect to our executive compensation program.
Annual Cash Bonus
We seek to motivate and reward our executives for achievements relative to our corporate goals and expectations for each fiscal year. For the fiscal year ending March 31, 2023, the target cash bonus for Mr. Nassif is 50% of his base salary, subject to the achievement of overall company performance criteria and individual performance criteria to be determined by the Board or the Compensation Committee.
Additionally, On March 30, 2021, the Compensation Committee of the Board approved a one-time cash performance incentive for Dr. Corcoran (the "Performance Incentive"). Under the terms of the Performance Incentive, Dr. Corcoran was to be paid a bonus of $35,000 upon completion of patient enrollment in the dose-escalation Stage 1 of our AXO-AAV-GM1 gene therapy program for the treatment of GM1 gangliosidosis, including both Type 1 (early infantile) and Type 2 (late infantile and juvenile) patients if such enrollment occurred on or before March 31, 2022, which was not achieved. Additionally, Dr. Corcoran was to be paid a bonus of $35,000 upon dosing of the first patient in our AXO-Lenti-PD gene therapy program for the treatment of Parkinson's disease using clinical trial material from a suspension-based manufacturing process if such dosing occurred on or before March 31, 2022, which was not achieved.
For the years ended March 31, 2022 and March 31, 2021, bonuses were awarded based on our achievement of specified corporate goals, including creating value with our gene therapy pipeline and finance goals, as well as individual goals for the named executive officers. The target cash bonus for each of Mr. Nassif and Dr. Corcoran was 50% of their respective base salaries, including a pro-rated amount for Mr. Nassif's service as Chief Executive Officer since January 2022, subject to the achievement of individual performance criteria to be determined by the Board or the Compensation Committee, as well as overall company performance criteria. For Mr. Nassif and Dr. Corcoran, the bonuses were weighted 75% based on the achievement of the corporate goals and 25% based on the achievement of individual objectives established for each such officer. Dr. Cheruvu’s bonuses were weighted 100% based on the achievement of corporate goals, and the target cash bonus for Dr. Cheruvu was 60% of his base salary, subject to the achievement of overall company performance criteria. In March 2022, the Compensation Committee awarded Mr. Nassif a bonus for the year ended March 31, 2022, based on his achievement of corporate goals at the 100% level and individual goals at the 100% level. In March 2021, the Compensation Committee awarded each named executive officer a bonus for the year ended March 31, 2021, based on each named executive officer’s achievement of corporate goals at the 96% level and individual goals at levels ranging from 90% to 125%.

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Outstanding Equity Awards as of March 31, 2022
The following table shows certain information regarding outstanding equity awards held by our named executive officers as of March 31, 2022. All option awards were granted under our 2015 Amended and Restated Equity Incentive Plan.
Option Awards Stock Awards
Name
Number of Securities Underlying Unexercised Options Exercisable (1)
Number of Securities Underlying Unexercised Options Unexercisable (2)(3)
Option Exercise Price Option Expiration Date Number of Vested Securities Underlying
Number of Unvested Securities Underlying (4)
Market Value of Outstanding RSUs (5)
David Nassif, J.D. —  75,000 
(6)
$ 6.42  6/30/2029 —  —  $ — 
93,750  56,250  6.42  6/30/2029 —  —  — 
34,519  44,381  3.45  4/14/2030 —  —  — 
—  239,000  2.47  4/14/2031 —  —  — 
—  —  —  —  —  581,566  389,649 
Pavan Cheruvu, M.D.(7)(8)
6,250  —  $ 127.92  11/15/2025 —  —  $ — 
6,250  —  193.92  4/27/2027 —  —  — 
242,523  —  14.48  2/12/2028 —  —  — 
137,158  —  8.48  4/14/2029 —  —  — 
73,981  —  3.45  4/14/2030 —  —  — 
—  —  —  —  —  —  — 
Gavin Corcoran, M.D. (9)
—  — 

$ —  —  —  —  $ — 
(1) Because options granted to the named executive officers are exercisable immediately subject to a repurchase right in our favor which lapses as the option vests, this column reflects the number of options held by the named executive officers that were exercisable and vested as of March 31, 2022.
(2) Because options granted to the named executive officers are exercisable immediately subject to a repurchase right in our favor which lapses as the option vests, this column reflects the number of options held by the named executive officers that were exercisable and unvested as of March 31, 2022.
(3) Except as otherwise noted, each of these options vests as to 25% of the underlying shares of common stock one year from the date of grant, with the remaining shares of common stock vesting in 12 equal quarterly installments thereafter, provided the named executive officer has provided continuous service to us through each such date. All shares of common stock underlying each of these options will become fully vested upon a change in control, as that term is defined in our Amended and Restated 2015 Equity Incentive Plan.
(4) These unvested restricted shares are scheduled to vest in three equal annual installments on the first, second and third anniversaries of the date of grant, provided the named executive officer has provided continuous service to us through that date.
(5) The market value is equal to the product of $0.67, which is the closing price of our common stock on March 31, 2022, and the sum of the number of vested and unvested RSUs.
(6) One-third of the option will vest at such time as the Company's stock price is equal to or greater than $12.84 per share, one-third of the option will vest at such time as the Company's stock price is equal to or greater than $25.68 per share, and one-third of the option will vest at such time as the Company's stock price is equal to or greater than $38.52 per share, provided the named executive officer has provided continuous service to us through each such date.
(7) Excludes all RSL equity instruments. In March 2020, RSL granted RSL performance options and RSL CVARs to Dr. Cheruvu. Upon his resignation and termination of his service to the Company in February 2022, Dr. Cheruvu forfeited all unvested RSL performance options and all RSL CVARs that did not achieve their applicable service vesting condition, and the remaining RSL equity instruments held by him as of March 31, 2022 remain outstanding. The aggregate fair value of the RSL equity instruments held by Dr. Cheruvu was $0.8 million at March 31, 2022, based on the closing price of RSL's shares of common stock of $4.94 per share as reported on the Nasdaq Global Market.
(8) Dr.Cheruvu resigned as our Chief Executive Officer effective January 2022.
(9) Dr. Corcoran resigned as our Chief Research and Development Officer effective November 2021.
Employment, Separation, Severance and Change in Control Agreements
The employment agreement or offer letter for each of our named executive officers sets forth the initial terms and conditions of his employment. These agreements provide for at-will employment and set forth the officer’s annual base salary, performance bonus target opportunity, initial equity incentive grant, terms of severance and eligibility for employee benefits. Each of them provided services to us pursuant to one or more inter-company services agreements between Axovant Gene Therapies Ltd. and its wholly owned subsidiaries until August 2020. For the purposes of this discussion, references to "we," "us" and "our" will be deemed to refer to Sio Gene Therapies Inc., Axovant Gene Therapies Ltd. or Axovant Sciences, Inc., as the context requires.

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David Nassif, J.D.
Under Mr. Nassif’s employment agreements, he is eligible for the following severance and change in control benefits, conditioned upon delivering a release of claims in our favor:
If we terminate Mr. Nassif's employment without cause or he resigns for good reason, in either case, prior to a change in control or more than 12 months following a change in control, then we will pay to Mr. Nassif a one-time cash payment equal to the sum of his annual base salary, the pro-rated amount of his annual target bonus in respect of the fiscal year in which the termination of employment occurs, and any unpaid annual bonus amount with respect to the fiscal year ended prior to the termination of his employment. We will also reimburse Mr. Nassif for continued medical coverage for one year if he timely elects such continued coverage.
If we terminate Mr. Nassif's employment without cause or he resigns for good reason, in either case, upon or on or before the twelve-month anniversary of a change in control, but not before a change in control, then we will pay to Mr. Nassif a one-time cash payment equal to 2 times the sum of his annual base salary, the full amount of his annual target bonus in respect of the fiscal year in which the termination of employment occurs, and any unpaid annual bonus amount with respect to the fiscal year ended prior to the termination of his employment. If a non-interim Chief Executive Officer is hired, Mr. Nassif’s severance benefits revert back to the current benefits, which provide for 1.5 times his base salary in the event his employment is terminated without cause or he resigns for good reason on or within 12 months of a change in control, with certain exceptions in the event that a non-interim Chief Executive Officer is hired within three months of a change in control. We will also reimburse Mr. Nassif for continued medical coverage for 18 months if he timely elects such continued coverage.
If Mr. Nassif is subjected to excise tax pursuant to Sections 280G and 4999 of the Internal Revenue Code, he will either have his payments cut back so that the excise tax does not apply, or he will receive the full payments and benefits and be subject to the excise tax, whichever puts him in a better after-tax position.
The definitions of "cause," "good reason" and "change in control" are set forth in the individual employment agreements.
Further, if Mr. Nassif is employed by us immediately prior to a change in control, then 175,631 shares of common stock underlying his outstanding stock options and RSUs that remain unvested as of March 31, 2022 would automatically vest immediately prior to a change in control.
We consider the severance and change in control benefits described above to be critical to attracting and retaining high caliber executives. We believe that appropriately structured severance and change in control benefits, including accelerated vesting provisions, minimize the distractions and reduce the risk that an executive voluntarily terminates his employment with us during times of uncertainty, such as before an acquisition is completed. We believe that our existing arrangements allow each named executive officer to focus on continuing normal business operations and, in the event of a change in control, on the success of a potential business combination, rather than on how business decisions that may be in the best interest of our stockholders will impact his own financial security.
Pavan Cheruvu, M.D.
In 2019, we entered into an employment agreement with Dr. Cheruvu. The agreement was for an unspecified term and entitled Dr. Cheruvu to an annual base salary, which has been amended from time to time by our board of directors, most recently to $543,375 in 2021. The agreement also provided that he would be eligible to receive a target bonus equal to a percentage of his base salary (60% for 2021) upon the achievement of annual performance milestones.
Dr. Cheruvu resigned from his positions at our company, including as Chief Executive Officer and a member of our Board, effective as of January 31, 2022. Dr. Cheruvu agreed to assist with the executive transition as a non-executive employee through February 15, 2022. Dr. Cheruvu was paid $452,813 for unpaid base salary amounts accrued through January 31, 2022 and was paid $22,640 for his services as a non-executive employee from February 1, 2022 through February 15, 2022 but did not receive any severance benefits under his employment agreement. Dr. Cheruvu’s outstanding equity awards ceased to vest on February 15, 2022.
Gavin Corcoran, M.D.
In 2019, we entered into an employment agreement with Mr. Corcoran. The agreement was for an unspecified term and entitled Mr. Corcoran to an annual base salary, which has been amended from time to time by our board of directors, most recently to $444,338 in 2021. The agreement also provided that he would be eligible to receive a target bonus equal to a percentage of his base salary (50% for 2021) upon the achievement of annual performance milestones.
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Dr. Corcoran resigned from his position as Chief R&D Officer effective as of November 12, 2021. Dr. Corcoran was paid $276,287 for unpaid base salary amounts accrued through November 12, 2021 but did not receive any severance benefits under his employment agreement. Mr. Corcoran’s outstanding equity awards ceased to vest on November 12, 2021.
2015 Equity Incentive Plan
In March 2015, our board of directors and our sole stockholder adopted our 2015 Equity Incentive Plan, or the 2015 Plan. In May 2015, our board of directors amended the 2015 Plan and our sole stockholder ratified such amendments. The description of the 2015 Plan set forth below, reflects the 2015 Plan, as amended. Our 2015 Plan provides for the grant of incentive options within the meaning of Section 422 of the Internal Revenue Code, or the Code, to our employees and our subsidiary corporations' employees, and for the grant of nonstatutory options, restricted stock awards, restricted stock unit awards, stock appreciation rights, performance stock awards and other forms of stock compensation to our employees, including officers, consultants and directors. The 2015 Plan also provides for the grant of performance cash awards to our employees, consultants and directors.
Shares issued under the 2015 Plan may be authorized but unissued or reacquired shares of common stock. Shares subject to stock awards granted under the 2015 Plan that expire or terminate without being exercised in full, or that are paid out in cash rather than in shares, will not reduce the number of shares available for issuance under the 2015 Plan. Additionally, shares issued pursuant to stock awards under the 2015 Plan that we repurchase or that are forfeited, as well as shares reacquired by us as consideration for the exercise or purchase price of a stock award or to satisfy tax withholding obligations related to a stock award, will become available for future grant under the 2015 Plan.
Our board of directors, or a duly authorized committee thereof, will have the authority to administer the 2015 Plan. Our board of directors will delegate its authority to administer the 2015 Plan to our compensation committee under the terms of the compensation committee's charter. Our board of directors may also delegate to one or more of our officers the authority to (i) designate employees other than officers to receive specified stock awards and (ii) determine the number of our shares of common stock to be subject to such stock awards. Subject to the terms of the 2015 Plan, the administrator has the authority to determine the terms of awards, including recipients, the exercise price or strike price of stock awards, if any, the number of shares subject to each stock award, the fair market value of a share of common stock, the vesting schedule applicable to the awards, together with any vesting acceleration, the form of consideration, if any, payable upon exercise or settlement of the stock award and the terms and conditions of the award agreements for use under the 2015 Plan.
The administrator has the power to modify outstanding awards under our 2015 Plan. Subject to the terms of the 2015 Plan, the administrator has the authority to reprice any outstanding option or stock appreciation right, cancel and re-grant any outstanding option or stock appreciation right in exchange for new stock awards, cash or other consideration, or take any other action that is treated as a repricing under generally accepted accounting principles, with the consent of any adversely affected participant.
The administrator may provide, in an individual award agreement or in any other written agreement between us and the participant, that the stock award will be subject to additional acceleration of vesting and exercisability in the event of a change in control. In the absence of such a provision, no such acceleration of the stock award will occur.
Our board has the authority to amend, suspend, or terminate the 2015 Plan, provided that such action does not materially impair the existing rights of any participant without such participant's written consent. No incentive options may be granted after the tenth anniversary of the date our board of directors adopted the 2015 Plan.
Director Compensation
Non-Employee Director Compensation Policy
Non-employee directors are compensated for service on the Board and its committees through a combination of cash retainers and equity grants. We also reimburse directors for expenses incurred in serving as a director. Directors who are also employed by us are not separately compensated for their service on the Board. Additionally, Dr. Venker does not receive a cash retainer or equity grants.
For our fiscal year ended March 31, 2022, each non-employee director (other than Dr. Venker) was paid the following annual amounts quarterly in arrears:
Board retainer of $40,000
Audit committee retainer of $9,000 ($20,000 for the Chairperson)
Compensation Committee retainer of $6,000 ($12,000 for the Chairperson)
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Nominating and Corporate Governance Committee retainer of $5,000 ($8,000 for the Chairperson)
The chairman of the Board receives an annual retainer of $30,000, and the lead independent director receives an annual retainer of $20,000. In addition, on an annual basis, typically in April, each continuing non-employee director will receive an additional option or restricted stock unit grant at the election of the Board. Option grants have an exercise price equal to the closing price of our common stock on Nasdaq on the grant date. Initial grants vest in three equal annual installments, and annual grants vest in full on the first anniversary of the grant date, in each case subject to the non-employee director’s continuous service through the vesting date. Option grants to non-employee directors expire on the ten-year anniversary of the grant date. In April 2019, the Compensation Committee adopted a policy that all directors serving as of an annual grant date shall be eligible for equity awards regardless of the date of their appointment to the Board.
Director Compensation for Fiscal Year Ended March 31, 2022
The following table shows, for our fiscal year ended March 31, 2022, certain information with respect to the compensation of our non-employee directors:
Name Fee Earned or Paid in Cash
Option Awards(1)
Total
Current Directors
Frank Torti, M.D. $ 70,000  $ 85,446 
(2)
$ 155,446 
Atul Pande, M.D. 83,000  85,446 
(2)
168,446 
Berndt Modig 61,000  85,446 
(2)
146,446 
Senthil Sundaram 65,000  85,446 
(2)
150,446 
Eric Venker, M.D., Pharm.D. (3)
—  —  — 
Kristiina Vuori, M.D., Ph.D.
45,000  85,446 
(2)
130,446 
(1) Amounts reported in this column do not reflect the amounts actually received by the director. Instead, these amounts reflect the aggregate grant date fair value of each stock option and the incremental fair value related to the accelerated vesting of stock options granted to certain directors during the fiscal year, as computed in accordance with FASB ASC 718. Assumptions used in the calculation of these amounts are included in Note 10 to our consolidated financial statements included in this Annual Report on Form 10-K for the fiscal year ended March 31, 2022. As required by SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions.
(2) In April 2021, each of Dr. Torti, Dr. Pande, Mr. Modig, Mr. Sundaram and Dr. Vuori was granted an option to purchase 42,000 shares of common stock with an exercise price of $2.47 per share. The shares subject to the options will vest on the first anniversary of the date of the grant.
(3) Dr. Venker has declined to receive any cash or equity compensation for his service as a director.
The following table provides information regarding the aggregate number of stock options held by each of our non-employee directors as of March 31, 2022:
Name
Outstanding Stock Options (1)
Current Directors
Frank Torti, M.D. 110,125 
Atul Pande, M.D. 119,375 
Berndt Modig 110,885 
Senthil Sundaram 78,250 
Kristiina Vuori, M.D., Ph.D. 77,000 
(1) All of these options allow for early exercise, subject to our repurchase option with respect to any unvested shares of common stock. In addition, all shares of common stock underlying options held by our directors will become fully vested upon a change in control, as that term is defined in our Amended and Restated 2015 Equity Incentive Plan.

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Item 12.        Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth certain information regarding the ownership of our shares of common stock as of March 31, 2022, by:
all those known by us to be beneficial owners of more than five percent of our shares of common stock;
each of our named executive officers;
each of our directors; and
all of our executive officers and directors of as a group.
This table is based upon information supplied by officers, directors and principal stockholders and filings with the SEC. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, we believe that each of the stockholders named in this table has sole voting and dispositive power with respect to the shares indicated as beneficially owned. We have deemed shares of common stock subject to options that are currently exercisable or exercisable within 60 days of March 31, 2022, to be outstanding and to be beneficially owned by the person holding the option for the purpose of computing the percentage ownership of that person but have not treated them as outstanding for the purpose of computing the percentage ownership of any other person.
Applicable percentages are based on 73,739,378 shares outstanding on March 31, 2022, adjusted as required by rules promulgated by the SEC. Except as set forth below, the principal business address of each such person or entity is c/o Sio Gene Therapies Inc., 130 West 42nd Street, 26th Floor, New York, New York 10036.
Beneficial Owner Number of Shares Beneficially Owned Percent of Shares Beneficially Owned
5% Stockholder:
Roivant Sciences Ltd. (1)
18,577,380  25.19%
Suvretta Capital Management, LLC (2)
5,914,000  8.02
Named Executive Officers and Directors:
Pavan Cheruvu. M.D. (3)
669,271  *
David Nassif, J.D. (4)
588,144  *
Atul Pande, M.D. (5)
152,745  *
Berndt Modig (6)
120,624  *
Frank Torti, M.D. (7)
110,125  *
Senthil Sundaram (8)
78,250  *
Kristiina Vuori, M.D., Ph.D. (9)
77,000  *
Gavin Corcoran, M.D. (10)
—  — 
Eric Venker, M.D., Pharm.D. —  — 
All executive officers and directors as a group (7 persons) 1,126,888  1.51%
_____________
* Represents beneficial ownership of less than one percent
(1) As reported on a Schedule 13D/A filed by RSL on February 28, 2020, RSL directly owns and has sole voting power over 18,577,380 shares of common stock. Matt Gline, Daniel Gold, Andrew Lo, Patrick Machado, Keith Manchester, M.D., James Momtazee, Ilan Oren, Vivek Ramaswamy and Masayo Tada are the members of the board of directors of RSL and may be deemed to have shared voting, investment and dispositive power with respect to the shares held by this entity. These individuals disclaim beneficial ownership with respect to such shares except to the extent of their pecuniary interest therein. The principal business address of RSL is c/o Roivant Sciences Ltd., Suite 1, 3rd Floor, 11-12 St. James’s Square, London, SW1Y 4LB, United Kingdom.
(2) As reported on a Schedule 13F-HR filed by Suvretta Capital Management, LLC on May 16, 2022. Suvretta Capital Management, LLC holds 5,914,000 shares of common stock. The address of Suvretta Capital Management, LLC is 540 Madison Avenue, 7th Floor, New York NY 10022.
(3) Dr. Cheruvu resigned as our Chief Executive Officer and as a member of our Board effective January 2022. Represents (i) 203,109 shares of common stock and (ii) 466,162 shares of common stock issuable pursuant to immediately exercisable options.
(4) Represents (i) 45,244 shares of common stock and (ii) 542,900 shares of common stock issuable pursuant to immediately exercisable options, including 320,658 shares issuable following exercise of such options that remain unvested within 60 days after March 31, 2022.
(5) Represents (i) 33,370 shares of common stock and (ii) 119,375 shares of common stock issuable pursuant to immediately exercisable options.
(6) Represents (i) 9,739 shares of common stock and (ii) 110,885 shares of common stock issuable pursuant to immediately exercisable options.
(7) Represents 110,125 shares of common stock issuable pursuant to immediately exercisable options.
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(8) Represents 78,250 shares of common stock issuable pursuant to immediately exercisable options, including 6,250 shares issuable following exercise of such options that remain unvested within 60 days after March 31, 2022.
(9) Represents 77,000 shares of common stock issuable pursuant to immediately exercisable options, including 23,333 shares issuable following exercise of such options that remain unvested within 60 days after March 31, 2022.
(10) Dr. Corcoran resigned as our Chief Research and Development Officer effective November 2021.
Equity Compensation Plan Information
The following table shows information regarding our equity compensation plan as of March 31, 2022:
Plan Category Number of shares of common stock to be issued upon exercise of outstanding options and rights (a) Weighted-average exercise price of outstanding options and rights (b) Number of shares of common stock available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by stockholders 5,001,501 
(1)
$ 10.46  7,606,384 
(2)
Equity compensation plans not approved by stockholders —  —  — 
Total 5,001,501  $ 10.46  7,606,384 
(1) Includes RSUs representing 3,291,491 shares of our common stock, which have no exercise price.
(2) Pursuant to the terms of our Amended and Restated 2015 Equity Incentive Plan, an additional 2,949,575 shares were added to the number of available shares effective April 1, 2022.
Item 13.    Certain Relationships and Related Transactions, and Director Independence
Related-Person Transactions Policy and Procedures
We have adopted a written Related-Person Transactions Policy that sets forth our policies and procedures regarding the identification, review, consideration and approval or ratification of “related-person transactions.” For purposes of our policy only, a “related-person transaction” is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which we and any “related person” are participants involving an amount that exceeds $120,000. Transactions involving compensation for services provided to us as an employee, director, consultant or similar capacity by a related person are not covered by this policy. A related person is any executive officer, director, or more than 5% stockholder of Sio Gene Therapies Inc., including any of their immediate family members, and any entity owned or controlled by such persons.
Under the policy, where a transaction has been identified as a related-person transaction, management must present information regarding the proposed related-person transaction to the Audit Committee (or, where Audit Committee approval would be inappropriate, to another independent body of the Board) for consideration and approval or ratification. The presentation must include a description of, among other things, the material facts, the interests, direct and indirect, of the related persons, the benefits to us of the transaction and whether any alternative transactions were available. To identify related-person transactions in advance, we rely on information supplied by our executive officers, directors and certain significant stockholders. In considering related-person transactions, the Audit Committee takes into account the relevant available facts and circumstances including, but not limited to:
the risks, costs and benefits to us;
the impact on a director’s independence in the event the related person is a director, immediate family member of a director or an entity with which a director is affiliated;
the terms of the transaction;
the availability of other sources for comparable services or products; and
the terms available to or from, as the case may be, unrelated third parties or to or from employees generally. In the event a director has an interest in the proposed transaction, the director must recuse himself or herself from the deliberations and approval.
The policy requires that, in determining whether to approve, ratify or reject a related-person transaction, the Audit Committee considers, in light of known circumstances, whether the transaction is in, or is not inconsistent with, the best interests of Sio and its stockholders, as the Audit Committee determines in the good faith exercise of its discretion.
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Related-Person Transactions
The following is a description of transactions since April 1, 2020, or any currently proposed transaction, in which we were or are to be a participant and the amount involved exceeded or will exceed $120,000, and in which any of our directors, executive officers or holders of more than 5% of our share capital, or any members of their immediate family, had or will have a direct or indirect material interest.
Information Sharing and Cooperation Agreement
In June 2018, we entered into an amended and restated information sharing and cooperation agreement with RSL (the "Cooperation Agreement"), which became effective concurrently with the closing of the private placement to RSL in July 2018. The Cooperation Agreement, among other things:
obligates us to deliver to RSL periodic financial statements and other information upon reasonable request and to comply with other specified financial reporting requirements;
requires us to supply certain material information to RSL to assist it in preparing any future SEC filings; and
requires us to implement and observe certain policies and procedures related to applicable laws and regulations.
We have agreed to indemnify RSL and its affiliates and their respective officers, employees and directors against all losses arising out of, due to or in connection with RSL’s status as a stockholder under the Cooperation Agreement and the operations of or services provided by RSL or its affiliates or their respective officers, employees or directors to us or any of our subsidiaries, subject to certain limitations set forth in the Cooperation Agreement.
Subject to specified exceptions, the Cooperation Agreement will terminate at such time as RSL is no longer required (a) under Generally Accepted Accounting Principles in the United States, or U.S. GAAP, to consolidate our results of operations and financial position, (b) under U.S. GAAP to account for its investment in us under the equity method of accounting, or (c) otherwise to include our separate financial statements in its filings with the SEC pursuant to any SEC rule. In addition, the Cooperation Agreement may be terminated upon mutual written consent of the parties or upon written notice from RSL to us in the event of our bankruptcy, liquidation, dissolution or winding-up.
Affiliate Services Agreements
We have entered into services agreements with RSI and Roivant Sciences GmbH (collectively, the "Service Providers"), each a wholly owned subsidiary of RSL, pursuant to which the Service Providers provide us with services in relation to the identification of potential product candidates and project management of clinical trials, as well as other services related to our development, administrative and financial functions (the "Services Agreements"). Under the terms of the Services Agreements, we are obligated to pay or reimburse the Service Providers for the costs they, or third parties acting on their behalf, incur in providing services to us, including administrative and support services as well as research and development services. In addition, we are obligated to pay to the Service Providers at a predetermined mark-up on any general and administrative and research and development services incurred directly by the Service Providers. For the years ended March 31, 2022 and 2021, we incurred expenses of zero and $0.1 million, respectively, under the Services Agreements, inclusive of the mark-up, which have been treated as capital contributions. Going forward, the costs allocated to us under the Services Agreements with the Service Providers are expected to continue to be insignificant.
Indemnification Agreements
We have entered into indemnity agreements with our officers and directors which provide, among other things, that we will indemnify such officer or director, under the circumstances and to the extent provided for therein, for expenses, damages, judgments, fines and settlements he or she may be required to pay in actions or proceedings which he or she is or may be made a party by reason of his or her position as a director, officer or other agent of ours.
Independence of the Board of Directors
After review of all relevant identified transactions or relationships between each director, or any of his family members, and Sio, our senior management and our independent auditors, the Board has affirmatively determined that the following four individuals are independent directors within the meaning of the applicable SEC and Nasdaq listing rules: Mr. Modig, Dr. Pande, Mr. Sundaram and Dr. Vuori. In making this determination, the Board found that none of these directors had a material or other disqualifying relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. The Board has determined that Mr. Nassif, by virtue of his positions as our principal executive officer, principal financial officer, principal accounting officer and general counsel; and Dr. Torti and Dr. Venker, by virtue of their positions with RSI, are not independent under applicable SEC and Nasdaq listing rules.
59


Item 14.        Principal Accounting Fees and Services
Independent Registered Public Accounting Firm Fees and Services
The following table presents aggregate fees billed by Ernst & Young LLP for our fiscal years ended March 31, 2022 and 2021:
Fiscal Year Ended March 31, 2022 Fiscal Year Ended March 31, 2021
Audit Fees(1)
$ 557,316  $ 752,062 
Audit Related Fees —  — 
Tax Fees(2)
—  — 
All Other Fees —  — 
Total Fees $ 557,316  $ 752,062 
(1) Includes fees for the audit of our annual consolidated financial statements, included in our Annual Report on Form 10-K, review of the unaudited consolidated financial statements included in our Quarterly Reports on Form 10-Q, and for services that are normally provided by Ernst & Young LLP in connection with statutory and regulatory filings or engagements, including issuance of consents.
(2) Includes fees for professional services for international tax compliance, supporting other tax-related regulatory requirements primarily in the transfer pricing area, and international tax consulting and planning services.
All of the fees described above were pre-approved by the Audit Committee.
Pre-Approval Policies and Procedures
The Audit Committee has adopted a policy and procedures for the pre-approval of audit and non-audit services rendered by our independent registered public accounting firm. The policy generally pre-approves specified services in the defined categories of audit services, audit-related services and tax services up to specified amounts. Pre-approval may also be given as part of the Audit Committee’s approval of the scope of the engagement of the independent registered public accounting firm or on an individual, explicit, case-by-case basis before the independent registered public accounting firm is engaged to provide each service. The pre-approval of services may be delegated to one or more of the Audit Committee’s members, but the decision must be reported to the full Audit Committee at its next scheduled meeting.
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PART IV.    FINANCIAL INFORMATION
Item 15.        Exhibits and Financial Statements Schedules
(a) Documents filed as part of this Annual Report on Form 10-K:
(1) Financial Statements. The Consolidated Financial Statements are included as Appendix A hereto and are filed as part of this Annual Report on Form 10-K. The Consolidated Financial Statements include:
(2) Exhibits. The exhibits set forth below on the Exhibit Index to this annual report are filed as part of this Annual Report on Form 10-K. This list of exhibits identifies each management contract or compensatory plan or arrangement required to be filed as an exhibit to this Annual Report on Form 10-K.
Exhibit Index
Exhibit No.   Description of Document Schedule/Form File No. Exhibit No. Filing Date
3.1   8-K12G3 000-56226 3.1 11/13/2020
3.2   8-K12G3 000-56226 3.2 11/13/2020
4.1 8-K12G3 000-56226 4.1 11/13/2020
4.2 10-K 001-37418 4.2 06/09/2021
10.1 S-1/A 333-204073 10.9 05/22/2015
10.2+ 10-K 001-37418 10.12 06/13/2017
10.3 10-Q 001-37418 10.1 08/07/2018
10.4 10-Q 001-37418 10.3 08/07/2018
10.5* 10-Q 001-37418 10.1 02/07/2019
10.6 10-K 001-37418 10.21 06/11/2019
10.7 10-K 001-37418 10.22 06/11/2019
10.8+ S-8 POS 333-244371 10.2 11/13/2020
10.9+ S-8 POS 333-244371 10.3 11/13/2020
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Exhibit No.   Description of Document Schedule/Form File No. Exhibit No. Filing Date
10.10 8-K 001-37418 1.1 12/18/2020
10.11+ 10-K 001-37418 10.16 06/09/2021
10.12+ 10-Q 001-37418 10.1 11/12/2021
10.13†+
10.14†+
21.1†
23.1†
24.1†
31.1†  
32.1†**  
101.INS XBRL   Instance Document
101.SCH XBRL   Taxonomy Extension Schema
101.CAL XBRL   Taxonomy Extension Calculation Linkbase
101.DEF XBRL   Taxonomy Extension Definition Linkbase
101.LAB XBRL   Taxonomy Extension Label Linkbase
101.PRE XBRL   Taxonomy Extension Presentation Linkbase
104 Cover Page Interactive Data File (embedded within the Inline XBRL document).
† Filed herewith.
+ Indicates management contract or compensatory plan.
* Confidential treatment has been granted for portions omitted from this exhibit (indicated by asterisks) and those portions have been separately filed with the Securities and Exchange Commission.
** In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release Nos. 33-8238 and 34-47986, Final Rule: Management's Reports on Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, these certifications are being furnished solely to accompany this Annual Report on Form 10-K pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the Registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
  SIO GENE THERAPIES INC.
     
     
June 14, 2022 By: /s/ David Nassif
  David Nassif
  Chief Executive Officer; Chief Financial Officer; Chief Accounting Officer; and General Counsel
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints David Nassif, jointly and severally, as his, her or their true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him, her or them and in his, her or their name, place and stead, in any and all capacities, to sign this Annual Report on Form 10-K of Sio Gene Therapies Inc., and any or all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises hereby ratifying and confirming all that said attorneys-in-fact and agents, or his, her or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated
Signature Title Date
/s/ David Nassif Chief Executive Officer; Chief Financial Officer; Chief Accounting Officer; General Counsel; and Director June 14, 2022
David Nassif (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)
/s/ Frank Torti Director, Chairman of the Board June 14, 2022
Frank Torti
/s/ Atul Pande Director, Lead Independent Director June 14, 2022
Atul Pande
/s/ Berndt Modig Director June 14, 2022
Berndt Modig
/s/ Senthil Sundaram Director June 14, 2022
Senthil Sundaram
/s/ Eric Venker Director June 14, 2022
Eric Venker
/s/ Kristiina Vuori Director June 14, 2022
Kristiina Vuori
63



64


Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Sio Gene Therapies Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Sio Gene Therapies Inc. (the Company) as of March 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for each of the two years in the period ended March 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at March 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended March 31, 2022, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.
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Clinical Study Accrual
Description of the Matter
As discussed in Note 2 to the consolidated financial statements, the estimated costs of research and development activities conducted by third-party service providers, which primarily include activities associated with clinical studies, are accrued over the service periods specified in the contracts and adjusted as necessary based upon an ongoing review of the level of effort and costs actually incurred.
Auditing the Company’s accrual for clinical study costs was complex because information necessary to estimate the accrual is accumulated from third parties, and the Company’s assessment of the completeness of the information is subject to variability and uncertainty. In addition, in certain circumstances, the determination of the nature and amount of services that have been received during the reporting period requires judgment as the timing and pattern of vendor invoicing does not correspond to the level of services provided.
How We Addressed the Matter in Our Audit
To test the clinical study accrual, our audit procedures included, among others, reading a sample of the Company’s agreements with the service providers, including pending amendments, to understand key financial and contractual terms, assessing the impact of these terms on the accrual and testing the accuracy and completeness of the underlying data used in the accrual computations. We also evaluated management’s estimates of the vendors’ progress for a sample of clinical studies by making direct inquiries of the Company’s operations personnel overseeing the clinical studies and obtaining information about the service providers’ estimate of costs that had been incurred through March 31, 2022. To evaluate the completeness and valuation of the accrual, we also inspected subsequent invoices received from the service providers and cash disbursements to the service providers, to the extent such invoices were received, or payments were made prior to the date that the consolidated financial statements were issued.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2016.

Iselin, New Jersey
June 14, 2022
66


SIO GENE THERAPIES INC.
Consolidated Balance Sheets
(in thousands, except share and per share amounts)

 
March 31, 2022 March 31, 2021
Assets  
Current assets:  
Cash and cash equivalents $ 63,729  $ 118,986 
Restricted cash 1,184  — 
Receivable from sale of long-term investment —  4,343 
Prepaid expenses and other current assets 5,214  7,348 
Income tax receivable 1,609  1,656 
Total current assets 71,736  132,333 
Long-term restricted cash —  1,184 
Operating lease right-of-use assets 2,444  1,152 
Property and equipment, net 900  478 
Total assets $ 75,080  $ 135,147 
Liabilities and Stockholders’ Equity  
Current liabilities:  
Accounts payable $ 3,984  $ 1,341 
Accrued expenses 8,232  9,196 
Current portion of operating lease liabilities 786  311 
Total current liabilities 13,002  10,848 
Operating lease liabilities, net of current portion 1,730  932 
Total liabilities 14,732  11,780 
Commitments and contingencies (Note 12)
Stockholders’ equity:  
Common stock, par value $0.00001 per share, 1,000,000,000 shares authorized, 73,739,378 and 69,377,567 shares issued and outstanding at March 31, 2022 and March 31, 2021, respectively
Accumulated other comprehensive income 337  335 
Additional paid-in capital 922,966  914,100 
Accumulated deficit (862,956) (791,069)
Total stockholders’ equity 60,348  123,367 
Total liabilities and stockholders’ equity $ 75,080  $ 135,147 

The accompanying notes are an integral part of these consolidated financial statements.
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SIO GENE THERAPIES INC.
Consolidated Statements of Operations
(in thousands, except share and per share amounts)

Years Ended March 31,
  2022 2021
Operating expenses:
Research and development expenses
(includes $1,286 and $1,583 of stock-based compensation expense for the years ended March 31, 2022 and 2021, respectively)
$ 53,399  $ 24,903 
General and administrative expenses
(includes $6,139 and $2,909 of stock-based compensation expense for the years ended March 31, 2022 and 2021, respectively)
18,163  17,294 
Total operating expenses 71,562  42,197 
Interest expense 27  799 
Other expense (income) 39  (10,359)
Loss before income tax expense (benefit) (71,628) (32,637)
Income tax expense (benefit) 259  (212)
Net loss $ (71,887) $ (32,425)
Net loss per share of common stock — basic and diluted $ (0.98) $ (0.62)
Weighted average shares of common stock outstanding — basic and diluted 73,211,565 52,181,398

The accompanying notes are an integral part of these consolidated financial statements.
68


SIO GENE THERAPIES INC.
Consolidated Statements of Comprehensive Loss
(in thousands)

Years Ended March 31,
2022 2021
Net loss $ (71,887) $ (32,425)
Other comprehensive income:
Foreign currency translation adjustment 390 
Total other comprehensive income 390 
Comprehensive loss $ (71,885) $ (32,035)

The accompanying notes are an integral part of these consolidated financial statements.
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SIO GENE THERAPIES INC.
Consolidated Statements of Stockholders’ Equity
(in thousands, except share and per share amounts)

  Common Stock Additional Paid-in Capital Accumulated
Deficit
Accumulated Other Comprehensive Income (Loss) Total
Stockholders’
Equity
  Shares Amount
Balance at March 31, 2020 39,526,299  $ —  $ 820,257  $ (758,644) $ (55) $ 61,558 
Shares issued upon settlement of restricted stock units 187,741  —  —  —  —  — 
Shares sold in connection with at-the-market offering, net of brokerage fees and offering expenses of $4.0 million
29,663,527  89,230  —  —  89,231 
Stock-based compensation expense —  —  4,492  —  —  4,492 
Capital contribution received from Roivant Sciences, Inc. —  —  121  —  —  121 
Foreign currency translation adjustment —  —  —  —  390  390 
Net loss —  —  —  (32,425) —  (32,425)
Balance at March 31, 2021 69,377,567  $ $ 914,100  $ (791,069) $ 335  $ 123,367 
Shares issued upon settlement of restricted stock units 320,368  —  —  —  —  — 
Shares sold in connection with at-the-market offering, net of brokerage fees and offering expenses of $0.2 million
739,445  —  1,441  —  —  1,441 
Stock-based compensation expense —  —  7,425  —  —  7,425 
Shares issued upon exercise of pre-funded warrants 3,301,998  —  —  —  —  — 
Foreign currency translation adjustment —  —  —  — 
Net loss —  —  —  (71,887) —  (71,887)
Balance at March 31, 2022 73,739,378  $ $ 922,966  $ (862,956) $ 337  $ 60,348 

The accompanying notes are an integral part of these consolidated financial statements.
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SIO GENE THERAPIES INC.
Consolidated Statements of Cash Flows
(in thousands)
 
Years Ended March 31,
2022 2021
Cash flows from operating activities:  
Net loss $ (71,887) $ (32,425)
Adjustments to reconcile net loss to net cash used in operating activities:  
Amortization of operating lease right-of-use assets 398  1,521 
Stock-based compensation expense 7,425  4,492 
Depreciation and non-cash amortization 268  945 
Gains on long-term investment —  (11,256)
Change in operating lease liabilities (417) (866)
Other 474 
Changes in operating assets and liabilities:  
Prepaid expenses and other current assets 2,134  (4,377)
Income tax receivable 47  51 
Other non-current assets —  46 
Accounts payable 2,643  (3,071)
Accrued expenses (964) (2,123)
Net cash used in operating activities (60,346) (46,589)
Cash flows from investing activities:  
Cash proceeds from sale of long-term investment 4,343  12,784 
Purchases of property and equipment (695) (398)
Net cash provided by investing activities 3,648  12,386 
Cash flows from financing activities:  
Payments on long-term debt —  (15,731)
Capital contribution received from affiliate —  121 
Cash proceeds from issuance of shares of common stock and pre-funded warrants, net of issuance costs 1,441  89,231 
Net cash provided by financing activities 1,441  73,621 
Net change in cash and cash equivalents, restricted cash and long-term restricted cash (55,257) 39,418 
Total cash and cash equivalents, restricted cash and long-term restricted cash—beginning of year 120,170  80,752 
Total cash and cash equivalents, restricted cash and long-term restricted cash—end of year $ 64,913  $ 120,170 
Cash and cash equivalents—beginning of year 118,986  80,752 
Restricted cash included in long-term assets—beginning of year 1,184  — 
Total cash and cash equivalents, restricted cash and long-term restricted cash—beginning of year 120,170  80,752 
Cash and cash equivalents—end of year 63,729  118,986 
Restricted cash included in current assets—end of year 1,184  — 
Restricted cash included in long-term assets—end of year —  1,184 
Total cash and cash equivalents, restricted cash and long-term restricted cash—end of year $ 64,913  $ 120,170 
Non-cash operating activities:
Operating lease right-of-use assets and liabilities recognized $ 1,690  $ 1,141 
Supplemental disclosure of cash paid:  
Income taxes $ $ 40 
Interest $ 27  $ 465 
The accompanying notes are an integral part of these consolidated financial statements.
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SIO GENE THERAPIES INC.
Notes to Consolidated Financial Statements

Note 1—Description of Business
Historically, Sio Gene Therapies Inc. ("Sio"), together with its wholly owned subsidiaries (the "Company"), was a clinical-stage company focused on developing gene therapies to radically transform the lives of patients with neurodegenerative diseases (see Note 3 and Note 14).
Sio is a Delaware corporation, which was originally an exempted limited company incorporated under the laws of Bermuda in October 2014 and was named Axovant Gene Therapies Ltd. ("AGT") from March 2019 until November 2020. During November 2020, the Company completed a corporate transformation, changing its jurisdiction of incorporation from Bermuda to the State of Delaware, changing its name to Sio Gene Therapies Inc., and changing its ticker symbol on The Nasdaq Global Select Market (“Nasdaq”) to “SIOX” (collectively, these events comprise the “Domestication”). The Company continues to be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, and applicable rules of Nasdaq.
Since its initial public offering in 2015, the Company has devoted substantially all of its efforts to raising capital, acquiring product candidates and advancing its product candidates into clinical development. The Company has determined that it has one operating and reporting segment as it allocates resources and assesses financial performance on a consolidated basis.
Note 2—Summary of Significant Accounting Policies
(A) Basis of Presentation:
The Company’s fiscal year ends on March 31, and its fiscal quarters end on June 30, September 30, and December 31.
These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification ("ASC") and as amended by Accounting Standards Updates ("ASU") issued by the Financial Accounting Standards Board ("FASB"). These consolidated financial statements and accompanying notes include the accounts of the Company and its wholly owned subsidiaries. The Company has no unconsolidated subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Certain prior period balances have been reclassified to conform to the current period presentation.
During November 2020, the historical financial statements and subsidiaries of AGT became the historical financial statements and subsidiaries of Sio upon consummation of the Domestication. As a result, these consolidated financial statements and accompanying notes reflect (i) the historical operating results of AGT and its subsidiaries prior to the Domestication; (ii) the operating results of the Company following the Domestication; and (iii) the Company’s equity structure for all periods presented.
(B) Going Concern and Management's Plans:
The Company assesses and determines its ability to continue as a going concern in accordance with the provisions of ASC Subtopic 205-40, "Presentation of Financial Statements—Going Concern", which requires the Company to evaluate whether there are conditions or events that raise substantial doubt about its ability to continue as a going concern within one year after the date that its annual and interim consolidated financial statements and accompanying notes are issued. Certain additional financial statement disclosures are required if such conditions or events are identified. If and when an entity’s liquidation becomes imminent, financial statements should be prepared under the liquidation basis of accounting. Determining the extent, if any, to which conditions or events raise substantial doubt about the Company’s ability to continue as a going concern, or the extent to which mitigating plans sufficiently alleviate any such substantial doubt, as well as whether or not liquidation is imminent, requires judgment by management. The Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the consolidated financial statements and accompanying notes are issued.
The Company is currently a development stage company, and thus, has not yet achieved profitability. The Company expects to continue to incur significant operating and net losses, as well as negative cash flows from operations, for the foreseeable future. The Company has not generated any revenue to date.
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For the years ended March 31, 2022 and March 31, 2021, the Company incurred net losses of $71.9 million and $32.4 million, respectively. As of March 31, 2022, the Company's cash and cash equivalents totaled $63.7 million and its accumulated deficit was $863.0 million. The Company estimates that its current cash and cash equivalents balance is sufficient to support operations beyond the twelve-month period following the date that these consolidated financial statements and footnotes were issued. These estimates are based on assumptions that may prove to be wrong, and the Company could use its available capital resources sooner than it currently expects.
The Company's future funding requirements, both near and long-term, will depend on many factors, including, but not limited to the timing and outcome of its exploration of, and execution upon any, potential strategic alternatives, the cost of obtaining necessary intellectual property and defending potential intellectual property disputes, realization of the anticipated benefits of the Company's headcount reduction, and the costs of operating as a public company.
(C) Use of Estimates:
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company regularly evaluates estimates and assumptions related to certain assets and liabilities, including its research and development accruals, as well as assumptions used to estimate the fair value of its stock option awards, estimate its income tax expense and estimate its ability to continue as a going concern. Specifically, the Company’s assessment of the completeness of the information for research and development accruals is subject to variability and uncertainty. In addition, in certain circumstances, the determination of the nature and amount of research and development services that have been received during the reporting period requires judgment as the timing and pattern of vendor invoicing does not correspond to the level of services provided. The Company estimates the grant date fair value of stock option awards with only time-based vesting requirements using a Black-Scholes valuation model and uses a Monte Carlo Simulation method under the income approach to estimate the grant date fair value of stock option awards with market-based performance conditions. The Company bases its estimates and assumptions on historical experience and on various other factors that it believes 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 could differ from those estimates.
Additionally, the Company assessed the impact that the COVID-19 pandemic has had on its operations and financial results as of March 31, 2022 and through the date of issuance of these audited consolidated financial statements and accompanying notes. The Company’s analysis was informed by the facts and circumstances as they were known to the Company. This assessment considered the impact COVID-19 may have on financial estimates and assumptions that affect the reported amounts of assets and liabilities and expenses.
(D) Risks and Uncertainties:
The Company is subject to risks common to companies in the pharmaceutical industry including, but not limited to, uncertainties related to commercialization of products, regulatory approvals, dependence on key products, dependence on key customers and suppliers, and protection of intellectual property rights.
(E) Concentrations of Credit Risk:
Financial instruments that potentially subject the Company to concentration of credit risk include cash and cash equivalents. At March 31, 2022, substantially all of the Company's cash balances are deposited in 1 banking institution in excess of insured levels.
(F) Cash and Cash Equivalents:
The Company considers all highly liquid investments purchased with original maturities of 90 days or less at acquisition to be cash equivalents. Cash and cash equivalents include cash held in banks and amounts held in money market funds.
(G) Property and Equipment:
Property and equipment, consisting of leasehold improvements, furniture and fixtures, computers, software and other office and laboratory equipment, is recorded at cost. Maintenance and repairs that do not improve or extend the lives of the respective assets are expensed to operations as incurred. Upon disposal, retirement or sale, the related cost and accumulated depreciation is removed from the accounts and any resulting gain or loss is included in the results of operations. Depreciation is recorded for property and equipment using the straight-line method over the estimated useful lives of the respective assets, generally three to five years, once the asset is installed and placed in service. Amortization of leasehold improvements is recorded over the shorter of the lease term or estimated useful life of the related asset.
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The Company reviews the recoverability of all long-lived assets, including the related useful lives, whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset might not be recoverable. Recoverability is measured by comparison of the book values of the assets to future net undiscounted cash flows that the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the book value of the assets exceed their fair value, which is measured based on the projected discounted future net cash flows arising from the assets.
(H) Debt Issuance Costs and Debt Discount:
Debt issuance costs related to a recognized debt liability are presented on the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts, and are amortized to interest expense over the term of the related debt using the effective interest method. Further, debt discounts created as a result of the allocation of proceeds received from a debt issuance to warrants issued in conjunction with the debt issuance are amortized to interest expense under the effective interest method over the life of the recognized debt liability.
(I) Research and Development Expense:
Research and development costs are expensed as incurred. Clinical study costs are accrued over the service periods specified in the contracts and adjusted as necessary based upon an ongoing review of the level of effort and costs actually incurred. Payments for a product license prior to regulatory approval of the product and payments for milestones achieved prior to regulatory approval of the product are expensed in the period incurred as research and development. Milestone payments made in connection with final regulatory approvals are capitalized and amortized to cost of revenue over the remaining useful life of the asset. Research and development costs primarily consist of intellectual property and research and development materials acquired under license and license and collaboration agreements (see Note 3) and expenses from third parties who conduct research and development activities on behalf of the Company. The Company expenses in-process research and development projects acquired as asset acquisitions which have not reached technological feasibility, and which have no alternative future use.
(J) Income Taxes:
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and the respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded when, after consideration of all positive and negative evidence, it is not more likely than not that the Company's deferred tax assets will be realizable. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. When and if the Company were to recognize interest and penalties related to unrecognized tax benefits, they would be reported in tax expense in the consolidated statement of operations.
(K) Stock-Based Compensation:
Stock-based awards to employees and directors with only time-based vesting requirements are valued at fair value on the date of grant and that fair value is recognized on a straight-line basis over the requisite service period of the entire award and is included in research and development expense and general and administrative expense in the Company's consolidated statements of operations. The Company values such time-based stock options using the Black-Scholes option pricing model. Certain assumptions are made with respect to utilizing the Black-Scholes option pricing model, including the expected life of the award, the volatility of the underlying shares and the risk-free interest rate. The expected life of such time-based stock options is calculated using the simplified method (based on the mid-point between the vesting date and the end of the contractual term), and the risk-free interest rate is based on the rates paid on securities issued by the U.S. Treasury with a term approximating the expected life of the equity award. The expected share price volatility for such time-based stock option awards was estimated partially using weighted average measures of implied volatility and using the average historical price volatility for industry peers.
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The Company estimates the grant date fair value of stock option awards to employees with market-based performance conditions using a Monte Carlo Simulation method under the income approach. Certain assumptions are made with respect to utilizing the Monte Carlo Simulation method, including the volatility of the underlying shares and the drift rate, or estimated cost of equity. The expected share price volatility for such market-based performance stock option awards was estimated by taking the median historical price volatility for industry peers over the contractual term of the options. The drift rate, or estimated cost of equity, for such market-based performance stock option awards is based on various financial and risk-associated metrics of industry peers, as well as estimated factors specific to us.
The Company accounts for stock-based payments to nonemployees issued in exchange for services in accordance with ASU No. 2018-07, "Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting" based upon the fair value of the equity instruments issued. Compensation expense for stock options issued to nonemployees is calculated using the Black-Scholes option pricing model on the grant date and is recorded over the service performance period.
The Company recognizes forfeitures of awards when they occur.
(L) Net Loss per Share of Common Stock:
Basic net loss per share of common stock is computed by dividing the net loss applicable to holders of common stock by the weighted-average number of shares of common stock and 3,301,998 pre-funded warrants (see Note 9(B)) outstanding during the period, without further consideration for potentially dilutive securities. The pre-funded warrants were fully exercised in July 2021 (see Note 9(B)). In accordance with ASC Topic 260, Earnings Per Share, the pre-funded warrants were included in the computation of basic net loss per share because the exercise price was negligible and they were fully vested and exercisable at any time after the original issuance date. Diluted net loss per share of common stock is computed by dividing the net loss applicable to holders of common stock by the diluted weighted-average number of shares of common stock outstanding during the period calculated in accordance with the treasury stock method. In periods in which the Company reports a net loss, all common stock equivalents are deemed anti-dilutive such that basic net loss per share of common stock and diluted net loss per share of common stock are equivalent. Potentially dilutive shares of common stock have been excluded from the diluted net loss per share of common stock computations in all periods presented because such securities have an anti-dilutive effect on net loss per share of common stock due to the Company’s net loss. Restricted Stock Units ("RSUs") and stock options outstanding for totals of 5.0 million and 3.1 million shares of common stock were not included in the calculation of diluted weighted-average shares of common stock outstanding for the years ended March 31, 2022 and 2021, respectively, because they were anti-dilutive given the net loss of the Company.
(M) Financial Instruments and Fair Value Measurement:
The Company utilizes fair value measurement guidance prescribed by accounting standards to value its financial instruments.
The guidance establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company's own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances.
Fair value is defined as the exchange price, or exit price, representing the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, the guidance establishes a three-tier fair value hierarchy that distinguishes among the following:
Level 1-Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.
Level 2-Valuations are based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and models for which all significant inputs are observable, either directly or indirectly.
Level 3-Valuations are based on inputs that are unobservable (supported by little or no market activity) and significant to the overall fair value measurement.
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To the extent the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
The Company's financial instruments include cash and cash equivalents and restricted cash. Cash consists of non-interest-bearing deposits denominated in the U.S. dollar, Swiss franc and Euro, while cash equivalents consists of interest-bearing money market fund deposits denominated in the U.S. dollar, which are invested in debt securities issued or guaranteed by the U.S. government and repurchase agreements fully collateralized by U.S. Treasury and U.S. government securities, and restricted cash consists of interest-bearing deposits denominated in the U.S. dollar. Cash and restricted cash are stated at their historical carrying amounts, which approximate fair value due to their short-term nature. The carrying values of the Company's money market fund included in cash and cash equivalents of $61.0 million and $114.0 million at March 31, 2022 and 2021, respectively, approximated their fair values, which are based on quoted prices in active markets for identical securities.
The following table summarizes the fair value of the Company's money market fund included in cash equivalents based on the inputs used at March 31, 2022 and 2021 in determining such values (in thousands):
As of March 31, 2022 As of March 31, 2021
Fair Value Price Quotations (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Fair Value Price Quotations (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)
Money market fund $ 61,000  $ 61,000  $ —  $ —  $ 114,000  $ 114,000  $ —  $ — 
(N) Recent Accounting Pronouncements:
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" ("ASU No. 2016-13"). ASU 2016-13 requires that financial assets measured at amortized cost, such as loans, accounts and trade receivables and investments, be represented net of expected credit losses, which may be estimated based on relevant information such as historical experience, current conditions, and future expectation for each pool of similar financial asset. ASU No. 2016-13 requires enhanced disclosures related to trade receivables and associated credit losses. In May 2019, the FASB issued ASU No. 2019-05, “Financial Instruments — Credit Losses (Topic 326): Targeted Transition Relief", which allows for a transition election on certain instruments and is effective for smaller reporting companies for fiscal years beginning after December 15, 2022 and interim periods in those fiscal years. In November 2019, the FASB issued ASU No. 2019-11, "Codification Improvements to Topic 326, Financial Instruments — Credit Losses", which amends certain aspects of ASU No. 2016-13, including transition relief for trouble debt restructuring ("TDR"), among other topics. In March 2022, the FASB issued ASU No. 2022-02, "Financial Instruments — Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures" ("ASU No. 2022-02"), which eliminates the accounting guidance on TDRs for creditors in ASC Subtopic 310-40 and amends the guidance on “vintage disclosures” to require disclosure of current-period gross write-offs by year of origination. ASU No. 2022-02 also updates the requirements related to accounting for credit losses under ASC Topic 326 and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty. While the Company does not expect the adoption of this guidance to materially impact the Company's consolidated financial statements and related disclosures because it does not currently have any investments or trade receivables, the impact on the Company's consolidated financial statements and disclosures will depend on the facts and circumstances of any specific future transactions or circumstances.
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In August 2020, the FASB issued ASU No. 2020-06, "Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity's Own Equity (Subtopic 815-40)" ("ASU No. 2020-06"). ASU No. 2020-06 simplifies the accounting for convertible debt instruments by removing the beneficial conversion and cash conversion separation models for convertible instruments. Under ASU No. 2020-06, the embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives or that do not result in substantial premiums accounted for as paid-in capital. ASU No. 2020-06 also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, the new guidance modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the computation of diluted earnings or loss per share. The provisions of ASU No. 2020-06 are effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, with early adoption permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company's adoption of ASU No. 2020-06 on April 1, 2022 did not impact the Company's consolidated financial statements and related disclosures because it did not maintain any debt instruments accounted for in accordance with ASC Subtopic 470-20, "Debt — Debt with Conversion and Other Options" or instruments accounted for as derivatives in accordance with ASC Subtopic 815-40, "Derivatives and Hedging — Contracts in Entity's Own Equity", and the Company had also included outstanding pre-funded warrants in the computation of basic net loss per share (see Note 2(L)).
In May 2021, the FASB issued ASU No. 2021-04, "Earnings Per Share (Topic 260), Debt — Modifications and Extinguishments (Subtopic 470-50), Compensation — Stock Compensation (Topic 718), and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options" ("ASU No. 2021-04"). ASU No. 2021-04 provides a principles-based framework for issuers to account for a modification or exchange of freestanding equity-classified written call options. To the extent applicable, issuers first reference other U.S. GAAP to account for the effect of the modification. In the absence of other U.S. GAAP, ASU No. 2021-04 clarifies whether to account for the effect as an adjustment to equity, and the related EPS implications, or as an expense, and if so the manner and pattern of recognition. The provisions of ASU No. 2021-04 are effective for annual periods beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted. The Company's adoption of ASU No. 2021-04 on April 1, 2022 did not impact the Company's consolidated financial statements and related disclosures because it did not modify outstanding equity-classified written call options upon adoption.
In March 2022, the FASB issued ASU No. 2022-01, "Derivatives and Hedging (Topic 815) — Fair Value Hedging — Portfolio Layer Method" ("ASU No. 2022-01"). ASU No. 2022-01 clarifies the guidance in ASC Topic 815 on fair value hedge accounting of interest rate risk for portfolios of financial assets, and amends the guidance in ASU 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities", that, among other things, established the “last-of-layer” method for making the fair value hedge accounting for these portfolios more accessible. ASU 2022-01 renames that method the “portfolio layer” method. The provisions of ASU No. 2022-01 are effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. While the Company does not expect the adoption of this guidance to materially impact the Company's consolidated financial statements and related disclosures because it does not currently have any financial instruments designated as fair value hedges, the impact on the Company's consolidated financial statements and disclosures will depend on the facts and circumstances of any specific future transactions or circumstances.
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the SEC did not, or are not believed by management to, have a material impact on the Company’s present or future consolidated financial position, results of operations or cash flows.
(O) Foreign Currency:
The Company has operations in the United States, the United Kingdom, Ireland and Switzerland. The results of its non-U.S. dollar based functional currency operations are translated to U.S. dollars at the average exchange rates during the year. The Company’s assets and liabilities are translated using the current exchange rate as of the balance sheet date and stockholders’ equity is translated using historical rates. Adjustments resulting from the translation of the financial statements of the Company’s foreign functional currency subsidiaries into U.S. dollars are excluded from the determination of net loss and are accumulated in a separate component of stockholders’ equity. Foreign exchange transaction gains and losses are included in other (income) expense in the Company’s results of operations.

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Note 3—License and Collaboration Agreements
(A) The University of Massachusetts Medical School Exclusive License Agreement:
In December 2018, the Company entered into an exclusive license agreement (the "UMMS Agreement"), with the University of Massachusetts Medical School ("UMMS") pursuant to which the Company received a worldwide, royalty-bearing, sub-licensable license under certain patent applications and any patents issuing therefrom, biological materials and know-how controlled by UMMS to develop and commercialize gene therapy product candidates, including AXO-AAV-GM1 and AXO-AAV-GM2, for the treatment of GM1 gangliosidosis and GM2 gangliosidosis (including Tay-Sachs disease and Sandhoff disease), respectively. In April 2022, the Company provided notice of termination to UMMS of the UMMS Agreement, which termination is expected to become effective by June 30, 2022 (see Note 14).
Under the UMMS Agreement, the Company is solely responsible, at its expense, for the research, development and commercialization of the licensed gene therapy product candidates. The Company reimburses UMMS for payments made by UMMS for the manufacture of clinical trial materials for the Company, up to a specified amount.
The Company incurred totals of $27.7 million and $6.9 million of program-specific costs related to its AXO-AAV-GM1 and AXO-AAV-GM2 programs within research and development expenses in its consolidated statements of operations during the years ended March 31, 2022 and March 31, 2021, respectively, including a total of $3.0 million for license fee milestones due under the terms of the UMMS Agreement during the year ended March 31, 2022. The Company paid totals of $5.3 million and $29 thousand to UMMS during the years ended March 31, 2022 and March 31, 2021, respectively.
(B) Oxford Biomedica License Agreement:
In June 2018, the Company entered into a license agreement (the "Oxford Agreement") with Oxford Biomedica (UK) Ltd. ("Oxford"), pursuant to which the Company received a worldwide, exclusive, royalty-bearing, sub-licensable license under certain patents and other intellectual property controlled by Oxford to develop and commercialize AXO-Lenti-PD and related gene therapy products for all diseases and conditions. In February 2022, the Company provided notice of termination to Oxford of the Oxford Agreement, which termination is expected to become effective by June 30, 2022. The Company incurred $10.6 million and $5.7 million of AXO-Lenti-PD program-specific costs within research and development expenses in its consolidated statements of operations during the years ended March 31, 2022 and March 31, 2021, respectively, including a $2.0 million nonrecurring development milestone achieved during the year ended March 31, 2022. The Company paid totals of $7.2 million and $3.5 million to Oxford during the years ended March 31, 2022 and March 31, 2021, respectively, including the payment for the nonrecurring development milestone achieved.
Note 4—Investment in Arvelle Therapeutics B.V.
On February 13, 2019, the Company entered into a share subscription agreement (the "Subscription Agreement") to purchase up to approximately 8.1 million shares of nonredeemable convertible preferred stock of Arvelle Therapeutics B.V. ("Arvelle") in exchange for €0.00001 per share paid in cash, as well as certain goods and services provided by the Company to Arvelle. The Company accounted for its investment in Arvelle in accordance with the provisions of ASC 321, "Investments - Equity Securities", and elected to use the measurement alternative therein. The first closing under the Subscription Agreement occurred on February 25, 2019 with the Company purchasing approximately 5.9 million nonredeemable convertible preferred shares of Arvelle, which was initially recorded at a fair value of $5.9 million and was capitalized as a long-term investment in the Company's consolidated balance sheet and recorded to other non-operating income in its consolidated statement of operations. The Company also received the right to purchase up to approximately 2.2 million additional nonredeemable convertible preferred shares of Arvelle at a price of €0.00001 per share upon a potential future second closing under the Subscription Agreement. In May 2020, the Company fully exercised this right and purchased the approximately 2.2 million additional nonredeemable convertible preferred shares upon the closing of the second financing under the Subscription Agreement, which was recorded at a fair value of $2.2 million and was capitalized as a long-term investment in the Company's consolidated balance sheet and recorded to other non-operating income in the Company's consolidated statement of operations. In February 2021, the Company sold its investment in Arvelle to a third party as part of that third party's cash acquisition of all of the outstanding equity of Arvelle. In exchange, the Company received an upfront payment of approximately $11.6 million, in addition to a future payment to be received of approximately $1.2 million that is being held in escrow and that is recorded as restricted cash in the Company's consolidated balance sheet at March 31, 2022, as well as the right to receive up to an additional total of $7.0 million in potential future regulatory and sales milestone payments (collectively, the "Arvelle Sale"). The Company recorded a net gain of approximately $4.7 million to other non-operating income in the Company's consolidated statement of operations upon the closing of the Arvelle Sale in February 2021, as well as a gain of approximately $4.3 million recorded to other non-operating income in the Company's consolidated statement of operations and to receivable from sale of long-term investment in its consolidated balance sheet upon the achievement of a regulatory milestone in March 2021 that was collected during the year ended March 31, 2022.
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Note 5—Leases
Under the provisions of ASC Topic 842, "Leases" ("Topic 842"), the Company has elected the practical expedients to: (i) use the total lease term in its initial incremental borrowing rate calculation; (ii) combine its lease and non-lease components and account for