20-F 1 transitionreport20f1q19.htm TRANSITION 20-F

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 20-F

(Mark One)

o | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

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

OR

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

for the transition period from October 1, 2018 to December 31, 2018
OR

o | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report
Commission file number: 001-38547
Autolus Therapeutics plc
(Exact name of Registrant as specified in its charter)
N/A
(Translation of Registrant’s name into English)
England and Wales
(Jurisdiction of incorporation)
Forest House
58 Wood Lane
London W12 7RZ United Kingdom
(Address of principal executive offices)
Christian Itin
Chief Executive Officer
Autolus Therapeutics plc
58 Wood Lane
London W12 7RZ United Kingdom
+44 20 3829 6230
Email: ir@autolus.com

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered, pursuant to Section 12(b) of the Act

Title of each class |  | Name of each exchange on which registered
American Depository Shares, each representing one ordinary share, nominal value $0.000042 per share |  | The Nasdaq Stock Market LLC The Nasdaq Stock Market LLC*
Ordinary shares, nominal value $0.000042 per share* * Not for trading, but only in connection with the registration of the American Depositary Shares* |  |

Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes o No x
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 x No o
Indicate by check mark whether the registrant has submitted every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o Accelerated filer o Non-accelerated filer x Emerging growth company x
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards † provided pursuant to Section 13(a) of the Exchange Act. x
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP x |  | International Financial Reporting Standards as issued by the International Accounting Standards Board o |  | Other o

If “Other” has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected to follow. Item 17 o Item 18 o
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
Indicate the number of outstanding shares of each of the issuer’s classes of capital stock or common stock as of the close of business covered by the annual report.
Ordinary shares, nominal value $0.000042 per share: 40,145,617 as of December 31, 2018

TABLE OF CONTENTS

|  | Page
PART I |  | 7
ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS | 7
| A. Operating results | 7
| B. Liquidity and capital resources | 15
| C. Research and development, patents and licenses, etc. | 20
| D. Trend information | 21
| E. Off-balance sheet arrangements | 21
| F. Tabular disclosure of contractual obligations | 21
| G. Other disclosures | 22
ITEM 8. | FINANCIAL INFORMATION | 22
| A. Consolidated statements and other financial information | 22
PART II |  | 22
ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES | 22
ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | 22
PART III |  | 22
ITEM 17. | FINANCIAL STATEMENTS | 23
ITEM 18. | FINANCIAL STATEMENTS | 23
ITEM 19. | EXHIBITS | 23

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GENERAL INFORMATION
All references in this Transition Report on Form 20-F, or Transition Report, to “Autolus,” the “company,” “we,” “us” and “our” refer to Autolus Therapeutics plc and its consolidated subsidiaries, except where the context otherwise requires.
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
The consolidated financial statement data as at December 31, 2018 and September 30, 2018 and 2017 and for the three months ended December 31, 2018 and the years ended September 30, 2018, 2017 and 2016 have been derived from our consolidated financial statements, as presented elsewhere in this Transition Report, which have been prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, as issued by the Financial Accounting Standards Board, or FASB.
All references in this Transition Report to “$” are to U.S. dollars and all references to “£” are to pounds sterling. Solely for the convenience of the reader, unless otherwise indicated, all pounds sterling amounts as of and for the three months ended December 31, 2018 have been translated into U.S. dollars at the noon buying rate of the Federal Reserve Bank of New York on December 31, 2018 of £1.00 = $1.2763. These translations should not be considered representations that any such amounts have been, could have been or could be converted into U.S. dollars at that or any other exchange rate as at that or any other date.
Explanatory Note
On December 19, 2018, the board of directors of Autolus Therapeutics plc announced a change of fiscal year end from September 30 to December 31. As a result, we are required to file this Transition Report on Form 20-F for the transition period of October 1, 2018 to December 31, 2018. After filing the Transition Report, our next fiscal year end will be the fiscal year ending December 31, 2019. We note that this Transition Report on Form 20-F is filed pursuant to Rule 13a-10(g)(4) of the Securities Exchange Act of 1934, as amended, which permits us to respond to only Items 5, 8.A.7., 13, 14 and 17 or 18 of Form 20-F.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Transition Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that involve substantial risks and uncertainties. The forward-looking statements are contained principally in Part I, Item 5. “Operating and Financial Review and Prospects,” but are also contained elsewhere in this Transition Report. In some cases, you can identify forward-looking statements by the words “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” and “ongoing,” or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe we have a reasonable basis for each forward-looking statement contained in this Transition Report, we caution you that these statements are based on a combination of facts and factors currently known by us and our expectations of the future, about which we cannot be certain. Forward-looking statements include statements about:

• | the development of our product candidates, including statements regarding the timing of initiation, completion and the outcome of clinical studies or trials and related preparatory work, the period during which the results of the trials will become available and our research and development programs;

• | our ability to advance our product candidates into, and successfully complete, clinical trials;

• | our ability to obtain and maintain regulatory approval of our product candidates in the indications for which we plan to develop them, and any related restrictions, limitations or warnings in the label of an approved drug or therapy;

• | our ability to license additional intellectual property relating to our product candidates from third parties and to comply with our existing license agreement;

• | our plans to research, develop, manufacture and commercialize our product candidates;

• | the timing of our regulatory filings for our product candidates, along with regulatory developments in the United States, European Union and other foreign countries;

• | the size and growth potential of the markets for our product candidates, if approved, and the rate and degree of market acceptance of our product candidates, including reimbursement that may be received from payors;

• | our ability to raise additional capital;

• | our commercialization, marketing and manufacturing capabilities and strategy;

• | our expectations regarding our ability to obtain and maintain intellectual property protection;

• | our ability to attract and retain qualified employees and key personnel;

• | our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;

• | the scalability and commercial viability of our manufacturing methods and processes;

• | the success of competing therapies that are or may become available;

• | whether we are classified as a PFIC for current and future periods; and

• | our estimates regarding future expenses, revenues and needs for additional financing and the accuracy thereof.

You should refer to the “Risk Factors” section of our Annual Report on Form 20-F filed with the SEC on November 23, 2018, or the Annual Report, as well as our subsequent periodic reports for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Transition Report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any
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specified time frame, or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Transition Report.
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PART I
Item 5. Operating and Financial Review and Prospects.
The following discussion and analysis of our financial condition and results of operations should be read together with Item 3.A. “Selected Consolidated Financial Data” of our Annual Report and our consolidated financial statements and related notes appearing elsewhere in this Transition Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Transition Report and in our Annual Report, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those set forth in the Item 3.D. “Risk Factors” section of our Annual Report, our actual results could differ materially from the results described in or implied by these forward-looking statements. Please also see the section titled “Cautionary Statement Regarding Forward-Looking Statements.”
We maintain our books and records in pounds sterling, our results are subsequently converted to U.S. dollars and we prepare our consolidated financial statements in accordance with U.S. GAAP, as issued by FASB. All references in this Transition Report to “$” are to U.S. dollars and all references to “£” are to pounds sterling. Our consolidated financial statements as of and for the three months ended December 31, 2018 have been translated from pounds sterling into U.S. dollars at the rate of £1.00 to $1.2763, which was the noon buying rate of the Federal Reserve Bank of New York on December 31, 2018. Our consolidated financial statements as of and for the years ended September 30, 2018 and 2017 have been translated from pounds sterling into U.S. dollars at the rate of £1.00 to $1.3053 and £1.00 to $1.3402, which were the noon buying rates of the Federal Reserve Bank of New York on the last business day of the years ended September 30, 2018 and 2017, respectively. These translations should not be considered representations that any such amounts have been, could have been or could be converted into U.S. dollars at that or any other exchange rate as of that or any other date.
We have historically conducted our business through Autolus Limited, and therefore our historical consolidated financial statements previously presented the consolidated results of operations of Autolus Limited. Following the completion of our IPO in June 2018, our consolidated financial statements present the consolidated results of operations of Autolus Therapeutics plc.

A. | Operating results.

Overview
We are a biopharmaceutical company developing next-generation programmed T cell therapies for the treatment of cancer. Using our broad suite of proprietary and modular T cell programming technologies, we are engineering precisely targeted, controlled and highly active T cell therapies that are designed to better recognize cancer cells, break down their defense mechanisms and attack and kill these cells. We believe our programmed T cell therapies have the potential to be best-in-class and offer cancer patients substantial benefits over the existing standard of care, including the potential for cure in some patients.
Since our inception in July 2014, we have devoted substantially all of our resources to conducting preclinical studies and clinical trials, organizing and staffing our company, business planning, raising capital and establishing our intellectual property portfolio. We do not have any products approved for sale and have not generated any revenue from product sales. We have funded our operations to date primarily with sales of our equity securities, including the net proceeds from our recently completed IPO in June 2018. Through December 31, 2018, we have received net proceeds of $333.3 million from sales of our equity securities. We do not expect to generate significant revenue unless and until we obtain marketing approval for and commercialize one of our product candidates.
Since our inception, we have incurred significant operating losses. For the three months ended December 31, 2018, we incurred a net loss of $20.6 million. For the years ended September 30, 2018, 2017, and 2016, we incurred net losses of $44.8 million, $19.7 million and $12.6 million, respectively. As of December 31, 2018, we had an accumulated deficit of $113.3 million.
We expect to continue to incur significant expenses for the foreseeable future as we advance our product candidates through preclinical and clinical development, seek regulatory approval and pursue commercialization of any approved product candidates. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. In addition, we may incur expenses in connection with the in-license or acquisition of additional product candidates. Furthermore, we have incurred and expect to continue to incur, additional costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses that we did not incur as a private company.
As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through the sale of equity, debt financings or other capital sources, including potential collaborations with other companies or other strategic transactions.
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We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our drug candidates or delay our pursuit of potential in-licenses or acquisitions.
As of December 31, 2018, we had cash on hand of $217.5 million. Based on our current clinical development plans, we believe our existing cash and cash equivalents will be able to fund our current and planned operating expenses and capital expenditure requirements into calendar year 2021. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our available capital resources sooner than we expect.
Components of Our Results of Operations
Grant Income
Grant income consists of proceeds from government research grants used to perform specific research and development activities. We recognize grant income over the period in which we recognize the related costs covered under the terms and conditions of the grant. We have received grants from the U.K. government, which are repayable under certain circumstances, including breach or noncompliance with the terms of the grant. For grants with refund provisions, we review the grant to determine the likelihood of repayment. If the likelihood of repayment of the grant is determined to be remote, then the grant is recognized as grant income.
Operating Expenses
Research and Development Expenses
Research and development expenses consist of costs incurred in connection with the research and development of our product candidates, which are partially offset by research and development expenditure tax credits provided by Her Majesty’s Revenue & Customs, or HMRC. We expense research and development costs as incurred. These expenses include:

• | expenses incurred under agreements with contract research organizations, or CROs, as well as investigative sites and consultants that conduct our clinical trials, preclinical studies and other scientific development services;

• | manufacturing scale-up expenses and the cost of acquiring and manufacturing preclinical and clinical trial materials;

• | employee-related expenses, including salaries, related benefits, travel and share-based compensation expense for employees engaged in research and development functions;

• | expenses incurred for outsourced professional scientific development services;

• | costs for laboratory materials and supplies used to support our research activities;

• | allocated facilities costs, depreciation and other expenses, which include rent and utilities; and

• | upfront, milestone and management fees for maintaining licenses under our third-party licensing agreements.

We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our service providers.
Our direct research and development expenses are tracked on a program-by-program basis for our product candidates and consist primarily of external costs, such as fees paid to outside consultants and CROs in connection with our preclinical development, manufacturing and clinical development activities. Our direct research and development expenses by program also include fees incurred under license agreements. We do not allocate employee costs or facility expenses, including depreciation or other indirect costs, to specific programs because these costs are deployed across multiple programs and, as such, are not separately classified. We use internal resources primarily to oversee research and development as well as for managing our preclinical development, process development, manufacturing and clinical development activities.
The following table summarizes our research and development expenses incurred by program (in thousands):
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|  | Three Months Ended |  |
|  | December 31, |  | 2018 - 2017
|  | 2018 |  | 2017 |  | Change
|  | (in thousands)
Direct research and development expenses by program: |  |  |  |  |  |
B cell malignancies (AUTO1 & AUTO3) |  | $ | 3,344 |  |  | $ | 990 |  |  | $ | 2,354 |
T cell lymphoma (AUTO4 & AUTO 5) |  | 499 |  |  | 369 |  |  | 130 |
Multiple myeloma (AUTO2) |  | 531 |  |  | 488 |  |  | 43 |
Solid tumors (AUTO6 & AUTO7) |  | — |  |  | — |  |  | — |
Total direct research and development expense |  | 4,374 |  |  | 1,847 |  |  | 2,527 |
Research and discovery expense and unallocated costs: |  |  |  |  |  |
Personnel related (including share-based compensation) |  | 8,162 |  |  | 2,691 |  |  | 5,471 |
License fees |  | — |  |  | — |  |  |
Indirect research and development expense |  | 5,177 |  |  | 1,026 |  |  | 4,151 |
Total research and development expenses |  | $ | 17,713 |  |  | $ | 5,564 |  |  | $ | 12,149 |

|  | Year Ended September 30, |  | 2018 - 2017 |  | 2017 - 2016
|  | 2018 |  | 2017 |  | 2016 |  | Change |  | Change
|  | (in thousands)
Direct research and development expenses by program: |  |  |  |  |  |  |  |  |  |
B cell malignancies (AUTO1 & AUTO3) |  | $ | 4,274 |  |  | $ | 1,733 |  |  | $ | 446 |  |  | $ | 2,541 |  |  | $ | 1,287 |
T cell lymphoma (AUTO4 & AUTO 5) |  | 1,123 |  |  | 1,470 |  |  | 102 |  |  | (347 | ) |  | 1,368 |
Multiple myeloma (AUTO2) |  | 2,335 |  |  | 1,782 |  |  | 1,379 |  |  | 553 |  |  | 403 |
Solid tumors (AUTO6 & AUTO7) |  | 179 |  |  | — |  |  | — |  |  | 179 |  |  | — |
Total direct research and development expense |  | 7,911 |  |  | 4,985 |  |  | 1,927 |  |  | 2,926 |  |  | 3,058 |
Research and discovery expense and unallocated costs: |  |  |  |  |  |  |  |  |  |
Personnel related (including share-based compensation) |  | 15,944 |  |  | 6,984 |  |  | 4,638 |  |  | 8,960 |  |  | 2,346 |
License fees |  | 2,018 |  |  | 38 |  |  | 1,481 |  |  | 1,980 |  |  | (1,443 | )
Indirect research and development expense |  | 10,277 |  |  | 4,005 |  |  | 2,390 |  |  | 6,272 |  |  | 1,615 |
Total research and development expenses |  | $ | 36,150 |  |  | $ | 16,012 |  |  | $ | 10,436 |  |  | $ | 20,138 |  |  | $ | 5,576 |

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. As a result, we expect that our research and development expenses will increase substantially over the next few years as we increase personnel costs, initiate and conduct additional clinical trials and prepare regulatory filings related to our product candidates. We also expect to incur additional expenses related to milestone, royalty payments and maintenance fees payable to third parties with whom we have entered into license agreements to acquire the rights related to our product candidates.
The successful development and commercialization of our product candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the clinical development of any of our product candidates or when, if ever, material net cash inflows may commence from sales of any of our product candidates. This uncertainty is due to the numerous risks and uncertainties associated with development and commercialization activities, including the uncertainty of:

• | the scope, progress, outcome and costs of our clinical trials and other research and development activities, including establishing an appropriate safety profile with IND-directed studies;

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• | successful patient enrollment in, and the initiation and completion of, clinical trials;

• | the timing, receipt and terms of any marketing approvals from applicable regulatory authorities;

• | establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;

• | development and timely delivery of commercial-grade drug formulations that can be used in our clinical trials and for commercial manufacturing;

• | obtaining, maintaining, defending and enforcing patent claims and other intellectual property rights;

• | significant and changing government regulation;

• | launching commercial sales of our product candidates, if and when approved, whether alone or in collaboration with others;

• | maintaining a continued acceptable safety profile of the product candidates following approval; and

• | significant competition and rapidly changing technologies within the biopharmaceutical industry.

We may never succeed in achieving regulatory approval for any of our product candidates. We may obtain unexpected results from our clinical trials. We may elect to discontinue, delay or modify clinical trials of some product candidates or focus on others. Any changes in the outcome of any of these variables with respect to the development of our product candidates in clinical development could mean a significant change in the costs and timing associated with the development of these product candidates. For example, if the EMA, the FDA, or another regulatory authority were to delay our planned start of clinical trials or require us to conduct clinical trials or other testing beyond those that we currently expect or if we experience significant delays in enrollment in any of our planned clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development of that product candidate. Commercialization of our product candidates will take several years and millions of dollars in development costs.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries, related benefits, travel and share-based compensation expense for personnel in executive, finance, legal and administrative functions. General and administrative expenses also include allocated facility-related costs, patent filing and prosecution costs and professional fees for marketing, insurance, legal, consulting, accounting and audit services.
We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support the planned development of our product candidates. We have experienced, and expect to continue to experience, increased expense with being a public company, including increased accounting, audit, legal, regulatory and compliance costs associated with maintaining compliance with Nasdaq listing rules and SEC requirements, director and officer insurance premiums, as well as higher investor and public relations costs.
Additionally, if we believe a regulatory approval of one of our product candidates appears likely, we would anticipate an increase in payroll and expense as a result of our preparation for commercial operations, especially as it relates to the sales and marketing of our product candidate.
Other Income (Expense)
Other income consists primarily of interest income earned on our cash balances held at a commercial bank. Other expense consists primarily of foreign currency transaction losses.
Income Tax Benefit
We are subject to corporate taxation in the United Kingdom and in the United States. Due to the nature of our business, we have generated losses since inception. Our income tax credit recognized represents the sum of the research and development tax credits recoverable in the United Kingdom and income tax payable in the United States.
As a company that carries out extensive research and development activities, we benefit from the U.K. research and development tax credit regime under the scheme for small or medium-sized enterprises, or SMEs, and also claim a Research and Development Expenditure Credit, or RDEC, to the extent that our projects are grant funded. Under the SME regime, we are able to surrender some of our trading losses that arise from our qualifying r esearch and development activities for a cash rebate of up to 33.35% of such qualifying
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research and development expenditure. The net tax benefit of the RDEC is expected to be 9.7% in the year ending December 31, 2019. We meet the conditions of the SME regime, but also can make claims under the RDEC regime to the extent that our projects are grant funded. Qualifying expenditures largely comprise employment costs for research staff, consumables, outsourced CRO costs and utilities costs incurred as part of research projects. Certain subcontracted qualifying research and development expenditures are eligible for a cash rebate of up to 21.67%. A large portion of costs relating to our research and development, clinical trials and manufacturing activities are eligible for inclusion within these tax credit cash rebate claims.
We may not be able to continue to claim research and development tax credits under the SME regime in the future because we may no longer qualify as a small or medium-sized company. However, we should continue to be able to make claims under the RDEC regime.
Un-surrendered U.K. losses may be carried forward indefinitely to be offset against future taxable profits, subject to numerous utilization criteria and restrictions. The amount that can be offset each year is limited to £5.0 million plus an incremental 50% of U.K. taxable profits. After accounting for tax credits receivable, there were accumulated tax losses for carry forward in the United Kingdom o f $46.2 million as of December 31, 2018. We currently do not recognize a deferred tax asset from our accumulated losses and r ecord a full valuation allowance against the net deferred tax asset as the recoverability due to future taxable profits is unknown.
In the event we generate revenues in the future, we may benefit from the new U.K. “patent box” regime that allows profits attributable to revenues from patents or patented products to be taxed at an effective rate of 10%.
Value Added Tax, or VAT, is broadly charged on all taxable supplies of goods and services by VAT-registered businesses. Under current rates, an amount of 20% of the value, as determined for VAT purposes, of the goods or services supplied is added to all sales invoices and is payable to HMRC. Similarly, VAT paid on purchase invoices is generally reclaimable from HMRC.
Results of Operations
We previously announced results for our fiscal year ended September 30, 2018 and comparative periods. We are transitioning to reporting our results on a calendar year basis, starting with the fiscal year ended December 31, 2018, and as such we are reporting herein audited results for the three-month period from October 1, 2018 to December 31, 2018, and the comparative period for 2017, which is unaudited.
Comparison of Three Months Ended December 31, 2018 and 2017
The following table summarizes our results of operations for the three months ended December 31, 2018 and 2017 (in thousands):

| Three Months Ended December 31, |  |
| 2018 |  | 2017 |  | Change
Grant income | $ | 296 |  |  | $ | 231 |  |  | $ | 65 |
Operating expenses: |  |  |  |  |
Research and development | (17,713 | ) |  | (5,564 | ) |  | (12,149 | )
General and administrative | (7,593 | ) |  | (3,084 | ) |  | (4,509 | )
Total operating expenses, net | (25,010 | ) |  | (8,417 | ) |  | (16,593 | )
Other income (expense): |  |  |  |  |
Interest income | 660 |  |  | 181 |  |  | 479 |
Other income (expense) | 1,097 |  |  | (685 | ) |  | 1,782 |
Total other income (expense), net | 1,757 |  |  | (504 | ) |  | 2,261 |
Net loss before income tax | (23,253 | ) |  | (8,921 | ) |  | (14,332 | )
Income tax benefit | 2,605 |  |  | 1,397 |  |  | 1,208 |
Net loss attributable to ordinary shareholders | $ | (20,648 | ) |  | $ | (7,524 | ) |  | $ | (13,124 | )

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Grant Income
Grant income increased to $0.3 million for the three months ended December 31, 2018 from $0.2 million for the three months ended December 31, 2017. The increase in grant income of $0.1 million was related to an increase in reimbursable expenditures submitted in the three months ended December 31, 2018 to the U.K. government as part of the reimbursement terms of additional government research grants used to perform specific research and development activities.
Research and Development Expenses
Research and development expenses increased to $17.7 million for the three months ended December 31, 2018 from $5.6 million for the three months ended December 31, 2017. Cash costs, which exclude depreciation as well as share-based compensation, increased to $15.2 million from $5.1 million. The increase in research and development cash costs of $10.1 million consisted primarily of an increase of $4.3 million in project expenses related to the activities necessary to prepare, activate, and monitor clinical trial programs, an increase in compensation-related costs of $3.8 million primarily due to an increase in headcount to support the advancement of our product candidates in clinical development, and an increase of $2.0 million in facilities costs and consumables supporting the expansion of our research and translational science capability and investment in manufacturing facilities and equipment.
Non-cash costs increased to $2.5 million for the three months ended December 31, 2018 from $0.5 million for the three months ended December 31, 2017. The increase is related to an increase of $1.6 million share-based compensation expense as a result of an increase in headcount and the increase in the price of our American Depositary Shares, or ADSs, during the three months ended December 31, 2018 an increase of $0.3 million in depreciation related to the purchase of equipment to support our clinical trials and research activities.
General and Administrative Expenses
General and administrative expenses increased to $7.6 million for the three months ended December 31, 2018 from $3.1 million for the three months ended December 31, 2017. Cash costs, which exclude depreciation as well as share-based compensation increased to $5.7 million from $2.5 million. The increase of $3.2 million consisted primarily of an increase of $2.3 million in insurance, patent costs, commercial costs, investor relations and communication costs and additional facility costs, as well as an increase in compensation-related expense of $0.9 million.
Non-cash costs increased to $1.9 million for the three months ended December 31, 2018 from $0.5 million for the three months ended December 31, 2017. The increase is primarily due to an increase of $1.1 million share-based compensation expense as a result of an increase in headcount and the increase in the price of our ADSs during the three months ended December 31, 2018 and an impairment expense of $0.4 million related to discontinued software.
Interest Income
Interest income increased to $0.7 million for the three months ended December 31, 2018 from $0.2 million f or the three months ended December 31, 2017 primarily due to a higher cash balance related to the proceeds from our IPO in June 2018.
Other Income (Expense)
Other income increased to $1.1 million for the three months ended December 31, 2018 from other expense of $0.7 million for the three months ended December 31, 2017 primarily due to foreign currency gains related to the British pound strength relative to the U.S. dollar during 2018 as compared to 2017.
Income Tax Benefit
Income tax benefit increased to $2.6 million for the three months ended December 31, 2018 from $1.0 million for the three months ended December 31, 2017 due to increased U.K. research and development tax credits receivable from HMRC. Research and development credits are obtained at a maximum rate of 33.35% of our qualifying research and development expenses, and the increase in the net credit was primarily attributable to an increase in our eligible research and development expenses.
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Comparison of Years Ended September 30, 2018 and 2017
The following table summarizes our results of operations for the years ended September 30, 2018 and 2017 (in thousands):

| Year Ended September 30, |  |
| 2018 |  | 2017 |  | Change
Grant income | $ | 1,407 |  |  | $ | 1,693 |  |  | $ | (286 | )
Operating expenses: |  |  |  |  |
Research and development | (36,150 | ) |  | (16,012 | ) |  | (20,138 | )
General and administrative | (22,790 | ) |  | (9,099 | ) |  | (13,691 | )
Total operating expenses, net | (57,533 | ) |  | (23,418 | ) |  | (34,115 | )
Other income (expense): |  |  |  |  |
Interest income | 1,532 |  |  | 84 |  |  | 1,448 |
Other income (expense) | 3,970 |  |  | (46 | ) |  | 4,016 |
Total other income, net | 5,502 |  |  | 38 |  |  | 5,464 |
Net loss before income tax | (52,031 | ) |  | (23,380 | ) |  | (28,651 | )
Income tax benefit | 7,280 |  |  | 3,653 |  |  | 3,627 |
Net loss attributable to ordinary shareholders | $ | (44,751 | ) |  | $ | (19,727 | ) |  | $ | (25,024 | )

Grant Income
Grant income decreased to $1.4 million for the year ended September 30, 2018 from $1.7 million for the year ended September 30, 2017. The decrease in grant income of $0.3 million was related to a decrease in reimbursable expenditures submitted in 2018 to the U.K. government.
Research and Development Expenses
Research and development expenses increased to $36.2 million for the year ended September 30, 2018 from $16.0 million for the year ended September 30, 2017. Cash costs, which exclude depreciation as well as share-based compensation, increased to $31.8 million from $14.1 million. The increase in research and development cash costs of $17.6 million consisted primarily of an increase in compensation-related costs of $6.0 million primarily due to an increase in headcount to support the advancement of our product candidates in clinical development, the expansion of our research and translational science capability and investment in manufacturing facilities and equipment, an increase of $4.4 million in project expenses related to the activities necessary to prepare, activate and monitor clinical trial programs, an increase of $3.3 million in materials, an increase of $2.0 million in license fees to UCL Business plc, or UCLB, the technology-transfer company of University College London, and $0.7 million in a milestone payment to UCLB.
Non-cash costs increased to $4.4 million for the year ended September 30, 2018 from $1.8 million for the year ended September 30, 2017. The increase is related to an increase of $2.0 million share-based compensation expense as a result of an increase in headcount and an increase of $0.6 million related to the purchase of equipment to support our clinical trials and research activities.
General and Administrative Expenses
General and administrative expenses increased to $22.8 million for the year ended September 30, 2018 from $9.1 million for the year ended September 30, 2017. Cash costs, which exclude depreciation as well as share-based compensation increased to $18.8 million from $6.9 million. The increase of $11.9 million consisted primarily of an increase in compensation-related of $5.1 million due to an overall increase in headcount, an increase in legal and professional fees of $4.2 million that includes $1.8 million in the preparations for becoming a public company and an increase of $1.0 million for patent filing fees, an increase of $0.7 million in facility costs related to rent and maintenance costs, and an increase of $0.7 million in IT costs related to software services and hardware maintenance contracts.
Non-cash costs increased to $4.0 million for the year ended September 30, 2018 from $2.3 million for the year ended September 30, 2017. The increase is primarily due to an increase of $1.6 million share-based compensation expense as a result of an increase in headcount and the increase in the market value of our ordinary shares and price of our ADSs during the year ended September 30, 2018.
Interest Income
Interest income increased to $1.5 million for the year ended September 30, 2018 from $84,000 for the year ended September 30, 2017 primarily due to a higher cash balance related to proceeds from private placements and our IPO.
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Other Income (Expense)
Other income increased to $4.0 million for the year ended September 30, 2018 from other expense of $46,000 for the year ended September 30, 2017 primarily due to foreign currency gains related to the British pound strength relative to the U.S. dollar during 2018 as compared to 2017.
Income Tax Benefit
Income tax benefit increased to $7.3 million for the year ended September 30, 2018 from $3.7 million for the year ended September 30, 2017 due to additional U.K. research and development tax credits receivable from HMRC. Research and development credits are obtained at a maximum rate of 33.35% of our qualifying research and development expenses, and the increase in the net credit was primarily attributable to an increase in our eligible research and development expenses.
Comparison of Years Ended September 30, 2017 and 2016
The following table summarizes our results of operations for the years ended September 30, 2017 and 2016 (in thousands):

| Year Ended September 30, |  |
| 2017 |  | 2016 |  | Change
Grant income | $ | 1,693 |  |  | $ | 1,212 |  |  | $ | 481 |
Operating expenses: |  |  |  |  |
Research and development | (16,012 | ) |  | (10,436 | ) |  | (5,576 | )
General and administrative | (9,099 | ) |  | (5,152 | ) |  | (3,947 | )
Total operating expenses, net | (23,418 | ) |  | (14,376 | ) |  | (9,042 | )
Other income, net | 38 |  |  | 49 |  |  | (11 | )
Net loss before income tax | (23,380 | ) |  | (14,327 | ) |  | (9,053 | )
Income tax benefit | 3,653 |  |  | 1,777 |  |  | 1,876 |
Net loss attributable to ordinary shareholders | $ | (19,727 | ) |  | $ | (12,550 | ) |  | $ | (7,177 | )

Grant Income
Grant income increased to $1.7 million for the year ended September 30, 2017 from $1.2 million for the year ended September 30, 2016. The increase of $0.5 million related to an increase in research grant income as we received an additional research grant from the U.K. government to fund additional projects in 2017.
Research and Development Expenses
Research and development expenses increased to $16.0 million for the year ended September 30, 2017 from $10.4 million for the year ended September 30, 2016. The increase of $5.6 million consisted primarily of an increase in salaries, bonuses and benefits of $2.3 million due to an overall increase in headcount as we advanced toward the commencement of clinical trials and manufacturing of our product candidates and additional share-based compensation expense, an increase of $3.1 million primarily related to direct costs associated with the additional activities necessary to prepare and activate clinical trial sites and with our viral vector and cell manufacturing processes for patients enrolled in the clinical trials for each of our research programs AUTO2, AUTO3, AUTO4 and AUTO5. In addition, our indirect costs increased by $1.6 million to support the functions of our research programs due to an increase in laboratory use of $0.5 million, an increase in overhead costs of $0.3 million, an increase of $0.3 million in rent fees related to our laboratory facilities, an increase of $0.3 million in lab equipment depreciation and an increase of $0.2 million related to other research and development costs. The overall increases were partially offset by higher license fees of $1.4 million in the year ended September 30, 2016 resulting from the issuance of 1,000,000 B ordinary shares to UCLB in March 2016; there were no such expenses recognized in 2017.
General and Administrative Expenses
General and administrative expenses increased to $9.1 million for the year ended September 30, 2017 from $5.2 million for the year ended September 30, 2016. The increase of $3.9 million consisted primarily of an increase in salaries, bonuses and benefits of $2.2 million due to an overall increase in headcount and the recognition of additional share-based compensation, an increase in legal and professional fees of $0.8 million related to new equity incentive plans and activities related to preparations for becoming a public company,
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an increase of $0.4 million related to other administrative expenses, an increase in corporate costs of $0.3 million related to the overall growth of the business and an increase in depreciation of $0.2 million.
Income Tax Benefit
Income tax benefit increased to $3.7 million for the year ended September 30, 2017 from $1.8 million for the year ended September 30, 2016 due to additional U.K. research and development tax credits receivable from HMRC. Research and development credits are obtained at a maximum rate of 33.35% of our qualifying research and development expenses, and the increase in the net credit was primarily attributable to an increase in our eligible research and development expenses.
B. Liquidity and capital resources.
Since our inception, we have not generated any product revenue and have incurred operating losses and negative cash flows from our operations. We expect to incur significant expenses and operating losses for the foreseeable future as we advance our product candidates through preclinical and clinical development, seek regulatory approval and pursue commercialization of any approved product candidates. We expect that our research and development and general and administrative costs will increase in connection with our planned research activities. As a result, we will need additional capital to fund our operations until such time as we can generate significant revenue from product sales.
We do not currently have any approved products and have never generated any revenue from product sales or otherwise. We have funded our operations to date primarily with proceeds from government grants and sales of our securities. Through December 31, 2018, we have received aggregate net cash proceeds of $333.3 million from sales of our equity securities. As of December 31, 2018, we had cash of $217.5 million.
We currently have no ongoing material financing commitments, such as lines of credit or guarantees, that are expected to affect our liquidity over the next five years, other than our lease obligations and supplier purchase commitments described below.
Cash Flows
The following table summarizes our cash flows for each of the periods presented:

| Three Months Ended December 31,
| 2018 |  | 2017
| (in thousands)
Net cash used in operating activities | $ | (19,785 | ) |  | $ | (8,797 | )
Net cash used in investing activities | (4,422 | ) |  | (764 | )
Net cash provided by financing activities | — |  |  | 433 |
Effect of exchange rate changes on cash and restricted cash | (5,327 | ) |  | 1,042 |
Net decrease in cash and restricted cash | $ | (29,534 | ) |  | $ | (8,086 | )

Net Cash Used in Operating Activities
During the three months ended December 31, 2018, operating activities used $19.8 million of cash, resulting from our net loss of $20.6 million, and net cash used resulting from changes in our operating assets and liabilities of $3.6 million, partially offset by non-cash charges of $4.4 million. Net cash used resulting from changes in our operating assets and liabilities for the three months ended December 31, 2018 consisted primarily of a $3.7 million increase in prepaid expenses and other assets and a $0.7 million decrease in accounts payable, partially offset by a $2.1 million increase in accrued expenses.
During the three months ended December 31, 2017, operating activities used $8.8 million of cash, resulting from our net loss of $7.5 million, net cash used resulting from changes in our operating assets and liabilities of $2.5 million, partially offset by non-cash charges of $1.2 million. Net cash used resulting from changes in our operating assets and liabilities for the three months ended December 31, 2018 consisted primarily of a $1.4 million increase in prepaid expenses and a a $1.1 million decrease in accounts payable.
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Net Cash Used in Investing Activities
During the three months ended December 31, 2018 and 2017, we used $4.4 million and $0.8 million, respectively, of cash in investing activities, each of which consisted of purchases of property and equipment.
Net Cash Provided by Financing Activities
During the three months ended December 31, 2018, there were no financing activities.
During the three months ended December 31, 2017, net cash provided by financing activities was $0.4 million consisting of net cash proceeds from our sale and issuance of equity securities in a private placement.
Cash Denomination
As of December 31, 2018 and 2017, we held $217.5 million and $129.0 million in cash, respectively. Of the $217.5 million cash balance as of December 31, 2018, $49.0 million was held in U.S. dollars and the remainder (£132.1 million) was held as pounds sterling. Of the $129.0 million cash balance as of December 31, 2017, $79.3 million was held in U.S. dollars and the remainder (£36.8 million) was held as pounds sterling.
The following table summarizes our cash flows for each of the periods presented:

| Year Ended September 30,
2018 |  | 2017 |  | 2016
(in thousands)
Net cash used in operating activities | $ | (31,537 | ) |  | $ | (16,360 | ) |  | $ | (9,849 | )
Net cash used in investing activities | (9,531 | ) |  | (2,876 | ) |  | (1,855 | )
Net cash provided by financing activities | 156,920 |  |  | 127,686 |  |  | 32,222 |
Effect of exchange rate changes on cash | (5,833 | ) |  | 561 |  |  | (2,662 | )
Net increase in cash | $ | 110,019 |  |  | $ | 109,011 |  |  | $ | 17,856 |

Net Cash Used in Operating Activities
During the year ended September 30, 2018, operating activities used $31.5 million of cash, resulting from our net loss of $44.8 million, offset by net cash provided from changes in our operating assets and liabilities of $4.7 million, and non-cash charges of $8.5 million. Net cash provided resulting from changes in our operating assets and liabilities for the year ended September 30, 2018 consisted primarily of an $11.0 million increase in accrued expenses and a $0.8 million increase in accounts payable, partially offset by a $7.1 million increase in prepaid expenses and other assets.
During the year ended September 30, 2017, operating activities used $16.4 million of cash, resulting from our net loss of $19.7 million and net cash used resulting from changes in our operating assets and liabilities of $0.8 million, partially offset by non-cash charges of $4.2 million. Net cash used resulting from changes in our operating assets and liabilities for the year ended September 30, 2017 consisted primarily of a $2.3 million increase in prepaid expenses and other assets, partially offset by a $1.1 million increase in accrued expenses and a $0.4 million increase in accounts payable.
During the year ended September 30, 2016, operating activities used $9.8 million of cash, resulting from our net loss of $12.6 million and net cash used resulting from changes in our operating assets and liabilities of $1.2 million, partially offset by non-cash charges of $3.9 million. Net cash used resulting from changes in our operating assets and liabilities for the year ended September 30, 2016 consisted primarily of a $2.0 million increase in prepaid expenses and other current assets, partially offset by $0.3 million increase in accrued expenses and a $0.5 million increase in accounts payable.
Net Cash Used in Investing Activities
During the years ended September 30, 2018, 2017 and 2016, we used $9.5 million, $2.9 million, and $1.9 million, respectively, of cash in investing activities, each of which consisted primarily of purchases of property and equipment.
Net Cash Provided by Financing Activities
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During the year ended September 30, 2018, net cash provided by financing activities was $156.9 million consisting of the $156.5 million net cash proceeds from our IPO in June 2018 and $0.4 million received in October 2017 from a private placement financing completed at the end of September 2017.
During the years ended September 30, 2017 and 2016, net cash provided by financing activities was $127.7 million and $32.2 million, respectively, in each case consisting of net cash proceeds from our sale and issuance of preferred shares.
Cash Denomination
As of September 30, 2018, 2017 and 2016, we held $247.1 million, $137.1 million, and $28.1 million in cash, respectively. Of the $247.1 million cash balance as of September 30, 2018, $53.4 million was held in U.S. dollars and the remainder (£148.3 million) was held as pounds sterling. Of the $137.1 million cash balance as of September 30, 2017, $79.5 million was held in U.S. dollars and the remainder (£43.0 million) was held as pounds sterling. Of the $28.1 million cash balance as of September 30, 2016, the entire amount (£21.7 million) was held as pounds sterling and there were no U.S. dollar holdings.
Funding Requirements
We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance the preclinical activities and clinical trials of our product candidates. Our expenses will increase as we:

• | seek regulatory approvals for any product candidates that successfully complete preclinical and clinical trials;

• | establish a sales, marketing and distribution infrastructure in anticipation of commercializing of any product candidates for which we may obtain marketing approval and intend to commercialize on our own or jointly;

• | hire additional clinical, medical, and development personnel;

• | expand our infrastructure and facilities to accommodate our growing employee base; and

• | maintain, expand and protect our intellectual property portfolio.

Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, clinical costs, external research and development services, laboratory and related supplies, legal and other regulatory expenses, and administrative and overhead costs. Our future funding requirements will be heavily determined by the resources needed to support development of our product candidates.
Based on our current clinical development plans, we believe our existing cash of $217.5 million at December 31, 2018 will enable us to fund our current and planned operating expenses and capital expenditure requirements for at least the next 12 months. We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. If we receive regulatory approval for our other product candidates, we expect to incur significant commercialization expenses related to product manufacturing, sales, marketing and distribution, depending on where we choose to commercialize. We may also require additional capital to pursue in-licenses or acquisitions of other product candidates.
Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical product candidates, we are unable to estimate the exact amount of our working capital requirements. Our future funding requirements will depend on and could increase significantly as a result of many factors, including:

• | the scope, progress, outcome and costs of our clinical trials and other research and development activities;

• | the costs, timing, receipt and terms of any marketing approvals from applicable regulatory authorities;

• | the costs of future activities, including product sales, medical affairs, marketing, manufacturing and distribution, for any of our product candidates for which we receive marketing approval;

• | the revenue, if any, received from commercial sale of our products, should any of our product candidates receive marketing approval;

• | the costs and timing of hiring new employees to support our continued growth;

• | the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; and

• | the extent to which we in-license or acquire additional product candidates or technologies.

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Until such time, if ever, that we can generate product revenue sufficient to achieve profitability, we expect to finance our cash needs through equity offerings. To the extent that we raise additional capital through the sale of equity, your ownership interest will be diluted. If we raise additional funds through other third-party funding, collaborations agreements, strategic alliances, licensing arrangements or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.
Critical Accounting Policies and Significant Judgments and Estimates
Our financial statements are prepared in accordance with U.S. GAAP. The preparation of our financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are 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. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are described in more detail in Note 2 to our financial statements appearing at the end of this Transition Report, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.
Share-Based Compensation
We issue ordinary shares as well as options and other securities exercisable for or convertible into ordinary shares or ADSs, as incentives to our employees and directors. To the extent such incentives are in the form of share options, the options are granted pursuant to the terms of our 2017 Share Option Plan, or the 2017 Plan, or pursuant to the terms of our 2018 Equity Incentive Plan, or the 2018 Plan. Options granted under the 2017 Plan and 2018 Plan, as well as shares granted as employee incentives, typically vest over a four-year service period with 25% of the award vesting on the first anniversary of the commencement date and the balance vesting monthly over the remaining three years, unless the awards contain specific performance vesting provisions. For equity awards issued that have both a performance vesting condition and a services condition, or performance awards, once the performance criteria is achieved, the performance awards are then subject to a four-year service vesting with 25% of the performance award vesting on the first anniversary of the performance condition being achieved, with the balance vesting monthly over the remaining three years. For certain members of senior management and directors, the board has approved an alternative vesting schedule for the equity awards. The options granted under the 2017 Plan and 2018 Plan generally expire ten years from the date of grant. We expect our share-based compensation expense for awards granted to employees, directors and other service providers to increase in future periods due to the planned increases in our headcount.
We recognize compensation expense for equity awards based on the grant date fair value of the award. For equity awards that vest based on a service condition, the share-based compensation expense is recognized on a straight-line basis over the requisite service period. For equity awards that contain both performance and service conditions, we recognize share-based compensation expense ratably over the requisite service period when the achievement of a performance-based milestone is probable based on the relative satisfaction of the performance condition as of the reporting date. We use the fair value of our ordinary shares to determine the fair value of restricted share awards.
Share-based compensation is recognized as an expense in the financial statements based on the grant date fair value over the requisite service period. For awards granted to our employees and directors that vest based on service conditions, we use the accelerated method to allocate compensation expense to reporting periods. We do not adjust share-based compensation for estimated forfeitures and account for forfeitures when they occur.
We use the Black-Scholes option pricing model to estimate the fair value of share options. This option-pricing model requires the input of various subjective assumptions, including the option’s expected life and the price volatility of the security.
The fair value of each share option grant is estimated on the date of grant using the Black-Scholes option pricing model and applying assumptions used in connection with option grants made during the periods covered by these financial statements. Assumptions used in the option pricing model include the following:
Expected volatility. We lack company-specific historical and implied volatility information for our ADSs. Therefore, we estimate the expected share volatility based on the historical volatility of publicly traded peer companies and expect to continue to do so until such time as we have adequate historical data regarding the volatility of our own traded security price.
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Expected term. The expected term of options granted represents the weighted average period of time that options granted are expected to be outstanding giving consideration to vesting schedules and our historical exercise patterns. The expected term of our share options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options.
Risk-free interest rate. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods that are approximately equal to the expected term of the award.
Expected dividend. Expected dividend yield of zero is based on the fact that we have never paid cash dividends on ordinary shares and do not expect to pay any cash dividends in the foreseeable future.
Fair value of ordinary shares. Options granted after our IPO are issued at the fair market value of our ADSs at the date the grant is approved by the Board.
Prior to the IPO, we calculated the fair value of our ordinary shares in accordance with the guidelines in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. The valuations of ordinary shares were prepared using a market approach, based on precedent transactions in the shares, to estimate our total equity value using the option-pricing method, or OPM, which used a combination of market approaches and an income approach to estimate our enterprise value.
The OPM derives an equity value such that the value indicated is consistent with the investment price, and it provides an allocation of this equity value to each class of our securities. The OPM treats the various classes of shares as call options on the total equity value of a company, with exercise prices based on the value thresholds at which the allocation among the various holders of a company’s securities changes. Under this method, each class of shares has value only if the funds available for distribution to shareholders exceed the value of the share liquidation preferences of the class or classes of shares with senior preferences at the time of the liquidity event. Key inputs and assumptions used in the OPM calculation include the following:
Expected volatility. We applied re-levered equity volatility based on the historical unlevered and re-levered equity volatility of publicly traded peer companies.
Expected dividend. Expected dividend yield of zero is based on the fact that we have never paid cash dividends on ordinary shares and does not expect to pay any cash dividends in the foreseeable future.
Expected term. The expected term of the option or the estimated time until a liquidation event.
Risk-free interest rate. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve for the period commensurate with the expected of the exit event.
When considering the fair value of options granted in the period prior to the IPO, management considered probability-weighted scenarios based on the relative likelihoods of completing the IPO and remaining a privately-held company. In the IPO scenarios, the fair value was calculated by dividing our total estimated equity value by the number of fully diluted ordinary shares outstanding, and then discounting the implied per-share value at a rate intended to approximate our cost of equity between the share option grant date and the expected IPO date. The stay-private scenario utilized an OPM "Backsolve" calculation to estimate our equity value implied by the purchase price of the series A preference shares in September 2017. In March and May 2018, we issued share option grants to employees that applied a 50% and 80% probability weighting of an IPO, respectively, to the fair value of the underlying ordinary share utilized in the Black-Scholes option pricing model.
Income Taxes
We account for income taxes under the asset and liability method which includes the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in our financial statements. Under this approach, deferred taxes are recorded for the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxes represents income taxes paid or payable for the current year plus deferred taxes. Deferred taxes result from differences between the financial statements and tax bases of our assets and liabilities, and are adjusted for changes in tax rates and tax laws when changes are enacted. The effects of future changes in income tax laws or rates are not anticipated.
We are subject to corporation taxes in the United Kingdom and the United States. The calculation of our tax provision involves the application of U.K. tax law and requires judgement and estimates.
We evaluate the realizability of our deferred tax assets at each reporting date, and we establish a valuation allowance when it is more likely than not that all or a portion of our deferred tax assets will not be realized.
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income of the same character and in the same jurisdiction. We consider all available positive and negative evidence in making this assessment, including, but not limited to, the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies. In circumstances where
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there is sufficient negative evidence indicating that our deferred tax assets are not more likely than not realizable, we establish a valuation allowance.
We use a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate tax positions taken or expected to be taken in a tax return by assessing whether they are more likely than not sustainable, based solely on their technical merits, upon examination, and including resolution of any related appeals or litigation process. The second step is to measure the associated tax benefit of each position as the largest amount that we believe is more likely than not realizable. Differences between the amount of tax benefits taken or expected to be taken in our income tax returns and the amount of tax benefits recognized in our financial statements represent our unrecognized income tax benefits, which we either record as a liability or as a reduction of deferred tax assets.
Deferred Tax and Current Tax Credits
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognized in the statement of operations, except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity. Current tax is the expected tax payable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Tax credits are accrued for the year based on calculations that conform to the U.K. research and development tax credit regime, under both the SME and large company regimes. We meet the conditions of the SME regime, but also can make claims under the RDEC regime to the extent that our projects are grant funded.
We may not be able to continue to claim research and development tax credits under the SME regime in the future because we may no longer qualify as a small or medium-sized company. However, we should continue to be able to make claims under the RDEC regime.
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. No deferred tax assets are recognized on our losses carried forward and other attributes because there is currently no indication that we will make sufficient profits to utilize these attributes.
JOBS Act
On April 5, 2012, the Jumpstart Our Business Startups Act, or the JOBS Act, was enacted. The JOBS Act provides that, among other things, an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. As an emerging growth company, we have irrevocably elected not to take advantage of the extended transition period afforded by the JOBS Act for implementation of new or revised accounting standards and, as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth public companies.
In addition, we also currently rely on the other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, we are entitled to continue to rely on certain exemptions as an “emerging growth company,” and we are not required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b), (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis), and (iv) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our IPO or until we no longer meet the requirements of being an emerging growth company, whichever is earlier.
Recently Issued Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2, “Summary of Significant Accounting Policies,” to our consolidated financial statements included in this Transition Report.

C. | Research and development, patents and licenses, etc.

20

Full details of our research and development activities and expenditures are given in “Item 4. Information on the Company - B. Business” in our Annual Report and “Item 5.A. Operating and Financial Review and Prospects — A. Operating Results” within this Transition Report.
D. Trend information.
See Item 5.A. "Operating and Financial Review and Prospects - Operating Results” and Item 5.B. " Operating and Financial
Review and Prospects - Liquidity and Capital Resources” within this Transition Report.
E. Off-balance sheet arrangements.
We did not have any off-balance sheet arrangements during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the Securities and Exchange Commission other than operating leases as described under “Tabular Disclosure of Contractual Obligations” below.
F. Tabular disclosure of contractual obligations.
The following table summarizes our contractual obligations as of December 31, 2018 and the effects that such obligations are expected to have on our liquidity and cash flows in future periods (in thousands):

| Payments Due by Period
|  | Total |  | Less than 1 Year |  | 1 to 3 Years |  | 4 to 5 Years |  | More than 5 Years
Operating lease obligations(1) |  | $ | 10,151 |  |  | $ | 2,244 |  |  | $ | 4,266 |  |  | $ | 2,520 |  |  | $ | 1,121 |
(1) Amounts in the table reflect minimum payments due for our leases of office, laboratory and manufacturing space and payments required to reimburse the landlord for leasehold improvements related to operating leases.

Operating Leases
Operating lease obligations relate to (i) our lease of office space for our corporate headquarters at Forest House in White City, London, (ii) subleases for our two manufacturing suites at the Cell and Gene Therapy Catapult manufacturing center in Stevenage, United Kingdom, and (iii) the sublease agreement for office space in Rockville, Maryland. In connection with the Forest House lease, as amended, we, in conjunction with the landlord, made tenant improvements to the leased space. The total cost of these improvements was funded by the landlord with a portion of the cost to be reimbursed by us over the term of the amended lease.
Not included in the table above are (i) an arrangement we entered into in June 2018 for additional office space in White City, London, under which a lease is expected to be executed in March 2019 with annual minimum payments of approximately £1.6 million, (ii) an arrangement we entered into September 2018 for additional manufacturing space in Enfield, United Kingdom, under which a lease will commence in February 2019 and expires in February 2034 with an annual minimum payments of approximately £0.5 million, and (iii) a lease agreement we entered into January 2019 for office and manufacturing space in Rockville, Maryland, under which the lease term is expected to commence in June 2020 and expires in June 2035 with an annual minimum payments of approximately $3.3 million.
Purchase and Other Obligations
We enter into contracts in the normal course of business with CROs and other third parties for clinical trials and preclinical research studies and testing. These contracts are generally cancelable by us upon prior notice. Payments due upon cancellation consist only of payments for services provided or expenses incurred, including noncancelable obligations of our service providers, up to the date of cancellation. These payments are not included in the table above, as the amount and timing of such payments are not known as of December 31, 2018.
We have not included any contingent payment obligations that we may incur upon achievement of clinical, regulatory and commercial milestones, as applicable, or royalty payments that we may be required to make under our license agreement with UCL Business plc, as the amount, timing and likelihood of such payments are not known as of December 31, 2018.
21

G. Safe harbor.
This Transition Report contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act and as defined in the Private Securities Litigation Reform Act of 1995. See the section titled “Cautionary Statement Regarding Forward-Looking Statements” at the beginning of this Transition Report.
Item 8. Financial Information.
A.Consolidated Statements and Other Financial Information.
Our consolidated financial statements are appended at the end of this Transition Report, starting on page F-1.
Legal Proceedings
We are not currently a party to any material legal proceedings. From time to time, we may be a party to litigation or subject to claims incident to the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, we currently believe that the final outcome of these ordinary course matters will not have a significant effect on our financial position or profitability. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies.
None.
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds.
A. Not applicable.
B. Not applicable.
C. Not applicable.
D. Not applicable.
E. Use of Proceeds.
In June 2018, we completed as offering of an aggregate of 10,147,059 ordinary shares, including the full exercise of the underwriters’ option to purchase 1,323,529 additional ordinary shares. The offering was in the form of American Depositary Shares, each representing one ordinary share, at an offering price of $17.00 per ADS for aggregate gross proceeds to us of approximately $172.5 million. The net offering proceeds to us, after deducting underwriting discounts and commissions and offering expenses, were approximately $156.5 million. The offering commenced on June 8, 2018 and did not terminate before all of the securities registered in the registration statement were sold. The effective date of the registration statement, File No. 333-224720, for our offering was June 21, 2018.
Goldman Sachs & Co. LLC and Jefferies LLC acted as joint book-running mangers for the offering. Wells Fargo Securities, LLC and William Blair & Company, L.L.C. acted as lead managers for the offering.
The net proceeds from our offering have been used, and are expected to continue to be used, as described in the final prospectus for the offering filed with the U.S. Securities and Exchange Commission on June 22, 2018.
None of the net proceeds of our offering were paid directly or indirectly to any director, officer, general partner of ours or to their associates, persons owning ten percent or more of any class of our equity securities, or to any of our affiliates.
PART III
22

Item 17. Financial Statements.
We have elected to provide financial statements pursuant to Item 18.
Item 18. Financial Statements.
The financial statements are filed as part of this Transition Report beginning on page F-1.
Item 19. Exhibits.

|  |  |  | INCORPORATED BY REFERENCE
EXHIBIT NUMBER |  | DESCRIPTION OF EXHIBIT |  | SCHEDULE/ FORM |  | FILE NUMBER |  | EXHIBIT |  | FILE DATE
1.1 |  | Articles of Association of Autolus Therapeutics plc. |  | Form F-1/A |  | 333-224720 |  | 3.1 |  | 6/19/18
2.1* |  | Deposit Agreement by and among the registrant, Citibank, N.A., as the depositary bank and the holders and beneficial owners of American Depositary Shares issued thereunder. |  |  |  |  |  |  |  |
2.2* |  | Form of American Depositary Receipt (included in exhibit 2.1). |  |  |  |  |  |  |  |
2.3 |  | Autolus Therapeutics plc, Registration Rights Agreement, dated as June 26, 2018 |  | Form 20-F |  | 001-38547 |  | 2.3 |  | 11/23/18
4.1# |  | License Agreement, dated as of September 25, 2014 by and between the registrant and UCL Business plc, as amended on March 2, 2016 and March 28, 2018. |  | Form F-1/A |  | 333-224720 |  | 10.1 |  | 5/10/18
4.2# |  | Supply Agreement, dated as of March 23, 2018, by and between the registrant and Miltenyi Biotec GmbH. |  | Form F-1/A |  | 333-224720 |  | 10.2 |  | 6/8/18
4.3+ |  | Autolus Therapeutics plc 2018 Equity Incentive Plan. |  | Form F-1/A |  | 333-224720 |  | 10.3 |  | 6/19/18
4.4+ |  | Non-employee Sub Plan to the Autolus Therapeutics plc 2018 Equity Incentive Plan. |  | Form F-1/A |  | 333-224720 |  | 10.4 |  | 6/19/18
4.5+ |  | Management Incentive Compensation Plan. |  | Form F-1/A |  | 333-224720 |  | 10.5 |  | 6/8/18
4.6+ |  | Form of Deed of Indemnity between the registrant and each of its members of senior management and directors. |  | Form F-1/A |  | 333-224720 |  | 10.6 |  | 6/8/18
8.1 |  | Subsidiaries of the registrant. |  | Form F-1/A |  | 333-224720 |  | 21.1 |  | 6/8/18
12.1* |  | Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |  |  |  |  |  |  |  |

23

12.2* |  | Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |  |  |  |  |  |  |  |
13.1** |  | Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |  |  |  |  |  |  |  |
15.1* |  | Consent of Ernst & Young LLP. |  |  |  |  |  |  |  |
101.INS* |  | XBRL Instance Document |  |  |  |  |  |  |  |
101.SCH* |  | XBRL Taxonomy Extension Schema Document |  |  |  |  |  |  |  |
101.CAL* |  | XBRL Taxonomy Extension Calculation Linkbase Document |  |  |  |  |  |  |  |
101.DEF* |  | XBRL Taxonomy Extension Definition Linkbase Document |  |  |  |  |  |  |  |
101.LAB* |  | XBRL Taxonomy Extension Label Linkbase Document |  |  |  |  |  |  |  |
101.PRE* |  | XBRL Taxonomy Extension Presentation Linkbase Document |  |  |  |  |  |  |  |

+ | Indicates management contract or compensatory plan.

# | Confidential treatment has been granted as to portions of the exhibit (indicated by asterisks). Confidential materials omitted and filed separately with the Securities and Exchange Commission.

* | Filed herewith.

** | Furnished herewith.

24

SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this transition report on its behalf.

|  | AUTOLUS THERAPEUTICS PLC
Date: February 25, 2019 |  | By: | /s/ Christian Itin
|  |  | Christian Itin
|  |  | Chief Executive Officer

25

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm | F-2
Consolidated Balance Sheets as of December 31, 2018, September 30, 2018 and 2017 | F-3
Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended December 31, 2018 and Years Ended September 30, 2018, 2017 and 2016 | F-4
Consolidated Statements of Shareholders’ Equity for the Three Months Ended December 31, 2018 and Years Ended September 30, 2018, 2017 and 2016 | F-5
Consolidated Statements of Cash Flows for the Three Months Ended December 31, 2018 and Years Ended September 30, 2018 2017, and 2016 | F-6
Notes to Consolidated Financial Statements | F-7

F-1

Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Autolus Therapeutics plc
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Autolus Therapeutics plc (and subsidiaries) (the Company) as of December 31, 2018, September 30, 2018 and September 30, 2017, the related consolidated statements of operations and comprehensive loss, shareholders' equity and cash flows for the three-months ended December 31, 2018, and each of the three years in the period ended September 30, 2018, 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 December 31, 2018, September 30, 2018 and September 30, 2017, and the results of its operations and its cash flows for the three-month period ended December 31, 2018 and each of the three years in the period ended September 30, 2018, 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.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2017.
Reading, United Kingdom
February 25, 2019
F-2

AUTOLUS THERAPEUTICS PLC
Consolidated Balance Sheets
(In thousands, except share and per share amounts)

|  | December 31, |  | September 30,
|  | 2018 |  | 2018 |  | 2017
Assets |  |  |  |  |  |
Current assets: |  |  |  |  |  |
Cash |  | $ | 217,450 |  |  | $ | 246,984 |  |  | $ | 137,070 |
Restricted cash |  | 105 |  |  | 105 |  |  | — |
Prepaid expenses and other current assets |  | 15,411 |  |  | 12,189 |  |  | 5,412 |
Total current assets |  | 232,966 |  |  | 259,278 |  |  | 142,482 |
Non-current assets: |  |  |  |  |  |
Property and equipment, net |  | 19,968 |  |  | 13,528 |  |  | 6,180 |
Long-term deposits |  | 1,276 |  |  | — |  |  | — |
Intangible assets, net |  | — |  |  | 399 |  |  | — |
Total assets |  | $ | 254,210 |  |  | $ | 273,205 |  |  | $ | 148,662 |
Liabilities and shareholders' equity |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |
Accounts payable |  | 2,022 |  |  | 3,036 |  |  | 1,946 |
Accrued expenses and other liabilities |  | 19,054 |  |  | 14,103 |  |  | 3,087 |
Total current liabilities |  | 21,076 |  |  | 17,139 |  |  | 5,033 |
Non-current liabilities: |  |  |  |  |  |
Long-term lease incentive obligation |  | 207 |  |  | 221 |  |  | 265 |
Other long-term payables |  | 285 |  |  | 380 |  |  | 763 |
Total liabilities |  | 21,568 |  |  | 17,740 |  |  | 6,061 |
Shareholders' equity: |  |  |  |  |  |
Ordinary shares, $0.000042 par value; 200,000,000 shares authorized as of December 31, 2018 and September 30, 2018, 37,426,509 authorized as of September 30, 2017; 40,145,617, 40,146,182, and 29,962,742 shares issued and outstanding at December 31, 2018 and September 30, 2018 and 2017, respectively |  | 2 |  |  | 2 |  |  | 1 |
Deferred shares, £0.00001 par value; 34,425 shares authorized, issued and outstanding at December 31, 2018 and September 30, 2018, respectively; no shares authorized, issued or outstanding at September 30, 2017 |  | — |  |  | — |  |  | — |
Deferred B shares, £0.00099 par value; 88,893,548 shares authorized, issued and outstanding at December 31, 2018 and September 30, 2018; no shares authorized, issued or outstanding at September 30, 2017 |  | 118 |  |  | 118 |  |  | — |
Deferred C shares, £0.000001 par value; 1 share authorized, issued and outstanding at December 31, 2018 and September 30, 2018; no shares authorized, issued or outstanding at September 30, 2017 |  | — |  |  | — |  |  | — |
Additional paid-in capital |  | 361,311 |  |  | 357,918 |  |  | 194,351 |
Accumulated other comprehensive loss |  | (15,488 | ) |  | (9,920 | ) |  | (3,849 | )
Accumulated deficit |  | (113,301 | ) |  | (92,653 | ) |  | (47,902 | )
Total shareholders' equity |  | 232,642 |  |  | 255,465 |  |  | 142,601 |
Total liabilities and shareholders' equity |  | $ | 254,210 |  |  | $ | 273,205 |  |  | $ | 148,662 |

The accompanying notes are an integral part of these consolidated financial statements.
F-3

AUTOLUS THERAPEUTICS PLC
Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except share and per share amounts)

|  | Three Months Ended December 31, |  | For the Year Ended September 30,
|  | 2018 |  | 2018 |  | 2017 |  | 2016
Grant income |  | $ | 296 |  |  | $ | 1,407 |  |  | $ | 1,693 |  |  | $ | 1,212 |
Operating expenses: |  |  |  |  |  |  |  |
Research and development |  | (17,713 | ) |  | (36,150 | ) |  | (16,012 | ) |  | (10,436 | )
General and administrative |  | (7,593 | ) |  | (22,790 | ) |  | (9,099 | ) |  | (5,152 | )
Total operating expenses, net |  | (25,010 | ) |  | (57,533 | ) |  | (23,418 | ) |  | (14,376 | )
Other income (expense): |  |  |  |  |  |  |  |
Interest income |  | 660 |  |  | 1,532 |  |  | 84 |  |  | 75 |
Other income (expense) |  | 1,097 |  |  | 3,970 |  |  | (46 | ) |  | (26 | )
Total other income, net |  | 1,757 |  |  | 5,502 |  |  | 38 |  |  | 49 |
Net loss before income tax |  | (23,253 | ) |  | (52,031 | ) |  | (23,380 | ) |  | (14,327 | )
Income tax benefit |  | 2,605 |  |  | 7,280 |  |  | 3,653 |  |  | 1,777 |
Net loss attributable to ordinary shareholders |  | (20,648 | ) |  | (44,751 | ) |  | (19,727 | ) |  | (12,550 | )
Other comprehensive (loss) income: |  |  |  |  |  |  |  |
Foreign currency exchange translation adjustment |  | (5,568 | ) |  | (6,071 | ) |  | 802 |  |  | (2,942 | )
Total comprehensive loss |  | (26,216 | ) |  | (50,822 | ) |  | (18,925 | ) |  | (15,492 | )
Basic and diluted net loss per ordinary share |  | $ | (0.52 | ) |  | $ | (1.42 | ) |  | $ | (1.43 | ) |  | $ | (1.26 | )
Weighted-average basic and diluted ordinary shares |  | 39,366,634 |  |  | 31,557,034 |  |  | 13,783,222 |  |  | 9,933,399 |

The accompanying notes are an integral part of these consolidated financial statements.
F-4

AUTOLUS THERAPEUTICS PLC
Consolidated Statements of Shareholders’ Equity
(In thousands, except share amounts)

|  | Ordinary shares |  | Deferred Shares |  | Deferred B shares |  | Deferred C Shares |  |  |  |  |  |  |  |
|  | Shares |  | Amount |  | Shares |  | Amount |  | Shares |  | Amount |  | Shares |  | Amount |  | Additional Paid in Capital |  | Accumulated other comprehensive loss |  | Accumulated deficit |  | Total
Balance at September 30, 2015 |  | 6,713,663 |  |  | $ | — |  |  | — |  |  | $ | — |  |  | — |  |  | $ | — |  |  | — |  |  | $ | — |  |  | $ | 27,835 |  |  | $ | (1,709 | ) |  | $ | (15,625 | ) |  | $ | 10,501 |
Issuance of ordinary shares, net of issuance costs |  | 7,207,881 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 33,421 |  |  | — |  |  | — |  |  | 33,421 |
Share-based compensation expense |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 2,257 |  |  | — |  |  | — |  |  | 2,257 |
Unrealized loss on foreign currency translation |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (2,942 | ) |  | — |  |  | (2,942 | )
Net loss |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  |  |  | (12,550 | ) |  | (12,550 | )
Balance at September 30, 2016 |  | 13,921,544 |  |  | $ | — |  |  | — |  |  | $ | — |  |  | — |  |  | $ | — |  |  | — |  |  | $ | — |  |  | $ | 63,513 |  |  | $ | (4,651 | ) |  | $ | (28,175 | ) |  | $ | 30,687 |
Issuance of ordinary shares, net of issuance costs |  | 16,041,198 |  |  | 1 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 127,685 |  |  | — |  |  | — |  |  | 127,686 |
Share-based compensation expense |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 3,153 |  |  | — |  |  | — |  |  | 3,153 |
Unrealized loss on foreign currency translation |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 802 |  |  | — |  |  | 802 |
Net loss |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (19,727 | ) |  | (19,727 | )
Balance at September 30, 2017 |  | 29,962,742 |  |  | $ | 1 |  |  | — |  |  | $ | — |  |  | — |  |  | $ | — |  |  | — |  |  | $ | — |  |  | $ | 194,351 |  |  | $ | (3,849 | ) |  | $ | (47,902 | ) |  | $ | 142,601 |
Issuance of ordinary shares, net of issuance costs |  | 10,183,440 |  |  | 1 |  |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | — |  |  | 156,802 |  |  |  |  | — |  |  | 156,803 |
Issuance of deferred shares |  |  |  | — |  |  | 34,425 |  |  | — |  |  | 88,893,548 |  |  | 118 |  |  | 1 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 118 |
Share-based compensation expense |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | — |  |  | 6,765 |  |  | — |  |  | — |  |  | 6,765 |
Unrealized gain on foreign currency translation |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | — |  |  | — |  |  | (6,071 | ) |  | — |  |  | (6,071 | )
Net loss |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (44,751 | ) |  | (44,751 | )
Balance at September 30, 2018 |  | 40,146,182 |  |  | $ | 2 |  |  | 34,425 |  |  | $ | — |  |  | 88,893,548 |  |  | $ | 118 |  |  | 1 |  |  | $ | — |  |  | $ | 357,918 |  |  | $ | (9,920 | ) |  | $ | (92,653 | ) |  | $ | 255,465 |
Share-based compensation expense |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 3,393 |  |  | — |  |  | — |  |  | 3,393 |
Restricted shares - forfeited |  | (565 | ) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Unrealized gain on foreign currency translation |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (5,568 | ) |  | — |  |  | (5,568 | )
Net loss |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (20,648 | ) |  | (20,648 | )
Balance at December 31, 2018 |  | 40,145,617 |  |  | $ | 2 |  |  | 34,425 |  |  | $ | — |  |  | 88,893,548 |  |  | $ | 118 |  |  | 1 |  |  | $ | — |  |  | $ | 361,311 |  |  | $ | (15,488 | ) |  | $ | (113,301 | ) |  | $ | 232,642 |

The accompanying notes are an integral part of these consolidated financial statements.
F-5

AUTOLUS THERAPEUTICS PLC
Consolidated Statements of Cash Flows
(In thousands)

|  | For the Three Months Ended December 31, |  | For the Year Ended September 30,
|  | 2018 |  | 2018 |  | 2017 |  | 2016
Cash flows from operating activities: |  |  |  |  |  |  |  |
Net loss |  | $ | (20,648 | ) |  | $ | (44,751 | ) |  | $ | (19,727 | ) |  | $ | (12,550 | )
Adjustments to reconcile net loss to net cash used in operating activities: |  |  |  |  |  |  |  |
Depreciation |  | 645 |  |  | 1,709 |  |  | 1,009 |  |  | 478 |
Loss on disposal of fixed and intangible assets |  | 394 |  |  | 8 |  |  | — |  |  | — |
Non-cash share-based compensation |  | 3,393 |  |  | 6,765 |  |  | 3,153 |  |  | 2,257 |
Non-cash consideration for licenses |  | — |  |  | — |  |  | — |  |  | 1,199 |
Changes in operating assets and liabilities |  |  |  |  |  |  |  |
Prepaid expenses and other current assets |  | (3,521 | ) |  | (7,132 | ) |  | (2,317 | ) |  | (2,048 | )
Long-term deposits |  | (1,285 | ) |  | — |  |  | — |  |  | — |
Accounts payable |  | (723 | ) |  | 838 |  |  | 434 |  |  | 507 |
Accrued expenses and other liabilities |  | 1,960 |  |  | 11,026 |  |  | 1,088 |  |  | 308 |
Net cash used in operating activities |  | (19,785 | ) |  | (31,537 | ) |  | (16,360 | ) |  | (9,849 | )
Cash flows from investing activities: |  |  |  |  |  |  |  |
Purchases of property and equipment |  | (4,422 | ) |  | (9,119 | ) |  | (2,876 | ) |  | (1,855 | )
Purchase of intangible assets |  | — |  |  | (412 | ) |  | — |  |  | — |
Net cash used in investing activities |  | (4,422 | ) |  | (9,531 | ) |  | (2,876 | ) |  | (1,855 | )
Cash flows from financing activities: |  |  |  |  |  |  |  |
Proceeds of issuance of ordinary shares, net of issuance costs |  | — |  |  | 156,920 |  |  | 127,686 |  |  | 32,222 |
Net cash provided by financing activities |  | — |  |  | 156,920 |  |  | 127,686 |  |  | 32,222 |
Effect of exchange rate changes on cash and restricted cash |  | (5,327 | ) |  | (5,833 | ) |  | 561 |  |  | (2,662 | )
Net (decrease) / increase in cash and restricted cash |  | (29,534 | ) |  | 110,019 |  |  | 109,011 |  |  | 17,856 |
Cash and restricted cash, beginning of period |  | 247,089 |  |  | 137,070 |  |  | 28,059 |  |  | 10,203 |
Cash and restricted cash, end of period |  | $ | 217,555 |  |  | $ | 247,089 |  |  | $ | 137,070 |  |  | $ | 28,059 |
Supplemental cash flow information |  |  |  |  |  |  |  |
Property and equipment purchases included in accounts payable and accrued expenses |  | $ | 3,343 |  |  | $ | 328 |  |  | $ | — |  |  | $ | — |
Reconciliation of cash and restricted cash reported within the consolidated balance sheets: |  |  |  |  |  |  |  |
Cash |  | $ | 217,450 |  |  | $ | 246,984 |  |  | $ | 137,070 |  |  | $ | 28,059 |
Short-term restricted cash |  | 105 |  |  | 105 |  |  | — |  |  | — |
Total cash and restricted cash |  | $ | 217,555 |  |  | $ | 247,089 |  |  | $ | 137,070 |  |  | $ | 28,059 |

The accompanying notes are an integral part of these consolidated financial statements.
F-6

AUTOLUS THERAPEUTICS PLC
Notes to Consolidated Financial Statements
Note 1. Nature of the Business
Autolus Therapeutics plc (the “Company”) is a biopharmaceutical company developing next-generation programmed T cell therapies for the treatment of cancer. Using its broad suite of proprietary and modular T cell programming technologies, the Company is engineering precisely targeted, controlled and highly active T cell therapies that are designed to better recognize cancer cells, break down their defense mechanisms and attack and kill these cells. The Company believes its programmed T cell therapies have the potential to be best-in-class and offer cancer patients substantial benefits over the existing standard of care, including the potential for cure in some patients.
The Company is a public limited company incorporated in England and Wales. On June 22, 2018, the Company completed its initial public offering ("IPO") of American Depositary Shares (“ADSs”). In the IPO, the Company sold an aggregate of 10,147,059 ADSs representing the same number of ordinary shares, including 1,323,529 ADSs pursuant to the underwriters’ option to purchase additional ADSs, at a public offering price of $17.00 per ADS. Net proceeds were approximately $156.5 million, after deducting underwriting discounts and commissions and offering expenses paid by the Company.
Autolus Therapeutics plc is a continuation of Autolus Limited and its subsidiaries. In connection with the IPO, the Company completed a corporate reorganization, which has been accounted for as a combination of entities under common control. The corporate reorganization has been given retrospective effect in these financial statements and such financial statements represent the financial statements of Autolus Therapeutics plc. In connection with the corporate reorganization, outstanding restricted share awards and option grants of Autolus Limited were exchanged for share awards and option grants of Autolus Therapeutics plc with identical restrictions.
The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize revenue from its product sales.
The Company has funded its operations primarily with proceeds from the sale of its equity securities. The Company has incurred recurring losses since its inception, including net losses of $20.6 million for the three months ended December 31, 2018 and $44.8 million, $19.7 million and $12.6 million for the years ended September 30, 2018, 2017 and 2016, respectively. In addition, the Company had an accumulated deficit of $113.3 million, $92.7 million and $47.9 million as of December 31, 2018, September 30, 2018 and 2017, respectively. The Company expects to continue to generate operating losses for the foreseeable future. The future viability of the Company beyond that point is dependent on its ability to raise additional capital to finance its operations. The Company’s inability to raise additional capital as and when needed could have a negative impact on its financial condition and ability to pursue its business strategies. There can be no assurances, however, that the current operating plan will be achieved or that additional funding will be available on terms acceptable to the Company, or at all. The Company believes the cash on hand at December 31, 2018 of $217.5 million will be sufficient to fund the Company’s operations into calendar year 2021.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements include those of the Company, Autolus Limited, and its U.S. subsidiary, Autolus Inc., and have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All intercompany accounts and transactions have been eliminated upon consolidation. Certain amounts in the Company’s consolidated balance sheet and consolidated cash flows as of and for the year ended September 30, 2018 have been reclassified to conform with the current period presentation.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the reporting periods. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, the accrual for research and development
F-7

AUTOLUS THERAPEUTICS PLC
Notes to Consolidated Financial Statements — Continued
expenses, the fair value of ordinary shares, the valuation of tranche obligations, share-based compensation and income taxes. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ materially from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments that have maturities of three months or less when acquired to be cash equivalents.
Restricted Cash
The Company has entered into a credit card arrangement that requires a security deposit of $0.1 million. The Company includes the restricted cash balance in cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts shown on the consolidated statements of cash flows.
Fair Value Measurements
The carrying amounts reported in the balance sheets for cash, prepaid expenses and other assets, accounts payable and accrued expenses and other liabilities approximate their fair value because of the short-term nature of these instruments.
Concentration of Credit Risk
Financial instruments that subject the Company to credit risk consist primarily of cash and cash equivalents. The Company places cash and cash equivalents in established financial institutions. The Company has no significant off-balance-sheet risk or concentration of credit risk, such as foreign exchange contracts, options contracts, or other foreign hedging arrangements.
Property and Equipment
Property and equipment are recorded at cost and depreciated or amortized using the straight-line method over the estimated useful lives of the respective assets. As of December 31, 2018 and September 30, 2018 and 2017, the Company’s property and equipment consisted of office equipment, lab equipment, furniture and fixtures, and leasehold improvements. The office equipment has an estimated useful life of three years and the lab equipment and furniture and fixtures have an estimated useful life of five years. Leasehold improvements are depreciated over the shorter of the lease term or the estimated useful life of the asset. Assets under construction primarily consist of costs incurred with leasehold improvements, and, once placed into service, will be depreciated over the shorter of the lease term or the estimated useful life of the asset. Upon retirement or sale, the cost of assets disposed of, and the related accumulated depreciation, are removed from the accounts and any resulting gain or loss is included in the statement of operations and other comprehensive loss. Repairs and maintenance expenditures, which are not considered improvements and do not extend the useful life of property and equipment, are expensed as incurred.
The Company evaluates an asset for potential impairment when events or changes in circumstances indicate the carrying value of the asset may not be recoverable. Recoverability is measured by comparing the book value of the asset to the expected future net undiscounted cash flows that the asset is expected to generate. If such asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the book value of the asset exceeds the fair value. The Company did not recognize any impairment losses from its inception through September 30, 2017. The Company recognized asset disposals of less than $10,000 for the year ended September 30, 2018. The Company has not recognized any impairment losses in the three months ended December 31, 2018.
Intangible Assets Subject to Amortization
The Company’s intangible assets with finite lives are amortized over their useful lives and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If any indicators were present, the Company would test for recoverability by comparing the carrying amount of the asset to the net undiscounted cash flows expected to be generated from the asset. If those net undiscounted cash flows do not exceed the carrying amount (i.e., the asset is not recoverable), the Company would perform the next step, which is to determine the fair value of the asset and record an impairment loss, if any. The Company evaluates the useful lives for these intangible assets each reporting period to determine whether events and circumstances warrant a revision in their remaining useful lives. The Company recognized an impairment expense of $0.4 million for the three months ended December 31, 2018 related to software the Company elected to discontinue.
F-8

AUTOLUS THERAPEUTICS PLC
Notes to Consolidated Financial Statements — Continued
Segment Information
Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker in deciding how to allocate resources and assess performance. The Company and the Company’s chief operating decision maker, the Company’s Chief Executive Officer, view the Company’s operations and manage its business as a single operating segment, which is the business of developing and commercializing gene therapies; however, the Company operates in two geographic regions: the United Kingdom and the United States. Substantially all of the Company’s assets are held in the United Kingdom.
Deferred Rent and Lease Incentives
Rent expense and lease incentives from operating leases are recognized on a straight-line basis over the lease term. The Company has operating leases that include rent escalation payment terms and a rent free period. Deferred rent represents the difference between actual operating lease payments and straight-line rent expense over the term of the lease.
Research and Development Costs
Research and development costs are expensed as incurred. Research and development expenses consist of costs incurred in performing research and development activities, including salaries, share-based compensation and benefits, depreciation expense, third-party license fees, external costs of outside vendors engaged to conduct clinical development activities, clinical trials, costs to manufacture clinical trial materials and certain tax credits associated with research and development activities. The Company recorded the U.K. research and development expenditure credit (“RDEC”) in the amount of $37,000, $0.2 million and $0.2 million for the three months ended December 31, 2018 and years ended September 30, 2018 and 2017, respectively, as reductions of research and development expenses within the Company’s statement of operations and comprehensive loss.
Accrued Research and Development Expenses
As part of the process of preparing consolidated financial statements, the Company is required to estimate accruals for research and development expenses. This process involves reviewing and identifying services which have been performed by third parties on the Company’s behalf and determining the value of these services. In addition, the Company makes estimates of costs incurred to date but not yet invoiced, in relation to external CROs and clinical site costs. The Company analyzes the progress of clinical trials, including levels of patient enrollment; invoices received and contracted costs, when evaluating the adequacy of the accrued liabilities for research and development. The Company makes judgments and estimates in determining the accrued balance in any accounting period.
Share-Based Compensation
The Company recognizes compensation expense for equity awards based on the grant date fair value of the award. The Company recognizes share-based compensation expense for awards granted to employees that have a graded vesting schedule based on a service condition only on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in substance, multiple awards (the “graded-vesting attribution method”), based on the estimated grant date fair value for each separately vesting tranche. For equity awards with a graded vesting schedule and a combination of service and performance conditions, the Company recognizes share-based compensation expense using a graded-vesting attribution method over the requisite service period when the achievement of a performance-based milestone is probable, based on the relative satisfaction of the performance condition as of the reporting date. For share-based awards granted to consultants and non-employees, compensation expense is recognized using the graded-vesting attribution method over the period during which services are rendered by such consultants and non-employees until completed. At the end of each financial reporting period prior to completion of the service, the fair value of these awards is remeasured using the then-current fair value of the Company’s ordinary shares. The Company accounts for forfeitures as they occur. Forfeitures to date have been infrequent and immaterial.
The fair value of each share option grant is estimated on the date of grant using the Black-Scholes option pricing model. See Note 7 for the Company’s assumptions used in connection with option grants made during the periods covered by these financial statements. Assumptions used in the option pricing model include the following:
Expected volatility. The Company lacks company-specific historical and implied volatility information for its ADSs. Therefore, the Company estimates the expected share volatility based on the historical volatility of publicly traded peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded share price.
Expected term. The expected term of the Company’s share options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options.
F-9

AUTOLUS THERAPEUTICS PLC
Notes to Consolidated Financial Statements — Continued
Risk-free interest rate. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods that are approximately equal to the expected term of the award.
Expected dividend. Expected dividend yield of zero is based on the fact that the Company has never paid cash dividends on ordinary shares and does not expect to pay any cash dividends in the foreseeable future.
Fair value of ordinary shares. Options granted after the Company’s IPO are issued at the fair market value of the Company’s ADS at the date the grant is approved by the Board.
Prior to the IPO, the Company calculated the fair value of its ordinary shares in accordance with the guidelines in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. The Company’s valuations of ordinary shares were prepared using a market approach, based on precedent transactions in the shares, to estimate the Company’s total equity value using the option-pricing method (“OPM”), which used a combination of market approaches and an income approach to estimate the Company’s enterprise value.
The OPM derives an equity value such that the value indicated is consistent with the investment price, and it provides an allocation of this equity value to each class of the Company’s securities. The OPM treats the various classes of shares as call options on the total equity value of a company, with exercise prices based on the value thresholds at which the allocation among the various holders of a company’s securities changes. Under this method, each class of shares has value only if the funds available for distribution to shareholders exceed the value of the share liquidation preferences of the class or classes of shares with senior preferences at the time of the liquidity event. Key inputs and assumptions used in the OPM calculation include the following:
Expected volatility. The Company applied re-levered equity volatility based on the historical unlevered and re-levered equity volatility of publicly traded peer companies.
Expected dividend. Expected dividend yield of zero is based on the fact that the Company has never paid cash dividends on ordinary shares and does not expect to pay any cash dividends in the foreseeable future.
Expected term. The expected term of the option or the estimated time until a liquidation event.
Risk-free interest rate. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve for the period commensurate with the expected of the exit event.
When considering the fair value of options granted in the period prior to the IPO, management considered probability-weighted scenarios based on the relative likelihoods of completing the IPO and remaining a privately-held company. In the IPO scenarios, the fair value was calculated by dividing the total estimated equity value by the number of fully diluted ordinary shares outstanding, and then discounting the implied per-share value at a rate intended to approximate the Company's cost of equity between share option grant date and the expected IPO date. The stay-private scenario utilized an OPM "Backsolve" calculation to estimate our equity value implied by the purchase price of the series A preference shares in September 2017. In March and May 2018, the Company issued share option grants to employees that applied a 50% and 80% probability weighting of an IPO, respectively, to the fair value of the underlying ordinary share utilized in the Black-Scholes option pricing model.
Foreign Currency Translation
The Company maintains its financial statements in its functional currency, which is the pounds sterling. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at rates of exchange prevailing at the balance sheet dates. Non-monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the date of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income (loss) for the respective periods. The Company recorded foreign exchange gain of $1.1 million for the three months ended December 31, 2018 and a foreign exchange gain of $4.0 million and a foreign exchange loss of $25,000 for the years ended September 30, 2018 and 2017, respectively, which are included in other income in the statements of operations and comprehensive loss.
For financial reporting purposes, the financial statements of the Company have been translated into U.S. dollars. Assets and liabilities have been translated at the exchange rates at the balance sheet dates, while revenue and expenses are translated at the average exchange rates over the reporting period and shareholders’ equity amounts are translated based on historical exchange rates as of the date of each transaction. Translation adjustments are not included in determining net income (loss) but are included in foreign exchange adjustment to other comprehensive loss, a component of shareholders’ equity.
F-10

AUTOLUS THERAPEUTICS PLC
Notes to Consolidated Financial Statements — Continued
Patent Costs
The Company expenses patent prosecution and related legal costs as they are incurred and classifies such costs as general and administrative expenses in the accompanying statements of operations and comprehensive loss. The Company recorded patent expenses of $0.2 million, $1.0 million and $0.5 million for the three months ended December 31, 2018 and years ended September 30, 2018 and 2017, respectively.
Grant Income
The Company has received research grants under which it is reimbursed for specific research and development activities. Payments received are recognized as income in the statements of operations and comprehensive loss over the period in which the Company recognizes the related costs. At the time the Company recognizes grant income, it has complied with the conditions attached to it and the receipt of the reimbursement is reasonably assured. The Company has received grants from the U.K. government, which are repayable under certain circumstances, including breach or noncompliance. For grants with refund provisions, the Company reviews the grant to determine the likelihood of repayment. If the likelihood of repayment of the grant is determined to be remote, then the grant is recognized as grant income. The Company has determined that the likelihood of any repayment events included in its current grants is remote.
Income Taxes
The Company accounts for income taxes under the asset and liability method which includes the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the Company’s financial statements. Under this approach, deferred taxes are recorded for the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxes represents income taxes paid or payable for the current year plus deferred taxes. Deferred taxes result from differences between the financial statements and tax bases of the Company’s assets and liabilities, and are adjusted for changes in tax rates and tax law when changes are enacted. The effects of future changes in income tax laws or rates are not anticipated.
The Company is subject to income taxes in the United Kingdom and the United States. The calculation of the Company’s tax provision involves the application of United Kingdom tax law and requires judgement and estimates.
The Company evaluates the realizability of its deferred tax assets at each reporting date, and establishes a valuation allowance when it is more likely than not that all or a portion of its deferred tax assets will not be realized.
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income of the same character and in the same jurisdiction. The Company considers all available positive and negative evidence in making this assessment, including, but not limited to, the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies. In circumstances where there is sufficient negative evidence indicating that the Company’s deferred tax assets are not more likely than not realizable, the Company establishes a valuation allowance.
The Company uses a two-step approach for recognizing and measuring uncertain tax positions. The first step is to evaluate tax positions taken or expected to be taken in a tax return by assessing whether they are more likely than not sustainable, based solely on their technical merits, upon examination, and including resolution of any related appeals or litigation process. The second step is to measure the associated tax benefit or each position as the largest amount that the Company believes is more likely than not realizable. Differences between the amount of tax benefits taken or expected to be taken in the Company’s income tax returns and the amount of tax benefits recognized in the its financial statements represent the Company’s unrecognized income tax benefits, which it either records as a liability or reduction of deferred tax assets.
Income Tax Credit
The Company benefits from the U.K. research and development tax credit regime under both the small and medium sized enterprise, or SME, scheme and by claiming an RDEC in respect of grant funded projects. Under the SME regime, a portion of the Company’s losses can be surrendered for a cash rebate of up to 33.35% of eligible expenditures. Such credits are accounted for within the tax provision in the year in which the expenditures were incurred.
Comprehensive Loss
The Company follows the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 220, Comprehensive Income, which establishes standards for the reporting and display of comprehensive income and its
F-11

AUTOLUS THERAPEUTICS PLC
Notes to Consolidated Financial Statements — Continued
components. Comprehensive loss is defined to include all changes in equity during a period except those resulting from investments by owners and distributions to owners. The Company recorded a loss of $5.6 million, a loss of $6.1 million, a gain of $0.8 million, and a loss of $2.9 million related to foreign currency translation during the three months ended December 31, 2018 and years ended September 30, 2018, 2017 and 2016, respectively.
Net Loss per Share
Basic and diluted net loss per ordinary share is determined by dividing net loss by the weighted average number of ordinary shares outstanding during the period. For all periods presented, the preferred shares and outstanding but unvested restricted shares and share options have been excluded from the calculation, because their effects would be anti-dilutive. Therefore, the weighted average shares outstanding used to calculate both basic and diluted loss per share are the same for all periods presented.
The following potentially dilutive securities have been excluded from the calculation of diluted net loss per share due to their anti-dilutive effect:

|  | Three Months Ended December 31, |  | Year Ended September 30,
|  | 2018 |  | 2018 |  | 2017 |  | 2016
Unvested restricted incentive shares |  | 708,834 |  |  | 815,632 |  |  | 1,358,317 |  |  | 1,266,619 |
Incentive share options |  | 3,711,274 |  |  | 2,065,481 |  |  | 570,309 |  |  | — |
Total |  | 4,420,108 |  |  | 2,881,113 |  |  | 1,928,626 |  |  | 1,266,619 |

Ordinary Share Conversion
On the date of the IPO, the Company converted its outstanding preferred and ordinary shares as discussed in Note 6. All share and per share information has been retroactively adjusted to reflect the share conversion.
Emerging Growth Company Status
The Company is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (“JOBS Act”) and may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. The Company may take advantage of these exemptions until the Company is no longer an emerging growth company. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards. The Company 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.
These exemptions provided by the JOBS Act will apply up until the last day of the fiscal year following the fifth anniversary of the IPO or such earlier time that the Company no longer meets the requirements of being an emerging growth company. The Company would cease to be an emerging growth company if it has more than $1.07 billion in annual revenue, has more than $700 million in market value of its securities held by non-affiliates (and it has been a public company for at least 12 months, and has filed one annual report on Form 20-F), or it issues more than $1 billion of non-convertible debt securities over a three-year period.
JOBS Act
On April 5, 2012, the Jumpstart Our Business Startups Act, or the JOBS Act, was enacted. The JOBS Act provides that, among other things, an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. As an emerging growth company, the Company has irrevocably elected not to take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards and, as a result, the Company will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth public companies.
In addition, the Company also currently relies on the other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, the Company is entitled to continue to rely on certain exemptions as an “emerging growth company.” As an emerging growth company, the Company is not required to, among other things, (i) provide an auditor’s attestation report on the Company’s system of internal controls over financial reporting pursuant to Section 404(b), (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street
F-12

AUTOLUS THERAPEUTICS PLC
Notes to Consolidated Financial Statements — Continued
Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis), and (iv) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of the IPO or until the Company no longer meets the requirements of being an emerging growth company, whichever is earlier.
Recently issued accounting pronouncements not yet adopted
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”), which requires a lessee to recognize assets and liabilities on the balance sheet for most leases and changes many key definitions, including the definition of a lease. The new standard includes a short-term lease exception for leases with a term of 12 months or less, as part of which a lessee can make an accounting policy election not to recognize lease assets and lease liabilities. Lessees will continue to differentiate between finance leases (previously referred to as capital leases) and operating leases using classification criteria that are substantially similar to the previous guidance.
ASU 2016-02 will be effective beginning January 1, 2019 requiring the use of a modified retrospective transition approach applied at the beginning of the earliest comparative period presented in the financial statements. In July 2018, the FASB issued ASU 2018-11, Leases, Targeting Improvements, (“ASU 2018-11”), which contains certain amendments to ASU 2016-02 intended to provide relief in implementing the new standard. ASU 2018-11 provides registrants with an option to not restate comparative periods presented in the financial statements. The Company intends to elect this new transition approach using a cumulative-effect adjustment on the effective date of the standard, for which comparative periods will be presented in accordance with the previous guidance in ASC 840, Leases.
The Company is currently evaluating the potential impact ASU 2016-02 may have on its financial position, results of operations, and related footnotes. The Company expects it will make an accounting policy election to keep leases with an initial term of 12 months or less off of its balance sheet. To date, the Company has identified all of its leases which consist of the London, United Kingdom corporate office and manufacturing leases and the Gaithersburg, Maryland office and manufacturing facility leases, and the Company anticipates that adoption of ASU 2016-2 will result in the recognition of additional assets and lease liabilities.
In July 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718) (“ASU 2018-07”): Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 aligns the guidance on share-based payments to nonemployees with that for share-based payments to employees. Entities will recognize a cumulative-effect adjustment to retained earnings for equity-classified nonemployee awards for which a measurement date has not been established. The guidance is effective in annual periods beginning after December 31, 2018, and interim periods within those years. The Company is currently evaluating the impact that the adoption of ASU 2018-07 will have on its consolidated financial statements.
Note 3. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):

|  | December 31, |  | September 30,
|  | 2018 |  | 2018 |  | 2017
Research and development claims receivable |  | $ | 10,272 |  |  | $ | 7,191 |  |  | $ | 4,069 |
Prepayments |  | 2,069 |  |  | 2,208 |  |  | 681 |
VAT receivable |  | 1,973 |  |  | 1,274 |  |  | 248 |
Other assets |  | — |  |  | 717 |  |  | — |
Grant income receivable |  | 661 |  |  | 678 |  |  | 279 |
Other receivable |  | 436 |  |  | 121 |  |  | 135 |
Total prepaid expenses and other current assets |  | $ | 15,411 |  |  | $ | 12,189 |  |  | $ | 5,412 |

Note 4. Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
F-13

AUTOLUS THERAPEUTICS PLC
Notes to Consolidated Financial Statements — Continued

|  | December 31, |  | September 30,
|  | 2018 |  | 2018 |  | 2017
Lab equipment |  | $ | 10,771 |  |  | $ | 10,473 |  |  | $ | 4,141 |
Office equipment |  | 1,610 |  |  | 1,019 |  |  | 950 |
Furniture and fixtures |  | 599 |  |  | 594 |  |  | 517 |
Leasehold improvements |  | 2,076 |  |  | 2,124 |  |  | 2,100 |
Assets under construction |  | 8,620 |  |  | 2,456 |  |  | — |
Less: accumulated depreciation |  | (3,708 | ) |  | (3,138 | ) |  | (1,528 | )
Total property and equipment, net |  | $ | 19,968 |  |  | $ | 13,528 |  |  | $ | 6,180 |

Depreciation expense recorded for the three months ended December 31, 2018 was $0.6 million and for the years ended September 30, 2018 and 2017 was $1.7 million and $1.0 million, respectively.
Note 5. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consisted of the following (in thousands):

|  | December 31, |  | September 30,
|  | 2018 |  | 2018 |  | 2017
Compensation and benefits |  | $ | 3,296 |  |  | $ | 2,500 |  |  | $ | 1,662 |
Research and development costs |  | 9,362 |  |  | 6,659 |  |  | 339 |
UCLB milestone |  | 638 |  |  | 653 |  |  | — |
Professional fees |  | 4,130 |  |  | 3,099 |  |  | 300 |
Deferred rent |  | 561 |  |  | 569 |  |  | 197 |
Other liabilities |  | 1,067 |  |  | 623 |  |  | 589 |
Total accrued expenses and other liabilities |  | $ | 19,054 |  |  | $ | 14,103 |  |  | $ | 3,087 |

As of December 31, 2018, other liabilities included U.S. tax payable of $0.6 million and the current portion of other long-term payables and lease incentive liability, which together amounted to $0.4 million. As of each September 30, 2018 and 2017, the current portion of other long-term payables and lease incentive liability, together amounted to $0.4 million.
Note 6. Shareholders’ Equity
Ordinary Shares
Each holder of ordinary shares is entitled to one vote per ordinary share and to receive dividends when and if such dividends are recommended by the board of directors and declared by the shareholders. As of December 31, 2018, the Company has not declared any dividends.
As of December 31, 2018, the Company’s authorized capital shares consisted of 200 million ordinary shares with a nominal value of $0.000042 per share.
Initial Public Offering and Impact of Corporate Reorganization
On June 18, 2018, Autolus Therapeutics Limited re-registered as a public limited company and its name was changed from Autolus Therapeutics Limited to Autolus Therapeutics plc (see Note 1).
On June 26, 2018, the Company closed its IPO. In the IPO, the Company sold an aggregate of 10,147,059 ADSs representing the same number of ordinary shares at a public offering price of $17.00 per ADS, which included the full exercise by the underwriters of their option to purchase additional ADSs. Net proceeds were approximately $156.5 million, after deducting underwriting discounts,
F-14

AUTOLUS THERAPEUTICS PLC
Notes to Consolidated Financial Statements — Continued
and commissions and offering expenses paid by the Company of $16.0 million. Upon the closing of the IPO, each separate class of ordinary shares of Autolus Therapeutics plc was converted into a single class of ordinary shares of Autolus Therapeutics plc as described further below.
Prior to the Company’s June 2018 reorganization and IPO, the Company had issued series A preferred shares, ordinary B shares, and ordinary C shares to fund its operations and upon the Company completing its IPO of ADSs, the different classes of shares were converted into a single class of ordinary shares on a 3.185-for-1 basis and created various classes of deferred shares.
The following deferred share classes were created:
Deferred Shares - The 34,425 deferred shares, aggregate nominal value less than $1.00, existed in Autolus Limited and were re-created in Autolus Therapeutics plc as part of the share exchange to place Autolus Therapeutics as the ultimate parent entity. The Company was required to replicate the shares to ensure the existing share has the correct nominal value to ensure stamp duty mirroring relief is available on the subsequent share for share exchange. These deferred shares have no voting rights.
Deferred B Shares - The deferred B shares were the product of the reorganization of the series A preferred shares and ordinary B shares into ordinary shares. The nominal residual value was utilized by management as the required £50,000 of share capital to re-register Autolus Therapeutics Limited as Autolus Therapeutics plc. The resulting 88,893,548 deferred shares, aggregate nominal value of $118,000, is presented as a separate class of equity on the balance sheet and statement of shareholder’s equity. These deferred B shares have no voting rights.
Deferred C Share - The deferred C share, nominal value less than $1.00, was created when the shares in Autolus Therapeutics plc were redenominated from GBP to USD as part of the capital reduction to deal with rounding issues that would otherwise have unbalanced the company’s nominal share capital. This deferred C share has no voting rights.
The table below reflects the number of preferred shares, ordinary shares, and deferred shares issued and outstanding at December 31, 2018 and September 30, 2018 and 2017, and also reflects the conversion of preferred and ordinary shares on 3.185-for-1 basis in the current and previous years and the creation of deferred shares.

|  | December 31, |  | September 30,
|  | 2018 |  | 2018 |  | 2017
Series A preferred shares |  | — |  |  | — |  |  | 24,490,705 |
Class B ordinary shares |  | — |  |  | — |  |  | 3,375,196 |
Class C ordinary shares |  | — |  |  | — |  |  | 2,096,841 |
Ordinary Shares |  | 40,145,617 |  |  | 40,146,182 |  |  | — |
Deferred shares |  | 34,425 |  |  | 34,425 |  |  | — |
Deferred B shares |  | 88,893,548 |  |  | 88,893,548 |  |  | — |
Deferred C shares |  | 1 |  |  | 1 |  |  | — |
Total ordinary and deferred shares |  | 129,073,591 |  |  | 129,074,156 |  |  | 29,962,742 |

Note 7. Share Based Compensation
In February 2017, the Company’s board of directors adopted the 2017 Share Option Plan, or the 2017 Plan. The 2017 Plan was set to expire on February 21, 2027. The 2017 Plan provided for the grant of potentially tax-favored Enterprise Management Incentives, or EMI, options to the Company's U.K. employees and for the grant of options to its U.S. employees.
In June 2018, as part of the Company's reorganization and IPO, the Company’s board of directors and shareholders approved the 2018 Equity Incentive Plan, or the 2018 Plan. The initial maximum number of ordinary shares that may be issued under the 2018 Plan was 3,281,622. This number consists of 3,025,548 new ordinary shares and 256,074 ordinary shares that would have otherwise remained available for future grants under the 2017 Plan. The number of ordinary shares reserved for issuance under the 2018 Plan will automatically increase on October 1st of each year, for a period of not more than ten years, commencing on October 1, 2018 and ending on (and including) October 1, 2027, by an amount equal to the lesser of (i) 4% of the total number of ordinary shares outstanding on September 30th of the same calendar year or (ii) such fewer number of ordinary shares as the board of directors may designate prior to the applicable October 1st date. Shares issued under the 2018 Plan may be authorized but unissued shares, shares purchased on the open
F-15

AUTOLUS THERAPEUTICS PLC
Notes to Consolidated Financial Statements — Continued
market, treasury shares or ADSs. No more than 14,000,000 shares may be issued under the 2018 Plan upon the exercise of incentive share options.
Options granted under the 2018 Plan and 2017 Plan, as well as restricted shares granted as employee incentives, typically vest over a four-year service period with 25% of the award vesting on the first anniversary of the commencement date and the balance vesting monthly over the remaining three years, unless the award contains specific performance vesting provisions. For equity awards issued that have both a performance vesting condition and a services condition, once the performance criteria is achieved, the awards are then subject to a four-year service vesting with 25% of the award vesting on the first anniversary of the performance condition being achieved and the balance vesting monthly over the remaining three years. Options granted under the 2018 Plan and 2017 Plan generally expire 10 years from the date of grant. For certain senior members of management and directors, the board of directors has approved an alternative vesting schedule.
Share Option Valuation
The assumptions (see Note 2) used in the Black-Scholes option pricing model to determine the fair value of the share options granted to employees and directors during the three months ended December 31, 2018 and the years ended September 30, 2018 and 2017 were as follows:

|  | December 31, |  | September 30,
|  | 2018 |  | 2018 |  | 2017
Expected option life (years) |  | 6 years |  | 6 years |  | 6 years
Risk-free interest rate |  | 2.70% to 3.09% |  | 2.61% to 3.00% |  | 1.91% to 2.05%
Expected volatility |  | 69.52% to 71.26% |  | 68.15% to 72.99% |  | 68.61% to 68.93%
Expected dividend yield |  | 0.00% |  | 0.00% |  | 0.00%

Share Options
The table below reflects summarizes share option activity for the three months ended December 31, 2018.

|  | Number of Options |  | Weighted- Average Exercise Price |  | Weighted- Average Remaining Contractual Term (Years) |  | Aggregate Intrinsic Value
Outstanding as of September 30, 2018 |  | 2,065,481 |  |  | $ | 9.87 |  |  | 9.35 |  |  | $ | 43,146 |
Granted |  | 1,651,740 |  |  | $ | 31.23 |  |  | — |  |  | — |
Exercised |  | — |  |  | — |  |  | — |  |  | — |
Canceled or forfeited |  | (5,947 | ) |  | $ | 5.71 |  |  | — |  |  | — |
Outstanding as of December 31, 2018 |  | 3,711,274 |  |  | $ | 19.25 |  |  | 9.47 |  |  | $ | 51,464 |
Exercisable as of December 31, 2018 |  | 206,085 |  |  | $ | 0.50 |  |  | 8.48 |  |  | $ | 6,664 |
Vested and expected to vest as of December 31, 2018 |  | 3,711,274 |  |  | $ | 19.25 |  |  | 9.47 |  |  | $ | 51,464 |

The aggregate intrinsic value of share options is calculated as the difference between the exercise price of the share options and the fair value of the Company’s ADSs for those share options that had exercise prices lower than the fair value of the Company’s ADSs.
The weighted average grant-date fair value of share options granted was $20.04, $8.55 and $4.04 for the three months ended December 31, 2018 and the years ended September 30, 2018 and 2017, respectively, none of which were vested.
The Company recorded share-based compensation expense related to share options to certain consultants, who are not employees, of $50,000 and $0.1 million for the three months ended December 31, 2018 and the year ended September 30, 2018, respectively. There were no share options granted to consultants during the year ended September 30, 2017.
F-16

AUTOLUS THERAPEUTICS PLC
Notes to Consolidated Financial Statements — Continued
Restricted Ordinary Shares
The assumptions (see Note 2) used in the OPM to determine the fair value of the ordinary shares for the following dates were as follows:

|  | March 2, 2016 |  | April 26, 2017 |  | September 25, 2017 |  | March 31, 2018 |  | May 31, 2018
Expected term |  | 2.8 years |  |  | 1.2 years |  |  | 0.8 years |  |  | 1.8 years |  |  | 1.8 years |
Risk-free interest rate |  | 1.0 | % |  | 1.0 | % |  | 1.3 | % |  | 2.1 | % |  | 2.1 | %
Expected volatility |  | 73.2 | % |  | 76.6 | % |  | 71.0 | % |  | 71 | % |  | 71 | %
Expected dividend yield |  | 0.0 | % |  | 0.0 | % |  | 0.0 | % |  | 0.0 | % |  | 0.0 | %

A summary of the changes in the Company’s restricted ordinary shares during the three months ended December 31, 2018 is as follows.

|  | Number of restricted shares |  | Weighted average grant date fair value
Unvested and outstanding at September 30, 2018 |  | 815,632 |  |  | $ | 4.17 |
Granted |  | — |  |  | — |
Vested |  | (106,233 | ) |  | 3.97 |
Canceled or forfeited |  | (565 | ) |  | 2.99 |
Unvested and outstanding at December 31, 2018 |  | 708,834 |  |  | $ | 4.10 |

During the year ended September 30, 2017, the Company granted an aggregate of 439 restricted ordinary shares with vesting based on service conditions only and 641,711 restricted ordinary shares that included both performance and service conditions in order to vest. During the years ended September 30, 2018 and 2017, 159,490 and 24,896 restricted ordinary shares were vested related to performance-based awards. The remainder of the restricted C ordinary shares and all forfeited restricted C ordinary shares related to awards with only service-based vesting conditions. There were no restricted shares granted during the year ended September 30, 2018 or three months ended December 31, 2018.
The 2017 performance-based restricted shares were scheduled to begin vesting upon the Company’s achievement of specified clinical development milestones. The Company achieved the milestones related to the 2017 performance-based restricted shares during the year ended September 30, 2017 and recorded share-based compensation expense of $1.0 million and $0.8 million related to the vesting of those incentive share awards for the years ended September 30, 2018 and 2017, respectively.
As of December 31, 2018, there was unrecognized compensation of $1.1 million, which will be recognized over the remaining vesting term of the awards.
The Company recorded share-based compensation expense related to awards to certain consultants, who are not employees, of $0.1 million, $1.0 million and $0.2 million for the three months ended December 31, 2018 and years ended September 30, 2018 and 2017, respectively.
Share-based Compensation Expense
The Company recorded share-based compensation expense of $3.4 million, $6.8 million and $3.2 million during the three months ended December 31, 2018 and years ended September 30, 2018 and 2017, respectively, related to both restricted shares and share options based awards. As of December 31, 2018, there was $42.0 million of unrecognized compensation cost related to outstanding but unvested restricted shares and share options, which amounts are expected to be recognized over weighted-average period of 3.8 years.
Share-based compensation expense recorded as research and development and general and administrative expenses is as follows (in thousands):
F-17

AUTOLUS THERAPEUTICS PLC
Notes to Consolidated Financial Statements — Continued

|  | Three months ended December 31, |  | Year ended September 30,
|  | 2018 |  | 2018 |  | 2017 |  | 2016
Research and development |  | $ | 1,906 |  |  | $ | 3,116 |  |  | $ | 1,145 |  |  | $ | 916 |
General and administrative |  | 1,487 |  |  | 3,649 |  |  | 2,008 |  |  | 1,341 |
Total share-based compensation |  | $ | 3,393 |  |  | $ | 6,765 |  |  | $ | 3,153 |  |  | $ | 2,257 |

In February 2017, the Company modified the terms of all outstanding share options and restricted share awards to adjust the vesting of the awards in the event of an exit event or IPO. As modified, the options and share awards do not convert to deferred shares and will continue vesting as a result of the June 2018 IPO. The incremental share-based compensation expense due to the modification was nominal.
Note 8. License Agreements
UCL Business plc License
In September 2014, the Company entered into an exclusive license agreement (the “License”) with UCL Business plc (“UCLB”), the technology transfer company of University College London (“UCL”), to obtain licenses to certain technology rights in the field of cancer therapy and diagnosis. In March 2016, the License was amended to include additional rights.
As part of the consideration for the License in September 2014, the Company issued 1,497,643 ordinary shares to UCLB. The Company paid upfront fees of $0.3 million and issued an additional 313,971 ordinary shares to UCLB when the License was amended in March 2016.
In March 2018, the License was further amended and restated in March 2018 to include a license to AUTO1, for which UCL is conducting Phase 1 clinical trials in pediatric and adult ALL patients. The Company paid an upfront fee of £1.5 million for consideration for the Amended and Restated License Agreement and is obligated to pay an additional £0.5 million in connection with UCLB's transfer of clinical data to the Company. No equity was issued as part of the upfront fee consideration.
The License required the Company to make annual license payments of £30,000 through September 30, 2018. The Company is no longer required to make any further annual license payments to UCLB. Additionally, the Company may be obligated to make payments to UCLB under the Amended and Restated License Agreement upon the receipt of specified regulatory approvals in an aggregate amount of £35.5 million, the start of commercialization in an aggregate amount of £18 million, and the achievement of net sales levels in an aggregate amount of £51 million, as well as royalty payments based on possible future sales resulting from the utilization of the licensed technologies. On a per-product basis, these milestone payments range from £1 million to £18.5 million, depending on which T cell programming modules are used in the product achieving the milestone.
Upon commercialization of any of the Company’s products that use the in-licensed patent rights, the Company will be obligated to pay UCLB a flat royalty for each licensed product ranging from the low- to mid-single digits, depending on which technologies are deployed in the licensed product, based on worldwide annual net sales of each licensed product, subject to certain reductions, including for the market entry of competing products and for loss of patent coverage of licensed products. The Company may deduct from the royalties payable to UCLB half of any payments made to a third party to obtain a license to such third party’s intellectual property that is necessary to exploit any licensed products. Once net sales of a licensed product have reached a certain specified threshold, the Company may exercise an option to buy out UCLB’s rights to the remaining milestone payments, royalty payments, and sublicensing revenue payments for such licensed product, on terms to be negotiated at the time.
The License expires on a product-by-product and country-by-country basis upon the expiration of the royalty term with respect to each product in each country. The Company may unilaterally terminate the license agreement for any reason upon advance notice to UCLB. Either party may terminate the License for the uncured material breach by the other party or for the insolvency of the other party. If UCLB terminates the License following the Company’s insolvency or the Company’s material breach of the License, or if the Company terminates the License unilaterally, all rights and licenses granted to the Company will terminate, and all patent rights and know-how transferred to the Company pursuant to the License will revert back to UCLB, unless and to the extent the Company has exercised its option to acquire ownership of the licensed patent rights. In addition, UCLB has the right to negotiate with the Company for the grant of an exclusive license to the Company’s improvements to the T cell programming modules the Company has licensed on terms to be agreed upon at the time.
F-18

AUTOLUS THERAPEUTICS PLC
Notes to Consolidated Financial Statements — Continued
Note 9. Income Taxes
The Company recorded an income tax benefit of $2.6 million, $7.3 million and $3.7 million for the three months ended December 31, 2018 and the years ended September 30, 2018 and 2017, respectively.
Certain amounts previously reported in Income Taxes for the year ended September 30, 2018 have been restated to reflect the correction of an immaterial error as disclosed in the Company's Annual Report on Form 20-F for the year ended September 30, 2018. The error related to the calculation of deferred tax asset and related valuation allowance. The Company believes the effect of the error is not material to its consolidated financial statements.
A reconciliation of income tax expense (benefit) at the statutory corporate income tax rate to the income tax expense (benefit) at the Company’s effective income tax rates is as follows (in thousands):

|  | Three months ended |  | Year ended
|  | December 31, |  | September 30,
|  | 2018 |  | 2018 |  | 2017 |  | 2016
Net loss before taxes |  | $ | (23,253 | ) |  | $ | (52,031 | ) |  | $ | (23,380 | ) |  | $ | (14,327 | )
U.K. statutory tax rate |  | 19.0 | % |  | 19.0 | % |  | 19.5 | % |  | 20.0 | %
Income tax benefit at U.K. statutory tax rate |  | (4,423 | ) |  | (9,886 | ) |  | (4,559 | ) |  | (2,865 | )
Tax incentives / credits |  | (3,234 | ) |  | (7,296 | ) |  | (3,702 | ) |  | (1,837 | )
Non-deductible expenses |  | 127 |  |  | 1,553 |  |  | 609 |  |  | 694 |
Adjustments in respect of prior years |  | 265 |  |  | (13 | ) |  | 13 |  |  | 57 |
Operating losses |  | 3,605 |  |  | 7,317 |  |  | 3,754 |  |  | 2,168 |
Tax on property, plant, equipment and intangibles |  | 140 |  |  | 233 |  |  | 113 |  |  | — |
Other, net |  | 915 |  |  | 812 |  |  | 119 |  |  | 6 |
Total income tax benefit |  | $ | (2,605 | ) |  | $ | (7,280 | ) |  | $ | (3,653 | ) |  | $ | (1,777 | )
Effective rate of income tax |  | 11.2 | % |  | 14.0 | % |  | 15.6 | % |  | 12.4 | %

The effective tax rate for the three months ended December 31, 2018 was 11.2% and for the years ended September 30, 2018, 2017, and 2016 is was 14.0%, 15.6% and 12.4%, respectively. This is lower than the main rate of U.K. tax primarily due to administration of the U.K. research and development tax credit, which is included within the tax incentive/credits line in the table above.
Deferred tax assets and liabilities consisted of the following at December 31, 2018 and September 30, 2018 and 2017 (in thousands):

|  | December 31, |  | September 30,
|  | 2018 |  | 2018 |  | 2017
Deferred tax assets: |  |  |  |  |  |
Other differences |  | $ | 2,870 |  |  | $ | 1,785 |  |  | $ | 11 |
Tax losses |  | 7,851 |  |  | 6,515 |  |  | 3,878 |
Fixed assets |  | 621 |  |  | 1,740 |  |  | 1,098 |
Total deferred tax assets |  | 11,342 |  |  | 10,040 |  |  | 4,987 |
Valuation allowances |  | (11,342 | ) |  | (10,040 | ) |  | (4,987 | )
Net deferred tax asset (liability) |  | $ | — |  |  | $ | — |  |  | $ | — |

Deferred tax assets resulted from loss carryforwards, fixed assets and retirement benefits, with total deferred tax assets increasing by $1.3 million in the three months December 31, 2018. The Company has recorded a full valuation allowance against the net deferred tax asset as the recoverability due to future taxable profits is unknown. As a result, the net deferred tax remains the same, due to a corresponding increase in valuation allowance.
F-19

AUTOLUS THERAPEUTICS PLC
Notes to Consolidated Financial Statements — Continued
At December 31, 2018, the Company had U.K. trading losses carry forward of $46.2 million. These losses are carry forwards indefinitely under local law, but are subject to numerous utilization criteria and restrictions.
As required by the authoritative guidance on accounting for income taxes, the Company evaluates the realizability of deferred tax assets at each reporting date. Accounting for income taxes guidance requires that a valuation allowance be established when it is more likely than not that all or a portion of the deferred tax assets will not be realized. In circumstances where this is sufficient negative evidence indicating that the deferred tax assets are not more likely than not realizable, the Company establishes a valuation allowance. The Company recorded valuation allowances in the amounts of $11.3 million at December 31, 2018 and $10.0 million and $5.0 million at September 30, 2018 and 2017, respectively.
Note 10. Commitments and Contingencies
License Agreement
The Company has entered into an exclusive license agreement, as amended, with UCLB (see Note 8). In connection with the UCLB license agreement, the Company is required to make annual license payments and may be required to make payments upon the achievement of specified milestones. The Company has estimated the probability of the Company achieving each potential milestone in accordance with ASC 450, Contingencies. The Company concluded that, as of December 31, 2018 there was a $0.6 million million milestone that was considered probable related to the receipt of clinical data for its AUTO1 program, and accordingly the Company accrued a liability of $0.6 million as of December 31, 2018. As of December 31, 2018, there were no other milestones for which the likelihood of achievement was probable.
Legal Proceedings
From time to time, the Company may be a party to litigation or subject to claims incident to the ordinary course of business. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors. The Company was not a party to any litigation and did not have contingency reserves established for any liabilities as of December 31, 2018 and September 30, 2018 and 2017.
Leases
The Company’s corporate headquarters are located in London, United Kingdom. As of December 31, 2018 and September 30, 2018 and 2017, the Company leased space at this location from Imperial (Forest House) Limited under a ten year lease, the term of which commenced in September 2015. The lease included an option for the Company to lease additional space within a 15-month period, which the Company exercised in October 2016. The exercise of the option resulted in a separate new lease with a concurrent term through August 2025. The Company and the landlord has the option to early terminate both leases in September 2020.
Prior to the lease commencement date of both leases, the Company, in conjunction with the landlord, made improvements to the leased space. The total cost of these improvements was funded by the landlord, a portion of the cost will be reimbursed by the Company over the term of the leases. The total cost of the improvements was capitalized as leasehold improvements on the Company’s balance sheet, with an offset to long-term lease incentive obligation for the portion funded by the landlord and other long-term payables for the portion to be repaid to the landlord. As of September 30, 2018 and 2017, the Company capitalized $0.1 million, and $2.1 million, respectively, as leasehold improvements. No similar costs were capitalized as of December 31, 2018. The lease related to this facility is classified as an operating lease.
In September 2017, the Company executed an arrangement to lease a manufacturing suite at the Cell and Gene Therapy Catapult manufacturing center for a term through May 2021, at which time the Company has the option to renew or terminate the lease. The lease related to this facility is classified as an operating lease. The lease has an six-month rent-free period. The rent-free period is included in the deferred rent. In December 2018, the Company executed an additional lease arrangement for additional manufacturing space for a term through January 2023, at which time the Company has the option to renew or terminate the lease. The lease related to this facility is classified as an operating lease. There is no rent free period.
In June 2018, the Company signed a binding letter of intent to enter into a lease for office and laboratory space in White City, London. The letter of intent requires the Company to enter into a ten-year lease provided that the landlord completes the required leasehold improvements described in the agreement. The expected lease commencement date is in February 2019. The lease will include an option to lease additional space. As of December 31, 2018 and September 30, 2018, the Company capitalized $6.6 million and $2.5 million, respectively, as leasehold improvements. The Company did not include future minimum payments in the lease payment schedule, as the lease agreement was not complete as of December 31, 2018.
F-20

AUTOLUS THERAPEUTICS PLC
Notes to Consolidated Financial Statements — Continued
In September 2018, the Company signed a binding letter of intent to enter into a lease for manufacturing space in Enfield, United Kingdom. The letter of intent requires the Company to enter into a 15-year lease provided that the landlord completes the required leasehold improvements described in the agreement. The Company executed the lease agreement in February 2019 and the lease commencement date is expected to be February 2019. The Company has incurred no leasehold improvements to capitalize as of December 31, 2018 and September 30, 2018. The Company did not include future minimum payments in the lease payment schedule as the lease agreement was not entered into as of December 31, 2018.
In October 2018, the Company executed an agreement to sublease office space in Rockville, Maryland for a term through October 2021. The lease related to this facility is classified as an operating lease. The lease has a four-month rent-free period. The rent-free period is included in the deferred rent.
In January 2019, the Company executed a lease agreement to lease additional office and manufacturing space in Rockville, Maryland. The Company expects the lease to commence in June 2020 for a term through June 2035. The Company did not include future minimum payments in the lease payment schedule as the lease agreement was not complete as of December 31, 2018.
The following table summarizes the future minimum lease payments due under operating leases as of December 31, 2018 (in thousands):

Year ending December 31, |  |
2019 |  | $ | 2,244 |
2020 |  | 2,332 |
2021 |  | 1,934 |
2022 |  | 1,324 |
2023 |  | 1,196 |
Thereafter |  | 1,121 |
Total |  | $ | 10,151 |

The Company recognizes rent expense on a straight-line basis over the respective lease period and has recorded deferred rent for rent expense incurred but not yet paid.
The Company recorded rent expense totaling $0.5 million, $0.9 million, and $0.6 million for the three months ended December 31, 2018 and years ended September 30, 2018 and 2017, respectively.
Note 11. Related Party Transactions
Syncona LLP
The Company previously had an agreement with Syncona LLP, an investor in the Company, pursuant to which the Company was charged for services including director compensation fees. The agreement terminated effective as of the Company's IPO. For the three months ended December 31, 2018, the Company paid nominal fees to Syncona. The Company recorded expenses totaling $60,000 $56,000, and $0.2 million for the years ended September 30, 2018, 2017, and 2016, respectively, which are included in general and administrative expenses. As of September 30, 2018 and 2017 there was $13,000 and $3,000 included in accrued expenses on the Company’s balance sheets related to the arrangement with Syncona LLP, respectively. There were no accrued expenses on the Company’s balance sheet at December 31, 2018.
University College London and Related Entities
The Company, under various agreements, received research and development, office and consulting services from the University College London (“UCL”) and its subsidiaries. UCL is a shareholder of the Company through UCLB. As of September 30, 2018, UCL is no longer a principal shareholder of the Company and, as a result, the Company no longer considers UCL a related party for reporting purposes.
For the years ended September 30, 2018, the Company recorded research and development expenses from arrangements with UCL totaling $0.7 million and $2.4 million, respectively, of which $40,000 and $1.5 million represented license fees for the years
F-21

AUTOLUS THERAPEUTICS PLC
Notes to Consolidated Financial Statements — Continued
ended September 30, 2017 and 2016, respectively. As of September 30, 2017, there was $0.2 million included in accrued expenses and accounts payable on the Company’s balance sheet related to the arrangement with UCL.
Arix Bioscience
The Company previously had an agreement with Arix Bioscience Holdings Limited ("Arix"), an investor of the Company, pursuant to which the Company was charged for director compensation fees. The agreement terminated effective as of the Company's IPO. There were no expenses for the three months ended December 31, 2018. The Company recorded expenses totaling $18,000, $20,000, and $11,000 for the years ended September 30, 2018, 2017, and 2016, respectively. As of December 31, 2018 and September 30, 2018, there were no outstanding balances. As of September 30, 2017, there was $2,000 included in accrued expenses on the Company’s balance sheet.
Kapil Dhingra, M.D.,
The Company entered into a consulting agreement with Dr. Kapil Dhingra, a member of its board of directors, in November 2014, pursuant to which he has agreed to provide up to nine days of healthcare consulting services to the Company. Dr. Dhingra receives an annual fee of £10,000 under the terms of the agreement. Subject to mutual agreement between the Company and Dr. Dhingra, he may provide services to the Company beyond the nine days, in which case the Company has agreed to pay Dr. Dhingra an additional fee of £1,111 per day. As of December 31, 2018 and September 30, 2018 and 2017, there was $3,000, $46,000, and $32,000 included in accrued expenses on the Company’s balance sheet.
Note 12. Employee Benefit Plans
In the United Kingdom, the Company makes contributions to private defined benefit pension schemes on behalf of its employees. The Company expensed $0.2 million, $0.5 million, $0.3 million and $0.1 million in contributions for the three months ended December 31, 2018 and years ended September 30, 2018, 2017 and 2016, respectively.
In the United States, the Company established a defined contribution savings plan under Section 401(k) of the Internal Revenue Code in October 2018. The plan covers substantially all U.S. employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. The Company matches employee contributions up to four percent of the employee’s annual salary. For the three months ended December 31, 2018, the Company incurred $18,000 in matching expenses. The Company pays all administrative fees related to the 401(k) plan.
Note 13. Selected Financial Data for the Three Months Ended December 31, 2017
The following tables present condensed comparative information for the three months ended December 31, 2017:
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AUTOLUS THERAPEUTICS PLC
Notes to Consolidated Financial Statements — Continued

|  | Three Months Ended December 31,
|  | 2017
|  | (unaudited)
Results of Operations |  |
Grant income |  | $ | 231 |
Operating expenses: |  |
Research and development |  | (5,564 | )
General and administrative |  | (3,084 | )
Total operating expenses, net |  | (8,417 | )
Other income (expense): |  |
Interest income |  | 181 |
Other income (expense) |  | (685 | )
Total other income (expense), net |  | (504 | )
Net loss before income tax |  | (8,921 | )
Income tax benefit |  | 1,397 |
Net loss attributable to ordinary shareholders |  | $ | (7,524 | )
Cash Flows |  |
Net cash used in operating activities |  | $ | (8,797 | )
Net cash used in investing activities |  | (764 | )
Net cash provided by financing activities |  | 433 |
Effect of exchange rate changes on cash |  | 1,042 |
Net decrease in cash |  | $ | (8,086 | )
Balance Sheet Data |  |
Cash |  | $ | 128,984 |
Working capital (1) |  | 131,576 |
Net assets |  | 137,515 |
Total assets |  | 142,715 |
Ordinary shares |  | 1 |
Additional paid-in-capital |  | 195,644 |
Total shareholders' equity |  | 137,515 |
(1) The Company defines working capital as current assets less current liabilities.

Note 14. Subsequent Events
The Company evaluated subsequent events through February 25, 2019, the date on which these financial statements were issued.
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