Cynata Therapeutics Limited Annual Report 2020

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FY2020 Annual Report · Cynata Therapeutics Limited

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Annual Report
2019/2020

Corporate Directory

Cynata Therapeutics Limited
ACN 104 037 372

Board of Directors

Auditors

Stantons International
Level 2, 1 Walker Avenue
West Perth, Western Australia 6005

Share Registry

Automic Registry Services
Level 2, 267 St Georges Terrace
Perth, Western Australia 6000

Tel: 1300 288 664 (within Australia)

+61 2 9698 5414
(outside Australia)
Fax: +61 8 9321 2337
Email: hello@automic.com.au
Web: www.automic.com.au

Stock Exchange

Australian Securities Exchange
Level 4, North Tower, Rialto
525 Collins Street
Melbourne, Victoria 3000

ASX Code

CYP

Annual report for the
financial year ended

30 June 2020

Dr Geoff Brooke
Non-Executive Chairman

Dr Ross Macdonald
Managing Director/
Chief Executive Officer

Dr Stewart Washer
Non-Executive Director

Dr Paul Wotton
Non-Executive Director

Dr Darryl Maher
Non-Executive Director

Company Secretary

Mr Peter Webse

Registered and
Principal Office

Level 3, 62 Lygon Street
Carlton, Victoria 3053

Postal Address

PO Box 7165
Hawthorn North, Victoria 3122

Tel: +61 3 9824 5254
Fax: +61 3 9822 7735
Email: info@cynata.com

Website

www.cynata.com

Contents

Chairman’s Letter

CEO Letter

Directors’ Report

Operating and Financial Review

Remuneration Report (audited)

Auditor’s Independence Declaration

Independent Auditor’s Report

Directors’ Declaration

Financial Statements

Notes

Corporate Governance Statement

ASX Additional Information

1
1

Chairman’s Letter

Dear Shareholders,

I am pleased to present to you Cynata Therapeutics Limited

(“Cynata”) Annual Report for the period ended 30 June 2020.

As you may be aware, I recently took
over as Chairman of Cynata, following
Paul Wotton stepping down but
remaining as a non-executive director.
I very much appreciate the confidence
shown in me and look forward to
serving shareholders through this
exciting time in the Company’s
development.

Despite the challenges faced by the
healthcare industry this year in light of
the global pandemic, I am pleased to
inform you that Cynata has continued
to advance its leadership position
in the regenerative medicine sector.
Throughout the year, we focused on
our clinical development plans across
various indications, including securing
our first product out-licence deal. We
further strengthened our Board and
bolstered our financial position to
provide the financial strength needed
to advance product development plans
with confidence and ensure we emerge
in a robust position to commence
clinical trials as soon as possible after

COVID-19 related restrictions on
recruitment are lifted.

Advanced platform technology
provides a truly commercially viable
MSC solution

The market for mesenchymal stem
cells (MSCs) is highly attractive, with
a growing amount of pre-clinical and
clinical evidence supporting the role
of MSCs in repair and regeneration.
MSC therapeutic products have been
embraced by regulatory agencies
in the major markets of Japan and
Europe, where fast-track approval
pathways are streamlining market
launch. Further global regulatory
approvals are expected thereby
increasing the demand for MSCs,
which will in turn focus attention on
the current manufacturing issues all
other MSC-based companies face in
their efforts to produce commercial
quantities of product.

We further

strengthened our

Board and bolstered

our financial position

to provide the

financial strength

needed to advance

product development

plans with confidence

Cynata Therapeutics Annual Report 2019/2020Cynata is in a unique position in the MSC market. We
have the most advanced manufacturing platform
technology globally, which can produce commercial
quantities of consistent, robust MSCs from a single
blood donation. The absolute requirement for product
consistency has recently been brought into stark
focus by the FDA, further cementing Cynata’s unique
competitive advantage. Our distinctive technology
draws on induced pluripotent stem cells (iPSCs) as a
starting material which can then be developed into
virtually any cell in the human body and produce
effectively limitless quantities of finished product, from
the same cell bank. MSC products derived from our
iPSCs, using our proprietary Cymerus™ technology,
therefore overcome the inherent challenges associated
with the conventional methods of manufacturing
MSC-based therapies.

Executing licensing strategy endorses platform, with
further commercial interest

In September 2019, FUJIFILM exercised its licence
option in graft-versus-host disease (GvHD),
representing a clear validation of our platform
technology solution, as well as a significant
commercial opportunity for Cynata. The Company
received a US$3m cash upfront fee, with a potentially
lucrative future revenue stream through milestone
payments of ~US$43m plus royalties on eventual
product sales. The endorsement also supports the
continued commercialisation of Cymerus cell therapy
products in further indications.

During the year, Cynata has continued to receive
active commercial interest from a range of parties. In
early FY20, Cynata announced a non-binding proposal
from Sumitomo Dainippon regarding an acquisition of
all of its shares at a price of $2.00 per share in cash by
way of a scheme of arrangement. While the parties
withdrew from those discussions, we are pleased by
the further commercial interest we are receiving and
will continue to engage strategic parties to explore
potential collaboration and partnering opportunities
as they arise.

Cynata is in a strengthened position to execute
strategy and progress clinical development

As our diverse clinical development pipeline
advances, Cynata continues to build an impressive
team, which has been strengthened by the recent
addition of Dr Darryl Maher as an independent
Non-Executive Director. Dr Maher’s 23 years of
experience in biopharmaceutical development and
commercialisation at CSL Limited will be pivotal in
Cynata’s next stage of growth, and we are pleased to
welcome him to the Board.

Cynata is in a robust financial position, with A$13.65m
in cash as at 30 June 2020. In April 2020, the
Company made the prudent decision to raise ~$A8.3m
to support clinical development across multiple
indications. We were extremely pleased with the
resounding support received from investors during this
time. Cynata is now in a strong position to progress
development across existing indications and advance
any opportunities to pursue new therapeutic targets to
drive shareholder value.

At this point, I would like to thank Paul Wotton for his
considerable contributions as the previous chair. Paul
has a superb relevant background for Cynata and I am
very happy he has agreed to continue to serve on the
Company’s board.

On behalf of the Board, I would also like to thank all
our shareholders for their continued support as we
develop our Cymerus technology to produce scalable
cellular therapeutic products to treat serious and
debilitating diseases. Our staff and partners have
continued to show their unwavering dedication to
Cynata during these challenging times and I am
confident that another successful year lies ahead for
us all.

Yours sincerely,

Dr Geoff Brooke
Chairman

Chairman’s Letter

CEO Letter

Dear Shareholders,

From an operational standpoint, there were several key

achievements for Cynata during the financial year ended

30 June 2020. In addition to completing the licence transaction

with FUJIFILM for GvHD, and strengthening our balance sheet, we

have received approval for three new clinical trials, and completed

several further pre-clinical studies with compelling results, two of

which have been published in leading peer-reviewed journals.

Strong progress towards multiple
clinical trials, despite COVID-19
impacts

In June, we were pleased to receive
approval from the University of Sydney
Human Research Ethics Committee for
the Phase 3 clinical trial of CYP-004
for osteoarthritis, which represents
a significant milestone towards
commencing recruitment of the trial.
While initially described as a Phase
2 clinical trial, based on the size
and impact of the expected clinical
effect, it was reclassified as a Phase
3 trial. Additionally, Cynata and the
University of Sydney (as sponsor of
the trial) reached an agreement on
an expedited regulatory pathway of
this trial with the Therapeutic Goods

Administration. Despite the COVID-19
related restrictions resulting in patient
recruitment being delayed, Cynata
continues to prepare for the trial
so that it is ready for enrolment as
soon as possible. The trial, funded
by an Australian Government grant,
will showcase our manufacturing
capability with 440-patients to be
recruited, making it one of the largest
ever MSC-based clinical trials.

In light of the industry-wide upheavals
caused by the global pandemic,
Cynata took the opportunity to assess
and optimise its clinical development
plans for the new environment.
Following receipt of results in April
2020 that demonstrated beneficial
effects of Cymerus MSCs in a pre-

In light of the

industry-wide

upheavals caused by

the global pandemic,

Cynata took the

opportunity to assess

and optimise its

clinical development

plans for the new

environment.

Cynata Therapeutics Annual Report 2019/2020clinical model of acute respiratory distress syndrome
(ARDS), Cynata received rapid approval to undertake
a clinical trial to investigate early efficacy of Cymerus
MSCs in adults admitted into intensive care with
COVID-19. This trial will build on Cynata’s strong
pre-clinical results across ARDS, sepsis and cytokine
release syndrome (CRS), all of which represent
significant hallmarks of a serious COVID-19 infection,
as well as representing large unmet medical needs in
their own right, beyond COVID-19. We are proud of
our contributions thus far towards the global effort to
develop effective treatments for patients infected with
the virus. The capital raised earlier this year further
places the Company in a strong position to continue
working towards treating this debilitating disease.

Following the execution of FUJIFILM’s licence
agreement in GvHD earlier in FY20, Cynata continues
to collaborate on the planning and start-up activities
in preparation for the proposed Phase 2 clinical trial
in GvHD, which is expected to commence in Japan
towards the end of 2020.

Well positioned for further development

Our Cymerus platform technology has multiple
potential clinical applications, and it is our view that
the most effective way to generate shareholder value
across these applications is to access the capital,
expertise and resources of large pharmaceutical

and biotech companies. As such, we continue to
advance our vigorous partner outreach program and
progress discussions with potential partners toward
transactions that are sound and drive meaningful
shareholder value . In parallel, Cynata continues to
progress its broad preclinical and clinical pipeline,
providing further data to drive potential strategic
partnerships.

Cynata is well placed to continue its development and
growth in FY21, building on its success in FY20, with
various clinical trials advancing and a strong financial
position to support future activity. The Company and
its clinical advisors will continue to progress clinical
trial start-up activities and carefully monitor the
evolving global pandemic environment, so that patient
recruitment into the upcoming trials can commence as
soon as possible.

Yours sincerely,

Dr Ross Macdonald
Chief Executive Officer

CEO Letter

Directors’ Report

The directors of Cynata Therapeutics Limited (“Cynata”

or “the Company”) and its controlled entities (“the Group”)

submit herewith the annual report of the Group for the

financial year ended 30 June 2020.

In order to comply with the provisions of the

Corporations Act 2001, the directors report as follows:

Cynata Therapeutics Annual Report 2019/2020Information about the directors

The names and particulars of the directors of the Group during or since the end of
the financial year are:

Dr Geoff Brooke
MBBS, MBA

Chairman, joined the Board in May
2019 as Non-Executive Director and
appointed Chairman on 18 August
2020. Dr Brooke co-founded GBS
Venture Partners in 1996 and has
more than 30 years’ venture capital
experience. He was formerly President
of Medvest Inc., a US-based early-
stage venture capital group he
founded with Johnson & Johnson. Dr
Brooke’s experience includes company
formation and acquisitions as well as
public listings on NYSE, NASDAQ and

ASX exchanges. He is a non-executive
director of Acrux Limited (ASX: ACR)
and Chairman of Actinogen Medical
Limited (ASX: ACW) and has been
a founder, executive and director of
private and public companies. From
2009 until 2015, Dr Brooke was an
independent director of the Victoria
Workcover Authority. Dr Brooke holds
a Bachelor of Medicine/Surgery from
Melbourne University and a Masters of
Business Administration from IMEDE
(now IMD) in Switzerland.

Dr Ross Macdonald
PhD (Biochemistry), Grad Dip in Bus Admin

Chief Executive Officer, joined the
Board in August 2013. Dr Macdonald
has over 33 years’ experience
and a track record of success in
pharmaceutical and biotechnology
businesses. His career history
includes positions as Vice President
of Business Development for Sinclair
Pharmaceuticals Ltd (now Sinclair
Pharma plc), a UK-based specialty
pharmaceuticals company and Vice
President, Corporate Development
for Stiefel Laboratories Inc, the

Dr Stewart Washer
BSc (Hons), PhD

Non-Executive Director, joined the
Board in August 2013 and was
Executive Chairman until 28 February
2017. Dr Washer has over 27 years of
CEO and board experience in medical
technology and biotech companies. He
is currently the Chairman of Emerald
Clinics Ltd (ASX: EMD), Orthocell Ltd

largest independent dermatology
company in the world and acquired by
GlaxoSmithKline in 2009 for £2.25b.
Dr Macdonald has also served as
CEO of Living Cell Technologies
Ltd, Vice President of Business
Development of Connetics Corporation
and Vice President of Research and
Development of F H Faulding & Co Ltd.
Dr Macdonald currently serves as a
member of the Investment Committee
of UniSeed Management Pty Ltd.

(ASX: OCC) and a Director of Botanix
Pharmaceuticals Ltd (ASX: BOT). Dr
Washer was previously a Director
of Zelira Therapeutics Ltd (formerly
Zelda Therapeutics Ltd) (ASX: ZLD)
and AusBiotech and a Senator with
Murdoch University.

Directors’ Report

Directors’ Report cont’d

Dr Paul Wotton
MBA, PhD

Non-Executive Director, joined
the Board in June 2016 and was
Non-Executive Chairman from 28
February 2017 until 18 August 2020.
Dr Wotton is the Chief Executive
Officer of Obsidian Therapeutics, a
leading synthetic biology company
based in Cambridge, Massachusetts.
Prior to this, he was the Founding
President and CEO of Sigilon Inc. He
was previously President and CEO of
Ocata Therapeutics Inc. (NASDAQ:
OCAT) guiding the company through
a take-over by Astellas Pharma
Inc., in a US$379 million all cash
transaction. Prior to Ocata, Dr Wotton
had served as President and CEO of
Antares Pharma Inc. (NASDAQ: ATRS)
since October 2008. Prior to joining
Antares, Dr Wotton was the CEO of
Topigen Pharmaceuticals and prior to
Topigen, he was the Global Head of
Business Development of SkyePharma
PLC. Dr Wotton held senior level

Dr Darryl Maher
MBBS, PhD

Non-Executive Director, joined
the Board in June 2020. Dr Maher
adds global biopharmaceutical
and commercialisation capability
to the Cynata board, with over 23
years’ experience with CSL Limited.
CSL is one of the world’s most
successful developers of biologic
pharmaceutical products and has
a market capitalisation of ~A$130
billion. Dr Maher has had a long
successful career in pharmaceutical
product development, most recently
as the former Vice President of R&D

positions at Eurand International BV,
Penwest Pharmaceuticals, Abbott
Laboratories and Merck, Sharp and
Dohme. Dr Wotton is a member of the
Board and Governance Committee of
Vericel Corporation, a US company
developing autologous cellular
therapies and a member of the board
at PaxMedica where he is Chairman
of the Compensation Committee. He
was a member of the board of Veloxis
Pharmaceuticals A/S and Chairman
of the Compensation Committee,
until its acquisition by Asahi Kasai in
February 2020 in a $1.3 Billion all cash
transaction. He is also past Chairman
of the Emerging Companies Advisory
Board of BIOTEC Canada. Dr Wotton
received his PhD in pharmaceutical
sciences from the University of
Nottingham. In 2014, he was named
New Jersey EY Entrepreneur of the Year
in Life Sciences.

and Medical Affairs at CSL Behring
Australia where he was responsible for
the development of multiple successful
drug products from initiation through
to clinical development and ultimately
to commercialisation. Dr Maher
undertook medical training, qualified
as a specialist haematologist and
completed a PhD before commencing
his career in the pharmaceutical
industry.

Cynata Therapeutics Annual Report 2019/2020Mr Peter Webse
B.Bus, FGIA, FCIS, FCPA, MAICD

Non-Executive Director, joined the
Board in May 2012. Mr Webse has
over 28 years’ company secretarial
experience and is the managing
director of Platinum Corporate
Secretariat Pty Ltd, a company

specialising in providing company
secretarial, corporate governance and
corporate advisory services. Mr Webse
resigned as Non-Executive Director on
30 June 2020.

The above-named directors held office during the whole of the financial year and
since the end of the financial year except for:

z Dr Darryl Maher – appointed 16 June 2020
z Mr Peter Webse – resigned 30 June 2020

Directorships of other listed companies

Directorships of other listed companies held by directors in the 3 years immediately before the end
of the financial year are as follows:

Name

Paul Wotton

Company

Vericel Corporation

Veloxis Pharmaceuticals A/S

Ross Macdonald

Stewart Washer

None

Orthocell Limited

Peter Webse

Geoff Brooke

Zelira Therapeutics Limited

Botanix Pharmaceuticals Limited

Emerald Clinics Limited

IMEXHS Limited

Acrux Limited

Actinogen Medical Limited

Darryl Maher

None

Period of directorship

Since 2015

2016-2020

n/a

Since 2014

2016-2019

Since Feb 2019

Since Mar 2018

2017-2018

Since Jun 2016

Since Mar 2017

n/a

Directors’ Report

Directors’ Report cont’d

Directors’ shareholdings

The following table sets out each director’s relevant
interest in shares, rights or options in shares or

debentures of the Company or a related body
corporate as at the date of this report:

Directors

Fully paid ordinary share

Share options

Paul Wotton

Ross Macdonald

Stewart Washer

Geoff Brooke

Darryl Maher

No.

175,775

2,070,050

2,224,856

77,000

No.

300,000

Remuneration of key management personnel

Information about the remuneration of key
management personnel is set out in the remuneration
report section of this directors’ report. The term ‘key
management personnel’ refers to those persons

having authority and responsibility for planning,
directing and controlling the activities of the Group,
directly or indirectly, including any director (whether
executive or otherwise) of the Group.

Options granted to directors and senior management

No options were granted to directors and senior
management during the financial year ended 30 June
2020 (2019: 1,425,000). Subsequent to the year end,

a total of 1,100,000 options were issued to senior
management.

Company Secretary

Mr Webse held the position of company secretary of
Cynata Therapeutics Limited at the end of the financial
year. He joined Cynata in April 2012. Mr Webse is the
Managing Director of Platinum Corporate Secretariat
Pty Ltd, a company specialising in providing company

secretarial, corporate governance and corporate
advisory services. Peter acts as Company Secretary
for a number of ASX listed biotech and technology
companies.

Dividends

No dividends have been paid or declared since the
start of the financial year and the directors have not
recommended the payment of a dividend in respect of
the financial year.

1010

Cynata Therapeutics Annual Report 2019/2020Cynata Therapeutics Annual Report 2019/2020Shares under option or issued on exercise of options

Details of unissued shares or interests under option as
at the date of this report are:

Issuing entity

Grant date

Number of
shares under
option

Class of shares

Exercise
price of
option

Expiry date
of options

Cynata Therapeutics

Limited1

Cynata Therapeutics

Limited2

Cynata Therapeutics

Limited3

17 May 2019

300,000

Ordinary

$2.11

16 May 2024

17 May 2019

1,425,000

Ordinary

$1.75

16 May 2022

19 Aug 2020

1,250,000

Ordinary

$0.97

18 Aug 2024

The holders of these options do not have the right, by
virtue of the option, to participate in any share issue
or interest issue of the Company or of any other body
corporate or registered scheme.

There have been no options granted over unissued
shares or interests of any controlled entity within the
Group during or since the end of the reporting period.

1 Unlisted options issued to Dr Brooke on 17 May 2019

pursuant to the terms of his appointment as non-

executive director.

2 Unlisted options issued to Dr Kelly (750,000), Dr Lipe

(375,000) and Dr Atley (300,000) on 17 May 2019

pursuant to an Employee Option Acquisition Plan.

3 Unlisted options issued to Dr Kelly (1,000,000), Dr Lipe

(100,000), Dr Atley (50,000) and Mr Thraves (100,000)

on 19 August 2020 pursuant to an Employee Option

Acquisition Plan. Mr Thraves is an employee of Cynata

Therapeutics and was appointed on 3 August 2020.

Details of shares or interests issued during or since the
end of the financial year as a result of exercise of an
option are (2019: 7,018,802):

Issuing entity

Cynata Therapeutics
Limited

Number of shares
issued

Class of shares

Amount paid for
shares

Amount unpaid on
shares

150,000 i

Ordinary

$153,300

900,000 ii

Ordinary

$900,000

83,100 iii

Ordinary

i. Exercise of 50,000 unlisted 17 November 2019 options on

iii. Cashless exercise of 400,000 unlisted 17 November2019

2 August 2019 and 100,000 unlisted 17 November 2019

options by Dr Wotton, Dr Macdonald and Mr Webse

on 11 November 2019.

ii. Exercise of 200,000 unlisted 17 July 2020 options in

August 2019 and 700,000 unlisted 17 July 2020 options

in September 2019.

on 11 November 2019 in accordance with the terms and

conditions using the cashless exercise mechanism.

Directors’ Report
Directors’ Report

11
11

Directors’ Report cont’d

Directors’ meetings

The following table sets out the number of directors’
meetings (including meetings of committees of
directors) held during the financial year and the

number of meetings attended by each director (while
they were a director or committee member). During
the financial year, 19 board meetings were held.

Directors

Paul Wotton

Ross Macdonald

Stewart Washer

Geoff Brooke

Darryl Maher

Peter Webse

Board of Directors

Held

Attended

Proceedings on behalf of the Company

No person has applied for leave of Court to bring
proceedings on behalf of the Company or intervene in
any proceedings to which the Company is a party for

the purpose of taking responsibility on behalf of the
Company for all or any part of those proceedings.

Non-audit services

The auditor did not perform any non-audit services
during the financial year.

Auditor’s independence declaration

The auditor’s independence declaration is included on
page 34 of this annual report.

1212

Cynata Therapeutics Annual Report 2019/2020Cynata Therapeutics Annual Report 2019/2020Directors’ Report
Directors’ Report

13
13

Operating and Financial Review

Principal activities

The Group’s principal activities in the course of the
financial year continued to be the development and
commercialisation of a proprietary mesenchymal
stem cell (MSC) technology for potential human
therapeutic use, which the Company has branded
Cymerus™. The Cymerus technology represents an
important breakthrough in regenerative medicine,
enabling the development of therapeutic stem cell

Operating results

The consolidated loss of the Group for the financial
year, after accounting for an R&D refund of
$2,510,462 (2019: $1,308,552) and providing
for income tax, amounted to $3,639,100 (2019:

Operational update

products that facilitates large-scale manufacture of
MSCs from a single donor and a single donation. This
compares favourably to most other MSC technologies
that require multiple donors and multiple donations.
Cynata’s Cymerus technology has the potential to
revolutionise commercial manufacture of MSC based
therapeutic products.

$8,472,146). Further discussion on the Group’s
operations is provided below:

FUJIFILM exercised licence option for GvHD and
Phase 2 clinical trial planning underway

In September 2019, FUJIFILM exercised its option
to an exclusive, worldwide licence to develop and
commercialise Cynata’s lead MSC product, CYP-001,
for the prevention and treatment of GvHD in humans.
In return, Cynata received US$3m cash from FUJIFILM
as an upfront fee and will potentially receive additional

future milestone and royalty payments totalling up to
US$43m, plus royalties on eventual product sales. All
future product development and commercialisation
activities will be financed by FUJIFILM.

FUJIFILM’S decision to exercise its licence option in
GvHD is a clear validation of the Cymerus technology
for manufacturing MSCs at scale.

1414

Cynata Therapeutics Annual Report 2019/2020Cynata Therapeutics Annual Report 2019/2020Cynata continues to work collaboratively with
FUJIFILM on the planning and start-up activities
towards the proposed Phase 2 clinical trial in GvHD,
which is expected to commence in Japan towards the
end of 2020.

Substantial progress made in Phase 3 Clinical Trial
in Osteoarthritis

In June 2020, the Phase 3 clinical trial of CYP-004 for
osteoarthritis was formally approved by the University
of Sydney Human Research Ethics Committee,
representing a key milestone towards commencing
the recruitment of the trial. While originally described
as a Phase 2 clinical trial, based on the size of the trial
and the impact of the clinical effect being investigated,
it was reclassified as a Phase 3 trial. Additionally, an
agreement was reached on an expedited regulatory
pathway for this trial. Following extensive discussions,
the Therapeutic Goods Administration (TGA) advised
that the trial can be conducted under the Clinical
Trial Notification (CTN) scheme, which requires only
submitting a notification to the TGA, as opposed to
undergoing a potentially lengthy formal review and
approval process.

This trial will assess 440 patients and is one of the
largest ever conducted using MSCs. It is designed
to assess the effect of Cymerus MSCs compared to
placebo on clinical outcomes and knee joint structure
in patients with osteoarthritis of the knee. The
Cymerus product has the potential to favourably
modify the progressively degenerative nature of
osteoarthritis, giving Cynata an attractive competitive
advantage in a very large market.

As a consequence of the COVID-19 pandemic, the
Clinical Trial Support Office of the University of Sydney
advised that the newly approved trial should not
commence trial participant involvement (first visits)
until further notice. This mirrors the situation for a
very large proportion of clinical trials being conducted
by biotech and pharmaceutical companies around
the world. Cynata continues to work with the Chief
Investigator, Professor David Hunter, to continue
to prepare for the trial to be ready to commence
enrolment as soon as possible.

Review of operations

Key Highlights

FUJIFILM exercised licence option for GvHD,
with planning underway for a Phase 2
clinical trial expected to commence in 2020

Ethics committee approval and continued
progress towards commencing recruitment in
the Phase 3 osteoarthritis trial

Ethics committee approval to conduct a
clinical trial in patients admitted to ICU with
COVID-19, following positive pre-clinical
results in ARDS, with Cynata taking this
opportunity to optimise clinical development
plans

Approval received from the UK Medicines
and Healthcare products Regulatory Agency
(MHRA) to proceed with a Phase 2 clinical
trial of CYP-002 in patients with critical limb
ischaemia (CLI)

Continued to strengthen the intellectual
property surrounding Cymerus™ with
a patent received from the Canadian
Intellectual Property Office (CIPO)

Strengthened the Cynata Board to support
Cynata’s advancing clinical development
with the appointment of Dr Darryl Maher as
Non-executive Director

Raised ~A$8.3m in capital through a
Placement and SPP to accelerate product

development

Operating and Financial Review
Operating and Financial Review

15
15

Operating and Financial Review cont’d

COVID-19 trial follows compelling pre-clinical
results, with Cynata clinical development reassessed

Further compelling pre-clinical results accepted for
publication

In September 2019, a scientific paper demonstrating
the efficacy of Cymerus MSCs in a preclinical model
of organ transplant rejection was accepted for
publication in a leading peer-reviewed journal, Stem
Cell Research & Therapy. Organ transplantation can
be a life-saving procedure in patients with end-stage
organ failure, but success rates are severely limited
be rejection of the transplanted organ. Conducted at
King Faisal Specialist Hospital Research Centre, the
results point clearly to Cynata’s MSC product being
a potential option for immunosuppression in organ
transplant recipients, with the conclusion that a
clinical trial of Cymerus MSCs is warranted.

As noted above, a further scientific paper has been
published in the American Journal of Respiratory and
Critical Care Medicine describing the use of Cymerus
MSCs in a pre-clinical model of ARDS. This adds to
previously published papers regarding pre-clinical
studies of Cymerus MSCs in models of CLI, GvHD and
allergic airways disease. The publication of research
like this provides important validation as well as
raising awareness of Cynata’s potential in a broad
pipeline of indications.

Strengthened IP through new Patent Grant

Cynata continues to build a robust intellectual property
portfolio around the Cymerus MSC technology in both
Australia and overseas jurisdictions. At the beginning
of calendar year 2020, the Company announced
that the Canadian Intellectual Property Office (CIPO)
had granted a patent covering Cynata’s proprietary
Cymerus MSC technology. The patent application
is owned by the University of Wisconsin-Madison’s
Wisconsin Alumni Research Foundation (WARF) and
is among the intellectual property licenced exclusively
from WARF to Cynata.

In April 2020, Cynata announced compelling results
demonstrating the beneficial effects of Cymerus
MSCs in a pre-clinical model of ARDS, which is an
inflammatory process that leads to the build-up
of fluid in the lungs and is one of the most serious
complications experienced by patients suffering from
COVID-19. The study was conducted independently of
Cynata and led by Professor John Fraser of the Critical
Care Research Group, The Prince Charles Hospital,
Brisbane. A scientific paper describing the findings
was accepted for publication in the American Journal
of Respiratory and Critical Care Medicine (AJRCCM),
which is widely regarded as the foremost peer-
reviewed journal in the field of respiratory and critical
care medicine.

Following these positive ARDS results, Cynata
received ethics committee approval to commence a
clinical trial to investigate Cymerus MSCs in adults
admitted to intensive care with COVID-19. The trial
will build on Cynata’s strong pre-clinical study results
not only in ARDS, but also in sepsis and CRS, which
together are the leading causes of death in COVID 19
patients. This trial forms part of a broader strategy for
Cynata to leverage increased interest to accelerate its
development program and validate its technology.

In light of the global pandemic, Cynata and its clinical
advisors took the opportunity to reassess its clinical
development plans. It is the expectation that the
pandemic will have a continued impact on potential
recruitment for the critical limb ischemia (CLI) trial,
due to the age and underlying conditions of the
typical CLI patient. Consequently, although approval
for a Phase 2 CLI trial has now been granted by the
UK Medicines and Healthcare products Regulatory
Agency, the Company determined that it would be
imprudent to commence recruitment at this stage,
and decided to re-direct its financial and operational
resources to progress other opportunities, such as the
COVID-19 trial. The Company believes it is now in a
stronger position to productively advance its clinical
development activities because of this strategy.

1616

Cynata Therapeutics Annual Report 2019/2020Cynata Therapeutics Annual Report 2019/2020Strengthened Cynata Board

Raised capital to accelerate clinical development

In June 2020, Cynata was pleased to announce the
appointment of Dr Darryl Maher as an independent
Non-Executive Director effective 16 June 2020. Dr
Maher adds global biopharmaceutical development
and commercialisation capability to the Cynata board,
with over 23 years’ experience with CSL Limited, one
of the world’s most successful developers of biologic
pharmaceutical products. As the Vice President of
R&D and Medical Affairs at CSL Behring Australia,
Dr Maher was responsible for the development of
multiple successful drug products from initiation
through clinical development and ultimately to
commercialisation. Dr Maher’s expertise will be
a valuable addition to Cynata as clinical phase
development progresses.

During the year, Cynata successfully raised ~A$8.3m
through a A$3.5m Placement and A$4.8m Share
Purchase Plan (SPP). Given the overwhelming
support the Company received from shareholders
to participate in the capital raise, the SPP cap was
increased from A$2.0m to ensure that existing
shareholders would have an equitable opportunity to
participate in the capital raising on the same terms
as the Placement. Funds will be used to accelerate
ongoing product development, to ensure Cynata is
well placed to take advantage of further opportunities
and to strengthen the Company’s Balance Sheet.

Cynata also received a ~A$2.5m R&D Tax Incentive
Refund for the 2018/2019 financial year from the
Australian Government as part of the program
that refunds up to 43.5% of eligible expenditure on
research and development. Furthermore, the Company
also received a temporary cash flow boost of
$50,000, an initiative by the Australian Government to
support organisations during the economic downturn
associated with COVID-19.

Outlook

Cynata’s focus remains on advancing clinical trial
development to provide clinical safety and efficacy
data in support of potential treatments for patients
with serious and debilitating diseases, with multiple
clinical trials expected to commence in CY20. While
exact timing for some trials remains uncertain due to
the unprecedented impacts of COVID-19, there are
numerous workstreams which are being progressed in
the meantime to ensure that the Company is ready for
patient recruitment once this crisis resolves.

The Phase 3 clinical trial in osteoarthritis, funded
by the NHMRC, is expected to commence patient
recruitment in CY20. The trial will take place at study
centres in Sydney and Tasmania, and patients will be
followed up for a total of two years from enrolment.
This 440-patient study will showcase Cynata’s ability
to consistently manufacture high quality MSCs at scale
and represents a significant commercial opportunity
with the osteoarthritis market estimated to be worth
~US$11.6bn.

The Phase 2 clinical trial in COVID-19 patients
admitted to an ICU with COVID-19 and respiratory
distress is expected to commence recruitment in
the near term, subject to finalisation of relevant
agreement with study centres and related practical
matters. ARDS represents a significant unmet
medical need beyond COVID-19 patients, and also
provides a valuable opportunity with the treatment
market estimated at ~US$2.5bn. Given there is some
uncertainty surrounding timing of patient recruitment,
it is premature to provide a reliable estimate of
recruitment rate and trial duration, however the
current expectation is that the trial will complete
within 6-12 months. To ensure timely completion
of this clinical trial the Company is now working on
completing all the essential trial start-up activities and
considering multiple strategies, including the potential
to expand the trial to other jurisdictions.

Plans for patient recruitment for the CLI Phase 2 trial
have been put on hold given the current situation

Operating and Financial Review
Operating and Financial Review

17
17

Operating and Financial Review cont’d

fee already received, the partnership also offers
potentially lucrative future revenue streams through
milestone payments and royalties that could be
worth more than A$100m. The nearest milestone is
on completion of the Phase 2 clinical trial, when a
milestone payment of US$2m will be due to Cynata.
The Phase 2 trial is expected to commence this
calendar year. All costs associated with the further
development of CYP-001 for GvHD are being met by
FUJIFILM under the terms of the licence agreement.

and widespread clinical trial restrictions now in place
globally. The age and underlying conditions of the
typical CLI patient has led Cynata and its clinical
advisors to conclude that it would be imprudent to
commence recruitment in this trial while the pandemic
is still evolving. The situation will be continually
assessed as the restrictions associated with
COVID-19 are relaxed.

The Company also continues to work with its licence
partner, FUJIFILM, to progress the planned Phase
2 clinical trial in GvHD. Beyond the upfront licence

Financial position

The net assets of the Group have increased
by $5,819,638 to $16,791,104 in 2020 (2019:
$10,971,466).

Changes in state of affairs

There was no significant change in the state of affairs
of the Group during the financial year.

1818

Cynata Therapeutics Annual Report 2019/2020Cynata Therapeutics Annual Report 2019/2020Subsequent events

On 20 July 2020, the Company confirmed the expiry of
1,340,557 unlisted options, having an exercise price of
$1.00 each and an expiry date of 17 Jul 2020.

On 14 August 2020, Dr Ross Macdonald repaid
$100,000 of his director loan, leaving a balance of
$200,000.

On 5 August 2020, the Company announced the
expiry of 100,000 unlisted options, having an exercise
price of $0.88 each and an expiry date of 4 August
2020.

On 19 August 2020, 1,000,000 options were issued to
Dr Kilian Kelly and 100,000 options to Dr Suzanne Lipe
pursuant to Cynata’s Employee Option Acquisition
Plan. The options are exercisable at $0.97 and expire
on 18 August 2024.

On 6 August 2020, Dr Stewart Washer repaid
$300,000 of his director loan, thereby fully discharging
the loan.

Other than the above, there has not been any matter
or circumstance occurring subsequent to the end of
the financial year that has significantly affected, or
may significantly affect, the operations of the Group,
the results of those operations, or state of affairs of
the Group in future financial years.

Future developments, prospects and business strategies

clinical trials not only in GvHD (through licence partner
FUJIFILM, expected to commence in Japan towards
the end of 2020) but also in other indications such as
CLI, COVID-19 associated ARDS and osteoarthritis
(Phase 3).

The endorsement by FUJIFILM further supports the
continued commercialisation of cell therapeutic
products in other indications which are available
to be licenced, such as CLI and osteoarthritis. The
Company believes the most effective way to generate
shareholder value is to access the capital, expertise
and resources of large pharmaceutical and biotech
companies. As such, we continue to advance the
partner outreach program and progress discussion
with potential partners that have a commercial
interest in accessing Cynata’s technologies.

Cynata is well positioned in the regenerative medicine
space, with its proprietary therapeutic stem cell
platform technology Cymerus providing the ability
to consistently manufacture high quality MSCs at
scale from a single donor and from a single donation.
This unique technology overcomes many of the
manufacturing challenges, particularly in assuring
product consistency, associated with the conventional
process which involves deriving MSC products from
multiple tissue donations (e.g. bone marrow) from
multiple donors.

The clinically important outcomes from our Phase
1 trial in GvHD provides the Company with the
confidence to pursue further pre-clinical and clinical
trials across a number of indications and a number
of key target disease areas. The data generated in
that trial has enabled Cynata to advance to Phase 2

Environmental regulations

The Group’s operations are not affected significantly
by environmental regulation under the Australian
Commonwealth or State law.

Operating and Financial Review
Operating and Financial Review

19
19

Remuneration Report (audited)

This remuneration report, which forms part

of the directors’ report, sets out information

Contents

about the remuneration of Cynata

Therapeutics Limited’s key management

personnel for the financial year ended 30

June 2020.

The term ‘key management personnel’ refers to
those persons having authority and responsibility for
planning, directing and controlling the activities of
the Group, directly or indirectly, including any director
(whether executive or otherwise) of the Group.

2020

The prescribed details for each person
covered by this report are detailed below
under the following headings:

1. Key management personnel

2. Remuneration policy

(a) Non-executive director remuneration
(b) Executive director remuneration
(c) Equity settled compensation

3. Relationship between the remuneration

policy and Company performance

4. Remuneration of key management

personnel
(a) Bonus and share-based payments
granted as compensation for the
current financial year
(i) Bonuses
(ii) Incentive share-based payment

arrangements

5. Key terms of employment contracts

6. Key management personnel with loans
above $100,000 in the reporting period

7. Key management personnel equity

holdings

Cynata Therapeutics Annual Report 2019/2020Cynata Therapeutics Annual Report 2019/2020

1. Key management personnel

The directors and other key management personnel of
the Group during or since the end of the financial year
were:

Non-executive directors

Dr Geoff Brooke1

Dr Stewart Washer

Position

Non-executive chairman

Non-executive director

Mr Peter Webse (resigned on 30 June 2020)

Non-executive director

Dr Paul Wotton2

Non-executive director

Dr Darryl Maher (appointed on 16 June 2020)

Non-executive director

Executive director

Dr Ross Macdonald

Position

Managing Director/Chief Executive Officer

Other key management personnel

Position

Dr Kilian Kelly

Dr Suzanne Lipe

Chief Operating Officer

Vice President, Alliance Management

Except as noted, the named persons held their current
position for the whole of the financial year and since
the end of the financial year.

Appointed as non-executive Chairman on 18 August 2020. Dr Brooke was appointed as a non-executive director

on 17 May 2019.

Reverted to non-executive director on 18 August 2020. Dr Wotton was appointed as non-executive Chairman

on 28 February 2017.

Operating and Financial Review
Operating and Financial Review

21
21

Remuneration Report (audited) cont’d

2. Remuneration policy

Cynata’s remuneration policy was developed by
the Board and has been designed to facilitate the
alignment of shareholder, director and executive
interests by:

one Vice President, Alliance Management. As set out
below, total remuneration costs for the 2020 financial
year were $1,640,514 up from $1,371,874 for the
previous financial year.

z Providing levels of fixed remuneration and ‘at

risk’ remuneration sufficient to attract and retain
individuals with the skills and experience required
to build on and execute the Company’s business
strategy.

z Ensuring ‘at risk’ remuneration is contingent on

outcomes that grow shareholder value.

z Ensuring a suitable proportion of remuneration
is received as a share-based payment so that
rewards are realised through the performance of
the Company over the longer term.

Remuneration consists of:

z Fixed remuneration
z Short-term incentives (‘STI’)
z Long-term incentives (‘LTI’)
z Benefits (e.g. car parking, telephone, etc.)

The fixed remuneration component is determined
regarding market conditions, so that the Company can
recruit and retain the best available talent.

The Board’s policy regarding short- and long-term
incentives includes cash bonuses (STI) and the
granting of options under the Company’s Employee
Option Acquisition Plan (EOAP) (LTI). Options are
granted with an exercise price at a premium to the
underlying market value of shares at the time of
grant and vest over time subject to continuity of
employment. The term of options is set to ensure that
there is a reasonable expectation that the strategies
and actions of the recipients will, if successful,
produce above-market Company performance. This
policy aligns the interests of executives with those
of shareholders and creates a direct relationship
between individual remuneration outcomes and
Company performance.

As at the date of this report, the Company has two
executives – the Chief Executive Officer and the Chief
Operating Officer, four non-executive directors and

2222

(a) Non-executive Director Remuneration

Non-executive directors are remunerated by
way of fees, in the form of cash, superannuation
contributions or salary sacrifice into equity (the latter
subject to shareholder approval). Fees for non-
executive directors are not linked to the performance
of the Company. To align directors’ interests with
shareholder interests, the directors are encouraged to
hold shares in the Company.

Non-executive directors receive a superannuation
guarantee contribution required by the government,
which was 9.5% in the 2019/2020 financial year
and do not receive any other retirement benefits.
Individuals may choose to sacrifice part of their fees to
increase payments towards superannuation.

The Board’s policy is to remunerate non-executive
directors at market rates for comparable companies
for time, commitment and responsibilities. The
Board determines, subject to shareholder approval,
payments to non-executive directors and reviews their
remuneration annually, based on market practice,
duties and accountability. The Board has engaged
an independent consultant to undertake a review of
long-term incentive plans and remuneration of board
members across the Australian listed biotechnology
sector and this was used to benchmark remuneration
received by directors.

(b) Executive Director Remuneration

Executive directors receive fixed remuneration, based
upon performance, professional qualifications and
experience and superannuation benefits and under
certain circumstances, options and performance
incentives.

Cynata Therapeutics Annual Report 2019/2020Cynata Therapeutics Annual Report 2019/2020Executive Remuneration Objectives

An appropriate balance
of ‘fixed’ and ‘at-risk’
components.

Attract, motivate, and
retain executive talent.

The creation of reward
differentiation to drive
performance and
behaviours.

Shareholder value
creation through EOAP.

Total Remuneration

Fixed Remuneration

Short-Term Incentives

Long-Term Incentives

Set based on relevant market
relativities, performance,
qualifications, experience, and
location.

Set by reference to Company and
individual stretch performance
targets relevant to the specific
position.

Realisation dependent upon total
shareholder return.

Delivery

Base salary including
superannuation.

Payable in cash following review
of performance against Key Result
Areas (KRAs) and subject to Board
discretion.

Eligible executives may participate
in the Company’s equity-based
incentive scheme subject to Board
discretion. Equity options are issued
under the Company’s EOAP at a
premium to the underlying market
value of shares and typically vest
over a 3-year period.

Strategic Intent

Generally guided by the median
compared to relevant market-based
data taking into consideration
expertise and performance in roles.

Directed at achieving short-term
KRAs. Fixed Remuneration plus
STI to be positioned competitively
when compared to groups of
similar companies.

LTI is intended to align executive
performance with the Company’s
long-term strategy and
shareholders’ interests.

Overall remuneration policies are subject to the
discretion of the Board and can be changed to reflect
competitive and business conditions where it is in the
interests of the Company and shareholders to do so.

Executive remuneration and other terms of
employment are reviewed annually by the Board with
reference to the Company’s performance, executive
performance, comparable information from industry
sectors and other listed companies in similar industries
and expert advice.

The Board has not formally engaged the services of a
remuneration consultant to provide recommendations
when setting the specific remuneration received by
directors or other key management personnel during

the financial year ended 30 June 2020. However,
the Board has engaged an independent consultant,
Wexford Hayes Pty Ltd to undertake a review of
long-term incentives plans and remuneration of board
members and executives across the Australian listed
biotechnology sector and this was used to benchmark
remuneration received by executives. An amount of
$11,000 was paid to the independent consultant
to conduct the review. Wexford Hayes Pty Ltd is an
independent company based in Sydney, Australia and
the Board is satisfied that the review was made free
from undue influence by the members of the Board.

Remuneration Report (audited)
Remuneration Report (audited)

23
23

Remuneration Report (audited) cont’d

Performance Measurement

The performance of executives is measured against
criteria agreed annually with each executive and
is based upon the achievement of the strategic
objectives to secure shareholder value.

All incentive bonuses must be linked to predetermined
performance criteria. Key results areas are set
annually by the Board on the following basis:

z are specifically tailored to the responsibility areas

in which the executive is directly involved.

z target areas that the Board believe hold greater

potential for business expansion and shareholder
value.

z cover financial and non-financial as well as short

and long-term goals.

z represent stretch targets to encourage exemplary

performance.

KRAs for the Chief Executive Officer and Chief
Operating Officer are focused on the areas of
operational excellence, investor/stakeholder relations
and corporate partnering and alliances.

Performance in relation to KRAs is assessed annually
with incentives awarded depending on the number
and difficulty of the KRAs achieved. Following
this assessment, KRAs are reviewed by the Board
considering their desired and actual outcomes. The
efficacy of the KRAs is assessed in relation to the
Company’s goals and shareholder wealth, before the
KRAs are set for the following year.

The Board may, however, exercise its discretion in
relation to approving incentives, bonuses, and options,
and can decide on changes. Any change must be
justified by reference to measurable performance
criteria.

The fair value of the equity which executives and
employees are granted is measured at grant date and
recognised as an expense over the vesting period,
with a corresponding increase to an equity account.
The fair value of shares is ascertained as the market
bid price. The fair value of options is ascertained using
a Black–Scholes pricing model which incorporates all
market vesting conditions. The number of shares and
options expected to vest is reviewed and adjusted at
each reporting date such that the amount recognised
for services received as consideration for the equity
instruments granted shall be based on the number of
equity instruments that eventually vest.

3. Relationship between the
Remuneration Policy and
Company Performance

The Board considers at this time, evaluation of
the Group’s financial performance using generally
accepted measures such as profitability, total
shareholder return or per company comparison are
either not relevant or difficult to objectively quantify as
the Group is pre-revenue and at an early stage in the
implementation of a commercialisation strategy that
includes the development of a novel life sciences (i.e.
therapeutic stem cell) technology and the identification
and execution of business opportunities as outlined in
the directors’ report.

The table below sets out summary information about
the Group’s earnings and movements in shareholder
wealth for the five (5) years to 30 June 2020:

2424

Cynata Therapeutics Annual Report 2019/2020Cynata Therapeutics Annual Report 2019/2020Other income

Net loss before tax

Net loss after tax

30 June 2020 30 June 2019 30 June 2018 30 June 2017 30 June 2016

7,153,903

1,569,103

1,518,060

1,843,105

1,247,397

3,639,100

8,472,146

4,566,134

4,553,536

4,939,471

3,639,100

8,472,146

4,566,134

4,553,536

4,939,471

Share price at start of year

Share price at end of year

Basic/diluted loss per share (cents)

1.245

0.610

3.48

1.365

1.245

8.48

0.61

1.365

5.04

0.31

0.61

5.69

0.93

0.31

6.82

4. Remuneration of key management personnel

Short-term employee benefits

Salary &
fees

Cash
bonus

Others

110,000

2020

Directors

P. Wotton

R. Macdonald3

361,250

69,525

(1,609)

S. Washer

P. Webse4,5

G. Brooke

D.Maher6

Other KMP

K. Kelly3

S. Lipe3,7

Total

50,228

55,000

2,093

85,000

199

300,000

39,000

170,776

22,440

3,195

8,247

1,104,347

130,965

95,032

Post-
employment
benefits

Super-
annuation

25,000

4,772

25,000

16,224

70,996

Share-based
payment

Options

Total

110,000

454,166

55,000

140,000

Value of
options as
proportion of
remuneration

52,884

107,884

49.02%

2,292

104,653

471,848

81,637

299,324

239,174

1,640,514

22.18%

27.27%

14.58%

Amounts in ‘Other’ represent annual leave accrued in accordance with AASB 119 Employee Benefits. The amount of

$69,525 for Dr Macdonald, $39,000 for Dr Kelly and $22,440 for Dr Lipe in ‘Cash Bonus’ represents bonus determined

and accrued for the financial year 2020.

Amount in ‘Other’ represents company secretarial fees of $6,000 per month (exc. GST) and additional services charged at

a rate of $250 per hour paid to Mr Webse pursuant to a consultancy agreement with Platinum Corporate Secretariat Pty

Ltd (Platinum). Mr Webse is the sole director of Platinum.

Resigned 30 June 2020.

Appointed 16 June 2020.

Effective 1 April 2020 and for a period of 9 months, Dr Lipe’s employment was temporarily varied to full time basis.

Remuneration Report (audited)
Remuneration Report (audited)

25
25

S. Washer

P. Webse9

G. Brooke10

J. Chiplin11

Other KMP

K. Kelly12

S. Lipe13

Total

Remuneration Report (audited) cont’d

During the 2020 financial year, the Company paid a premium in respect of a contract insuring the directors
of the Company, the company secretary and all executive officers of the Company. The contract of insurance
prohibits disclosure of the nature of the liability and the amount of the premium.

Short-term employee benefits

Salary &
fees

Cash
bonus

Other

100,833

2019

Directors

P. Wotton

R. Macdonald8

361,250

84,589

6,078

46,043

50,417

6,801

43,952

50,000

Post-
employment
benefits

Super-
annuation

25,000

4,374

Share-based
payment

Options

Total

Value of
options as
proportion of
remuneration

71,333

172,166

41.43%

476,917

50,417

100,417

45,467

52,268

86.99%

43,952

278,831

49,563

5,602

9,376

856

24,965

891

89,976

448,937

15,677

26,800

897,503

134,152

62,536

55,230

222,453

1,371,874

20.04%

58.50%

16.22%

During the 2019 financial year, the Company paid a premium in respect of a contract insuring the directors of the
Company, the company secretary and all executive officers of the Company. The contract of insurance prohibits
disclosure of the nature of the liability and the amount of the premium.

The amount of $6,078 in ‘Other’ represents accrued annual leave in accordance with AASB 119 Employee Benefits. The

amount of $84,589 in ‘Cash bonus’ represents bonus determined and accrued for the financial year 2019.

The amount of $50,000 in ‘Other’ represents company secretarial fees of $4,000 per month paid to Mr Webse pursuant

to a consultancy agreement with Platinum Corporate Secretariat Pty Ltd (Platinum). Pursuant to a varied consultancy

agreement with Platinum, the monthly company secretarial fees increased to $6,000 per month as from 1 June 2019. Mr

Webse is the sole director of Platinum.

10 Appointed 17 May 2019.

11 Resigned 17 May 2019.

The amount of $5,602 in ‘Other’ represents accrued annual leave in accordance with AASB 119 Employee Benefits. The

amount of $49,563 in ‘Cash bonus’ represents bonus determined and accrued for the financial year 2019.

13 Appointed 10 June 2019. The amount of $856 in ‘Other’ represents accrued annual leave in accordance with AASB 119

Employee Benefits.

2626

Cynata Therapeutics Annual Report 2019/2020Cynata Therapeutics Annual Report 2019/2020(a) Bonuses and share-based payments granted as
compensation for the current financial year

(i) Bonuses

Cash bonuses of $84,589 to Dr Macdonald and
$49,563 to Dr Kelly were paid during the financial
year. These amounts were accrued in the 2019
accounts.

A performance bonus entitlement of $69,525 for Dr
Macdonald, $39,000 for Dr Kelly and $22,440 for Dr
Lipe were accrued in the 2020 accounts. Allocation
of cash bonuses is determined by attainment of short
and medium term KPIs which are considered to be

important drivers of value and typical within the
biotechnology industry for a company at Cynata’s
stage of development. For example, achievement
of specified development, clinical, regulatory and
commercial milestones. These amounts are payable
subsequent to 30 June 2020.

No other cash bonuses were granted to key
management personnel during 2020.

(ii) Incentive share-based payments arrangements

As at the date of this report, the following share-
based payment arrangements were in existence:

Option
series

2**

Number

300,000

Grant date

Expiry date

17 May 2019

16 May 2024

1,425,000

17 May 2019

16 May 2022

Exercise price
fair value

Grant date

Vesting date

$2.110

$1.750

$0.3838

$0.3038

Various

* Unlisted options issued to Dr Brooke pursuant to the terms
of his appointment as non-executive director. 200,000
options have vested and the remaining 100,000 options
vest 24 months from grant date.

** Unlisted options issued to employees of the Company

pursuant to an Employee Option Acquisition Plan. 950,000
options have vested and the remaining 475,000 vest in 24
months from grant date.

There are no further services or performance criteria that need to be met in relation to options granted under
series (1) and (2) above, and as a consequence the beneficial interest has vested to the recipients. There has been
no alteration of the terms and conditions of the above share-based payment arrangements since the grant date.

No share options were granted to key management personnel during the current financial year.

During the financial year, the following key management personnel exercised options that were granted to them
as part of their compensation. Each option converted into one ordinary share of Cynata Therapeutics Limited.

Name

R. Macdonald

P. Webse

P. Wotton

No. of options
exercised

No. of ordinary shares
of Cynata issued

Amount paid

Value of options
exercised (ii)

200,000

100,000

41,550

100,000

20,775

(i)

102,200

(i)

53,807

73,800

26,903

(i) Cashless exercise of unlisted 17 November 2019 options
in accordance with the terms and conditions using the
cashless exercise mechanism.

(ii) The value of options exercised during the year is

calculated as the market price of the shares of the
Company on the exercise date after deducting the price
paid to exercise the options.

Remuneration Report (audited)
Remuneration Report (audited)

27
27

Remuneration Report (audited) cont’d

5. Key terms of employment contracts

Employee/Director

Remuneration / Fees

Performance-based
remuneration criteria

Dr Paul Wotton

Effective 18 August 2020,

N/A

Dr Wotton reverted to a

non-executive director with

a fee of $55,000 per annum.

During the financial year

2020, Dr Wotton was paid a

fee of $110,000 per annum

for his role as non-executive

Chairman.

Notice period

The appointment may be

terminated immediately by

the Company if Dr Wotton

becomes disqualified or

is prohibited by law from

being or acting as director

or from being involved in the

management of a company.

Dr Ross Macdonald

A salary of $386,250

Eligible to receive an annual

Term of renewed agreement

per annum including

STI assessed against

– ongoing until terminated by

superannuation.

Company and Individual

agreement with both parties

KRAs and at the discretion of

(by giving 6 months’ written

the Board.

notice) or terminated by the

Company with reasons.

Eligible to participate in the

Company’s equity- based

incentive scheme. Any issue

of securities is subject to

Board and shareholder

approval.

Dr Stewart Washer

A fee of $55,000 per annum

N/A

inclusive of statutory

superannuation.

The appointment may be

terminated if Dr Washer

gives notice of resignation

and the appointment may be

terminated immediately if Dr

Washer becomes disqualified

or prohibited by law from

being or acting as a director

or from being involved in the

management of a company.

2828

Cynata Therapeutics Annual Report 2019/2020Cynata Therapeutics Annual Report 2019/2020Employee/Director

Remuneration / Fees

Performance-based
remuneration criteria

Notice period

Dr Geoff Brooke

Effective 18 August 2020,

N/A

Dr Brooke was appointed

as non-executive Chairman

with a fee of $110,000

per annum inclusive of

statutory superannuation

and excluding GST. During

the financial year 2020, Dr

Brooke was paid a fee of

$55,000 for his role as non-

executive director.

Dr Darryl Maher

A fee of $55,000 per annum

N/A

inclusive of statutory

superannuation.

The appointment may be

terminated if Dr Brooke gives

notice of resignation and

the appointment may be

terminated immediately if Dr

Brooke becomes disqualified

or prohibited by law from

being or acting as a director

or from being involved in the

management of a company.

The appointment may be

terminated if Dr Maher gives

notice of resignation and

the appointment may be

terminated immediately if Dr

Maher becomes disqualified

or prohibited by law from

being or acting as a director

or from being involved in the

management of a company.

Dr Kilian Kelly

A salary of $325,000

Eligible to participate in the

The contract may be

per annum including

Company’s equity-based

terminated by either party

superannuation.

incentive scheme and an

providing 3 months’ notice.

incentive payment of up to

20% of the annual salary

and based on attainment

of agreed performance

indicators.

The Company may (but is

not bound to) pay additional

performance-based

remuneration.

Remuneration Report (audited)
Remuneration Report (audited)

29
29

Remuneration Report (audited) cont’d

Employee/Director

Remuneration / Fees

Performance-based
remuneration criteria

Notice period

Dr Suzanne Lipe

A salary of $176,000 per

Eligible to participate in the

The contract may be

annum inclusive of statutory

Company’s equity-based

terminated by either party 3

superannuation. Dr Lipe is

incentive scheme and an

months’ notice.

The varied agreement is

subject to 3 months’ notice of

termination.

employed on a part-time (0.8

incentive payment of up to

FTE) basis. As from 1 April

20% of the annual salary

2020 and for a period of 9

and based on attainment

months ended 31 December

of agreed performance

2020, Dr Suzanne’s

indicators.

employment was temporarily

varied to full time basis

with a salary of $220,000

per annum inclusive of

superannuation.

Mr Peter Webse

In the FY2020, services as

N/A

non-executive director and

Company Secretary were

provided through Platinum

Corporate Secretariat Pty

Ltd (“Platinum”). Platinum

was paid a fee of $55,000

(exc. GST) per annum for

the provision of Mr Webse’s

services as a non-executive

director and $6,000 (exc.

GST) per month for the

provision of company

secretarial services plus

additional services charged

at a rate of $250 per hour

as agreed from time to

time. Effective, 1 July 2020

and pursuant to a varied

consultancy agreement,

Platinum is paid a fee

of $8,500 (exc. GST) per

month for the provision of

company secretarial services.

The varied agreement is

subject to 3 months’ notice

of termination. Mr Webse

resigned as a director of

Cynata on 30 June 2020.

3030

Cynata Therapeutics Annual Report 2019/2020Cynata Therapeutics Annual Report 2019/20206. Key management personnel with loans above $100,000 in the

reporting period

The Company has provided 2 of its key management
personnel with loans at rates comparable to the
average commercial rate of interest. The loans to
key management personnel are full recourse loans
and unsecured. The loans carry a simple interest rate

of 5.20% per annum, interest is paid annually and
accrued daily.

The following table outlines amounts in relation to
loans above $100,000 made to key management
personnel of the Group:

Name

R. Macdonald (i)

S. Washer (i)

Balance at
1/7/2019

730,246

935,773

Interest
charged

31,052

45,347

(i) At a General Meeting of shareholders held on 12

September 2018, shareholders of Cynata approved
the financial assistance and financial benefit provided
to Dr Macdonald and Dr Washer or their nominees as
constituted by the making of a director loan of $900,000
each to Dr Macdonald and Dr Washer solely for the
purpose of funding the exercise of 2,500,000 unlisted
options each at $0.40 having an expiry date of 27
September 2018. During the financial year ended 30 June

Allowance
for doubtful
receivables

Balance at
30/6/2020

Highest loan
balance during
the period (ii)

325,336

334,320

733,261

947,569

2020, Dr Macdonald repaid $437,962 (2019: $200,000)
of his loan which included $37,962 accrued interest and
Dr Washer repaid $646,800 (2019: $nil) of his loan which
included $46,800 accrued interest. The accrued interest
paid by Dr Macdonald and Dr Washer is the interest due
and payable on the first anniversary of the loans. At 30
June 2020, neither of the loans were impaired.

(ii) Includes interest.

7. Key management personnel equity holdings

Fully paid ordinary shares of Cynata Therapeutics Limited

Balance at
1 July 2019

Received on
exercise of
options

Shares
acquired

Shares
disposed

Balance at
resignation

Balance at
30 June 2020

No.

155,000

2,528,500

2,724,856

220,000

494,013

No.

20,775

41,550

120,775

No.

77,000

No.

(500,000)

No.

340,775

175,775

2,070,050

2,224,856

77,000

494,013

2020

P. Wotton

R. Macdonald

S. Washer

G. Brooke

D. Maher (i)

P. Webse (ii)

K. Kelly

S. Lipe

(i) Appointed 16 June 2020
(ii) Resigned 30 June 2020

Remuneration Report (audited)
Remuneration Report (audited)

31
31

Remuneration Report (audited) cont’d

Fully paid ordinary shares of Cynata Therapeutics Limited

Balance at
1 July 2018

Granted as
compensation

Received on
exercise of options

Balance at
resignation

Balance at
30 June 2019

2019

P. Wotton

R. Macdonald

S. Washer

G. Brooke (i)

P. Webse

J. Chiplin (ii)

K. Kelly (iii)

S. Lipe (iv)

No.

55,000

28,500

224,856

220,000

50,000

16,640

No.

100,000

2,500,000

150,000

477,373

No.

(200,000)

No.

155,000

2,528,500

2,724,856

220,000

494,013

(i) Appointed 17 May 2019

(ii) Resigned 17 May 2019.

(iii) Cashless exercise of 750,000 unlisted 16 Dec 2018

options in accordance with the terms and conditions using
the cashless exercise mechanism.

(iv) Appointed 10 June 2019.

Share options of Cynata Therapeutics Limited

Balance
at 1 July
2019

Options
expired Exercised

Balance at
resignation

Balance
at 30
June
2020

Balance
vested at
30 June
2020

Options
vested
during
year

Vested and
exercisable

2020

No.

300,000

200,000

100,000

750,000

500,000

250,000

375,000

250,000

125,000

P. Wotton

2,100,000

(2,000,000)

(100,000)

R. Macdonald

200,000

S. Washer

G. Brooke

300,000

D. Maher (i)

P. Webse (ii)

200,000

K. Kelly

S. Lipe

750,000

375,000

(i) Appointed 16 June 2020

(ii) Resigned 30 June 2020

(200,000)

(iii) No options were granted to key management personnel

during the year.

3232

Cynata Therapeutics Annual Report 2019/2020Cynata Therapeutics Annual Report 2019/2020Share options of Cynata Therapeutics Limited

Balance
at 1 July
2018

Granted as

Balance at

compensation Exercised

resignation

Balance
at 30
June
2019

Balance
vested at
30 June
2019

Vested and

exercisable

Options
vested
during
year

2019

No.

P. Wotton

2,200,000

R. Macdonald

2,700,000

S. Washer

2,500,000

(100,000)

(2,500,000)

G. Brooke (i)

300,000

P. Webse

200,000

J. Chiplin (ii)

200,000

- 2,100,000

2,100,000

2,000,000

200,000

300,000

100,000

200,000

(150,000)

(50,000)

K. Kelly

750,000

(750,000)

S. Lipe (iii)

375,000

750,000

250,000

375,000

(i) Appointed 17 May 2019.

(ii) Resigned 17 May 2019.

(iii) Appointed 10 June 2019.

All share options issued to key management personnel
were made in accordance with the provisions of the
Employee Option Acquisition Plan.

Further details of the Employee Option Acquisition
Plan and share options are contained in note 18 to the
financial statements.

This is the end of the audited remuneration report

This directors’ report is signed in accordance with a
resolution of directors made pursuant to s.298(2) of
the Corporations Act 2001.

On behalf of the directors,

Dr Ross Macdonald

Managing Director/Chief Executive Officer

Melbourne,

25 August 2020

Remuneration Report (audited)
Remuneration Report (audited)

33
33

Auditor’s Independence
Declaration

PO Box 1908
West Perth WA 6872
Australia

Level 2, 1 Walker Avenue
West Perth WA 6005
Australia

Tel: +61 8 9481 3188
Fax: +61 8 9321 1204

ABN: 84 144 581 519
www.stantons.com.au

Stantons International Audit and Consulting Pty Ltd
trading as

Chartered Accountants and Consultants

25 August 2020

Board of Directors
Cynata Therapeutics Limited
Level 3, 62 Lygon Street
CARLTON, VICTORIA 3053

Dear Directors

RE:

CYNATA THERAPEUTICS LIMITED

In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following
declaration of independence to the directors of Cynata Therapeutics Limited.

As the Audit Director for the audit of the financial statements of Cynata Therapeutics Limited for the year
ended 30 June 2020, I declare that to the best of my knowledge and belief, there have been no contraventions
of:

(i)

(ii)

the auditor independence requirements of the Corporations Act 2001 in relation to the audit;
and
any applicable code of professional conduct in relation to the audit.

Yours sincerely

STANTONS INTERNATIONAL AUDIT AND CONSULTING PTY LTD
(Trading as Stantons International)
(Authorised Audit Company)

Samir R Tirodkar
Director

Liability limited by a scheme approved
under Professional Standards Legislation

3434

Cynata Therapeutics Annual Report 2019/2020Cynata Therapeutics Annual Report 2019/2020

Independent Auditor’s Report

Stantons International Audit and Consulting Pty Ltd
trading as

Chartered Accountants and Consultants

PO Box 1908
West Perth WA 6872
Australia

Level 2, 1 Walker Avenue
West Perth WA 6005
Australia

Tel: +61 8 9481 3188
Fax: +61 8 9321 1204

ABN: 84 144 581 519
www.stantons.com.au

INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF
CYNATA THERAPEUTICS LIMITED

Report on the Audit of the Financial Report

Our Opinion

We have audited the financial report of Cynata Therapeutics Limited (the Company) and its subsidiaries (the
Group), which comprises the consolidated statement of financial position as at 30 June 2020, the
consolidated statement of profit or loss and other comprehensive income, the consolidated statement of
changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the
financial statements, including a summary of significant accounting policies, and the directors' declaration.

In our opinion: the accompanying financial report of the Group is in accordance with the Corporations Act
2001, including:

(i)

giving a true and fair view of the Group's financial position as at 30 June 2020 and of its
financial performance for the year then ended; and

(ii)

complying with Australian Accounting Standards and the Corporations Regulations 2001.

Basis for Opinion

We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section of
our report. We are independent of the Group in accordance with the auditor independence requirements of
the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards
Board's APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the
Code.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit
of the financial report of the current year. These matters were addressed in the context of our audit of the
financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.

Liability limited by a scheme approved
under Professional Standards Legislation

Independent Auditor’s Report
Independent Auditor’s Report

35
35

Independent Auditor’s Report cont’d

Key Audit Matters

How the matter was addressed in the audit

Carrying
value
amortisation and impairment

intangible

assets,

At 30 June 2020, the Group had intangibles with a
carrying value of $2,972,495. The intangible assets
are considered a Key Audit Matter as
they
represent around 18% of the net assets of the
Group.

Cynata Therapeutics acquired intangible assets
(patents) through the acquisition of a subsidiary.
Under AASB 138 Intangible Assets and AASB 136
Impairment of Assets, the Group is required to
assess whether
indicators of
impairment, and if so, perform an impairment
review of the intangible assets at least annually.

there are any

Our audit procedures included, inter alia, the
following:

i. A review of the ASX announcements and
Minutes of the Board of Directors minutes
to obtain an understanding of
the
significant activities undertaken by the
Group during the year;

ii. An audit of the Group’s patent register to
obtain reasonable assurance any patents
that have expired are written off;

iii. Review of management’s assessment of
the carrying value of the patents and
the appropriateness and
assessing
relevance of
to
information provided
justify the carrying value of the patents;

iv. Discussing the operational strategies and
potential investments in the Company by
other parties with management to obtain
further understanding as to the basis of
the assumptions used to justify carrying
forward the patents.

the amortisation charge

to
v. Checking
the patents are being
ensure
amortised over the 20-year patents’ life;
and

that

vi. Evaluating

the

the
disclosures (Note 11) to the financial
statements.

adequacy

Other Information

The directors are responsible for the other information. The other information comprises the information
included in the Group's annual report for the year ended 30 June 2020 but does not include the financial
report and our auditor's report thereon.

Our opinion on the financial report does not cover the other information and accordingly we do not express
any form of assurance conclusion thereon.

In connection with our audit of the financial report, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial report or our
knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we
have performed, we conclude that there is a material misstatement of this other information, we are required
to report that fact. We have nothing to report in this regard.

Responsibilities of the Directors for the Financial Report

The directors of the Company are responsible for the preparation of the financial report that gives a true and
fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such
internal control as the directors determine is necessary to enable the preparation of the financial report that
gives a true and fair view and is free from material misstatement, whether due to fraud or error.

3636

Cynata Therapeutics Annual Report 2019/2020Cynata Therapeutics Annual Report 2019/2020

In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or
has no realistic alternative but to do so.

Auditor's Responsibilities for the Audit of the Financial Report

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with the Australian Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of this
financial report.

As part of an audit in accordance with Australian Auditing Standards, we exercise professional judgement and
maintain professional scepticism throughout the audit. An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the financial report.

The procedures selected depend on the auditor's judgement, including the assessment of the risks of material
misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the entity's preparation of the financial report that gives a true
and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the entity's internal control.

The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.

An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial
report.

We conclude on the appropriateness of the Directors' use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions
that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures
in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based
on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions
may cause the Group to cease to continue as a going concern.

We evaluate the overall presentation, structure and content of the financial report, including the disclosures,
and whether the financial report represents the underlying transactions and events in a manner that achieves
fair presentation.

We obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the financial report. We are responsible for the direction,
supervision and performance of the Group audit. We remain solely responsible for our audit opinion.

We communicate with the Directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in Internal control that we identify
during our audit.

The Auditing Standards require that we comply with relevant ethical requirements relating to audit
engagements. We also provide the Directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that
may reasonably be thought to bear on our independence, and where applicable, related safeguards.

Independent Auditor’s Report
Independent Auditor’s Report

37
37

Independent Auditor’s Report cont’d

Report on the Remuneration Report

We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2020.
The directors of the Company are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing
Standards.

Opinion on the Remuneration Report

In our opinion, the Remuneration Report of Cynata Therapeutics Limited for the year ended 30 June 2020
complies with section 300A of the Corporations Act 2001.

STANTONS INTERNATIONAL AUDIT AND CONSULTING PTY LTD
(Trading as Stantons International)
(An Authorised Audit Company)

Samir R Tirodkar

Director
West Perth, Western Australia
25 August 2020

3838

Cynata Therapeutics Annual Report 2019/2020Cynata Therapeutics Annual Report 2019/2020

Directors’ Declaration

The directors declare that:

(a) in the directors’ opinion, there are reasonable grounds to believe that the
Group will be able to pay its debts as and when they become due and
payable;

(b) in the directors’ opinion, the attached financial statements are in compliance

with International Financial Reporting Standards, as stated in note 3 to the
financial statements;

(c)

in the directors’ opinion, the attached financial statements and notes thereto
are in accordance with the Corporations Act 2001, including compliance with
accounting standards and giving a true and fair view of the financial position
and performance of the Group; and

(d) the directors have been given the declarations required by s.295A of the

Corporations Act 2001.

Signed in accordance with a resolution of the directors made pursuant to s.295(5)
of the Corporations Act 2001.

On behalf of the directors,

Dr Ross Macdonald

Managing Director/Chief Executive Officer

Melbourne,

25 August 2020

Directors’ Declaration
Directors’ Declaration

39
39

Financial Statements

Cynata Therapeutics Annual Report 2019/2020Consolidated statement of profit or loss
and other comprehensive income
for the year ended 30 June 2020

Interest income

Other income

Total revenue and other income

Product development costs

Employee benefits expenses

Amortisation expenses

Share based payment expenses

Other expenses

Loss before income tax

Income tax expense

Loss for the year

Other comprehensive income, net of income tax

Items that will not be reclassified subsequently to profit or loss

Items that may be reclassified subsequently to profit or loss

Exchange differences on translating foreign operations

Other comprehensive income for the year, net of income tax

Total comprehensive loss for the year

Loss for the year attributable to:

Owners of Cynata Therapeutics Limited

Year ended

30 June 2020

30 June 2019

142,350

7,011,553

7,153,903

260,551

1,308,552

1,569,103

Note

(5,919,531)

(5,652,119)

(1,194,809)

(280,732)

(388,236)

(949,151)

(279,965)

(904,308)

7,16

(3,009,695)

(2,255,706)

(3,639,100)

(8,472,146)

(3,639,100)

(8,472,146)

(3,639,100)

(8,472,146)

(3,639,100)

(8,472,146)

Total comprehensive loss for the year attributable:

Owners of Cynata Therapeutics Limited

(3,639,100)

(8,472,146)

Loss per share:

Basic and diluted (cents per share)

(3.48)

(8.48)

The above consolidated statement of profit or loss
and other comprehensive income should be read in
conjunction with the accompanying notes.

Financial Statements
Financial Statements

41
41

Consolidated statement of financial position
as at 30 June 2020

30 June 2020

30 June 2019

Note

13,649,644

6,977,390

16,965

184,080

67,044

286,064

13,850,689

7,330,498

2,972,495

657,656

3,630,151

3,253,227

1,666,019

4,919,246

17,480,840

12,249,744

634,754

54,982

689,736

1,236,983

41,295

1,278,278

16,791,104

10,971,466

16.1

16.2

57,165,390

47,987,688

4,782,446

4,501,410

4,724

(45,161,456)

(41,522,356)

16,791,104

10,971,466

Current assets

Cash and cash equivalents

Trade and other receivables

Prepayments

Total current assets

Non-current assets

Intangibles

Loans receivable

Total non-current assets

Total assets

Current liabilities

Trade and other payables

Provisions

Total current liabilities

Total liabilities

Net assets

Equity

Issued capital

Option reserves

Foreign currency translation reserve

Accumulated losses

Total equity

The above consolidated statement of financial
position should be read in conjunction with the
accompanying notes.

4242

Cynata Therapeutics Annual Report 2019/2020Cynata Therapeutics Annual Report 2019/2020Consolidated statement of changes in equity
for the year ended 30 June 2020

Issued
Capital

Option
Reserve

Foreign
currency
translation
reserve

Accum-
ulated
losses

2018-2019

Total

Balance at 1 July 2018

44,191,746

4,240,602

4,724 (33,050,210)

15,386,862

Loss for the year

Other comprehensive income for the year, net

of tax

Total comprehensive income/(loss) for the year

Issue of ordinary shares (refer to note 15)

Share issue costs

Share based payments

3,849,429

(53,487)

260,808

(8,472,146)

3,849,429

(53,487)

260,808

Balance at 30 June 2019

47,987,688

4,501,410

4,724 (41,522,356)

10,971,466

2019-2020

Balance at 1 July 2019

47,987,688

4,501,410

4,724 (41,522,356)

10,971,466

Loss for the year

Other comprehensive income for the year, net

of tax

Total comprehensive income/(loss) for the year

Issue of ordinary shares (refer to note 15)

Share issue costs

9,695,626

(517,924)

Share based payments (refer to note 16.1)

281,036

(3,639,100)

9,695,626

(517,924)

281,036

Balance at 30 June 2020

57,165,390

4,782,446

4,724 (45,161,456)

16,791,104

The above consolidated statement of changes
in equity should be read in conjunction with the
accompanying notes.

Financial Statements
Financial Statements

43
43

Consolidated statement of cash flows
for the year ended 30 June 2020

Cash flows from operating activities

Grants and other income received

Payments to suppliers and employees

Interest received

Research and development tax refund received

Fujifilm Option Licence Fee received

Development costs paid

Year ended

30 June 2020

30 June 2019

Note

51,459

(3,894,444)

(3,192,273)

83,590

2,510,462

4,227,151

188,903

1,308,552

(6,365,897)

(5,064,259)

Net cash (used in) operating activities

(3,387,679)

(6,759,077)

Cash flows from financing activities

Proceeds from issue of equity instruments of the Company

Payment for share issue costs

Repayment by related parties

9,382,110

(406,924)

1,084,762

1,405,929

(75,514)

200,000

Net cash provided by financing activities

10,059,948

1,530,415

Net increase/(decrease) in cash and cash equivalents

6,672,269

(5,228,662)

Cash and cash equivalents at the beginning of the year

6,977,390

12,206,040

Effects of exchange rate changes on the balance of cash held in foreign

currencies

(15)

Cash and cash equivalents at the end of the year

13,649,644

6,977,390

The above consolidated statement of cash flows
should be read in conjunction with the accompanying
notes.

4444

Cynata Therapeutics Annual Report 2019/2020Cynata Therapeutics Annual Report 2019/2020Financial Statements

Notes

Notes to the consolidated financial statements

for the year ended 30 June 2020

1. General information

Cynata Therapeutics Limited (“the Company”) is a
listed public company incorporated in Australia. The
addresses of its registered office and principal place of
business are disclosed in the corporate directory to the
annual report.

The principal activities of the Company and its
controlled subsidiaries (“the Group”) are described in
the directors’ report.

2. Application of new and revised

Accounting Standards

2.1 Amendments to Accounting Standards and

new Interpretations that are mandatorily
effective for the current year

The Group has adopted all of the new and revised
Standards and Interpretations issued by the
Australian Accounting Standards Board (the AASB)
that are relevant to its operations and effective for an
accounting period that begins on or after 1 July 2019.

New and revised Standards and amendments thereof
and Interpretations effective for the current financial
year that are relevant to the Group include:

AASB 16 Leases

AASB 16 introduces new or amended requirements
with respect to lease accounting. It introduces

significant changes to lessee accounting by removing
the distinction between operating and finance lease
and requiring the recognition of a right-of-use asset
and a lease liability at commencement for all leases,
except for short-term leases and leases with low
value assets. In contrast to lessee accounting, the
requirements for lessor accounting have remained
largely unchanged.

AASB 2018-3 Amendments to Australian
Accounting Standards – Reduced Disclosure
Requirements

AASB 2018-3 establishes the disclosure requirements
of AASB 16 Leases in financial statements prepared
in accordance with Australian Accounting Standards –
Reduced Disclosure Requirements (RDR).

Interpretation 23 Uncertainty over Income Tax
Treatments and AASB 2017-4 Amendments to
Australian Accounting Standards – Uncertainty over
Income Tax Treatments

Interpretation 23 sets out how to determine the
accounting tax position when there is uncertainty over
income tax treatments.

The adoption of these Amendments/Interpretation
has had no significant impact on the disclosures or
the amounts recognised in the Group’s consolidated
financial statements.

4646

Cynata Therapeutics Annual Report 2019/2020Cynata Therapeutics Annual Report 2019/2020
2.2 New and revised Australian Accounting

Standards and Interpretations on issue but not
yet effective

At the date of authorisation of the financial
statements, the Standards and Interpretations that
were issued but not effective are listed below:

Standard/amendment

Effective for annual reporting periods
beginning on or after

AASB 2020-1 Amendments to Australian Accounting Standards –

Classification of Liabilities as Current or Non‑Current

AASB 2020-3 Amendments to Australian Accounting Standards –

Annual Improvements 2018‑2020 and Other Amendments

1 January 2022

3. Significant accounting policies

3.1 Statement of compliance

These financial statements are general purpose
financial statements which have been prepared
in accordance with the Corporations Act 2001,
Accounting Standards and Interpretations and comply
with other requirements of the law.

The financial statements comprise the consolidated
financial statements of the Group. For the purposes of
preparing the consolidated financial statements, the
Company is a for-profit entity.

Accounting Standards include Australian Accounting
Standards. Compliance with Australian Accounting
Standards ensures that the financial statements and
notes of the Company and the Group comply with
International Financial Reporting Standards (‘IFRS’).

The financial statements were authorised for issue by
the directors on 25 August 2020.

3.2 Basis of preparation

The consolidated financial statements have been
prepared on the basis of historical cost, except for
certain financial instruments that are measured at
revalued amounts or fair values at the end of each
reporting period, as explained in the accounting
policies below. Historical cost is generally based on
the fair values of the consideration given in exchange
for goods and services. All amounts are presented in
Australian dollars, unless otherwise noted.

Fair value is the price that would be received to sell
an asset or paid to transfer a liability in an orderly
transaction between market participants at the
measurement date, regardless of whether that price
is directly observable or estimated using another
valuation technique. In estimating the fair value of
an asset or liability, the Group takes into account
the characteristics of the asset or liability at the
measurement date. Fair value for measurement and/
or disclosure purposes in these consolidated financial
statements is determined on such a basis, except for
share-based payment transactions that are within
the scope of AASB 2 Share‑based Payment, leasing
transactions that are within the scope of AASB 16
Leases, and measurements that have some similarities
to fair value but are not fair value, such as net
realisable value in AASB 102 Inventories or value in
use in AASB 136 Impairment of Assets.

In addition, for financial reporting purposes, fair value
measurements are categorised into Level 1, 2 or 3
based on the degree to which inputs to the fair value
measurements are observable and the significance of
the inputs to the fair value measurement in its entirety,
which are described as follows:

Level 1 inputs are quoted prices (unadjusted) in
active markets for identical assets or liabilities
that the entity can access at the measurement
date;

Level 2 inputs are inputs, other than quoted
prices included in Level 1, that are observable for

Notes
Notes

47
47

Significant accounting policies cont’d

the asset or liability, either directly or indirectly;
and

Level 3 inputs are unobservable inputs for the
asset or liability.

3.3 Basis of consolidation

The consolidated financial statements incorporate
the financial statements of the Company and entities
controlled by the Company and its subsidiaries.
Control is achieved when the Company:

has power over the investee;

is exposed, or has rights, to variable returns from
its involvement with the investee; and

has the ability to use its power to affect its
returns.

The Company reassesses whether or not it controls an
investee if facts and circumstances indicate that there
are changes to one or more of the three elements of
control listed above.

Consolidation of a subsidiary begins when the
Company obtains control over the subsidiary and
ceases when the Company loses control of the
subsidiary. Specifically, income and expenses of a
subsidiary acquired or disposed of during the year
are included in the consolidated statement of profit or
loss and other comprehensive income from the date
the Company gains control until the date when the
Company ceases to control the subsidiary.

Profit or loss and each component of other
comprehensive income are attributed to the owners
of the Company and to the non-controlling interests.
Total comprehensive income of subsidiaries is
attributed to the owners of the Company and to the
non-controlling interests even if this results in the non-
controlling interests having a deficit balance.

When necessary, adjustments are made to the
financial statements of subsidiaries to bring their
accounting policies into line with the Group’s
accounting policies. All intragroup assets and
liabilities, equity, income, expenses and cash flows
relating to transactions between members of the
Group are eliminated in full on consolidation.

4848

3.4 Business combinations

Acquisitions of businesses are accounted for using
the acquisition method. The consideration transferred
in a business combination is measured at fair value
which is calculated as the sum of the acquisition-
date fair values of assets transferred by the Group,
liabilities incurred by the Group to the former owners
of the acquiree and the equity instruments issued by
the Group in exchange for control of the acquiree.
Acquisition-related costs are recognised in profit or
loss as incurred.

At the acquisition date, the identifiable assets
acquired and the liabilities assumed are recognised at
their fair value, except that:

deferred tax assets or liabilities and assets
or liabilities related to employee benefit
arrangements are recognised and measured in
accordance with AASB 112 Income Taxes and
AASB 119 Employee Benefits respectively;

liabilities or equity instruments related to share-
based payment arrangements of the acquiree
or share-based payment arrangements of the
Group entered into to replace share-based
payment arrangements of the acquiree are
measured in accordance with AASB 2 Share‑
based Payment at the acquisition date; and

assets (or disposal groups) that are classified as
held for sale in accordance with AASB 5 Non-
current Assets Held for Sale and Discontinued
Operations are measured in accordance with that
Standard.

Goodwill is measured as the excess of the sum of the
consideration transferred, the amount of any non-
controlling interests in the acquiree, and the fair value
of the acquirer’s previously held equity interest in the
acquiree (if any) over the net of the acquisition-date
amounts of the identifiable assets acquired and the
liabilities assumed. If, after reassessment, the net of
the acquisition-date amounts of the identifiable assets
acquired and liabilities assumed exceeds the sum
of the consideration transferred, the amount of any
non-controlling interests in the acquiree and the fair
value of the acquirer’s previously held interest in the

Cynata Therapeutics Annual Report 2019/2020Cynata Therapeutics Annual Report 2019/2020acquiree (if any), the excess is recognised immediately
in profit or loss as a bargain purchase gain.

Non-controlling interests that are present ownership
interests and entitle their holders to a proportionate
share of the entity’s net assets in the event of
liquidation may be initially measured either at fair
value or at the non-controlling interests’ proportionate
share of the recognised amounts of the acquiree’s
identifiable net assets. The choice of measurement
basis is made on a transaction-by-transaction basis.
Other types of non-controlling interests are measured
at fair value or, when applicable, on the basis specified
in another Standard.

Where the consideration transferred by the Group
in a business combination includes assets or
liabilities resulting from a contingent consideration
arrangement, the contingent consideration is
measured at its acquisition-date fair value. Changes
in the fair value of the contingent consideration
that qualify as measurement period adjustments
are adjusted retrospectively, with corresponding
adjustments against goodwill. Measurement
period adjustments are adjustments that arise
from additional information obtained during the
‘measurement period’ (which cannot exceed one
year from the acquisition date) about facts and
circumstances that existed at the acquisition date.

The subsequent accounting for changes in the fair
value of contingent consideration that do not qualify
as measurement period adjustments depends on
how the contingent consideration is classified.
Contingent consideration that is classified as equity
is not remeasured at subsequent reporting dates and
its subsequent settlement is accounted for within
equity. Contingent consideration that is classified
as an asset or liability is remeasured at subsequent
reporting dates in accordance with AASB 9 Financial
Instruments, or AASB 137 Provisions, Contingent
Liabilities and Contingent Assets as appropriate, with
the corresponding gain or loss being recognised in
profit or loss.

Where a business combination is achieved in
stages, the Group’s previously held equity interest
in the acquiree is remeasured to its acquisition date
fair value and the resulting gain or loss, if any, is

recognised in profit or loss. Amounts arising from
interests in the acquiree prior to the acquisition
date that have previously been recognised in other
comprehensive income are reclassified to profit or loss
where such treatment would be appropriate if that
interest were disposed of.

If the initial accounting for a business combination is
incomplete by the end of the reporting period in which
the combination occurs, the Group reports provisional
amounts for the items for which the accounting is
incomplete. Those provisional amounts are adjusted
during the measurement period (see above), or
additional assets or liabilities are recognised, to
reflect new information obtained about facts and
circumstances that existed as of the acquisition date
that, if known, would have affected the amounts
recognised as of that date.

3.5 Goodwill

Goodwill arising on an acquisition of a business
is carried at cost as established at the date of the
acquisition of the business (see 3.4 above) less
accumulated impairment losses, if any.

For the purposes of impairment testing, goodwill is
allocated to each of the Groups’ cash-generating units
(or groups of cash-generating units) that is expected
to benefit from the synergies of the combination.

A cash-generating unit to which goodwill has been
allocated is tested for impairment annually, or more
frequently when there is an indication that the unit
may be impaired. If the recoverable amount of the
cash-generating unit is less than its carrying amount,
the impairment loss is allocated first to reduce the
carrying amount of any goodwill allocated to the unit
and then to the other assets of the unit pro rata based
on the carrying amount of each asset in the unit. Any
impairment loss for goodwill is recognised directly
in profit or loss. An impairment loss recognised for
goodwill is not reversed in subsequent periods. On
disposal of the relevant cash-generating unit, the
attributable amount of goodwill is included in the
determination of the profit or loss on disposal.

Notes
Notes

49
49

Significant accounting policies cont’d

3.6 Revenue recognition

The Group has applied AASB 15 Revenue from
Contracts with Customers using the cumulative
effective method. The Group does not have any
revenue from contracts with customers.

3.6.1

Interest income

Interest income from a financial asset is recognised
when it is probable that the economic benefits will
flow to the Group and the amount of revenue can be
measured reliably. Interest income is accrued on a
time basis, by reference to the principal outstanding
and at the effective interest rate applicable, which
is the rate that exactly discounts estimated future
cash receipts though the expected life of the financial
asset to that asset’s net carrying amount on initial
recognition.

into Australian dollars using the exchange rates
prevailing at the end of the reporting period. Income
and expense items are translated at the average
exchange rates for the period, unless exchange
rates fluctuated significantly during that period, in
which case the exchange rates at the dates of the
transactions are used. Exchange differences arising,
if any, are recognised in other comprehensive income
and accumulated in equity (and attributed to non-
controlling interests as appropriate).

Goodwill and fair value adjustments to identifiable
assets acquired and liabilities assumed through
acquisition of a foreign operation are treated as assets
and liabilities of the foreign operation and translated
at the rate of exchange prevailing at the end of each
reporting period. Exchange differences arising are
recognised in other comprehensive income.

3.7 Foreign currencies

3.8 Government grants

The individual financial statements of each group
entity are presented in the currency of the primary
economic environment in which the entity operates
(its functional currency). For the purpose of the
consolidated financial statements, the results and
financial position of each group entity are expressed in
Australian dollars (‘$’), which is the functional currency
of the Company and the presentation currency for the
consolidated financial statements.

In preparing the financial statements of each
individual group entity, transactions in currencies
other than the entity’s functional currency (foreign
currencies) are recognised at the rates of exchange
prevailing at the dates of the transactions. At the end
of each reporting period, monetary items denominated
in foreign currencies are retranslated at the rates
prevailing at that date. Non-monetary items carried at
fair value that are denominated in foreign currencies
are translated at the rates prevailing at the date when
the fair value was determined. Non-monetary items
that are measured in terms of historical cost in a
foreign currency are not retranslated.

For the purpose of presenting these consolidated
financial statements, the assets and liabilities
of the Group’s foreign operations are translated

5050

Government grants are not recognised until there is
reasonable assurance that the Group will comply with
the conditions attaching to them and that the grants
will be received.

Government grants are recognised in profit or loss on
a systematic basis over the periods in which the Group
recognises as expenses the related costs for which
the grants are intended to compensate. Specifically,
government grants whose primary condition is that
the Group should purchase, construct or otherwise
acquire non-current assets are recognised as
deferred revenue in the consolidated statement of
financial position and transferred to profit or loss on a
systematic and rational basis over the useful lives of
the related assets.

Government grants that are receivable as
compensation for expenses or losses already incurred
or for the purpose of giving immediate financial
support to the Group with no future related costs are
recognised in profit or loss in the period in which they
become receivable.

Grants related to the COVID-19 incentives are
accounted for when received.

Cynata Therapeutics Annual Report 2019/2020Cynata Therapeutics Annual Report 2019/20203.9 Employee benefits

Short-term and long-term employee benefits

A liability is recognised for benefits accrued to
employees in respect of wages and salaries and
annual leave when it is probable that settlement will
be required and they are capable of being measured
reliably.

Liabilities recognised in respect of short-term
employee benefits are measured at their nominal
values using the remuneration rate expected to apply
at the time of settlement.

Liabilities recognised in respect of long-term employee
benefits are measured as the present value of the
estimated future cash outflows to be made by the
Group in respect of services provided by employees up
to reporting date.

3.10 Share-based payment arrangements

Equity-settled share-based payments to employees
and others providing similar services are measured at
the fair value of the equity instruments at the grant
date. Details regarding the determination of the fair
value of equity-settled share-based transactions are
set out in note 18.

The fair value determined at the grant date of the
equity-settled share-based payments is expensed on
a straight-line basis over the vesting period, based
on the Group’s estimate of equity instruments that
will eventually vest, with a corresponding increase
in equity. At the end of each reporting period, the
Group revises its estimate of the number of equity
instruments expected to vest. The impact of the
revision of the original estimates, if any, is recognised
in profit or loss such that the cumulative expense
reflects the revised estimate, with a corresponding
adjustment to the equity-settled employee benefits
reserve.

Equity-settled share-based payment transactions with
parties other than employees are measured at the fair
value of the goods or services received, except where
that fair value cannot be estimated reliably, in which
case they are measured at the fair value of the equity

instruments granted, measured at the date the entity
obtains the goods or the counterparty renders the
service.

For cash-settled share-based payments, liability
is recognised for the goods or services acquired,
measured initially at the fair value of the liability. At
the end of each reporting period until the liability is
settled, and at the date of settlement, the fair value
of the liability is remeasured, with any changes in fair
value recognised in profit or loss for the year.

3.11 Taxation

Income tax expense represents the sum of the tax
currently payable and deferred tax.

3.11.1 Current tax

The tax currently payable is based on taxable profit for
the year. Taxable profit differs from profit before tax as
reported in the consolidated statement of profit or loss
and other comprehensive income because of items
of income or expense that are taxable or deductible
in other years and items that are never taxable or
deductible. The Group’s current tax is calculated using
the tax rates that have been enacted or substantively
enacted by the end of the reporting period.

R&D rebates are accounted for on a cash basis and
included under other income.

3.11.2 Deferred tax

Deferred tax is recognised on temporary differences
between the carrying amounts of assets and liabilities
in the consolidated financial statements and the
corresponding tax bases used in the computation of
taxable profit. Deferred tax liabilities are generally
recognised for all taxable temporary differences.
Deferred tax assets are generally recognised for all
deductible temporary differences to the extent that
it is probable that taxable profits will be available
against which those deductible temporary differences
can be utilised. Such deferred tax assets and liabilities
are not recognised if the temporary difference arises
from the initial recognition (other than in a business
combination) of assets and liabilities in a transaction
that affects neither the taxable profit nor the

Notes
Notes

51
51

Significant accounting policies cont’d

accounting profit. In addition, deferred tax liabilities
are not recognised if the temporary difference arises
from the initial recognition of goodwill.

Deferred tax liabilities are recognised for taxable
temporary differences associated with investments
in subsidiaries and associates, and interests in joint
ventures, except where the Group is able to control the
reversal of the temporary difference and it is probable
that the temporary difference will not reverse in the
foreseeable future. Deferred tax assets arising from
deductible temporary differences associated with such
investments and interests are only recognised to the
extent that it is probable that there will be sufficient
taxable profits against which to utilise the benefits of
the temporary differences and they are expected to
reverse in the foreseeable future.

The carrying amount of deferred tax assets is
reviewed at the end of each reporting period and
reduced to the extent that it is no longer probable that
sufficient taxable profits will be available to allow all
or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at
the tax rates that are expected to apply in the period
in which the liability is settled or the asset realised,
based on tax rates (and tax laws) that have been
enacted or substantively enacted by the end of the
reporting period. The measurement of deferred tax
liabilities and assets reflects the tax consequences
that would follow from the manner in which the
Group expects, at the end of the reporting period, to
recover or settle the carrying amount of its assets and
liabilities.

Deferred tax liabilities and assets are offset when
there is a legally enforceable right to set off current
tax assets against current tax liabilities and when they
relate to income taxes levied by the same authority
and the Group intends to settle its current tax assets
and liabilities on a net basis.

3.11.3 Current and deferred tax for the year

Current and deferred tax are recognised in profit
or loss, except when they relate to items that are
recognised in other comprehensive income or directly
in equity, in which case the current and deferred tax

5252

are also recognised in other comprehensive income
or directly in equity, respectively. Where current tax
or deferred tax arises from the initial accounting for a
business combination, the tax effect is included in the
accounting for the business combination.

3.12 Intangible assets

3.12.1 Intangible assets acquired in a business
combination

Intangible assets acquired in a business combination
and recognised separately from goodwill are initially
recognised at their fair value at the acquisition date
(which is regarded as their cost).

Intangibles have been identified as all granted patents
and patent applications. They have a finite useful life
and are carried at cost less accumulated amortisation.
Amortisation is calculated using the straight-line
method over the expected life of the assets, as follows:

Patents — 20 years

3.12.2 Derecognition of intangible assets

An intangible asset is derecognised on disposal,
or when no future economic benefits are expected
from use or disposal. Gains or losses arising from
derecognition of an intangible asset, measured as the
difference between the net disposal proceeds and the
carrying amount of the asset are recognised in profit
or loss when the asset is derecognised.

3.13 Impairment of tangible and intangible assets

other than goodwill

At the end of each reporting period, the Group reviews
the carrying amounts of its tangible and intangible
assets to determine whether there is any indication
that those assets have suffered an impairment loss. If
any such indication exists, the recoverable amount of
the asset is estimated in order to determine the extent
of the impairment loss (if any). When it is not possible
to estimate the recoverable amount of an individual
asset, the Group estimates the recoverable amount of
the cash-generating unit to which the asset belongs.
When a reasonable and consistent basis of allocation
can be identified, corporate assets are also allocated
to individual cash-generating units, or otherwise they

Cynata Therapeutics Annual Report 2019/2020Cynata Therapeutics Annual Report 2019/2020are allocated to the smallest group of cash-generating
units for which a reasonable and consistent allocation
basis can be identified.

Intangible assets with indefinite useful lives and
intangible assets not yet available for use are tested
for impairment at least annually, and whenever there
is an indication that the asset may be impaired.

Recoverable amount is the higher of fair values less
costs to sell and value in use. In assessing value in
use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that
reflects current market assessments of the time value
of money and the risks specific to the asset for which
the estimates of future cash flows have not been
adjusted.

If the recoverable amount of an asset (or cash-
generating unit) is estimated to be less than its
carrying amount, the carrying amount of the
asset (or cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised
immediately in profit or loss, unless the relevant asset
is carried at a revalued amount, in which case the
impairment loss is treated as a revaluation decrease.

When an impairment loss subsequently reverses, the
carrying amount of the asset (or cash-generating unit)
is increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount
does not exceed the carrying amount that would
have been determined had no impairment loss been
recognised for the asset (or cash-generating unit)
in prior years. A reversal of an impairment loss is
recognised immediately in profit or loss, unless the
relevant asset is carried at a revalued amount, in
which case the reversal of the impairment loss is
treated as a revaluation increase.

3.14 Provisions

Provisions are recognised when the Group has a
present obligation (legal or constructive) as a result
of a past event, it is probable that the Group will
be required to settle the obligation, and a reliable
estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best
estimate of the consideration required to settle the
present obligation at the end of the reporting period,
taking into account the risks and uncertainties
surrounding the obligation. When a provision is
measured using the cash flows estimated to settle the
present obligation, its carrying amount is the present
value of those cash flows (where the effect of the time
value of money is material).

When some or all of the economic benefits required to
settle a provision are expected to be recovered from a
third party, a receivable is recognised as an asset if it
is virtually certain that reimbursement will be received
and the amount of the receivable can be measured
reliably.

3.15 Financial instruments

Recognition, initial measurement and derecognition

Financial assets and financial liabilities are recognised
when the Group becomes a party to the contractual
provisions of the financial instrument. Financial
instruments (except for trade receivables) are
measured initially at fair value adjusted by transaction
costs, except for those carried at ‘fair value through
profit or loss’, in which case transaction costs are
expensed to profit or loss. Where available, quoted
prices in an active market are used to determine the
fair value. In other circumstances, valuation techniques
are adopted. Subsequent measurement of financial
assets and financial liabilities are described below.

Trade receivables are initially measured at the
transaction price if the receivables do not contain a
significant financing component in accordance with
AASB 15.

Financial assets are derecognised when the
contractual rights to the cash flows from the
financial asset expire, or when the financial asset
and all substantial risks and rewards are transferred.
A financial liability is derecognised when it is
extinguished, discharged, cancelled or expired.

Notes
Notes

53
53

Significant accounting policies cont’d

Classification and measurement

FINANCIAL ASSETS

Except for those trade receivables that do not contain
a significant financing component and are measured
at the transaction price in accordance with AASB 15,
all financial assets are initially measured at fair value
adjusted for transaction costs (where applicable).

For the purpose of subsequent measurement, financial
assets other than those designated and effective as
hedging instruments are classified into the following
categories upon initial recognition:

amortised cost;

fair value through other comprehensive income
(FVOCI); and

fair value through profit or loss (FVPL).

Classifications are determined by both:

the contractual cash flow characteristics of the
financial assets; and

the Group’s business model for managing the
financial asset.

Financial assets at amortised cost

Financial assets are measured at amortised cost if the
assets meet with the following conditions (and are not
designated as FVPL);

they are held within a business model whose
objective is to hold the financial assets and
collect its contractual cash flows; and

the contractual terms of the financial assets give
rise to cash flows that are solely payments of
principal and interest on the principal amount
outstanding.

After initial recognition, these are measured at
amortised cost using the effective interest method.
Discounting is omitted where the effect of discounting
is immaterial. The Group’s cash and cash equivalents,
trade and most other receivables fall into this category
of financial instruments.

Financial assets at fair value through other
comprehensive income (Equity instruments)

5454

The Group measures debt instruments at fair value
through OCI if both of the following conditions are met:

the contractual terms of the financial asset give
rise on specified dates to cash flows that are
solely payments of principal and interest on the
principal amount outstanding; and

the financial asset is held within a business
model with the objective of both holding to collect
contractual cash flows and selling the financial
asset.

For debt instruments at fair value through OCI, interest
income, foreign exchange revaluation and impairment
losses or reversals are recognised in the statement of
profit or loss and computed in the same manner as
for financial assets measured at amortised cost. The
remaining fair value changes are recognised in OCI.

Upon initial recognition, the Group can elect to
classify irrevocably its equity investments as equity
instruments designated at fair value through OCI
when they meet the definition of equity under AASB
132 Financial Instruments: Presentation and are not
held for trading.

Financial assets at fair value through profit or loss

(FVPL)

Financial assets at fair value through profit or loss
include financial assets held for trading, financial
assets designated upon initial recognition at fair value
through profit or loss or financial assets mandatorily
required to be measured at fair value. Financial assets
are classified as held for trading if they are acquired
for the purpose of selling or repurchasing in the near
term.

FINANCIAL LIABILITIES

Financial liabilities are classified, at initial recognition,
as financial liabilities at fair value through profit or
loss, loans and borrowings, payables or as derivatives
designated as hedging instruments in an effective
hedge, as appropriate.

Financial liabilities are initially measured at fair value,
and, where applicable, adjusted for transaction costs
unless the Group designated a financial liability at fair
value through profit or loss.

Cynata Therapeutics Annual Report 2019/2020Cynata Therapeutics Annual Report 2019/2020Subsequently, financial liabilities are measured at
amortised cost using the effective interest method
except for derivatives and financial liabilities
designated at FVPL, which are carried subsequently
at fair value with gains or losses recognised in profit
or loss.

All interest-related charges and, if applicable, gains
and losses arising on changes in fair value are
recognised in profit or loss.

IMPAIRMENT

The Group assesses on a forward-looking basis
the expected credit loss associated with its debt
instruments carried at amortised cost and FVOCI. The
impairment methodology applied depends on whether
there has been a significant increase in credit risk. For
trade receivables, the Group applies the simplified
approach permitted by AASB 9, which requires
expected lifetime losses to be recognised from initial
recognition of the receivables.

3.16 Goods and services tax

Revenues, expenses and assets are recognised net of
the amount of goods and services tax (GST), except:

i. where the amount of GST incurred is not

recoverable from the taxation authority, it is
recognised as part of the cost of acquisition of an
asset or as part of an item of expense; or

ii.

for receivables and payables which are
recognised inclusive of GST.

The net amount of GST recoverable from, or payable
to, the taxation authority is included as part of
receivables or payables.

Cash flows are included in the cash flow statement
on a gross basis. The GST component of cash flows
arising from investing and financing activities which is
recoverable from, or payable to, the taxation authority
is classified within operating cash flows.

3.17 Leases

The Group as a lessee

At inception of a contract, the Group assesses if the
contract contains characteristics of or is a lease. If
there is a lease present, a right-of-use asset and a
corresponding liability are recognised by the Group
where the Group is a lessee. However, all contracts
that are classified as short-term leases (i.e. leases
with a remaining lease term of 12 months or less)
and leases of low-value assets are recognised as an
operating expense on a straight-line basis over the
term of the lease.

Initially, the lease liability is measured at the present
value of the lease payments still to be paid at the
commencement date. The lease payments are
discounted at the interest rate implicit in the lease. If
this rate cannot be readily determined, the Group uses
incremental borrowing rate.

Lease payments included in the measurement of the
lease liability are as follows:

fixed lease payments less any lease incentives;

variable lease payments that depend on the
index of the rate, initially measured using the
index or rate at the commencement date;

the amount expected to be payable by the lessee
under residual value guarantees;

the exercise price of purchase options if the
lessee if reasonably certain to exercise the
options;

lease payments under extension profits, if the
lessee is reasonably certain to exercise the
options; and

payments of penalties for terminating the lease,
if the lease term reflects the exercise of options to
terminate the lease.

The right-of-use assets comprise the initial
measurement of the corresponding lease liability, any
lease payments made at or before the commencement
date and initial direct costs. The subsequent

Notes
Notes

55
55

Significant accounting policies cont’d

4.1 Key sources of estimation uncertainty

4.1.1 Recoverability of intangible assets acquired in
a business combination

During the year, the directors reconsidered the
recoverability of the Group’s intangible assets arising
from the acquisition of Cynata Incorporated, which
is included in the consolidated statement of financial
position at 30 June 2020 with a carrying value of
$2,972,495 (2019: $3,253,227) after accounting for
amortisation.

The directors have allocated the carrying value of
the patents (before amortisation) to the different
categories of the research based on their estimates.
The resulting allocation has given rise to an
amortisation expense of $280,732 for the year ended
30 June 2020 (2019: $279,965).

The directors performed an impairment testing and
concluded that no further impairment of the intangible
assets is required for the year (2019: nil).

4.1.2 Share-based payment transactions

The Group accounts for all equity-settled share-
based payments based on the fair value of the
award on grant date. Under the fair value-based
method, compensation cost attributable to options
granted is measured at fair value at the grant date
and amortised over the vesting period. The amount
recognised as an expense is adjusted to reflect any
changes in the Group’s estimate of the options that
will eventually vest and the effect of any non-market
vesting conditions.

Share-based payment arrangements in which the
Group receives good or services as consideration
are measured at the fair value of the good or service
received, unless that fair value cannot be reliably
estimated.

measurement of the right-of-use asset is at cost less
accumulated depreciation and impairment losses.

Right-of-use assets are depreciated over the lease
term or useful life of the underlying asset, whichever is
the shortest.

Where a lease transfers ownership of the underlying
asset or the costs of the right-of-use asset reflects
that the Group anticipates exercising a purchase
option, the specific asset is depreciated over the useful
life of the underlying asset.

The Group does not currently have any leases that
would require recognition of a right-of-use asset in the
current reporting period.

3.18 Comparative amounts

When current period balances have been classified
differently within current period disclosures when
compared to prior periods, comparative disclosures
have been restated to ensure consistency of
presentation between periods.

4. Critical accounting judgements

and key sources of estimation
uncertainty

In the application of the Group’s accounting policies,
which are described in note 3, the directors of the
Company are required to make judgements, estimates
and assumptions about the carrying amounts of
assets and liabilities that are not readily apparent
from other sources. The estimates and associated
assumptions are based on historical experience and
other factors that are considered to be relevant.
Actual results may differ from these estimates.

The estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period on which the
estimate is revised if the revision affects only that
period, or in the period of the revision and future
periods if the revision affects both current and future
periods.

5656

Cynata Therapeutics Annual Report 2019/2020Cynata Therapeutics Annual Report 2019/20205. Segment information

The Group operates in one business segment, namely
the development and commercialisation of therapeutic
products. AASB 8 Operating Segments states that
similar operating segments can be aggregated to
form one reportable segment. However, none of
the operating segments currently meet any of the
prescribed quantitative thresholds, and as such
do not have to be reported separately. The Group

has therefore decided to aggregate all its reporting
segments into one reportable operating segment.

The revenue and results of this segment are those
of the Group as a whole and are set out in the
consolidated statement of profit or loss and other
comprehensive income. The segment assets and
liabilities are those of the Group and set out in the
consolidated statement of financial position.

6. Interest income and other income

Interest income

Accrued interest on directors’ loans (refer to note 14)

Other income

R&D rebate

Other income/grants (i)

(i)

This includes an amount of $4,449,632 (US$3million)

received from FUJIFILM Corporation under the graft-

versus-host-disease (GvHD) licence agreement.

2020

65,951

76,399

142,350

2019

194,532

66,019

260,551

2,510,462

1,308,552

4,501,091

7,011,553

1,308,552

Notes
Notes

57
57

7. Loss for the year

Loss for the year has been arrived at after charging the following items of expenses:

Employee benefits expenses

Wages and salaries

Superannuation expenses

Leave entitlements

Total employee benefits expenses (i)

Share-based payment expenses

Other expenses

Share register fees

Director fees

Legal costs

Investor/public relations

Corporate advisors

Other administrative expenses

Foreign tax withheld (ii)

Effect of foreign exchange

Total other expenses

(i)

Excludes amounts charged to product development

costs.

(ii)

This represents US$150,000 being the Japanese 5%

withholding tax from the option fee received from

FUJIFILM Corporation. The Group expensed the

withholding tax as recoverability of this tax is not

certain.

2020

2019

1,102,057

869,584

79,065

13,687

1,194,809

388,236

62,633

277,289

888,547

472,740

198,897

606,556

222,482

280,551

59,023

20,544

949,151

904,308

15,674

252,419

653,685

581,352

243,521

528,937

(19,881)

3,009,695

2,255,707

5858

Cynata Therapeutics Annual Report 2019/2020Cynata Therapeutics Annual Report 2019/20208. Income taxes relating to continuing operations

8.1

Income tax recognised in profit or loss

2020

2019

Current tax

Deferred tax

The income tax expense for the year can be reconciled
to the accounting loss as follows:

Loss before tax from continuing operations

Income tax expense calculated at 27.5% (2019: 27.5%)

Tax effect of R&D rebate received

2020

2019

(3,639,100)

(8,472,146)

(1,000,753)

(2,329,840)

(690,377)

(359,852)

Effect of expenses that are not deductible in determining taxable income

1,906,239

2,169,214

Effect of unused tax losses not recognised as deferred tax assets

(215,109)

520,478

8.2

Income tax recognised directly in equity

2020

2019

Current tax

Share issue costs

Deferred tax

Arising on transactions with owners:

Share issue costs deductible over 5 years

8.3 Unrecognised deferred tax assets in relation to:

Unused tax losses (revenue) for which no deferred tax assets have been

recognised (i)

Other

2020

2019

5,978,841

6,011,237

107,904

134,011

6,086,745

6,145,248

Notes
Notes

59
59

Income taxes relating to continuing operations cont’d

8.4 Unrecognised deferred tax (liabilities) in relation to:

Intangibles

Other

2020

2019

(817,436)

(894,638)

(52,294)

(85,190)

(869,730)

(979,828)

Net deferred tax assets

5,217,015

5,165,420

(i)

All unused tax losses were incurred by Australian

This benefit for tax losses will only be obtained if the

entities. The figure also includes unused carried

specific entity carrying forward the tax losses derives

forward tax losses of Cynata Australia Pty Ltd (“Cynata

future assessable income of a nature and of an amount

Australia”). Cynata Australia is the wholly owned

sufficient to enable the benefit from the deductions for

subsidiary of Cynata Inc and Cynata Inc is the wholly

the losses to be realised, and the Company complies

owned subsidiary of Cynata Therapeutics Limited.

with the conditions for deductibility imposed by tax

legislation.

9. Loss per share

Basic and diluted loss per share (cents per share)

9.1 Basic and diluted loss per share

The loss and weighted average number of ordinary
shares used in the calculation of basic earnings per
share are as follows:

2020

2019

¢ / share

(3.48)

(8.48)

2020

2019

Loss for the year attributable to owners of the Company

(3,639,100)

(8,472,146)

Weighted average number of ordinary shares for the purposes of basic and diluted

loss per share

2020

2019

104,510,253

99,913,217

6060

Cynata Therapeutics Annual Report 2019/2020Cynata Therapeutics Annual Report 2019/2020
10. Trade and other receivables

Deposits made

Other receivables

11. Intangibles

Carrying value at beginning of year (i)

Amortisation (ii)

Net book value of research and development at end of year

2020

3,568

13,397

16,965

2019

3,568

63,476

67,044

2020

2019

3,253,227

3,533,192

(280,732)

(279,965)

2,972,495

3,253,227

(i)

The carrying value at beginning of year represents

(ii) An amortisation expense of $280,732 has been

the fair value attributable to interests in research and

recognised in profit or loss (2019: $279,965). Refer

development of stem cells is due to, and in recognition

to note 3.13 for more information on the Group’s

of, the successful development activities and data

accounting policy on intangibles and amortisation.

generated by Cynata Incorporated as at the acquisition

date (1 December 2013), representing progress

toward the eventual commercialisation of the relevant

technology less accumulated amortisation.

Cost

Balance at 1 July

Additions

Disposals

Balance at 30 June

Accumulated amortisation

Balance at 1 July

Amortisation expense

Balance at 30 June

2020

2019

4,821,799

2020

2019

1,568,572

1,288,607

280,732

279,965

1,849,304

1,568,572

Notes
Notes

61
61

12. Trade and other payables

Trade payables

Accrued expenses

13. Provisions

Provisions for employee entitlements

14. Loans receivable

Balance at beginning of year (i)

Interest accrued (ii)

Repayments by related parties (iii)

Balance at end of year

2020

297,359

337,395

634,754

2019

790,964

446,019

1,236,983

2020

54,982

2019

41,295

2020

2019

1,666,019

1,800,000

76,399

66,019

(1,084,762)

(200,000)

657,656

1,666,019

(i)

At the General Meeting of shareholders held on 12

(ii)

The director loans carry a simple interest rate of 5.20%

September 2018, shareholders of Cynata approved the

per annum and have a 3-year term. Interest is paid

financial assistance and financial benefit provided to

annually and accrued daily.

Dr Ross Macdonald and Dr Stewart Washer or their

nominees as constituted by the making of a director
loan of $900,000 each to Dr Ross Macdonald and Dr

Stewart Washer solely for the purpose of funding the

exercise of 2,500,000 unlisted options each at $0.40

having an expiry date of 27 September 2018. Each

director paid $100,000 in cash on exercise of the

options . The loans provided are full recourse loans and

unsecured. At 30 June 2020, neither of the loans were

impaired.

(iii) During the financial year ended 30 June 2020, Dr

Macdonald repaid $437,962 (2019: $200,000) of his

loan which included $37,962 accrued interest and Dr

Washer repaid $646,800 (2019: $nil) of his loan which

$46,800 represents accrued interest. The accrued

interest paid by Dr Macdonald and Dr Washer is the

interest due and payable on the first anniversary of

the loans. Subsequent to the year end, Dr Washer

repaid $300,000, thereby fully discharging his loan and

Dr Macdonald repaid $100,000, leaving a balance of

$200,000.

6262

Cynata Therapeutics Annual Report 2019/2020Cynata Therapeutics Annual Report 2019/202015. Issued capital

117,124,004 fully paid ordinary shares (2019: 101,885,053)

57,165,390

47,987,688

Fully paid ordinary shares

No.

Balance at beginning of year

101,885,053

47,987,688

95,066,251

44,191,746

30 June 2020

30 June 2019

2020

2019

Exercise of share options (i)

Exercise of share options (ii)

Exercise of share options (iii)

Exercise of share options (iv)

Exercise of share options (v)

Share placement (vi)

Share placement (vii)

Issue of shares (viii)

Issue of shares (ix)

Exercise of share options (x)

Exercise of share options (xi)

Exercise of share options (xii)

Exercise of share options (xiii)

Exercise of share options (xiv)

Exercise of share options (xv)

Exercise of share options (xvi)

Exercise of share options (xvii)

Exercise of share options (xviii)

Exercise of share options (xix)

Share issue costs

50,000

200,000

700,000

100,000

83,100

51,100

200,000

700,000

102,200

107,199

5,312,085

3,187,251

569,251

341,551

8,000,014

4,800,009

224,501

206,316

(517,924)

60,000

477,373

55,000

60,000

643,500

55,000

5,000,000

2,000,000

100,000

336,429

100,000

300,000

340,000

50,000

102,200

336,429

102,200

159,000

340,000

51,100

(53,487)

Balance at end of the year

117,124,004

57,165,390

101,885,053

47,987,688

(i)

Exercise of unlisted 17 November 2019 options at

(v) Cashless exercise of unlisted 17 November 2019

$1.022 each on 2 August 2019.

options by Dr Paul Wotton, Dr Ross Macdonald and Mr

(ii)

Exercise of unlisted 17 July 2020 options at $1.00 each

Peter Webse on 11 November 2019.

during the month of August 2019.

(vi)

Issue of shares to US investors pursuant to a Placement

(iii) Exercise of unlisted 17 July 2020 options at $1.00 each

during the month of September 2019.

(iv) Exercise of unlisted 17 November 2019 options at

$1.022 each on 11 November 2019.

to raise US$2,000,000 (converted to A$ at a rate of

0.6275) at A$0.60 per share on 24 April 2020.

(vii)

Issued shares pursuant to a Placement at $0.60 per

share on 1 May 2020.

Notes
Notes

63
63

Issued capital cont’d

(viii) Issued shares pursuant to a Share Purchase Plan at

(xiv) Exercise of unlisted 17 November 2019 options at

$0.60 per share on 2 June 2020.

$1.022 each on 25 September 2018.

(ix)

Issue of shares at $0.919 per share on 10 June 2020 to

(xv) Exercise of unlisted 17 July 2020 options at $1.00 each

a third party for the completion of corporate services.

in February 2019.

(x)

Exercise of unlisted 17 July 2020 options at $1.00 each

(xvi) Exercise of unlisted 17 November 2019 options at

on 6 July 2018.

$1.022 each on 11 February 2019.

(xi) Cashless exercise of 750,000 unlisted 16 December

(xvii) Exercise of unlisted 22 February 2019 options at $0.53

2018 options on 11 July 2018 resulting in the issue

each on 22 February 2019.

of 477,373 ordinary shares at a calculate value of

(xviii) Exercise of unlisted 17 July 2020 options at $1.00 each

$643,499.

in March 2019.

(xii) Exercise of unlisted 17 July 2020 options at $1.00 each

(xix) Exercise of unlisted 17 November 2019 options at

on 16 July 2018.

$1.022 each on 7 May 2019.

(xiii) Exercise of unlisted 27 September 2018 options at

$0.40 each on 25 September 2018.

16. Reserves

16.1 Share-based payments

Balance at beginning of year

Recognition of share-based payments (i)

Balance at end of year

2020

2019

4,501,410

4,240,602

281,036

260,808

4,782,446

4,501,410

(i)

Total expenses arising from share-based payment

(ii)

Total amount of share-based payments recognised in

transactions as a result of vesting on unlisted options to

the statement of profit or loss and other comprehensive

executives and employees recognised during the year

income ($388,236) include an amount of $107,200

ended 30 June 2020 was $281,038 (2019: $260,808).

representing the value assigned to the cashless

Further information about share-based payments is set out

in note 18.

16.2 Foreign currency translation reserve

Balance at beginning of year

Exchange differences arising on translating the foreign operations

Balance at end of year

exercise of 400,000 unlisted options; 100,000 by Dr

Wotton, 200,000 by Dr Macdonald and 100,000 by Mr

Webse in accordance with the terms and conditions

of using the cashless exercise mechanism. This was

credited to issued capital.

2020

4,724

2019

4,724

Exchange differences relating to the translation
of results and net assets of the Group’s foreign
operations from their functional currencies to the
Group’s presentation currency (i.e. Australian dollars)
are recognised directly in other comprehensive income

and accumulated in the foreign currency translation
reserve.

6464

Cynata Therapeutics Annual Report 2019/2020Cynata Therapeutics Annual Report 2019/202017. Financial instruments

17.1 Capital management

The Group’s objective when managing capital is to
safeguard its ability to continue as a going concern so
that it can continue to provide returns for shareholders
and benefits to other stakeholders and to maintain an
optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the
Group may adjust the amount of dividends paid, return
capital to shareholders, issue new shares or sell assets
to reduce debt.

17.2 Categories of financial instruments

Financial assets

Cash and cash equivalents

Trade and other receivables

Loans receivable

Financial liabilities

Trade and other payables

Given the nature of the business, the Group monitors
capital on the basis of current business operations and
cash flow requirements. There were no changes in the
Group’s approach to capital management during the
year.

2020

2019

13,649,644

6,977,390

16,965

657,656

67,044

1,666,019

14,324,265

8,710,453

634,754

1,236,983

Net financial assets

13,689,511

7,473,470

The fair value of the above financial instruments
approximates their carrying values.

17.3 Financial risk management objectives

In common with all other businesses, the Group is
exposed to risks that arise from its use of financial
instruments. This note describes the Group’s
objectives, policies and processes for managing those
risks and the methods used to measure them. Further
quantitative information in respect of those risks is
presented throughout these financial statements.

There have been no substantive changes in the
Group’s exposure to financial instrument risks, its
objectives, policies and processes for managing those
risks or the methods used to measure them from
previous periods unless otherwise stated in this note.

The board has overall responsibility for the
determination of the Group’s risk management
objectives and policies and, whilst retaining ultimate
responsibility for them, it has delegated the authority
for designing and operating processes that ensure
the effective implementation of the objectives and
policies to the Group’s finance function. The Group’s
risk management policies and objectives are therefore
designed to minimise the potential impacts of these
risks on the Group where such impacts may be
material. The board receives monthly financial reports
through which it reviews the effectiveness of the
processes put in place and the appropriateness of the
objectives and policies it sets. The overall objective of
the board is to set policies that seek to reduce risk as
far as possible without unduly affecting the Group’s
competitiveness and flexibility.

Notes
Notes

65
65

Financial instruments cont’d

17.4 Market risk

17.7 Credit risk management

Credit risk refers to the risk that a counterparty will
default on its contractual obligations resulting in
financial loss to the Group. The Group has adopted
a policy of dealing with creditworthy counterparties
and obtaining sufficient collateral, where appropriate,
as a means of mitigating the risk of financial loss
from defaults. The Group only transacts with
entities that are rated the equivalent of investment
grade and above. This information is supplied by
independent rating agencies where available and, if
not available, the Group uses other publicly available
financial information and its own trading records
to rate its major customers. The Group’s exposure
and the credit ratings of its counterparties are
continuously monitored and the aggregate value of
transactions concluded is spread amongst approved
counterparties.

The credit risk on liquid funds is limited because the
counterparties are banks with high credit-ratings
assigned by international credit-rating agencies.

17.8 Liquidity risk management

Ultimate responsibility for liquidity risk management
rests with the board of directors, which has
established an appropriate liquidity risk management
framework for the management of the Group’s
short-, medium- and long-term funding and liquidity
management requirements. The Group manages
liquidity by maintaining adequate banking facilities,
by continuously monitoring forecast and actual
cash flows, and by matching the maturity profiles of
financial assets and liabilities.

Market risk for the Group arises from the use of
interest-bearing financial instruments. It is the risk
that the fair value or future cash flows of a financial
instrument will fluctuate because of changes in
interest rate (see 17.5 below).

17.5 Interest rate risk management

Interest rate risk arises on cash and cash equivalents
and receivables from related parties. The Group does
not enter into any derivative instruments to mitigate
this risk. As this is not considered a significant risk for
the Group, no policies are in place to formally mitigate
this risk.

Interest rate sensitivity analysis

The sensitivity analyses below have been determined
based on the exposure to interest rates for both
derivatives and non-derivative instruments at the end
on the reporting period.

If interest rates had been 100 basis points higher/
lower and all other variables were held constant, the
Group’s loss for the year ended 30 June 2020 would
decrease/increase by $136,496 (2019: $69,774)

17.6 Foreign currency risk management

The Group undertakes transactions denominated
in foreign currencies; consequently, exposures to
exchange rate fluctuations arise. At 30 June 2020,
the Company has cash denominated in US dollars
(US$2,818,908 (2019: US$168)). The A$ equivalent
at 30 June 2020 is $4,094,858 (2019: $239). A 5%
movement in foreign exchange rates would increase or
decrease the Group’s loss before tax by approximately
$204,743 (2019: $12). Exchange rate exposures are
managed within approved policy parameters utilising
forward foreign exchange contracts. As at 30 June
2020, the Group has not entered in any forward
foreign exchange contracts.

6666

Cynata Therapeutics Annual Report 2019/2020Cynata Therapeutics Annual Report 2019/2020Contractual cash flows

Carrying
Amount

Less than 1

month 1-3 months

3-12
months

1 year to 5
years

2020

Trade and other payables

634,754

2019

Trade and other payables

1,236,983

Total
contractual
cash flows

634,754

1,236,983

18. Share-based payments

18.1 Employee Option Acquisition plan

Options may be issued to external consultants or non-
related parties without shareholders’ approval, where
the annual 15% capacity pursuant to ASX Listing Rule
7.1 has not been exceeded. Options cannot be offered
to a director or an associate of a director except where
approval is given by shareholders at a general meeting.

Each option converts into one ordinary share of
Cynata Therapeutics Limited on exercise. The options
carry neither right to dividends nor voting rights.
Options may be exercised at any time from the date of
vesting to the date of their expiry.

The following share-based payment arrangements
were in existence at balance date:

Grant date

Option series

Number

Grant date

fair value Exercise price

Expiry date

Vesting date

1,340,557(i)

17 July 2015

100,000 (ii)

7 Aug 2017

300,000(iii)

17 May 2019

1,425,000(iv)

17 May 2019

$0.610

$0.233

$0.384

$0.304

$1.000

17 July 2020

$0.880

4 Aug 2020

$2.110

16 May 2024

$1.750

16 May 2022

Vested

Various

(i)

This represent remainder of unlisted options issued to
institutional investors and the placement agent on 17

(iv) This represents unlisted options issued to Dr Kelly
(750,000), Dr Suzanne (375,000) and Dr Atley

July 2015 pursuant to a private placement in July 2015.

(300,000) pursuant to an Employee Option Acquisition

(ii)

This represents remainder of unlisted options issued

to a third party on 7 August 2017 for provision of

corporate advisory services.

(iii) This represents unlisted options issued to Dr Brooke

pursuant to the terms of his appointment as non-

executive director. 200,000 options have vested and

the remainder 100,000 vest in 24 months from grant

date.

Plan. Dr Atley is an employee of Cynata Therapeutics

Ltd. 950,000 options have vested and the remainder

475,000 vest in 24 months from grant date.

There has been no alteration to the terms and
conditions of the above options arrangements.

Notes
Notes

67
67

Share-based payments cont’d

18.2 Fair value of share options

Option were priced using the Black-Scholes pricing
model. Expected volatility is based on the historical
share price volatility over the past 12 months from
grant date.

Where relevant, the fair value of the options has been
adjusted based on management’s best estimate for
the effects of non-transferability of the options.

There were no options granted during the year.

18.3 Movements in share options during the year

The following reconciles the share options outstanding
at the beginning and end of the year:

2020

Weighted
average
exercise price

2019*

Weighted
average
exercise price

Number of
options

No.

Balance at beginning of the year

6,615,557

1.363

11,981,986

Granted during the year

Forfeited during the year

Exercised during the year

Expired during the year

Balance at end of year

Exercisable at end of year

(1,450,000)

(2,000,000)

3,165,557

2,590,557

1.008

1.500

1.439

1.356

1,725,000

(7,091,429)

6,615,557

5,340,557

1.813

0.504

1.363

1.257

* The 2019 figures were restated to correct an error in the presentation of this disclosure. This error in presentation did not

have any impact on the statement of financial position or the statement of profit and loss and other comprehensive income.

18.4 Share options exercised during the year

The following share options were exercised during the
year (2019: 6,415,000):

Option series

Number
exercised

Exercise date

Share price at
exercise date

Granted 17 July 2015

100,000

2 August 2019

Granted 16 November 2016

Granted 17 July 2015

Granted 16 November 2016

50,000

200,000

500,000

2 August 2019

15 August 2019

27 August 2019

3 September 2019

18 September 2019

17 November 2019

$1.760

$1.625

$1.600

$1.735

$1.295

6868

Cynata Therapeutics Annual Report 2019/2020Cynata Therapeutics Annual Report 2019/202018.5 Share options outstanding at the end of the year

The share options outstanding at the end of the year
had a weighted average exercise price of $1.439
(2019: $1.363) and a weighted average remaining
contractual life of 451 days (2019: 497 days).

19. Key management personnel

The aggregate compensation made to directors and
other members of key management personnel of the
Group is set out below:

Short-term employee benefits

Post-employment benefits

Share-based payments

2020

2019

1,330,344

1,094,191

70,996

239,174

55,230

222,453

1,640,514

1,371,874

Short-term employee benefits

Share-based payments

These amounts include fees paid to non-executive
directors, accrued bonuses, salary and paid leave
benefits awarded to executive directors and key
management personnel and fees paid to entities
controlled by the directors.

Post-employment benefits

These amounts are superannuation contributions
made during the year.

20. Related party transactions

These amounts represent the expense related to the
participation of key management personnel in equity
-settled benefit schemes as measured by the fair value
of the options granted on grant date.

Further information in relation to key management
personnel remuneration can be found in the
remuneration report contained in the directors’ report.

20.1 Entities under the control of the Group

The Group consists of the parent entity, Cynata
Therapeutics Limited and its wholly-owned Ireland-
based subsidiary Cynata Therapeutics Ireland Limited
and US-based subsidiary Cynata Incorporated, which
in turns controls 100% of Cynata Australia Pty Ltd, the
non-operating entity of Cynata Incorporated.

Balances and transactions between the parent entity
and its subsidiaries, which are related parties of the

entity, have been eliminated on consolidation and are
not disclosed in this note.

20.2 Key management personnel

Any person(s) having authority and responsibility for
planning, directing and controlling the activities of
the entity, directly or indirectly, including any director
(whether executive or otherwise) of that entity, are
considered key management personnel.

Notes
Notes

69
69

Related party transactions cont’d

For details of disclosures relating to key management
personnel, refer to the remuneration report contained
in the directors’ report, note 18 and note 19.

Mr Webse’s services are provided by Platinum
Corporate Secretariat Pty Ltd (“Platinum”). Mr Webse
is the sole director of Platinum Corporate. Company

secretarial fees paid to Platinum are disclosed in the
remuneration report.

Transactions with related parties are on normal
commercial terms and conditions no more favourable
than those available to other parties unless otherwise
stated.

21. Cash and cash equivalents

For the purposes of the consolidated statement of
cash flows, cash and cash equivalents include cash
on hand and in banks. Cash and cash equivalents
at the end of the reporting period as shown in

the consolidated statement of cash flows can be
reconciled to the related items in the consolidated
statement of financial position as follows:

Cash and bank balances

21.1 Reconciliation of loss for the year to net cash flows from

operating activities

Cash flow from operating activities

Loss for the year

Adjustments for:

Share-based payments

Amortisation expenses

Accrued income

Effects of exchange rate changes on the balance of cash held in foreign currencies

Movements in working capital

Decrease in trade and other receivables and prepayments

(Decrease)/increase in trade and other payables

Increase in annual leave provisions

2020

2019

13,649,644

6,977,390

2020

2019

(3,639,100)

(8,472,146)

388,236

280,732

(76,399)

274,013

152,063

(780,911)

13,687

904,308

279,965

(66,019)

(12)

40,668

533,615

20,544

Net cash outflows from operating activities

(3,387,679)

(6,759,077)

7070

Cynata Therapeutics Annual Report 2019/2020Cynata Therapeutics Annual Report 2019/202022. Contingent liabilities and contingent assets

The directors are not aware of any significant
contingencies at balance date other than a
requirement for the payment of royalties pursuant to

certain licence agreements should future revenues
exceed predetermined thresholds.

23. Commitments for expenditure

The Group has entered into a number of agreements
related to research and development activities. As at
30 June 2020, under these agreements, the Company
is committed to making payments over future periods,
as follows:

During the period 1 July 2020 – 30 June 2021

During the period 1 July 2021 – 30 June 2022

During the period 1 July 2022 – 30 June 2023

Where commitments are denominated in foreign
currencies, the amounts have been converted to
Australian dollars based on exchange rates prevailing
as at 30 June 2020.

24. Remuneration of auditors

Auditor of the Group

Audit and review of the financial statements

The auditor of the Group is Stantons International
Audit and Consulting Pty Ltd.

AU$

1,149,863

352,356

2020

48,522

2019

46,641

Notes
Notes

71
71

25. Parent entity information

The accounting policies of the parent entity, which
have been applied in determining the financial
information shown below, are the same as those
applied in the consolidated financial statements. Refer

to note 3 for a summary of significant accounting
policies relating to the Group.

2020

2019

13,850,690

7,330,499

5,548,308

6,556,672

19,398,998

13,887,171

634,754

54,982

689,736

1,236,983

41,295

1,278,278

18,709,262

12,608,893

57,165,390

47,987,688

4,782,446

4,501,410

(43,238,574)

(39,880,205)

18,709,262

12,608,893

(3,358,368)

(8,192,181)

Financial position

Assets

Current assets

Non-current assets

Total assets

Liabilities

Current liabilities

Provisions

Total liabilities

Net assets

Equity

Issued capital

Reserves

Accumulated losses

Total equity

Financial performance

Loss for the year

Commitments and contingencies

There were no material commitments or contingencies
at the reporting date for the parent company except
for those mentioned in note 22 and note 23 above.

7272

Cynata Therapeutics Annual Report 2019/2020Cynata Therapeutics Annual Report 2019/202026. Subsidiaries

Details of the Company’s subsidiaries at the end of the
reporting period are as follows:

Name of subsidiary

Principal activity

Place of
incorporation

Cynata Incorporated

Holds licences with WARF for core IPs

USA

Proportion of
ownership interest and
voting power held by
the Group

2020

100%

2019

100%

Cynata Therapeutics Ireland

Legal representative of Cynata in the

Limited

European Economic Area

Cynata Australia Pty Ltd (i)

Non-operating subsidiary from date of

reconstruction

Ireland

100%

Australia

100%

(i)

Cynata Australia Pty Ltd is a wholly owned subsidiary

of Cynata Incorporated.

27. Events after the reporting period

On 20 July 2020, the Company announced the expiry
of 1,340,557 unlisted options, having an exercise price
of $1.00 each and an expiry date of 17 Jul 2020.

On 5 August 2020, the Company announced the
expiry of 100,000 unlisted options, having an exercise
price of $0.88 each and an expiry date of 4 August
2020.

On 6 August 2020, Dr Stewart Washer repaid
$300,000 of his director loan, thereby fully discharging
his loan.

On 14 August 2020, Dr Ross Macdonald repaid
$100,000 of his director loan, leaving a balance of
$200,000.

28. Approval of financial statements

The financial statements were approved by the board
of directors and authorised for issue on 25 August
2020.

Notes
Notes

73
73

Corporate Governance Statement

This Corporate Governance Statement (“Statement”) outlines

the key aspects of Cynata Therapeutics Limited (‘Cynata’ or

‘the Company’) governance framework and main governance

practices. The Company’s charters, policies, and procedures

are regularly reviewed and updated to comply with law and

best practice. These charters and policies can be viewed on

Cynata’s website located at www.cynata.com.

This Statement is structured with reference to the
Australian Securities Exchange Corporate Governance
Council’s (“the Council’s”) “Corporate Governance
Principles and Recommendations 3rd Edition” (“the
Recommendations”). The Board of Directors has
adopted the Recommendations to the extent that is
deemed appropriate considering current the size and
operations of the Company. Therefore, considering
the size and financial position of the Company, where
the Board considers that the cost of implementing a
recommendation outweighs any potential benefits,
those recommendations have not been adopted. The
Company will be reporting against the Corporate
Governance Principles and Recommendations 4th
Edition for the financial year ending 30 June 2021.

This Statement was approved by the Board of
Directors and is current as at 25 August 2020.

Principle 1: Lay solid foundations for
management and oversight

Roles of the Board & Management

The Board is responsible for evaluating and setting the
strategic direction for the Company, establishing goals
for management and monitoring the achievement of
these goals. The Managing Director is responsible
to the Board for the day-to-day management of the
Company.

The principal functions and responsibilities of the
Board include, but are not limited to, the following:

Appointment, evaluation and, if necessary,
removal of the Managing Director, any other
executive directors, the Company Secretary and
the Chief Financial Officer (if applicable) and
approval of their remuneration;

Determining, in conjunction with management,
corporate strategy, objectives, operations, plans
and approving and appropriately monitoring
plans, new investments, major capital and
operating expenditures, capital management,
acquisitions, divestitures and major funding
activities;

Establishing appropriate levels of delegation to
the Managing Director to allow the business to
be managed efficiently;

Approval of remuneration methodologies and
systems;

z Monitoring actual performance against planned
performance expectations and reviewing
operating information at a requisite level
to understand at all times the financial and
operating conditions of the Company;

z Monitoring the performance of senior

management, including the implementation of
strategy and ensuring appropriate resources are
available;

Identifying areas of significant business risk
and ensure that the Company is appropriately
positioned to manage those risks;

Overseeing the management of safety,

7474

Cynata Therapeutics Annual Report 2019/2020Cynata Therapeutics Annual Report 2019/2020 z

occupational health and environmental issues;

Satisfying itself that the financial statements of
the Company fairly and accurately set out the
financial position and financial performance of
the Company for the period under review;

Satisfying itself that there are appropriate
reporting systems and controls in place to assure
the Board that proper operational, financial,
compliance, risk management and internal
control processes are in place and functioning
appropriately;

Ensuring that appropriate internal and external
audit arrangements are in place and operating
effectively;

Authorising the issue of any shares, options,
equity instruments or other securities within the
constraints of the Corporations Act and the ASX
Listing Rules; and

Ensuring that the Company acts legally and
responsibly on all matters and assuring itself that
the Company has adopted, and that its practice
is consistent with, a number of guidelines
including:

−

Code of Conduct;

Continuous Disclosure Policy;

Diversity Policy;

Performance Evaluation Policy;

Procedures for Selection and Appointment
of Directors;

Remuneration Policy;

Risk Management and Internal Compliance
and Control Policy;

Securities Trading Policy; and

Shareholder Communications Policy.

Subject to the specific authorities reserved to the
Board under the Board Charter, the Board has
delegated to the Managing Director responsibility
for the management and operation of Cynata. The
Managing Director is responsible for the day-to-day
operations, financial performance and administration
of Cynata within the powers authorised to him from
time-to-time by the Board. The Managing Director

may make further delegation within the delegations
specified by the Board and is accountable to the Board
for the exercise of those delegated powers.

Further details of Board responsibilities, objectives
and structure are set out in the Board Charter on the
Cynata Website.

Board Committees

The Board considers that the Company is not currently
of a size, nor are its affairs of such complexity to
justify the formation of separate committees at this
time including audit, risk, remuneration or nomination
committees, preferring at this stage to manage the
Company through the full Board of Directors. The
Board assumes the responsibilities normally delegated
to the audit, risk, remuneration and nomination
Committees.

If the Company’s activities increase, in size, scope
and nature, the appointment of separate committees
will be reviewed by the Board and implemented if
appropriate.

Board Appointments

The Company undertakes comprehensive reference
checks prior to appointing a director, or putting
that person forward as a candidate to ensure that
person is competent, experienced, and would not be
impaired in any way from undertaking the duties of
director. The Company provides relevant information
to shareholders for their consideration about the
attributes of candidates together with whether the
Board supports the appointment or re-election.

The terms of the appointment of a non-executive
director, executive directors and senior executives
are agreed upon and set out in writing at the time of
appointment.

The Company Secretary

The Company Secretary is accountable directly to the
Board, through the Chairman, on all matters to do
with the proper functioning of the Board, including
agendas, Board papers and minutes, advising
the Board and its Committees (as applicable) on

Corporate Governance Statement
Corporate Governance Statement

75
75

Corporate Governance Statement cont’d

governance matters, monitoring that the Board and
Committee policies and procedures are followed,
communication with regulatory bodies and the ASX
and statutory and other filings.

Diversity

The Board has adopted a Diversity Policy which
provides a framework for the Company to establish
and achieve measurable diversity objectives, including
in respect to gender, age, ethnicity and cultural
diversity. The Diversity Policy allows the Board to set
measurable gender diversity objectives (if considered
appropriate) and to assess annually both the
objectives (if any have been set) and the Company’s
progress towards achieving them.

The Board considers that, due to the size, nature
and stage of development of the Company, setting
measurable objectives for the Diversity Policy at
this time is not appropriate. The Board will consider
setting measurable objectives as the Company
increases in size and complexity.

The participation of women in the Company at the
date of this report is as follows:

z Women employees in the Company — 40%

z Women in senior management positions — 33%

z Women on the Board — 0%

The Company’s Diversity Policy is available on its
website.

Board & Management Performance Review

On an annual basis, the Board conducts a review of its
structure, composition and performance.

The annual review includes consideration of the
following measures:

comparing the performance of the Board against
the requirements of its Charter;

assessing the performance of the Board over
the previous 12 months having regard to the
corporate strategies, operating plans and the
annual budget;

7676

reviewing the Board’s interaction with
management;

reviewing the type and timing of information
provided to the Board by management;

reviewing management’s performance in
assisting the Board to meet its objectives; and

identifying any necessary or desirable
improvements to the Board Charter.

The method and scope of the performance evaluation
will be set by the Board and may include a Board
self-assessment checklist to be completed by each
Director. The Board may also use an independent
adviser to assist in the review.

The Chairman has primary responsibility for
conducting performance appraisals of Non-Executive
Directors, in conjunction with them, having particular
regard to:

contribution to Board discussion and function;

degree of independence including relevance of
any conflicts of interest;

availability for and attendance at Board meetings
and other relevant events;

contribution to Company strategy;

z membership of and contribution to any Board

committees; and

suitability to Board structure and composition.

The Board conducts an annual performance
assessment of the Managing Director against agreed
key performance indicators.

Board and management performance reviews were
conducted during the financial year in accordance
with the above processes.

Independent Advice

Directors have a right of access to all Company
information and executives. Directors are entitled,
in fulfilling their duties and responsibilities, to obtain
independent professional advice on any matter
connected with the discharge of their responsibilities,
with prior notice to the Chairman, at Cynata’s expense.

Cynata Therapeutics Annual Report 2019/2020Cynata Therapeutics Annual Report 2019/2020Principle 2: Structure the board to add value

Board Composition

During the financial year and to the date of this report
the Board was comprised of the following members:

Dr Geoff Brooke

Non-Executive Chairman (Non-Executive Director from 17 May 2019 to 18 August
2020. Non-Executive Chairman from 18 August 2020);

Dr Ross Macdonald

Managing Director (appointed 1 August 2013);

Dr Paul Wotton

Non-Executive Director (Non-Executive Director from 8 June 2016 to 28 February
2017. Non-Executive Chairman from 28 February 2017 to 18 August 2020. None-
Executive Director from 18 August 2020);

Dr Stewart Washer

Non-Executive Director (appointed 1 August 2013);

Mr Peter Webse

Non-Executive Director (appointed 18 May 2012; resigned 30 June 2020);

Dr Darryl Maher

Non-Executive Director (appointed 16 June 2020).

The Board currently consists of one Executive Director,
being the Managing Director, and four Non-Executive
Directors.

Cynata has adopted a definition of ‘independence’
for Directors that is consistent with the
Recommendations.

The Board, at the date of this statement is comprised
of a majority of independent Directors. However, prior
to the appointment of Dr Darryl Maher on 16 June
2020 and the resignation of Mr Peter Webse on 30
June 2020, the Company did not have a majority of
independent Directors. Dr Paul Wotton, Dr Geoffrey
Brooke and Dr Darryl Maher are the current directors
considered to be independent. Dr Ross Macdonald is
not considered to be an independent director by virtue
of him being an executive of the Company. Dr Stewart
Washer is not considered to be an independent
director by virtue of the fact that he was a former
executive of the Company. Mr Peter Webse, who
resigned on 30 June 2020 was not considered to be
an independent director by virtue of the fact the he
has a contractual arrangement to provide company
secretarial services to the Company.

Board Selection Process

The Board considers that a diverse range of skills,
backgrounds, knowledge and experience is required in
order to effectively govern Cynata. The Board believes
that orderly succession and renewal contributes to
strong corporate governance and is achieved by
careful planning and continual review.

The Board is responsible for the nomination and
selection of directors. The Board reviews the size and
composition of the Board regularly and at least once
a year as part of the Board evaluation process. The
Board has a skills matrix covering the competencies
and experience of each member. When the need for a
new director is identified, the required experience and
competencies of the new director are defined in the
context of this matrix and any gaps that may exist.

Generally, a list of potential candidates is identified
based on these skills required and other issues such as
geographic location and diversity criteria. Candidates
are assessed against the required skills and on their
qualifications, backgrounds and personal qualities. In
addition, candidates are sought who have a proven
track record in creating security holder value and the
required time to commit to the position.

Corporate Governance Statement
Corporate Governance Statement

77
77

Corporate Governance Statement cont’d

An employee that breaches the Code of Conduct
may face disciplinary action including, in the cases
of serious breaches, dismissal. If an employee
suspects that a breach of the Code of Conduct has
occurred or will occur, he or she must report that
breach to the Company Secretary. No employee will
be disadvantaged or prejudiced if he or she reports
in good faith a suspected breach. All reports will be
acted upon and kept confidential.

Principle 4: Safeguard integrity in
corporate reporting

The Board as a whole fulfills the functions normally
delegated to the Audit Committee as detailed in the
Audit Committee Charter.

The Board is responsible for the initial appointment
of the external auditor and the appointment of a new
external auditor when any vacancy arises. Candidates
for the position of external auditor must demonstrate
complete independence from the Company through
the engagement period. The Board may otherwise
select an external auditor based on criteria relevant
to the Company’s business and circumstances. The
performance of the external auditor is reviewed on an
annual basis by the Board.

The Board receives regular reports from management
and from external auditors. It also meets with the
external auditors as and when required.

The external auditors attend Cynata’s AGM and are
available to answer questions from security holders
relevant to the audit.

Prior approval of the Board must be gained for non-
audit work to be performed by the external auditor.
There are qualitative limits on this non-audit work
to ensure that the independence of the auditor is
maintained.

There is also a requirement that the audit partner
responsible for the audit not perform in that role for
more than five years.

Induction of New Directors and Ongoing
Development

New Directors are issued with a formal Letter
of Appointment that sets out the key terms
and conditions of their appointment, including
Director’s duties, rights and responsibilities, the time
commitment envisaged, and the Board’s expectations
regarding involvement with any Committee work.

An induction program is in place and new
Directors are encouraged to engage in professional
development activities to develop and maintain the
skills and knowledge needed to perform their role as
Directors effectively.

Principle 3: Act ethically and
responsibly

The Company has implemented a Code of Conduct,
which provides guidelines aimed at maintaining
high ethical standards, corporate behaviour and
accountability within the Company.

All employees and Directors are expected to:

respect the law and act in accordance with it;

z maintain high levels of professional conduct;

respect confidentiality and not misuse Company
information, assets or facilities;

avoid real or perceived conflicts of interest;

act in the best interests of shareholders;

by their actions contribute to the Company’s
reputation as a good corporate citizen which
seeks the respect of the community and
environment in which it operates;

perform their duties in ways that minimise
environmental impacts and maximise workplace
safety;

exercise fairness, courtesy, respect, consideration
and sensitivity in all dealings within their
workplace and with customers, suppliers and the
public generally; and

act with honesty, integrity, decency and
responsibility at all times.

7878

Cynata Therapeutics Annual Report 2019/2020Cynata Therapeutics Annual Report 2019/2020CEO and CFO (Equivalent) Certifications

The Board has received certifications from the CEO
and CFO (Equivalent) in connection with the financial
statements for Cynata for the Reporting Period. The
certifications state that the declaration provided in
accordance with Section 295A of the Corporations
Act as to the integrity of the financial statements is
founded on a sound system of risk management and
internal control which is operating effectively.

Principle 5: Make timely and
balanced disclosure

The Company has a Continuous Disclosure Policy
which outlines the disclosure obligations of the
Company as required under the ASX Listing Rules
and Corporations Act. The policy is designed to
ensure that procedures are in place so that the market
is properly informed of matters which may have
a material impact on the price at which Company
securities are traded.

The Board considers whether there are any matters
requiring disclosure in respect of each and every item
of business that it considers in its meetings. Individual
Directors are required to make such a consideration
when they become aware of any information in the
course of their duties as a Director of the Company.

The Company is committed to ensuring all investors
have equal and timely access to material information
concerning the Company.

The Board has designated the Company Secretary
as the person responsible for communicating with
the ASX. The Chairman, Managing Director and the
Company Secretary are responsible for ensuring that:

a) Company announcements are made in a timely

manner, that announcements are factual and
do not omit any material information required
to be disclosed under the ASX Listing Rules and
Corporations Act; and

b) Company announcements are expressed in a

clear and objective manner that allows investors
to assess the impact of the information when
making investment decisions.

Principle 6: Respect the rights of
security holders

The Company recognises the value of providing
current and relevant information to its shareholders.

The Company respects the rights of its shareholders
and to facilitate the effective exercise of those rights
the Company is committed to:

communicating effectively with shareholders
through releases to the market via ASX, the
company website, information mailed to
shareholders and the general meetings of the
Company;

giving shareholders ready access to clear and
understandable information about the Company;
and

z making it easy for shareholders to participate in

general meetings of the Company.

The Company also makes available a telephone
number and email address for shareholders to make
enquiries of the Company. These contact details are
available on the “contact us” page of the Company’s
website.

Shareholders may elect to, and are encouraged to,
receive communications from Cynata and Cynata’s
securities registry electronically.

The Company maintains information in relation to its
Constitution, governance documents, Directors and
senior executives, Board and committee charters,
annual reports and ASX announcements on the
Company’s website.

Corporate Governance Statement
Corporate Governance Statement

79
79

Corporate Governance Statement cont’d

Principle 7: Recognise and manage
risk

The Board is committed to the identification,
assessment and management of risk throughout
Cynata’s business activities.

The Board is responsible for the oversight of the
Company’s risk management and internal compliance
and control framework. The Company does not have
an internal audit function. Responsibility for control
and risk management is delegated to the appropriate
level of management within the Company with the
Managing Director having ultimate responsibility
to the Board for the risk management and internal
compliance and control framework. Cynata has
established policies for the oversight and management
of material business risks.

Cynata’s Risk Management and Internal Compliance
and Control Policy recognises that risk management
is an essential element of good corporate governance
and fundamental in achieving its strategic and
operational objectives. Risk management improves
decision making, defines opportunities and mitigates
material events that may impact security holder value.

Cynata believes that explicit and effective risk
management is a source of insight and competitive
advantage. To this end, Cynata is committed to the
ongoing development of a strategic and consistent
enterprise wide risk management program,
underpinned by a risk conscious culture.

Cynata accepts that risk is a part of doing business.
Therefore, the Company’s Risk Management and
Internal Compliance and Control Policy is not designed
to promote risk avoidance. Rather Cynata’s approach
is to create a risk conscious culture that encourages
the systematic identification, management and
control of risks whilst ensuring we do not enter into
unnecessary risks or enter into risks unknowingly.

Cynata assesses its risks on a residual basis; that is, it
evaluates the level of risk remaining and considering
all the mitigation practices and controls. Depending
on the materiality of the risks, Cynata applies varying
levels of management plans.

8080

The Board has required management to design
and implement a risk management and internal
compliance and control system to manage Cynata’s
material business risks. It receives regular reports
on specific business areas where there may exist
significant business risk or exposure. The Company
faces risks inherent to its business, including economic
risks, which may materially impact the Company’s
ability to create or preserve value for security holders
over the short, medium or long term. The Company
has in place policies and procedures, including
a risk management framework (as described in
the Company’s Risk Management and Internal
Compliance and Control Policy), which is developed
and updated to help manage these risks. The Board
does not consider that the Company currently has
any material exposure to environmental or social
sustainability risks.

The Company’s process of risk management and
internal compliance and control includes:

identifying and measuring risks that might
impact upon the achievement of the Company’s
goals and objectives, and monitoring the
environment for emerging factors and trends that
affect those risks;

formulating risk management strategies to
manage identified risks, and designing and
implementing appropriate risk management
policies and internal controls; and

z monitoring the performance of, and improving
the effectiveness of, risk management systems
and internal compliance and controls, including
regular assessment of the effectiveness of risk
management and internal compliance and
control.

The Board reviews the Company’s risk management
framework at least annually to ensure that it continues
to effectively manage risk.

Management reports to the Board as to the
effectiveness of Cynata’s management of its material
business risks on at each Board meeting.

Cynata Therapeutics Annual Report 2019/2020Cynata Therapeutics Annual Report 2019/2020Cynata’s executive remuneration policies and
structures and details of remuneration paid to
directors and senior managers are set out in the
Remuneration Report.

Non-Executive Directors receive fees (including
statutory superannuation where applicable) for their
services, the reimbursement of reasonable expenses
and, in certain circumstances options. They do not
receive any termination or retirement benefits, other
than statutory superannuation.

The maximum aggregate remuneration approved by
shareholders for Non-Executive Directors is $300,000
per annum. The Directors set the individual Non-
Executive Directors fees within the limit approved by
shareholders.

The total fees paid to Non-Executive Directors during
the reporting period were $277,292.

Executive directors and other senior executives
are remunerated using combinations of fixed
and performance-based remuneration. Fees and
salaries are set at levels reflecting market rates and
performance-based remuneration is linked directly to
specific performance targets that are aligned to both
short and long-term objectives.

In accordance with the Company’s Securities Trading
Policy, participants in an equity-based incentive
scheme are prohibited from entering into any
transaction that would have the effect of hedging or
otherwise transferring the risk of any fluctuation in the
value of any unvested entitlement in the Company’s
securities to any other person.

Further details in relation to the company’s
remuneration policies are contained in the
Remuneration Report, within the Directors’ report.

Principle 8: Remunerate fairly and
responsibly

The Board as a whole fulfils the functions normally
delegated to the Remuneration Committee as detailed
in the Remuneration Committee Charter.

Cynata has implemented a Remuneration Policy
which was designed to recognise the competitive
environment within which Cynata operates and also
emphasise the requirement to attract and retain
high calibre talent in order to achieve sustained
improvement in Cynata’s performance. The overriding
objective of the Remuneration Policy is to ensure
that an individual’s remuneration package accurately
reflects their experience, level of responsibility,
individual performance and the performance of
Cynata.

The key principles are to:

link executive reward with strategic goals and
sustainable performance of Cynata;

apply challenging corporate and individual key
performance indicators that focus on both short-
term and long-term outcomes;

z motivate and recognise superior performers with

fair, consistent and competitive rewards;

remunerate fairly and competitively in order to
attract and retain top talent;

recognise capabilities and promote opportunities
for career and professional development; and

through employee ownership of Cynata shares,
foster a partnership between employees and
other security holders.

The Board determines the Company’s remuneration
policies and practices and assesses the necessary and
desirable competencies of Board members. The Board
is responsible for evaluating Board performance,
reviewing Board and management succession plans
and determines remuneration packages for the CEO,
Non-Executive Directors and senior management
based on an annual review.

Corporate Governance Statement
Corporate Governance Statement

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ASX Additional Information

As at 6 October 2020

Substantial Shareholders

The names of the substantial shareholders disclosed
to the Company as substantial shareholders as at
6 October 2020 are:

Name

FIL Investment Management (Hong Kong) Limited

Fujifilm Corporation

Distribution of Ordinary Shares