Cynata Therapeutics Limited Annual Report 2021

FY2021 Annual Report · Cynata Therapeutics Limited

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Appendix 4E

Preliminary final report

1. Details of reporting period
Name of entity
ABN
Reporting Period
Previous Corresponding Period
Presentation Currency

Cynata Therapeutics Limited (the Company)
98 104 037 372
Year ended 30 June 2021
Year ended 30 June 2020
Australian Dollars ($)

2. Results for announcement to the market

Key information

Revenues from ordinary activities
Loss from ordinary activities after
tax attributable to members

Net loss for the period
attributable to members
Net tangible asset/(deficiency)
per share

12 months ended
30 June 2021
$

12 months ended
30 June 2020
$

Increase/
(decrease)
%

1,688,351

7,153,903

(76.40%)

Amount
change
$
5,465,552

7,689,683

3,639,100

111.31%

4,050,583

7,689,683

3,639,100

111.31%

4,050,583

0.179

0.118

3. Consolidated statement of profit or loss and other comprehensive income

Refer to attached consolidated financial statements.

4. Consolidated statement of financial position

Refer to attached consolidated financial statements.

5. Consolidated statement of cash flows

Refer to attached consolidated financial statements.

6. Consolidated statement of changes in equity

Refer to attached consolidated financial statements.

7. Dividends/Distributions

No dividends declared in current or prior year.

8. Details of dividend reinvestment plans

Not applicable.

Page | 1

9. Details of entities over which control has been gained or lost during the period

Not applicable.

10. Details of associate and joint venture entities

Not applicable.

11. Any other significant information needed by an investor to make an informed
assessment of the Company’s financial performance and financial position

Refer to attached consolidated financial statements.

12. Foreign entities

Refer to attached consolidated financial statements.

13. Commentary on results for period and explanatory information

Cynata Therapeutics Limited (“Cynata” or “the Company”) and its controlled entities (the Group)
incurred a net loss from operations for the financial year ended 30 June 2021 of $7,689,683 (2020:
$3,639,100). At 30 June 2021, the Group had a cash balance of $26,716,670 (2020: $13,649,644)
and net assets of $28,373,153 (2020: $16,791,104). The net cash outflow from operating activities
for the financial year was $5,163,109 (2020: $3,387,679). Cynata announced the commencement of
the Phase 3 clinical trial of CYP-004 for osteoarthritis in November 2020 which is currently recruiting
440 patients with osteoarthritis of the knee at study centres in Sydney and Tasmania. This landmark
trial is designed to assess the efficacy of Cymerus™ MSCs compared to placebo on clinical outcomes
and knee joint structure in patients with osteoarthritis of the knee, over a two-year period. This is
supported by preclinical research which suggests that MSCs can exert several important effects
relevant to osteoarthritis. Following commencement in August 2020, Cynata received ethics
committee approval in March 2021 to expand the recruitment criteria of the MEND (MEseNchymal
coviD-19) clinical trial to include patients admitted to an ICU with respiratory failure of any cause.
The expansion is expected to accelerate recruitment into the trial by increasing the pool of eligible
patients with COVID-19 no longer a limiting requirement for eligibility. Cynata achieved a significant
milestone by treating the first patient in the trial in May 2021. In June, Cynata received approval
from the Central Adelaide Local Health Network Human Research Ethics Committee to commence a
clinical trial in patients with DFU. The Phase 1 DFU study will be a randomised, controlled trial
investigating the safety, tolerability, and efficacy of Cymerus MSC product CYP-006TK, in adult
patients with DFU, over a treatment period of 4 weeks, with a 24-week evaluation period. Cynata
announced the execution of a worldwide exclusive licence agreement with TekCyte Pty Ltd
(TekCyte) in June 2021, which enables the use of TekCyte’s polymer-coated wound dressing
technology in clinical trials and commercial development. TekCyte, a leading manufacturer of
advanced biomedical coatings, has developed a unique and scalable wound dressing technology
that can facilitate the delivery of MSCs directly to DFUs. The licence is for the life of the relevant
TekCyte patents and involves a signing fee and capped, success-based milestone payments.
Planning for a potential clinical trial in IPF is underway, supported by positive preclinical results
which demonstrate the efficacy of Cymerus MSCs in rodent models of IPF. The Company is also
investigating a potential clinical trial in renal transplantation.

During the year, Cynata successfully raised ~A$18.3m (gross) in an institutional placement,
entitlement offer and shortfall placement, led by a A$10m investment by cornerstone healthcare
investor BioScience Managers. Cynata also received a A$1.391m R&D Tax Incentive Refund for the
2019/2020 financial year from the Australian Government. For more information, refer to the
attached consolidated financial statements.

Page | 2

14. Audit

This report is based on accounts which have been audited and the audit report is included in the
attached consolidated financial statements.

Dr. Ross Macdonald
Managing Director/Chief Executive Officer

30 August 2021

Page | 3

Annual Report
2020/2021

Corporate Directory

Cynata Therapeutics Limited
ACN 104 037 372

Board of Directors

Auditors

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 Office and
Place of Business

Level 3, 100 Cubitt Street
Cremorne, Victoria 3121

Postal Address

PO Box 7165
Hawthorn North, Victoria 3122

Tel: +61 3 7067 6940
Email: info@cynata.com

Website

www.cynata.com

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 2021

Contents

Key Highlights 2020-2021

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

Cynata Therapeutics Annual Report 2020/2021Key Highlights 2020-2021

Commenced
and advanced
enrolment in the
Phase 3 trial in
osteoarthritis

Expanded
recruitment criteria
and commenced
enrolment of
patients with
respiratory failure
in the MEND
clinical trial

Ethics approval
received for a
clinical trial in
patients with
diabetic foot
ulcers (DFU)

Completed Phase
1 graft-versus-
host disease
(GvHD) clinical trial
two-year follow-
up with positive
efficacy results

Signed a licence
agreement with
TekCyte Pty Ltd
(‘TekCyte’) for their
wound dressing
technology

Cynata’s Cymerus™
MSC technology
featured in a
publication in the
prestigious Nature
Medicine journal

Continued successful
results from
pre‑clinical efficacy
studies across
multiple therapeutic
indications

Progress toward
expanding the
clinical pipeline
in potential
therapeutic targets
including idiopathic
pulmonary fibrosis
(IPF) and renal
transplantation

Strengthened the
Cynata Board with
the appointment of
Dr. Geoff Brooke
as Independent
Chairman

Raised ~$18.3m
(gross) in capital to
accelerate clinical
development led by
a A$10m investment
from BioScience
Managers

Strong financial
position with net
assets of ~$28m as
at June 30, 2021

Key Highlights 2020-2021

Chairman’s Letter

Dear Shareholders,

I am pleased to present to you Cynata Therapeutics Limited

(“Cynata”) Annual Report for the period ended 30 June 2021.

Since my appointment as Chairman
of Cynata in August last year, it has
been encouraging to see Cynata
flourish, with several clinical milestones
achieved this year. Cynata continues to
advance its position in the regenerative
medicine sector, reinforced by the
addition of new indications to the
clinical pipeline and the introduction of
highly successful healthcare investor
BioScience Managers, to the register
as our largest institutional shareholder.
The achievements this year are a
testament to the exceptional team that
has managed to prudently navigate
through several unforeseeable
circumstances.

Unique platform technology
addresses current challenges of MSC
manufacturing

The market for mesenchymal
stem cell (MSC) products is highly
attractive, with a growing body
of evidence supporting the role of
MSCs in treating a range of diseases.

As more MSC-based therapies
approach commercialisation,
attention has turned toward the
production challenges associated with
manufacturing commercial quantities
using conventional processes and
the reported consequent diminution
of potency of the finished product.
These challenges have also drawn
commentary from regulatory bodies
such as the US FDA, particularly in
relation to manufacturing consistency.

Cynata has a leading technology
in the MSC market, with a unique
manufacturing platform that can
produce essentially limitless quantities
of uniform MSCs from a single blood
donation. Our proprietary Cymerus™
technology leverages the powerful
characteristics of induced pluripotent
stem cells (iPSCs) – a Nobel Prize
winning discovery - which can be
expanded indefinitely to provide
a highly consistent and robust
manufacturing starting material. The
expanded iPSCs are then differentiated

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 2020/2021into MSCs via the Cymerus process, without ever
having to secure donors and donor-derived tissue
again. Notably, Cynata is the most advanced company
worldwide in the development of iPSC-derived cell
therapies. The Cymerus MSC manufacturing process
actively addresses current challenges associated
with conventional methods of producing MSC-based
therapies including cell heterogeneity arising from
a reliance on multiple donors and manufacturing
quantity limits.

Advancing clinical trials and clinical development

Cynata also has two advanced clinical trials with
recruitment underway: a Phase 3 trial in osteoarthritis
(OA) of the knee, which is one of the largest OA trials
ever undertaken with MSCs; and a trial in acute
respiratory distress syndrome, each of which cements
the Company’s position as a leader in the regenerative
medicine space. In addition, Cynata was granted
ethics committee approval to commence a clinical
trial in diabetic foot ulcers, which is expected to begin
later this year. Cynata’s diverse and broad pipeline
is grounded in solid preclinical foundations that
demonstrate the efficacy and safety of Cymerus MSCs.
Cynata is also progressing several other indications
in the pipeline, including idiopathic pulmonary fibrosis
and renal transplantation, both of which have large
market opportunities and supportive preclinical data.

Accelerating commercial development

Cynata is dedicated to recruiting exceptional and
experienced individuals, which is evidenced by the
recent appointment of Dr. Jolanta Airey as Chief
Medical Officer, subsequent to the financial year.
Dr. Airey’s 25 years of experience in the successful
development and commercialisation of novel biological
agents will be important as we look to extend product
development activities internationally and build
shareholder value.

We continue to liaise with Fujifilm on the licensed
GvHD program, while actively exploring other
licensing and partnership agreements as we look
towards commercialisation opportunities for our
other portfolio products. The worldwide exclusive
licence agreement signed this year with biomedical

coating manufacturer TekCyte for the proposed
trial in diabetic foot ulcers enables exclusive use of
TekCyte’s unique polymer-coated dressings in this
clinical trial and, if clinical development is successful,
ultimately to commercialisation. These agreements
and partnerships will help drive valuable commercial
outcomes for Cynata.

Strong financial foundations

Cynata is in a robust financial position, with $26.7m
in cash as at 30 June 2021. In December 2020/
January 2021, the Company raised $18.3m (gross)
in an institutional placement, entitlement offer and
shortfall placement, led by a $10m investment by
cornerstone healthcare investor, BioScience Managers.
This successful transaction provides strong validation
of Cynata’s technology and clinical pipeline, allowing
us to be well positioned to advance new and existing
therapeutic targets. Further, our lead phase 3
indication (in osteoarthritis) is funded by an Australian
Government National Health and Medical Research
Council project grant, while the Company retains full
commercial rights, providing further financial flexibility
and confidence in the future.

On behalf of the Board, I want to thank our dedicated
employees, who work tirelessly in their efforts to
advance shareholder value.

And in conclusion, I would like to thank all our
shareholders for your continued support as we
advance our Cymerus™ technology, developing
scalable cellular therapeutic products to treat serious
and debilitating diseases.

Yours sincerely,

Dr Geoff Brooke
Chairman

Chairman’s Letter

CEO Letter

Dear Shareholders,

Reflecting on the last 12 months, the world has shown the resilience

of humanity and our ability to emerge out of a devastating global

pandemic through medical science. This human accomplishment

exemplifies why Cynata exists, and what we as a company attempt

to do: help overcome diseases by creating new effective and safe

therapeutic products.

This is no small task, but we are an
ambitious company working hard to
achieve our goals. Pleasingly, this past
year has put us several steps closer,
as we are progressing multiple clinical
trials, targeting further indications and
are well funded to achieve shareholder
value generating catalysts. I am
excited for our future, as the Company
is in a strong position to execute its
objectives, drive commercial outcomes
and build shareholder value.

Commenced multiple clinical trials,
with recruitment underway

We are pleased to have initiated the
SCUlpTOR (“Stem Cells as a symptom-
and strUcture-modifying Treatment for
medial tibiofemoral OsteoaRthritis”)
Phase 3 clinical trial of CYP-004 for
osteoarthritis earlier this financial year,

representing a significant milestone
for the Company and for our partner
and trial sponsor, the University
of Sydney. The trial, funded by an
Australian Government grant, is the
world’s first Phase 3 clinical trial for
an iPSC-based cell therapy and one of
the largest MSC trials in osteoarthritis.
This landmark trial showcases our
unique MSC manufacturing platform,
highlighting our patented Cymerus™
process to deliver consistent MSCs.
The osteoarthritis trial aims to recruit
440 patients, validating our leading
position in the stem-cell industry.

Earlier this financial year we
commenced the MEND (“MEseNchymal
coviD-19”) trial initially in COVID-19
patients admitted to an ICU with
respiratory failure, with a total of 24
adult patients expected to participate

I am excited for

our future, as the

company is in a

strong position to

execute its objectives

to drive commercial

outcomes and build

shareholder value.

Cynata Therapeutics Annual Report 2020/2021in the trial. We have now expanded the recruitment
criteria to include patients with respiratory distress
from any cause in a bid to capture more applicable
participants and accelerate trial completion.
Preclinical research shows MSCs can exert a number
of important beneficial effects relevant to specific
conditions associated with respiratory distress: ARDS,
CRS and sepsis, including reducing the excessive
inflammatory reactions associated with these
diseases. The market opportunity is highly attractive,
valued at over $8b1. We are expediting completion
of the MEND trial, bearing in mind the unpredictable
nature of COVID-19 outbreaks and community steps
to mitigate spread, and the seasonality of other
respiratory illnesses. We currently expect completion
by the end of this calendar year.

Progressed a new indication, leveraging a
worldwide exclusive licence agreement

In June, we were delighted to receive approval from
the Central Adelaide Local Health Network Human
Research Ethics Committee to commence a clinical
trial in Diabetic Foot Ulcers (DFU). This achievement
represents a significant milestone towards initiating
patient recruitment into the trial. In further validation
of our technology, we have signed a worldwide
exclusive agreement with leading biomedical coating
manufacturer TekCyte, to leverage their unique
polymer coated dressings to enable the delivery of
our MSCs to patient wounds. We are very excited by
this agreement as it gives us even greater confidence
in a successful trial outcome. The TekCyte technology
will be incorporated into the Cynata product being
investigated in the proposed DFU clinical trial.

Well positioned for further development

Following the execution of the worldwide exclusive
licence agreement with FUJIFILM for our GvHD
product last financial year, Cynata continues to
collaborate on the planning and start-up activities in
preparation for a proposed Phase 2 clinical trial. The
company remains in active discussions with FUJIFILM,

noting that responsibility for development and
commercialisation lie with FUJIFILM.

While we continue to leverage our Cymerus platform
technology to expand our pipeline and continue
with our trials, we are also looking to the future in
a bid to drive greater shareholder value through
partnering activities. We are actively exploring
licensing and partnership agreements throughout
the world under strict criteria for partnership:
expertise, capability, experience, commitment and
scale. The pre-clinical and clinical achievements in
FY21, coupled with the endorsement arising from the
investment by BioScience Managers and our licensing
deal with FUJIFLM puts us in a good negotiating
position. A strong cash balance and the fact that
our osteoarthritis trial is funded by external sources,
allows us to judiciously assess business opportunities
to ensure we have the right partner(s) on the right
commercial terms.

Lastly, I would like to thank the Board for its support
throughout this year and sharing its experience,
encouragement and governance. A special note to
Geoff Brooke, who has taken on the role of Chairman
with aplomb, offering great advice and insights from
his broad experience. With the support of the Board
and our dedicated staff, I firmly believe Cynata is well
placed to thrive in FY22 and beyond.

Yours sincerely,

Dr Ross Macdonald
Chief Executive Officer & Managing Director

1 Vasomune Therapeutics company announcement, 2018 (reflects total global market opportunity in 2018); GlobalData 2017

(reflects total global market opportunity in 2026); GlobeNewswire, 2020.

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 2021.

In order to comply with the provisions of the

Corporations Act 2001, the directors report as follows:

Cynata Therapeutics Annual Report 2020/2021Information 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 34 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 Ltd), a UK-based specialty
pharmaceuticals company and Vice
President, Corporate Development
for Stiefel Laboratories Inc, then 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 30 years of
CEO and board experience in medical
technology and biotech companies.
He is currently the Chairman of Emyria
Limited (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 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 2020/2021Directorships 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

Geoff Brooke

Company

Acrux Limited

Actinogen Medical Limited

Ross Macdonald

Stewart Washer

None

Orthocell Limited

Zelira Therapeutics Limited

Botanix Pharmaceuticals Limited

Emyria Limited

Paul Wotton

Vericel Corporation

Veloxis Pharmaceuticals A/S

Darryl Maher

None

Directors’ shareholdings

Period of directorship

Since Jun 2016

Since Mar 2017

n/a

Since 2014

2016-2019

Since Feb 2019

Since Mar 2018

Since 2015

2016-2020

n/a

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 shares

Share options

Geoff Brooke

Ross Macdonald

Stewart Washer

Paul Wotton

Darryl Maher

No.

77,000

2,070,050

2,224,856

175,775

No.

2,300,000

1,500,000

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.

Directors’ Report

Directors’ Report (cont’d)

Options granted to directors and senior management

During and since the end of the financial year, an aggregate of 4,400,000 options were granted to the following
key management personnel (2020: nil):

Key management
personnel

Number of
options granted

Geoff Brooke

Ross Macdonald

Stewart Washer

Paul Wotton

Darryl Maher

2,000,000

1,500,000

300,000

Issuing entity

Cynata Therapeutics Ltd

Company Secretary

Dividends

Number of
ordinary shares
under option

2,000,000

1,500,000

300,000

Mr Peter 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 director of Governance Corporate
Pty Ltd, a company specialising in providing company
secretarial, corporate governance and corporate
advisory services. Mr Webse acts as Company
Secretary for a number of ASX listed biotech and
technology companies.

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.

1212

Cynata Therapeutics Annual Report 2020/2021Shares 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

Cynata Therapeutics Limited1

17 May 2019

300,000

Cynata Therapeutics Limited2

17 May 2019

1,425,000

Cynata Therapeutics Limited3

19 Aug 2020

1,250,000

Cynata Therapeutics Limited4

14 Sept 2020

100,000

Cynata Therapeutics Limited5

24 Nov 2020

4,500,000

Class of
shares

Ordinary

Exercise
price of
option

$2.11

$1.75

$0.97

$1.28

$0.97

Expiry date
of options

16 May 2024

16 May 2022

18 Aug 2024

13 Sept 2024

29 Nov 2025

1 Unlisted options issued to Dr Brooke on 17 May 2019

4 Unlisted options issued to Mrs Gupta on 14 September

pursuant to the terms of his appointment as non-

2020 pursuant to an Employee Option Acquisition Plan.

executive director.

Mrs Gupta is an employee of Cynata and was appointed

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

on 7 September 2020.

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

5 Unlisted options issued to Dr Brooke (2,000,000), Dr

pursuant to an Employee Option Acquisition Plan.

Macdonald (1,500,000), Dr Washer (300,000), Dr Wotton

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

and was appointed on 3 August 2020.

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.

(300,000), Dr Maher (300,000) and Mr Webse (100,000)

on 30 November 2020 pursuant to an Employee Option

Acquisition Plan.

There were no shares or interests issued during
or since the end of the financial year as a result of
exercise of an option (2020: 1,450,000).

Directors’ Report

13
13

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, 12 board meetings were held.

Directors

Geoff Brooke

Ross Macdonald

Stewart Washer

Paul Wotton

Darryl Maher

Board of Directors

Attended

Held

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 for the
financial year ended 30 June 2021 has been received
and is included on page 36 of this annual report.

1414

Cynata Therapeutics Annual Report 2020/2021Directors’ Report

15
15

Operating and Financial Review

Principal activities

Operational update

The Group’s principal activities throughout 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 that facilitates
large-scale manufacture of highly uniform, potent
MSCs from a single donor and a single donation,
enabling the development of therapeutic stem cell
products. This compares favourably to conventional
MSC technologies that require multiple donors and
multiple donations. Cynata’s Cymerus technology has
the potential to revolutionise the manufacture of MSC
based therapeutic products for commercial use.

Operating results

The consolidated loss of the Group for the financial
year, after accounting for an R&D refund of
$1,391,067 (2020: $2,510,462) and providing
for income tax, amounted to $7,689,683 (2020:
$3,639,100). Further discussion on the Group’s
operations is provided below:

Substantial progress made in the Phase 3
osteoarthritis trial

Cynata announced the commencement of the Phase 3
clinical trial of CYP-004 for osteoarthritis in November
2020 which is currently recruiting 440 patients with
osteoarthritis of the knee at study centres in Sydney
and Tasmania. This landmark trial is designed to
assess the efficacy of Cymerus MSCs compared to
placebo on clinical outcomes and knee joint structure
in patients with osteoarthritis of the knee, over a
two-year period. This is supported by preclinical
research which suggests that MSCs can exert several
important effects relevant to osteoarthritis.

The trial is sponsored by the University of Sydney
and is funded by the Australian Government National
Health and Medical Research Council (NHMRC) project
grant. Esteemed Professor David Hunter, the Florance
and Cope Chair of Rheumatology and the Professor
of Medicine at the University of Sydney is leading
the trial.

1616

Cynata Therapeutics Annual Report 2020/2021Cynata’s CYP-004 MSC product has potential in
the treatment of this progressively degenerative
and incurable disorder that has a market estimate
of ~US$11.6bn1. Trial results are expected in 2024,
with timing dependent on various factors including
COVID-19 restrictions.

Enrolment and patient treatment commenced in
MEND respiratory failure trial

Following commencement in August 2020, Cynata
received ethics committee approval in March 2021
to expand the recruitment criteria of the MEND
(MEseNchymal coviD-19) clinical trial to include
patients admitted to an ICU with respiratory failure of
any cause. The expansion is expected to accelerate
recruitment into the trial by increasing the pool of
eligible patients with COVID-19 no longer a limiting
requirement for eligibility.

Cynata achieved a significant milestone by treating
the first patient in the trial in May 2021. The open-
label randomised controlled clinical trial design aims
to investigate the safety and early efficacy of Cymerus
MSCs in 24 adult patients with respiratory failure.
The trial will involve 12 critically infected patients
randomised to receive Cymerus MSC infusions, in
addition to standard of care, and 12 patients who will
be randomised to the control group and will receive
current standard of care only. Given the seasonal
nature of the incidence of respiratory distress and the
highly uncertain situation around COVID-19 outbreaks
in Australia at present, Cynata is currently unable to
provide firm guidance on when trial results might be
expected. However, it is currently estimated that the
trial will complete late in calendar 2021. The trial is
fully funded by Cynata’s existing cash reserves.

Cynata has identified acute respiratory distress
syndrome (ARDS), sepsis, and cytokine release
syndrome (CRS) as targets relevant to the outcome
of this trial, as they present significant unmet medical
needs, and are manifestations of the excessive
inflammatory responses typically seen in acutely

1 Persistence Market Research 2018 research report:

“Osteoarthritis Treatment Market: Global Industry Analysis

(2012-2016) and Forecast (2017-2025).

Review of operations
Key Highlights

Commenced and advanced enrolment in the
Phase 3 osteoarthritis trial

Expanded the recruitment criteria and
commenced enrolment of patients with
respiratory failure in the MEND clinical trial

Progressed toward commencing a clinical
trial in patients with diabetic foot ulcers
(DFU), with ethics approval received and
Datapharm engaged as Clinical Research
Organisation (CRO)

Signed a worldwide exclusive licence
agreement with TekCyte Pty Ltd (‘TekCyte’) to
utilise advanced wound dressing technology
for the planned trial in DFU

Cynata’s proprietary Cymerus MSC
technology was the subject of an article
published in, and featured on the front cover
of, the prestigious Nature Medicine journal,
providing further recognition of Cynata’s
technology platform

Expanding the clinical pipeline, with
high priority targets identified, including
idiopathic pulmonary fibrosis (IPF) and renal
transplantation

Strengthened the Cynata Board to support
Cynata’s advancing clinical development
and commercialisation pathways with
the appointment of Dr. Geoff Brooke as
Independent Chairman

Raised capital to accelerate clinical
development, with ~$18.3m (gross)
raised via an institutional placement and
non-renounceable entitlement offer, led
by a A$10m investment from BioScience
Managers

Operating and Financial Review

17
17

Operating and Financial Review (cont’d)

unwell patients. Cynata’s pre-clinical studies have
shown that these conditions can potentially be
improved with Cymerus MSCs which modulate the
inflammatory reaction associated with these diseases.
The combined market opportunity of ARDS, sepsis,
and CRS is estimated to be over US$8bn2.

Advancing a clinical trial in patients with
diabetic foot ulcers (DFU)

In June, Cynata received approval from the Central
Adelaide Local Health Network Human Research
Ethics Committee to commence a clinical trial in
patients with DFU. The Phase 1 DFU study will be a
randomised, controlled trial investigating the safety,
tolerability, and efficacy of Cymerus MSC product CYP-
006TK, in adult patients with DFU, over a treatment
period of 4 weeks, with a 24-week evaluation period.

DFU represents a significant unmet medical need,
with an estimated market value approaching
US$10b3. Cynata’s MSCs have demonstrated efficacy
in a preclinical model of DFU that was conducted
independently by the Cooperative Research Centre
for Cell Therapy Manufacturing, establishing a solid
preclinical foundation for the proposed DFU trial.

Cynata also engaged leading Australian full-service
CRO Datapharm Australia, to assist in the conduct
and management of the DFU trial. Patient enrolment
for the DFU trial is expected to commence late
in calendar year 2021, subject to regulatory and
administrative approvals, and completion of trial start
up activities, which are presently underway. The trial
will be funded from Cynata’s available cash reserves.

The trial will take place under the leadership of
Professor Robert Fitridge, who is Professor of Vascular
Surgery at the University of Adelaide, and Consultant
Vascular Surgeon with the Central Adelaide Local
Health Network.

Signed a worldwide exclusive licence agreement
with TekCyte

Cynata announced the execution of a worldwide
exclusive licence agreement with TekCyte in June
2021, which enables the use of TekCyte’s polymer-
coated wound dressing technology in clinical trials and
commercial development.

TekCyte, a leading manufacturer in advanced
biomedical coatings, has developed a unique and
scalable wound dressing technology that can facilitate
the delivery of MSCs directly to DFUs. The licence is for
the life of the relevant TekCyte patents and involves
a signing fee and capped, success-based milestone
payments.

Studies utilising TekCyte’s dressing to apply Cymerus
MSCs in a pre-clinical model of diabetic wounds
have demonstrated promising efficacy, especially in
comparison to other methods, and support further
clinical development. The wound dressing technology
will be utilised in Cynata’s planned clinical trial in DFU.

Cynata’s proprietary Cymerus MSC technology
published in Nature Medicine

Cynata’s proprietary Cymerus MSC technology
was the subject of a publication in, and featured on
the front cover of, the prestigious medical journal,
Nature Medicine, in November 2020. The cover’s
illustration (by Patton’d Studios, Melbourne) was
of an induced pluripotent stem cell (iPSC) derived
mesenchymoangioblast colony, which represents
a crucial step in the Cymerus MSC manufacturing
process. The issue also includes a paper describing
the successful Phase 1 GvHD trial results, in which
all safety and efficacy endpoints were met, providing
further recognition of Cynata’s ground-breaking
research in the wider field of regenerative medicine.

2 Vasomune Therapeutics company announcement, 2018 (reflects total global market opportunity in 2018); GlobalData 2017

(reflects total global market opportunity in 2026); GlobeNewswire, 2020.

3 Transparency Market Research, 2020 (Reflects global DFU treatment market by 2027).

1818

Cynata Therapeutics Annual Report 2020/2021Expanding the clinical pipeline, with
further potential targets including IPF and
renal transplantation

Cynata is investigating further clinical trials in
additional indications underpinned by promising
results from studies in relevant preclinical disease
models and significant commercial opportunities.

Clinical trial planning for IPF is underway, supported
by positive preclinical results which demonstrate the
efficacy of Cymerus MSCs in rodent models of IPF. The
disease is incurable and causes extensive scarring of
the lungs, often progressing to respiratory failure.

The Company is also investigating a potential
clinical trial in renal transplantation. Donor kidney
transplantation is a high-risk procedure that is
associated with significant morbidity. Cymerus
MSC treatment in a preclinical transplant model
demonstrated immunoregulatory effects expected
to prevent or reduce kidney transplant rejection,
providing a promising outlook for future clinical trials.
Existing treatment options for both indications have
limited effects on disease progression and survival
rates, representing significant unmet medical needs.

A schematic of the Company’s product development
pipeline is shown below.

Operating and Financial Review

19
19

Operating and Financial Review (cont’d)

Strengthened Cynata Board

Outlook

Dr. Geoff Brooke was appointed as independent
Chairman of Cynata’s Board of Directors on 18 August
2020, following the commencement of the Phase 3
clinical trial in osteoarthritis. Preceding Chairman,
Dr. Paul Wotton, remained on the Board as a Non-
Executive Director.

Dr Brooke’s substantial experience in healthcare
and venture capital continues to be invaluable to
the Cynata Board. He was the founder and former
Managing Director of two leading life sciences venture
capital firms, GBS Ventures and Medvest Inc, and
has been the lead investor of numerous healthcare
companies.

Raised capital to accelerate clinical development

Cynata raised A$15m in a successful institutional
placement in December 2020. This was led by a
A$10m investment from major healthcare investor
BioScience Managers, via the BioScience Managers
Translation Fund I. The endorsement by BioScience
Managers provides outstanding validation of Cynata’s
technology platform and commercial potential.
Following the placement, Cynata raised an additional
~A$3.3m via a 1 for 15 non-renounceable pro rata
entitlement offer and partial placement of shortfall
shares.

Proceeds will be used to fund the expanded clinical
pipeline, including the proposed DFU trial, and trial
planning activities in IPF and renal transplantation.
Cynata is well placed to fund all planned trials.

Cynata also received a ~A$1.39m R&D Tax Incentive
Refund for the 2019/2020 financial year from the
Australian Government as part of the program
that refunds up to 43.5% of eligible expenditure on
research and development.

Cynata has two active clinical trials underway; a
Phase 3 trial in osteoarthritis and the MEND trial in
patients with respiratory failure. The planned clinical
trial in DFU is expected to commence in 4Q CY21,
upon completion of trial start up activities and relevant
approvals.

Cynata is in active discussions with its license partner
FUJIFILM on the planning and start-up activities
toward a proposed Phase 2 clinical trial in GvHD,
with details to be announced at the appropriate
time. The Company intends to continue its business
development activities and has active engagement
with entities that have expressed a commercial
interest in accessing Cynata’s technologies.

Cynata will look to assess opportunities to partner
or initiate the approved Phase 2 trial in Critical Limb
Ischemia (CLI), which is currently on hold, when the
COVID-19 pandemic stabilises in Australia and the
UK. The pandemic has significantly impeded potential
recruitment for the CLI trial, due to the age and
underlying health issues of the typical CLI patient.

Cynata is also focused on optimising and expanding
manufacturing capabilities, while continuing to
progress its US regulatory strategy. The diverse
clinical pipeline, and potential commercial pathways
place the Company in a strong position for growth and
execution of its strategies to build shareholder value.

Financial position

The net assets of the Group have increased by
$11,582,049 to $28,373,153 in 2021 (2020:
$16,791,104).

Changes in state of affairs

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

2020

Cynata Therapeutics Annual Report 2020/2021Subsequent events

On 26 July 2021, Cynata announced the appointment
of Dr Jolanta Airey as Chief Medical Officer (CMO). Dr
Airey is an accomplished biopharmaceutical executive
and physician with broad international experience in
the successful development and commercialisation of
pharmaceutical products, including novel biological
agents.

Dr Airey is expected to join Cynata from CSL Limited in
October 2021, where she currently holds the position
of Director, Translational Development. Her previous
experience includes Clinical Development Physician
at Seqirus (a subsidiary of CSL), and a range of
medical positions in various biopharma and research
companies. Her appointment adds in-house medical
knowledge and experience to Cynata’s clinical trial
activities and strategic management of its late-stage
clinical product portfolio.

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

Cynata is well positioned in the regenerative
medicine space, with its proprietary therapeutic
stem cell platform technology Cymerus providing
the unique ability to consistently manufacture high
quality MSC’s at scale from a single donor and
from a single donation. This process overcomes
many of the manufacturing challenges associated
with conventional methods, placing the company
in a highly favourable position to capitalise on the
growing commercial potential of therapeutic MSCs.
The Company continues to focus on investigating the
safety and efficacy of its MSC product and optimising
and expanding manufacturing capabilities to prepare
for commercialisation.

The clinically relevant and favourable outcomes from
our Phase 1 trial in GvHD provides the Company with
the confidence to pursue further clinical trials across a
number of indications, and potentially bypass Phase 1
in number of key target disease areas.

The licence transaction with FUJIFILM supports the
potential for value to be generated through further
commercial agreements around cell therapeutic
products in other indications which are available to
be licensed, such as CLI and osteoarthritis. Cynata
continues to advance its partner outreach program
and progress discussions with potential partners.

Environmental regulations

The Group’s operations are not subject to significant
environmental regulation under the Australian
Commonwealth or State law.

Operating and Financial Review

21
21

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

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

30 June 2021.

1. Key management personnel

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.

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

2222

Cynata Therapeutics Annual Report 2020/2021

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 Brooke

Dr Stewart Washer

Dr Paul Wotton

Dr Darryl Maher

Executive director

Dr Ross Macdonald

Position

Non-executive Chairman

Non-executive director

Position

Managing Director/Chief Executive Officer

Other key management personnel

Position

Dr Kilian Kelly

Dr Suzanne Lipe

Chief Operating Officer

Vice President, Partner Engagement

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.

Remuneration Report (audited)

23
23

Remuneration Report (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:

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.

2424

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
one Vice President, Partner Engagement. As set out
below, total remuneration costs for the 2021 financial
year were $2,932,641 up from $1,640,514 for the
previous financial year.

(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 and do not normally participate in
schemes designed for the remuneration of executives.

Non-executive directors receive a superannuation
guarantee contribution required by the government,
which was 9.5% in the 2020/2021 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.

(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 2020/2021Executive 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 2021.

Remuneration Report (audited)

25
25

Remuneration Report (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.

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.

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

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 following table sets out summary information
about the Group’s earnings and movements in
shareholder wealth for the five (5) years to 30 June
2021:

2626

Cynata Therapeutics Annual Report 2020/2021Other income

Net loss before tax

Net loss after tax

30 June 2021 30 June 2020 30 June 2019 30 June 2018 30 June 2017

1,688,351

7,153,903

1,569,103

1,518,060

1,843,105

7,689,683

3,639,100

8,472,146

4,566,134

4,553,536

7,689,683

3,639,100

8,472,146

4,566,134

4,553,536

Share price at start of year

Share price at end of year

Basic/diluted loss per share (cents)

0.610

0.505

5.90

1.245

0.610

3.48

1.365

1.245

8.48

0.61

1.365

5.04

0.31

0.61

5.69

4. Remuneration of key management personnel

Short‑term employee benefits

Salary &
fees

Cash
bonus

Others

102,903

2021

Directors

G. Brooke

R. Macdonald1

361,250

70,104

79,511

S. Washer

P. Wotton

D. Maher

Other KMP

K. Kelly1

S. Lipe1, 2

Total

50,228

62,233

50,228

300,000

56,550

63,485

180,822

34,452

2,213

1,107,664

161,106

145,209

Post-
employment
benefits

Super-
annuation

25,000

4,772

25,000

19,310

78,854

Share-based
payment

Options

Total

Value of
options as
proportion of
remuneration

511,446

614,349

370,981

906,846

74,195

129,195

74,195

136,428

74,195

129,195

292,268

737,303

42,528

279,325

1,439,808

2,932,641

83.25%

40.91%

57.43%

54.38%

57.43%

39.64%

15.23%

49.10%

1 Amounts in ‘Other’ represent annual leave and long service leave

2 For the period 1 July 2020 to 31 December

(Dr Macdonald and Dr Kelly only) accrued in accordance with AASB

2020, Dr Lipe’s employment was temporarily

119 Employee Benefits. The amounts of $70,104 for Dr Macdonald,

varied to full time basis. As from 1 January

$56,550 for Dr Kelly and $34,452 for Dr Lipe under ‘Cash bonus’

2021, Dr Lipe’s employment reverted to part

represent bonus determined and accrued for the financial year 2021.

time basis.

During the 2021 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.

Remuneration Report (audited)

27
27

Remuneration Report (cont’d)

Short‑term employee benefits

Salary &
fees

Cash
bonus

2020

P. Wotton

110,000

Other

R. Macdonald1

361,250

69,525

(1,609)

S. Washer

P. Webse2,3

G. Brooke

D.Maher4

Other KMP

K. Kelly1

S. Lipe1,5

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%

1 Amounts in ‘Other’ represent annual leave accrued in

3 Resigned 30 June 2020.

accordance with AASB 119 Employee Benefits. The

amount of $69,525 for Dr Macdonald, $39,000 for Dr Kelly

and $22,440 in ‘Cash bonus’ represents bonus determined

and accrued for the financial year 2020.

4 Appointed 16 June 2020.

5 Effective 1 April 2020 and for a period of 9 months, Dr

Lipe’s employment was temporarily varied to full time

2 Amount in ‘Other’ represents company secretarial fees

basis.

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.

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.

2828

Cynata Therapeutics Annual Report 2020/2021(a) Bonuses and share-based payments granted as
compensation for the current financial year

(i) Bonuses

Cash bonuses of $69,525 to Dr Macdonald, $39,000
to Dr Kelly and $22,440 to Dr Lipe were paid during
the financial year. These amounts were accrued in the
2020 accounts.

A performance bonus entitlement of $70,104 for Dr
Macdonald, $56,550 for Dr Kelly and $34,452 for Dr
Lipe were accrued in the 2021 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 2021.

No other cash bonuses were granted to key
management personnel during 2021.

(ii) Employee share option plan

Cynata Therapeutics Limited operates an ownership-
based scheme for executives and senior employees
of the Group. In accordance with the provisions of
the plan, as approved by shareholders at a previous
annual general meeting, executives and senior
employees may be granted options to purchase
parcels of ordinary shares.

Each employee share option converts to one ordinary
share of Cynata Therapeutics Limited on exercise.
No amounts are paid or payable by the recipient
on receipt of the option. The options carry neither
rights to dividends nor voting rights. Options may be
exercised at any time from the date of vesting to the
date of their expiry.

Terms and conditions of share-based payment
arrangements affecting remuneration of key
management personnel in the current financial year or
future financial years:

Grant date

Expiry date

Exercise price

Grant date
fair value

Vesting date

Option
series

2**

3***

4****

Number

300,000

17 May 2019

16 May 2024

1,425,000

17 May 2019

16 May 2022

1,250,000

19 Aug 2020

18 Aug 2024

4,500,000

24 Nov 2020

29 Nov 2025

$2.110

$1.750

$0.970

$0.3838

$0.3038

$0.4152

$0.4927

Vested

Various

* Unlisted options issued to Dr Brooke pursuant to the terms

of his appointment as non-executive director.

** Unlisted options issued to employees of the Company
pursuant to an Employee Option Acquisition Plan.

*** Unlisted options issued to employees of the Company
pursuant to an Employee Option Acquisition Plan.

**** Unlisted options issued to Directors and Company

Secretary pursuant to an Employee Option Acquisition
Plan.

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.

Remuneration Report (audited)

29
29

Remuneration Report (cont’d)

Details of share-based payments granted as
compensation to key management personnel during
the current financial year:

Name

Option series

No. granted

No. vested

G. Brooke

R. Macdonald

S. Washer

P. Wotton

D. Maher

K. Kelly

S. Lipe

2,000,000

1,500,000

300,000

1,000,000

100,000

388,885

291,662

58,331

305,556

30,556

No share options were exercised by key management
personnel during the year (2020: 500,000).

During the financial year

% of grant
vested

% of grant
forfeited

19.4%

30.6%

n/a

3030

Cynata Therapeutics Annual Report 2020/20215. Key terms of employment contracts

Director/Employee

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.

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.

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.

Dr Paul Wotton

Effective 18 August 2020, Dr

n/a

Wotton reverted to a non-

executive director with a fee

of $55,000 per annum.

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.

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.

Remuneration Report (audited)

31
31

Remuneration Report (cont’d)

Director/Employee

Remuneration / Fees

Performance-based
remuneration criteria

Notice period

Dr Darryl Maher

A fee of $55,000 per annum

n/a

inclusive of statutory

superannuation.

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

Effective 1 July 2021, a salary

Eligible to participate in the

The contract may be

of $340,000 per annum

Company’s equity-based

terminated by either party

including superannuation.

incentive scheme and an

providing 3 months’ notice.

During the financial year

incentive payment of up to

2021, Dr Kelly was paid

20% of the annual salary

a salary of $325,000

and based on attainment

per annum including

of agreed performance

superannuation.

indicators.

The Company may (but is

not bound to) pay additional

performance-based

remuneration.

Dr Suzanne Lipe

Effective 1 July 2021, a

Eligible to participate in the

The contract may be

salary of $184,000 per

Company’s equity-based

terminated by either party 3

annum inclusive of statutory

incentive scheme and an

months’ notice.

superannuation. Dr Lipe is

incentive payment of up to

employed on a part-time (0.8

20% of the annual salary

FTE) basis. As from 1 April

and based on attainment

2020 and for a period of 9

of agreed performance

months ended 31 December

indicators.

2020, Dr Suzanne’s

employment was temporarily

varied to full time basis

with a salary of $220,000

per annum inclusive of

superannuation. As from

1 January 2021, Dr Lipe’s

employment reverted back to

part time (0.8 FTE) basis.

3232

Cynata Therapeutics Annual Report 2020/20216. 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:

Balance at
1/7/2020

323,336

334,320

Interest
charged

11,055

1,539

Allowance
for doubtful
receivables

Balance at
30/6/2021

Highest loan
balance during
the period (ii)

207,978

324,660

335,645

Name

R. Macdonald (i)

S. Washer (i)

(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
2021, Dr Macdonald repaid $126,413 (2020: $437,962)

of his loan which included $26,413 accrued interest and
Dr Washer made final repayment of $335,859 (2020:
$646,800) of his loan which in included $35,859 accrued
interest. The accrued interest paid by Dr Macdonald
and Dr Washer is the interest due and payable on each
anniversary of the loans. At 30 June 2021, the loan
outstanding from Dr Macdonald is not impaired and has
been classified under current assets as it is expected to be
settled within 12 months.

(ii) Includes interest.

7. Key management personnel equity holdings

Fully paid ordinary shares of Cynata Therapeutics Limited

Balance at
1 July 2020

Received on
exercise of
options

Shares
acquired

Shares
disposed

Balance at
resignation

Balance at
30 June 2021

2021

G. Brooke

R. Macdonald

S. Washer

P. Wotton

D. Maher

K. Kelly

S. Lipe

No.

77,000

2,070,050

2,224,856

175,775

494,013

No.

77,000

2,070,050

2,224,856

175,775

494,013

Remuneration Report (audited)

33
33

Remuneration Report (cont’d)

Fully paid ordinary shares of Cynata Therapeutics Limited

Received on
exercise of
options

No.

20,775

41,550

120,775

Balance at
1 July 2019

No.

155,000

2020

P. Wotton

R. Macdonald

2,528,500

S. Washer

G. Brooke

D. Maher (i)

P. Webse (ii)

K. Kelly

S. Lipe

2,724,856

220,000

494,013

(i) Appointed 16 June 2020

(ii) Resigned 30 June 2020

Shares
acquired

Shares
disposed

Balance at
resignation

Balance at
30 June 2020

No.

77,000

No.

(500,000)

No.

340,775

175,775

2,070,050

2,224,856

77,000

494,013

Share options of Cynata Therapeutics Limited

Balance
at 1 July
2020

Granted
as comp-
ensation Exercised

Balance at
resignation

Balance
at 30
June 2021

Balance
vested at
30 June
2021

Vested and
exercisable

Options
vested
during
year

2021

No.

G. Brooke

300,000

2,000,000

R. Macdonald

S. Washer

P. Wotton

D. Maher

K. Kelly

S. Lipe

1,500,000

300,000

750,000

1,000,000

375,000

100,000

2,300,000

688,885

388,885

1,500,000

291,662

300,000

58,331

300,000

58,331

300,000

58,331

1,750,000

1,055,556

305,556

475,000

405,556

30,556

3434

Cynata Therapeutics Annual Report 2020/2021Share options of Cynata Therapeutics Limited

Balance
at 1 July
2019

Granted
as comp-
ensation Exercised

Balance at
resignation

Balance
at 30
June 2020

Balance
vested at
30 June
2020

Vested and
exercisable

Options
vested
during
year

2020

No.

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 2020 year.

300,000

200,000

100,000

750,000

500,000

250,000

375,000

250,000

125,000

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,

30 August 2021

Remuneration Report (audited)

35
35

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

30 August 2021

Board of Directors
Cynata Therapeutics Limited
Level 3, 100 Cubitt Street
Cremorne, Victoria 3121

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 Audit Director for the audit of the financial statements of Cynata Therapeutics Limited for the year
ended 30 June 2021, I declare that to the best of my knowledge and belief, there have been no
contraventions of:

(i)

the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

(ii)

any applicable code of professional conduct in relation to the audit.

Yours sincerely

STANTONS INTERNATIONAL AUDIT AND CONSULTING PTY LTD
(An Authorised Audit Company)

Samir R Tirodkar
Director

Liability limited by a scheme approved under Professional Standards Legislation

Stantons Is a member of the Russell
Bedford International network of firms

3636

Cynata Therapeutics Annual Report 2020/2021

Independent Auditor’s Report

37
37

Liability limited by a scheme approved under Professional Standards Legislation 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 Is a member of the Russell Bedford International network of firms 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 2021, 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 2021 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. Independent Auditor’s Report (cont’d)

3838

Cynata Therapeutics Annual Report 2020/2021 Key Audit Matters How the matter was addressed in the audit Carrying value of intangible assets, amortisation and impairment At 30 June 2021, the Group had intangibles with a carrying value of $2,692,530. The intangible assets are considered a Key Audit Matter as they represent around 9% of the net assets of the Group and also due to the level of judgement required from the management in assessing their recoverable amounts. 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 there are any indicators of impairment, and if so, perform an impairment review of the intangible assets at least annually. 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 assessing the appropriateness and relevance of information provided to 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. v. Checking the amortisation charge to ensure that the patents are being amortised over the 20-year patents’ life; and vi. Evaluating the adequacy of the disclosures (Note 11) to the financial statements. 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 2021 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 Independent Auditor’s Report

39
39

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. 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. Independent Auditor’s Report (cont’d)

4040

Cynata Therapeutics Annual Report 2020/2021 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. Report on the Remuneration Report We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2021. 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 2021 complies with section 300A of the Corporations Act 2001. STANTONS INTERNATIONAL AUDIT AND CONSULTING PTY LTD (An Authorised Audit Company) Samir R Tirodkar Director West Perth, Western Australia 30 August 2021 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 1 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,

30 August 2021

Directors’ Declaration

41
41

Financial Statements

Cynata Therapeutics Annual Report 2020/2021Consolidated statement of profit or loss
and other comprehensive income
for the year ended 30 June 2021

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

Note

7,18

Year ended

30 June 2021

30 June 2020

92,299

1,596,052

1,688,351

142,350

7,011,553

7,153,903

(3,778,030)

(5,919,531)

(1,758,388)

(1,194,809)

(279,965)

(1,536,871)

(280,732)

(388,236)

(2,024,780)

(3,009,695)

(7,689,683)

(3,639,100)

(7,689,683)

(3,639,100)

(7,689,683)

(3,639,100)

(7,689,683)

(3,639,100)

Total comprehensive loss for the year attributable:

Owners of Cynata Therapeutics Limited

(7,689,683)

(3,639,100)

Loss per share:

Basic and diluted (cents per share)

(5.90)

(3.48)

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

Financial Statements

43
43

Consolidated statement of financial position
as at 30 June 2021

30 June 2021

30 June 2020

Note

26,716,670

13,649,644

70,464

207,978

287,261

16,965

184,080

27,282,373

13,850,689

2,692,530

2,972,495

657,656

2,692,530

3,630,151

29,974,903

17,480,840

1,375,685

226,065

1,601,750

634,754

54,982

689,736

28,373,153

16,791,104

74,900,251

57,165,390

6,319,317

4,782,446

4,724

(52,851,139)

(45,161,456)

28,373,153

16,791,104

Current assets

Cash and cash equivalents

Trade and other receivables

Loans receivable

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.

4444

Cynata Therapeutics Annual Report 2020/2021Consolidated statement of changes in equity
for the year ended 30 June 2021

Issued
Capital

Option
Reserve

Foreign
currency
translation
reserve

Accum-
ulated
losses

Total

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

Share based payments

9,695,626

(517,924)

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

Balance at 1 July 2020

57,165,390

4,782,446

4,724 (45,161,456)

16,791,104

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)

18,306,813

Share issue costs

(571,952)

Share based payments (refer to note 16.1)

1,536,871

(7,689,683)

18,306,813

(571,952)

1,536,871

Balance at 30 June 2021

74,900,251

6,319,317

4,724 (52,851,139)

28,373,153

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

Financial Statements

45
45

Consolidated statement of cash flows
for the year ended 30 June 2021

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 License Fee received

Development costs paid

Year ended

30 June 2021

30 June 2020

Note

204,985

51,459

(3,770,355)

(3,894,444)

82,033

1,391,067

83,590

2,510,462

4,227,151

(3,070,839)

(6,365,897)

Net cash (used in) operating activities

(5,163,109)

(3,387,679)

Cash flows from financing activities

Proceeds from issue of equity instruments of the Company

Payment for share issue costs

Repayment by related parties

18,306,813

(571,952)

462,272

9,382,110

(406,924)

1,084,762

Net cash provided by financing activities

18,197,133

10,059,948

Net increase in cash and cash equivalents

13,034,024

6,672,269

Cash and cash equivalents at the beginning of the year

13,649,644

6,977,390

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

foreign currencies

33,002

(15)

Cash and cash equivalents at the end of the year

26,716,670

13,649,644

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

4646

Cynata Therapeutics Annual Report 2020/2021Financial Statements

Notes

Notes to the consolidated financial statements

for the year ended 30 June 2021

1. General information

Statement of compliance

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.

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 30 August 2021.

4848

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 2020.

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

AASB 2018-6 Amendments to Australian
Accounting Standards – Definition of a
Business
This Standard amends AASB 3 Business
Combinations. The amendments clarify that
while businesses usually have outputs, outputs
are not required for an integrated set of
activities and assets to qualify as a business.
To be considered a business an acquired set of
activities and assets must include, at a minimum,
an input and a substantive process that together
significantly contribute to the ability to create
outputs.

AASB 2018-7 Amendments to Australian
Accounting Standards – Definition of Material
This Standard amends AASB 101 Presentation of

Cynata Therapeutics Annual Report 2020/20212.2 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:

Effective for annual
reporting periods
beginning on or after

1 January 2022

Standard/amendment

AASB 2020-1 Amendments

to Australian Accounting

Standards – Classification of

Liabilities as Current or Non-

current and AASB 2020-6

Amendments to Australian

Accounting Standards –

Classification of Liabilities

as Current or Non-current –

Deferral of Effective Date

AASB 2020-3 Amendments

to Australian Accounting

Standards – Annual

1 January 2022

Improvements 2018-2020 and

Other Amendments

AASB 2020-8 Amendments

to Australian Accounting

Standards – Interest Rate

Benchmark Reform – Phase 2

AASB 2021-2 Amendments

to Australian Accounting

Standards – Disclosure of

Accounting Policies and

Definition of Accounting

Estimates

1 June 2021

1 January 2023

Financial Statements and AASB 108 Accounting
Policies, Changes in Accounting Estimates and
Errors, and makes consequential amendments to
several other pronouncements and publications.

AASB 2019-1 Amendments to Australian
Accounting Standards – References to the
Conceptual Framework
The amendments include consequential
amendments to the affected Australian
Accounting Standards, Interpretations and other
pronouncements to reflect the issuance of the
Conceptual Framework for Financial Reporting
(Conceptual Framework) by the AASB.

AASB 2019-3 Amendments to Australian
Accounting Standards – Interest Rate
Benchmark Reform
The amendments in AASB 2019-3 modify
specific hedge accounting requirements to allow
hedge accounting to continue for affected hedges
during the period of uncertainty before the
hedged items or hedging instruments affected
by the current interest rate benchmarks are
amended as a result of the ongoing interest rate
benchmark reforms.

AASB 2019-5 Amendments to Australian
Accounting Standards – Disclosure of the
Effect of New IFRS Standards Not Yet Issued in
Australia
This Standard makes amendments to AASB
1054 Additional Australian Disclosures by adding
a disclosure requirement for an entity intending
to comply with IFRS Standards to disclose
information specified in paragraphs 30 and 31
of AASB 108 Accounting Policies, Changes in
Accounting Estimates and Errors on the potential
effect of an IFRS Standard that has not yet been
issued by the AASB.

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.

Notes

49
49

3. Significant accounting policies

3.1 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
the asset or liability, either directly or indirectly;
and

5050

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

3.2 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.

Cynata Therapeutics Annual Report 2020/20213.3 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

acquiree (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

Notes

51
51

Significant accounting policies (cont’d)

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.

3.4 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 3.3 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.

3.5 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.

3.5.1

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.

3.6 Foreign currencies

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
into Australian dollars using the exchange rates

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Cynata Therapeutics Annual Report 2020/2021prevailing 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 Government grants

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.

3.8 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.

3.9 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

Notes

53
53

Significant accounting policies (cont’d)

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

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

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.

3.10 Taxation

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

3.10.1 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.

3.10.2 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

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.

3.10.3 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

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Cynata Therapeutics Annual Report 2020/2021are 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.

3.11 Intangible assets

3.11.1 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

3.11.2 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.

3.12 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

are 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.

3.13 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.

Notes

55
55

Significant accounting policies (cont’d)

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.

3.14 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.

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.

5656

Cynata Therapeutics Annual Report 2020/2021Financial assets at fair value through other
comprehensive income (Equity instruments)

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.

Subsequently, 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.

3.15 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.

Notes

57
57

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
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.

3.17 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.

Significant accounting policies (cont’d)

3.16 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.

5858

Cynata Therapeutics Annual Report 2020/20214. Critical accounting judgements and key sources of estimation

uncertainty

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.

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.

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 2021 with a carrying value of
$2,692,530 (2020: $2,972,495) 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 $279,965 for the year ended
30 June 2021 (2020: $280,732).

The directors performed an impairment testing and
concluded that no further impairment of the intangible
assets is required for the year (2020: nil).

Notes

59
59

5. 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.

6. Interest income and other income

Interest income

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

Other income

R&D rebate

Grants received (i)

Other income (ii)

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.

2021

79,705

12,594

92,299

2021

2020

65,951

76,399

142,350

2020

1,391,067

2,510,462

204,985

4,501,091

1,596,052

7,011,553

(i)

This includes an Innovation Connections grant

(ii)

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

of $54,985, the Australian Federal Government’s

received from FUJIFILM Corporation in 2020 under the

COVID-19 Cash Flow Boost package of $50,000

graft-versus-host-disease (GvHD) license agreement.

and the 2020 Export Market Development Grant of

$100,000.

6060

Cynata Therapeutics Annual Report 2020/20217. 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

2021

2020

1,467,272

1,102,057

120,033

171,083

79,065

13,687

1,758,388

1,194,809

1,536,871

388,236

30,185

275,136

289,701

269,649

208,625

653,833

297,651

62,633

277,289

888,547

472,740

198,897

606,556

222,482

280,551

2,024,780

3,009,695

(i)

Excludes amounts charged to product development

(ii)

This represents US$150,000 being the Japanese

costs.

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.

Notes

61
61

8. Income taxes relating to continuing operations

8.1

Income tax recognised in profit or loss

2021

2020

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 26% (2020: 27.5%)

Tax effect of R&D rebate received

2021

2020

(7,689,683)

(3,639,100)

(1,999,317)

(1,000,753)

(361,677)

(690,377)

Effect of expenses that are not deductible in determining taxable income

1,450,270

1,906,239

Effect of unused tax losses not recognised as deferred tax assets

910,724

(215,109)

The tax rate used for the 2021 reconciliations above is
the corporate tax rate of 26% (2020: 27.5%) payable
by Australian corporate entities on taxable profits
under Australian tax law.

8.2

Income tax recognised directly in equity

2021

2020

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

6262

2021

2020

7,236,506

5,978,841

240,668

107,904

7,477,174

6,086,745

Cynata Therapeutics Annual Report 2020/20218.4 Unrecognised deferred tax (liabilities) in relation to:

Intangibles

Other

2021

2020

(700,058)

(817,436)

(75,663)

(52,294)

(775,721)

(869,730)

Net deferred tax assets

6,701,453

5,217,015

(i)

All unused tax losses were incurred by Australian

entities. The figure also includes unused carried

forward tax losses of Cynata Australia Pty Ltd (“Cynata

Australia”). Cynata Australia is the wholly owned

subsidiary of Cynata Inc and Cynata Inc is the wholly

owned subsidiary of Cynata Therapeutics Limited.

This benefit for tax losses will only be obtained if
the specific entity carrying forward the tax losses
derives future assessable income of a nature and
of an amount sufficient to enable the benefit from
the deductions for the losses to be realised, and the
Company complies 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:

2021

2020

¢ / share

(5.90)

(3.48)

2021

2020

Loss for the year attributable to owners of the Company

(7,689,683)

(3,639,100)

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

loss per share

2021

2020

130,427,077

104,510,253

Notes

63
63

10. Trade and other receivables

Deposits made

Other receivables

At the reporting date, none of the receivables were
past due/impaired.

11. Intangibles

Carrying value at beginning of year (i)

Amortisation (ii)

Net book value of research and development at end of year

2021

25,528

44,936

70,464

2020

3,568

13,397

16,965

2021

2020

2,972,495

3,253,227

(279,965)

(280,732)

2,692,530

2,972,495

(i)

The carrying value at beginning of year represents

(ii) An amortisation expense of $279,965 has been

the fair value attributable to interests in research and

recognised in profit or loss (2020: $280,732). Refer

development of stem cells is due to, and in recognition

to note 3.12 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

6464

2021

2020

4,821,799

2021

2020

1,849,304

1,568,572

279,965

280,732

2,129,269

1,849,304

Cynata Therapeutics Annual Report 2020/202112. 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

2021

676,104

699,581

1,375,685

2021

226,065

2021

657,656

12,594

2020

297,359

337,395

634,754

2020

54,982

2020

1,666,019

76,399

(462,272)

(1,084,762)

207,978

657,656

(i)

At the General Meeting of shareholders held on 12

(iii) During the financial year ended 30 June 2021, Dr

September 2018, shareholders of Cynata approved the

Macdonald repaid $126,413 (2020: $437,962) of his

financial assistance and financial benefit provided to

loan which included $26,413 accrued interest and Dr

Dr Ross Macdonald and Dr Stewart Washer or their

Washer made final repayment of $335,859 (2020:

nominees as constituted by the making of a director

$646,800) of his loan which included $35,859 accrued

loan of $900,000 each to Dr Ross Macdonald and Dr

interest. The accrued interest paid by Dr Macdonald

Stewart Washer solely for the purpose of funding the

and Dr Washer is the interest due and payable on each

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

anniversary of the loans. At 30 June 2021, the director

having an expiry date of 27 September 2018. Each

loan outstanding from Dr Macdonald is not impaired

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

and has been classified under current assets as it is

options. The loans provided are full recourse loans and

expected to be settled within 12 months.

unsecured.

(ii)

The director loans carry a simple interest rate of 5.20%

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

annually and accrued daily.

Notes

65
65

15. Issued capital

143,276,594 fully paid ordinary shares (2020: 117,124,004)

74,900,251

57,165,390

Fully paid ordinary shares

No.

Balance at beginning of year

117,124,004

57,165,390

101,885,053

47,987,688

30 June 2021

30 June 2020

2021

2020

Share placement (i)

Share placement (ii)

Share placement (iii)

Rights Issue (iv)

Rights Issue Shortfall (v)

Exercise of share options (vi)

Exercise of share options (vii)

Exercise of share options (viii)

Exercise of share options (ix)

Exercise of share options (x)

Share placement (xi)

Share placement (xii)

Issue of shares (xiii)

Issue of shares (xiv)

Share issue costs

6,930,460

4,851,322

14,285,715

10,000,000

224,120

156,885

3,558,725

2,491,108

1,153,570

807,499

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

(571,953)

(517,924)

Balance at end of the year

143,276,594

74,900,251

117,124,004

57,165,390

(i)

Issue of shares pursuant to a Placement at $0.70 per

(ix) Exercise of unlisted 17 November 2019 options at

share on 21 December 2020.

$1.022 each on 11 November 2019.

(ii)

Issue of shares pursuant to a Placement at $0.70 per
share on 24 December 2020.

(x) Cashless exercise of unlisted 17 November 2019

options by Dr Paul Wotton, Dr Ross Macdonald and Mr

(iii)

Issue of shares pursuant to a Placement at $0.70 per

Peter Webse on 11 November 2019.

share on 31 December 2020.

(xi)

Issue of shares to US investors pursuant to a Placement

(iv)

Issue of shares pursuant to an Entitlement Offer at

$0.70 per share on 20 January 2021.

(v)

Issue of shares pursuant to a Shortfall Placement under

the Entitlement Offer at $0.70 per share on 20 January

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.

(xii)

Issue of shares pursuant to a Placement at $0.60 per

share on 1 May 2020.

2021.

(xiii) Issue of shares pursuant to a Share Purchase Plan at

(vi) Exercise of unlisted 17 November 2019 options at

$0.60 per share on 2 June 2020.

$1.022 each on 2 August 2019.

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

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

a third party for the completion of corporate services.

during the month of August 2019.

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

during the month of September 2019.

6666

Cynata Therapeutics Annual Report 2020/202116. Reserves

16.1 Share-based payments

Balance at beginning of year

Recognition of share-based payments (i)

Balance at end of year

2021

2020

4,782,446

4,501,410

1,536,871

281,036

6,319,317

4,782,446

(i)

Total expenses arising from share-based payment

transactions as a result of vesting on unlisted options to

executives and employees recognised during the year

ended 30 June 2021 was $1,536,871 (2020: $281,036).

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

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.

2021

4,724

2020

4,724

Notes

67
67

17. 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.

2021

2020

26,716,670

13,649,644

70,464

207,978

16,965

657,656

26,995,112

14,324,265

1,375,685

634,754

Net financial assets

25,619,427

13,689,511

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

6868

Cynata Therapeutics Annual Report 2020/2021designed 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.

17.4 Market risk

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 2021 would
decrease/increase by $267,167 (2020: $136,496)

17.6 Foreign currency risk management

The Group undertakes transactions denominated
in foreign currencies; consequently, exposures to
exchange rate fluctuations arise. At 30 June 2021,
the Company has cash denominated in US dollars
(US$4,837,747 (2020: US$2,818,908)). The A$
equivalent at 30 June 2021 is $6,445,817 (2020:
$4,094,858). A 5% movement in foreign exchange
rates would increase or decrease the Group’s loss

before tax by approximately $322,291 (2020:
$204,743). Exchange rate exposures are managed
within approved policy parameters utilising forward
foreign exchange contracts. As at 30 June 2021,
the Group has not entered in any forward foreign
exchange contracts.

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.

Notes

69
69

Financial instruments (cont’d)

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.

Contractual cash flows

Carrying
Amount

Less than 1

month 1-3 months

3-12
months

1 year to 5
years

2021

Trade and other payables

1,375,685

2020

Trade and other payables

634,754

Total
contractual
cash flows

1,375,685

634,754

7070

Cynata Therapeutics Annual Report 2020/202118. 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

CYPOPT12

CYPOPT13

CYPOPT14

CYPOPT15

CYPOPT16

300,000i

17 May 2019

1,425,000ii

17 May 2019

1,250,000iii

19 Aug 2020

100,000iv

14 Sept 2020

4,500,000v

24 Nov 2020

$0.384

$0.304

$0.415

$0.388

$0.493

$2.110

16 May 2024

$1.750

16 May 2022

$0.970

18 Aug 2024

$1.280

13 Sept 2024

$0.970

29 Nov 2025

Vested

Various

This represents unlisted options issued to Dr Brooke

This represents unlisted options issued to Mrs Gupta

pursuant to the terms of his appointment as non-

pursuant to an Employee Option Acquisition Plan. Mrs

executive director.

Gupta is an employee of Cynata Therapeutics Ltd.

This represents unlisted options issued to Dr Kelly

This represents unlisted options issued to Dr Brooke

(750,000), Dr Suzanne (375,000) and Dr Atley (300,000)

(2,000,000), Dr Macdonald (1,500,000), Dr Washer

pursuant to an Employee Option Acquisition Plan. Dr

(300,000), Dr Wotton (300,000), Dr Maher (300,000)

Atley is an employee of Cynata Therapeutics Ltd.

and Mr Webse (100,000) pursuant to an Employee

iii

This represents unlisted options issued to Dr Kelly

Option Acquisition Plan.

(1,000,000), Dr Lipe (100,000), Dr Atley (50,000) and

Mr Thraves (100,000) pursuant to an Employee Option

Acquisition Plan. Mr Thraves is an employee of Cynata

Therapeutics Ltd.

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

18.2 Fair value of share options

Options 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.

The weighted average exercise price of options
granted during the year is $0.975 (2020: no options
granted).

Notes

71
71

Share-based payments (cont’d)

The inputs to the Black-Scholes pricing model were as
follows:

Inputs

Number of options

Grant date

Grant date fair value

Exercise price

Expected volatility

Implied option life (years)

Expected dividend yield

Risk-free rate

CYPOPT14

CYPOPT15

CYPOPT16

1,250,000

100,000

4,500,000

19 Aug 2020

14 Sept 2020

24 Nov 2020

$0.415

$0.97

74%

4.0

n/a

$0.388

$1.28

75%

4.0

n/a

$0.493

$0.97

74%

n/a

0.27%

0.23%

0.29%

18.3 Movements in share options during the year

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

2021

Weighted
average
exercise price

1.439

0.975

0.992

1.167

1.466

Number of
options

No.

3,165,557

5,850,000

(1,440,557)

7,575,000

2,931,929

2020

Weighted
average
exercise price

1.363

1.008

1.500

1.439

1.356

Number of
options

No.

6,615,557

(1,450,000)

(2,000,000)

3,165,557

2,590,557

Balance at beginning of the year

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

18.4 Share options exercised during the year

18.5 Share options outstanding at the end of the year

No share options were exercised during the year
(2020: 1,450,000).

Share options outstanding at the end of the year
had a weighted average exercise price of $1.166
(2020: $1.439) and a weighted average remaining
contractual life of 1,264 days (2020: 451 days).

7272

Cynata Therapeutics Annual Report 2020/202119. 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

2021

2020

1,413,979

1,330,344

78,854

1,439,808

70,996

239,174

2,932,641

1,640,514

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.

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. Related party transactions

20.1 Entities under the control of the Group

20.2 Key management personnel

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.

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.

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

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

Notes

73
73

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

Movements in working capital

2021

2020

26,716,670

13,649,644

2021

2020

(7,689,683)

(3,639,100)

1,536,871

279,965

(12,594)

(33,002)

388,236

280,732

(76,399)

274,013

(Increase)/decrease in trade and other receivables and prepayments

Increase/(decrease) in trade and other payables

Increase in annual leave provisions

(156,680)

740,931

171,083

152,063

(780,911)

13,687

Net cash outflows from operating activities

(5,163,109)

(3,387,679)

22. 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 license agreements should future revenues
exceed predetermined thresholds.

7474

Cynata Therapeutics Annual Report 2020/202123. Commitments for expenditure

The Group has entered into a number of agreements
related to research and development activities. As at
30 June 2021, under these agreements, the Company
is committed to making payments over future periods,
as follows:

During the period 1 July 2021 – 30 June 2022

During the period 1 July 2022 – 30 June 2023

During the period 1 July 2023 – 30 June 2024

Where commitments are denominated in foreign
currencies, the amounts have been converted to
Australian dollars based on exchange rates prevailing
as at 30 June 2021.

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.

2,490,366

679,051

300,195

2021

46,967

2020

48,522

Notes

75
75

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.

2021

2020

27,282,373

13,850,690

4,890,653

5,548,308

32,173,026

19,398,998

1,375,685

226,065

1,601,750

634,754

54,982

689,736

30,571,276

18,709,262

74,900,251

57,165,390

6,319,317

4,782,446

(50,648,292)

(43,238,574)

30,571,276

18,709,262

(7,409,718)

(3,358,368)

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.

7676

Cynata Therapeutics Annual Report 2020/202126. 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 licenses with WARF for core IPs

USA

Proportion of
ownership interest and
voting power held by
the Group

2021

100%

2020

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

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.

28. Approval of financial statements

The financial statements were approved by the board
of directors and authorised for issue on 30 August
2021.

Notes

77
77

Corporate Governance Statement

This Corporate Governance Statement (“Statement”)

outlines the key aspects of the governance framework and

main governance practices of Cynata Therapeutics Limited

(‘Cynata’ or ‘the Company’), a Company which is not included

within the S&P/ASX 300 index.

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.

Dr Stewart Washer

Dr Paul Wotton

Non-Independent
Non-Executive Director

Independent
Non-Executive Director

This Statement is structured with reference to the
Australian Securities Exchange Corporate Governance
Council’s (“the Council’s”) “Corporate Governance
Principles and Recommendations 4th 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.

As at the date of this Statement, the Board of Cynata
Therapeutics Limited consists of five Directors.
Three Directors are considered by the Board to be
independent, and two Directors are considered by the
Board as non-independent;

Dr Geoffrey Brooke

Independent
Non-Executive Chairman

Dr Ross Macdonald

Managing Director

Dr Darryl Maher

Independent
Non-Executive Director

This Statement was approved by the Board of Directors
and is current as at 27 August 2021.

Principle 1: Lay solid foundations for
management and oversight

A listed entity should clearly delineate the respective
roles and responsibilities of its Board and management
and regularly review their performance.

1.1 A listed entity should have and disclose a Board
Charter setting out the respective roles of the Board
and management and those matters expressly
reserved to the Board and those delegated to
management.

Cynata’s constitution (“Constitution”) provides that
the business of Cynata will be managed by or under
the direction of the Board. The Board operates under
a Board Charter, a copy of which is located on the
Company’s website at https://www.cynata.com/
corporategovernance.

The key roles and responsibilities of the Board along
with the key roles and responsibilities of senior
management, including those specifically delegated to
the Managing Director are set out in the Board Charter.

7878

Cynata Therapeutics Annual Report 2020/2021The 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:

Providing leadership, defining the Company’s
purpose and setting the strategic objectives of the
Company;

z Monitoring management’s implementation and
execution of the Company’s strategy, instilling
of the Company’s values and its performance
generally, and (when required) challenging
management and holding it to account;

Developing and reviewing the Company’s core
values and corporate governance policies in
order to underpin the desired culture within the
Company, and monitoring corporate culture;

In accordance with the Remuneration and
Nomination Policy:

−

appointing the Chairperson;

reviewing the skills experience, expertise and
diversity represented by the Directors on the
Board;

selecting, appointing, removing and
evaluating from time to time the performance
of, determining the remuneration of, and
planning succession of, the Managing
Director;

approving the appointment and removal of
the Company Secretary and Chief Financial
Officer (if applicable);

approving the appointment of, determining
the remuneration of, monitoring the
performance of and planning succession
of, members of key management personnel
(including Non-Executive Directors);

ensuring that there are appropriate resources
available to fulfill the responsibility of key
management personnel (including Non-
Executive Directors);

−

approving the delegation of authority
framework;

approving the Company’s remuneration
policies and practices in order to ensure
that they are aligned with the Company’s
purpose, values, strategic objectives and risk
appetite; and

− where applicable, approving measurable

objectives for achieving diversity on an
annual basis;

In accordance with the Audit, Risk and Compliance
Policy:

−

setting performance objectives and
approving operating budgets;

reviewing, ratifying and monitoring systems
of risk management, accountability, internal
control and ethical and legal compliance, on a
regular basis;

setting the risk appetite within which the
Board expects management to operate;

approving major capital expenditure,
acquisitions and divestitures, monitoring
capital management;

− monitoring and reviewing management

processes aimed at ensuring the integrity of
financial and other reporting;

−

reviewing performance, operations and
compliance reports from the Chairperson
and Managing Director, including reports
and updates on strategic issues and risk
management matters;

approving the selection and termination
of the external auditor, subject to any
shareholder approvals;

approving financial reports and other reports
required at law or under the ASX Listing
Rules to be adopted by the Board; and

reviewing and monitoring any related party
transaction and recommending its approval;

Ensuring that shareholders are kept informed
of the Company’s performance and major
developments affecting its state of affairs;

Corporate Governance Statement

79
79

Corporate Governance Statement (cont’d)

Performing such other functions as are prescribed
by law or are assigned to the Board; and

a decision on whether or not to elect or re-elect a
Director.

Satisfying itself that an appropriate framework
exists for relevant information to be reported by
management to the Board.

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.

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.

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.

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

1.2 A listed entity should undertake appropriate
checks before appointing a Director or senior
executive or putting someone forward for election
as a Director and provide security holders with all
material information in its possession relevant to

8080

The Constitution of the Company sets out the process of
appointment, retirement and rotation of directors.

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 a Director. The
Company provides all material information that is in its
possession to shareholders for their consideration about
the attributes of candidates together with whether the
Board supports the appointment or re-election.

1.3 A listed entity should have a written agreement
with each Director and senior executive setting out
the terms of their appointment.

Pursuant to the Company’s Remuneration and
Nomination Policy the appointment of any new Director
(executive or non-executive) of Cynata and each senior
executive is made by, and in accordance with, a formal
letter of appointment or written agreement setting out
the key terms and conditions relative at the time of
appointment. All current agreements are made with the
Director or senior executive personally.

1.4 The Company Secretary of a listed entity should
be directly accountable to the Board, through the
Chair, on all matters to do with the proper functioning
of the Board.

In accordance with the Board Charter, the decision
to appoint or remove the Company Secretary must
be made or approved by the Board. The Company
Secretary is accountable directly to the Board, through
the Chairperson, 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 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.

1.5 A listed entity should have and disclose a Diversity
Policy; set measurable objectives for achieving gender

Cynata Therapeutics Annual Report 2020/2021diversity and disclose the measurable objectives set to
achieve gender diversity.

The Board has adopted a Diversity Policy which is
available on its website and 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 has not yet set measurable objectives for
achieving gender diversity due to the Company’s current
size and level of operations. The Board is acutely
aware of the importance for gender diversity within the
workforce and looks to achieve a culture of inclusion
when assessing a suitable candidate for an open
position and through its day-to-day practices.

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

z Women employees in the Company — 50%

z Women in senior management positions — 33%

z Women on the Board — 0%

The Company is not a “relevant employer” under the
Workplace Gender Equality Act.

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

1.6 A listed entity should have and disclose a process
for periodically evaluating the performance of the
Board, its committees and individual Directors
and disclose for each reporting period whether a
performance evaluation has been undertaken in
accordance with that process during or in respect of
that period.

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;

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.

A Board performance review was conducted during the
year in accordance with the above process.

1.7 A listed entity should have and disclose a process
for evaluating the performance of its senior executives
at least once every reporting period and disclose
for each reporting period whether a performance
evaluation has been undertaken in accordance with
that process during or in respect of that period.

The Company has an annual performance review
process in place for its Managing Director and other
senior executives. On an annual basis, corporate

Corporate Governance Statement

81
81

Corporate Governance Statement (cont’d)

objectives and individual key performance indicators
(KPIs) are set. The Managing Director reviews the
performance of senior executives and their delivery of
corporate and individual objectives.

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.

Performance reviews of senior executives were
conducted during the year in accordance with the above
process.

Principle 2: Structure the board to
be effective and add value

The Board of a listed entity should be of an appropriate
size and collectively have the skills, commitment and
knowledge of the entity and the industry in which it
operates, to enable it to discharge its duties effectively
and to add value.

2.1 The Board of listed entity should have a
nomination committee or, if it does not have a
nomination committee, disclose the fact and the
processes it employs to address Board succession
issues and to ensure that the Board has the
appropriate balance of skill, knowledge, experience,
independence and diversity to enable it to discharge
its duties and responsibilities effectively.

The Board considers that the Company does not
currently benefit from the establishment of a separate
Nomination Committee. In accordance with the
Company’s Board Charter and operating within the
boundaries of the Remuneration and Nomination
Policy, 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. When the need for a
new director is identified, the required experience and
competencies of the new director are defined in the
context of the skills 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.

2.2 A listed entity should have and disclose a Board
skills matrix setting out the mix of skills that the
Board currently has or is looking to achieve in its
membership.

The Board has a skills matrix covering the competencies
and experience of each Director. The results of the skills
matrix assessment in relation to the Board as a whole
is displayed on the Company’s website at https://www.
cynata.com/corporategovernance.

2.3 A listed entity should disclose the names of the
Directors considered by the Board to be independent
Directors and the length of service of each Director.

The Board considers that a diverse range of skills,
backgrounds, knowledge and experience is required in

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

Director

Length of Service

Dr Geoffrey Brooke

Independent Non-Executive Chairman (appointed as a Non-Executive director on
17 May 2019);

Dr Ross Macdonald

Managing Director (appointed 1 August 2013);

Dr Darryl Maher

Independent Non-Executive Director (appointed 16 June 2020);

Dr Stewart Washer

Non-Independent Non-Executive Director (appointed 1 August 2013);

Dr Paul Wotton

Independent Non-Executive Director (appointed as a Non-Executive Director on
8 June 2016).

8282

Cynata Therapeutics Annual Report 2020/20212.4 A majority of the Board should be independent
Directors.

Principle 3: Instil a culture of acting
lawfully, ethically and responsibly

The Board, at the date of this statement is comprised
of a majority of independent Directors. Dr Geoffrey
Brooke, Dr Darryl Maher and Dr Paul Wotton 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.

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

2.5 The chair of the board of a listed entity should be
an independent Director and, in particular, should not
be the same person as the CEO of the entity.

Dr Geoffrey Brooke is the Chairman of the Company
and is considered by the Board to be independent and is
not the same person as the CEO of the Company.

2.6 A listed entity should have a program for inducting
new Directors and for periodically reviewing whether
there is a need for existing Directors to undertake
professional development to maintain the skills and
knowledge needed to perform their role as Directors
effectively.

In accordance with the Company’s Board Charter and
the Remuneration and Nomination Policy the Board is
responsible for the approval and review of induction
and continuing professional development programs
and procedures for Directors to ensure that they can
effectively discharge their responsibilities.

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.

The Company Secretary is responsible for facilitating
inductions and professional development that is tailored
to the individual’s needs.

A listed entity should instil and continually reinforce
a culture across the organisation of acting lawfully,
ethically and responsibly.

3.1 A listed entity should articulate and disclose its
values

Cynata has adopted a Statement of Values that
underpins the commitment that each individual and the
Company as a whole lives by each and every day and
includes the following values:

1. Honesty;

Integrity;

3. Creativity;

4. Compassion;

5. Diligence and perseverance; and

Ethical, responsible and law-abiding conduct.

3.2 A listed entity should have and disclose a Code
of Conduct for its Directors, senior executives and
employees and ensure that the Board or a committee
of the Board is informed of any material breaches of
that Code.

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;

Corporate Governance Statement

83
83

Corporate Governance Statement (cont’d)

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.

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 their
manager or alternatively the Company Secretary, a
Director or the Managing Director. 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.

3.3 A listed entity should have and disclose a
Whistleblower Policy and ensure that the Board or a
committee of the Board is informed of any material
incidents reported under that Policy.

The Company has adopted a Whistleblower Protection
Policy which is available on the Company’s website.

The Policy includes that the Board will be informed of
any material incidents reported under that Policy.

3.4 A listed entity should have and disclose an Anti-
Bribery and Corruption Policy and ensure that the
Board or a committee of the Board is informed of any
material incidents breaches of that Policy.

The Company has adopted an Anti-Bribery and
Corruption Policy which is available on the Company’s
website.

The Policy includes that the Board will be informed of
any material breaches under that Policy.

Principle 4: Safeguard the integrity
of corporate reports

A listed entity should have appropriate processes to
verify the integrity of its corporate reports.

4.1 A Board of listed entity should have an audit
committee or if it does not have an audit committee,
disclose the fact and the processes it employs that
independently verify and safeguard the integrity of its
corporate reporting, including the processes for the
appointment and removal of the external auditor and
the rotation of the audit engagement partner.

The Board considers that the Company does not
currently benefit from the establishment of a separate
Audit Committee. The Board as a whole fulfills the
functions normally delegated to the Audit Committee as
detailed in the Audit Risk and Compliance Policy.

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.

8484

Cynata Therapeutics Annual Report 2020/20214.2 A Board of listed entity should, before it approves
the entity’s financial statements for a financial
period, receive from its CEO and CFO a declaration
that, in their opinion, the financial records of the
entity have been properly maintained and that the
financial statements comply with the appropriate
accounting standards and give a true and fair view of
the financial position and performance of the entity
and that the opinion has been formed on the basis
of a sound system of risk management and internal
control which is operating effectively.

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
2001 as to the integrity of the financial statements is
founded on a sound system of risk management and
internal control which is operating effectively.

4.3 A listed entity should disclose its process to verify
the integrity of any period corporate report it releases
to the market that is not audited or reviewed by an
external auditor.

In reviewing the quarterly cashflow reports and prior to
the lodgement with the ASX, the following process has
been adopted:

cash transactions for the quarter are provided by
the accountant for each subsidiary and the parent
entity to the Chief Financial Officer (equivalent);

cash transactions are matched against the bank
statements; and

consolidated quarterly figures are compiled and
verified by the CFO (equivalent) and CEO.

A declaration is then provided by the CFO (equivalent)
and CEO to the Board noting compliance section 286 of
the Corporations Act 2001, the appropriate accounting
standards and with Listing Rule 19.11A.

Principle 5: Make timely and
balanced disclosure

A listed entity should make timely and balanced
disclosure of all matters concerning it that a reasonable
person would expect to have a material effect on the
price or value of its securities.

5.1 A listed entity should have and disclose a written
policy for complying with its continuous disclosure
obligations under listing rule 3.1.

The Company has adopted a Continuous Disclosure
Policy for complying with its disclosure obligations of
the Company as required under the ASX Listing Rules
(including Listing Rule 3.1) and the Corporations Act
2001. 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) All material market announcements are to be

circulated to and reviewed by all members of the
Board;

b) All announcements are clearly noted as to the
authorising officer and in general, all material
announcements are authorised for release by the
Board;

c) All announcements are made in a timely manner,

are factual and do not omit any material
information required to be disclosed under the ASX
Listing Rules and Corporations Act 2001;

Corporate Governance Statement

85
85

Corporate Governance Statement (cont’d)

d) All announcements are expressed in a clear and
objective manner that allows investors to assess
the impact of the information when making
investment decisions; and

e) Any new and substantive investor or analyst
presentation will be released on the ASX
market announcements platform ahead of the
presentation.

5.2 A listed entity should ensure that its Board
receives copies of all material market announcements
after they have been made.

The Board receives copies of all material market
announcements after they have been made.

5.3 A listed entity that gives a new and substantive
investor or analyst presentation should release a
copy of the presentation materials on the ASX Market
Announcements Platform ahead of the presentation.

Any new and substantive investor or analyst
presentation will be released on the ASX Market
Announcements Platform ahead of the presentation.

Principle 6: Respect the rights of
security holders

A listed entity should provide its security holders with
appropriate information and facilities to allow them to
exercise their rights as security holders effectively.

6.1 A listed entity should provide information about
itself and its governance framework to investors via
its website.

The Company has adopted a Communications Strategy
(Strategy) which is available on the Company’s website.
Under this Strategy, Cynata’s website will contain
information about the Company and its governance,
copies of media releases, ASX announcements, annual
reports, financial statements, notices of meeting of
shareholders, copies of documents tabled at meetings
of shareholders and any materials distributed at
investor or analyst presentations.

6.2 A listed entity should have an investor relations
program that facilitates effective two-way
communication with investors.

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 the ASX, the
Company’s website, information emailed or 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.

Cynata’s register is maintained by a professional
security registry, Automic Group. Shareholders are
able to communicate with Cynata and Automic via
email and can register to receive communications and
shareholder materials from Cynata via its security
registry electronically.

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.

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.

6.3 A listed entity should disclose how it facilitates
and encourages participation at meetings of security
holders.

The Communication Strategy provides that security
holders are encouraged to attend and participate
at general meetings. To facilitate this, meetings will
be held during normal business hours, at a place,
or in a manner, convenient for the greatest possible
number of security holders to attend either in person or
electronically. Moreover, Cynata’s Constitution allows,

8686

Cynata Therapeutics Annual Report 2020/2021if permitted by law, shareholder meetings to be held
electronically and provides each security holder with the
right to appoint a proxy, attorney or representative to
vote on their behalf.

6.4 A listed entity should ensure that all substantive
resolutions at a meeting of security holders are
decided by a poll rather than by a show of hands.

The Company has a policy that all resolutions at a
meeting of security holders are to be decided by a poll.

6.5 A listed entity should give security holders the
option to receive communications from, and send
communications to, the entity and its security registry
electronically.

risk and maintaining the entity’s risk management
framework and associated internal compliance and
control procedures.

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.
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.

The Company provides security holders the option to
electronically receive communications from, and send
communications to, the Company and its share registry,
Automic Registry Services. The Company encourages
security holders to utilise electronic communications
with the Company to facilitate speed, convenience and
environmental friendliness of communications.

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.

Principle 7: Recognise and manage
risk

A listed entity should establish a sound risk
management framework and periodically review the
effectiveness of that framework.

7.1 The Board of a listed entity should have a
committee or committees that oversee risk and if
it does not have a risk committee or committees,
disclose that fact and the processes it employs for
overseeing the entity’s risk management framework

The Board considers that the Company does not
currently benefit from the establishment of a separate
Risk Committee. In accordance with the Company’s
Board Charter and operating within the boundaries of
the Audit Risk and Compliance Policy, the Board carries
out the duties that would ordinarily be carried out by the
Risk Committee under the Risk and Compliance Policy.

The Board devotes time at Board meetings to fulfilling
the roles and responsibilities associated with overseeing

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.

Corporate Governance Statement

87
87

Corporate Governance Statement (cont’d)

7.2 The Board or a committee of the Board should
review the entity’s risk management framework at
least annually to satisfy itself that it continues to be
sound and that the entity is operating with due regard
to the risk appetite set by the Board and disclose,
in relation to each reporting period, whether such a
review has taken place.

The Board reviews the Company’s risk management
framework at each scheduled Board meeting to ensure
that it continues to effectively manage risk.

7.3 A listed entity should disclose if it has an internal
audit function or if it does not have an internal audit
function, that fact and the processes it employs for
evaluating and continually improving the effectiveness
of its governance, risk management and internal
control processes.

The Company does not have an internal audit function.

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 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

8888

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.

7.4 A listed entity should disclose whether it has any
material exposure to environmental or social risks
and, if it does, how it manages or intends to manage
those risks.

The Board does not consider that the Company
currently has any material exposure to environmental or
social risks.

Principle 8: Remunerate fairly and
responsibly

A listed entity should pay Director remuneration
sufficient to attract and retain high quality directors
and design its executive remuneration to attract, retain
and motivate high quality senior executives and to align
their interests with the creation of value for security
holders and with the entity’s values and risk appetite.

8.1 The Board of a listed entity should have a
remuneration committee or if it does not have a
remuneration committee, disclose that fact and
the processes it employs for setting the level and
composition of remuneration for Directors and senior
executives and ensuring that such remuneration is
appropriate and not excessive.

The Company does not have a Remuneration
Committee. The Board considers that the Company
will not currently benefit from the establishment of a
Remuneration Committee and as a whole fulfills the
functions normally delegated to the Remuneration
Committee as detailed in the Remuneration and
Nomination Policy.

In accordance with the Company’s Board Charter, the
Board carries out the duties that would ordinarily be
carried out by the Remuneration Committee under
the Remuneration and Nomination Policy, including
devoting time at the annual Board meeting to assess
the level and composition of remuneration for Directors
and senior executives.

Cynata Therapeutics Annual Report 2020/20218.2 A listed entity should separately disclose its
policies and practices regarding the remuneration
of non-executive Directors and the remuneration of
executive Directors and other senior executives.

Cynata has implemented a Remuneration and
Nomination 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 and Nomination Policy
is to ensure that an individual’s remuneration package
accurately reflects their experience, level of responsibility,
individual performance and the performance of Cynata.

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 $275,136.

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.

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

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.

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

8.3 A listed entity which has an equity-based
remuneration scheme should have a policy on whether
participants are permitted to enter into transactions
(whether through the use of derivatives or otherwise)
which limit the economic risk of participating in the
scheme and disclose that policy or a summary of it.

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.

Corporate Governance Statement

89
89

ASX Additional Information

As at 24 August 2021

Substantial Shareholders

The names of the substantial holders in the Company
and the number of shares to which each substantial
holder has an interest in, as disclosed in substantial

holding notices given to the Company under the
Corporations Act 2001 are:

Name

Shares Held

Issued Capital

No.

14,285,715

9,506,625

8,088,403

Ordinary
Shares

No.

483,922

3,484,659

4,526,245

34,329,689

Holders

No.

801

1,237

575

1,064

166

100,452,079

3,879

143,276,594

10.33

10.00

8.98

Issued Capital

0.34

2.43

3.16

23.96

70.11

100.00

Phillip Asset Management Ltd atf BioScience Managers Translation Fund

FIL Investment Management (Hong Kong) Limited

Fujifilm Corporation

Distribution of Ordinary Shares