Cynata Therapeutics Limited Annual Report 2022

FY2022 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 2022
Year ended 30 June 2021
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 2022
$

12 months ended
30 June 2021
$

Increase/
(decrease)
%

7,835,174

1,688,351

364.07%

Amount
change
$
6,146,823

5,445,172

7,689,683

(29.19%)

(2,244,511)

5,445,172

7,689,683

(29.19%)

(2,244,511)

0.150

0.179

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 2022 of $5,445,172 (2021:
$7,689,683). At 30 June 2022, the Group had a cash balance of $23,798,046 (2021: $26,716,670)
and net assets of $23,960,085 (2021: $28,373,153). The net cash outflow from operating activities
for the financial year was $3,298,331 (2021: $5,163,109). During the financial year ended 30 June
2022, the Company received an R&D refund of $832,677 and also received US$5 million from
FUJIFILM Corporation under a Strategic Partnership Agreement. During the reporting period,
Cynata actively recruited and treated patients in three clinical trials: (1) the Phase 3 SCUlpTOR
osteoarthritis clinical trial, (2) the MEND respiratory distress clinical trial and, (3) the Diabetic Foot
Ulcers (DFU) clinical trial. The Company also received clearance from the US Food and Drug
Administration (FDA) for Cynata’s Investigational New Drug (IND) application for a proposed Phase 2
trial in acute graft-versus-host disease (aGvHD). During the financial year, Cynata signed a Strategic
Partnership Agreement (SPA) and a Manufacturing Services Agreement with FUJIFILM Corporation
and with FUJIFILM Cellular Dynamics, Inc., respectively, for FUJIFILM to manufacture CymerusTM
MSCs for clinical and commercial purposes. In addition, Cynata regained development and
commercialisation rights to CYP-001 for graft-versus-host disease (GvHD) as part of the SPA and
received a payment of US$5m as part of the SPA. The Company strengthened its intellectual
property portfolio, with patents encompassing the Company’s unique Cymerus MSC technology
being granted in the US, Canada, Russia, China and Japan, which are core markets for the
development of cutting-edge regenerative medicine technologies. Cynata reported compelling data
from preclinical studies in models of idiopathic pulmonary fibrosis (IPF) and heart attack, with a
paper describing the latter published in leading journal, Cytotherapy. Following a review after the
completion of FY21-22 and in face of ongoing recruitment challenges, enrolment to the MEND trial
was concluded as announced to the market on 12 August 2022. Cynata’s core focus for the outlook
period is to complete recruitment in its active clinical trials, negotiate with study centres the logistic
aspects of the proposed Phase 2 clinical trial in aGvHD, and to continue to engage in commercial
discussions with multiple potential partners. Cynata’s pipeline is robust and diverse, with positive
preclinical data demonstrated in a host of relevant disease models including in IPF, renal
transplantation and myocardial infarction (heart attacks). The versatility of MSCs make the
Company’s Cymerus platform a powerful and valuable clinical asset and Cynata’s history of positive
preclinical and clinical results are a promising indication that MSCs can be leveraged across a range
of target indications.

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

Authorised for release by the Board

24 August 2022

Page | 3

Annual Report
2021/2022

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

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

Postal Address

PO Box 7165
Hawthorn North, Victoria 3122

Website

www.cynata.com

Stantons
Level 2, 40 Kings Park Road
West Perth, Western Australia 6005

Share Registry

Automic Registry Services
Level 5, 191 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 2022

Contents

Key Highlights 2021-2022

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

ASX Additional Information

1
1

Cynata Therapeutics Annual Report 2021/2022Key Highlights 2021-2022

Actively recruiting
and treating
patients in the
Phase 3 SCUlpTOR
osteoarthritis
clinical trial

Actively recruited
and treated
patients in the
MEND respiratory
distress clinical
trial

Actively recruiting
and treating
patients in the
Diabetic Foot
Ulcers (DFU)
clinical trial

Received clearance
from FDA for
Cynata’s IND
application for
Phase 2 trial in
acute graft-versus-
host disease
(aGvHD)

FUJIFILM to
manufacture
Cymerus™ MSCs
for clinical and
commercial
purposes

Regained
development and
commercialisation
rights to CYP-001
for graft-versus-
host disease
(GvHD)

Received a
payment of
US$5m as part of
the SPA

Signed a Strategic
Partnership
Agreement and
a Manufacturing
Services
Agreement with
FUJIFILM

Strengthened
intellectual
property portfolio,
with patents
granted in the US,
Canada, Russia,
China and Japan

Reported
compelling data
from preclinical
studies in models
of idiopathic
pulmonary fibrosis
(IPF) and heart
attack.

Published a paper
in leading journal,
Cytotherapy,
describing
compelling data
from preclinical
studies in models of
heart attack

Appointment of
Dr Jolanta Airey to
the new position
of Chief Medical
Officer to drive
Cynata’s advanced
clinical product
pipeline

Key Highlights 2021-2022

Chairman’s Letter

Dear Shareholders,

I am pleased to present to you Cynata Therapeutics Limited’s

(“Cynata”) Annual Report for the period ended 30 June 2022.

This year posed unique challenges
with global equity market negativity,
exacerbated by rising inflation and
interest rates, supply chain issues, as
well as the persistence of COVID-19.
This volatility has resulted in increased
risk aversion by investors, plus a
broader rotation out of growth stocks,
which has impacted the tech and
biotech sector. Despite this, we believe
Cynata is in its strongest position ever
with the advancement of several clinical
trials, new commercial partnerships,
and a strong balance sheet. I am
confident in the Company’s ability to
maintain this momentum into FY23.

Cynata’s proprietary MSC technology
achieves transformative milestone

We were extremely proud that
our technology has been further
validated by the US Food and Drug
Administration (FDA), with the
clearance of our Investigational New
Drug (IND) application for a proposed
Phase 2 trial in acute graft-versus-

host disease (aGvHD). This important
achievement is a landmark milestone
for Cynata as it provides a gateway in
the USA (which is the world’s largest
healthcare market) and, in addition
to the proposed clinical study in
aGvHD, allows us to pursue further
clinical targets there in the future.
It is important to note that Cynata
has already received Orphan Drug
Designation from the FDA.

Advancing clinical trials, building a
strong portfolio

Cynata has three advanced clinical
trials: a Phase 3 trial in osteoarthritis,
a trial in diabetic foot ulcers (DFU) and
a trial in acute respiratory distress
syndrome (ARDS). Each indication
has positive traits that typify our
commercial profile – a large unmet
need with a significant addressable
market. The combined addressable
market of our clinical and pre-clinical
indications amounts to approximately
A$46B.

I believe we have

constructed a

well-balanced and

de-risked portfolio,

that aims to provide

a materially higher

standard of care in

a variety of clinical

indications, thereby

improving the lives of

millions of people.

Cynata Therapeutics Annual Report 2021/2022Subsequent to the financial year, we conducted a
comprehensive strategic review of our clinical portfolio
and noted that the changing nature of the COVID-19
pandemic, together with continuous pressure on
healthcare systems, all contributed to a slow rate of
recruitment in the respiratory distress (MEND) clinical
trial. With the consequent uncertainty about timely
recruitment and completion we decided to conclude
that trial, as announced on 12 August 2022.

In addition, our DFU trial leverages leading wound
dressing technology from TekCyte, with whom
we have signed a world-wide exclusive license
agreement. If successful with DFU, Cynata’s MSCs
combined with TekCyte’s wound dressing technology
can potentially be leveraged across other indications
that require topical applications of MSCs, further
bolstering the Company’s potential addressable
market.

Cynata is also progressing several other indications,
such as renal transplantation, which exhibit large
market opportunities and supportive preclinical data.
These indications illustrate the potency of Cynata’s
proprietary MSC technology across a range of
diseases and support the implementation of potential
future clinical trials that assess the use of Cymerus™
MSCs. The Company remains engaged with
prospective commercial partners as each indication
provides a pathway to commercialisation.

I believe we have constructed a well-balanced and
de-risked portfolio, that aims to provide a materially
higher standard of care in a variety of clinical
indications, thereby improving the lives of millions of
people.

Strategic partnerships to validate and advance our
technology

During the year the Company signed a Strategic
Partnership Agreement and a Manufacturing
Services Agreement with FUJIFILM Corporation and
with FUJIFILM Cellular Dynamics, Inc., respectively.
The new partnership allows Cynata to leverage
FUJIFILM’s leading manufacturing capabilities to
produce its MSC products for clinical trials and other
applications at a commercial scale. Further, the new
agreement allows Cynata to retain all commercial and
developmental rights to the aGvHD product, as well
as receive US$5m from FUJIFILM as per the terms of
the previous agreement. I am pleased that Cynata
and FUJIFILM have maintained a strong and fruitful
working relationship, and the Company is excited at
the prospect of continuing this partnership with one of
our largest shareholders.

Strategic hire to accelerate development

Dr Jolanta Airey joined us as Chief Medical Officer
earlier in the financial year, to drive Cynata’s clinical
development and commercialisation of our products.
Dr Airey has already made a meaningful contribution
in her short time with Cynata, leveraging her 25 years
of experience in companies such as CSL Ltd. Her
key insights and knowledge will help us continue to
build and monetise our portfolio, as we progress with
clinical trials.

Strong financial foundations

Cynata is in a robust financial position with A$23.8m
in cash as at 30 June 2022 which leaves us well
placed to grow and extend our product pipeline. Our
well-funded position affords us greater financial
flexibility, while still providing the Company with
many shots on goal, to enable the greatest chance of
success.

On behalf of the Board, I would like to thank all
our shareholders for their continued support as we
advance our portfolio. I would like to thank my fellow
Directors, Ross, Kilian and the rest of the team for their
hard-work and determination this year. I look forward
to achieving further operational success in FY23.

Yours sincerely,

Dr Geoff Brooke
Chairman

Chairman’s Letter

CEO Letter

Dear Shareholders,

This year, Cynata achieved several key operational milestones,

including signing a Strategic Partnership Agreement (SPA) with

FUJFILM Corporation and a Manufacturing Services Agreement

(MSA) with FUJIFILM Cellular Dynamics, Inc., gaining FDA clearance

for our Investigational New Drug (IND) application for a proposed

Phase 2 trial in acute graft-versus-host disease (aGvHD) and

commencing a new clinical trial in diabetic foot ulcers (DFU).

I am proud of our team’s focus,
discipline, and hard work, which has
led to the Company being in such a
strong position for FY23 and beyond.

New partnership strengthened our
operations

Toward the end of 2021, we signed
a SPA with FUJIFILM and executed
an MSA with FUJIFILM Cellular
Dynamics, Inc (FCDI), a subsidiary
of FUJIFILM. FCDI has world-class
manufacturing capabilities and is a
global leader in manufacturing cell
therapy products. These strengths,
together with the fact that FCDI was
the original developer of the induced
pluripotent stem cell (iPSC) line used
in our Cymerus™ manufacturing
process, provides us with access to an
enormously valuable resource for the
development of our MSCs. The MSA
encompasses provision of clinical and
commercial manufacturing services
for our Cymerus MSC products moving
forward, with technology transfer

currently underway at FCDI. FUJIFILM
also extended its voluntary escrow
over its 8.1 million shares in Cynata, a
clear indicator of its commitment to a
long-term relationship with Cynata.

Clinical trial progress and preclinical
study success

We have seen good progress in
our clinical trials across multiple
indications. The Phase 3 SCUlpTOR
osteoarthritis clinical trial, sponsored
by the University of Sydney, is well into
its recruitment and treatment phase
with current expectations to complete
enrolment in late 2024.

We also regained the rights to our
lead product for aGvHD, CYP-001,
upon execution of the new SPA with
FUJIFILM, which laid the foundation for
us to execute a product development
strategy in the US for aGvHD. This is
a significant development for Cynata,
providing us with long-term benefit as
we move closer to commercialisation
of our Cymerus MSC products.

I am proud of

our team’s focus,

discipline, and hard

work, which has

led to the Company

being in such a

strong position for

FY23 and beyond.

Cynata Therapeutics Annual Report 2021/2022Recently, the US FDA cleared our Investigational New
Drug (IND) application for a proposed Phase 2 clinical
trial of CYP-001 in GvHD, allowing us to commence
trial planning activities toward potentially opening
enrolment by the end of 2022.

In December 2021, we advanced our clinical trial of
CYP-006TK as a potential treatment for Diabetic Foot
Ulcers (DFU) with the trial opening for enrolment.
Our current expectation is that this trial will complete
enrolment in the first half of calendar 2023. CYP-
006TK utilises TekCyte’s polymer coated wound-
dressing technology seeded with Cymerus™ MSCs
for topical application to DFUs. TekCyte is a leading
manufacturer of biomedical coatings, and we are
excited to have partnered with another Australian
innovator through an exclusive worldwide licence to
its technology for this trial, which potentially opens a
pathway for other topical indications.

In June of this year, a further pre-clinical study in mice
subjected to bleomycin (BLM)-induced pulmonary
fibrosis, which mimics features of idiopathic
pulmonary fibrosis (IPF) in humans was completed.
The very encouraging data provided further evidence
in support of the highly potent anti-inflammatory
effects of our proprietary Cymerus MSCs. The study
was conducted by Professor Chrishan Samuel, a
Monash Biomedicine Discovery Fellow and Head of
the Fibrosis Laboratory, Department of Pharmacology
at Monash University.

Lastly, the MEND trial aims to investigate the efficacy
of MSCs in patients admitted to ICUs with acute
respiratory distress syndrome (ARDS). ARDS, and
more broadly respiratory failure, is a severe and life-
threatening illness and a major unmet medical need.
Patient recruitment has been slower than expected
and, in an effort to mitigate that and accelerate
recruitment and the timeline for expected completion,
we added a new site for the trial at St George Hospital
in Sydney.

After the financial year, we conducted a strategic
review of the clinical development pipeline with
particular reference to the MEND trial and the
widespread uptake of COVID-19 and influenza
vaccines, availability of new antiviral drugs, vastly

improved patient management practices in our target
population, and major resource problems within the
hospital system. Considering the review and the
ongoing uncertainty about timely recruitment and
completion, we decided to conclude the current MEND
trial, as announced on 12 August 2022.

Recently granted patents have further expanded our
IP footprint

In addition to expanding our clinical pipeline,
we continued to add to the comprehensive
patent portfolio which protects our unique and
proprietary intellectual property. We were granted
several new patents across the globe during the
year, which strengthens our path to competitive
commercialisation. In a significant achievement, a
substantial six new patents were granted in Canada,
Russia, Japan, China and the US, across a variety of
Cymerus™ processes and applications.

FY23 outlook

Cynata is well placed to continue its successful
operational development and growth into FY23 and
onwards, building on the success of the past 12
months. With a series of advancements in clinical
trials, strengthened partnerships with FUJIFILM and
TekCyte, and ending the year with a strong balance
sheet, we are in a better position than ever before.

I would like to especially thank our Chairman, Dr Geoff
Brooke and the Board of Directors for their guidance
and persistence, and the broader team for all their
hard work in accelerating clinical and commercial
developments. I would finally like to extend my
gratitude to our shareholders who have continued
to support us along this journey. I am confident that
another year of milestone achievements lies ahead.

Yours sincerely,

Dr Ross Macdonald
Chief Executive Officer & Managing Director

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 2022.

In order to comply with the provisions of the

Corporations Act 2001, the directors report as follows:

Cynata Therapeutics Annual Report 2021/2022Board of 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 31 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
clinical stage TIL therapy 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 positions

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

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
Founder of AvengeBio, a clinical stage
immune-oncology company focused
on ovarian and peritoneal cancers. 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 2021/2022Directorships 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.

117,809

2,070,050

2,284,856

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 1,000,000 options were granted to the following
key management personnel (2021: 4,400,000):

Key management
personnel

Number of options
granted

Issuing entity

Number of
ordinary shares
under option

Jolanta Airey 1

1,000,000

Cynata Therapeutics Ltd

1,000,000

1 Dr Jolanta Airey is an employee of Cynata and was appointed on 11 October 2021 as Chief Medical Officer.

Company Secretary

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.

Dividends

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

1212

Cynata Therapeutics Annual Report 2021/2022Shares 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

19 Aug 2020

1,250,000

Cynata Therapeutics Limited3

14 Sept 2020

100,000

Cynata Therapeutics Limited4

24 Nov 2020

4,500,000

Cynata Therapeutics Limited5

11 Oct 2021

1,000,000

Class of
shares

Ordinary

Exercise
price of
option

$2.11

$0.97

$1.28

$0.97

$0.89

Expiry date
of options

16 May 2024

18 Aug 2024

13 Sept 2024

29 Nov 2025

11 Oct 2025

1 Unlisted options issued to Dr Brooke on 17 May

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

2019 pursuant to the terms of his appointment as

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

non-executive director.

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

(100,000) on 30 November 2020 pursuant to an Employee

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

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

Option Acquisition Plan.

on 19 August 2020 pursuant to an Employee Option

5 Unlisted options issued to Dr Airey on 11 October 2021

Acquisition Plan.

3 Unlisted options issued to Mrs Gupta on 14 September

2020 pursuant to an Employee Option Acquisition Plan.

pursuant to an Employee Option Acquisition Plan.

Dr Airey is an employee of Cynata and was appointed on

11 October 2021 as Chief Medical Officer.

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.

There were no shares or interests issued during
or since the end of the financial year as a result of
exercise of an option (2021: nil).

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, 10 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 2022 has been received
and is included on page 36 of this annual report.

1414

Cynata Therapeutics Annual Report 2021/2022Directors’ Report

15
15

Operating and Financial Review

Principal activities

Further discussion on the Group’s operations is
provided below:

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™.
There are currently three active clinical trials taking
place using Cymerus technology which are attempting
to treat osteoarthritis, respiratory distress, and
diabetic foot ulcers.

The Cymerus technology represents an important
breakthrough in regenerative medicine, enabling the
development of therapeutic stem cell products through
scalable manufacture of MSCs from a single donor
and a single donation. This compares favourably to
most other MSC technologies that require multiple
donors and multiple donations. Cynata’s proprietary
Cymerus technology has the potential to revolutionise
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 $832,677
(2021: $1,391,067) and providing for income tax,
amounted to $5,445,172 (2021: $7,689,683). Cynata
also received US$5 million from FUJIFILM Corporation
in Oct 2021 under a Strategic Partnership Agreement.

1616

Operational update

Phase 3 osteoarthritis trial underway

The Phase 3 SCUlpTOR (structure-modifying
treatment for medial tibiofemoral osteoarthritis) trial
sponsored by the University of Sydney continues
to recruit patients with osteoarthritis of the knee.
The study in 440 patients is designed to assess the
efficacy of CYP-004, Cynata’s Cymerus MSC product
for osteoarthritis, compared to placebo on clinical
outcomes and knee joint structure over a two-year
period. The co-primary endpoints are pain alleviation
and improvement in the underlying disease measured
by cartilage loss, which provides a more objective
performance assessment on the efficacy of MSCs. The
trial is funded by an Australian Government National
Health and Medical Research Council project grant,
with full intellectual property and commercialisation
rights held by Cynata. Currently, there is no cure for
osteoarthritis and available treatment options only
focus on managing symptoms. Research in pre-clinical
and early clinical studies suggests that MSCs have
the potential to evoke a regenerative response in the
underlying disease, which is currently a significant
unmet need with a market size of approximately
US$11.6bn.

Cynata Therapeutics Annual Report 2021/2022Diabetic Foot Ulcers clinical trial underway

During this past year, Cynata commenced a clinical
trial in diabetic foot ulcers (DFU), following the
successful completion of start-up activities including
a Site Initiation Visit and human research ethics
committee and research governance approvals. The
trial is based in part on very promising results from an
independent pre-clinical study in a model of diabetic
wounds in which Cymerus MSCs demonstrated
significantly better results compared to bone marrow
derived MSCs. Currently, Cynata is continuing to
recruit subjects after enrolling the initial patients into
the trial in April 2022. Subjects are being followed
for a treatment period of 4 weeks, and each patient
will be evaluated for a total of 24 weeks. The trial
aims to recruit 30 patients with DFU who will be
randomly assigned to receive CYP-006TK or a
standard treatment. CYP-006TK is a novel polymer-
coated silicon wound dressing seeded with Cymerus
mesenchymal stem cells (MSCs) to facilitate topical
application to the wound. This unique dressing
technology has been exclusively licensed from leading
manufacturer of innovative biomedical coatings,
TekCyte Limited. The trials are taking place at Royal
Adelaide Hospital and The Queen Elizabeth Hospital,
Adelaide. The primary outcome measure in the trial
will be safety, with secondary efficacy outcome
measures including wound healing, pain and quality
of life at 12 and 24 weeks after treatment. The trial is
expected to complete enrolment by the end of 2022.

MEND respiratory distress clinical trial

Patient recruitment and treatment in the MEND trial
continued and passed the half-way point during the
financial year. The randomised controlled clinical
trial aimed to investigate the safety and early
efficacy of Cymerus MSCs in 24 adult patients with
respiratory failure who met the established criteria
for acute respiratory distress syndrome (ARDS). In
the face of slow recruitment caused by a range of
external factors, Cynata added St. George Hospital
in Sydney as a further study site. The hospital is
the largest within the district with 550 beds and
is amongst the leading centres for trauma and
emergency management in the state. The addition
of St. George Hospital was intended to accelerate

Review of operations
Key Highlights

Actively recruiting and treating patients in
three clinical trials: 1. Phase 3 SCUlpTOR
osteoarthritis clinical trial; 2. MEND
respiratory distress clinical trial; and 3.
Diabetic Foot Ulcers (DFU) clinical trial

Received clearance from the US Food and
Drug Administration (FDA) for Cynata’s
Investigational New Drug (IND) application
for a proposed Phase 2 trial in acute graft-
versus-host disease (aGvHD)

Signed a Strategic Partnership Agreement
(SPA) and a Manufacturing Services
Agreement with FUJIFILM Corporation
and with FUJIFILM Cellular Dynamics, Inc.,
respectively, for FUJIFILM to manufacture
Cymerus™ MSCs for clinical and commercial
purposes. In addition, Cynata: 1. regained
development and commercialisation rights
to CYP-001 for graft-versus-host disease
(GvHD) as part of the SPA; and 2. received a
payment of US$5m as part of the SPA.

Strengthened intellectual property portfolio,
with patents encompassing the Company’s
unique Cymerus MSC technology granted in
the US, Canada, Russia, China and Japan,
which are core markets for the development
of cutting-edge regenerative medicine
technologies

Reported compelling data from preclinical
studies in models of idiopathic pulmonary
fibrosis (IPF) and heart attack, with a paper
describing the latter published in leading
journal, Cytotherapy

Appointment of Dr Jolanta Airey to the new
position of Chief Medical Officer to drive
Cynata’s advanced clinical product pipeline

Operating and Financial Review

17
17

Operating and Financial Review (cont’d)

recruitment and formed part of Cynata’s mitigation
strategies to ensure that the trial is completed in a
timely manner. The combined market opportunity
of ARDS, sepsis and CRS, which represent potential
targets if the trial is successful, is estimated to be over
US$8bn. Cynata’s pre-clinical studies have shown
that these conditions can potentially be improved
with Cymerus MSCs through modulation of the
inflammatory reaction associated with these diseases.
The trial is in collaboration with the Cerebral Palsy
Alliance Research Institute and the COVID-19 Stem
Cell Treatment Group. Following a review after the
completion of FY21-22 and in the face of ongoing
recruitment challenges, the trial was concluded, as
announced to the market on 12 August 2022.

FDA clears Cynata’s IND application for Phase 2 trial
in aGvHD

During Q4 FY22, the US FDA cleared Cynata’s IND
application for a proposed Phase 2 clinical trial of CYP
001, Cynata’s lead product, in patients with acute
steroid resistant graft-versus-host disease (aGvHD).
This is a major milestone and value catalyst for the
Company as it affirms the quality of the data package
for CYP-001 and provides a gateway in the USA to
potential further clinical targets, validating Cynata’s
ongoing product development and commercial
partnering activities. The proposed Phase 2 clinical
study is expected to commence after completion of
negotiations with study centres and receipt of relevant
ethical and administrative approvals. It aims to recruit
60 patients with high risk aGvHD across several
countries including the USA and Australia, with
Overall Response Rate (ORR) evaluated at Day 28.
The clinical trial will be randomised, and participants
will receive either CYP 001 or a placebo, in addition
to corticosteroids. The trial is expected to begin
later this year, with results of the primary evaluation
expected in early 2024. The cornerstone for this trial
was Cynata’s previous ground-breaking Phase 1
clinical trial in aGvHD in which all safety and efficacy
endpoints were met. The highly encouraging data
received significant attention including a feature on
the front cover of prestigious medical journal, Nature
Medicine.

Strategic Partnership Agreement (SPA) and
Manufacturing Services Agreement (MSA) with
FUJIFILM

During H1 FY22, Cynata and FUJIFILM entered into
a new strategic partnership for FUJIFILM to provide
clinical and commercial manufacturing services for,
and supply of, Cynata’s Cymerus MSC products.
Under the SPA, Cynata executed a Manufacturing
Services Agreement with FUJIFILM Cellular Dynamics
Inc (FCDI), a subsidiary of FUJIFILM and the parties
have begun work towards establishing the Cymerus
manufacturing process at FCDI. FUJIFILM will
undertake technology transfer, process validation and
manufacturing under stage-by-stage commercial,
arms-lengths arrangements while Cynata’s existing
contract manufacturer, Waisman Biomanufacturing,
will continue to manufacture product for Cynata’s
current clinical trials.

As part of the SPA, Cynata regained all rights to
CYP-001 for GvHD and received a US$5m payment
from FUJIFILM. Subsequently, Cynata commenced
implementation of a US development strategy for
Cymerus MSCs, capitalising on the need for an
effective and scalable MSC therapeutic product for
acute GvHD. Cynata has already secured an IND as
outlined above, in addition to the previously granted
Orphan Drug Designation from the FDA for CYP-001,
potentially providing several commercially significant
incentives and decreased time to commercialisation.
The effectiveness of current therapies for aGvHD are
suboptimal, presenting a compelling opportunity for
Cynata.

Strengthened intellectual property portfolio

Cynata continued to advance its unique and
proprietary intellectual property portfolio, generating
protection in major markets of commercial
importance. During Q1 FY22, Cynata received a
Notice of Allowance from the United States Patent
and Trademark Office and also from the Canadian
Intellectual Property Office, for a patent application
covering its proprietary Cymerus MSC technology.
The US patent and the Canadian patent will extend to
2037 and 2034, respectively. Additionally, the Patent
Office of the Russian Federation accepted two patent

1818

Cynata Therapeutics Annual Report 2021/2022applications covering Cynata’s Cymerus technology
for grant, with expiration in 2037. Furthermore,
Cynata has also been granted a patent from the State
Intellectual Property Office of the People’s Republic
of China (SIPO) and the Japan Patent Office (JPO)
for its proprietary Cymerus MSC technology, with
expiration in 2037 and 2034, respectively. This strong
portfolio of patents extends the already strong IP
protection of the Cymerus platform and its unique
ability to manufacture consistent MSCs at scale from
a single donation derived from a single donor to create
therapeutic stem cell products.

Pre-clinical studies

A scientific paper describing the use of Cymerus MSCs
in a model of myocardial infarction (heart attack)
was published in peer-reviewed journal, Cytotherapy,
the official journal of the International Society for
Cell & Gene Therapy. In the published study, rats
were randomly assigned to receive Cymerus MSCs,
bone marrow derived MSCs, or placebo control. The
results were positive and demonstrated the efficacy of
Cymerus MSCs in this pre-clinical model of myocardial
infarction.

In addition, a pre-clinical study in an animal model
of idiopathic pulmonary fibrosis (IPF), a serious
lung disease, provided further evidence to support
the efficacy of Cynata’s Cymerus MSCs. The study
presented more detail on the molecular mechanisms
associated with the proprietary MSCs with key
findings including a marked reduction in pulmonary
fibrosis and a highly potent anti-inflammatory effect
of Cynata’s Cymerus MSCs in the airways/lungs.
Importantly, the results support the implementation
of future clinical trials that assess the use of Cymerus
MSCs in treating fibrotic diseases of the lungs and
other organs, providing a prospective pathway for
Cynata to engage with potential commercial partners.

New Chief Medical Officer

During Q1, Cynata announced the appointment of
Dr Jolanta Airey as Chief Medical Officer to drive
Cynata’s advanced clinical product pipeline, consistent
with Cynata’s growing trial activities and late-stage
portfolio. Dr Airey is a highly experienced clinician

who has over 25 years’ clinical pharmaceutical
industry experience working at listed companies in
fields including respiratory medicine, rheumatology,
dermatology and biological therapies developed for
international markets. She was formerly Director,
Translational Development at CSL Limited and has
held a range of medical positions within biotech,
pharmaceutical and clinical research companies.

Tax Incentive Rebate

During the year, Cynata received an ~A$833k
R&D Tax Incentive Rebate which strengthened the
company’s cash position. The R&D Tax Incentive is
an initiative by the Australian Government to support
companies engaging in research and development
benefitting Australia, reflective of the potential that
Cymerus MSCs have on improving the lives of patients
suffering from a range of devastating diseases.

Outlook

Significant progress continues to be made in the
Phase 3 trial in osteoarthritis with patient enrolment
steadily advancing. The Phase 3 trial is the largest
randomised controlled trial of MSCs conducted in
patients with osteoarthritis worldwide, with results
having the potential to lead to a dramatic change in
the clinical management and outcome of OA patients,
globally. The sponsor of the study, the University of
Sydney, expects the trial to conclude late in 2024, as
planned.

Following a review after the completion of FY21-22
and in the face of ongoing recruitment challenges,
the MEND trial was concluded as announced to the
market on 12 August 2022.

Cynata’s clinical trial in DFU continues to enrol
subjects and it is expected that the target of 30
subjects will be achieved during the first half of 2023.

Cynata’s core focus for the outlook period is to
complete recruitment in its active clinical trials,
negotiate with study centres the logistic aspects of
the proposed Phase 2 clinical trial in aGvHD, and
to continue to engage in commercial discussions
with multiple potential partners. Cynata’s pipeline

Operating and Financial Review

19
19

Operating and Financial Review (cont’d)

is robust and diverse, with positive preclinical data
demonstrated in a host of relevant disease models
including in IPF, renal transplantation and myocardial
infarction (heart attacks). The versatility of MSCs
make the Company’s Cymerus platform a powerful
and valuable clinical asset and Cynata’s history of
positive preclinical and clinical results are a promising
indication that MSCs can be leveraged across a range
of target indications.

hospital system. Given the ongoing recruitment
activities in the Phase 3 osteoarthritis trial and
Phase 2 diabetic foot ulcer (DFU) trial, as well as the
recent IND clearance for a proposed Phase 2 acute
graft-versus-host disease (aGvHD), the Company
has decided to prioritise resources towards these
initiatives and conclude the current MEND respiratory
distress clinical trial, as announced on 12 August
2022.

Financial position

The net assets of the Group have decreased
by $4,413,068 to $23,960,085 in 2022 (2021:
$28,373,153).

Changes in state of affairs

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

Subsequent events

Subsequent to the financial year, Cynata received
Notice of Allowance from the United States Patent
and Trademark Office for a patent application
covering the use of its proprietary Cymerus MSCs
in treating asthma and allergic airway disease. The
inventors are Professor Chrishan Samuel, a Monash
Biomedicine Discovery Fellow and Head of the Fibrosis
Laboratory, and Dr Simon Royce, Research Fellow,
Department of Pharmacology at Monash University.
Cynata anticipates that the patent will be granted
around October 2022, with an expiration date of 31
August 2038.

Subsequent to the financial year, the Company
conducted a strategic review of the clinical
development pipeline to ensure the portfolio
maximises the commercial opportunities and is
optimised to deliver shareholder value. This was
with particular reference to the MEND trial where
widespread uptake of COVID-19 and influenza
vaccines, availability of new antiviral drugs, vastly
improved patient management practices in our target
population and major resource problems within the

2020

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 donation from a single donor.
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 clinically relevant and favourable outcomes from
our Phase 1 trial in GvHD, as well as gaining FDA
clearance for a Phase 2 trial, provides the Company
with the confidence to pursue further clinical trials
across several indications, and potentially bypass
Phase 1 in a number of key target disease areas.

The endorsement by FUJIFILM, through both the
Strategic Partnership Agreement (SPA) and the
Manufacturing Services Agreement (MSA), further
supports the continued commercialisation of cell
therapeutic products in other indications which are
available to be licensed, such as critical limb ischemia
(CLI) and osteoarthritis. The Company is focused on
optimising and expanding manufacturing capabilities
to prepare for commercialisation by ensuring a
turnkey manufacturing solution that is both viable

Cynata Therapeutics Annual Report 2021/2022and scalable. 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.

Corporate governance

Cynata Therapeutics Limited and the board support
and adhere to the principles of corporate governance
and are committed to achieving and demonstrating
the highest standards of corporate governance.
Cynata has reviewed its corporate governance
practices against the Corporate Governance Principles
and Recommendations (4th edition) published by
the ASX Corporate Governance Council. The 2022
Corporate Governance Statement is dated 23 August
2022 and reflects the corporate governance practices
in place throughout the 2022 financial year. The 2022
Corporate Governance Statement was approved by
the board on 23 August 2022. A description of the
Group’s current corporate governance practices is set
out in the Group’s Corporate Governance Statement
which can be viewed at www.cynata.com/corporate-
governance.

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 2022.

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 2021/2022

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

Dr Jolanta Airey1

Chief Operating Officer

Vice President, Partner Engagement

Chief Medical Officer

1 Appointed 11 October 2021.

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.

Operating and Financial Review

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, one
Vice President, Partner Engagement and one Chief
Medical Officer. As set out below, total remuneration
costs for the 2022 financial year were $2,581,604
down from $2,932,641 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 10% in the 2021/2022 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 2021/2022Executive 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 2022.

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.

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

z are specifically tailored to the responsibility areas

in which the executive is directly involved.

z target areas that the Board believe hold greater

potential for business expansion and shareholder
value.

z cover financial and non-financial as well as short

and long-term goals.

z represent stretch targets to encourage exemplary

performance.

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

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

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

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

2626

Cynata Therapeutics Annual Report 2021/20223. Relationship between the Remuneration Policy and

Company Performance

The table below sets out summary information about
the Group’s earnings and movements in shareholder
wealth for the five (5) years to 30 June 2022:

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.

Other income

Net loss before tax

Net loss after tax

30 June 2022 30 June 2021 30 June 2020 30 June 2019 30 June 2018

7,835,174

1,688,351

7,153,903

1,569,103

1,518,060

5,445,172

7,689,683

3,639,100

8,472,146

4,566,134

5,445,172

7,689,683

3,639,100

8,472,146

4,566,134

Share price at start of year

Share price at end of year

Basic/diluted loss per share (cents)

0.505

0.360

3.80

0.610

0.505

5.90

1.245

0.610

3.48

1.365

1.245

8.48

0.61

1.365

5.04

Remuneration Report (audited)

27
27

Remuneration Report (cont’d)

4. Remuneration of key management personnel

Short-term employee benefits

Salary &
fees

Cash
bonus

Others

110,000

2022

Directors

G. Brooke

R. Macdonald1

358,750

55,620

10,212

S. Washer

P. Wotton

D. Maher

Other KMP

K. Kelly1

S. Lipe1,

J. Airey1, 2

Total

50,000

55,000

50,000

312,500

40,800

1,086

168,899

34,452

(2,041)

203,000

33,600

12,281

Post-
employment
benefits

Super-
annuation

27,500

5,000

27,500

20,335

20,300

Share-based
payment

Options

Total

Value of
options as
proportion of
remuneration

351,379

461,379

263,534

715,616

52,707

107,707

52,707

107,707

52,707

107,707

117,495

499,381

11,750

233,395

79,531

348,712

76.16%

36.83%

48.94%

23.53%

5.03%

22.81%

38.03%

1,308,149

164,472

21,538

105,635

981,810

2,581,604

1 Amounts in ‘Other’ represent annual leave and long

2 Appointed 11 October 2021.

service leave (Dr Macdonald and Dr Kelly only) accrued

in accordance with AASB 119 Employee Benefits. The

amounts of $55,620 for Dr Macdonald, $40,800 for

Dr Kelly, $34,452 for Dr Lipe and $33,600 for Dr Airey

under ‘Cash bonus’ represent potential bonus accrued for

the financial year 2022.

During the 2022 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 2021/2022Short-term employee benefits

Salary &
fees

Cash
bonus

Other

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

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

Value of
options as
proportion of
remuneration

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

2 For the period 1 July 2020 to 31 December 2020, Dr Lipe’s

service leave (Dr Macdonald and Dr Kelly only) accrued

employment was temporarily varied to full time basis. As

in accordance with AASB 119 Employee Benefits. The

from 1 January 2021, Dr Lipe’s employment reverted to

amounts of $70,104 for Dr Macdonald, $56,550 for

part time basis.

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

represent bonus determined and accrued for the financial

year 2021.

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.

(a) Bonuses and share-based payments granted as
compensation for the current financial year

(i) Bonuses

Cash bonuses of $70,104 to Dr Macdonald, $56,550 to
Dr Kelly and $34,452 to Dr Lipe were paid during the
financial year ended 30 June 2022. These amounts
were accrued in the 2021 accounts.

A potential performance bonus entitlement of $55,620
for Dr Macdonald, $40,800 for Dr Kelly, $34,452 for
Dr Lipe and $33,600 for Dr Airey were accrued in
the 2022 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 2022.

No other cash bonuses were granted to key
management personnel during 2022.

Remuneration Report (audited)

29
29

Remuneration Report (cont’d)

(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:

Option
series

Number

Grant date

Expiry date

Exercise price

Grant date
fair value

Vesting date

CYPOPT12*

300,000

17 May 2019

16 May 2024

CYPOPT14**

1,250,000

19 Aug 2020

18 Aug 2024

CYPOPT16***

4,400,000

24 Nov 2020

29 Nov 2025

CYPOPT17****

1,000,000

11 Oct 2021

11 Oct 2025

$2.110

$0.970

$0.890

$0.3838

$0.4152

$0.4927

$0.156

Vested

Various

Unlisted options issued to Dr Brooke pursuant to the
terms of his appointment as non-executive director.

*** Unlisted options issued to Directors 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 Dr Airey 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 CYPOPT12 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.

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

Name

Option series

No. granted

No. vested

J. Airey

CYPOPT17

1,000,000

200,000

No share options were exercised by key management
personnel during the year (2021: nil).

During the financial year

% of grant
vested

% of grant
forfeited

20%

n/a

3030

Cynata Therapeutics Annual Report 2021/20225. Key terms of employment contracts

Director/Employee

Remuneration / Fees

Performance-based
remuneration criteria

Dr Geoff Brooke

A fee of $110,000 per

n/a

annum inclusive of statutory

superannuation and

excluding GST.

Notice period

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

A fee of $55,000 per annum.

n/a

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

A salary of $340,000

Eligible to participate in the

The contract may be

per annum including

Company’s equity-based

terminated by either party

superannuation.

incentive scheme and an

providing 3 months’ notice.

incentive payment of up to

20% of the annual salary

and based on attainment

of agreed performance

indicators.

The Company may (but is

not bound to) pay additional

performance-based

remuneration.

Dr Suzanne Lipe

A salary of $184,000 per

Eligible to participate in the

The contract may be

annum inclusive of statutory

Company’s equity-based

terminated by either party

superannuation. Dr Lipe is

incentive scheme and an

3 months’ notice.

employed on a part-time

incentive payment of up to

(0.8 FTE) basis.

20% of the annual salary

and based on attainment

of agreed performance

indicators.

Dr Jolanta Airey

A salary of $308,000 per

Eligible to participate in the

The contract may be

annum inclusive of statutory

Company’s equity-based

terminated by either party

superannuation. Dr Airey

incentive scheme and an

3 months’ notice.

is employed on a part-time

incentive payment of up to

(0.8 FTE) basis.

20% of the annual salary

and based on attainment

of agreed performance

indicators.

3232

Cynata Therapeutics Annual Report 2021/20226. Key management personnel with loans above $100,000 in the reporting

period

The Company 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
1/7/2021

Interest
charged

207,978

2,146

Allowance
for doubtful
receivables

Balance at
30/6/2022

Highest loan
balance during
the period (ii)

208,861

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 2022, Dr Macdonald made final repayment of
$210,124 (2021: $126,413) of his loan which included
$2,146 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
2022, all director loans were repaid.

(ii) Includes interest.

7. Key management personnel equity holdings

Fully paid ordinary shares of Cynata Therapeutics Limited

Balance at
1 July 2021

No.

77,000

2,070,050

2,224,856

175,775

494,013

Received on
exercise of
options

No.

2022

G. Brooke

R. Macdonald

S. Washer

P. Wotton

D. Maher

K. Kelly

S. Lipe

J. Airey (i)

(i) Appointed 11 October 2021.

Shares
acquired

Shares
disposed

Balance at
resignation

Balance at
30 June 2022

No.

40,809

60,000

No.

117,809

2,070,050

2,284,856

175,775

494,013

Remuneration Report (audited)

33
33

Remuneration Report (cont’d)

Fully paid ordinary shares of Cynata Therapeutics Limited

Balance at
1 July 2020

No.

77,000

2021

G. Brooke

R. Macdonald

2,070,050

S. Washer

P. Wotton

D. Maher

K. Kelly

S. Lipe

2,224,856

175,775

494,013

Received on
exercise of
options

Shares
acquired

Shares
disposed

Balance at
resignation

Balance at
30 June 2021

No.

77,000

2,070,050

2,224,856

175,775

494,013

Share options of Cynata Therapeutics Limited

Balance
at 1 July
2021

Granted
as comp-
ensation Lapsed (ii)

Exercised

Balance
at 30
June 2022

Balance
vested at
30 June
2022

Vested and
exercisable

Options
vested
during
year

2022

No.

G. Brooke

2,300,000

R. Macdonald 1,500,000

S. Washer

300,000

P. Wotton

300,000

D. Maher

300,000

K. Kelly

S. Lipe

1,750,000

475,000

(750,000)

(375,000)

J. Airey (i)

1,000,000

2,300,000

1,355,545

666,660

1,500,000

791,654

499,992

300,000

158,327

99,996

300,000

158,327

99,996

300,000

158,327

99,996

1,000,000

638,889

333,333

100,000

63,889

33,333

1,000,000

200,000

(i) Appointed 11 October 2021

(ii) 1,125,000 options granted to KMP in the 2019 financial

year lapsed unexercised during the 2022 financial year.

3434

Cynata Therapeutics Annual Report 2021/2022Share options of Cynata Therapeutics Limited

Balance
at 1 July
2020

Granted
as comp-
ensation

Lapsed

Exercised

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

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,

24 August 2022

Remuneration Report (audited)

35
35

Auditor’s Independence
Declaration

PO Box 1908
West Perth WA 6872
Australia

Level 2, 40 Kings Park Road
West Perth WA 6005
Australia

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

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

24 August 2022

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 2022, 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 2021/2022

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, 40 Kings Park Road 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 2022, 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 2022 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 2021/2022 Key Audit Matters How the matter was addressed in the audit Carrying value of intangible assets, amortisation and impairment At 30 June 2022, the Group had intangibles with a carrying value of $2,412,565. The intangible assets are considered a Key Audit Matter as they represent around 10% 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 2022 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 2021/2022 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 2022. 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 2022 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 24 August 2022 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,

24 August 2022

Directors’ Declaration

41
41

Financial Statements

Cynata Therapeutics Annual Report 2021/2022Consolidated statement of profit or loss
and other comprehensive income
for the year ended 30 June 2022

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 2022

30 June 2021

64,749

7,770,425

7,835,174

92,299

1,596,052

1,688,351

(8,824,894)

(3,778,030)

(1,920,709)

(1,758,388)

(279,965)

(1,032,104)

(1,536,871)

(1,222,674)

(2,024,780)

(5,445,172)

(7,689,683)

(5,445,172)

(7,689,683)

(5,445,172)

(7,689,683)

(5,445,172)

(7,689,683)

Total comprehensive loss for the year attributable:

Owners of Cynata Therapeutics Limited

(5,445,172)

(7,689,683)

Loss per share:

Basic and diluted (cents per share)

(3.80)

(5.90)

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 2022

30 June 2022

30 June 2021

Note

23,798,046

26,716,670

100,389

237,029

70,464

207,978

287,261

24,135,464

27,282,373

2,412,565

2,692,530

26,548,029

29,974,903

2,327,368

1,375,685

260,576

2,587,944

226,065

1,601,750

23,960,085

28,373,153

16.1

16.2

74,900,251

7,351,421

6,319,317

4,724

(58,296,311)

(52,851,139)

23,960,085

28,373,153

Current assets

Cash and cash equivalents

Trade and other receivables

Loans receivable

Prepayments

Total current assets

Non-current assets

Intangibles

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 2021/2022Consolidated statement of changes in equity
for the year ended 30 June 2022

Issued
Capital

Option
Reserve

Foreign
currency
translation
reserve

Accum-
ulated
losses

Total

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

Share based payments

(571,952)

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

Balance at 1 July 2021

74,900,251

6,319,317

4,724 (52,851,139)

28,373,153

Loss for the year

Other comprehensive income for the year, net

of tax

Total comprehensive income/(loss) for the year

Share based payments (refer to note 16.1)

1,032,104

(5,445,172)

1,032,104

Balance at 30 June 2022

74,900,251

7,351,421

4,724 (58,296,311)

(23,960,085)

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 2022

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

Note

Year ended

30 June 2022

30 June 2021

204,985

(3,185,386)

(3,770,355)

50,343

832,677

6,731,903

82,033

1,391,067

(7,727,868)

(3,070,839)

Net cash (used in) operating activities

21.1

(3,298,331)

(5,163,109)

Cash flows from financing activities

Proceeds from issue of equity instruments of the Company

Payment for share issue costs

Repayment by related parties

Net cash provided by financing activities

210,124

18,306,813

(571,952)

462,272

18,197,133

Net (decrease)/increase in cash and cash equivalents

(3,088,207)

13,034,024

Cash and cash equivalents at the beginning of the year

26,716,670

13,649,644

Effects of exchange rate changes on the balance of cash held

in foreign currencies

169,583

33,002

Cash and cash equivalents at the end of the year

23,798,046

26,716,670

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

4646

Cynata Therapeutics Annual Report 2021/2022Financial Statements

Notes

Notes to the consolidated financial statements

for the year ended 30 June 2022

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 24 August 2022.

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 2021.

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

AASB 2020-8 Amendments to Australian
Accounting Standards – Interest Rate
Benchmark Reform – Phase 2
Amends AASB 4 Insurance Contracts, AASB
9 Financial Instruments, AASB 139 Financial
Instruments: Recognition and Measurement,
AASB 7 Financial Instruments: Disclosures
and AASB 16 Leases to address issues that
may affect financial reporting during interest
rate benchmark reform, including the effect of
changes to contractual cash flows or hedging
relationships resulting from the replacement of
an interest rate benchmark with an alternative
benchmark rate.

The adoption of this Amendment has had no
significant impact on the disclosures or the amounts

4848

Cynata Therapeutics Annual Report 2021/2022recognised in the Group’s consolidated financial
statements.

3. Significant accounting policies

2.2 New and revised Australian Accounting

Standards and Interpretations on issue but not
yet effective

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

Effective
for annual
reporting
periods
beginning on
or after

1 January 2023

Standard/amendment

AASB 17 Insurance Contracts (as

amended)

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 2021-2 Amendments to

Australian Accounting Standards –

Disclosure of Accounting Policies and

Definition of Accounting Estimates

AASB 2021-5 Amendments to

Australian Accounting Standards

– Deferred Tax related to Assets

1 January 2023

and Liabilities arising from a Single

Transaction

AASB 2022-1 Amendments to

Australian Accounting Standards – Initial

Application of AASB 17 and AASB 9 –

1 January 2023

Comparative Information

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

Notes

49
49

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.

3.3 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

5050

Cynata Therapeutics Annual Report 2021/2022acquiree (if any), the excess is recognised immediately
in profit or loss as a bargain purchase gain.

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

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

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

Where a business combination is achieved in
stages, the Group’s previously held equity interest
in the acquiree is remeasured to its acquisition date

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

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

3.4 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.

Notes

51
51

Significant accounting policies (cont’d)

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.

3.5.2 Other income

Other income is generally income earned from
transactions outside the course of the Group’s ordinary
activities. Other income is recognised in profit or loss
when received.

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

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

3.6 Foreign currencies

3.7 Government grants

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

In preparing the financial statements of each
individual group entity, transactions in currencies
other than the entity’s functional currency (foreign
currencies) are recognised at the rates of exchange
prevailing at the dates of the transactions. At the end
of each reporting period, monetary items denominated
in foreign currencies are retranslated at the rates
prevailing at that date. Non-monetary items carried at
fair value that are denominated in foreign currencies
are translated at the rates prevailing at the date when

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

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Cynata Therapeutics Annual Report 2021/2022recognised in profit or loss in the period in which they
become receivable.

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

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

3.10 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

Notes

53
53

Significant accounting policies (cont’d)

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

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

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

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

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

3.10.3 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
are also recognised in other comprehensive income
or directly in equity, respectively. Where current tax
or deferred tax arises from the initial accounting for a
business combination, the tax effect is included in the
accounting for the business combination.

3.11 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

5454

Cynata Therapeutics Annual Report 2021/2022of 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.

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

Notes

55
55

Significant accounting policies (cont’d)

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.

trade and most other receivables fall into this category
of financial instruments.

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

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,

5656

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

Cynata Therapeutics Annual Report 2021/2022designated 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.

arising from investing and financing activities which is
recoverable from, or payable to, the taxation authority
is classified within operating cash flows.

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.

Cash flows are included in the cash flow statement
on a gross basis. The GST component of cash flows

The right-of-use assets comprise the initial
measurement of the corresponding lease liability, any

Notes

57
57

Significant accounting policies (cont’d)

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.

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.

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 Cash and cash equivalents

For the purpose of presentation in the consolidated
statement of cash flows, cash and cash equivalents
includes cash on hand, deposits held at call with
financial institutions with maturities of four months or
less that are readily convertible to known amounts of
cash and which are subject to an insignificant risk of
changes in value. Bank overdrafts are shown within
borrowings in current liabilities in the consolidated
statement of financial position.

3.18 Comparative amounts

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

4. Critical accounting judgements

and key sources of estimation
uncertainty

In the application of the Group’s accounting policies,
which are described in note 3, the directors of the
Company are required to make judgements, estimates
and assumptions about the carrying amounts of
assets and liabilities that are not readily apparent

5858

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 2022 with a carrying value of
$2,412,565 (2021: $2,692,530) 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 2022 (2021: $279,965).

The directors performed an impairment testing and
concluded that no further impairment of the intangible
assets is required for the year (2021: nil).

4.1.2 Share-based payment transactions

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

Cynata Therapeutics Annual Report 2021/2022Share-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.

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.

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

6. Interest income and other income

Interest income

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

Other income

R&D rebate

Grants received (i)

Other income (ii)

2022

62,603

2,146

64,749

2022

2021

79,705

12,594

92,299

2021

832,677

1,391,067

204,985

6,937,748

7,770,425

1,596,052

(i)

This includes an Innovation Connections grant

(ii)

This represents an amount of US$5 million from Fujifilm

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

Corporation under a Strategic Partnership Agreement.

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

and the 2020 Export Market Development Grant of

$100,000.

Notes

59
59

7. Loss for the year

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

Employee benefits expenses

Wages and salaries

Superannuation expenses

Leave entitlements

Total employee benefits expenses (i)

Share-based payment expenses

Other expenses

Share register fees

Director fees

Legal costs

Investor/public relations

Corporate advisors

Other administrative expenses

Effect of foreign exchange

Total other expenses

(i)

Excludes amounts charged to product development

costs.

2022

2021

1,737,569

1,467,272

148,630

34,510

120,033

171,083

1,920,709

1,758,388

1,032,104

1,536,871

33,631

275,000

437,858

65,966

201,500

766,417

(557,698)

30,185

275,136

289,701

269,649

208,625

653,833

297,651

1,222,674

2,024,780

6060

Cynata Therapeutics Annual Report 2021/20228. Income taxes relating to continuing operations

8.1

Income tax recognised in profit or loss

2022

2021

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 25% (2021: 26%)

Tax effect of R&D rebate received

2022

2021

(5,445,172)

(7,689,683)

(1,361,293)

(1,999,317)

(208,169)

(361,677)

Effect of expenses that are not deductible in determining taxable income

2,462,108

1,450,270

Effect of unused tax losses not recognised as deferred tax assets

(892,646)

910,724

The tax rate used for the 2022 reconciliations above is
the corporate tax rate of 25% (2021: 26%) payable by
Australian corporate entities on taxable profits under
Australian tax law.

8.2

Income tax recognised directly in equity

2022

2021

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

2022

2021

6,470,884

7,236,506

251,866

240,668

6,722,750

7,477,174

Notes

61
61

8.4 Unrecognised deferred tax (liabilities) in relation to:

Intangibles

Other

2022

2021

(603,141)

(700,058)

(63,260)

(75,663)

(666,401)

(775,721)

Net deferred tax assets

6,056,349

6,701,453

(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:

2022

2021

¢ / share

(3.80)

(5.90)

2022

2021

Loss for the year attributable to owners of the Company

(5,445,172)

(7,689,683)

Weighted average number of ordinary shares for the purposes of

basic and diluted loss per share

2022

2021

143,276,594

130,427,077

6262

Cynata Therapeutics Annual Report 2021/202210. Trade and other receivables

Deposits made

Other receivables

At the reporting date, none of the receivables were
past due/impaired. There are no expected credit
losses.

11. Intangibles

Carrying value at beginning of year (i)

Amortisation (ii)

Net book value of research and development at end of year

2022

25,528

74,861

100,389

2021

25,528

44,936

70,464

2022

2021

2,692,530

2,972,495

(279,965)

2,412,565

2,692,530

(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 (2021: $279,965). 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

2022

2021

4,821,799

2022

2021

2,129,269

1,849,304

279,965

2,409,234

2,129,269

Notes

63
63

12. Trade and other payables

Trade payables

Accrued expenses

13. Provisions

Provisions for employee entitlements

14. Loans receivable

Balance at beginning of year (i)

Interest accrued (ii)

Repayments by related parties (iii)

Balance at end of year

2022

1,580,478

746,890

2021

676,104

699,581

2,327,368

1,375,685

2022

2021

260,576

226,065

2022

207,978

2,146

2021

657,656

12,594

(210,124)

(462,272)

207,978

(i)

At the General Meeting of shareholders held on

(ii)

The director loans carry a simple interest rate of 5.20%

12 September 2018, shareholders of Cynata approved

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

the financial assistance and financial benefit provided

annually and accrued daily.

to Dr Ross Macdonald and Dr Stewart Washer or their

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

Dr Stewart Washer solely for the purpose of funding

the exercise of 2,500,000 unlisted options each at

$0.40 having an expiry date of 27 September 2018.

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

options. The loans provided are full recourse loans and

unsecured.

(iii) During the financial year ended 30 June 2022,

Dr Macdonald made final repayment of $210,124

(2021: $126,413) of his loan which included $10,124

accrued interest. At 30 June 2022, all director loans

were repaid.

6464

Cynata Therapeutics Annual Report 2021/202215. Issued capital

2022

2021

143,276,594 fully paid ordinary shares (2021: 143,276,594)

74,900,251

There were no movements in the issued capital of the
Company in the current reporting period.

Fully paid ordinary shares

No.

Balance at beginning of year

143,276,594

74,900,251

117,124,004

57,165,390

30 June 2022

30 June 2021

Share placement (i)

Share placement (ii)

Share placement (iii)

Rights Issue (iv)

Rights Issue Shortfall (v)

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

(571,953)

Balance at end of the year

143,276,594

74,900,251

143,276,594

74,900,251

(i)

Issue of shares pursuant to a Placement at $0.70 per

(iv)

Issue of shares pursuant to an Entitlement Offer at

share on 21 December 2020.

$0.70 per share on 20 January 2021.

(ii)

Issue of shares pursuant to a Placement at $0.70 per

(v)

Issue of shares pursuant to a Shortfall Placement under

share on 24 December 2020.

the Entitlement Offer at $0.70 per share on 20 January

(iii)

Issue of shares pursuant to a Placement at $0.70 per

2021.

share on 31 December 2020.

Notes

65
65

2022

2021

6,319,317

4,782,446

1,032,104

1,536,871

7,351,421

6,319,317

Further information about share-based payments is
set out in note 18.

2022

4,724

2021

4,724

16. Reserves

16.1 Share-based payments

Balance at beginning of year

Recognition of share-based payments (i)

Balance at end of year

(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 2022 was $1,032,104 (2021:

$1,536,871).

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.

6666

Cynata Therapeutics Annual Report 2021/202217. 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.

2022

2021

23,798,046

26,716,670

100,389

70,464

207,978

23,898,435

26,995,112

2,327,368

1,375,685

2,327,368

1,375,685

Net financial assets

21,571,067

25,619,427

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

Notes

67
67

designed to minimise the potential impacts of these
risks on the Group where such impacts may be
material. The board receives monthly financial reports
through which it reviews the effectiveness of the
processes put in place and the appropriateness of the
objectives and policies it sets. The overall objective of
the board is to set policies that seek to reduce risk as
far as possible without unduly affecting the Group’s
competitiveness and flexibility.

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 lower/
higher and all other variables were held constant, the
Group’s loss for the year ended 30 June 2022 would
increase (or decrease) by $237,980 (2021: $267,167)

17.6 Foreign currency risk management

The Group undertakes transactions denominated
in foreign currencies; consequently, exposures to
exchange rate fluctuations arise. At 30 June 2022,
the Company had cash denominated in US dollars
(US$6,305,303 (2021: US$4,837,747)). The A$
equivalent at 30 June 2022 is $9,166,204 (2021:
$6,445,817). A 5% movement in foreign exchange
rates would increase (or decrease) the Group’s
loss before tax by approximately $458,310 (2021:
$322,291). Exchange rate exposures are managed
within approved policy parameters utilising forward
foreign exchange contracts. As at 30 June 2022,
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.

6868

Cynata Therapeutics Annual Report 2021/202217.8 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

2022

Trade and other payables

2,327,368

2021

Trade and other payables

1,375,685

Total
contractual
cash flows

2,327,368

1,375,685

Notes

69
69

Financial instruments (cont’d)

18. Share-based payments

18.1 Employee Option Acquisition Plan

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

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

The following share-based payment arrangements
were in existence at balance date (30 June 2022):

Grant date

Option series

Number

Grant date

fair value Exercise price

Expiry date

Vesting date

CYPOPT12

CYPOPT14

CYPOPT15

CYPOPT16

CYPOPT17

300,000i

17 May 2019

1,250,000ii

19 Aug 2020

100,000iii

14 Sept 2020

4,500,000iv

24 Nov 2020

1,000,000v

11 Oct 2021

$0.384

$0.415

$0.388

$0.493

$0.156

$2.110

16 May 2024

$0.970

18 Aug 2024

$1.280

13 Sept 2024

$0.970

29 Nov 2025

$0.89

11 Oct 2025

Vested

Various

This represents unlisted options issued to Dr Brooke

pursuant to the terms of his appointment as non-

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

executive director.

This represents unlisted options issued to Dr Kelly

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

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

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

Option Acquisition Plan.

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

This represents unlisted options issued to Dr Airey

Acquisition Plan. Mr Thraves is an employee of Cynata

pursuant to an Employee Option Acquisition Plan. Dr

Therapeutics Ltd.

iii

This represents unlisted options issued to Mrs Gupta

pursuant to an Employee Option Acquisition Plan. Mrs

Gupta is an employee of Cynata Therapeutics Ltd.

Airey was appointed as Chief Medical Officer of the

Company on 11 October 2021.

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

The weighted average exercise price of options
granted during the year is $0.89 (2021: $0.975).

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.

7070

Cynata Therapeutics Annual Report 2021/2022

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

CYPOPT17

1,000,000

11 Oct 2021

$0.156

$0.89

47%

4.0

n/a

0.58%

18.3 Movements in share options during the year

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

2022

Weighted
average
exercise price

1.167

0.890

1.750

1.011

1.064

Number of
options

No.

7,575,000

1,000,000

(1,425,000)

7,150,000

3,676,332

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

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
(2021: nil).

Share options outstanding at the end of the year
had a weighted average exercise price of $1.011
(2021: $1.167) and a weighted average remaining
contractual life of 1,130 days (2021: 1,264 days).

Notes

71
71

Share-based payments (cont’d)

19. Key management personnel

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

Short-term employee benefits

Post-employment benefits

Share-based payments

2022

2021

1,494,159

1,413,979

105,635

981,810

78,854

1,439,808

2,581,604

2,932,641

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.

7272

Cynata Therapeutics Annual Report 2021/202221. Cash and cash equivalents

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

Decrease/(increase) in trade and other receivables and prepayments

Increase in trade and other payables

Increase in annual leave provisions

2022

2021

23,798,046

26,716,670

2022

2021

(5,445,172)

(7,689,683)

1,032,104

1,536,871

279,965

(2,146)

(169,583)

279,965

(12,594)

(33,002)

20,307

951,683

34,511

(156,680)

740,931

171,083

Net cash outflows from operating activities

(3,298,331)

(5,163,109)

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.

Notes

73
73

3,497,689

223,260

225,950

2022

48,814

2021

46,967

23. Commitments for expenditure

The Group has entered into a number of agreements
related to research and development activities. As at
30 June 2022, under these agreements, the Company
is committed to making payments over future periods,
as follows:

During the period 1 July 2022 – 30 June 2023

During the period 1 July 2023 – 30 June 2024

During the period 1 July 2024 – 30 June 2025

Where commitments are denominated in foreign
currencies, the amounts have been converted to
Australian dollars based on exchange rates prevailing
as at 30 June 2022.

24. Remuneration of auditors

Auditor of the Group

Audit and review of the financial statements

The auditor of the Group is Stantons.

7474

Cynata Therapeutics Annual Report 2021/202225. 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.

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.

2022

2021

24,135,462

27,282,373

4,890,653

29,026,115

32,173,026

2,327,368

1,375,685

260,576

226,065

2,587,944

1,601,750

26,438,171

30,571,276

74,900,251

7,351,421

6,319,317

(55,813,501)

(50,648,292)

26,438,171

30,571,276

(5,165,209)

(7,409,718)

Notes

75
75

26. 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

2022

100%

2021

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.

7676

Cynata Therapeutics Annual Report 2021/202227. Events after the reporting period

vaccines, availability of new antiviral drugs, vastly
improved patient management practices in our target
population and major resource problems within the
hospital system. Given the ongoing recruitment
activities in the Phase 3 osteoarthritis trial and
Phase 2 diabetic foot ulcer (DFU) trial, as well as the
recent IND clearance for a proposed Phase 2 acute
graft-versus-host disease (aGvHD), the Company
has decided to prioritise resources towards these
initiatives and conclude the current MEND respiratory
distress clinical trial, as announced on 12 August
2022.

28. Approval of financial statements

The financial statements were approved by the board
of directors and authorised for issue on 24 August
2022.

Notes

77
77

ASX Additional Information

As at 4 August 2022

Substantial Shareholders

The names of the substantial shareholders disclosed
to the Company as substantial shareholders as at
4 August 2022 are:

Name

Shares Held

Issued Capital

Phillip Asset Management Ltd atf BioScience Managers Translation Fund I

FIL Investment Management (Hong Kong) Limited

Fujifilm Corporation

Distribution of Ordinary Shares

No.

14,285,715

9,506,625

8,088,403

10.33

10.00

8.98

Holders

Ordinary Shares

Issued Capital

No.

721

1,185

518

948

170

No.

418,907

3,261,754

4,076,070

30,912,750

104,607,113

3,542

143,276,594

0.29

2.28

2.84

21.58

73.01

100.00