2022
ANNUAL REPORT
RHYTHM BIOSCIENCES LIMITED
ACN 619 459 335
RHYTHM’S ColoSTAT®
IS A SIMPLE BLOOD TEST THAT DETECTS
PROTEIN BIOMARKERS IN THE BLOOD
THAT ARE INDICATIVE OF THE PRESENCE
OF COLORECTAL CANCER
CONTENTS
Key Milestones ...................................................................................................................... 4
Company Overview ............................................................................................................ 6
Market Overview ..................................................................................................................7
Chairman and Chief Executive Officer’s Report ................................................... 8
Directors’ Report................................................................................................................. 11
Auditor Independence Declaration ..........................................................................22
Consolidated Statement of Profit or Loss and Other
Comprehensive Income .................................................................................................23
Consolidated Statement of Financial Position .....................................................24
Consolidated Statement of Changes in Equity ................................................... 25
Consolidated Statement of Cash Flows ..................................................................26
Notes to the Consolidated Financial Statements ...............................................27
Directors’ Declaration ..................................................................................................... 45
Independent Auditor’s Report ................................................................................... 46
Additional ASX Information .........................................................................................50
Corporate Directory ........................................................................................................ 53
RHYTHM
BIOSCIENCES
IS HITTING ITS
MILESTONES
4
RHYTHM BIOSCIENCES
2022 ANNUAL REPORT
Completion
of the ColoSTAT®
prototype test-kit
Core technology
technically
validated
Successfully achieved
CE Mark (Europe) and
expanded to UK and
Ireland
Submitted TGA
(Australia)
Inclusion of
RHY into the All
Ordinaries Index
Clinical trial (Study 7)
successfully completed,
delivering exceptional
results
Commenced Platform
Technology Expansion
REMAINS
ON TRACK
FOR FUTURE
MILESTONES
TGA approval
(Australia)
Further advance
Platform Technology
Expansion Program
Additional international
regulatory submissions
Partners -
Distribution /
Labs
Market Entry
First revenues /
incomes
5
ABOUT RHYTHM BIOSCIENCES
Rhythm Biosciences is focused on becoming a globally
significant, transformative, predictive cancer diagnostics
technology company. The Company is currently focused upon
the commercialisation of ColoSTAT®, Rhythm’s simple blood
test for the detection of colorectal cancer, aimed at global
mass market screening. In addition, the Company has begun
leveraging its existing technologies and progressing a pipeline
of multiple cancer diagnostic initiatives.
Worldwide, colorectal cancer is the third
most common cancer in men and the second
most common in women, accounting for
an estimated 1.9 million new cases and
approximately 935,000 deaths annually.
In an effort to reduce the global burden,
many countries have implemented screening
programs aimed at early detection. These
programs are predominantly administered
with a faecal immunochemical test (FIT) for
the assessment of colorectal cancer risk, with
a positive result referred for a colonoscopy.
FIT analyses the presence of blood in faeces,
which can occur for several reasons other
than cancer, therefore it is not designed as an
accurate test for cancer. Many people simply
don’t take the test for fear of an unnecessary
colonoscopy procedure, unpleasantness,
difficulty, or for religious/cultural reasons.
There is currently no appropriate simple blood
test alternative.
Rhythm aims to transform the global colorectal
cancer diagnostics market with its simple,
low cost blood test that is fit for purpose,
meaning that it is designed to actually detect
colorectal cancer. Since listing on the ASX,
the Company has run a successful multi-
year research and development program
that has successfully delivered technical
validation of the core biomarker technology,
ensuring it is reproducible and stable. The
ColoSTAT® test-kit was manufactured in
2021 and delivered performance testing that
outperforms the current market standard
faecal immunochemical test (FIT) utilising
Rhythm’s proprietary algorithm. The Company
has achieved CE Mark approval for Europe,
including expanding to the United Kingdom
and Ireland. Further, the Company has
successfully completed its clinical trial (Study
7), including filing its regulatory submission to
the Therapeutic Goods Administration (TGA)
in Australia. The Company is progressing
regulatory, manufacturing and scale up
activities ahead of market entry in late 2022.
Rhythm’s targeted global addressable
population is over 800 million people which
are over 50 years of age. Almost 70%, or 550
million people, are not currently screened for
colorectal cancer due to the limitations of the
current faecal based testing regime. This “at
risk” population is also expanding with the
disease growing rapidly in much younger age
groups. Early detection and intervention can
lead to cure in over 90 per cent of new cases,
therefore the need for effective screening and
early intervention has the potential to save a
significant number of lives. Rhythm estimates
today’s colorectal cancer screening market
alone to be worth in excess of $38 billion.
6
RHYTHM BIOSCIENCES
2022 ANNUAL REPORT
COLORECTAL CANCER
Globally, Colorectal Cancer is currently the 3rd largest cancer by volume with 1.93 million
new cases diagnosed annually and the 2nd largest cause of cancer related deaths.
11.2%
11.4%
7.3%
5.6%
4.6%
3.1%
10.0%
BREAST
2,261M
LUNG
2,20M
COLORECTAL
1,931M
PROSTATE
1,141M
STOMACH
1,089M
LIVER
905M
CERVIX UTERI
604M
Source: Xi Y, Xu P (2021), Global colorectal cancer burden in 2020 and projections to 2040, Translational Oncology, 14 (10), 101174; doi: 10.1016/j.tranon.2021.101174 Epub 2021 Jul 6.
GLOBAL BURDEN
1.93 million new cases
~940,000 deaths
Source: Xi Y, Xu P (2021), Global colorectal cancer burden in 2020 and projections to 2040, Translational Oncology, 14 (10), 101174; doi: 10.1016/j.tranon.2021.101174 Epub 2021 Jul 6.
CURRENT TESTING & SCREENING REGIME
In most countries, screening is recommended for those aged between 50-74 years old, with
the primary method being faecal test (FIT), which is designed to test only for blood in stool.
50+
Aged
over 50
Inherited
genetic
risk factor
Poor diet
and lack of
excercise
Smoking
A waistline over
94cm for men and
80cm for women
A strong family
history of
bowel cancer
A serious inflammatory
bowel disease for more
than eight years
EARLY DETECTION IS KEY TO SURVIVAL
>90%
DIAGNOSIS BY STAGE
7
CHAIRMAN AND CHIEF EXECUTIVE OFFICER’S REPORT
A MESSAGE FROM THE CHAIRMAN
& CHIEF EXECUTIVE OFFICER
OTTO BUTTULA & GLENN GILBERT
Dear Fellow Shareholders
On behalf of the Board, we welcome all new and existing
shareholders to Rhythm Biosciences’ 2022 Annual Report. The
financial year marked one of success in achieving our initial goal
of taking our first product, ColoSTAT® from laboratory testing to a
“real-world” application, capable of being commercialised in the
current financial year.
Hence, the team at Rhythm has successfully delivered upon
our FY’22 Strategic Operating Plan, which focussed upon
transitioning our Company from pre-market discovery to
one about to embark upon commercial sales. Before the
commencement of the financial year, the Company set out (and
delivered upon) a number of milestones aimed at achieving this,
including:
• Accelerating USA Market Entry – incorporated a US
based entity, with partnership and distribution discussions
ongoing with multiple parties;
• Platform technology expansion activities commenced,
with other cancer targets identified;
• Submission and successful grant of a CE Mark, including
expansion into UK and Ireland;
• A successful conclusion to the clinical trial (Study 7) in
Australia, with final submission of documentation to the
Therapeutic Goods Administration (TGA) in Australia; and
• Commercial / Strategic alignments with distribution
partners in negotiation both domestically and overseas
These milestones mitigate the major technology development
risk associated with commercialising a cancer diagnostics
technology business. Rhythm is now in a strong position to
deliver upon its initial goal of commercialising a simple, low
cost, blood-based diagnostic, for the mass-market screening
of colorectal cancer.
“I would like to commend the entire team
at Rhythm Biosciences for their unwavering
dedication and inexhaustible efforts in bringing
ColoSTAT® to a market-ready status. Their
extra efforts have built a strong ‘can-do’ culture
within the Company, which all stakeholders can
be proud of.“
Quote from Executive Chairman, Otto Buttula
8
RHYTHM BIOSCIENCES 2022 ANNUAL REPORT
Summary of Operations
Clinical Trial – Study 7
The ColoSTAT® Clinical Trial (Study 7) involved a prospective,
cross sectional, multicentre, study to evaluate the diagnostic
performance of the In Vitro Diagnostic (IVD) relative to
colonoscopy (Primary Endpoint). Secondary endpoints of
the study included assessing the ColoSTAT® test kit to detect
advanced adenomas and a comparison of the performance of
ColoSTAT® with the current globally adopted market standard
Faecal Immunochemical Test (FIT); both relative to colonoscopy.
A total of 989 samples were collected, across 12 sites.
The Company delivered this highly anticipated clinical trial in
April 2022, confirming both primary and secondary endpoints
were met with statistically significant and outstanding
performance, recording 81% Sensitivity1 and a Specificity2 of 91%.
Following the confirmation that the clinical trial met the primary
endpoint, all ColoSTAT® trial sites were closed. This signified a
major milestone for completion of all clinical trial operational
aspects and confidence by the Company that all compliance
measures have been met for regulatory submission. The
Company is now focused on achieving final regulatory approval
from the Therapeutic Goods Administration (TGA).
“We are at the beginning of a very exciting
journey as we enter the pre-market and
commercialisation phase of ColoSTAT®. The
volume and standard of work completed this
past year has been significant, and the entire
Rhythm team should be incredibly proud of
their efforts. Early detection of cancer is critical,
and we want to ensure that people all around
the world can have access to simple, low-cost
blood tests. The Company has continued
to deliver on milestones, and currently is in
a strong position to continue to deliver and
maximise shareholder value.”
Quote from Managing Director & CEO, Glenn Gilbert
Technology and Performance
ColoSTAT® Colorectal Cancer Detection
Having delivered a technically validated cancer diagnostics
platform, Rhythm took a massive step forward on the
commerciality of ColoSTAT® with a pioneering clinical trial
(Study 7) outcome confirming that ColoSTAT® exhibits very
high accuracy for the detection of colorectal cancer, recording
a sensitivity1 of 81% and a specificity2 of 91%. This means that
ColoSTAT® is 35% more accurate than the current global standard
Faecal Immunochemical Test (FIT) for detecting colorectal
cancer. In fact, the trial also showed ColoSTAT® to be more
accurate than FIT at detecting advanced adenomas.
90
80
70
60
50
40
30
20
10
0
%
y
t
i
v
i
t
i
s
n
e
S
35% better
@ 92%
specificity
@ 91%
specificity
FIT Market
Standard
Rhythm ColoSTAT®
Clinical Trial
Enhancements to Rhythm’s proprietary, artificial intelligence
(AI) and machine learning algorithm are also ongoing. Despite
a fixed algorithm being submitted to the TGA, over time with
further data, we expect to enhance the algorithm via continued
“learning”, and potentially deliver further improvements in
diagnostic performance.
The high-performance validation attaching to the successful
outcomes of the clinical trial is the culmination of many years of
research, initially with CSIRO, to deliver a simple, low cost, blood-
based diagnostic, for the mass-market screening of colorectal
cancer. The Company is targeting late calendar year 2022 for first
market entry of ColoSTAT®.
Technology Platform Expansion
Several high value additional cancer target markets have been
identified that are now part of a new Research and Development
program designed to follow a similar commercial pathway to
ColoSTAT®. The Company believes it could add meaningful value
in these segments to transform both screening and detection for
improved health outcomes on a global scale.
The initial five additional cancers targeted include: Breast,
Cervical, Lung, Gastric and Pancreatic.
1Sensitivity is the ability of the test to correctly identify those patients with colorectal cancer, that is, the percentage of people with colorectal cancer who are correctly identified as having illness.
2Specificity is the ability of the test to correctly identify people who do not have colorectal cancer, that is, the percentage of people without colorectal cancer who are correctly identified as not having cancer.
9
CHAIRMAN AND CHIEF EXECUTIVE OFFICER’S REPORT
Commercialisation and Market Entry
Corporate
During the year, the Company continued its prudent approach
to capitalising the business appropriately. Again, the Board
determined to reward existing loyal shareholders via a $4.3M
Non-Renounceable Rights Issue (NRRI) and a small, heavily
scaled back Placement of $1.28M. In early CY’22, the Company
raised a further $6.53M (before associated costs) via an exclusive
placement to a single, global, institutional fund manager. The
addition of a global leader in funds management onto our
share register, after significant due diligence on the Company,
validates the achievements thus far, and more importantly, for the
significant commercial potential ahead of us.
In line, with a desire to continue a capital-light model in our
executive structure, Otto Buttula assumed the position
of Executive Chairman, formalising his added executive
involvement in supporting the Company’s commercialisation
pathway. Moreover, the Board also recognised the consistent and
strong performance of Chief Executive Officer, Glenn Gilbert,
appointing him to the Board as Managing Director.
In March 2022, the Company’s stock was added to the All-
Ordinaries Index (XAO). The Index represents the 500 largest
companies in the Australian equities market and is rebalanced
annually.
On behalf of the Board, we would like to acknowledge the
dedication of the entire team at Rhythm who have worked
tirelessly and executed skilfully over the year to position the
Company for commercial success. Equally important, has been
the support from our shareholders and business partners for
which the Company is thankful.
We look forward to the FY’23 year with enthusiasm. Rhythm is
at the juncture of transforming the global cancer diagnostics
sector. We expect ColoSTAT® to not only reduce the economic
burden on all payors (including Governments and health insurers)
globally, but to potentially save millions of lives. All stakeholders
should be proud that the realisation of this collective goal is close,
with the Company’s lead product, ColoSTAT® and its pipeline
of additional diagnostic tests under development expected to
advance significantly. Hence, we expect another year of solid
growth for shareholders
Otto Buttula
Executive Chairman
Glenn Gilbert
Managing Director & CEO
Rhythm continued ongoing confirmatory testing of its
commercially manufactured ColoSTAT® test-kit with its global
France-based manufacturer, Biotem. The Company has
demonstrated consistent and reproducible results, significantly
better than the current market standard Faecal Immunochemical
Test - providing high confidence in the potential market appeal of
Rhythm’s cancer diagnostics technology.
On a commercial front, Rhythm has commenced several
partnering discussions both domestically and globally, with these
discussions progressing at various rates. Importantly, given the
unique global value proposition, Rhythm can consider being
more selective when appointing licensing and distribution
partners. With a product like ColoSTAT® it is more important
to select the most appropriate partner that will maximise
shareholder value over the medium to long term rather than
short term opportunists.
Quality and Regulatory
TGA Approval
The TGA submission process requires two key steps, consisting of
filing both the Manufacturers Evidence documentation and filing
for an Australian Register of Therapeutic Goods (ARTG) listing.
Rhythm has completed both steps, and with the application now
filed in May 2022, the TGA will assess Rhythm’s ARTG listing
submission, along with key technical documents and provide final
approval which will enable commercialisation of ColoSTAT® in the
Australian market. The Company anticipates this review process
to be completed by 2022 calendar year end.
CE Mark
The Conformitè Europëenne (CE) Mark is the European Union’s
(EU) mandatory conformity marking for regulating products
sold within the European Economic Area (EEA). The CE Mark
represents that a manufacturer’s products comply with the EU’s
IVD Directives - a series of legislative requirements that are in
place to ensure ultimate product safety on the European market.
Rhythm was granted CE Mark in November 2021 which means
ColoSTAT® fully conforms with the European Directives for
IVD Medical Devices (98/79/EC). This critical regulatory
achievement is a result of robust and stringent analytical testing
and adherence to design and development procedures as per
the Essential Requirements. By January 2022, the Company
expanded its CE Mark registration allowing ColoSTAT® to be
marketed and sold within Great Britain (England, Wales and
Scotland) and Northern Ireland. Europe and the UK alone
represent a significant addressable screening population for
ColoSTAT® of over 231 million people, with a potential combined
value of ~US$12 billion.
ISO Certification
The Company maintained its certification to the International
Standard for In-Vitro Diagnostics and Medical Devices
(ISO13485:2016), passing an audit conducted by the British
Standards Institution (BSI). This standard certifies Rhythm’s
Quality Management System, a key indicator for the high
standard the Company has set.
10
RHYTHM BIOSCIENCES 2022 ANNUAL REPORT
DIRETOR’S REPORT
The Directors of Rhythm Biosciences Limited (Rhythm, the Group, or the Consolidated Entity) present their report for
the financial year ended 30 June 2022.
Directors
The Directors at any time during the year, or since the end of the financial year, were as follows:
Mr Otto Buttula
Mr Glenn Gilbert (appointed 1 December 2021)
Dr Trevor Lockett
Mr Louis (Lou) Panaccio
Mr Eduardo Vom
Dr Rachel David (appointed 15 December 2021)
Mr David White (resigned 14 July 2021)
Principal Activities
Rhythm Biosciences Limited (ASX: RHY) is developing and commercialising Australian medical diagnostics technology
for sale in domestic and international markets. Its ColoSTAT® product, which is nearing the commercialisation phase aims
to provide an accurate and early detection test for colorectal cancer.
Corporate Information
Rhythm, a company limited by shares, is incorporated and domiciled in Australia. Rhythm has prepared a consolidated
financial report incorporating the entities that it controlled during the financial year.
Results of Operations
The Group incurred a loss after income tax of $8,793,521 for the year ended 30 June 2022 (2021: $6,612,148).
The Chairman’s Letter and Managing Director & CEO’s Report contain a review of operations.
Significant Changes in the State of Affairs
There were no significant changes in the state of affairs of the consolidated entity during the financial year.
Future Developments
The Directors’ do not foresee any unusual future event that may significantly negatively impact the Group’s operations,
results or state of affairs.
Rhythm’s business model of developing diagnostic products for global markets will always bear some risk given the
nature of technological development, competitors entering the market, changes in global healthcare, reliance on
commercial partners and our ability to access capital to sustain operations. We cannot guarantee that Rhythm’s
technology will be widely adopted. Moreover, the global Healthcare industry is an ever-evolving landscape where
changes may impact our business opportunities.
Dividends
No dividends were paid or declared since the start of the financial year. No recommendation for payment has been made.
11
Directors and Company Secretary
Names, qualifications and experience
Name
Title
Otto Buttula
Executive Chairman
Experience and expertise
Mr Buttula has had extensive experience and success in investment research, funds
management, information and biotechnologies and has held directorships in a number
of public companies. Mr Buttula’s executive experience includes co-founder and CEO
and Managing Director of IWL Ltd, an online financial services company that listed on
the ASX in 1999. The company grew from a market capitalisation of $48 million at listing
before a takeover in 2007 by Commonwealth Bank of Australia Ltd for $373 million. Mr
Buttula also founded and was Managing Director of Investors Mutual, prior to which he
was a co-founder and director of Lonsdale Securities Ltd.
Following his completion of executive duties, Mr Buttula was Non-Executive Chairman
of platform and stockbroking provider Investorfirst Ltd and led the acquisition of
HUB24 Ltd (ASX: HUB). More recently, he served on the Board as a non-executive
director and Head of Audit and Risk at Imugene Ltd (ASX: IMU) between 2014 and
2016.
Other current directorships
HITIQ Limited (appointed 28 January 2021)
OncoSil Medical Limited (appointed 20 July 2021)
Interests in shares
28,085,001 fully paid ordinary shares
Interests in options
2,685,000 Options
Name
Title
Experience and expertise
Glenn Gilbert
Managing Director & CEO (appointed 1 December 2021)
Mr Gilbert has over 18 years of experience in the healthcare sector (incl.
pharmaceutical, medical device (Rx and OTC) and IVD industry) across domestic
and international markets. His expertise spans corporate and business strategy,
manufacturing, and sales, with a sharp focus on disciplined execution through culture,
relationships and planning. Mr Gilbert has held leadership roles at Seqirus, a CSL
company (ASX: CSL), and at Medical Developments International (ASX: MVP) with
extensive business experience across the UK, Europe, Asia, North and South America.
He specialises in mergers and acquisitions, corporate development, operations,
intellectual property, and legal portfolios.
Interests in shares
1,242,925 fully paid ordinary shares
Interests in options
5,559,584 Options
Name
Title
Dr Trevor Lockett
Technical Director
Experience and expertise
A molecular biologist by trade, Dr Lockett received his PhD in biochemistry from the
University of Adelaide and postdoctoral experience at the Rockefeller University in
New York. With over 30 years of research experience, predominantly at the CSIRO, Dr
Lockett has led large, multidisciplinary research efforts in the areas of prostate cancer
gene therapy, colorectal cancer prevention and the promotion of gastrointestinal
health. In his role as Theme Leader, Colorectal Cancer and Gut Health, Dr Lockett
oversaw the research efforts leading to the technology that is to become ColoSTAT®.
Interests in shares
164,000 fully paid ordinary shares
Interests in options
1,879,000 Options
12
DIRECTORS’ REPORTRHYTHM BIOSCIENCES 2022 ANNUAL REPORT Name
Title
Lou Panaccio
Non-Executive Director
Experience and expertise
A chartered accountant with extensive management experience in business and
healthcare services. Mr Panaccio is currently on the boards of ASX listed companies
Sonic Healthcare Limited and Avita Therapeutics, Inc. Mr Panaccio is also on the board
of Unison Housing Ltd. Mr Panaccio has more than twenty years’ experience as a board
member of both public and private, for profit and not for profit companies. Previously,
Mr Panaccio was the CEO of Melbourne Pathology and Monash IVF, and executive
Chairman of Health Networks Australia.
Other current directorships
Sonic Healthcare Limited
Avita Therapeutics, Inc
Interests in shares
820,000 fully paid ordinary shares
Interests in options
170,000 Options
Name
Title
Eduardo Vom
Non-Executive Director
Experience and expertise
Mr Vom has over 20 years’ experience in technology and development and
commercialisation in the biotech industry, having held leadership roles at cancer
diagnostics manufacturer Vision BioSystems and molecular diagnostics company
Genetic Technologies. Mr Vom is a co-founder and Director of Planet Innovation. He
currently serves as a non-executive director with privately owned health and wellbeing
companies and is well known for his expertise in digital healthcare, management
of multi discipline projects, business strategy and technology commercialisation.
Eduardo has been directly responsible for the conception, development and
commercialization of several new multi-million dollar technologies. He holds a Post
Graduate Diploma in Management Technology and an honours degree in Industrial
Engineering and Computing from Monash University.
Interests in shares
3,641,484 fully paid ordinary shares
Interests in options
238,818 Options
Name
Title
Dr Rachel David (appointed 15 December 2021)
Non-Executive Director
Experience and expertise
Dr David is an experienced senior health and financial services sector executive
who holds a Bachelor of Medicine, Bachelor of Surgery (MBBS), Master of Business
Administration (MBA) and is a graduate of the Australian Institute of Company
Directors. Dr David is currently the Chief Executive Officer (CEO) of Private Healthcare
Australia (PHA). Dr David’s career has spanned over 25 years during which she has
delivered significant value by promoting policy change to address the significant
economic problems and market failures in healthcare, particularly relating to evidence-
based practice and access to new technologies. Prior roles include Senior Director
Government Affairs, Policy and Market Access for Johnson & Johnson, senior roles
within McKinsey, CSL and Pfizer (formerly Wyeth). Further, Dr David has held direct
Government roles within the Office of the Federal Minister for Health and Ageing.
Interests in shares
Interests in options
Nil
Nil
13
Name
Title
Experience and expertise
David White
Former Non-Executive Director (Resigned 14 July 2021)
Mr White is based in Chicago in the US and is currently the Vice President of Business
Development for Bluechiip Ltd. Bluechiip is an ASX listed company with unique
technology that assists Biotech and Pharmaceutical companies to track biological
samples in and out of cryogenic storage. Prior to Bluechiip, Mr White spent 4 years
with Planet Innovation (PI) in Project Management and Business Development roles,
assisting PI in commercializing their IP in the Point of Care diagnostics space. Mr White
brings over 20 years’ experience with diverse companies such as GenMark Diagnostics
and Leica Biosystems in developing, marketing and selling IVD products in regulated
markets. Mr White remains a director of Rhythm’s US subsidiary and his experience,
networks and contacts within the US diagnostics market may assist commercialisation
in this key geography.
Interests in shares
Interests in options
Nil
Nil
‘Other current directorships’ quoted above are current directorships for listed entities only and excludes directorships of
all other types of entities, unless otherwise stated.
‘Former directorships (last 3 years)’ quoted above are directorships held in the last 3 years for listed entities only and
excludes directorships of all other types of entities, unless otherwise stated.
Company Secretary
Andrea Steele (appointed 25 February 2022) has a Bachelor of Laws (LLB), a Master of Laws (LLM), a Master of Legal
Practice and a Bachelor of Commerce (Accounting/Finance). Her professional career spans over 23 years and includes
management consultancy, corporate strategy, company secretary and general counsel positions throughout Europe and
Australia. Currently Ms Steele is a Principal Consultant at ENRG Consulting.
Adrien Wing and Pauline Moffatt resigned as joint company secretaries effective 25 February 2022.
Meetings of Directors
The following table sets out the number of Director meetings of the Company held during the financial year, and the
number of meetings attended by each Director.
Director
Mr O Buttula
Mr G Gilbert
Dr T Lockett
Mr L Panaccio
Mr E Vom
Dr R David
Mr D White
Directors’ Meetings
Held
Attended
17
9
17
17
17
4
-
17
8
16
17
17
4
-
Corporate Governance
Details on the Company’s corporate governance procedures, policies and practices are at www.rhythmbio.com.
14
DIRECTORS’ REPORTRHYTHM BIOSCIENCES 2022 ANNUAL REPORT The Remuneration Report, which forms part of the Directors’ report, sets out information about the remuneration of the
Company’s Directors and its Key Management Personnel for the financial year ended 30 June 2022.
Directors’ Report – Remuneration Report (Audited)
Names and positions held by Directors and Key Management Personnel at any time during the financial year were:
Name
Position
Date Appointed to Position
Mr Otto Buttula
Executive Chairman
Dr Trevor Lockett
Technical Director
1 December 2021 (previously Non-
Executive Chairman from 28 October 2019)
27 November 2018 (previously Managing
Director from 1 June 2017)
Mr Louis (Lou) Panaccio
Non-Executive Director
1 August 2017
Mr David White
Mr Eduardo Vom
Dr Rachel David
Mr Glenn Gilbert
Non-Executive Director
Non-Executive Director
Non-Executive Director
Managing Director & CEO
1 June 2017 (Resigned 14 July 2021)
5 June 2020
15 December 2021
1 December 2021 (previously Chief
Executive Officer from 27 November 2018)
Mr Adrien Wing
Company Secretary
1 June 2017 (Resigned 25 February 2022)
Directors’ and Key Management Personnel Interests in Shares and Options
Directors’ and Key Management Personnel’s interests in the ordinary shares of Rhythm Biosciences Limited and options
over ordinary shares as at the date of this report are detailed below:
Name
Position
Mr Otto Buttula
Executive Chairman
Dr Trevor Lockett
Technical Director
Mr Louis (Lou) Panaccio
Non-Executive Director
Mr Eduardo Vom
Dr Rachel David
Mr Glenn Gilbert
Non-Executive Director
Non-Executive Director
Managing Director & CEO
Remuneration Policy
Number of
Ordinary Shares
28,085,001
164,000
820,000
3,641,484
-
1,242,925
33,953,410
Number
of Options
2,685,000
1,879,000
170,000
238,818
-
5,559,584
10,532,402
The aim of the Company’s remuneration policy is to align the interests of directors and employees with those of
shareholders. To do this Rhythm sets remuneration levels that attract and retain highly skilled and experienced directors
and employees; and motivates and rewards performance that advances the Company’s strategic goals.
Remuneration Structure
The remuneration of Key Management Personnel and employees is structured in two parts:
• Fixed Remuneration, comprising: base salary, superannuation and other benefits in lieu of salary; and
• Variable Remuneration, may include: a short-term incentive bonus (cash) and a long-term incentive in the form of options
under the ESOP.
The Company aims to set the level of fixed remuneration at market levels for comparable jobs, in similarly structured and
sized companies in the industry in which the Company operates. No advice from a remuneration consultant was sought
during the financial year.
15
Short-Term Incentive Plan
The short-term incentive plan provides an incentive to employees to achieve an annual cash bonus on the achievement
of corporate goals set at the beginning of each calendar year. These corporate goals are clearly defined, drive shareholder
value and can be objectively measured. The percentage of an employee’s base salary that can be earned through the
Short-Term Incentive Plan (STIP) is set by the Board for management personnel. At the end of the calendar year the
Board assesses the level of achievement of these corporate goals. Payments made pursuant to the STIP are at the
discretion of the Board.
Long-Term Incentive Plan
The purpose of the long-term incentive plan is to align the interests of directors, management personnel and employees
with those of the shareholders and provide reward for sustained achievement of the Group’s strategic objectives.
Rhythm’s long-term incentive plan is implemented through the Employee Share Option Plan (ESOP).
Options
During the 2022 year, 7,195,000 (2021: 8,150,000) Options were issued to management personnel and employees.
The fair value of employee share options was $6,258,750 (2021: $1,063,298). $2,155,676 was expensed in the current
financial year (2021: $531,649). The options were issued for nil consideration and granted in accordance with performance
guidelines established by the Board.
The following Share Options arrangements existed at 30 June 2022:
Number of
Options
Exercise Price
($)
Grant Date
Vesting Period Vesting Date
Expiry Date
Holder
Fair Value
per Option at
Grant Date
750,000
750,000
1,750,000
1,750,000
1,575,000
1,575,000
1,895,000
5,300,000
$0.20
$0.20
$0.20
$0.20
$0.20
$0.20
$1.80
$1.80
18.11.2020
N/A
18.11.2020
14.9.2023
Dr T Lockett
$0.3545
18.11.2020
See below (i)
See below (i)
14.9.2023
Dr T Lockett
$0.3545
14.9.2020
N/A
14.9.2020
14.9.2023
G Gilbert
14.9.2020
See below (i)
See below (i)
14.9.2023
G Gilbert
$0.0799
$0.0799
14.9.2020
N/A
14.9.2020
14.9.2023
Employees
$0.0799
14.9.2020
See below (i)
See below (i)
14.9.2023
Employees
$0.0799
26.7.2021
Various (ii)
Various (ii)
31.7.2024
Employees
24.11.2021
Various (ii)
Various (ii)
31.7.2024
Directors
$0.45
$1.02
15,345,000
Total ESOP Options
(i) Vesting conditions related to these options not yet achieved are as follows:
- 50% upon achieving Therapeutic Goods Association (TGA) registration by 30 September 2022.
(ii) There are multiple performance and or service vesting conditions related to these options not yet achieved. Refer to Note 17 for details on vesting conditions.
All options granted are in respect of ordinary shares in Rhythm Biosciences Limited and confer a right of one ordinary share for each option held.
For factors that determine the fair value of options granted during the year refer to Note 17 to the financial statements.
Movement in the number of share options on issue
2022
2022
2021
2021
Number
of Options
Weighted Average
Exercise Price (cents)
Number
of Options
Weighted Average
Exercise Price (cents)
Opening balance
Voluntarily Forfeited / Lapsed
Granted
Exercised
Outstanding at year-end
Exercisable at year-end
7,475,000
(287,500)
7,195,000
(150,000)
14,232,500
7,086,250
20.00
180.00
180.00
20.00
97.65
83.19
3,000,000
(3,000,000)
8,150,000
(675,000)
7,475,000
3,400,000
26.67
26.67
20.00
20.00
20.00
20.00
16
DIRECTORS’ REPORTRHYTHM BIOSCIENCES 2022 ANNUAL REPORT Shares
In the prior year, 183,241 fully paid ordinary shares were issued to the CEO, Mr Glenn Gilbert, as a sign-on incentive for a
revised employment agreement. Included under employee costs in the income statement is a share-based payments
expense of $nil (2021: $26,570) based on a price of 14.5 cents per share at the date of issue.
Non-Executive Director Remuneration
The Board considers the level of remuneration necessary to attract and retain Directors with the skills and experience
required by the Company at its stage of development. Non-executive Directors fees are paid within an aggregate limit
which is approved by the shareholders from time to time. No retirement payments are made to Non-executive Directors.
In December 2021, Non-executive Directors’ fees were increased to $50,000 (previously $42,000) per annum inclusive
of superannuation. 800,000 Options exercisable at $1.80 on or before 31 July 2024 were issued to Non-Executive
Directors under the ESOP during the 2022 financial year. The issue of these Options was approved by shareholders
at the Annual General Meeting of the Company on 24 November 2021. Refer to Note 17 for details on Options vesting
conditions.
Key Management Personnel Remuneration
Key Terms of the Executive Chairman’s employment contract
The Company entered into an executive services agreement effective 1 December 2021 for Mr Otto Buttula to receive an
annual salary of $165,000 (inclusive of 10% superannuation). Remuneration prior to 1 December 2021 was $84,000 per
annum (inclusive of superannuation). The Company also issued Mr Buttula 2,000,000 unlisted Options exercisable at
$1.80 on or before 31 July 2024. The issue of these Options was approved by shareholders at the Annual General Meeting
of the Company on 24 November 2021. Refer to Note 17 for details on Options vesting conditions.
Key Terms of the CEO’s employment contract
The Company entered into a revised executive services agreement effective 1 July 2021 for Mr Glenn Gilbert as Chief
Executive Officer (CEO) to receive an annual salary of $300,000 (exclusive of 10% superannuation). The Company also
issued Mr Gilbert 2,000,000 unlisted Options exercisable at $1.80 cents on or before 31 July 2024. The issue of these
Options was approved by shareholders at the Annual General Meeting of the Company on 24 November 2021. Refer to
Note 17 for details on Options vesting conditions. Mr Gilbert may also receive short-term incentives dependent upon
performance, as assessed against key performance indicators. The Company may terminate Mr Gilbert’s employment
upon 3 months’ written notice.
Key Terms of the Technical Director’s employment contract
The Company entered into a revised consulting services agreement effective 15 December 2021 for Dr Trevor Lockett
to receive an annual salary of $145,000 (previously $112,000) inclusive of superannuation. The Company also issued
Dr Lockett 500,000 unlisted Options exercisable at $1.80 on or before 31 July 2024. The issue of these Options was
approved by shareholders at the Annual General Meeting of the Company on 24 November 2021. Refer to Note 17 for
details on Options vesting conditions.
17
Details of the remuneration of Directors and Key Management Personnel for the 2022 financial year are provided below:
Short-term Benefits
Long-term Benefits
Cash
salary
and fees
($)
Cash
bonus
($)
Annual
Leave
Provision
($)
Long Service
Leave
Provision
($)
Post-employment
Superannuation
($)
Equity-based
compensation
Shares
and Options
($)
Total
($)
%
Performance
Based
Executive Directors
O Buttula
T Lockett
119,318
118,189
-
-
-
-
-
-
11,932
11,819
625,531
756,781
289,313
419,321
G Gilbert (iii)
302,500
67,950
25,479
11,408
27,500
695,476
1,130,313
Non-Executive Directors
D White (i)
L Panaccio
E Vom
R David
1,355
42,111
42,111
24,765
Company Secretary
A Wing (ii)
70,400
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
127,500
128,855
4,211
4,211
2,477
-
46,915
46,915
-
-
93,237
93,237
27,242
70,400
82.7
69.0
67.5
98.9
50.3
50.3
-
-
Total
720,749
67,950
25,479
11,408
62,150
1,831,650
2,719,386
(i) Resigned 14 July 2021.
(ii) Resigned 25 February 2022.
(iii) Cash bonus paid during the year was 75.5% of the short-term incentives as assessed against key performance indicators.
Details of the remuneration of Directors and Key Management Personnel for the 2021 financial year are provided below:
Short-term Benefits
Long-term Benefits
Cash salary
and fees
($)
Cash
bonus
($)
Annual
Leave
Provision
($)
Long Service
Leave
Provision
($)
Post-employment
Superannuation
($)
Equity-based
compensation
Shares
and Options
($)
Total
($)
%
Performance
Based
Non-Executive Directors
O Buttula
D White
L Panaccio
E Vom
76,712
36,000
38,963
38,356
Executive Director
T Lockett
102,283
CEO
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,288
-
3,037
3,644
-
-
-
-
84,000
36,000
42,000
42,000
-
-
-
-
9,717
265,860
377,860
70.4
G Gilbert
270,400
61,977
19,945
3,605
28,943
166,459
551,329
30.2
Company Secretary
A Wing
Total
105,600
-
-
-
-
-
105,600
-
668,314
61,977
19,945
3,605
52,629
432,319
1,238,789
18
DIRECTORS’ REPORTRHYTHM BIOSCIENCES 2022 ANNUAL REPORT Share-Based Payments
The Group operates an Employee Share Option Plan (ESOP). Each option provides the holder with the right to purchase
an ordinary share in the parent entity at a pre-determined price. During the financial year ended 30 June 2022, 7,195,000
(2021: 8,150,000) options were issued pursuant to the Group’s ESOP. Options offered to Rhythm Directors and staff are
subject to several conditions which can restrict both vesting and the exercising of the options. At the date of the Directors
Report a total of 14,232,500 (2021: 7,475,000) options were on issue.
There were 150,000 (2021: 675,000) ordinary shares issued during the financial year from the exercise of employee share
options.
Option Holdings
The number of options over ordinary shares in the Company held during and at the end of the financial year by each
Director and Key Management Personnel, including related parties, are set out below (refer also to Note 17 for further
details):
Balance at
Beginning
of Year
Granted
During Year
Acquired
During Year (i)
Upon
Resignation
Lapsed
Balance at
End of Year
Vested and
Exercisable
at End of
Year
Unvested at
End of Year
T Lockett
1,500,000
500,000
G Gilbert
3,500,000
2,000,000
4,000
59,584
O Buttula
D White
E Vom
R David
L Panaccio
A Wing
-
-
-
-
-
-
2,000,000
685,000
500,000
-
(500,000)
150,000
88,818
-
-
150,000
20,000
-
-
-
-
432,500
(432,500)
-
-
-
(125,000)
1,879,000
1,254,000
750,000
-
-
-
-
-
-
-
5,559,584
3,184,584
2,375,000
2,685,000
1,185,000
1,500,000
-
-
-
238,818
126,318
112,500
-
-
-
170,000
57,500
112,500
-
-
-
Total
5,000,000
5,300,000
1,289,902
(932,500)
(125,000)
10,532,402
5,807,402
4,850,000
(i) Acquired via rights issue on the basis of 1 free attaching option for every 1 share issued.
Shareholdings
The number of ordinary shares in the Company held during and at the end of the 2022 financial year by each Director and
Key Management Personnel of the Group, including related parties, are set out below.
Balance at
Beginning
of Year
Share-based
Compensation
Acquired via
Rights Issue
Upon
Appointment/
Resignation
On-market
and Other
Transactions
Balance at
End of Year
Directors
O Buttula
D White
L Panaccio
E Vom
R David
T Lockett
G Gilbert
Former Company Secretary
A Wing
TOTAL
27,400,000
530,220
800,000
3,552,667
-
160,000
1,183,341
19,049,761
52,675,989
-
-
-
-
-
-
-
-
-
685,001
-
-
(530,220)
20,000
88,817
-
4,000
59,584
-
-
-
-
-
432,500
(19,482,261)
1,289,902
(20,012,481)
-
-
-
-
-
-
-
-
-
28,085,001
-
820,000
3,641,484
-
164,000
1,242,925
-
33,953,410
19
Additional Information
The earnings of the consolidated entity are summarised below:
Loss after income tax of $8,793,521 for the year ended 30 June 2022 (2021: $6,612,148).
The factors that are considered to affect total shareholders return (‘TSR’) are summarised below:
• Share price at the end of the financial year was $1.15 (2021: 88.5 cents).
• Basic Loss per share (cents per share) of 4.19 for the year ended 30 June 2022 (2021: 3.57).
Related Party Transactions
Both Mr Buttula ($12,500) and Mr Wing ($21,250) charged a fee at commercial market rates in respect to an underwriting
commitment for the Rights Issue completed during the 2022 year.
Both Mr Buttula and Mr Wing charged a fee at commercial market rates of $25,000 in respect to an underwriting
commitment for the Rights Issue completed during the 2021 year.
During the 2022 and 2021 financial years there were no other transactions with related parties other than remuneration.
This concludes the remuneration report, which has been audited.
Voting and comments made at the Company’s 2021 Annual General Meeting
At the 2021 Annual General Meeting the 2021 Remuneration Report was voted upon by shareholders with 1.05% votes
against the resolution.
Environmental Issues
Rhythm’s operations are subject to certain environmental regulations under the laws of the Commonwealth and State.
The Directors are not aware of any breaches during the period covered by this report.
After Balance Date Events
Subsequent to balance date, as at 22 August 2022, $1.3 million had been received rom the exercise of Options.
There has been no other matters or circumstances which have arisen since 30 June 2022 that has significantly affected or may
significantly affect:
• the operations, in financial years subsequent to 30 June 2022, of the consolidated entity; or
• the results of those operations; or
• the state of affairs, in financial years subsequent to 30 June 2022, of the consolidated entity.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on
behalf of the Company, or to 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.
Indemnity and Insurance of Officers
The Company has paid a premium for Directors’ and Officers’ Liability (Management Liability) Insurance.
Under the Company’s constitution:
i. To the extent permitted by law and subject to the restrictions in sections 199A and 199B of the Corporations Act 2001, the
Company indemnifies every person who is or has been an officer of the Company against any liability (other than for legal
costs) incurred by that person as an officer of the Company.
ii. To the extent permitted by law and subject to the restrictions in sections 199A and 199B of the Corporations Act 2001, the
Company indemnifies every person who is or has been an officer of the Company against reasonable legal costs incurred in
defending an action for a liability incurred by that person as an officer of the Company.
20
DIRECTORS’ REPORTRHYTHM BIOSCIENCES 2022 ANNUAL REPORT The Company insures its Directors, Company Secretary, and executive officers under a Management Liability Insurance
policy. Under the Company’s Management Liability Insurance Policy, the Company cannot release to any third party or
otherwise publish details of the nature of the liabilities insured by the policy or the amount of the premium. Accordingly,
the Company relies on section 300(9) of the Corporations Act 2001 to exempt it from the requirement to disclose the
nature of the liability insured against and the premium amount of the relevant policy.
Indemnity and Insurance of Auditor
The company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the
company or any related entity against a liability incurred by the auditor. During the financial year, the company has not
paid a premium in respect of a contract to insure the auditor of the company or any related entity.
Auditors’ Independence Declaration
A copy of the auditors’ independence declaration as required under s307C of the Corporations Act 2001 is set out on
page 22.
Non-Audit Services
BDO Audit Pty Ltd were paid $9,400 (2021: $7,830) for non-audit services during the 2022 financial year. Non-audit
services related to tax compliance services.
The directors are satisfied that the provision of non-audit services during the financial year, by the auditor, is compatible
with the general standard of independence for auditors imposed by the Corporations Act 2001 for the following reasons:
• all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of
the auditor; and
• none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code
of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including
reviewing, or auditing the auditor’s own work, acting in a management or decision-making capacity for the company, acting
as advocate for the company or jointly sharing economic risks and rewards.
Officers of the company who are former directors of BDO Audit Pty Ltd
There are no officers of the company who are former directors of BDO Audit Pty Ltd.
This report is made in accordance with a resolution of the Directors.
Glenn Gilbert
Managing Director & CEO
Melbourne, Australia
Dated this 29th day of August 2022
21
Tel: +61 3 9603 1700
Fax: +61 3 9602 3870
www.bdo.com.au
Collins Square, Tower Four
Level 18, 727 Collins Street
Melbourne VIC 3008
GPO Box 5099 Melbourne VIC 3001
Australia
DECLARATION OF INDEPENDENCE BY DAVID GARVEY TO THE DIRECTORS OF RHYTHM BIOSCIENCES
LIMITED
As lead auditor of Rhythm Biosciences Limited for the year ended 30 June 2022, I declare that, to the
best of my knowledge and belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Rhythm Biosciences Limited and the entities it controlled during the
period.
David Garvey
Director
BDO Audit Pty Ltd
Melbourne, 29 August 2022
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO
Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members
of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent
member firms. Liability limited by a scheme approved under Professional Standards Legislation.
22
AUDITOR’S INDEPENDENCE DECLARATIONRHYTHM BIOSCIENCES 2022 ANNUAL REPORT
FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Notes
2022 ($)
2021 ($)
Other Income
Interest Income
Government Grant Income
Research and Development Tax Refund
Expenses
Employment related costs
4
Office and compliance costs
Research and development costs
Marketing and investor relations
Occupancy costs
Travel and meetings
Finance costs – lease liabilities
Finance costs - other
Depreciation - PPE
Depreciation - ROU
Amortisation of intangibles
Loss Before Income Tax
Income tax expense
Loss After Tax
Other comprehensive income
Total Comprehensive Loss for the Year
Loss Per Share
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
10
9
5
6
6
24,965
15,000
2,412,406
(4,452,229)
(781,248)
(5,159,179)
(561,860)
(99,817)
(90,079)
-
-
(58,101)
(7,408)
(35,971)
13,973
-
1,108,507
(2,189,773)
(730,252)
(4,554,750)
(62,821)
(45,479)
(3,724)
(785)
(396)
(70,665)
(40,012)
(35,971)
(8,793,521)
(6,612,148)
-
-
(8,793,521)
(6,612,148)
-
-
(8,793,521)
(6,612,148)
(4.19)
(4.19)
(3.57)
(3.57)
The financial statements should be read in conjunction with the accompanying notes.
23
DIRECTORS’ REPORT FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022
Consolidated Statement of Financial Position
Notes
30 June 2022 ($)
30 June 2021 ($)
Current Assets
Cash and cash equivalents
Trade and other receivables
Other financial assets – term deposit
Prepayments
Total Current Assets
Non-Current Assets
Intangible assets
Right-of-use assets
Property, plant and equipment
Total Non-Current Assets
Total Assets
Current Liabilities
Trade and other payables
Provisions
Lease liabilities
Total Current Liabilities
Non-Current Liabilities
Provisions
Lease liabilities
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Issued capital
Reserves
Accumulated losses
Total Equity
7
8
9
10
11
12
12
13
14
7,550,424
2,228,397
82,415
45,000
93,199
163,982
45,000
56,580
7,771,038
2,493,959
426,044
170,388
70,299
666,731
462,015
-
113,800
575,815
8,437,769
3,069,774
630,937
215,909
85,534
932,380
48,733
84,606
133,339
1,065,719
7,372,050
27,834,579
3,137,326
(23,599,855)
7,372,050
1,206,237
137,047
-
1,343,284
19,686
-
19,686
1,362,970
1,706,804
15,981,488
531,650
(14,806,334)
1,706,804
24
The financial statements should be read in conjunction with the accompanying notes.
RHYTHM BIOSCIENCES 2022 ANNUAL REPORT Consolidated Statement of Changes in Equity
Balance at 1 July 2020
10,037,245
194,000
(8,388,186)
1,843,059
Issued Capital
($)
Reserves
($)
Accumulated
Losses ($)
Total
($)
Loss attributable to members
Lapse of performance rights
Transactions with owners in their capacity as owners:
Issued capital
Capital raising costs
-
-
6,168,754
(251,081)
-
(6,612,148)
(6,612,148)
(194,000)
194,000
-
-
-
-
-
-
6,168,754
(251,081)
558,220
Share-based payments expense (Note 17)
26,570
531,650
Balance at 30 June 2021
15,981,488
531,650
(14,806,334)
1,706,804
Balance at 1 July 2021
15,981,488
531,650
(14,806,334)
1,706,804
Loss attributable to members
-
Transactions with owners in their capacity as owners:
Issued capital
Capital raising costs
12,320,945
(467,854)
-
-
-
Share-based payments expense (Note 17)
-
2,605,676
(8,793,521)
(8,793,521)
-
-
-
12,320,945
(467,854)
2,605,676
Balance at 30 June 2022
27,834,579
3,137,326
(23,599,855)
7,372,050
The financial statements should be read in conjunction with the accompanying notes.
25
DIRECTORS’ REPORT Consolidated Statement of Cash Flows
Notes
2022 ($)
2021 ($)
Cash Flow from Operating Activities
Interest received
25,048
20,212
Payments to suppliers and employees
(8,948,856)
(6,580,420)
Interest paid
Government COVID-19 stimulus
Government grant
Research and development tax refund
-
-
15,000
2,412,406
(785)
50,000
-
1,108,507
Net Cash Used in Operating Activities
15
(6,496,402)
(5,402,486)
Cash Flow from Investing Activities
Purchase of property, plant and equipment
Net Cash Used In Investing Activities
Cash Flow from Financing Activities
Proceeds from issues of shares and options
Costs of capital raising
Repayment of lease liabilities
Net Cash From/(Used in) Financing Activities
Net Increase/(Decrease) In Cash Held
Cash and cash equivalents at beginning of financial year
Cash And Cash Equivalents at End of Financial Year
7
(27,006)
(27,006)
12,320,945
(467,854)
(7,656)
11,845,435
5,322,027
2,228,397
7,550,424
(68,271)
(68,271)
6,168,754
(225,121)
(42,437)
5,901,196
430,439
1,797,958
2,228,397
26
The financial statements should be read in conjunction with the accompanying notes.
FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022RHYTHM BIOSCIENCES 2022 ANNUAL REPORT Note 1: Statement of Significant Accounting
Policies
The consolidated financial statements and notes represent
those of Rhythm Biosciences Limited and Controlled
Entities (the ‘consolidated entity’ or ‘Group’). The
separate financial statements of the parent entity, Rhythm
Biosciences Limited, have not been presented within this
financial report as permitted by amendments made to
the Corporations Act 2001. The financial report covers
the economic entities of Rhythm Biosciences Limited and
its controlled entities as an economic entity for the year
ended 30 June 2022. Comparatives are disclosed for the
year ended 30 June 2021.
The financial statements are presented in Australian
dollars, which is the Group’s functional and presentation
currency. The financial statements were authorised
for issue on the date of the approval of the Directors’
declaration by the Directors of the Company.
Statement of Compliance
These financial statements are general purpose financial
statements which have been prepared in accordance
with the Corporations Act 2001, Australian 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.
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’).
Basis of Preparation
Australian Accounting Standards set out accounting
policies that the AASB has concluded would result
in a financial report containing relevant and reliable
information about transactions, events and conditions to
which they apply. Material accounting policies adopted
in the preparation of this financial report are presented
below. They have been consistently applied unless
otherwise stated.
The financial report has been prepared on an accruals
basis and is based on historical costs, modified, where
applicable, by the measurement at fair value of selected
non-current assets, financial assets, and financial liabilities.
Going Concern
The consolidated entity incurred an operating loss of
$8,793,521 (2021: $6,612,148) and had cash outflows from
operating activities of $6,496,402 (2021: $5,402,486) for
the year ended 30 June 2022. The consolidated entity is
in start-up phase and does not yet have an income stream.
The ability of the company to continue as a going concern
is dependent on a number of factors, one being the
continuation and availability of funds.
The financial statements have been prepared on a going
concern basis, which contemplates the continuity of
normal business activities and the realisation of assets
and the settlement of liabilities in the normal course of
business for the following reasons:
• as at 30 June 2022, the consolidated entity had a strong
cash position of $7.6 million;
• a research and development refund, based on qualifying
expenditure incurred in the 2022 financial year, is
expected in the second half of 2022;
• the consolidated entity is still in the early stages of
operations and is able to scale back activity if required for
cash flow management purposes; and
• Subsequent to balance date, as at 22 August 2022, $1.3
million had been received from the exercise of options.
Accounting Policies
Principles of Consolidation
The consolidated financial statements incorporate
the assets and liabilities of all subsidiaries of Rhythm
Biosciences Limited (‘company’ or ‘parent entity’) as at 30
June 2022 and the results of all subsidiaries for the year
then ended.
Subsidiaries are all those entities over which the
consolidated entity has control. The consolidated entity
controls an entity when the consolidated entity is exposed
to, or has rights to, variable returns from its involvement
with the entity and has the ability to affect those returns
through its power to direct the activities of the entity.
Subsidiaries are fully consolidated from the date on which
control is transferred to the consolidated entity. They are
de-consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains
on transactions between entities in the consolidated entity
are eliminated. Unrealised losses are also eliminated unless
the transaction provides evidence of the impairment of the
asset transferred. Accounting policies of subsidiaries have
been changed where necessary to ensure consistency
with the policies adopted by the consolidated entity.
The acquisition of subsidiaries is accounted for using the
acquisition method of accounting. A change in ownership
interest, without the loss of control, is accounted for as
an equity transaction, where the difference between the
27
DIRECTORS’ REPORT consideration transferred and the book value of the share
of the non-controlling interest acquired is recognised
directly in equity attributable to the parent.
Operating Segments
Operating segments are presented using the
‘management approach’, where the information presented
is on the same basis as the internal reports provided to the
Chief Operating Decision Makers (‘CODM’). The CODM
is responsible for the allocation of resources to operating
segments and assessing their performance.
Revenue Recognition
Revenue is recognised at the fair value of the consideration
received net of the amount of goods and services tax
(GST) payable to the taxation authority. For each contract
with a customer, the consolidated entity: identifies the
contract with a customer; identifies the performance
obligations in the contract; determines the transaction
price which takes into account estimates of variable
consideration and the time value of money; allocates
the transaction price to the separate performance
obligations on the basis of the relative stand-alone selling
price of each distinct good or service to be delivered;
and recognises revenue when or as each performance
obligation is satisfied in a manner that depicts the transfer
to the customer of the goods or services promised.
Interest income is recognised as it accrues, taking into
account the effective yield on the financial asset.
Government stimulus and research and development tax
refund Income Is recognised when there Is reasonable
assurance that the eligibility conditions are met and that
the grants will be received.
Income Tax
Income tax expense represents the sum of the tax
currently payable and deferred tax.
Deferred tax is accounted for using the balance sheet
liability method in respect of temporary differences arising
between the tax bases of assets and liabilities and their
carrying amounts in the financial statements. No deferred
income tax will be recognised from the initial recognition
of an asset or liability, excluding a business combination,
where there is no effect on accounting or taxable profit or
loss.
Deferred tax is calculated at the tax rates that are expected
to apply in the period when the asset is realised or liability
is settled. Deferred tax is credited in the income statement
except where it relates to items that may be credited
directly to equity, in which case the deferred tax is adjusted
directly against equity.
Deferred income tax assets are recognised to the extent
that it is probable that future tax profits will be available,
against which deductible temporary differences can be
utilised. No deferred tax assets have been recognised on
the statement of financial position as at 30 June 2022, as
the probability of deriving a benefit is uncertain.
The amount of benefits brought to account or which may
be realised in the future is based on the assumption that
no adverse change will occur in income taxation legislation
and the expectation that the Group will derive sufficient
future assessable income to enable the benefit to be
realised and comply with the conditions of deductibility
imposed by the law.
Current and Non-current Classification
Assets and liabilities are presented in the statement of
financial position based on current and non-current
classification.
An asset is classified as current when: it is either expected
to be realised or intended to be sold or consumed in the
consolidated entity’s normal operating cycle; it is held
primarily for the purpose of trading; it is expected to be
realised within 12 months after the reporting period; or
the asset is cash or cash equivalent unless restricted from
being exchanged or used to settle a liability for at least
12 months after the reporting period. All other assets are
classified as non-current.
A liability is classified as current when: it is either expected
to be settled in the consolidated entity’s normal operating
cycle; it is held primarily for the purpose of trading; it is due
to be settled within 12 months after the reporting period;
or there is no unconditional right to defer the settlement of
the liability for at least 12 months after the reporting period.
All other liabilities are classified as non-current.
Deferred tax assets and liabilities are always classified as
non-current.
Cash and Cash Equivalents
Cash and cash equivalents includes cash on hand,
deposits held at call with financial institutions, other short-
term, highly liquid investments with original maturities of
three months or less that are readily convertible to known
amounts of cash and which are subject to an insignificant
risk of changes in value. For the statement of cash flows
presentation purposes, cash and cash equivalents
also includes bank overdrafts, which are shown within
borrowings in current liabilities on the statement of
financial position.
28
FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022RHYTHM BIOSCIENCES 2022 ANNUAL REPORT Trade and Other Receivables
Trade receivables are initially recognised at fair value
and subsequently measured at amortised cost using
the effective interest method, less any provision for
impairment. Trade receivables are generally due for
settlement within 30 days.
Collectability of trade receivables is reviewed on an
ongoing basis. Debts which are known to be uncollectable
are written off by reducing the carrying amount directly. A
provision for estimated credit losses of trade receivables
is raised when there is objective evidence that the
consolidated entity will not be able to collect all amounts
due according to the original terms of the receivables
expected. Significant financial difficulties of the debtor,
probability that the debtor will enter bankruptcy or
financial reorganisation and default or delinquency in
payments (more than 60 days overdue) are considered
indicators that the trade receivable may be impaired. The
amount of the impairment allowance is the difference
between the asset’s carrying amount and the present
value of estimated future cash flows, discounted at the
original effective interest rate. Cash flows relating to
short-term receivables are not discounted if the effect of
discounting is immaterial.
Other receivables are recognised at amortised cost, less
any provision for impairment.
Intangibles
Research and Development
Expenditure during the research phase of a project
is recognised as an expense when incurred. Product
development costs are capitalised only when each of the
following specific criteria has been satisfied
i. Technical feasibility of completing development of the
product and obtaining approval by regulatory authorities.
ii. Ability to secure a commercial partner for the product.
iii. Availability of adequate technical, financial and other
resources to complete development of the product,
obtain regulatory approval and secure a commercial
partner.
iv. Reliable measurement of expenditure attributable to the
product during its development.
v. High probability of the product entering a major
diagnostic market.
Capitalised development costs have a finite life and are
amortised on a systematic basis over the period from when
the product becomes available for use and ceases at the
earlier of the date the asset is expected to exit the market
or that the asset is classified as held for sale (or included
in a disposal group that is classified as held for sale) in
accordance with AASB 5.
Other Intangible Assets
Other intangible assets comprise licences and are stated
at cost less accumulated amortisation and impairment
losses.
Right-of-use assets
A right-of-use asset is recognised at the commencement
date of a lease. The right-of-use asset is measured at
cost, which comprises the initial amount of the lease
liability, adjusted for, as applicable, any lease payments
made at or before the commencement date net of any
lease incentives received, any initial direct costs incurred,
and, except where included in the cost of inventories, an
estimate of costs expected to be incurred for dismantling
and removing the underlying asset, and restoring the site
or asset.
Right-of-use assets are depreciated on a straight-line basis
over the unexpired period of the lease or the estimated
useful life of the asset, whichever is the shorter. Where the
consolidated entity expects to obtain ownership of the
leased asset at the end of the lease term, the depreciation
is over its estimated useful life. Right-of use assets are
subject to impairment or adjusted for any remeasurement
of lease liabilities.
The consolidated entity has elected not to recognise a
right-of-use asset and corresponding lease liability for
short-term leases with terms of 12 months or less and
leases of low-value assets. Lease payments on these assets
are expensed to profit or loss as incurred.
Property, Plant and Equipment
Each class of property, plant and equipment is carried at
cost or fair value less, where applicable, any accumulated
depreciation and impairment.
Plant and Equipment
The carrying amount of plant and equipment is reviewed
annually by the Directors to ensure it is not in excess of the
recoverable amount from these assets. The recoverable
amount is assessed on the basis of the expected net cash
flows that will be received from the assets’ employment
and subsequent disposal. The expected net cash
flows have been discounted to their present values in
determining recoverable amounts.
Subsequent costs are included in the asset’s carrying
amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits
29
DIRECTORS’ REPORT associated with the item will flow to the Group and the cost
of the item can be measured reliably. All other repairs and
maintenance are charged to the income statement during
the financial period in which they are incurred.
Depreciation
The depreciable amount of all fixed assets, including
building and capitalised lease assets but excluding
freehold land, is depreciated on a straight-line basis over
their useful lives to the Group commencing from the time
the asset is held ready for use. Items of property, plant and
equipment, are depreciated over their estimated useful
lives.
The depreciation rates for each class of asset are:
Class of Non-
Current Asset
Office Equipment
Computer
Equipment
Laboratory
Equipment
Depreciation
Rate
Estimated Useful
Lives
10%
33.3%
33.3%
10 years
3 years
3 years
The assets’ residual values and useful lives are reviewed,
and adjusted if appropriate, at each end of reporting
period.
An asset’s carrying amount is written down immediately
to its recoverable amount if the asset’s carrying amount is
greater than its estimated recoverable amount.
The consolidated entity leases office space. The lease is
short-term, so it has been expensed as incurred and not
capitalised as right-of-use assets.
Impairment of Non-Financial Assets
At each reporting date the Group reviews the carrying
values of its tangible and intangible assets to determine
whether there is any indication that those assets have
been impaired. If such an indication exists, the recoverable
amount of the asset, being the higher of the asset’s fair
value less costs to sell and value in use, is compared to the
asset’s carrying value. Any excess of the asset’s carrying
value over its recoverable amount is expensed to the
statement of comprehensive income.
Impairment testing is performed annually for intangible
assets with indefinite lives and capitalised development
costs not yet ready for use.
Where 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.
Payables
Liabilities are recognised for amounts to be paid in the
future for goods or services received. Due to their short-
term nature, they are measured at amortised cost and
are not discounted. Trade accounts payable and other
creditors are normally settled within 60 days.
Lease liabilties
A lease liability is recognised at the commencement
date of a lease. The lease liability is initially recognised
at the present value of the lease payments to be made
over the term of the lease, discounted using the interest
rate implicit in the lease or, if that rate cannot be readily
determined, the consolidated entity’s incremental
borrowing rate. Lease payments comprise of fixed
payments less any lease incentives receivable, variable
lease payments that depend on an index or a rate, amounts
expected to be paid under residual value guarantees,
exercise price of a purchase option when the exercise
of the option is reasonably certain to occur, and any
anticipated termination penalties. The variable lease
payments that do not depend on an index or a rate are
expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using
the effective interest method. The carrying amounts are
remeasured if there is a change in the following: future
lease payments arising from a change in an index or a
rate used; residual guarantee; lease term; certainty of
a purchase option and termination penalties. When a
lease liability is remeasured, an adjustment is made to the
corresponding right-of use asset, or to profit or loss if the
carrying amount of the right-of-use asset is fully written
down.
Employee Entitlements
Short-term and long-term employee benefits
A liability is recognised for benefits accruing to employees
for wages and salaries and annual leave in the year the
related service is rendered.
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
30
FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022RHYTHM BIOSCIENCES 2022 ANNUAL REPORT
Group in respect of services provided by employees up to
reporting date.
Contributions are made by the Group to employee
superannuation funds and are charged as expenses when
incurred.
Share-based compensation
Equity-settled and cash-settled share-based
compensation benefits are provided to employees.
Equity-settled transactions are awards of shares, or
options over shares, that are provided to employees in
exchange for the rendering of services. Cash-settled
transactions are awards of cash for the exchange of
services, where the amount of cash is determined by
reference to the share price.
The cost of equity-settled transactions are measured
at fair value on grant date. Fair value is independently
determined using either the Binomial or Black-Scholes
option pricing or models that takes into account the
exercise price, the term of the option, the impact of
dilution, the share price at grant date and expected price
volatility of the underlying share, the expected dividend
yield and the risk free interest rate for the term of the
option, together with non-vesting conditions that do not
determine whether the consolidated entity receives the
services that entitle the employees to receive payment. No
account is taken of any other vesting conditions.
The cost of equity-settled transactions are recognised as
an expense with a corresponding increase in equity over
the vesting period. The cumulative charge to profit or
loss is calculated based on the grant date fair value of the
award, the best estimate of the number of awards that are
likely to vest and the expired portion of the vesting period.
The amount recognised in profit or loss for the period is
the cumulative amount calculated at each reporting date
less amounts already recognised in previous periods.
The cost of cash-settled transactions is initially, and at each
reporting date until vested, determined by applying either
the Binomial or Black-Scholes option pricing model, taking
into consideration the terms and conditions on which the
award was granted. The cumulative charge to profit or loss
until settlement of the liability is calculated as follows:
• during the vesting period, the liability at each reporting
date is the fair value of the award at that date multiplied by
the expired portion of the vesting period.
• from the end of the vesting period until settlement of the
award, the liability is the full fair value of the liability at the
reporting date.
All changes in the liability are recognised in profit or loss.
The ultimate cost of cash-settled transactions is the cash
paid to settle the liability.
Market conditions are taken into consideration in
determining fair value. Therefore, any awards subject to
market conditions are considered to vest irrespective
of whether or not that market condition has been met,
provided all other conditions are satisfied.
If equity-settled awards are modified, as a minimum
an expense is recognised as if the modification has
not been made. An additional expense is recognised,
over the remaining vesting period, for any modification
that increases the total fair value of the share-based
compensation benefit as at the date of modification.
If the non-vesting condition is within the control of the
consolidated entity or employee, the failure to satisfy
the condition is treated as a cancellation. If the condition
is not within the control of the consolidated entity or
employee and is not satisfied during the vesting period,
any remaining expense for the award is recognised over
the remaining vesting period, unless the award is forfeited.
Issued Capital
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares or options
are shown in equity as a deduction, net of tax, from the
proceeds.
Financial Instruments
Recognition
Financial instruments are initially measured at fair value on
transaction date, plus or minus transaction costs directly
attributable to the acquisition. Subsequent to initial
recognition these instruments are measured as set out
below.
Receivables
Receivables are non-derivative financial assets with fixed
or determinable payments that are not quoted in an active
market and are stated at amortised cost using the effective
interest rate method.
Financial liabilities
Non-derivative financial liabilities are recognised at
amortised cost, comprising original debt less principal
payments and amortisation. Lease liabilities have been
recorded adopting an Incremental borrowing rate of 4.99%.
31
DIRECTORS’ REPORT Impairment
Critical Accounting Estimates and Judgments
An ‘expected credit loss’ (‘ECL’) model is used to recognise
an allowance. Impairment is measured using a 12-month
ECL method unless the credit risk on a financial instrument
has increased significantly since initial recognition in which
case the lifetime ECL method is adopted.
Earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to the owners of Rhythm Biosciences Limited,
excluding any costs of servicing equity other than ordinary
shares, by the weighted average number of ordinary shares
outstanding during the financial year, adjusted for bonus
elements in ordinary shares issued during the financial
year.
Diluted earnings per share adjusts the figures used in the
determination of basic earnings per share to take into
account the after income tax effect of interest and other
financing costs associated with dilutive potential ordinary
shares and the weighted average number of shares
assumed to have been issued for no consideration in
relation to dilutive potential ordinary shares.
Goods and Services Tax (‘GST’) and Other Similar Taxes
Revenues, expenses and assets are recognised net of
the amount of associated GST, unless the GST incurred
is not recoverable from the tax authority. In this case it is
recognised as part of the cost of the acquisition of the
asset or as part of the expense.
Receivables and payables are stated inclusive of the
amount of GST receivable or payable. The net amount
of GST recoverable from, or payable to, the tax authority
is included in other receivables or other payables in the
statement of financial position.
Cash flows are presented on a gross basis. The GST
components of cash flows arising from investing or
financing activities which are recoverable from, or payable
to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the
amount of GST recoverable from, or payable to, the tax
authority.
Comparative Figures
When required by Accounting Standards, comparative
figures have been adjusted to conform to changes in
presentation for the current financial year.
The Directors evaluate estimates and judgments
incorporated into the financial report based on historical
knowledge and best available current information.
Estimates assume a reasonable expectation of future
events and are based on current trends and economic
data, obtained both externally and within the Group.
Key Estimates
Share-based payments
Rhythm operates an Employee Share Option Plan
(ESOP). The non-cash expense of issuing these options
is calculated using a Black-Scholes option pricing model.
This model requires the input of a number of variables
including an estimate of future volatility and a risk-free
interest rate. Refer to Note 17 to the financial statements.
Research and Development Tax Refund Income
Research and development tax refund income Is
recognised when there Is reasonable assurance that
the eligibility conditions are met and that the grants
will be received. Significant judgement is required in
determining the income tax refund eligibility. There are
many transactions and calculations undertaken during
the ordinary course of business for which the ultimate tax
determination is uncertain.
Other Intangible Assets
Other intangible assets comprise licences and are stated
at cost less accumulated amortisation. The consolidated
entity assesses impairment of non-financial indefinite
life intangible assets and intangible assets not yet ready
for use at each reporting date by evaluating conditions
specific to the consolidated entity and to the particular
asset that may lead to impairment. If an impairment trigger
exists, the recoverable amount of the asset is determined.
This involves fair value less costs of disposal or value-
in-use calculations, which incorporate a number of key
estimates and assumptions.
Estimated Useful Lives of Other Intangible Assets
Rhythm determines the estimated useful lives and
related amortisation charges for its finite life intangible
assets. The useful lives could change significantly as a
result of technical innovations or some other event. The
amortisation charge will increase where the useful lives are
less than previously estimated lives, or technically obsolete
or non-strategic assets that have been abandoned or sold
will be written off or written down.
32
FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022RHYTHM BIOSCIENCES 2022 ANNUAL REPORT
Adoption of New and Revised Accounting Standards
During the current year, the Group has adopted all of the new and revised Australian Accounting Standards and
Interpretations applicable to its operations which became mandatory.
New Accounting Standards for Application in Future Periods
The Board has assessed the impact of the new, but not yet mandatory, accounting standards issued by Australian
Accounting Standards Board (AASB). The adoption of these Standards is not expected to have a material impact on the
financial statements.
2022 ($)
2021 ($)
7,498,630
664,100
8,162,730
571,807
218,873
790,680
27,834,579
3,137,326
2,331,673
25,464
2,357,137
630,647
19,686
650,333
15,981,488
531,650
(23,599,855)
(14,806,334)
7,372,050
2022 ($)
(8,793,521)
(8,793,521)
1,706,804
2021 ($)
(6,612,148)
(6,612,148)
Note 2: Parent Information
Statement of Financial Position
Current assets
Non-current assets
Total Assets
Current liabilities
Non-Current Liabilities
Total Liabilities
Issued Capital
Reserves
Accumulated losses
Total Equity
Statement of Comprehensive Income
Total loss
Total Comprehensive Income
Guarantees
The Parent Company has not entered into any guarantees in relation to
its subsidiaries.
Commitments and Contingent Liabilities
At 30 June 2022, the Parent Company had no capital commitments and
no contingent liabilities (2021: Nil).
Significant Accounting Policies
The accounting policies of the parent entity are consistent with those of
the consolidated entity, as disclosed in Note 1, except for investments in
subsidiaries which are accounted for at cost, less any impairment, in the
parent entity
Note 3: Controlled Entities
Controlled Entities
Country of Incorporation
Percentage Owned (%) 2022
Percentage Owned (%) 2021
Vision Tech Bio Pty Ltd
IchorDX, Inc.
Australia
United States
100%
100%
100%
-
* Percentage of voting power in proportion to ownership
33
DIRECTORS’ REPORT Note 4: Employment Related Costs
Loss from continuing activities before income tax after charging
the following
Employment Related Costs
Staff salaries and Director fees
Superannuation
Share-based payments expense (Refer to Note 17 for options and shares issued)
Other employment related expenses
Total
Note 5: Income Tax Relating to Continuing Activities
Prima facie income tax benefit from continuing activities before
income tax at 25% (2021: 27.5%)
Add/(subtract) Tax Effect:
- Research and development claim
- Share based payments expense
- Other non-deductible expenditure
- Tax losses and temporary differences not brought to account
Income Tax Expense
Total tax losses and temporary differences not brought to account $4,009,997 (2021: $3,466,469).
Note 6: Loss Per Share
The following reflects the income and share data used in the calculations of
basic and diluted loss per share:
2022 ($)
2021 ($)
2,099,205
171,504
2,155,676
25,844
1,498,760
120,491
558,219
12,303
4,452,229
2,189,773
2022 ($)
2,198,380
603,102
(651,419)
(9,900)
(2,140,163)
-
2021 ($)
1,818,341
304,839
(153,510)
(1,554)
(1,968,116)
-
2022 ($)
2021 ($)
Loss used in calculating basic and diluted earnings per share
(8,793,521)
(6,612,148)
2022
No. of Shares
2021
No. of Shares
Weighted average number of ordinary shares used in calculating basic loss
per share
209,946,293
100,750,000
Basic and diluted loss per share (cents)
(4.19)
(3.57)
Calculation of diluted loss per share
Potential ordinary shares are considered to be antidilutive, therefore diluted
loss per share is equivalent to the basic loss per share.
34
FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022RHYTHM BIOSCIENCES 2022 ANNUAL REPORT Note 7: Cash and Cash Equivalents
Cash at bank
Note 8: Trade and Other Receivables
GST receivable
Other receivables
Note 9: Intangible Assets
Intellectual Property
Licences at cost (i)
Licences accumulated amortisation (i)
Movement in Carrying Amounts
Balance at the beginning of the year
Amortisation (i)
Balance at the End of the Year
2022 ($)
7,550,424
7,550,424
2022 ($)
81,395
1,020
82,415
2021 ($)
2,228,397
2,228,397
2021 ($)
162,879
1,103
163,982
2022 ($)
2021 ($)
600,000
(173,956)
426,044
600,000
(137,985)
462,015
2022 ($)
2021 ($)
462,015
(35,971)
426,044
497,986
(35,971)
462,015
(i) A licence was granted by the Commonwealth Scientific and Industrial Research Organisation (“CSIRO”) on 23 August 2017 and is being amortised over a
period of 17 years based on contract terms.
35
DIRECTORS’ REPORT Note 10: Property, Plant and Equipment
Computers – at cost
Accumulated depreciation
Office equipment – at cost
Accumulated depreciation
Laboratory equipment - at cost
Accumulated depreciation
Total
2022 ($)
61,047
(44,922)
16,125
12,245
(1,711)
10,534
201,931
(158,291)
43,640
70,299
Movement in Carrying Amounts 2022
Computer
Equipment ($)
Office
Equipment ($)
Laboratory
Equipment ($)
Balance at the beginning of the year
Additions
Depreciation
Balance at the end of the year
25,130
2,721
(11,726)
16,125
595
10,258
(319)
10,534
88,075
1,621
(46,056)
43,640
Movement in Carrying Amounts 2021
Computer
Equipment ($)
Office
Equipment ($)
Laboratory
Equipment ($)
Balance at the beginning of the year
Additions
Depreciation
Balance at the end of the year
17,818
19,876
(12,564)
25,130
1,093
-
(498)
595
83,635
62,043
(57,603)
88,075
Note 11: Trade and Other Payables
Trade creditors
Accruals
Balance at the end of the year
2022 ($)
278,314
352,623
630,937
2021 ($)
58,326
(33,196)
25,130
1,986
(1,391)
595
200,310
(112,235)
88,075
113,800
Total ($)
113,800
14,600
(58,101)
70,299
Total ($)
102,546
81,919
(70,665)
113,800
2021 ($)
603,163
603,074
1,206,237
36
FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022RHYTHM BIOSCIENCES 2022 ANNUAL REPORT
Note 12: Provisions
Current
Provision for Annual Leave
Non-Current
Provision for Long Service Leave
Note 13: Issued Capital
Ordinary Shares Fully Paid
2022 ($)
2021 ($)
215,909
137,047
48,733
264,642
19,686
156,733
2022 (No.)
2021 (No.)
2022 ($)
2021 ($)
Balance at the beginning of the year
202,170,811
100,750,000
15,981,488
10,037,245
Rights issue and placement at 6 cents per share
-
100,562,570
-
6,033,754
Rights issue and placement at 85 cents per share
6,554,270
Placement at $1.40 per share
Options exercised
Share based payments
Capital raising costs
4,666,179
690,885
-
-
-
-
675,000
183,241
5,571,130
6,532,651
217,164
-
-
(467,854)
-
-
135,000
26,570
(251,081)
Balance at the end of the year
214,082,145
202,170,811
27,834,579
15,981,488
Ordinary Shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in
proportion to the number of and amounts paid on the shares held. Ordinary shares have no par value and the company
does not have a limited amount of authorised capital. On a show of hands every member present at a meeting in person
or by proxy shall have one vote and upon a poll each share shall have one vote.
Capital Risk Management
The consolidated entity’s objectives when managing capital is to safeguard its ability to continue as a going concern,
so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital
structure to reduce the cost of capital.
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is
calculated as total borrowings less cash and cash equivalents. In order to maintain or adjust the capital structure, the
consolidated entity may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new
shares or sell assets to reduce debt.
The consolidated entity would look to raise capital when an opportunity to invest further into development and
commercialisation or in a business seen as value adding relative to the current company’s share price at the time of the
investment. The consolidated entity is not actively pursuing additional investments in the short term as it continues to
integrate and grow its existing businesses in order to maximise synergies.
The capital risk management policy remains unchanged from 30 June 2021.
37
DIRECTORS’ REPORT Note 14: Reserves
Share Based Payments Reserve
Balance at the beginning of the year
Employee share-based payments expense
Consultants share-based payments expense
Lapse/forfeiture of performance rights
Balance at the End of the Year
Notes
2022 ($)
2021 ($)
17
17
17
531,650
2,155,676
450,000
194,000
531,650
-
-
(194,000)
3,137,326
531,650
Share based payments reserve is used to record the value of equity benefits provided to Directors, employees and consultants as part of their remuneration.
Note 15: Cash Flow Information
Notes
2022 ($)
2021 ($)
a. Cash at the end of the financial year as shown in the cash flow
statement is reconciled to the related items in the balance sheet as
follows:
Cash at bank
7,550,424
2,228,397
7
7,550,424
2,228,397
b. Reconciliation of cash flow from operating activities with loss from
continuing activities after income tax benefit
Loss from continuing activities after significant items and income tax
(8,793,521)
(6,612,148)
Non-Cash Items
Depreciation and amortisation
Expense recognised in respect of equity-settled share-based payments
Changes In Assets and Liabilities
Decrease/(Increase) in trade and other receivables
(Increase) in prepayments
(Decrease)/Increase in trade and other
Increase in provision for employee entitlements
101,480
2,605,676
70,997
(36,620)
(552,323)
107,909
146,647
558,220
(40,197)
(33,345)
505,920
72,417
Net Cash Used In Operating Activities
(6,496,402)
(5,402,486)
Note 16: Related Party Transactions
Rhythm Biosciences Limited is the parent entity. Refer to Note 3 for details on the subsidiaries.
The names of each person holding the position of director of Rhythm Biosciences Limited during the year were Mr Otto
Buttula, Mr Glenn Gilbert (appointed 1 December 2021), Dr Trevor Lockett, Mr David White (resigned 14 July 2021), Mr
Lou Panaccio, Mr Eduardo Vom and Dr Rachel David (appointed 15 December 2021). Company secretaries were Ms
Andrea Steele (appointed 25 February 2022), Mr Adrien Wing (resigned 25 February 2022) and Ms Pauline Moffatt
(resigned 25 February 2022).
Both Mr Buttula ($12,500) and Mr Wing ($21,250) charged a fee at commercial market rates in respect to an underwriting
commitment for the Rights Issue completed during the 2022 year.
38
FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022RHYTHM BIOSCIENCES 2022 ANNUAL REPORT Both Mr Buttula and Mr Wing charged a fee at commercial market rates of $25,000 in respect to an underwriting
commitment for the Rights Issue completed during the 2021 year.
During the 2022 and 2021 financial years there were no other transactions with related parties other than remuneration
as disclosed in the Remuneration Report.
Note 17: Share-Based Payments
Shares
In the prior year, 183,241 fully paid ordinary shares were issued to the CEO, Mr Glenn Gilbert, as a sign-on incentive for a
revised employment agreement. Included under employee costs in the income statement is a share-based payments
expense of $nil (2021: $26,570) based on a price of 14.5 cents per share at the date of issue.
Options
During the 2022 financial year the Company granted 8,195,000 options to consultants, key management personnel and
other employees as part of their remuneration. Vesting conditions related to these options not yet achieved are as set out
below.
In respect to Mr Buttula, Mr Gilbert, Mr Vom, Mr Panaccio and employees:
• 25% upon the Company achieving first revenue by December 2022;
• 25% upon the Company achieving first revenue from 2 other countries by June 2023; and
• 25% upon remaining employed on 21 July 2024.
In respect to Dr Lockett:
• 25% upon the Company achieving first revenue from 2 other countries by June 2023; and
• 25% upon remaining employed on 21 July 2024.
In respect to Mr White:
• 5% upon CRO appointment for the USFDA being operational;
• 7.5% on break-through designation from USFDA by 30 September 2022; and
• 30% on first revenue in USA by December 2022.
Vesting conditions related to these options not achieved and lapsed are as set out below:
In respect to Dr Lockett:
• 25% upon the validation of 1 alternate cancer target by 30 June 2022.
In respect to Mr White:
• 25% upon CLIA lab selection and LDT in the USA by 30 June 2022; and
• 7.5% on break-through designation from USFDA by 30 June 2022.
During the 2021 financial year the Company granted 8,150,000 options to key management personnel and other
employees as part of their remuneration. Vesting conditions related to these options not yet achieved are as follows:
• 25% upon the Company achieving Therapeutic Goods Association (TGA) registration by 30 September 2022.
Set out below are summaries of options granted.
Unvested options shall lapse upon employment termination without notice (with cause) or cessation.
39
DIRECTORS’ REPORT An expense of $2,605,676 (2021: $531,650) is included in the Statement of profit or loss and other comprehensive
income. Details are as follows:
Grant Date
Expiry Date
Exercise
Price
Balance at
Start of the
Year
14.9.2020
14.9.2023
$0.20
5,975,000
18.11.2020
14.9.2023
$0.20
1,500,000
26.7.2021
31.7.2024
26.7.2021
31.7.2024
24.11.2021
31.7.2024
$1.80
$1.80
$1.80
-
-
-
Granted
Lapsed
Exercised
Balance at
End of the
Year
Vested
-
-
1,895,000
1,000,000
-
-
-
-
5,300,000
(287,500)
(150,000)
5,825,000
4,162,500
-
-
-
-
1,500,000
1,125,000
1,895,000
473,750
1,000,000
1,000,000
5,012,500
1,325,000
TOTAL
7,475,000
8,195,000
(287,500)
(150,000)
15,232,500
8,086,250
The valuation model inputs used to determine the fair value at the grant date, are as follows:
Grant Date
14.9.2020
18.11.2020
26.7.2021
**24.11.2021
Expiry
Date
Share Price at
Grant Date
Exercise
Price
Expected
Volatility
Dividend
Yield
Risk-free
Interest Rate*
Fair Value at
Grant Date
14.9.2023
$0.145
14.9.2023
31.7.2024
31.7.2024
$0.47
$0.93
$1.74
$0.20
$0.20
$1.80
$1.80
100%
100%
100%
100%
-
-
-
-
0.24%
$0.0799
0.11%
0.13%
1.01%
$0.3545
$0.45
$1.02
* The risk-free interest rate is based on the Australian Government 3-year bond yield (Reserve Bank of Australia website) at the grant date.
** On 26 July 2021 when the share price was $0.93, Directors resolved to issue these Options, subject to receipt of shareholder approval. On 24 November 2021,
when the share price was $1.74, shareholder approval occurred at the Annual General Meeting (AGM). The fair value for accounting purposes is determined
based upon final approval at the date of the AGM.
A share option plan has been established by the consolidated entity, whereby the consolidated entity may, at the
discretion of the Board, grant options over ordinary shares in the company to certain key management personnel of
the consolidated entity. The options are issued for nil consideration and are granted in accordance with performance
guidelines established by the Board.
All options granted are in respect of ordinary shares in Rhythm Biosciences Limited and confer a right of one ordinary
share for each option held.
40
FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022RHYTHM BIOSCIENCES 2022 ANNUAL REPORT Movement in the number of share options on issue
2022
2022
2021
2021
Number of
Options
Weighted Average
Exercise Price (cents)
Number of
Options
Weighted Average
Exercise Price (cents)
Opening balance
Granted
Forfeited / Lapsed
Exercised
Expired
7,475,000
8,195,000
(287,500)
(150,000)
-
Outstanding at year-end
15,232,500
Exercisable at year-end
8,086,250
20.00
180.00
180.00
20.00
-
103.06
75.38
3,000,000
8,150,000
(3,000,000)
(675,000)
-
7,475,000
3,400,000
26.67
20.00
26.67
20.00
-
20.00
20.00
The fair value of issued share-based payments granted during the year pursuant to the in 2022 was calculated to be
$6,708,750. The total amount expensed in the income statement is a share-based payments expense of $2,605,676
(2021: $531,650).
The value of the vested share options issued has been calculated by using a Black-Scholes option pricing model applying
the following inputs:
Options granted
Grant date
Exercise price
Underlying share price
Expiry date
Vesting period
Expected share price volatility
Risk free interest rate
Fair value per option at grant date
Employees
Consultants
1,895,000
1,000,000
26.7.2021
26.7.2021
$1.80
$0.93
31.7.2024
various
100%
0.13%
$0.45
$1.80
$0.93
31.7.2024
n/a
100%
0.13%
$0.45
Directors
5,300,000
24.11.2021
$1.80
$1.74
31.7.2024
various
100%
1.01%
$1.02
Total fair value at grant date
$852,750
$450,000
$5,406,000
The life of the options is based on the contracted expiry date.
41
DIRECTORS’ REPORT Note 18: Financial Risk Management
The Group’s financial instruments consist mainly of term deposits with banks, other receivables and trade payables.
The totals for each category of financial instruments, measured in accordance with AASB 9 as detailed in the accounting
policies to these financial statements, are as follows:
Financial Assets
Cash and cash equivalents
Trade and other receivables
Other financial assets – term deposits
Financial Liabilities
Trade and other Payables
2022 ($)
2021 ($)
7,550,424
2,228,397
82,415
45,000
163,982
45,000
7,677,839
2,437,379
630,937
630,937
1,206,237
1,206,237
There are no impaired assets within trade and other receivables; these balances, and the balance of trade and other
payables, are expected to be settled within 1 year.
Financial Assets Pledged as Collateral
No financial assets have been pledged as security for any financial liability.
Financial Risk Management Policies
The Board are responsible for, among other issues, monitoring and managing financial risk exposures of the Group. The
Board monitors the Group’s transactions and reviews the effectiveness of controls relating to credit risk, liquidity risk, and
market risk. Discussions on monitoring and managing financial risk exposures are held regularly by the Board. The Board’s
overall risk management strategy seeks to ensure that the Group meets its financial targets, while minimising potential
adverse effects of cash flow shortfalls.
The Group did not have any derivative instruments at 30 June 2022.
Specific Financial Risk Exposures and Management
The main risk the Group is exposed to through its financial instruments is liquidity risk.
Credit Risk
Exposure to credit risk relating to financial assets arises from the potential non-performance by counterparties of
contract obligations that could lead to a financial loss to the Group.
Credit risk is managed through maintaining procedures ensuring, to the extent possible, that members and
counterparties to transactions are of sound credit worthiness.
Credit Risk Exposures
Cash reserves form the majority of the Group’s financial assets. At 30 June 2022, cash was deposited with a large
Australian bank in order to limit risk and ensure interest rate competitiveness.
42
FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022RHYTHM BIOSCIENCES 2022 ANNUAL REPORT Liquidity Risk
Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or otherwise
meeting its obligations related to financial liabilities. The Group manages this risk through the following mechanisms:
• preparing forward-looking cash flow analysis in relation to its operational, investing and financing activities; and
• only investing surplus cash with major financial institutions.
Market Risk
Interest Rate Risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as a result of
changes in market interest rates. Exposure to interest rate risk arises on interest earned on cash and cash equivalents and
term deposits.
The consolidated entity’s cash and cash equivalents and term deposits were $7,595,424 as at 30 June 2022 (2021:
$2,273,397). An official increase/decrease in interest rates of 100 (2021: 100) basis points would have an adverse/
favourable effect on loss before tax of $75,954 (2021: $22,734) per annum. The percentage change is based on the
expected volatility of interest rates using market data and analysts’ forecasts.
Price Risk
Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as a result of changes in
market prices. The Group is not exposed to price risk.
Currency Risk
Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in
foreign exchange rates. The Group’s exposure to currency risk is minimal at present as the majority of transactions are in
Australian dollars.
Note 19: Segment Reporting
In accordance with Australian Accounting Standard AASB 8 Operating Segments, the Company has determined that
it has one reporting segment, consistent with the manner in which the business is managed. This is the manner in which
the chief operating decision maker receives information for the purpose of resource allocation and assessment of
performance. The Group operates predominantly in one business and geographical segment being the research and
development of biosciences in Victoria, Australia.
Note 20: Key Management Personnel Compensation
The Key Management Personnel compensation included in employee expenses are as follows:
Share-based
payments ($)
Short-term
benefits ($)
Post-employment
benefit ($)
Other Long-term
benefits ($)
Total ($)
2022
Total compensation
1,831,650
814,178
62,150
11,408
2,719,386
2021
Total compensation
432,319
750,236
52,629
3,605
1,238,789
Further details on the above remuneration is disclosed in the Remuneration Report in the Directors’ report.
43
DIRECTORS’ REPORT
Note 21: Auditor Remuneration
Remuneration of the Auditor of the Group for:
2022 ($)
2021 ($)
Auditing or reviewing the financial report
53,175
41,500
Other services:
- Taxation advice
9,400
62,575
7,830
49,330
Note 22: Events Subsequent to Reporting Date
Subsequent to balance date, as at 22 August 2022, $1.3 million had been received from the exercise of options.
There has been no other matters or circumstances which have arisen since 30 June 2022 that has significantly affected or
may significantly affect:
• the operations, in financial years subsequent to 30 June 2022, of the consolidated entity; or
• the results of those operations; or
• the state of affairs, in financial years subsequent to 30 June 2022, of the consolidated entity.
Note 23: Commitments
The Group has no capital commitments for expenditure as at 30 June 2022 (2021: $nil).
Note 24: Contingent Assets and Liabilities
The Group has no contingent assets or liabilities as at 30 June 2022 (2021: $nil).
44
FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022RHYTHM BIOSCIENCES 2022 ANNUAL REPORT The Directors declare that:
1. The financial statements and notes, as set out on pages 23 to 44 are in accordance with the Corporations Act 2001, and:
a. comply with Australian Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements; and
b. give a true and fair view of the Consolidated Entity’s financial position as at 30 June 2022 and of its performance for the year
ended on that date;
2. The attached financial statements and notes comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board as described in note 1 to the financial statements;
3. The Chief Executive Officer and Chief Finance Officer have provided the declarations as required by section 295A of the
Corporations Act 2001 to the Company;
4. In the Directors’ opinion there are reasonable grounds to believe that the entity will be able to pay its debts as and when they
become due and payable; and
5. Remuneration disclosures on pages 15 to 20 comply with section 300A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Directors pursuant to section 295(5)(a) of the
Corporations Act 2001.
Glenn Gilbert
Managing Director & CEO
Melbourne, Australia
Dated 29th day of August 2022
45
DIRECTORS’ DECLARATION Tel: +61 3 9603 1700
Fax: +61 3 9602 3870
www.bdo.com.au
Collins Square, Tower Four
Level 18, 727 Collins Street
Melbourne VIC 3008
GPO Box 5099 Melbourne VIC 3001
Australia
INDEPENDENT AUDITOR'S REPORT
To the members of Rhythm Biosciences Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Rhythm Biosciences 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 report, 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)
(ii)
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 ended on that date; and
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 Corporations
Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (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 confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors as at the
time of this auditor’s report.
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 period. 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.
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO
Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of
BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member
firms. Liability limited by a scheme approved under Professional Standards Legislation.
46
INDEPENDENT AUDITOR’S REPORTRHYTHM BIOSCIENCES 2022 ANNUAL REPORT
INDEPENDENT AUDITOR’S REPORT
Carrying Value and Useful Life of Intangible Asset
Key audit matter
How the matter was addressed in our audit
Note 9 to the financial report discloses the
individual intangible asset and Note 1 to the
financial report discloses the policy used by the
Group for its recognition, measurement, and
assessment for indicators of impairment.
This is a key audit matter due to the materiality
of the recorded asset, and the degree of
estimation required to be made by the Group,
regarding its amortisation period and impairment
assessment.
Our procedures included, but were not limited to:
•
•
•
•
Evaluating whether management’s estimate of the
amortisation period and amortisation method had changed
in the period.
Recalculating the amortisation charge for the period.
Evaluating management’s assessment of indications of
impairment at the reporting date.
Checking the completeness and appropriateness of the
disclosures included in the financial report.
Going Concern
Key audit matter
How the matter was addressed in our audit
Note 1 to the financial report outlines the basis
of preparation of financial statements on a going
concern basis, which contemplates continuity of
normal business activities and the realisation of
assets and the settlement of liabilities in the
normal course of business.
As the group generates no operating revenue, it
is reliant on funding from other sources such as
capital raisings and receipt of research &
development incentives; therefore, there is
significant judgement involved in determining
whether the going concern basis adopted is
appropriate. As this is critical to the
understanding of the financial statements, this
matter was considered a key audit matter.
Our procedures included, but were not limited to:
• Obtaining and evaluating management’s assessment of the
•
•
•
•
group’s ability to continue as a going concern.
Reviewing cash-flow forecasts and challenging
management’s assumptions around cash inflows, cash
outflows, and resulting net cash flows.
Applying sensitivities to future cash outflows to assess the
impact of forecast cash inflows not being achieved.
Vouching the receipt of funds from the exercise of options
post balance date.
Assessing the adequacy of the Group's disclosures within
the financial statements.
Research and Development (R&D) Grant Revenue Recognition
Key audit matter
How the matter was addressed in our audit
Other income includes a research and
development (“R&D”) tax refund and Note 1 to
the financial report discloses the accounting
policy used by the Group for its recognition and
measurement of its R&D tax refund revenue.
Accuracy of the calculation of R&D claimed was
considered a key audit matter due to the
materiality of the recorded amount and the
inherent subjectivity associated with the
calculation of a R&D tax refund.
Our procedures included, but were not limited to:
• Updating our understanding of the revenue recognition
policies to ensure continued compliance with applicable
Accounting Standards and consistent application from
previous financial years.
Assessing the adequacy of procedures and key internal
controls surrounding the recording of revenue.
Engaging a R&D tax specialist to evaluate the assessment
by management and management’s external expert of its
allowable R&D expenditure claimed under Australian Tax
Office rules.
Vouching a sample of R&D expenditure claimed to
underlying support documents.
Checking the completeness and appropriateness of the
disclosures included in the financial report.
•
•
•
•
47
INDEPENDENT AUDITOR’S REPORTDIRECTORS’ REPORT
Measurement of Share Based Payments
Key audit matter
How the matter was addressed in our audit
A share-based payment expense was recognised
for options that were granted in prior periods and
continued to be expensed over their vesting
period, and additional share options that were
expensed during the year relating to option
issues during the 30 June 2022 financial year to
consultants, employees, and key management
personnel.
Share-based payments are a complex accounting
area, and due to this complexity and judgements
used in determining the fair value of the share-
based payments and the probability of vesting
conditions being achieved, we consider the
Group’s calculation of the share-based payment
expense to be a key audit matter.
Refer to Note 1 and Note 17 of the financial
report for a description of the accounting policy
and significant estimates and judgements applied
to the share-based payment expense.
Our procedures included, but were not limited to:
•
•
•
•
•
•
Reviewed board minutes and ASX announcements for the
completeness of share-based payments issued during the
period.
Engaged an auditor’s valuation expert to calculate an
appropriate valuation range for the new options issued
during the period.
Reviewed all underlying agreements related to the issuance
of any new share-based payments in addition to verifying
whether there have been any modifications in the
agreements in place from prior years.
Evaluated the reasonableness of key estimates applied by
management in determining the probability percentages of
the various performance-based vesting conditions.
Ensured that the recognition of the current year’s share-
based payment expense and corresponding reserve balance
movement were materially correct based on conditions
stipulated within the underlying agreements.
Reviewed the adequacy of the related disclosures within
the financial report.
Other information
The directors are responsible for the other information. The other information comprises the
information in the Group’s annual report for the year ended 30 June 2022, but does not include the
financial report and the auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
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.
48
INDEPENDENT AUDITOR’S REPORTRHYTHM BIOSCIENCES 2022 ANNUAL REPORT
INDEPENDENT AUDITOR’S REPORT
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.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf
This description forms part of our auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included on pages 15 to 20 of the directors’ report for the
year ended 30 June 2022.
In our opinion, the Remuneration Report of Rhythm Biosciences Limited, for the year ended 30 June
2022, complies with section 300A of the Corporations Act 2001.
Responsibilities
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.
BDO Audit Pty Ltd
David Garvey
Director
Melbourne, 29 August 2022
49
INDEPENDENT AUDITOR’S REPORTDIRECTORS’ REPORT
Rhythm Biosciences Ltd is quoted on the Australian Securities Exchange (ASX) under the ticker code RHY. The following
information was extracted from the Company’s records as at 12 August 2022 and is required by the ASX Listing Rules.
Rhythm’s securities are not quoted on any other stock exchange.
Twenty Largest Holders of Ordinary Shares
Rank
Shareholder
Number of Fully Paid
Ordinary Shares
Percentage of Total
Issued Capital
1
2
3
4
5
6
7
8
9
WEBINVEST PTY LTD
NEWFOUND INVESTMENTS PTY LTD
FERNDALE SECURITIES PTY LTD
LOUMEA INVESTMENT PTY LTD
NORTHERN STAR NOMINEES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
ROJO NERO CAPITAL PTY LTD
GIOKIR PTY LTD
MR HSIEN MICHAEL SOO
10
MRS SARAH CAMERON
17,083,334
11,001,667
10,310,000
9,755,435
7,380,000
4,636,203
4,270,835
3,661,470
3,305,403
3,000,000
COMMONWEALTH SCIENTIFIC & INDUSTRIAL RESEARCH ORGANISATION
2,500,000
7.98
5.14
4.81
4.55
3.45
2.16
1.99
1.71
1.54
1.40
1.17
1.16
1.04
1.03
0.98
0.98
0.95
0.73
0.70
0.68
44.14
55.86
2,477,083
2,225,294
2,200,000
2,100,000
2,092,782
2,030,000
1,558,000
1,500,000
1,453,600
94,541,106
119,641,527
214,182,633
100.00
11
12
13
14
15
16
17
18
19
MS NATALIE LOUISE PATTERSON
E & W NOMINEE PTY LTD
GARNSWORTHY PENSION FUND PTY LTD
JAWAF ENTERPRISES PTY LTD
MR DANIEL EDDINGTON & MRS JULIE EDDINGTON
DR GAVIN JAMES SHEPHERD & MRS CATHERINE SHEPHERD
MR RICHARD STANLEY DE RAVIN
DC & PC HOLDINGS PTY LTD
20
DR PAUL MAXWELL MILLER & MRS LOUISE MONIQUE MILLER
Total
Balance of register
Grand total
50
ADDITIONAL ASX INFORMATIONRHYTHM BIOSCIENCES 2022 ANNUAL REPORT Distribution Schedule
following is a distribution schedule of the number of holders of fully paid ordinary shares in the Company, within the
bands of holding specified by the ASX Listing Rules:
Range
No. of Shareholders
No. of Ordinary Shares
Percentage of Total
Issued Capital
100,001 and Over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
237
1,272
653
1,416
913
4,491
161,901,872
42,658,278
5,129,727
3,932,782
559,974
75.59
19.92
2.40
1.84
0.26
214,182,633
100.00
138 shareholders held less than a marketable parcel of fully paid ordinary shares.
Substantial Shareholdings Register
Shareholder
Otto Buttula
Michelle Wing
Number of fully paid ordinary shares
Percentage of Total Issued Capital
28,085,001
19,182,261
13.12%
8.96%
A substantial holder is a shareholder who either alone or together with their associates has an interest in 5% or more of the
voting shares of the Company.
Options Over Ordinary Shares
Rhythm has granted unlisted options which entitles the holder to purchase one ordinary share in the Company at a
predetermined price. No voting rights attach to options. Further details of options outstanding as at 12 August 2022 are
provided below:
Share Option Type
Expiry Date
Number of Options
Number of Holders
Exercise Price $
RHYUOPT2
RHYUOPT3
RHYUOPT4
RHYUOPT5
RHYUOTP2
Range
100,001 and Over
10,001 to 100,000
Total
14.09.2023
31.07.2024
31.08.2022
31.07.2024
6,862,500
8,195,000
3,099,280
3,275,463
12
17
1,216
1,270
0.20
1.80
1.20
1.80
Number of Options
Number of Holders
Percentage of Total
Issued Options
8
4
12
6,600,000
262,500
6,862,500
96.17
3.83
100.00
51
DIRECTORS’ REPORT RHYUOTP3
Range
100,001 and Over
Total
RHYUOTP4
Range
100,001 and Over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
RHYUOTP5
Range
100,001 and Over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
Number of Options
Number of Holders
17
17
8,195,000
8,195,000
Percentage of Total
Issued Options
100.00
100.00
Number of Options
Number of Holders
Percentage of Total
Issued Options
5
50
28
151
982
1,216
886,805
1,512,945
176,974
302,595
219,961
28.61
48.82
5.71
9.76
7.10
3,099,280
100.00
Number of Options
Number of Holders
Percentage of Total
Issued Options
5
55
34
159
1,017
1,270
886,805
1,616,658
219,962
321,624
230,414
27.07
49.36
6.72
9.82
7.03
3,275,463
100.00
Escrow Arrangements
There are no shares subject to mandatory escrow arrangements.
Voting Rights
The voting rights attached to ordinary shares are set out below:
Ordinary Shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
There are no other classes of equity securities.
52
ADDITIONAL ASX INFORMATIONRHYTHM BIOSCIENCES 2022 ANNUAL REPORT CORPORATE DIRECTORY
Directors
Mr Otto Buttula
Mr Glenn Gilbert
Dr Trevor Lockett
Mr Louis (Lou) Panaccio
Mr Eduardo Vom
Dr Rachel David
Company Secretary
Ms Andrea Steele
Registered Office
Bio21 Institute
30 Flemington Road
Parkville VIC 3010
Auditor
BDO Audit Pty Ltd
Level 18
727 Collins Street
Melbourne VIC 3000
Legal Advisers
Quinert Rodda and Associates
Level 6
400 Collins Street
Melbourne VIC 3000
K & L Gates
Level 25
525 Collins Street
Melbourne VIC 3000
Share Registry
Link Market Services Limited
Level 12
250 St Georges Terrace
Perth WA 6000
Phone: +61 1300 554 474
53
DIRECTORS’ REPORT Rhythm Biosciences Limited
ACN 619 459 335
Bio21 Institute
30 Flemington Road
Parkville VIC 3010
Phone +61 3 8256 2880
rhythmbio.com
RHYZ018 08/22