2023
ANNUAL REPORT
RHYTHM BIOSCIENCES LIMITED (ASX:RHY)
ACN 619 459 335
RHYTHM’S ColoSTAT®
IS A SIMPLE BLOOD TEST THAT DETECTS THE PROTEIN
BIOMARKERS IN THE BLOOD, THAT ARE INDICATIVE
OF THE PRESENCE OF COLORECTAL CANCER.
2
CONTENTS
Key Milestones �������������������������������������������������������������������������������������4
Company Overview ���������������������������������������������������������������������������6
Market Overview �������������������������������������������������������������������������������� 7
Chairman’s Report �����������������������������������������������������������������������������8
Directors’ Report�������������������������������������������������������������������������������12
Auditor Independence Declaration ���������������������������������������� 22
Consolidated Statement of Profit or
Loss and Other Comprehensive Income ������������������������������24
Consolidated Statement of Financial Position �������������������25
Consolidated Statement of Changes in Equity ������������������26
Consolidated Statement of Cash Flows �������������������������������� 27
Notes to the Consolidated Financial Statements �������������28
Directors’ Declaration �������������������������������������������������������������������� 47
Independent Auditor’s Report ��������������������������������������������������48
Additional ASX Information ��������������������������������������������������������52
Corporate Directory �����������������������������������������������������������������������55
3
RHYTHM BIOSCIENCES
MILESTONES
2003 - 2016
CSIRO Research and Development
January 2018
Development Program Commences
May 2019
ISO Certification
December 2020
Global Manufacturer Appointed
November 2021
CE Mark Granted for ColoSTAT®
May 2023
Strategic Partnership with LINK Medical Solutions
2023
International Market Entry
2024
TGA Submission
4
Rhythm Biosciences Lists on the ASX
December 2017
Clinical Trial Program Commences
February 2019
Patents Secured in 21 Countries
2018 - 2023
Clinical Trial Complete (RHY-001)
November 2021
ColoSTAT® Authorised for Sale in New Zealand
November 2022
UKCA Mark Granted
May 2023
RHY001 Study - Submit Publication
2023
Pipeline Activities - Other Cancers
2024
FUTURE MILESTONES
5
ABOUT RHYTHM BIOSCIENCES
Rhythm Biosciences is committed to saving lives through
early detection of cancers using simple and accurate
diagnostic technology, providing physicians with accurate
and reliable diagnostic tools.
Rhythm’s ColoSTAT® kit is a simple, affordable blood test
for the early detection of colorectal cancer for global
mass-market screening.
Colorectal cancer (CRC) is curable if detected early,
and is the second leading cause of cancer death
globally.1 In 2020, there were more than 1.9 million
people diagnosed with CRC and over 930,000
lives lost to the disease. 2 Europe, Australia and New
Zealand (NZ) had the highest incidence rates. 2 By
2040, the burden of CRC is predicted to increase
to 3.2 million new cases (an increase of 63%) and
1.6 million deaths (an increase of 73%) per year. 2
2020 - 2021 National Bowel Cancer Screening
Program report, identified that 6.7 million were
invited to take the FIT test, 2.4 million people
(37.4% of eligible participants) completed the test,
and 1.2 million people (18.6% of eligible participants)
were valid screening tests. 3 One of the reasons for
the invalidity rate (50.3% of all completed tests) is
due to tests being “spoilt” in the slow postal services
before the pathology lab can analyse them.5
Even though many countries around the world have
implemented screening programs aimed at early
detection (normally between 50 - 74 years of age),
low participation and the increasing incidence rates
are a significant challenge, particularly with younger
people. 3 Australia and NZ data identifies that more
than 11% of the people diagnosed with CRC, are
below the age of 50. 3,4 Not only does this pose a
public health challenge, it causes premature death
and increased healthcare costs.1 In addition, more
than 50% of people diagnosed with CRC in the
United Kingdom (UK) and Australia are outside the
current screening programs. 3,5,6
Faecal immunochemical test (FIT) is the prevalent
CRC screening method globally. Unfortunately,
the utilisation of the FIT test is low, due to
inconvenience, cultural & religious beliefs, the “Yuk”
factor, and / or physical inability to perform the test
correctly.
One of the challenges with the current screening
method is the rate of true valid results. The
Australian Institute of Health and Welfare (AIHW)
In an observational study, among 460 people in
the US who were offered CRC testing, 93.5% of the
participants opted for a blood-based test over FIT.7
Convenience and ease of a blood draw were main
reasons for their preference.6
Rhythm’s ColoSTAT® kit, is a simple, affordable,
blood-based test, developed for the early detection
of CRC. Since listing on the ASX, the Company has
run a multi-year research and development program
that has successfully delivered technical validation
of the 5-biomarker immunoassay across Europe,
New Zealand, and the UK.
ColoSTAT® provides an alternative for those
unwilling or unable to participate in current
screening programs and may increase the
participation rate in CRC testing. With the
increased incidence of CRC in younger people,
ColoSTAT® could be part of a routine health
examination, that may improve early diagnosis and
survival rates.
References: 1. 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.
2. https://www.who.int/news-room/fact-sheets/detail/colorectal-cancer. 3. AIHW 2023 Report https://www.aihw.gov.au/reports/cancer-screening/nbcsp-monitoring-2022/summary.
4. https://bowelcancernz.org.nz/about-bowel-cancer/what-is-bowel-cancer/symptoms-statistics. 5. Bowel cancer tests go missing in the mail under Telstra Health program for Australians
https://www.adelaidenow.com.au/lifestyle/health/bowel-cancer-tests-go-missing-in-the-mail-under-telstra-health-program-for-australians/news-story/f6b8e7ac45637d4262df376bfe0cf758.
6. https://www.cancerresearchuk.org/health-professional/cancer-statistics/statistics-by-cancer-type/bowel-cancer/incidence. 7. Ioannou S, Sutherland K, Sussman DA, Deshpande AR. Increasing
uptake of colon cancer screening in a medically underserved population with the addition of blood-based testing. BMC Cancer. 2021 Aug 28;21(1):966. 8. Hughes et al. J Community Health. Author
manuscript; available in PMC 2016 October 25. 9.https://www.canceraustralia.gov.au/cancer-types/bowel-cancer/awareness.
6
COLORECTAL CANCER
5-YEAR SURVIVAL RATES FOR THOSE DIAGNOSED AT AN EARLY STAGE OF CRC ARE OVER 90%.8
STAGE I
STAGE II
STAGE III
STAGE IV
EARLY DETECTION IS KEY TO SURVIVAL (STAGES I/II)
>90%
MODIFIABLE RISK FACTORS ASSOCIATED WITH CRC9
A diet low in
fibre
High red meat
consumption, especially
processed meats
Physical
inactivity and
obesity
Consumption
of alcohol and
tobacco
Low blood
level of
Vitamin D
NON-MODIFIABLE RISK FACTORS ASSOCIATED WITH CRC9
Personal history
of certain types
of cancers
(ovarian/uterine)
IBD, such as
Crohn's and
Ulcerative Colitis
Family history
of CRC
Type 2
diabetes
Aged ≥ 50
A previous
diagnosis of
polyps/CRC
7
A MESSAGE FROM
THE EXECUTIVE
CHAIRMAN
OTTO BUTTULA
Dear Fellow Shareholders,
On behalf of the Board, I am pleased to present
Rhythm Biosciences’ 2023 Annual Report. The last
financial year was not without disappointment, with
a significant decrease in our share price, following
our March 2023 decision to withdraw the current
ColoSTAT® application with the Therapeutic Goods
Administration (TGA). Despite this occurrence,
we remain committed to resubmitting to the
TGA in 2024. In the interim, we are focussing on
commercialising ColoSTAT® in geographies where
we have regulatory approvals already in place.
Notwithstanding our share price decline, I
personally believe that the Company remains
in a better position today than what it was at this
time last year. We remain confident that over the
next financial year, your Company will join other
successful Australian biotechnology enterprises
that have transitioned to commercial, revenue-
generating enterprises.
We remain driven by the beneficial impact that
the ColoSTAT® blood test will be an alternative to
cancer diagnostics in a real-world setting, given the
challenges with the current screening methods.
Importantly, our mission does not stop there, over
the past 12 months we have advanced our platform
technologies into three other cancer targets, breast
(Agilex), lung (Baker Medical Institute) and gastric
(Nexomics, part of the Peter MacCallum Cancer
Centre). Once, we start building meaningful
commercial revenues with ColoSTAT®, we will look
to further expand our pipeline.
In line with our ambition to commercialise the
business, our executive leadership team and
Board has been refreshed with new appointments
throughout the year, as part of the Company’s
ongoing succession planning, and to ensure we
have the right skills and experience for future
growth. At Board level, I am pleased to have
welcomed Ms Sue MacLeman, who has assumed
the position of Non-Executive, Deputy Chair,
an important independent position given my
own ongoing role as Executive Chair. Sue brings
a wealth of global bio-sector experience to
complement the diverse skills and experience
of our Board. I also acknowledge the valuable
contribution of Eduardo Vom, a founding influence
and shareholder of Rhythm, who retired from the
Board in November 2022.
8
RHYTHM BIOSCIENCES 2023 ANNUAL REPORTEXECUTIVE CHAIRMAN’S REPORT Summary of Operations
The ColoSTAT® technology has renewed patents
across 21 countries, and the Company continues to
investigate further patents in the interest of market
potential. This secures Rhythm’s market entry
strategy.
The Company continued to produce the
ColoSTAT® kit across our partnered Contract
Manufacturing Organisations (CMOs). The
production involved generating reproducible and
scalable outcomes across the validation batches.
The ColoSTAT® prospective, cross-sectional,
multi-centre clinical study (RHY001), evaluating the
clinical performance of ColoSTAT® for the detection
of 5 biomarkers associated with colorectal cancer,
was presented at a poster presentation at ASCO
(American Society of Clinical Oncology), in
Chicago. The ColoSTAT® test demonstrated a
sensitivity of 81% and specificity of 91%, compared
to the gold standard, colonoscopy.1
TGA Withdrawal
The withdrawal of the ColoSTAT® TGA application
was disappointing. However, the Company is
addressing the feedback provided by Australian
Therapeutic Goods Administration (TGA)
assessment and is preparing to submit a revised
application incorporating additional requirements
that will also satisfy the changes for the European In
Vitro Diagnostic Medical Device (IVDR).
Recent publications by the Australian Institute of
Health and Welfare (AIHW)2 identified over the
past 2 years, the current screening participation
rate (50 - 74 years) in Australia was at 40.9% (2.4
million people). Alarmingly, of the 2.4 million people
that sent in their FIT for analysis, over 50% of the
tests were invalid. Of the 15,473 people diagnosed
with bowel cancer in Australia, more than 50% were
outside the screening population (~12% were under
the aged of 50, and ~39% were above the screening
age of 74.)2
Although market entry in Australia is delayed,
Rhythm continues to identify opportunities to
position ColoSTAT® in other regions where it is
approved through increased market awareness and
collaboration with local participants.
References: 1. He et al DOI: 10.1200/JCO.2023.41.16_suppl.3529. 2. AIHW Publication - https://www.aihw.gov.au/reports/cancer-screening/nbcsp-monitoring-2023/summary.
9
Technology Platform Expansion
UKCA Mark
Rhythm has partnered with Nexomics, at the
Peter MacCallum Cancer Centre, to investigate its
leading markers in gastric cancer. The Company
is also collaborating with Agilex Biolabs for breast
cancer and the Baker Institute for lung cancer.
The ColoSTAT® colorectal cancer detection product
was granted UKCA (UK Conformity Assessment)
mark, fully conforming with the European directives
for IVD Medical Devices (98/79/EC) and the UKCA
requirements.
Manufacturing
Rhythm continued ongoing confirmatory testing of
its commercially manufactured ColoSTAT® test-kit
with its global France-based manufacturer, Biotem.
The Company has also run feasibility testing at a
second facility in the USA, which has led to a pilot
batch confirming consistent and reproducible
results.
Quality and Regulatory
ISO Certification
The UKCA mark is the new UK product marking
(post Brexit) that is required for certain products
being placed on the market in Great Britain
(England, Wales, and Scotland). It replaces most
products that previously required only a CE mark.
UKCA marking represents that the manufacturer's
product meets the essential requirements of the
UK MDR 2002 and is a legal requirement to place
a device on the market in Great Britain / United
Kingdom.
UK Subsidiary
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.
The Company established a 100% fully owned UK
subsidiary, Rhythm Biosciences UK Limited.
Rhythm Biosciences UK Limited, was established
in June 2023 to assist in the importation and
distribution channels of ColoSTAT® into the UK and
other parts of Europe.
New Zealand Regulatory Approval
Commercialisation
Rhythm successfully registered ColoSTAT® with the
New Zealand national database of medical devices
and expanded its international regulatory footprint.
MedSafe is the New Zealand Medicine and Medical
Devices Safety Authority, which is a business
unit of the Ministry of Health and is the authority
responsible for the regulation of therapeutic
products in New Zealand. As a manufacturer of
ColoSTAT®, Rhythm has registered with Medsafe
and listed ColoSTAT® to its Web Assisted
Notification of Devices (WAND) database.
Commercially, Rhythm has signed a strategic
partnership with LINK Medical Solution Ltd., for
the market entry into the UK (England, Wales,
Scotland). The Company remains in dialogue with
several potential partners both domestically and
globally. 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.
Currently, in the UK more than 61% of all
diagnosed bowel cancer cases are outside the
screening population (60 - 74 years of age). This
gives ColoSTAT®, a simple blood-based test, the
opportunity to address the large unmet need
outside of the UK screening population.
10
RHYTHM BIOSCIENCES 2023 ANNUAL REPORTEXECUTIVE CHAIRMAN’S REPORT The jurisdictions in focus for Rhythm over the next 12 to 15 months include:
Market
Population
Age -
Screening
Population
Screening
Method
Screening
Participation
Rate
Unscreened
Population/
Opportunity
Screening
Population
Based on Clinical
Trial RHY001
(40 to <85 yrs)
Screening
Opportunity
Based on Clinical
Trial RHY001
(40 to <85 yrs)
Incidence
of CRC
Europe
EU-27 ¥
455�1M
133�5M
(50 - 74 yrs)
FIT
Colonoscopy¶
38%
143.0M
192�9M
142.2M
341,419
UK
England, Scotland,
Wales and
Northern Ireland
67�6M
10�6M
(60 - 74 yrs)
FIT
67%
3.5M
28�1M
21.0M
52,128
USA
331�9M
161�5M
(45 - 75+ yrs)
FIT
Colonoscopy¶
Cologuard
Japan
123�3M*
South Africa
59�4M
Australia***
25�7M
New Zealand
5�1M
Total
78�6M
( >40 yrs)*
9�3M
(50 - 74 yrs)
7�1M
(50 - 74 yrs)
1�1M
(60 - 74 yrs)
301.7M
FIT
FIT
FIT
FIT
61%
62.9M
181�3M
82.8M
153,020
20%
48.2M
71�3M*
55.6M
148,505
NA
NA
17�6M
17.6M
8,671**
43%
4.0M
11�7M
8.8M
15,713
57%^
0.5M
2�3M
1.7M
> 3,000
216.8M
505.2M
329.6M
¥https://ec.europa.eu/eurostat/databrowser/view/TPS00001/default/table?lang=en
¶Every 10 years
*https://www.populationpyramid.net/japan/2023/
**https://journals.lww.com/ajg/Fulltext/2021/10001/S342_Evaluating_Trends_of_Colorectal_Cancer.342.aspx
***https://www.aihw.gov.au/reports/older-people/older-australians/contents/demographic-profile
^Based on pilot project, recent data not available - https://www.health.govt.nz/our-work/preventative-health-wellness/screening/bowel-screening-pilot/bowel-screening-pilot-results
FIT; faecal immunochemical test, NA; not available
Corporate
During the year, the Company continued its prudent approach to capitalising the business appropriately. Further funds
of $3.7M were raised via the exercise of options associated with the previous year’s Non-Renounceable Rights Issue
(NRRI). In line with a goal to continue a capital-light model in our executive structure, Otto Buttula continues in the
position of Executive Chairman, post the resignation of Glenn Gilbert as CEO/MD.
On behalf of the Board, I would like to acknowledge the devotion of the entire team at Rhythm who have worked tirelessly
over the year to position the Company for commercial success over the next financial year. Our diligent and hardworking
Board members have also made a strong contribution. Equally important, has been the support from our shareholders
and business partners for which the Company is thankful. We look forward to developing the Company's global influence
over financial and calendar year 2024, as we continue to pursue our purpose of helping patients screen for cancers early,
with a simple blood-based test. 2024 is shaping up to be our most important year yet and we expect to deliver positive
news and re-build shareholder value in the near future.
Otto Buttula
Executive Chairman
11
The Directors of Rhythm Biosciences Limited (Rhythm, the Group, or the Consolidated Entity) present their report for
the financial year ended 30 June 2023.
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 (resigned 21 April 2023)
Dr Trevor Lockett
Mr Louis (Lou) Panaccio
Mr Eduardo Vom (resigned 29 November 2022)
Ms Susan MacLeman (appointed 31 January 2023)
Dr Rachel David
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 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 entity that it controlled during the financial year.
The registered office and operations of the Company are located at Bio21 Institute, 30 Flemington Road, Parkville
Victoria, Australia, 3010.
Results of Operations
The Group incurred a loss after income tax of $8,217,557 for the year ended 30 June 2023 (2022: $8,793,521).
The Executive Chairman’s Report contains 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.
12
RHYTHM BIOSCIENCES 2023 ANNUAL REPORTDIRECTORS' REPORT Internal Risks:
Most risks associated with personnel are limited due to the use of external consultants and outsourced agencies.
Our people risks, were inherently our largest obstacle in the 2023 year which we have overcome with the training and
diversification of knowledge. Cash Flow, is identified as a potential risk, despite minimising the exposure with the R&D
grant and preparation of commercialisation. The management and Board have identified that Cash Flow is not expected
to be an impediment to the commercialisation and growth of the company.
External Risks:
The major external risks are supply chain of raw materials and global demand. With the current suppliers of raw materials and
the proprietary recipe / algorithm, the raw material supply is adequate material for production for current and future target
markets. It is anticipated that Rhythm will expand its CMO (Contract Manufacturers) globally as demand expands.
Dividends
No dividends were paid or declared since the start of the financial year. No recommendation for payment has been made.
Directors and Company Secretaries
Names, qualifications and experience
Name
Title
Experience and expertise
Other current directorships
Interests in shares
Interests in options
Name
Title
Experience and expertise
Otto Buttula
Executive Chairman
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.
HITIQ Limited
OncoSil Medical Limited
24,111,396 fully paid ordinary shares
1,342,500 Options
Dr Trevor Lockett
Technical Director
A molecular biologist by trade, Trevor 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, Trevor 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, Trevor oversaw the research efforts leading to the technology that is to
become ColoSTAT®.
Interests in shares
Interests in options
1,291,000 fully paid ordinary shares
252,000 Options
13
Name
Title
Experience and expertise
Lou Panaccio
Non-Executive Director
A chartered accountant with extensive management experience in business
and healthcare services. Lou is currently on the boards of ASX listed companies
Sonic Healthcare Limited and Avita Therapeutics, Inc. Lou is also on the board
of Unison Housing Ltd. Lou has more than twenty years’ experience as a board
member of both public and private, for profit and not for profit companies.
Previously, Lou was the CEO of Melbourne Pathology and Monash IVF, and
executive Chairman of Health Networks Australia.
Other current directorships
Sonic Healthcare Limited
Avita Medical, Inc.
Adherium Limited
Interests in shares
Interests in options
830,000 fully paid ordinary shares
85,000 Options
Name
Title
Experience and expertise
Susan MacLeman (appointed 31 January 2023)
Non-Executive Independent Deputy Chair
Susan has more than 30 years’ experience as a pharmaceutical, biotechnology
and medical technology executive having held senior roles in corporate, medical,
commercial and business development at Schering-Plough Corporation (now
Merck), Amgen, Bristol-Myers Squibb and Mesoblast. Susan has also served as
CEO and a Board member of several ASX, AIM and NASDAQ listed companies
in the Healthtech sector. Susan is a Non-Executive Director of Planet Innovation
Holdings Ltd, ATSE and OMICO (Australian Genomic Cancer Medicines Ltd).
Susan is also a member of the NSW Innovation and Productivity Council, Fellow
of the Australian Academy of Technology and Engineering (ATSE) and Fellow/
Graduate of Australian Institute of Company Directors (AICD). Susan is also
appointed to several academic and government advisory boards. Susan brings a
unique set of experiences in technology commercialisation, strategic planning,
capital markets and fund raising, M&A and alliance management. Her broad
commercial and technical experience is underpinned by a Bachelor of Pharmacy
from the University of Queensland, a Master of Laws from Deakin University and
a Master of Marketing from Melbourne Business School.
Other current directorships
Oventus Medical Limited
Interests in shares
Interests in options
Nil
Nil
Name
Title
Experience and expertise
Dr Rachel David
Non-Executive Director
Rachel 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. Rachel is currently the Chief Executive Officer (CEO) of
Private Healthcare Australia (PHA). Rachel’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
150,000 Options
14
RHYTHM BIOSCIENCES 2023 ANNUAL REPORTDIRECTORS' REPORT ‘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 Secretaries
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.
Paul Smith (appointed 17 October 2022) was a former Chief Financial Officer for OPED Australia and has more than 25
years of Australian and international experience delivering financial and operational transformations for both private
and public companies. With experience in the Australian, Chinese and US markets, Paul has led various financial,
manufacturing, and operational projects to improve financial positions through systems, processes and procedures.
Mr Smith has a Bachelor of Business and post grad in Accounting from Monash University. He has experience in the
healthcare industry, including manufacturing and commercialisation.
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
Ms S MacLeman
Directors’ Meetings
Held
Attended
11
8
11
11
4
11
5
11
8
11
11
3
10
5
Corporate Governance
Details on the Company’s corporate governance procedures, policies and practices are at www.rhythmbio.com.
15
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 2023.
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
Ms Susan MacLeman
Non-Executive Director
1 August 2017
31 January 2023
Mr Eduardo Vom
Dr Rachel David
Mr Glenn Gilbert
Former Non-Executive Director
5 June 2020 (Resigned 29 November 2022)
Non-Executive Director
15 December 2021
Former Managing Director & CEO
1 December 2021 (previously Chief
Executive Officer from 27 November 2018)
(Resigned 21 April 2023)
Mr Paul Smith
CFO & Company Secretary
17 October 2022
Directors’ and Key Management Personnel Interests in Shares and Options
Directors’ and Key Management Personnel’s interests in the ordinary shares and options as at the date of this report are
detailed below:
Name
Mr Otto Buttula
Dr Trevor Lockett
Position
Executive Chairman
Technical Director
Mr Louis (Lou) Panaccio
Non-Executive Director
Dr Rachel David
Non-Executive Director
Ms Susan MacLeman
Non-Executive Director
Mr Paul Smith
CFO & Company Secretary
Remuneration Policy
Number of Ordinary Shares
Number of Options
24,111,396
1,291,000
830,000
-
-
-
26,232,396
1,342,500
252,000
85,000
150,000
-
2,000,000
3,829,500
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.
16
RHYTHM BIOSCIENCES 2023 ANNUAL REPORTDIRECTORS' REPORT
Short-Term Incentive Plan (STIP)
The STIP 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 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 (LTIP)
The purpose of the LTIP 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 LTIP
is implemented through the Employee Share Option Plan (ESOP).
Options
During the 2023 year, 10,950,000 (2022: 7,195,000) options were issued to management personnel and employees.
The fair value of employee share options was $5,812,500 (2022: $6,258,750). $3,003,935 was expensed in the current
financial year (2022: $2,605,676) for options issued in the current and previous years. The options were issued for nil
consideration and granted in accordance with performance guidelines established by the Board.
The following share options arrangements existed at 30 June 2023:
Number
of Options
Exercise
Price ($)
750,000
375,000
293,750
293,750
807,500
1,450,000
150,000
7,800,000
$0.20
$0.20
$0.20
$0.20
$1.80
$1.80
$1.80
$1.80
Grant Date
Vesting Period Vesting Date
Expiry Date Holder
Fair Value per Option
at Grant Date
18.11.2020
18.11.2020
14.9.2020
14.9.2020
n/a
n/a
n/a
n/a
26.7.2021
Various (i)
24.11.2021
Various (i)
29.11.2022
Various (i)
31.12.2022
Various (i)
18.11.2020
14.9.2023
Dr T Lockett
30.11.2021
14.9.2023
Dr T Lockett
14.9.2020
14.9.2023
Employees
30.11.2021
14.9.2023
Employees
Various (i)
Various (i)
Various (i)
Various (i)
31.7.2024
Employees
31.7.2024
Directors
31.12.2025
Dr R David
31.12.2025
Employees
$0.3545
$0.3545
$0.0799
$0.0799
$0.45
$1.02
$0.59
$0.53
11,920,000
Total ESOP Options
(i) There are various 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.
17
Movement in the number of share options on issue
2023
2023
2022
2022
Number
of Options
Weighted Average
Exercise Price (cents)
Number
of Options
Weighted Average
Exercise Price (cents)
14,232,500
(9,687,500)
10,950,000
(3,575,000)
11,920,000
4,891,250
97.65
180.00
180.00
20.00
156.78
123.30
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
Opening balance
Voluntarily Forfeited / Lapsed
Granted
Exercised
Outstanding at year-end
Exercisable at year-end
Shares
No shares were issued to employees during the current or prior year.
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.
Effective 1 July 2022, Non-executive Directors’ fees were set at $52,500 per annum inclusive of superannuation. 150,000
Options exercisable at $1.80 on or before 31 December 2025 were issued to Dr R David, Non-Executive Director under
the ESOP during the 2023 financial year. The issue of these options was approved by shareholders at the Annual General
Meeting of the Company on 29 November 2022. 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 a revised executive services agreement effective 1 July 2022 for Mr Otto Buttula to receive an
annual salary of $165,000 (exclusive of 10.5% superannuation).
Key Terms of the CEO’s employment contract
The Company entered into a revised executive services agreement effective 1 July 2022 for Mr Glenn Gilbert as Chief
Executive Officer (CEO) to receive an annual salary of $350,000 (exclusive of 10.5% superannuation). The Company
also issued Mr Gilbert 3,000,000 unlisted Options exercisable at $1.80 on or before 31 December 2025. Refer to Note 17
for details on Options vesting conditions. Mr Gilbert was also entitled to receive short-term incentives dependent upon
performance, as assessed against key performance indicators. Mr Gilbert resigned effective 21 April 2023.
Key Terms of the Technical Director’s employment contract
The Company entered into a revised consulting services agreement effective 1 July 2022 for Dr Trevor Lockett to receive
an annual salary of $159,500 (inclusive of superannuation).
Key Terms of the CFO’s employment contract
The Company entered into an executive services agreement effective 17 October 2022 for Mr Paul Smith as Chief
Financial Officer (CFO) and Company Secretary to receive an annual salary of $265,000 (exclusive of 10.5%
superannuation). The Company also issued Mr Smith 2,000,000 unlisted Options exercisable at $1.80 on or before 31
December 2025. Refer to Note 17 for details on Options vesting conditions. Mr Smith is also entitled to receive short-term
incentives dependent upon performance, as assessed against key performance indicators.
18
RHYTHM BIOSCIENCES 2023 ANNUAL REPORTDIRECTORS' REPORT Details of the remuneration of Directors and Key Management Personnel for the 2023 financial year are provided below:
Short-term Benefits
Long-term Benefits
Cash
salary
and fees
($)
Termination
benefit
($)
Annual
Leave
Provision
($)
Long
Service
Leave
Provision
($)
Post-employment
Superannuation
($)
Equity-based
compensation
Shares
and Options
($)
Total
($)
%
Performance
Based
Executive Directors
O Buttula
T Lockett
G Gilbert (iv)
165,000
144,344
284,936
Non-Executive Directors
L Panaccio
E Vom (i)
R David
S MacLeman (ii)
Executives
P Smith (iii)
Total
47,511
18,854
47,511
19,796
188,234
916,186
-
-
-
-
-
-
96,688
6,179
(16,443)
-
-
-
-
-
-
-
-
-
14,480
-
-
-
-
-
96,688
20,659
(16,443)
17,325
15,156
35,370
4,989
1,980
4,989
2,079
191,510
373,835
47,878
207,378
397,500
804,230
14,363
66,863
-
20,834
48,546
101,046
-
21,875
19,765
101,653
525,334
747,813
1,225,131 2,343,874
51.2
23.1
49.4
21.5
-
48.0
-
70.2
(i) Resigned 29 November 2022.
(ii) Appointed 31 January 2023.
(iii) Appointed 17 October 2022.
(iv) Resigned 21 April 2023. During the year the amount paid for superannuation included 10.5% on a portion of annual leave entitlement taken as a cash
payment.
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 (vii)
302,500
67,950
25,479
11,408
27,500
695,476
1,130,313
Non-Executive Director
D White (v)
L Panaccio
E Vom
R David
1,355
42,111
42,111
24,765
Company Secretary
70,400
A Wing
Total
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
127,500
128,855
4,211
4,211
2,477
-
46,915
46,915
-
-
93,237
93,237
27,242
70,400
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, at the discretion of the Board.
82.7
69.0
67.5
98.9
50.3
50.3
-
-
19
Share-Based Payments
No shares were issued to employees during the current or prior year.
There were 3,575,000 (2022: 150,000) 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
Exercised
During Year
Lapsed
Upon
Resignation
Balance at
End of Year
Vested and
Exercisable
at End of Year
Unvested at
End of Year
T Lockett
1,879,000
-
(2,000)
(500,000)
-
1,377,000
1,252,000
125,000
G Gilbert
5,559,584
3,000,000
(29,792)
(1,375,000)
(7,154,792)
-
-
-
O Buttula
2,685,000
S MacLeman
-
238,818
-
-
-
(342,500)
(1,000,000)
-
-
-
-
(12,500)
(31,909)
(194,409)
-
150,000
-
-
L Panaccio
170,000
-
(10,000)
(75,000)
-
2,000,000
-
-
1,342,500
842,500
500,000
-
-
150,000
85,000
-
-
-
-
37,500
47,500
112,500
37,500
2,000,000
500,000
1,500,000
-
-
-
10,532,402
5,150,000
(396,792)
(2,981,909)
(7,349,201)
4,954,500
2,679,500
2,275,000
E Vom
R David
P Smith
Total
Shareholdings
The number of ordinary shares in the Company held during and at the end of the 2023 financial year by each Director and
Key Management Personnel of the Group, including related parties, are set out below.
Directors
O Buttula
S MacLeman
L Panaccio
E Vom
R David
T Lockett
G Gilbert
P Smith
Total
Balance at
Beginning
of Year
28,085,001
-
820,000
3,641,484
-
164,000
1,242,925
-
33,953,410
Share-based
Compensation
Acquired via
Rights Issue
Upon
Appointment/
Resignation
On-market
and Other
Transactions
Balance at
End of Year
-
-
-
-
-
-
-
-
-
1,026,395
-
10,000
-
-
-
12,500
(3,653,984)
-
2,000
29,792
-
-
-
(1,272,717)
-
(5,000,000)
24,111,396
-
-
-
-
-
-
-
-
830,000
-
-
166,000
-
-
1,080,687
(4,926,701)
(5,000,000)
25,107,396
Additional Information
The earnings of the consolidated entity are summarised below:
Loss after income tax of $8,217,557 for the year ended 30 June 2023 (2022: $8,793,521).
The factors that are considered to affect total shareholders return (‘TSR’) are summarised below:
• Share price at the end of the financial year was $0.41 (2022: $1.15).
• Basic Loss per share (cents per share) of 3.79 for the year ended 30 June 2023 (2022: 4.19).
20
RHYTHM BIOSCIENCES 2023 ANNUAL REPORTDIRECTORS' REPORT 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.
During the 2023 and 2022 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 2022 Annual General Meeting
At the 2022 Annual General Meeting the 2022 Remuneration Report was voted upon by shareholders with 1.8% 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
On 8 August 2023, the Company issued 1,125,000 shares to Dr Trevor Lockett arising from the exercise of 1,125,000
Options held at 20 cents per share. Dr Lockett paid $225,000 to the Company as consideration for the issued shares.
There has been no other matters or circumstances which have arisen since 30 June 2023 that has significantly affected or
may significantly affect:
• the operations, in financial years subsequent to 30 June 2023, of the consolidated entity; or
• the results of those operations; or
• the state of affairs, in financial years subsequent to 30 June 2023, 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.
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.
21
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 23.
Non-Audit Services
BDO Audit Pty Ltd were paid $25,280 (2022: $9,400) for non-audit services during the 2023 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.
Otto Buttula
Executive Chairman
Melbourne, Australia
Dated this 31st day of August 2023
22
RHYTHM BIOSCIENCES 2023 ANNUAL REPORTAUDITOR’S INDEPENDENCE DECLARATIONDIRECTORS' REPORT 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 2023, 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, 31 August 2023
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.
The financial statements should be read in conjunction with the accompanying notes.
23
AUDITOR’S INDEPENDENCE DECLARATION
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Notes
2023 ($)
2022 ($)
Other income
Other Income
Expenses
Employment related costs
Office and compliance costs
Research and development costs
Marketing and investor relations
Occupancy costs
Travel and meetings
Depreciation - PPE
Depreciation - ROU
Amortisation of intangibles
Loss Before Income Tax
Income tax expense
Loss After Tax
Other comprehensive income
Total Comprehensive Loss for the Year
Loss Per Share
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
3
4
10
9
5
6
6
3,324,112
2,452,371
(6,298,904)
(4,452,229)
(992,663)
(3,647,711)
(175,558)
(38,609)
(198,847)
(64,508)
(88,898)
(35,971)
(781,248)
(5,159,179)
(561,860)
(99,817)
(90,079)
(58,101)
(7,408)
(35,971)
(8,217,557)
(8,793,521)
-
-
(8,217,557)
(8,793,521)
-
-
(8,217,557)
(8,793,521)
(3.79)
(3.79)
(4.19)
(4.19)
24
The financial statements should be read in conjunction with the accompanying notes.
RHYTHM BIOSCIENCES 2023 ANNUAL REPORTFINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 Consolidated Statement of Financial Position
Notes
2023 ($)
2022 ($)
Current Assets
Cash and cash equivalents
Trade and other receivables
Other financial assets – term deposit
Prepayments
Inventories – raw materials
Total Current Assets
Non-Current Assets
Intangible assets
Right-of-use assets
Property, plant and equipment
Total Non-Current Assets
Total Assets
Current Liabilities
Trade and other payables
Provisions
Lease liabilities
Total Current Liabilities
Non-Current Liabilities
Provisions
Lease liabilities
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Issued capital
Reserves
Accumulated losses
Total Equity
15
7
8
9
10
11
12
12
13
14
4,124,181
7,550,424
65,513
45,000
117,569
2,766,682
82,415
45,000
93,199
-
7,118,945
7,771,038
390,073
81,490
104,913
576,476
426,044
170,388
70,299
666,731
7,695,421
8,437,769
1,522,843
158,139
84,606
630,937
215,909
85,534
1,765,588
932,380
55,382
-
55,382
48,733
84,606
133,339
1,820,970
1,065,719
5,874,451
7,372,050
31,550,602
27,834,579
6,141,261
3,137,326
(31,817,412)
(23,599,855)
5,874,451
7,372,050
The financial statements should be read in conjunction with the accompanying notes.
25
Consolidated Statement of Changes in Equity
Issued Capital
($)
Reserves
($)
Accumulated
Losses ($)
Total
($)
Balance at 1 July 2021
15,981,488
531,650
(14,806,334)
1,706,804
Loss attributable to members
-
Transactions with owners in their capacity as owners:
Issued capital
Capital raising costs
12,320,945
(467,854)
-
-
-
Share-based payments expense (Note 17)
-
2,605,676
(8,793,521)
(8,793,521)
-
-
-
12,320,945
(467,854)
2,605,676
Balance at 30 June 2022
27,834,579
3,137,326
(23,599,855)
7,372,050
Balance at 1 July 2022
27,834,579
3,137,326
(23,599,855)
7,372,050
Loss attributable to members
-
Transactions with owners in their capacity as owners:
Issued capital
Capital raising costs
3,740,240
(24,217)
-
-
-
Share-based payments expense (Note 17)
-
3,003,935
(8,217,557)
(8,217,557)
-
-
3,740,240
(24,217)
3,003,935
Balance at 30 June 2023
31,550,602
6,141,261
(31,817,412)
5,874,451
26
The financial statements should be read in conjunction with the accompanying notes.
RHYTHM BIOSCIENCES 2023 ANNUAL REPORTFINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 Consolidated Statement of Cash Flows
Notes
2023 ($)
2022 ($)
Cash Flow from Operating Activities
Interest received
Payments to suppliers and employees
Interest paid
Government grant
Other income
228,379
25,048
(10,275,274)
(8,948,856)
(6,557)
15,000
297
-
15,000
-
Research and development tax refund
3,080,545
2,412,406
Net Cash Used in Operating Activities
15
(6,957,610)
(6,496,402)
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
(99,122)
(27,006)
(99,122)
(27,006)
3,740,240
12,320,945
(24,217)
(467,854)
(85,534)
(7,656)
Net Cash From/(Used in) Financing Activities
3,630,489
11,845,435
Net Increase/(Decrease) in Cash Held
(3,426,243)
5,322,027
Cash and cash equivalents at beginning of financial year
7,550,424
2,228,397
Cash And Cash Equivalents at end of Financial Year
15
4,124,181
7,550,424
27
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 2023. Comparatives are disclosed for the
year ended 30 June 2023.
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
$8,217,557 (2022: $8,793,521) and had cash outflows from
operating activities of $6,957,610 (2022: $6,496,402) for
the year ended 30 June 2023. The consolidated entity is
in start-up phase and does not yet have an income stream.
These conditions indicate a material uncertainty that
may cast significant doubt about the company’s ability to
continue as a going concern. 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 2023, the consolidated entity had a cash
position of $4.2 million;
• a research and development refund, based on
expenditure incurred, is expected in the second half of
the 2023 calendar year;
• activities are focused on commercialising ColoSTAT® in
geographies where regulatory approvals are already in
place, and the consolidated entity expects to generate
revenue from this in the second half of the 2023
calendar year;
• the company has the potential to raise additional
capital from investors; and
• the consolidated entity is still in the early stages of
operations and is able to scale back activity if required
for cashflow management purposes.
Should the company be unable to continue as a going
concern it may be required to realise its assets and
discharge its liabilities other than in the normal course of
business and at amounts different to those stated in the
financial statements.
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 2023 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
28
RHYTHM BIOSCIENCES 2023 ANNUAL REPORTFINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023
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
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 2023, 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
29
the liability for at least 12 months after the reporting period.
All other liabilities are classified as non-current.
are determined after deducting rebates and discounts
received or receivable.
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.
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.
Inventories
Raw materials, work in progress and finished goods are
stated at the lower of cost and net realisable value on
a ‘weighted average’ basis. Cost comprises of direct
materials and delivery costs, direct labour, import
duties and other taxes. Costs of purchased inventory
Stock in transit is stated at the lower of cost and net
realisable value. Cost comprises of purchase and delivery
costs, net of rebates and discounts received or receivable.
Net realisable value is the estimated selling price in the
ordinary course of business less the estimated costs of
completion and the estimated costs necessary to make
the sale.
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
30
RHYTHM BIOSCIENCES 2023 ANNUAL REPORTFINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 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.
The depreciation rates for each class of asset are:
Class of
Non-Current Asset
Depreciation
Rate
Estimated
Useful Lives
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 & 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
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.
Office Equipment
Computer Equipment
Laboratory Equipment
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.
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.
Depreciation
Lease liabilities
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.
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,
31
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.
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.
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.
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.
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 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 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.
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
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.
32
RHYTHM BIOSCIENCES 2023 ANNUAL REPORTFINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 Issued Capital
Goods and Services Tax (‘GST’) and Other Similar Taxes
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% (2022: 4.99%).
Impairment
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.
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.
Critical Accounting Estimates and Judgments
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. The probability of meeting any vesting
conditions is also required to be estimated. 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
33
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.
Provision for Impairment of Inventories
The provision for impairment of inventories assessment
requires a degree of estimation and judgement. The
level of the provision is assessed by taking into account
expected future sales, the ageing of inventories and other
factors that affect inventory obsolescence.
Key Judgement
Recognition of inventory raw materials
The date of 3 November 2022 represents the time Rhythm
commenced expenditure on acquiring ColoSTAT®
inventory raw materials in preparation for commercial
sales. Up until this date, costs incurred on raw materials for
ColoSTAT® were expensed as research and development
activities. Some items of previously expensed raw
materials remain available for future commercial activities.
Key milestones to a decision on commercialisation of
ColoSTAT® and recognition of raw materials inventory
included:
• On 6 January 2022, Rhythm announced CE Mark
registration in the United Kingdom, providing
regulatory approval which allows ColoSTAT® to be sold
in the respective UK regions. Further development of
the product then continued to occur; and
• On 3 November 2022, Rhythm announced the
achievement of Medsafe approval in New Zealand
which allowed a wider pathway to progressing pre-sales
activities and partnership discussions.
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. The key Standard likely to have
an impact Is set .
AASB 2021-2 (issued March 2021) Amendments
to Australian Accounting Standards – Disclosure of
Accounting Policies and Definition of Accounting
Estimates (applicable from 1 July 2023)
Introduces a definition of ‘accounting estimate’, i.e.
monetary amounts in financial statements that are subject
to estimation uncertainty, such as estimating expected
credit losses for receivables, or estimating the fair value
of an item recognised in the financial statements at
fair value. Accounting estimates are developed using
measurement techniques and inputs. Measurement
techniques comprise estimation techniques (such as
used to determine expected credit losses or value in use)
and valuation techniques (such as the income approach
to determine fair value). The amendments clarify that a
change in an estimate occurs when there is either a change
in a measurement technique or a change in an input.
34
RHYTHM BIOSCIENCES 2023 ANNUAL REPORTFINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 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 aside from as stated in Note 23.
Commitments and Contingent Liabilities
At 30 June 2023, the Parent Company had no capital commitments and no
contingent liabilities (2022: 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.
Investments in subsidiaries are accounted for at cost, less any impairment,
in the parent entity.
Note 3: Other Income
Interest Income
Government Grant Income
2023 ($)
2022 ($)
4,052,048
2,346,158
6,398,206
468,373
55,382
523,755
7,498,630
664,103
8,162,733
571,807
218,873
790,680
31,550,602
27,834,579
6,141,261
3,137,326
(31,817,412)
(23,599,855)
5,874,451
2023 ($)
(8,217,557)
7,372,050
2022 ($)
(8,793,521)
(8,217,557)
(8,793,521)
2023 ($)
228,270
15,000
2022 ($)
24,965
15,000
Research and Development Tax Refund
3,080,545
2,412,406
Other sundry income
Total
297
-
3,324,112
2,452,371
35
Note 4: Employment Related Costs
Loss from continuing activities before income tax after charging
the following: items:
Staff salaries and Director fees
Superannuation
Share-based payments expense (Refer to Note 17 for options and
shares issued)
Other employment related expenses
2023 ($)
2022 ($)
2,739,970
288,258
3,003,935
266,741
2,099,205
171,504
2,155,676
25,844
Total
6,298,904
4,452,229
Note 5: Income Tax Relating to Continuing Activities
Prima facie income tax benefit before income tax at 25% (2022: 25%)
Add/(subtract) tax effect:
- Research and development claim
- Share based payments expense
- Other non-deductible expenditure
2023 ($)
2,054,389
770,136
(750,984)
(11,500)
2022 ($)
2,198,380
603,102
(651,419)
(9,900)
- Tax losses and temporary differences not brought to account
(2,062,041)
(2,140,163)
Income tax expense
-
-
Total tax losses and temporary differences not brought to account $4,259,230 (2022: $4,009,997).
Note 6: Loss Per Share
The following reflects the income and share data used in the
calculations of basic and diluted loss per share:
2023 ($)
2022 ($)
Loss used in calculating basic and diluted earnings per share
(8,217,557)
(8,793,521)
Weighted average number of ordinary shares used in calculating
basic loss per share
Basic and diluted loss per share (cents)
Calculation of diluted loss per share
Potential ordinary shares are considered to be antidilutive, therefore
diluted loss per share is equivalent to the basic loss per share.
2023
No. of Shares
2022
No. of Shares
216,893,990
209,946,293
(3.79)
(4.19)
36
RHYTHM BIOSCIENCES 2023 ANNUAL REPORTFINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 Note 7: Trade and Other Receivables
GST receivable
Other receivables
Note 8: Inventories
Raw materials – at cost
Note 9: Intangible Assets
Intellectual Property
Licences at cost (i)
Licences accumulated amortisation (i)
Movement in Carrying Amounts:
Balance at the beginning of the year
Amortisation (i)
Balance at the end of the year
2023 ($)
2022 ($)
65,513
–
65,513
2023 ($)
2,766,682
2,766,682
81,395
1,020
82,415
2022 ($)
–
–
2023 ($)
2022 ($)
600,000
(209,927)
390,073
600,000
(173,956)
426,044
2023 ($)
2022 ($)
426,044
(35,971)
390,073
462,015
(35,971)
426,044
(i) A licence was granted by the Commonwealth Scientific and Industrial Research Organisation (“CSIRO”) on 23 August 2017 and is being amortised over a
period of 17 years based on contract terms. This has been assessed as the expected useful life of the intangible asset.
37
Note 10: Property, Plant and Equipment
Computers – at cost
Accumulated depreciation
Office equipment – at cost
Accumulated depreciation
Laboratory equipment - at cost
Accumulated depreciation
Total
Movement in Carrying Amounts 2023:
Balance at the beginning of the year
Additions
Depreciation
Balance at the end of the year
Movement in Carrying Amounts 2022:
Balance at the beginning of the year
Additions
Depreciation
2023 ($)
90,020
(60,399)
29,621
36,063
(6,266)
29,797
248,262
(202,767)
45,495
104,913
Computer
Equipment ($)
Office
Equipment ($)
Laboratory
Equipment ($)
2022 ($)
61,047
(44,922)
16,125
12,245
(1,711)
10,534
201,931
(158,291)
43,640
70,299
Total ($)
70,299
99,122
16,125
28,973
(15,477)
29,621
10,534
23,818
(4,555)
29,797
43,640
46,331
(44,476)
(64,508)
45,495
104,913
Computer
Equipment ($)
Office
Equipment ($)
Laboratory
Equipment ($)
Total ($)
25,130
2,721
(11,726)
595
88,075
113,800
10,258
1,621
14,600
(319)
(46,056)
(58,101)
Balance at the end of the year
16,125
10,534
43,640
70,299
Note 11: Trade and Other Payables
Trade creditors
Accruals
Balance at the end of the year
38
2023 ($)
1,333,906
188,937
1,522,843
2022 ($)
278,314
352,623
630,937
RHYTHM BIOSCIENCES 2023 ANNUAL REPORTFINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 Note 12: Provisions
Current
Provision for Annual Leave
Non-Current
Provision for Long Service Leave
Note 13: Issued Capital
Ordinary shares fully paid
2023 ($)
2022 ($)
158,139
215,909
55,382
213,521
48,733
264,642
2023 (No.)
2022 (No.)
2023 ($)
2022 ($)
Balance at the beginning of the year
214,082,145
202,170,811
27,834,579
15,981,488
Rights issue and placement at 85 cents per share
Placement at $1.40 per share
Options exercised
Capital raising costs
-
-
6,554,270
4,666,179
-
-
5,571,130
6,532,651
5,710,444
690,885
3,740,240
217,164
-
-
(24,217)
(467,854)
Balance at the end of the year
219,792,589
214,082,145
31,550,602
27,834,579
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 2022.
39
Note 14: Reserves
Share Based Payments Reserve
Balance at the beginning of the year
Employee share-based payments expense
Consultants share-based payments expense
Balance at the End of the Year
Notes
2023 ($)
2022 ($)
17
17
3,137,326
531,650
3,003,935
2,155,676
–
450,000
6,141,261
3,137,326
Share based payments reserve is used to record the value of equity benefits provided to Directors, employees and
consultants as part of their remuneration.
.Note 15: Cash Flow Information
a. Cash at the end of the financial year as shown in the cash flow
statement is reconciled to the related items in the balance sheet
as follows:
Cash at bank
b. Reconciliation of cash flow from operating activities with loss from
continuing activities after income tax benefit
Notes
2023 ($)
2022 ($)
4,124,181
7,550,424
4,124,181
7,550,424
Loss from continuing activities after significant items and income tax
(8,217,557)
(8,793,521)
Non-Cash Items
Depreciation and amortisation
189,377
101,480
Expense recognised in respect of equity-settled share-based payments
3,003,935
2,605,676
Changes In Assets and Liabilities
Decrease/(Increase) in trade and other receivables
(Increase) in prepayments
(Increase) in inventories
(Decrease)/Increase in trade and other payables
Increase in provision for employee entitlements
16,902
70,997
(24,370)
(36,620)
(2,766,682)
-
891,906
(552,323)
(51,121)
107,909
Net Cash Used In Operating Activities
(6,957,610)
(6,496,402)
40
RHYTHM BIOSCIENCES 2023 ANNUAL REPORTFINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 Note 16: Related Party Transactions
Rhythm Biosciences Limited is the parent entity. Refer to Note 3 for details on the subsidiary.
The names of each person holding the position of director of Rhythm Biosciences Limited during the year were Mr Otto
Buttula, Mr Glenn Gilbert (resigned 1 April 2023), Dr Trevor Lockett, Mr Lou Panaccio, Mr Eduardo Vom (resigned 29
November 2022) and Dr Rachel David and Ms Susan MacLeman (appointed 31 January 2023). Company secretaries
were Ms Andrea Steele and Mr Paul Smith (appointed 17 October 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. Mr Wing is a former company secretary who resigned
on 25 February 2022.
During the 2023 and 2022 financial years there were no other transactions with related parties other than remuneration
as disclosed in the Remuneration Report.
Note 17: Share-Based Payments
No shares were issued to employees during the current or prior year.
During the 2023 financial year the Company granted 10,950,000 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 first revenue in 2 countries by December 2023;
• 25% upon the Company achieving first revenue from 2 other countries by December 2024; and
• 25% upon remaining employed on 31 December 2025.
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 Panaccio and employees:
• 25% upon remaining employed on 21 July 2024.
In respect to Dr Lockett:
• 25% upon remaining employed on 21 July 2024.
Vesting conditions related to these options not achieved and lapsed are as set out below:
In respect to Mr Buttula, Mr Panaccio and employees:
• 25% upon the Company achieving first revenue by December 2022; and
• 25% upon the Company achieving first revenue from 2 other countries by June 2023.
In respect to Dr Lockett:
• 25% upon the validation of 1 alternate cancer target by 30 June 2022; and
• 25% upon the Company achieving first revenue from 2 other countries by June 2023.
In respect to Mr White:
• 25% upon CLIA lab selection and LDT in the USA by 30 June 2022;
• 7.5% on break-through designation from USFDA 30 June 2022;
• 5% upon CRO appointment for the USFDA being operational;
• 7.5% on break-through designation from USFDA 30 September 2022; and
• 30% on first revenue in USA by December 2022.
41
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 achieved were 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.
An expense of $3,003,935 (2022: $2,605,676) 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
Granted
Lapsed
Exercised
Balance at
End of the Year
Vested
(1,662,500)
(3,575,000)
587,500
587,500
14.9.2020
14.9.2023
$0.20
5,825,000
18.11.2020
14.9.2023
$0.20
1,500,000
26.7.2021
31.7.2024
$1.80
1,895,000
26.7.2021
31.7.2024
$1.80
1,000,000
-
-
-
-
-
(375,000)
(1,087,500)
-
(3,562,500)
24.11.2021
31.7.2024
29.11.2022
31.12.2025
31.12.2022
31.12.2025
$1.80
$1.80
$1.80
5,012,500
-
-
150,000
-
10,800,000 (3,000,000)
-
-
-
-
-
-
1,125,000
1,125,000
807,500
403,750
1,000,000 1,000,000
1,450,000
787,500
150,000
37,500
7,800,000
1,950,000
Total
15,232,500
10,950,000 (9,687,500)
(3,575,000)
12,920,000 5,891,250
The valuation model inputs used to determine the fair value at the grant date, are as follows:
Grant Date
Expiry Date
Grant Date Exercise Price
Share Price at
Expected
Volatility Dividend Yield
Risk-free
Interest Rate*
Fair Value at
Grant Date
14.9.2020
14.9.2023
$0.145
18.11.2020
14.9.2023
** 26.7.2021
31.7.2024
24.11.2021
31.7.2024
29.11.2022
31.12.2025
31.12.2022
31.12.2025
$0.47
$0.93
$1.74
$1.10
$1.02
$0.20
$0.20
$1.80
$1.80
$1.80
$1.80
100%
100%
100%
100%
100%
100%
-
-
-
-
-
-
0.24%
$0.0799
0.11%
0.13%
1.01%
3.2%
3.3%
$0.3545
$0.45
$1.02
$0.59
$0.53
* 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.
42
RHYTHM BIOSCIENCES 2023 ANNUAL REPORTFINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 Movement in the number of share options on issue
2023
2023
2022
2022
Number of
Options
Weighted Average
Exercise Price (cents)
Number of
Options
Weighted Average
Exercise Price (cents)
Opening balance
Granted
Forfeited / Lapsed
Exercised
Expired
15,232,500
10,950,000
(9,687,500)
(3,575,000)
-
Outstanding at year-end
12,920,000
Exercisable at year-end
5,891,250
103.06
180.00
146.75
20.00
-
158.60
133.02
7,475,000
8,195,000
(287,500)
(150,000)
-
15,232,500
8,086,250
20.00
180.00
180.00
20.00
-
103.06
75.38
The fair value of issued share-based payments granted during the year pursuant to the ESOP in 2023 was calculated to
be $5,812,500. The total amount expensed in the income statement is a share-based payments expense of $3,003,935
(2022: $2,605,676) for Options in the current and previous years.
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
Director
7,800,000
3,000,000
Director
150,000
31.12.2022
31.12.2022
29.11.2022
$1.80
$1.02
$1.80
$1.02
$1.80
$1.10
31.12.2025
31.12.2025
31.12.2025
various
100%
3.32%
$0.53
various
100%
3.32%
$0.53
various
100%
3.2%
$0.59
Total fair value at grant date
$4,134,000
$1,590,000
$88,500
The life of the options is based on the contracted expiry date.
43
Note 18: Financial Risk Management
The Group’s financial instruments consist mainly of term deposits with banks, other receivables and trade payables.
The totals for each category of financial instruments, measured in accordance with AASB 9 as detailed in the accounting
policies to these financial statements, are as follows:
Financial Assets
Cash and cash equivalents
Trade and other receivables
Other financial assets – term deposits
Financial Liabilities
Trade and other Payables
2023 ($)
2022 ($)
4,124,181
65,513
45,000
7,550,424
82,415
45,000
4,234,694
7,677,839
1,522,843
1,522,843
630,937
630,937
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 2023.
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 2023, cash was deposited with a large
Australian bank in order to limit risk and ensure interest rate competitiveness.
44
RHYTHM BIOSCIENCES 2023 ANNUAL REPORTFINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 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 $4,169,181 as at 30 June 2023 (2022:
$7,595,424). An official increase/decrease in interest rates of 100 (2022: 100) basis points would have an adverse/
favourable effect on loss before tax of $41,692 (2022: $75,954) per annum. The percentage change is based on the
expected volatility of interest rates using market data and analysts’ forecasts.
Price risk
Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as a result of changes in
market prices. The Group is not exposed to price risk.
Currency risk
Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in
foreign exchange rates. The Group’s exposure to currency risk is minimal at present as the majority of transactions are in
Australian dollars.
Note 19: Segment Reporting
In accordance with Australian Accounting Standard AASB 8 Operating Segments, the Company has determined that it has
one reporting segment, consistent with the manner in which the business is managed. This is the manner in which the chief
operating decision maker receives information for the purpose of resource allocation and assessment of performance.
The Group operates predominantly in one business and geographical segment being the research and development of
biosciences in Victoria, Australia.
Note 20: Key Management Personnel Compensation
The Key Management Personnel compensation included in employee expenses are as follows:
Share-based
payments ($)
Short-term
benefits ($)
Termination
benefits ($)
Post-employment
benefits ($)
Other Long-term
benefits ($)
Total ($)
2023
Total compensation
1,225,131
936,845
96,688
101,653
(16,443)
2,343,874
2022
Total compensation
1,831,650
814,178
-
62,150
11,408
2,719,386
Further details on the above remuneration is disclosed in the Remuneration Report in the Directors’ report.
45
FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023
Note 21: Auditor Remuneration
Remuneration of the Auditor of the Group for:
2023 ($)
2022 ($)
Auditing or reviewing the financial report
65,433
53,175
Other services:
- Taxation advice
Note 22: Controlled Entities
Controlled Entities Consolidated
Vision Tech Bio Pty Ltd
IchorDX Inc,
25,280
90,713
9,400
62,575
Country of
Incorporation
Percentage Owned
(%) 2023
Percentage Owned
(%) 2022
Australia
United States
100%
100%
100%
100%
100%
-
Rhythm Biosciences UK Limited (i)
United Kingdom
* Percentage of voting power in proportion to ownership
(i) This subsidiary was incorporated on 23 June 2023.
Note 23: Deed of Cross Guarantee
A Deed of Cross Guarantee was lodged with the ASIC on 18 April 2023 covering Rhythm Biosciences Limited and Vision
Tech Pty Ltd. The assets and liabilities of the companies within the Deed are as stated in the financial statements as at 30
June 2023.
Note 24: Events Subsequent to Reporting Date
On 8 August 2023, the Company issued 1,125,000 shares to Dr Trevor Lockett arising from the exercise of 1,125,000
Options held at 20 cents per share. Dr Lockett paid $225,000 to the Company as consideration for the issued shares.
There has been no other matters or circumstances which have arisen since 30 June 2023 that has significantly affected or
may significantly affect:
• the operations, in financial years subsequent to 30 June 2023, of the consolidated entity; or
• the results of those operations; or
• the state of affairs, in financial years subsequent to 30 June 2023, of the consolidated entity.
Note 25: Commitments
The Group has inventory purchase commitments of $265,193 (2022: $nil) for goods not yet received as at 30 June 2023.
There are no capital commitments for expenditure as at 30 June 2023 (2022: $nil).
Note 26: Contingent Assets and Liabilities
The Group has no contingent assets or liabilities as at 30 June 2023 (2022: $nil).
46
RHYTHM BIOSCIENCES 2023 ANNUAL REPORT DIRECTORS’ DECLARATION
DIRECTORS' DECLARATION
The Directors declare that:
1. The financial statements and notes, as set out on pages 24 to 46 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 2023 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, subject to the matters disclosed in note 1, 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 16 to 21 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.
Otto Buttula
Executive Chairman
Melbourne, Australia
Dated this 31st day of August 2023
47
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 2023, 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) Giving a true and fair view of the Group’s financial position as at 30 June 2023 and of its financial
performance for the year ended on that date; and
(ii) Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the Financial
Report section of our report. We are independent of the Group in accordance with the 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.
Material Uncertainty Related to Going Concern
We draw attention to Note 1 in the financial report which describes the events and/or conditions which
give rise to the existence of a material uncertainty that may cast significant doubt about the group’s
ability to continue as a going concern and therefore the group may be unable to realise its assets and
discharge its liabilities in the normal course of business. Our opinion is not modified in respect of this
matter.
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.
48
RHYTHM BIOSCIENCES 2023 ANNUAL REPORTINDEPENDENCE AUDITOR’S REPORT
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. In addition to the matter described in the Material uncertainty
related to going concern section, we have determined the matters described below to be the key audit
matters to be communicated in our report.
Key audit matter
How the matter was addressed in our audit
Valuation of Inventory
The Group recognised a material amount of inventory
during the year representing raw materials purchased
for the future production and commercial sale of its
ColoSTAT product.
Valuation of inventory including measuring raw
materials at cost and assessing recoverability was
considered a key audit matter due to the materiality
of the recorded amount and the inherent subjectivity
associated with valuation of inventory.
Refer to Note 1 and Note 8 of the financial report for a
description of the accounting policy and significant
estimates and judgements applied to the recognition
of inventory raw materials.
Our procedures included, but were not limited to:
• Discussing procurement and inventory management
processes with management and manufacturing
partners.
•
• Obtaining inventory confirmations from manufacturing
partners and inspecting a sample of inventory items
on a test basis.
Examining supporting documentation, for a sample of
inventory items, to test the inventory cost base and
carrying values as of 30 June 2023.
Examining evidence of commercial viability of future
sales plans and future selling prices to assess
recoverability of inventory.
•
• Reviewing the adequacy of disclosures within the
financial report.
Research and Development Grant Revenue
Recognition
Our procedures included, but were not limited to:
• Updating our understanding of the revenue
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.
Measurement of Share Based Payments
A share-based payment expense was recognised for
options that were granted in prior periods and
continued to be expensed over their vesting period.
Additional share options were expensed during the
year relating to options issued during the 30 June 2023
financial year to employees and key management
personnel.
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 an auditor’s R&D tax expert 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.
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
49
INDEPENDENT AUDITOR’S REPORT
Key audit matter
How the matter was addressed in our audit
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.
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 2023, 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.
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.
50
RHYTHM BIOSCIENCES 2023 ANNUAL REPORTINDEPENDENCE AUDITOR’S REPORT
ADDITIONAL ASX INFORMATION
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 in pages 16 to 21 of the directors’ report for the
year ended 30 June 2023.
In our opinion, the Remuneration Report of Rhythm Biosciences Limited, for the year ended 30 June
2023, 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, 31 August 2023
51
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 11 August 2023 and is required by the ASX Listing Rules.
Rhythm’s securities are not quoted on any other stock exchange.
Number of Fully Paid
Ordinary Shares
Percentage of Total
Issued Capital
Twenty Largest Holders of Ordinary Shares
Rank
Shareholder
1
2
3
4
WEBINVEST PTY LTD
FERNDALE SECURITIES PTY LTD
LOUMEA INVESTMENT PTY LTD
NORTHERN STAR NOMINEES PTY LTD
5
NEWFOUND INVESTMENTS PTY LTD
6
7
8
9
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
ROJO NERO CAPITAL PTY LTD
GIOKIR PTY LTD
MR HSIEN MICHAEL SOO
10
COMMONWEALTH SCIENTIFIC & INDUSTRIAL RESEARCH ORGANISATION
2,500,000
MS NATALIE LOUISE PATTERSON
E & W NOMINEE PTY LTD
MR DANIEL EDDINGTON & MRS JULIE EDDINGTON
2,477,083
2,207,941
2,123,532
MR MARK ANTHONY ROGERS & MR ARTHUR NICHOLAS VELISS
2,000,000
MRS SARAH CAMERON
JAWAF ENTERPRISES PTY LTD
BNP PARIBAS NOMINEES PTY LTD ACF CLEARSTREAM
MRS JOAN MARGARET MOLYNEUX & MRS WENDY ANNE HUTCHISON &
MR JOHN EDWARD HUTCHISON
MR RICHARD STANLEY DE RAVIN
11
12
13
14
15
16
17
18
19
17,291,667
10,300,000
8,052,520
7,380,000
6,819,729
6,515,269
4,323,751
3,661,470
3,305,403
1,920,800
1,875,000
1,662,733
1,450,000
1,448,228
1,357,124
7.83
4.66
3.65
3.34
3.09
2.95
1.96
1.66
1.50
1.13
1.12
1.00
0.96
0.91
0.87
0.85
0.75
0.66
0.66
0.61
88,672,250
132,245,339
40.14
59.86
220,917,589
100.00
20
MR ADRIAN DARBY
Total
Balance of register
Grand total
52
RHYTHM BIOSCIENCES 2023 ANNUAL REPORTADDITIONAL ASX INFORMATION Distribution Schedule
The 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
280
1,396
711
1,466
1,143
4,996
165,277,916
45,406,171
5,635,273
4,015,176
583,053
74.81
20.55
2.55
1.82
0.26
220,917,589
100.00
1,263 shareholders held less than a marketable parcel of fully paid ordinary shares.
Substantial Shareholdings Register
Shareholder
Otto Buttula
Number of fully paid ordinary shares
Percentage of Total Issued Capital
24,111,396
10.91%
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 11 August 2023 are
provided below:
Share Option Type
Expiry Date
Number of Options
Number of Holders
Exercise Price $
RHYAH
RHYAI
RHYAL
RHYAM
RHYAH
Range
100,001 and Over
10,001 to 100,000
Total
14/09/23
31/07/24
31/07/24
31/12/25
587,500
3,257,500
3,275,463
7,950,000
4
13
1,269
7
0.20
1.80
1.80
1.80
Number of Options
Number of Holders
Percentage of Total
Issued Options
325,000
262,500
587,500
1
3
4
55.32
44.68
100.00
53
RHYAI
Range
100,001 and Over
10,001 to 100,000
Total
RHYAL
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
RHYAM
Range
100,001 and Over
Total
Number of Options
Number of Holders
Percentage of Total
Issued Options
2,995,000
262,500
3,257,500
9
4
13
91.94
8.06
100.00
Number of Options
Number of Holders
Percentage of Total
Issued Options
886,805
1,616,658
219,962
321,624
230,414
3,275,463
5
55
34
159
1,016
1,269
27.07
49.36
6.72
9.82
7.03
100.00
Number of Options
Number of Holders
7,950,000
7,950,000
7
7
Percentage of Total
Issued Options
100.00
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.
54
RHYTHM BIOSCIENCES 2023 ANNUAL REPORTCORPORATE DIRECTORYADDITIONAL ASX INFORMATION Directors
Mr Otto Buttula
Ms Susan MacLeman
Dr Trevor Lockett
Mr Louis (Lou) Panaccio
Dr Rachel David
Company Secretaries
Ms Andrea Steele
Mr Paul Smith
Registered and Principal Office
Bio21 Institute
30 Flemington Road
Parkville VIC 3010
Auditor
BDO Audit Pty Ltd
Level 18
727 Collins Street
Melbourne VIC 3000
Legal Advisers
K & L Gates
Level 25
525 Collins Street
Melbourne VIC 3000
Share Registry
Automic Registry Services
477 Collins Street
Melbourne VIC 3000
Phone 1300 288 664 (within Australia)
Phone +61 2 9698 5414 (outside Australia)
Email hello@automicgroup.com.au
55
CORPORATE DIRECTORY Rhythm Biosciences Limited
ACN 619 459 335
Bio21 Institute
30 Flemington Road
Parkville VIC 3010
Phone +61 3 8256 2880
rhythmbio.com
RHYZ024 08/23