Registered number: 10055682 (England and Wales)
IRHYTHM TECHNOLOGIES LTD.
DIRECTORS' REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
|
|
|
|
IRHYTHM TECHNOLOGIES LTD.
|
COMPANY INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ZEDRA Corporate Reporting Services (UK) Limited
|
|
|
|
|
|
|
|
|
IRHYTHM TECHNOLOGIES LTD.
|
CONTENTS
|
|
Statement of Financial Position
|
|
Statement of Changes in Equity
|
|
Notes to the Financial Statements
|
|
|
|
|
|
IRHYTHM TECHNOLOGIES LTD.
REGISTERED NUMBER:10055682
|
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debtors: amounts falling due within one year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Creditors: amounts falling due within one year
|
|
|
|
|
|
|
|
|
|
|
|
Total assets less current liabilities
|
|
|
|
|
|
Creditors: amounts falling due after more than one year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IRHYTHM TECHNOLOGIES LTD.
REGISTERED NUMBER:10055682
|
STATEMENT OF FINANCIAL POSITION (CONTINUED)
AS AT 31 DECEMBER 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital contribution reserve
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company's financial statements have been prepared in accordance with the provisions applicable to entities subject to the small companies regime.
The financial statements have been delivered in accordance with the provisions applicable to companies subject to the small companies regime.
The Company has opted not to file the statement of comprehensive income in accordance with provisions applicable to companies subject to the small companies' regime.
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
|
|
|
|
IRHYTHM TECHNOLOGIES LTD.
|
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
|
|
|
Capital contribution reserve
|
|
|
|
|
|
|
|
|
At 1 January 2021 (as previously stated)
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2021 (as restated)
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year (as restated)
|
|
|
|
|
|
Total comprehensive income for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IRHYTHM TECHNOLOGIES LTD.
|
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
iRhythm Technologies Ltd. is a private company, limited by shares, incorporated in England. The registered office can be found on the company information page.
2.Accounting policies
|
|
Basis of preparation of financial statements
|
The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 101 'Reduced Disclosure Framework' and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 101 requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the Company's accounting policies (see note 4).
The following principal accounting policies have been applied:
|
|
Financial Reporting Standard 101 - reduced disclosure exemptions
|
The Company has taken advantage of the following disclosure exemptions under FRS 101:
∙the requirements of paragraphs 45(b) and 46-52 of IFRS 2 Share-based payment
∙the requirements of IFRS 7 Financial Instruments: Disclosures
∙the requirement in paragraph 38 of IAS 1 'Presentation of Financial Statements' to present comparative information in respect of:
- paragraph 79(a)(iv) of IAS 1;
∙the requirements of paragraphs 10(d), 10(f), 16, 38A, 38B, 38C, 38D, 40A, 40B, 40C, 40D, 111 and 134-136 of IAS 1 Presentation of Financial Statements
∙the requirements of IAS 7 Statement of Cash Flows
∙the requirements of paragraph 17 and 18A of IAS 24 Related Party Disclosures
∙the requirements in IAS 24 Related Party Disclosures to disclose related party transactions entered into between two or more members of a group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member
This information is included in the consolidated financial statements of iRhythm Technologies, Inc. as at 31 December 2022 and these financial statements may be obtained from www.sec.gov.
The Company is in a net asset position of £2,715,918 (2021: £1,775,193) at the balance sheet date, supported by significant cash reserves. The Company has received written confirmation from its parent company, iRhythm Technologies, Inc., that it will continue to provide financial support for a period of at least 12 months from the date of signing these financial statements. For these reasons, the directors continue to adopt the going concern basis in preparing the financial statements.
|
|
|
|
IRHYTHM TECHNOLOGIES LTD.
|
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
Turnover is measured as the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes.
Rendering of services
The Company's turnover is derived from the provision of digital healthcare services to its customers.
Turnover is recognised as services are used by the customer. Turnover can only be recognised when each of the following criteria are met:
∙the amount of turnover can be measured reliably;
∙it is probable that the Company will receive the consideration due under the contract
The Company also recharges its expenditure to its parent company iRhythm Technologies, Inc., in accordance with an intercompany services agreement.
Tax is recognised in profit or loss except that a charge attributable to an item of income and expense recognised as other comprehensive income or to an item recognised directly in equity is also recognised in other comprehensive income or directly in equity respectively.
The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date in the countries where the Company operates and generates income.
Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the reporting date, except that:
∙The recognition of deferred tax assets is limited to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits; and
∙Any deferred tax balances are reversed if and when all conditions for retaining associated tax allowances have been met.
Deferred tax balances are not recognised in respect of permanent differences except in respect of business combinations, when deferred tax is recognised on the differences between the fair values of assets acquired and the future tax deductions available for them and the differences between the fair values of liabilities acquired and the amount that will be assessed for tax. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the reporting date.
|
|
|
|
IRHYTHM TECHNOLOGIES LTD.
|
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
|
|
Foreign currency translation
|
Functional and presentation currency
The Company's functional and presentational currency is GBP.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the spot exchange rates at the dates of the transactions.
At each period end foreign currency monetary items are translated using the closing rate. Non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined.
Foreign exchange gains and losses resulting from the settlement of transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.
Defined contribution pension plan
The Company operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. Once the contributions have been paid the Company has no further payment obligations.
The contributions are recognised as an expense in profit or loss when they fall due. Amounts not paid are shown in accruals as a liability in the Statement of Financial Position. The assets of the plan are held separately from the Company in independently administered funds.
Interest income is recognised in profit or loss using the effective interest method.
Certain employees of the Company are entitled to stock option grants, Restricted Stock Units ("RSUs") and shares under the Employee Stock Purchase Programme ("ESPP") in iRhythm Technologies, Inc., the parent company. The share options and ESPP shares are granted at an independently determined fair value using the Black-Scholes option pricing model. The RSU shares are valued at the fair value at the grant date. Shares granted under the 2016 Equity Incentive Plan are granted at a price of not less than 100% of the fair market value of the common stock at the date of grant. Shares granted under the Employee Stock Purchase Plan are discounted at a rate of 85% of the lower of the fair market value of the Company's common stock on the first date of the offering period or on the last day of the purchase period as defined in the terms of the agreement.
An expense equivalent to the fair value of the share options granted is recognised evenly over the vesting period, with a corresponding amount being recognised in the capital contribution reserve.
|
|
|
|
IRHYTHM TECHNOLOGIES LTD.
|
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
Tangible fixed assets under the cost model are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
At each reporting date the Company assesses whether there is any indication of impairment. If such indication exists, the recoverable amount of the asset is determined which is the higher of its fair value less costs to sell and its value in use. An impairment loss is recognised where the carrying amount exceeds the recoverable amount.
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
The estimated useful lives range as follows:
|
|
|
|
Short-term leasehold improvements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
Short term debtors are measured at transaction price, less any impairments. Amounts owed by group undertakings are intercompany loans which are repayable on demand, no interest is charged on these loans.
|
|
Cash and cash equivalents
|
Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash held on deposit by service providers is included within bank and cash balances, as these amounts are highly liquid and repayable without penalty on notice of not more than 24 hours.
Creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers.
Creditors are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
|
|
|
|
IRHYTHM TECHNOLOGIES LTD.
|
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
The Company as a lessee
The Company assesses whether a contract is or contains a lease, at inception of a contract. The Company recognises a right-of-use asset and a corresponding lease liability with respect to all lease agreements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets. For these leases, the Company recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Company uses its incremental borrowing rate, 4.75%. This rate has been based on the incremental borrowing rate obtained by the parent company.
Lease payments included in the measurement of the lease liability comprise:
∙variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;
The lease liability is included in 'Creditors' on the Statement of Financial Position.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Company expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease.
The right-of-use assets are included in the Tangible Fixed Assets as applicable, in the Statement of Financial Position.
The Company applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as described in note 2.10.
As a practical expedient, IFRS 16 permits a lessee not to separate non-lease components, and instead account for any lease and associated non-lease components as a single arrangement. The Company has not used this practical expedient.
VAT recovered from restrospective claims made to HMRC during the period and recognised as other operating income.
|
|
|
|
IRHYTHM TECHNOLOGIES LTD.
|
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
The auditors' report on the financial statements for the year ended 31 December 2022 was unqualified.
The audit report was signed on 8 March 2024 by Dominic King ACA (Senior Statutory Auditor) on behalf of ZEDRA Corporate Reporting Services (UK) Limited.
|
Judgements in applying accounting policies and key sources of estimation uncertainty
|
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and recorded amount of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form a basis for making judgements about the carrying value of assets and liabilities that are not readily apparent from other sources.
Incremental borrowing rate
In accordance with IFRS 16, management have been required to assess the time value of money in relation to long term liabilities. As a result, 4.75% has been identified as the Company's incremental borrowing rate, which has been based on the incremental borrowing rate obtained by the parent company, in connection with its Loan and Security Agreement with Silicon Valley Bank.
|
|
|
An analysis of turnover by class of business is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Digital healthcare services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All digital healthcare service sales arose within the United Kingdom and the intercompany sales arose in accordance with the intercompany services agreement with the parent company, iRhythm Technologies, Inc., a company incorporated in the United States.
|
|
|
|
The operating profit is stated after charging:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation of tangible fixed assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IRHYTHM TECHNOLOGIES LTD.
|
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
|
|
|
|
|
|
|
|
|
Cost of defined contribution scheme
|
|
|
|
|
|
|
|
|
|
|
|
The average monthly number of employees, including the directors, during the year was as follows:
|
|
|
|
|
IRHYTHM TECHNOLOGIES LTD.
|
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
|
|
|
|
|
Current tax on profits for the year
|
|
|
|
|
|
|
|
Taxation on profit on ordinary activities
|
|
|
|
Factors affecting tax charge for the year
|
|
The tax assessed for the year is higher than (2021 - higher than) the standard rate of corporation tax in the UK of 19% (2021 - 19%). The differences are explained below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit on ordinary activities before tax
|
|
|
|
Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 19% (2021 - 19%)
|
|
|
|
|
|
|
|
Expenses not deductible for tax purposes
|
|
|
|
|
|
|
|
Adjustments to tax charge in respect of prior periods
|
|
|
|
Short term timing difference leading to an increase (decrease) in taxation
|
|
|
|
Tax deduction arising from exercise of employee options
|
|
|
|
Other differences leading to an increase (decrease) in the tax charge
|
|
|
|
Total tax charge for the year
|
|
|
|
Factors that may affect future tax charges
|
On 24 May 2021, Finance Bill 2021 was substantively enacted. The result of this is that the main rate of corporation tax for the UK has increased to 25% from 1 April 2023.
|
|
|
|
IRHYTHM TECHNOLOGIES LTD.
|
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
|
|
Short-term leasehold property
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge for the year on owned assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts owed by group undertakings
|
|
|
|
|
|
|
|
Prepayments and accrued income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IRHYTHM TECHNOLOGIES LTD.
|
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
|
Creditors: Amounts falling due within one year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other taxation and social security
|
|
|
|
|
|
|
|
Accruals and deferred income
|
|
|
|
|
|
|
|
|
|
|
|
Creditors: Amounts falling due after more than one year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share premium account
The share premium account represents the excess of the issue price over the par value on shares issued less transaction costs arising on issue.
Capital contribution reserve
Certain employees of the Company have been granted options to purchase shares or granted Restricted Stock Units in iRhythm Technologies, Inc., the parent company. The share options and RSUs are granted at an independently determined fair value.
An expense equivalent to the fair value of the share options granted is recognised evenly over the vesting period, four years, with a corresponding amount being recognised in the capital contribution reserve.
On forfeiture or cancellation of an individual's share based payments, vesting is stopped and outstanding shares are transferred from the capital contribution reserve to the profit and loss reserve.
|
|
|
|
IRHYTHM TECHNOLOGIES LTD.
|
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
|
|
|
|
|
The Company leases its office space and is capitalised in accordance with IFRS 16.
The Company entered into a new lease in January 2021 for a minimum period of three years.
|
|
The following amounts in respect of leases, where the Company is a lessee, have been recognised in profit or loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on lease liabilities (IFRS 16)
|
|
|
|
Depreciation charge on right-of-use assets
|
|
|
iRhythm Technologies, Inc., is the parent of the smallest group for which consolidated financial statements are drawn up of which the Company is a member. The registered office of the parent company is 699 8th Street, Suite 600, San Francisco, CA 94103.
|
Post balance sheet events
|
During 2023, a Swiss branch of the UK entity was incorporated. Three employees were hired on 1 October 2023, however there has not been any significant financial activity during the year.
There were no adjusting or other non-adjusting events occurring between the end of the reporting period and the date these financial statements were approved.
|