Total Brain : Annual Report FY2022 (PDF)

Annual Report

Year Ended 30 June 2022

1

Total Brain Limited

Contents

30 June 2022

Corporate directory	3
Chairman's letter	4
Directors' report	5
Auditor's independence declaration	19
Financial statements cover	20
Statement of profit or loss and other comprehensive income	21
Statement of financial position	22
Statement of changes in equity	23
Statement of cash flows	24
Notes to the financial statements	25
Directors' declaration	64
Independent auditor's report to the members of Total Brain Limited	65
Shareholder information	69
Back cover	71

2

Total Brain Limited Corporate directory 30 June 2022

Directors	Dr Evian Gordon (Executive Chairman)
	Mr Matthew Morgan (Non-Executive Director)
	Mr David Torrible (Non-Executive Director)
	Mr David Daglio (Non-Executive Director)
Company secretary	Mr Phillip Hains
	Mr Nathan Jong
Registered office	15 Belvoir Street
	Surry Hills NSW 2010
	Telephone: [phone]
	Email: [e-mail]
Share register	Boardroom Pty Limited
	Level 12, 225 George Street
	Sydney NSW 2000
	Telephone: [phone]
	Email: [e-mail]
Auditor	Grant Thornton Audit Pty Ltd
	Level 18, 145 Ann Street
	Brisbane QLD 4001
Stock exchange listing	Total Brain Limited shares are listed on the Australian Securities Exchange (ASX
	code: TTB).
Website	http://www.totalbrain.com

Corporate Governance Statement The directors and management are committed to conducting the business of Total Brain Limited in an ethical manner and in accordance with the highest standards of corporate governance. Total Brain Limited has adopted and has substantially complied with the ASX Corporate Governance Principles and Recommendations (Fourth Edition) ('Recommendations') to the extent appropriate to the size and nature of its operations.

The Group's Corporate Governance Statement, which sets out the corporate governance practices that were in operation during the financial year and identifies and explains any Recommendations that have not been followed and ASX Appendix 4G are released to the ASX on the same day the Annual Report is released. The Corporate Governance Statement and Corporate Governance Compliance Manual can be found on the Company's website at http://www.totalbrain.com/investors/

3

Total Brain Limited Chairman's letter 30 June 2022

30 September 2022

Dear Shareholders,

On behalf of the Board of Directors of Total Brain Limited (the 'Company' or 'TTB'), I present our Annual Report for the Fiscal Year ended 30 June 2022 ('FY2022').

FY2022 was a particularly challenging year for the Company with slower than planned increases in new revenues and roll- outs of existing sales, in conjunction with a challenging period in the latter half of the year for the capital markets due to a precipitous downturn in the broader macroeconomic healthtech environment.

During the year the Company signed 26 new customers and grew annual recurring revenue by $912,000. The Company entered commercial agreements for the Group's standardised methodology and database assets with Johnson and Johnson and Alto Neuroscience for upfront payments of $3,719,869.

The rate of growth in sales of the Total Brain app were however lower than expectations and during the month of October 2021, the Company undertook a significant right-sizing exercise in order to minimise ongoing expenditure. Subsequent to this decision the Board then appointed Incentrum Group, a global merchant bank, to explore strategic alternatives for the Company. Incentrum Group assisted TTB in preparing a tailored positioning of the Company with potential buyers and ultimately soliciting offers for the sale of all or part of the Company's business.

The process included Incentrum Group contacting a number of strategic and financial buyers with interest in the sector. During the latter period of that process, the broader market conditions for non-profitable technology businesses significantly deteriorated, impacting the Company's ability to raise working capital at an appropriate price and ultimately the value attributed to the Company by third parties in a corporate transaction.

After the end of the financial year, on 5th August 2022, the Company entered into a binding sale agreement with Sondermind Inc, pursuant to which Sondermind has agreed to purchase the business of the Company through a sale of assets by the Company and its subsidiaries ('Proposed Transaction').

As the Proposed Transaction will be a disposal of the Company's main undertaking, TTB will be seeking shareholder approval at the next general meeting of shareholders in late October 2022. TTB shareholders are encouraged to participate in the meeting after having considered the notice of meeting and the independent's expert report which was undertaken by PKF Melbourne Corporate Pty Ltd.

TTB directors unanimously recommend that all TTB shareholders vote in favour of the Proposed Transaction and each director intends to vote all TTB shares held or controlled by them in favour, subject to the independent expert concluding that the Proposed Transaction is in the best interests of TTB shareholders and in the absence of a Superior Proposal (as defined in Annexure B of the 5 August 2022 announcement).

In closing, I would like to acknowledge the disappointing expectations and sincerely thank all shareholders for their longstanding support of the mental health and wellbeing commercial initiatives of the Company.

Yours sincerely,

Dr Evian Gordon, MBBCh, PhD, FAIS

4

Total Brain Limited Directors' report 30 June 2022

The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'Group') consisting of Total Brain Limited (referred to hereafter as the 'Company' or 'parent entity') and the entities it controlled at the end of, or during, the year ended 30 June 2022.

Directors

The following persons were directors of Total Brain Limited during the whole of the financial year and up to the date of this report, unless otherwise stated:

Dr Evian Gordon - Executive Chairman

Mr Matthew Morgan - Non-Executive Director Mr David Torrible - Non-Executive Director Mr David Daglio - Non-Executive Director

Mr Louis Gagnon - Managing Director and Chief Executive Officer (resigned on 12 November 2021)

Principal activities

The principal activity of the Group is developing and selling brain health products.

Dividends

There were no dividends paid, recommended or declared during the current or previous financial year.

Review of operations

The loss for the Group after providing for income tax amounted to $14,496,718 (30 June 2021: $8,316,773).

During the financial year, the Board appointed Incentrum Group to explore strategic alternatives for the Company including a sale of the company and or its assets. On 5 August 2022 (the 'Announcement Date'), the Company announced a binding agreement with SonderMind Inc. ('SonderMind' or the 'purchaser') to purchase the Group's business through a sale of assets ('Proposed Transaction'), which is subject to shareholder approval.

The purchase price is US$10,000,000 (approximately AU$14,000,000), less adjustments and liabilities, including the value of assumed employee entitlements of any transferring employees, any debt funding provided by or on behalf of SonderMind to fund the Group's working capital requirements and an agreed adjustment on account of certain tax liabilities. The purchase is subject to a number of conditions including shareholder approval, which is expected to be voted on at a general meeting held in late October 2022.

Material business risks

The following is a summary of material business risks that could adversely affect the Company's financial performance and growth potential in future years and how the Company proposes to mitigate such risks.

Risk of the Proposed Transaction not receiving shareholder approval

After the end of the financial year on 5 August 2022 (the 'Announcement Date'), the Company announced the binding agreement with SonderMind Inc. ('SonderMind' or the 'purchaser') to purchase the Group's business through a sale of assets ('Proposed Transaction').

The purchase is subject to various conditions including shareholder approval, which is expected to be voted on at a general meeting held in late October 2022.

The Company appointed a well credentialed investment bank ('Incentrum Group') to help realise maximum value for shareholders. Incentrum ran a competitive sale process and as an alternative the Directors consulted with local corporate financiers regarding raising capital to continue funding the Company.

On completion of the process and after consideration of the alternatives, if the Proposed Transaction is not approved, the Company is not expected to have sufficient funds to continue its product development and continue trading.

Going concern

The intention is to wind-up the Company post completion of the Proposed Transaction and therefore the preparation of the financial statements is on a realisation basis of accounting.

5