ANNUAL REPORT
Year Ended 30 June 2019
For personal use only Total Brain Limited
Appendix 4E
Preliminary final report
1. Company details
Name of entity:
ABN:
Reporting period:
Previous period:
Total Brain Limited (previously known as Brain Resource Limited)
24 094 069 682
For the year ended 30 June 2019
For the year ended 30 June 2018
2. Results for announcement to the market
$
Revenues from ordinary activities
down
0.5% to
2,602,137
Loss from ordinary activities after tax attributable to the owners of
Total Brain Limited
down
62.9% to
(8,570,754)
Loss for the year attributable to the owners of Total Brain Limited
down
62.9% to
(8,570,754)
Dividends
There were no dividends paid, recommended or declared during the current financial period.
Comments
The loss for the Group after providing for income tax amounted to $8,570,754 (30 June 2018: $23,101,340).
Further information on the 'Review of operations' is detailed in the Operating and Financial Review which is part of
the Annual Report.
3. Net tangible assets
Net tangible assets per ordinary security
4. Control gained over entities
Not applicable.
5. Loss of control over entities
Not applicable.
6. Dividends
Reporting
period
Cents
Previous
period
Cents
0.68
1.34
Current period
There were no dividends paid, recommended or declared during the current financial period.
Previous period
There were no dividends paid, recommended or declared during the previous financial period.
For personal use only
Total Brain Limited
Appendix 4E
Preliminary final report
7. Dividend reinvestment plans
Not applicable.
8. Foreign entities
Details of origin of accounting standards used in compiling the report:
Not applicable.
9. Audit qualification or review
Details of audit/review dispute or qualification (if any):
The financial statements have been audited and an unqualified opinion has been issued. The auditor’s report
contains a paragraph addressing material uncertainty related to going concern.
10. Attachments
Details of attachments (if any):
The Annual Report of Total Brain Limited for the year ended 30 June 2019 is attached.
11. Signed
Signed ___________________________
Date: 30 August 2019
Dr Evian Gordon
Chairman
Sydney
For personal use only
Total Brain Limited
Contents
30 June 2019
Corporate directory
Chairman's letter
Operating and financial review
Directors' report
Auditor's independence declaration
Financial statements
Statement of profit or loss and other comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
Notes to the financial statements
Directors' declaration
Independent auditor's report to the members of Total Brain Limited
Shareholder information
2
3
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12
25
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29
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66
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Total Brain Limited
Corporate directory
30 June 2019
Directors
Company secretary
Registered office
Share register
Auditor
Dr Evian Gordon (Executive Chairman)
Mr Louis Gagnon (Managing Director)
Mr Matthew Morgan (Non-Executive Director)
Mr Ajay Arora (Non-Executive Director)
Mr David Torrible (Non-Executive Director)
Mr Harvey Bui
Mr Phillip Hains
15 Belvoir Street
Surry Hills NSW 2010
Telephone: +61 2 9213 6666
Email: ir@totalbrain.com
Boardroom Pty Limited
Level 12, 225 George Street
Sydney NSW 2000
Telephone: +61 2 9290 9600
Email: enquiries@boardroomlimited.com.au
Grant Thornton
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) and has American Depository Receipts quoted on the OTC market
(OTC Code: BRRZY)
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 (Third 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/
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Total Brain Limited
Chairman's letter
30 June 2019
30 August 2019
Dear Shareholders,
On behalf of the Board of Directors of Total Brain Limited (the “Company” or “TB”), I am pleased to present our Annual
Report for the Fiscal Year ended 30 June 2019 (FY2019).
FY2019 was a year of major transformation and turnaround for our team. Following the launch of the new Total Brain
platform in September 2018, on time and on budget, we have been focused on sales execution through strategic go-
to-market prioritisation, continuous iteration of sales positioning, and optimisation of product-market-fit assumptions for
our product. This has resulted in important validation from the market evident in our positive momentum since the
beginning of calendar 2019, including the completion of 16 new sales and strategic partnerships.
Additionally, we have expanded our team significantly, welcoming high-calibre talent not only in engineering, data
science, and product, but also among our Board Directors and Senior Advisers. We are thrilled to grow our ranks with
individuals who have significant experience in our target markets and are strong believers in our product and its
potential. The Total Brain partnership network has also grown on the investor front. Earlier this year, we successfully
completed a A$6.9 million capital raise, led by US-based family offices and investors with meaningful participation
from existing and new institutional and private investors in Australia and Hong Kong. We are thankful for the continued
vote of confidence by our shareholders and have been putting the incremental funds to good use with a focus on
growing our sales, marketing, and engineering efforts, among others.
Meanwhile, the macro tailwinds behind our business and utmost urgency for our solution continue to accelerate.
Mental health and fitness have become top-of-mind for corporates, healthcare players, and government agencies
alike. 20% of the adult population in the United States has a mental health condition, and only half of them are
diagnosed, and based on a recent study by the American Heart Association “Mental Health: Crisis at Work”, costing
an employer an incremental $17,241 per year. At the same time, given that 20 US veterans die by suicide daily, and
70% of youth identify anxiety and depression as the top problem impacting students, the need for objective, data-
driven, technology-powered solutions is urgent. Total Brain’s long-standing scientific grounding, scalable product
solution, and implementation discipline, is poised to create significant economic and social returns in the next twelve
months and beyond.
Yours sincerely,
Dr. Evian Gordon, PhD
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Total Brain Limited
Operating and financial review
30 June 2019
1. HIGHLIGHTS
● During the twelve months ended 30 June 2019, Total Brain delivered 33% growth in revenue from the main Total
Brain Corporate business and flat annual growth in total revenue;
o The Corporate revenues were the primary driver of growth for the business, offsetting declines in other
revenue of -36%. Given that the Company follows a calendar year business cycle, the results achieved on a
fiscal year-basis do not fully reflect the significant operational momentum generated throughout the latter part
of the year, made evident by the 16 sales closed since January 2019;
● Total Brain’s 16 sales and strategic partnerships with new and existing B2B Corporate and B2C Affinity clients
include:
o 2 existing Fortune 500 clients which expanded their contracts and added ~65,000 new addressable users to
the new Total Brain platform;
o 3 new US organisations covering ~70,000 new addressable users contracted through an existing channel
partner;
o OneDigital, the largest company in the US focused exclusively on employee benefits and HR, with 44,000
corporate clients nationally;
o NFP, a new channel partner focused exclusively on employee benefits and HR, with 10,000 clients nationally.
Total Brain will also be deployed to NFP’s 5,000 employees;
o American Heart Association, one of the largest non-profit organisations in the United States partnered with TB
to study the relationship between the heart and the brain through data on Heart Rate Variability (HRV);
o Mental Health America, a leading US non-profit with 7.7 million annual website visitors;
o CNA Insurance, a leading US long-term care insurance company to offer the TB platform to 77,000 new users
with the objective of reducing incidents and claim rates within a pre-identified cohort of individuals;
● As of 30 June 2019, the Company grew cumulative User Registrations to 715k and the cumulative number of Brain
Profiles to 534k, representing 19% annual growth and a 56% CAGR since December 2015;
● During the past twelve months, Total Brain completed multiple operational initiatives, including:
o After 9 months of development, the Company launched Total Brain replacing the legacy MyBrainSolutions
product in September 2018, ahead of plan and on budget. The launch represented a complete overhaul of
the product, including cloud-hosted infrastructure on the back-end and modern design on the front-end, both
required elements of scaling as a SaaS business;
o Successfully migrated over 600,000 existing individual users, 23 corporate customers and 5 channel partners
to the new platform with very positive customer feedback;
o Executed a complete rebrand of MyBrainSolutions to Total Brain, including a fundamentally-redesigned
website (http://totalbrain.com), new social assets, revamped sales enablement materials, and updated go-to-
market positioning for the Total Brain platform and the Screening product;
o Launched an Account-based Marketing strategy, targeting the largest enterprises in the United States to
enhance scalability and effectiveness of sales and marketing efforts, resulting in 160+ new marketing
qualified leads to-date;
o Significantly increased promotional efforts through 15+ events and speaking opportunities scheduled for
CY2019, representing a 3x increase YoY.
● Total Brain also successfully completed a A$6.9 million capital raise, including a placement, entitlement offer, and
shortfall placement, consistent with the announcement made to the ASX on 18 March 2019
o The fundraise was led by US-based family offices and HNW investors with meaningful participation from
existing and new institutional and HNW investors in Australia and Hong Kong. The use of funds includes
growth in the software and product development, as well as sales and marketing functions of the Company,
among others.
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Total Brain Limited
Operating and financial review
30 June 2019
2. BUSINESS OPERATIONS
2.1 User KPIs
User Registrations and Brain Profiles are the key user KPIs for the Total Brain business. These indicators directly
reflect product adoption, use among clients and are a strong validator of TB’s product-market-fit assumptions, while
also powering the value of the Company’s proprietary database. During the twelve months ended 30 June 2019:
● User Registrations increased by 115k, representing 19% year-on-year growth in cumulative users and a 56%
CAGR since December 2015; and
● Brain Profiles increased by 87k, representing 19% year-on-year growth in cumulative profiles and a 56% CAGR
since December 2015.
This growth does not include user uplift from the expected re-launch of the new AARP platform, which includes Total
Brain, as well as several large B2C Affinity opportunities, such as Mental Health America.
Total Brain Profiles (Cumulative)
Total User Registrations (Cumulative)
715,316
654,094
519,387
491,558
534,472
367,870
296,265
199,767
151,895
113,028
800,000
600,000
400,000
200,000
0
CY2015
CY2016
CY2017
CY2018
Q2 CY2019
*Represents cumulative actual figures through 30 June 2019. User Registration figures exclude employer-pre-registered users. Brain
Profiles figures include multiple assessments taken by same user.
The key areas of focus and accomplishments across all business functions for FY2019 are highlighted below:
2.2 Product and Technology
● After 9 months of development, the Company launched Total Brain replacing the legacy MyBrainSolutions product
in September 2018, ahead of plan and on budget. The launch represented a complete overhaul of the product,
including cloud-hosted infrastructure on the back-end and modern design on the front-end, both required elements
of scaling as a SaaS business;
● Successfully migrated over 600,000 existing individual users, 23 corporate customers and 5 channel partners to the
new platform with very positive customer feedback;
● Revamped the training experience in the Total Brain platform, including a launch of 40 new pieces of mind-body
content via the exclusive content partnership with TLEX Institute, and a number of redesigned brain training
exercises;
o TLEX Institute is a leader in well-being and leadership training in the corporate sector, having taught courses
to 200+ large organisations across the globe, including American Express, Amazon, Microsoft and Intuit.
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Operating and financial review
30 June 2019
● Built scalable infrastructure for scheduled and dynamic email and push notifications to drive usage, engagement,
user habituation, initial deep linking (web), and basic direct to consumer registration workflow to support B2C
Affinity clients;
● Completed workstreams (dashboard migration, HIPPA compliance, report sharing) to enable enhanced product
functionality in the clinical market;
● Established General Data Protection Regulation (“GDPR”) infrastructure ensuring compliance with the security and
technology requirements of global B2B Corporate clients and expedited onboarding of new accounts;
● Completed initial designs of Total Brain 2.0, the next-generation experience of the platform designed to improve
flexibility and personalisation.
2.3
Sales and Customer Success
● Continued to iterate on optimal product-market-fit for Total Brain’s products within the B2B Corporate and B2C
Affinity markets;
● Closed 16 sales with new and existing B2B Corporate and B2C Affinity clients, including:
o 2 existing Fortune 500 clients which expanded their contracts and added ~65,000 new addressable users to
the new Total Brain platform;
o 3 new US organisations covering ~70,000 new addressable users contracted through an existing channel
partner;
o OneDigital, the largest company in the US focused exclusively on employee benefits and HR, with 44,000
clients nationally;
o NFP, a new channel partner focused exclusively on employee benefits with 10,000 clients nationally. Total
Brain will also be deployed to NFP’s 5,000 employees;
o American Heart Association, one of the largest non-profit organisations in the United States partnered with TB
to study the relationship between the heart and the brain through data on Heart Rate Variability (HRV);
o Mental Health America, a leading US non-profit with 7.7 million annual website visitors;
o CNA Insurance, a leading US long-term care insurance company to offer the TB platform to 77,000 new users
with the objective of reducing incidents and claim rates within a pre-identified cohort of individuals;
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Operating and financial review
30 June 2019
2.4 Marketing
● Executed a complete rebrand of MyBrainSolutions to Total Brain, including a fundamentally-redesigned website
(http://totalbrain.com), new social assets, revamped sales enablement materials, and updated go-to-market
positioning for the Total Brain platform and the Screening product;
● Launched Account-based Marketing strategy, targeting the largest enterprises in the United States to enhance
scalability and effectiveness of sales and marketing efforts, resulting in 160+ new marketing qualified leads;
● Significantly increased promotional efforts through 15+ events and speaking opportunities scheduled for CY2019,
representing a 3x increase YoY, including the following:
o ASU/GSV Education Conference in San Diego (April)
o World Health Care Congress in Washington DC (May)
o Service Academies Summit in Annapolis (June)
o Bloomberg CEO Summit in New York (June)
o National Health & Well-Being Summit in Boston (July)
o Jeffries Fitness Conference in New York (Sept)
● Became a Founding Partner of the National Summit for Mental Health & Mental Fitness, held in Denver, CO,
featuring key opinion leaders on mental health from around the United States and culminating with a large public
meditation attracting more than 250,000 people in-person and via global livestream;
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Total Brain Limited
Operating and financial review
30 June 2019
● Increased lead generation efforts on social media sites with a focus on LinkedIn and Facebook, deepened the
automated B2B prospect campaign via additional nurture tactics (webinars, social ad retargeting, account-based
marketing) to shorten the sales cycle and accelerate conversion;
● Continued to build thought leadership credibility via HR trade publications, podcasts, partnership press releases,
and 7-10 social weekly social posts to deepen engagement and broaden reach.
2.5 Human Resources
● Successfully onboarded 5 new senior members of the Total Brain team, including:
o David Torrible, a former Partner at Goldman Sachs, who joined TB’s Board as a Non-executive Director;
o Garrett Walker, the former Chief Human Resource Officer of Quintiles, a Fortune 500 company with 50,000
employees, who joined TB as an HR Practice Leader and commission-based reseller;
o John Boudreau, the Research Director for University of Southern California’s Center for Effective
Organisations and Professor at the Marshall School of Business, who joined TB as a Senior Advisor in HR
thought-leadership;
o Adam Pearson, the former Vice President of Chronic Care Management at Quest Diagnostics, a Fortune 500
company with 45,000 employees, who joined TB as a spokesperson and commission-based reseller;
o Peter Lafontaine, a former enterprise sales executive at Microsoft Canada, who joined TB as a spokesperson
and commission-based reseller in the Canadian corporate market.
● Sourced and filled critical positions across Sales, Engineering, Product, Data Science, Marketing, Operations, and
Executive Support; building pipeline for engineering team expansion;
● Finalised Company bonus policy to eligible employees and review process;
● Launched a modern HRIS software system providing management and employees with a centralised repository of
all administrative information pertaining to HR;
● Held three Company-wide retreats, allowing employees to engage in a variety of group working sessions,
presentations by all departments, and reflective workshops to improve their relationship with their teammates and
themselves.
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Operating and financial review
30 June 2019
2.6 iSPOT Diagnostic and Treatment Prediction Test
While the Company’s current business plan is focused on the development of the Total Brain business, management
continued to explore strategic alternatives to maximise shareholder value from the iSpot assets. The Company
announced positive developments with regard to the genetics work undertaken as part of the scientific validation of the
iSpot assets, including achieving 80% accuracy for the evaluation of the likelihood that an individual would remit from
depression given one’s brain genetic profile. While subject to a full replication analysis, these results help support a
potential monetisation path for iSpot. Total Brain continues to work with a New York-based investment bank on
evaluating strategic alternatives for the assets.
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Operating and financial review
30 June 2019
3. FINANCIALS
3.1 Revenues
$3,000
TB Corporate Revenue Total Revenue
$2,369
$2,609
$2,602
$1,243
$1,342
$1,788
$2,500
$2,000
$1,500
$1,000
$500
$0
FY2017
FY2018
FY2019
The Corporate revenues were the primary driver of growth for the business, offsetting declines in other revenue of -
36%. Given that the Company follows a calendar year business cycle, the results achieved on a fiscal year-basis do
not fully reflect the significant operational momentum behind the business currently, made evident by the 16 sales
closed since January 2019. Management expects that the Company will continue to establish new contracts and grow
revenue through CY2019.
3.2 Expenses
Total expenses for the twelve-month period ended 30 June 2019 decreased by $15.4 million (58%) to $11.2 million
due to the $17.7 million (90%) decrease in non-cash, non-recurring expenses during the period. Total cash expenses
increased by $2.9 million (46%) to $9.2 million, primarily driven by:
● $1.9 million (53%) increase in employee-related expenses driven by the continued growth of the team over the
course of FY2019;
● $0.8 million (31%) increase in corporate and operating costs driven by additional sales and marketing expenses
incurred as part of B2B Corporate strategy, including trade shows, sales team travel, and digital marketing costs,
among others.
Total non-cash expenses decreased by $17.7 million (90%) to $2 million during the period, driven by non-recurring
items in the prior comparison period. The current period saw a $1.4 million Impairment of goodwill / intangible assets
expense driven by the impairment of TB’s intangible assets. Please review the notes to the financial statements for
additional details.
3.3 Cash Flow
Average monthly cash consumption, net of revenue, for the twelve months ended 30 June 2019 was $751,923
compared to $475,304 in the prior period, reflecting the significant expansion of the business, doubling of the team, as
well as overhaul of infrastructure and processes. The Company’s closing cash balance as of 30 June 2019 was $5.2
million.
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Operating and financial review
30 June 2019
4. OUTLOOK
The twelve months ended 30 June 2019 were a time of significant transformation and turnaround for Total Brain. We
are encouraged by the positive sales momentum since the beginning of calendar 2019. The contracts won and
partnerships signed serve as an important validation of our product positioning and go-to-market strategy for the new
Total Brain platform. Additionally, we are thrilled to welcome to our team high-calibre individuals with significant
experience in our target markets. As such, we remain focused on our previously-communicated priorities for CY2019:
● Accelerate sales cycle of B2B Corporate revenue via increasing penetration of current and new channel
partners and continued execution of the Account-based Marketing strategy;
● Diversify into target sectors with shorter sales cycles such as the B2C Affinity market;
● Retain and upsell our existing book of business.
We continue to be excited about the business prospects for Total Brain and are committed to creating significant
shareholder value in CY2019 and beyond.
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Total Brain Limited
Directors' report
30 June 2019
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 (previously known as Brain Resource 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 2019.
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 Louis Gagnon - Managing Director and Chief Executive Officer
Mr Matthew Morgan - Non-Executive Director
Mr Ajay Arora - Non-Executive Director
Mr David Torrible - Non-Executive Director (appointed on 1 June 2019)
Dr Stephen Koslow - Non-Executive Director (resigned on 1 June 2019)
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 $8,570,754 (30 June 2018: $23,101,340).
A review of the operations of the Group during the financial year and the results of those operations are contained in
the Operating and Financial Review section of this report.
Significant changes in the state of affairs
On 24 July 2018, the Company announced that it had partnered with the TLEX institute (Transformational Leadership
for Excellence) which offers tools for well-being, adaptive leadership and creativity, to create the first end-to-end brain
performance monitoring and training platform.
The exclusive partnership will allow Total Brain to bring greater emotional and mental agility to its customers by
merging cutting-edge brain research with ancient wisdom and meditation provided by TLEX in its soon to be
launched upgraded product.
On 19 September 2018, the Company announced the release of a significant upgrade, expansion to its technological
platform and the brand repositioning of legacy “MyBrainSolutions” to “Total Brain”: the world's first Brain Performance
Monitoring and Training Platform.
On 3 December 2018, the company changed its name from Brain Resource Limited to Total Brain Limited. In parallel,
the ASX code has been changed from BRC to TTB.
There were no other significant changes in the state of affairs of the Group during the financial year.
Matters subsequent to the end of the financial year
On 29 August 2019, the Company announced that it had partnered with IBM (NYSE: IBM) whereby IBM will embed
Total Brain in IBM’s THRIVE360° of Mental Fitness platform as core functionality.
IBM’s THRIVE360° of Mental Fitness platform powers GRIT (Get Results in Transition) a collaboration between IBM
and The United States Department of Veterans Affairs (VA). GRIT is a digital solution for veterans, active-duty
service members, and reservists that provides a mobile experience to help them understand and strengthen their
mental fitness, social connections, and overall well-being.
GRIT is the first instantiation of the bigger platform called THRIVE360° of Mental Fitness, which IBM intends to
deploy with other communities under stress or in transition.
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Total Brain Limited
Directors' report
30 June 2019
IBM will collaborate with Total Brain to monitor mental health and build mental fitness. Total Brain provides scientific
brain assessments and personalised brain and mind training to help users consolidate mental strengths and master
weaknesses.
Due to the early stages of the partnership with IBM, an estimate of the financial effect on the Group’s results in future
financial years cannot be made.
No other matter or circumstance has arisen since 30 June 2019 that has significantly affected, or may significantly
affect the Group's operations, the results of those operations, or the Group's state of affairs in future financial years.
Likely developments and expected results of operations
Information on likely developments in the operations of the Group and the expected results of operations have been
included in the discussion of the Operating and Financial Review.
Environmental regulation
The Group is not subject to any significant environmental regulation under Australian Commonwealth or State law.
Information on directors
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
Dr Evian Gordon
Executive Chairman
BSc (Hons), PhD, MBBCh
Dr Gordon has over 30 years of experience in human brain research. He was the
director of the Brain Dynamics Centre at Westmead Hospital and a senior lecturer
in the Department of Psychological Medicine at the University of Sydney. Dr
Gordon edited the book “Integrative Neuroscience” and has more than 200
publications credited to him.
None
None
None
13,018,749 ordinary shares
None
Mr Louis Gagnon
Managing Director and Chief Executive Officer
MSC, BBA
Mr Gagnon has been the Chief Executive Officer (CEO) of the Company since 23
May 2017. Louis has over 25 years worth of experience as a high-growth global
digital business leader, most notably at Amazon’s subsidiary Audible, where he
served as Chief Product and Marketing Officer. Prior to working with the
Company, Louis was an Advisor to TPG Capital following a short CEO
assignment to turn around portfolio company Ride.com. His other past roles
include Chief Product and Marketing Officer at Yodle and Senior VP of Global
Products at Monster Worldwide.
None
None
None
4,159,225 ordinary shares
61,465,912 options over ordinary shares
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Directors' report
30 June 2019
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
Mr Matthew Morgan
Non-Executive Director
MBA, B Com, B App Sc
Mr Morgan is a former venture capitalist who is the Principal of Millers Point
Company, an advisory firm focused on emerging growth companies. He was a
co-founder of Diversa Ltd (ASX DVA) which was sold to OneVue (ASX OVH).
Non-Executive Director and Chairman of the Audit and Risk Committee of
Sensera Ltd (ASX SE1) and Leaf Resources Ltd (ASX LER).
None
Chairman of the Audit and Risk Committee and member of the Nomination and
Remuneration Committee
4,447,231 ordinary shares
4,250,000 options over ordinary shares
Mr Ajay Arora
Non-Executive Director
MBA, MSEE, B.Eng
Mr Arora is currently a Director of Product Innovation at Netflix, a world-leading
internet entertainment service. He has spent the last 20 years in management
roles within the most successful digital subscription businesses in the world, with
a primary focus on user acquisition and partnerships. Mr Arora was previously VP
of Product Management at Imgur, a top 100 global web destination for image
sharing, where he led the product, design and data teams. He also led global
product management for Audible, Inc., an Amazon company specialising in
spoken audio, where he oversaw mobile and desktop experiences, and led the
integration of Audible into Amazon’s Kindle and Echo product lines.
None
None
None
None
1,920,808 options over ordinary shares
Mr David Torrible
Non- Executive Director (appointed on 1 June 2019)
BA (Hons)
Mr Torrible is an active non-executive director and advisor to private companies,
financial firms and charities since 2012 when he retired as a partner of Goldman
Sachs. Prior to 2012 he worked 19 years as an equity specialist serving
institutional accounts in Asian capital markets. He has worked in Hong Kong,
Indonesia, USA and Australia. He is experienced in relationship management,
capital market risk and successfully managing geographically diverse teams.
None
None
Chairman of the Nomination and Remuneration Committee and member of the
Audit and Risk Committee
31,425,746 ordinary shares
None
'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.
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Directors' report
30 June 2019
Company secretaries
Mr Harvey Bui (ACCA, B Com) has held the role of Joint Company Secretary since June 2018. He is a qualified
chartered accountant with 10 years of experience in providing accounting finance and corporate compliance advisory
services to a wide range of businesses from not-for-profit organisations to multinational ASX/NASDAQ listed
companies, along with experience in auditing and assurance, having started his career with Ernst & Young in 2008.
Mr Phillip Hains (CA, MBA) has held the role of Joint Company Secretary since June 2018. He brings almost 30
years of experience in corporate secretarial, accounting and general management through his firm The CFO
Solution, a boutique professional services firm for listed companies. Mr Hains is currently a Director and Treasurer of
the Australian Outward Bound Foundation.
Meetings of directors
The number of meetings of the Company's Board of Directors ('the Board') held during the year ended 30 June 2019,
and the number of meetings attended by each director were:
Full Board
Remuneration Committee* Audit and Risk Committee
Attended
Held
Attended
Held
Attended
Held
Nomination and
Dr Evian Gordon
Mr Louis Gagnon
Mr Matthew Morgan
Mr Ajay Arora
Mr David Torrible
Dr Stephen Koslow
5
5
5
5
-
4
5
5
5
5
-
5
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1
-
-
-
-
-
1
-
-
-
Held: represents the number of meetings held during the time the director held office.
*
It is noted that despite there being no formal Nomination and Remuneration Committee meetings held during the
year, the Non-Executive Directors frequently discussed various matters in relation to remuneration during the
year ended 30 June 2019.
Remuneration report (audited)
The remuneration report details the key management personnel ('KMP') remuneration arrangements for the Group, in
accordance with the requirements of the Corporations Act 2001 and its Regulations.
KMP are those persons having authority and responsibility for planning, directing and controlling the activities of the
entity, directly or indirectly, including all directors.
The remuneration report is set out under the following main headings:
●
●
●
●
●
●
Principles used to determine the nature and amount of remuneration
Details of remuneration
Service agreements
Share-based compensation
Additional information
Additional disclosures relating to key management personnel
Principles used to determine the nature and amount of remuneration
The objective of the Group's employee reward framework is to ensure reward for performance is competitive and
appropriate for the results delivered. The framework aligns employee reward with the achievement of strategic
objectives and the creation of value for shareholders, and it is considered to conform to the market best practice for
the delivery of reward. The Board of Directors ('the Board') ensures that employee reward satisfies the following key
criteria for good reward governance practices:
competitiveness and reasonableness;
●
●
acceptability to shareholders;
●
performance linkage / alignment of executive compensation; and
●
transparency.
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Directors' report
30 June 2019
The Nomination and Remuneration Committee is responsible for determining and reviewing remuneration
arrangements for its directors, executives and the general remuneration framework for all employees. The
performance of the Group depends on the quality of its directors, executives and capability of the entire team. The
remuneration philosophy is to attract, motivate and retain high performance and high quality personnel.
The Nomination and Remuneration Committee has structured an executive remuneration framework that is market
competitive and complementary to the reward strategy of the Group. The Committee uses external remuneration
reports to benchmark the framework with Companies of similar size, market capitalisation and operations in similar
geography.
The reward framework is designed to align employee rewards to shareholders' interests. The Board have considered
that it should seek to enhance shareholders' interests by:
focusing on sustained growth in shareholder wealth;
●
delivering constant or increasing return on assets as well as focusing the executive on key non-financial drivers
●
of value; and
attracting and retaining high calibre executives.
●
Additionally, the reward framework should seek to enhance employees' interests by:
●
●
●
rewarding capability and experience;
reflecting competitive reward for contribution to growth in shareholder wealth; and
providing a clear structure for earning rewards.
In accordance with best practice corporate governance, the structure of non-executive director and executive director
remuneration is separate.
Non-executive directors' remuneration
Fees and payments to non-executive directors reflect the demands and responsibilities of their role. Non-executive
directors' fees and payments are reviewed by the Nomination and Remuneration Committee. The Nomination and
Remuneration Committee may, from time to time, receive advice from independent remuneration consultants to
ensure non-executive directors' fees and payments are appropriate and in line with the market but primarily refer to
Independently published remuneration reports for ASX listed companies and early stage technology Companies in
the USA to benchmark the framework with Companies of similar size, market capitalisation and operations in similar
geography.
Executive remuneration
The Group aims to reward executives based on their position and responsibility, with a level and mix of remuneration
which has both fixed and variable components.
The executive remuneration and reward framework has four components:
●
●
●
●
base pay;
short-term performance incentives;
equity-based payments; and
other remuneration such as superannuation and non-monetary benefits including health insurance for US
employees.
The combination of these comprises the executive's total remuneration.
Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed by the
Nomination and Remuneration Committee based on individual and business unit performance, the overall
performance of the Group and comparable market remunerations.
Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor
vehicle benefits) where it does not create any additional costs to the Group and provides additional value to the
executive.
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Directors' report
30 June 2019
The short-term incentives ('STI') program is designed to align the targets of the business units with the performance
hurdles of executives and employees. STI payments are granted to executives based on specific annual targets and
key performance indicators ('KPI's') being achieved. KPI's include revenue and or profit contribution, customer
satisfaction, leadership contribution and product management. Short-term incentives included the provision of cash
and or equity-based incentives.
The long-term incentives ('LTI') include long service leave and equity-based payments in the form of options which
are exercisable at a premium to the share price at the time they are issued. Options vest annually over a period of
three or four years. The Nomination and Remuneration Committee reviewed the long-term equity-linked performance
incentives specifically for executives during the year ended 30 June 2019.
Consolidated entity performance and link to remuneration
Remuneration for certain individuals is directly linked to the performance of the Group. A portion of cash bonus and
incentive payments are dependent on defined revenue and earnings targets being met. The remaining portion of the
cash bonus and incentive payments are at the discretion of the Nomination and Remuneration Committee based on
established KPI’s per employee.
The Nomination and Remuneration Committee is of the opinion that the continued improved results can be attributed
in part to the adoption of performance-based compensation and is satisfied that this improvement will continue to
increase shareholder wealth if maintained over the coming years.
Use of remuneration consultants
During the financial year ended 30 June 2019, the Group had not engaged any remuneration consultants to review or
advise upon its existing remuneration policies, including the implementation of the LTI.
Voting and comments made at the Company's 2018 Annual General Meeting ('AGM')
At the 2018 AGM, 91.62% of the votes received supported the adoption of the remuneration report for the year
ended 30 June 2018. The Company did not receive any specific feedback at the AGM regarding its remuneration
practices.
Details of remuneration
Amounts of remuneration
Details of the remuneration of key management personnel of the Group are set out in this section.
The key management personnel of the Group consisted of the following directors of Total Brain Limited:
●
●
●
●
●
●
Dr Evian Gordon - Executive Chairman
Mr Louis Gagnon - Managing Director and Chief Executive Officer
Mr Matthew Morgan - Non-Executive Director
Mr Ajay Arora - Non-Executive Director
Mr David Torrible - Non-Executive Director (appointed on 1 June 2019)
Dr Stephen Koslow - Non-Executive Director (resigned on 1 June 2019)
And the following persons:
●
●
Mr Matthew Mund - Chief Operating Officer (COO)
Mr Emil Vasilev - Director of Finance and Operations
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Total Brain Limited
Directors' report
30 June 2019
Short-term benefits
Post-
employment
benefits
Cash
Non-
bonus*** monetary annuation
$
Super-
$
$
Long-term
benefits Share-based payments
Long
service
leave
$
Equity-
settled
shares
$
Equity-
settled
options
$
Total
$
2019
Non-Executive
Directors:
Mr Matthew
Morgan
Mr Ajay Arora
Dr Stephen
Koslow *
Mr David Torrible
**
Executive
Directors:
Dr Evian Gordon
Mr Louis Gagnon
Other Key
Management
Personnel:
Mr Matthew
Mund
Mr Emil Vasilev
Cash
salary
and fees
$
79,944
41,656
33,000
4,583
-
-
-
-
349,469
419,361
-
256,213
349,468
230,649
1,508,130
120,638
50,427
427,278
-
-
-
-
-
-
-
-
-
-
-
-
435
-
-
-
-
435
-
-
-
-
-
-
-
-
-
-
-
-
-
26,125
348
106,069
42,004
131
33,131
-
5,018
-
-
-
32,679
349,469
708,253
-
-
-
12,655
2,944
482,761
284,020
74,882 2,010,725
Represents remuneration from 1 July 2018 to 1 June 2019
Represents remuneration from 1 June 2019 to 30 June 2019
*
**
*** Cash bonuses were paid upon the successful re-capitalisation of the Group in December 2017 and the
successful launch of the Total Brain product and brand in September 2018.
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Total Brain Limited
Directors' report
30 June 2019
Short-term benefits
Post-
employment
benefits
Cash
salary
and fees
$
Cash
bonus
$
Other
$
Super-
annuation
$
Long-term
benefits Share-based payments
Long
service
leave
$
Equity-
settled
shares
$
Equity-
settled
options
$
Total
$
55,000
127,463
45,464
388,735
208,350
-
-
-
-
-
-
-
135,727
-
12,894
-
173,625
203,389
1,074,563
-
-
127,463
-
-
135,727
-
-
12,894
-
-
-
-
-
-
-
-
-
-
-
100,937
283,400
141
45,605
-
454,093
537,356
662,443
-
-
-
238,496
95,549
412,121
298,938
889,216 2,239,863
2018
Non-Executive
Directors:
Mr Matthew
Morgan*
Dr Stephen
Koslow**
Executive
Directors:
Dr Evian Gordon
***
Mr Louis Gagnon
Other Key
Management
Personnel:
Mr Matthew
Mund
Mr Emil Vasilev
*
Included for Mr Morgan is a $127,463 fee for recapitalisation services, which was subsequently reinvested in the
December 2017 capital raising.
Mr Koslow's directors' fees are $36,000 per annum. 2018 includes a catch-up payment from 2017.
**
*** Included in cash salary and fees for Dr Gordon is a payment of $100,000 for unused annual leave. The
$135,727 amount that has been recorded as other paid to Dr Gordon was previously recognised in the
statement of financial position as an unpaid salary for the period from October 2012 to June 2016.
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
Non-Executive Directors:
Mr Matthew Morgan
Mr Ajay Arora
Dr Stephen Koslow
Mr David Torrible
Executive Directors:
Dr Evian Gordon
Mr Louis Gagnon
Other Key Management
Personnel:
Mr Matthew Mund
Mr Emil Vasilev
Fixed remuneration
2019
2018
At risk - STI
At risk - LTI
2019
2018
2019
2018
75%
99%
100%
100%
100%
59%
64%
-
100%
-
100%
32%
-
-
-
-
-
36%
72%
81%
42%
68%
25%
18%
-
-
-
-
-
-
-
-
25%
1%
-
-
-
5%
3%
1%
36%
-
-
-
-
68%
58%
32%
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Total Brain Limited
Directors' report
30 June 2019
The proportion of the cash bonus paid/payable or forfeited is as follows:
Name
Non-Executive Directors:
Mr Matthew Morgan
Executive Directors:
Dr Evian Gordon
Mr Louis Gagnon
Other Key Management Personnel:
Mr Matthew Mund
Mr Emil Vasilev
Cash bonus paid/payable
2019
2018
Cash bonus forfeited
2018
2019
-
100%
-
100%
100%
-
100%
100%
-
-
-
-
-
-
-
-
-
-
-
-
Service agreements
Remuneration and other terms of employment for key management personnel are formalised in service agreements.
Details of these agreements are as follows:
Name:
Title:
Term of agreement:
Details:
Name:
Title:
Term of agreement:
Details:
Name:
Title:
Term of agreement:
Details:
Name:
Title:
Term of agreement:
Details:
Name:
Title:
Term of agreement:
Details:
Name:
Title:
Term of agreement:
Details:
Name:
Title:
Term of agreement:
Details:
Dr Evian Gordon
Executive Chairman
No fixed term
1 months' notice required to terminate. Entitled to 75% of gross salary.
Mr Matthew Morgan
Non-Executive Director
No fixed term
No notice required to terminate. Entitled to 0% of gross fees.
Mr Ajay Arora
Non-Executive Director
No fixed term
No notice required to terminate. Entitled to 0% of gross fees.
David Torrible
Non-Executive Director
No fixed term
No notice required to terminate. Entitled to 0% of gross fees.
Mr Louis Gagnon
Managing Director and Chief Executive Officer
No fixed term
1 months' notice required to terminate. Entitled to 12 months of gross salary,
medical insurances and pro-rata portion of annual bonus.
Mr Matthew Mund
Chief Operating Officer
No fixed term
No notice required to terminate. Entitled to 6 months of gross salary, medical
insurances and pro-rata portion of annual bonus.
Mr Emil Vasilev
Director of Finance and Operations
No fixed term
No notice required to terminate. Entitled to 6 months of gross salary, medical
insurances and pro-rata portion of annual bonus.
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Total Brain Limited
Directors' report
30 June 2019
KMP have no entitlement to termination payments in the event of removal for misconduct.
Share-based compensation
Issue of shares
There were no shares issued to directors and other key management personnel as part of compensation during the
year ended 30 June 2019.
Options
The terms and conditions of each grant of options over ordinary shares affecting remuneration of directors and other
key management personnel in this financial year or future reporting years are as follows:
Name
Mr Matthew
Morgan
Number of
options
granted
Grant date
Vesting date and
exercisable date Expiry date
Exercise
price
Fair value
per option
at grant date
1,000,000 14/12/2017
1,000,000 14/12/2017
14/12/2018
14/12/2019
10/01/2023
10/01/2023
$0.1000
$0.1000
$0.0330
$0.0330
Mr Louis Gagnon
9,410,985 14/12/2017
9,410,985 14/12/2017
22/05/2019
22/05/2020
22/05/2022
22/05/2022
$0.1600
$0.1600
$0.0040
$0.0040
Mr Ajay Arora
Mr Matthew
Mund
480,202 29/04/2019
480,202 29/04/2019
480,202 29/04/2019
480,202 29/04/2019
4,455,493 16/07/2017
4,455,493 16/07/2017
4,455,493 16/07/2017
29/04/2019
29/04/2020
29/04/2021
29/04/2022
16/07/2018
16/07/2019
16/07/2020
28/04/2024
28/04/2024
28/04/2024
28/04/2024
16/07/2022
16/07/2022
16/07/2022
$0.0800
$0.1200
$0.1600
$0.1600
$0.1200
$0.1600
$0.1600
$0.0010
$0.0010
$0.0010
$0.0010
$0.0060
$0.0030
$0.0030
Mr Emil Vasilev
588,459 01/07/2017
588,459 01/07/2017
17/05/2019
17/05/2020
17/05/2022
17/05/2022
$0.1600
$0.1600
$0.0050
$0.0050
Options granted carry no dividend or voting rights.
Additional information
The earnings of the Group for the five years to 30 June 2019 are summarised below:
2019
$
2018
$
2017
$
2016
$
2015
$
Sales revenue
Loss after income tax
2,608,990
2,602,137
(8,570,754) (23,101,340)
2,369,321
(9,868,954)
2,910,157
(4,025,097)
2,637,973
(2,595,316)
The factors that are considered to affect total shareholders return ('TSR') are summarised below:
2019
2018
2017
2016
2015
Share price at financial year end ($)
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
0.02
(1.45)
(1.45)
0.04
(6.38)
(6.38)
0.06
(6.45)
(6.45)
0.13
(2.84)
(2.84)
0.23
(2.02)
(2.02)
21
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Total Brain Limited
Directors' report
30 June 2019
Additional disclosures relating to key management personnel
Shareholding
The number of shares in the Company held during the financial year by each director and other members of key
management personnel of the Group, including their personally related parties, is set out below:
Ordinary shares
Dr Evian Gordon
Mr Matthew Morgan
Dr Stephen Koslow
Mr Louis Gagnon
Mr David Torrible
Mr Matthew Mund
Mr Emil Vasilev
Balance at Received
the start of as part of
the year
remuneration Additions
Disposals/
other
Balance at
the end of
the year
13,018,749
3,417,152
94,250
4,159,225
-
4,444,824
702,188
25,836,388
-
-
1,030,079
-
-
-
-
-
- 31,425,746
5,443,000
-
-
-
37,898,825
-
- 13,018,749
4,447,231
-
94,250
-
4,159,225
-
31,425,746
-
9,887,824
-
-
702,188
63,735,213
-
Option holding
The number of options over ordinary shares in the Company held during the financial year by each director and other
members of key management personnel of the Group, including their personally related parties, is set out below:
Balance at
the start of Granted as
the year
remuneration
Expired
Balance at
the end of
the year
Vested and
exercisable
Options over ordinary shares
Mr Matthew Morgan
Dr Stephen Koslow
Mr Louis Gagnon
Mr Ajay Arora
Mr Matthew Mund
Mr Emil Vasilev
5,138,889
249,500
62,173,987
-
30,975,434
6,561,063
-
-
-
1,920,808
-
-
(888,889)
-
3,250,000
4,250,000
249,500
249,500
(708,075) 61,465,912 52,054,926
480,202
1,920,808
(242,477) 30,732,957 21,821,971
5,942,295
6,530,754
(30,309)
-
105,098,873
1,920,808
(1,869,750) 105,149,931 83,798,894
Loans to key management personnel and their related parties
In the prior year, the Company entered a short-term interest-free loan agreement with Mr Gagnon for US$59,954 and
other employees for US$14,546. Mr Gagnon and the employees subsequently purchased shares in the Company.
The loans were repaid during the current year.
There were no other transactions with key management personnel and their related parties.
This concludes the remuneration report, which has been audited.
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Total Brain Limited
Directors' report
30 June 2019
Shares under option
The following options over ordinary shares of Total Brain Limited were outstanding at the date of this report.
Grant date
14/04/2015
21/12/2016
22/05/2017
01/07/2017
01/07/2017
01/07/2017
16/07/2017
16/07/2017
16/07/2017
24/07/2017
24/07/2017
24/07/2017
07/08/2017
07/08/2017
07/08/2017
14/12/2017
14/12/2017
14/12/2017
14/12/2017
15/12/2017
19/12/2017
08/01/2018
08/01/2018
08/01/2018
24/02/2018
28/02/2018
01/04/2018
01/04/2018
01/04/2018
01/04/2018
29/04/2019
29/04/2019
29/04/2019
29/04/2019
Expiry date
14/04/2020
29/11/2021
22/05/2022
17/05/2022
17/05/2022
17/05/2022
16/07/2022
16/07/2022
16/07/2022
24/07/2022
24/07/2022
24/07/2022
07/08/2022
07/08/2022
07/08/2022
22/05/2022
22/05/2022
22/05/2022
10/01/2023
15/12/2022
10/01/2021
07/01/2023
07/01/2023
07/01/2023
23/02/2023
27/02/2023
31/03/2023
31/03/2023
31/03/2023
31/03/2023
28/04/2021
28/04/2024
28/04/2024
28/04/2024
Exercise
price
(Cents)
Number
under
option
37.5
20.0
8.0
8.0
12.0
16.0
12.0
16.0
8.0
12.0
16.0
8.0
12.0
16.0
765,000
499,500
5,000,000
4,765,377
588,459
1,176,918
8.0 17,366,478
4,455,493
8,910,986
8,951,563
2,650,521
5,301,042
480,202
480,202
960,404
8.0 28,232,956
12.0
9,410,985
16.0 18,821,970
10.0
4,000,000
10.0 50,000,000
4,000,000
12.0
1,920,810
8.0
1,920,810
12.0
3,841,620
16.0
300,000
8.0
300,000
8.0
1,599,346
8.0
1,441,477
12.0
1,915,079
16.0
1,441,477
24.0
2,066,115
4.5
480,202
8.0
480,202
12.0
960,404
16.0
195,485,598
Shares issued on the exercise of options
There were no ordinary shares of Total Brain Limited issued on the exercise of options during the year ended 30
June 2019 and up to the date of this report.
Indemnity and insurance of officers
The Company has indemnified the directors and executives of the Company for costs incurred, in their capacity as a
director or executive, for which they may be held personally liable, except where there is a lack of good faith.
During the financial year, the Company paid a premium in respect of a contract to ensure the directors and
executives of the Company against a liability to the extent permitted by the Corporations Act 2001. The contract of
insurance prohibits disclosure of the nature of the liability and the amount of the premium.
23
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Total Brain Limited
Directors' report
30 June 2019
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.
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 part of those proceedings.
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the
auditor are outlined in note 23 to the financial statements.
The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by
another person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors
imposed by the Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 23 to the financial statements do not
compromise the external auditor's independence requirements of 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 partners of Grant Thornton
There are no officers of the Company who are former partners of Grant Thornton.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set
out immediately after this directors' report.
Auditor
Grant Thornton continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act
2001.
On behalf of the directors
___________________________
Dr Evian Gordon
Chairman
30 August 2019
24
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Brisbane QLD 4000
Correspondence to:
GPO Box 1008
Brisbane QLD 4001
T +61 7 3222 0200
E info.qld@au.gt.com
W www.grantthornton.com.au
Auditor’s Independence Declaration
To the Directors of Total Brain Limited
In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Total Brain
Limited for the year ended 30 June 2019, I declare that, to the best of my knowledge and belief, there have been:
a
b
no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
Grant Thornton Audit Pty Ltd
Chartered Accountants
CDJ Smith
Partner – Audit & Assurance
Brisbane, 30 August 2019
Grant Thornton Audit Pty Ltd ACN 130 913 594
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For personal use only
FINANCIAL STATEMENTS
Year Ended 30 June 2019
ir@totalbrain.com
totalbrain.com
ASX: TTB ABN 24 094 069 682
26
For personal use only
Total Brain Limited
Statement of profit or loss and other comprehensive income
For the year ended 30 June 2019
Revenue
Note
Consolidated
2019
$
2018
$
5
2,602,137
2,615,787
Interest income calculated using the effective interest method
21,261
-
6
7
6
13
10
6
6
6
8
Expenses
Cost of equipment and third-party drug trial expense
Employee benefits expense
Corporate and operating costs
Depreciation and amortisation expense
Impairment of intangible assets
Impairment of receivables
Share of losses of joint ventures accounted for using the equity method
Share-based payments expense
Issue of options on conversion of convertible bond
Loss on conversion of convertible bond
Net foreign exchange losses
Finance costs
Loss before income tax benefit
Income tax benefit
Loss after income tax benefit for the year attributable to the owners of
Total Brain Limited
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
Other comprehensive income for the year, net of tax
Total comprehensive income for the year attributable to the owners of
Total Brain Limited
(318,585)
(5,534,036)
(3,332,336)
(418,489)
(122,207)
(3,626,641)
(2,542,318)
(90,650)
(1,380,680) (13,568,240)
-
(42,238)
(1,206,097)
(1,660,510)
(3,166,358)
(14,855)
(523,353)
(13,354)
-
(148,790)
-
-
(45,562)
(2,320)
(8,570,754) (23,947,680)
-
846,340
(8,570,754)
(23,101,340)
186,793
395,053
186,793
395,053
(8,383,961)
(22,706,287)
Cents
Cents
Basic earnings per share
Diluted earnings per share
31
31
(1.45)
(1.45)
(6.38)
(6.38)
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
27
For personal use only
Total Brain Limited
Statement of financial position
As at 30 June 2019
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Contract assets
Prepayments
Total current assets
Non-current assets
Plant and equipment
Intangibles
Other
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Contract liabilities
Employee benefits
Total current liabilities
Non-current liabilities
Deferred tax
Employee benefits
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
Note
Consolidated
2019
$
2018
$
9
10
11
12
13
14
15
16
8
17
5,214,802
811,160
89,935
97,393
6,213,290
6,615,972
1,317,206
-
28,783
7,961,961
247,349
221,636
14,900,018 14,659,278
11,800
15,157,927 14,892,714
10,560
21,371,217 22,854,675
457,958
209,489
385,001
1,052,448
489,476
-
488,495
977,971
65,165
33,704
98,869
65,165
29,884
95,049
1,151,317
1,073,020
20,219,900 21,781,655
18
19
64,753,937 58,080,521
3,898,159
(48,767,779) (40,197,025)
4,233,742
20,219,900 21,781,655
The above statement of financial position should be read in conjunction with the accompanying notes
28
For personal use only
Total Brain Limited
Statement of changes in equity
For the year ended 30 June 2019
Consolidated
Equity
component
on
convertible
bonds
$
Issued
capital
$
Reserves
$
Accumulated
losses
$
Total equity
$
Balance at 1 July 2017
31,777,787
5,738,666
664,939 (22,834,351) 15,347,041
Loss after income tax benefit for the year
Other comprehensive income for the year,
net of tax
Total comprehensive income for the year
Transactions with owners in their capacity as
owners:
Contributions of equity, net of transaction
costs (note 18)
Share-based payments (note 32)
Transfer on settlement of convertible bond
-
-
-
-
-
-
- (23,101,340) (23,101,340)
395,053
-
395,053
395,053 (23,101,340) (22,706,287)
26,302,734
-
-
-
-
(5,738,666)
-
2,838,167
-
-
-
5,738,666
26,302,734
2,838,167
-
Balance at 30 June 2018
58,080,521
-
3,898,159 (40,197,025) 21,781,655
Consolidated
Issued
capital
$
Reserves
$
Accumulated
losses
$
Total equity
$
Balance at 1 July 2018
58,080,521
3,898,159 (40,197,025) 21,781,655
Loss after income tax expense for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
-
-
-
-
186,793
(8,570,754)
-
(8,570,754)
186,793
186,793
(8,570,754)
(8,383,961)
Transactions with owners in their capacity as owners:
Contributions of equity, net of transaction costs (note 18)
Share-based payments (note 32)
6,673,416
-
-
148,790
-
-
6,673,416
148,790
Balance at 30 June 2019
64,753,937
4,233,742 (48,767,779) 20,219,900
The above statement of changes in equity should be read in conjunction with the accompanying notes
29
For personal use only
Total Brain Limited
Statement of cash flows
For the year ended 30 June 2019
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Research and development tax incentive
Interest received
Note
Consolidated
2019
$
2018
$
2,727,088
(9,362,747)
967,006
21,261
2,276,786
(6,630,416)
466,929
8,155
Net cash used in operating activities
30
(5,647,392)
(3,878,546)
Cash flows from investing activities
Payments for property, plant and equipment
Payments for intangibles
Net proceeds/(repayments) on loans made to related parties
Cash acquired in acquisition of subsidiary
12
13
(78,520)
(2,585,125)
102,553
-
(94,303)
(1,646,395)
(102,553)
18,154
Net cash used in investing activities
(2,561,092)
(1,825,097)
Cash flows from financing activities
Net proceeds from issue of shares
Repayment of borrowings to joint venture
Net cash from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
18
6,673,416 10,460,567
(84,496)
-
6,673,416 10,376,071
(1,535,068)
6,615,972
133,898
4,672,428
1,570,197
373,347
Cash and cash equivalents at the end of the financial year
9
5,214,802
6,615,972
The above statement of cash flows should be read in conjunction with the accompanying notes
30
For personal use only
Total Brain Limited
Notes to the financial statements
30 June 2019
Note 1. General information
The financial statements cover Total Brain Limited as a Group consisting of Total Brain Limited and the entities it
controlled at the end of, or during, the year. The financial statements are presented in Australian dollars, which is
Total Brain Limited's functional and presentation currency.
Total Brain Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its
registered office and principal place of business is:
15 Belvoir Street
Surry Hills NSW 2010
A description of the nature of the Group's operations and its principal activities are included in the directors' report,
which is not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of directors, on 30 August 2019.
The directors have the power to amend and reissue the financial statements.
Note 2. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. These
policies have been consistently applied to all the years presented, unless otherwise stated.
New or amended Accounting Standards and Interpretations adopted
The Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the
Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. The adoption of
these Accounting Standards and Interpretations did not have any significant impact on the financial performance or
position of the Group.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early
adopted.
The following Accounting Standards and Interpretations are most relevant to the Group:
AASB 9 Financial Instruments
The Group has adopted AASB 9 from 1 July 2018. The standard introduced new classification and measurement
models for financial assets. A financial asset shall be measured at amortised cost if it is held within a business model
whose objective is to hold assets in order to collect contractual cash flows which arise on specified dates and that are
solely principal and interest. A debt investment shall be measured at fair value through other comprehensive income
if it is held within a business model whose objective is to both hold assets in order to collect contractual cash flows
which arise on specified dates that are solely principal and interest as well as selling the asset on the basis of its fair
value. All other financial assets are classified and measured at fair value through profit or loss unless the entity
makes an irrevocable election on initial recognition to present gains and losses on equity instruments (that are not
held-for-trading or contingent consideration recognised in a business combination) in other comprehensive income
('OCI'). Despite these requirements, a financial asset may be irrevocably designated as measured at fair value
through profit or loss to reduce the effect of, or eliminate, an accounting mismatch. For financial liabilities designated
at fair value through profit or loss, the standard requires the portion of the change in fair value that relates to the
entity's own credit risk to be presented in OCI (unless it would create an accounting mismatch). New simpler hedge
accounting requirements are intended to more closely align the accounting treatment with the risk management
activities of the entity. New impairment requirements use an 'expected credit loss' ('ECL') model 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. For receivables,
a simplified approach to measuring expected credit losses using a lifetime expected loss allowance is available.
31
For personal use only
Total Brain Limited
Notes to the financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
AASB 15 Revenue from Contracts with Customers
The Group has adopted AASB 15 from 1 July 2018. The standard provides a single comprehensive model for
revenue recognition. The core principle of the standard is that an entity shall recognise revenue to depict the transfer
of promised goods or services to customers at an amount that reflects the consideration to which the entity expects
to be entitled in exchange for those goods or services. The standard introduced a new contract-based revenue
recognition model with a measurement approach that is based on an allocation of the transaction price. This is
described further in the accounting policies below. Credit risk is presented separately as an expense rather than
adjusted against revenue. Contracts with customers are presented in an entity's statement of financial position as a
contract liability, a contract asset, or a receivable, depending on the relationship between the entity's performance
and the customer's payment. Customer acquisition costs and costs to fulfil a contract can, subject to certain criteria,
be capitalised as an asset and amortised over the contract period.
There were also consequential changes to AASB 101 'Presentation of Financial Statements' from the introduction of
AASB 15 and AASB 9.
Impact of adoption
AASB 9 and AASB 15 were adopted using the modified retrospective approach and as such comparatives have not
been restated. The impact of adoption on opening retained profits as at 1 July 2018 was nil.
The impact on adoption of AASB 9 and AASB 15 is immaterial other than the changes to disclosure as required by
the standard, as follows;
●
●
●
●
●
interest income is now shown separate on the face of the Statement of profit or loss and other comprehensive
income;
impairment of receivables is now shown on the face of the Statement of profit or loss and other comprehensive
income;
accrued revenue is now classified as contract assets;
provision for impairment of receivables is now classified as allowance for expected credit losses; and
deferred revenue is now classified as contract liabilities.
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting
Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') and the Corporations
Act 2001, as appropriate for for-profit oriented entities. These financial statements also comply with International
Financial Reporting Standards as issued by the International Accounting Standards Board ('IASB').
Historical cost convention
The financial statements have been prepared under the historical cost convention.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group's accounting policies. The areas
involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to
the financial statements, are disclosed in note 3.
Going concern
During the year, the Group incurred a net loss after tax of $8,570,754 (2018: $23,101,340) and net operating cash
outflows of $5,647,392 (2018: $3,878,546). Prima facie, these circumstances represent a material uncertainty
regarding the Group’s ability to continue as a going concern.
Management understands that its current commitment to fund the ongoing growth and commercialisation objectives
and to continue as a going concern will require funds to be raised.
32
For personal use only
Total Brain Limited
Notes to the financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
The Directors have a reasonable expectation that they will be able to raise sufficient funds in the equity markets to
provide adequate levels of working capital to fund the Company’s strategic goals. They believe therefore that the
Company continues to be a going concern and that it will be able to pay its debts as and when they fall due for a
period of at least 12 months from the date of this report. On this basis, the Directors believe that the going concern
basis of presentation is appropriate. No adjustments have been made relating to the recoverability and classification
of recorded asset amounts and classification of liabilities that might be necessary should the Company not have the
ability to continue as a going concern. If for any reason the Company is unable to continue as a going concern, it
would impact on the Company’s ability to realise assets at their recognised values and to extinguish liabilities in the
normal course of business at the amounts stated in the consolidated financial statements.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the Group only.
Supplementary information about the parent entity is disclosed in note 27.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Total Brain Limited
('Company' or 'parent entity') as at 30 June 2019 and the results of all subsidiaries for the year then ended. Total
Brain Limited and its subsidiaries together are referred to in these financial statements as the 'Group'.
Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the Group is
exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those
returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on
which control is transferred to the Group. They are de-consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the Group 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 Group.
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.
Where the Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-
controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The
Group recognises the fair value of the consideration received and the fair value of any investment retained together
with any gain or loss in profit or loss.
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.
Foreign currency translation
The presentation currency of the Group’s financial statements is Australian dollars.
The functional currency of Brain Resource Inc., a subsidiary of the ultimate parent company, Total Brain Limited, is
US dollars.
Foreign currency transactions
Foreign currency transactions are translated into the Company's functional currency using the exchange rates
prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation at financial year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in profit or loss.
33
For personal use only
Total Brain Limited
Notes to the financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
Foreign operations
The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the
reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using the
average exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting
foreign exchange differences are recognised in other comprehensive income through the foreign currency reserve in
equity.
The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed
of.
Revenue recognition
The Group recognises revenue as follows:
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the consideration to which the Group is expected to be entitled in
exchange for transferring goods or services to a customer. For each contract with a customer, the Group: 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.
Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as
discounts, rebates and refunds, any potential bonuses receivable from the customer and any other contingent
events. Such estimates are determined using either the 'expected value' or 'most likely amount' method. The
measurement of variable consideration is subject to a constraining principle whereby revenue will only be recognised
to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will
not occur. The measurement constraint continues until the uncertainty associated with the variable consideration is
subsequently resolved. Amounts received that are subject to the constraining principle are recognised as a refund
liability.
Sale of software licenses
Software revenue comprises fees from subscribers to access the Group’s software platform during the license period.
Subscription-based arrangements generally have annual contractual terms.
In some customer contracts, software and other deliverables (such as services or support) are bundled together.
With the exception of set up charges (which are considered to be a separate performance obligation and for which
revenue is recognised at a point in time) the goods and services provided under these arrangements are highly
interrelated and are therefore accounted for as a single performance obligation. The Group recognises revenue
rateably as the services are performed, commencing with the date the service is made available to customers and all
other revenue recognition criteria have been satisfied. If, at the outset of an arrangement, revenue cannot be
measured reliably, revenue recognition is deferred until the relating fees become due and payable by the customer.
Additionally, if at the outset of an arrangement it is determined that collectability is not probable, revenue recognition
is deferred until the earlier of when collectability becomes probable or payment is received.
Sale of goods
Revenue from the sale of goods is recognised at the point in time when the customer obtains control of the goods,
which is generally at the time of delivery.
Rendering of services
Revenue from a contract to provide services is recognised over time as the services are rendered based on either a
fixed price or an hourly rate.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
34
For personal use only
Total Brain Limited
Notes to the financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
Interest income is recognised as interest accrues using the effective interest method
Interest income is recognised as interest accrues using the effective interest method. This is a method of calculating
the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective
interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the
financial asset to the net carrying amount of the financial asset.
Income tax
The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the
applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities
attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where
applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied
when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively
enacted, except for:
●
When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or
liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither
the accounting nor taxable profits; or
When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures,
and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse
in the foreseeable future.
●
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable
that future taxable amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date.
Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will
be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to
the extent that it is probable that there are future taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets
against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same
taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously.
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
Group'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 Group's normal operating cycle; it is
held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is
no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other
liabilities are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term,
highly liquid investments with original maturities of three months or less that are readily convertible to known amounts
of cash and which are subject to an insignificant risk of changes in value.
35
For personal use only
Total Brain Limited
Notes to the financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
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 allowance for expected credit losses. Trade receivables are generally due for
settlement within 30 days.
The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected
loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days
overdue.
Other receivables are recognised at amortised cost, less any allowance for expected credit losses.
Government grant receivable for research and development tax incentive ('R&D') is recognised to the degree that the
Group can reliably estimate that R&D expenditure for the full year will fall within the eligibility requirements. Advances
in other receivables are provided as an advance contractual payment generally covering the payable expected to
accrue over a 60-90 day period.
The accounting policy in place for the prior year was as follows;
Trade receivables, which generally have 30 – 60 day terms, are recognised and carried at original invoice amount
less an allowance for any uncollectible amounts. An estimate for doubtful debts is made when collection of the full
amount is no longer probable. Bad debts are written off when identified. The government grant receivable for R&D
tax incentives is recognised to the degree that the Group can reliably estimate that R&D expenditure for the full year
will fall within the eligibility requirements. Advances in Other receivables are provided as an advance contractual
payment generally covering the payable expected to accrue over a 60-90 day period. Trade and other receivables
with maturity greater than 12 months after reporting date are classified as non-current.
Contract assets
Contract assets are recognised when the Group has transferred goods or services to the customer but where the
Group is yet to establish an unconditional right to consideration. Contract assets are treated as financial assets for
impairment purposes.
Plant and equipment
Plant and equipment are stated at historical cost less accumulated depreciation and impairment. Historical cost
includes expenditure that is directly attributable to the acquisition of the items.
Depreciation is calculated on a diminishing value basis to write off the net cost of each item of plant and equipment
(excluding land) over their expected useful lives as follows:
Plant and equipment
3-10 years
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each
reporting date.
Leasehold improvements and plant and equipment under lease are depreciated over the unexpired period of the
lease or the estimated useful life of the assets, whichever is shorter.
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit
to the Group. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss.
Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement
and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset
or assets and the arrangement conveys a right to use the asset.
A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially all
the risks and benefits incidental to the ownership of leased assets, and operating leases, under which the lessor
effectively retains substantially all such risks and benefits.
36
For personal use only
Total Brain Limited
Notes to the financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
Finance leases are capitalised. A lease asset and liability are established at the fair value of the leased assets, or if
lower, the present value of minimum lease payments. Lease payments are allocated between the principal
component of the lease liability and the finance costs, so as to achieve a constant rate of interest on the remaining
balance of the liability.
Leased assets acquired under a finance lease are depreciated over the asset's useful life or over the shorter of the
asset's useful life and the lease term if there is no reasonable certainty that the Group will obtain ownership at the
end of the lease term.
Operating lease payments, net of any incentives received from the lessor, are charged to profit or loss on a straight-
line basis over the term of the lease.
Intangible assets
Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair
value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Finite life
intangible assets are subsequently measured at cost less amortisation and any impairment. The gains or losses
recognised in profit or loss arising from the derecognition of intangible assets are measured as the difference
between net disposal proceeds and the carrying amount of the intangible asset. The method and useful lives of finite
life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are
accounted for prospectively by changing the amortisation method or period.
Goodwill
Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for
impairment, or more frequently if events or changes in circumstances indicate that it might be impaired and is carried
at cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not
subsequently reversed.
Research and development
Research costs are expensed in the period in which they are incurred. Development costs are capitalised when it is
probable that the project will be a success considering its commercial and technical feasibility; the Group is able to
use or sell the asset; the Group has sufficient resources; and intent to complete the development and its costs can
be measured reliably. Capitalised development costs are amortised on a straight-line basis over the period of their
expected benefit, being their finite life of 5 years.
The Brain Resource International Database and associated analysis tools (‘BRID’) is treated as a single integrated
asset for presentation and impairment testing. Amortisation of components of BRID that are ready for use are
calculated on a straight line basis over 5 years.
Impairment of non-financial assets
Goodwill is not subject to amortisation and is tested annually for impairment, or more frequently if events or changes
in circumstances indicate that they might be impaired. Other non-financial assets are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is
the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the
asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are
grouped together to form a cash-generating unit.
Fair value less costs of disposal is determined by the directors based on an assessment of the price that would be
received to sell the asset in an orderly transaction between market participants at the measurement date.
37
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Total Brain Limited
Notes to the financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year
and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted.
The amounts are unsecured and are usually paid within 30 days of recognition.
Contract liabilities
Contract liabilities represent the Group's obligation to transfer goods or services to a customer and are recognised
when a customer pays consideration, or when the Group recognises a receivable to reflect its unconditional right to
consideration (whichever is earlier) before the Group has transferred the goods or services to the customer.
Finance costs
Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are
expensed in the period in which they are incurred.
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to
be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the
liabilities are settled.
Other long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date
are measured at the present value of expected future payments to be made in respect of services provided by
employees up to the reporting date using the projected unit credit method. Consideration is given to expected future
wage and salary levels, experience of employee departures and periods of service. Expected future payments are
discounted using market yields at the reporting date on high quality corporate bonds with terms to maturity and
currency that match, as closely as possible, the estimated future cash outflows.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred.
Share-based payments
Equity-settled share-based compensation benefits are provided to employees and contractors.
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees and
contractors in exchange for the rendering of services.
The cost of equity-settled transactions is measured at fair value on grant date. Fair value is independently
determined using the Black-Scholes option pricing model that takes into account the exercise price, the term of the
option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the
expected dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions
that do not determine whether the Group receives the services that entitle the employees to receive payment. No
account is taken of any other vesting conditions.
The cost of equity-settled transactions is 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.
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.
38
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Total Brain Limited
Notes to the financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
If the non-vesting condition is within the control of the Group or employee, the failure to satisfy the condition is
treated as a cancellation. If the condition is not within the control of the Group 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.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining
expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled
and new award is treated as if they were a modification.
Issued capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of
tax, from the proceeds.
Business combinations
The acquisition method of accounting is used to account for business combinations regardless of whether equity
instruments or other assets are acquired.
The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity
instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-
controlling interest in the acquiree. For each business combination, the non-controlling interest in the acquiree is
measured at either fair value or at the proportionate share of the acquiree's identifiable net assets. All acquisition
costs are expensed as incurred to profit or loss.
On the acquisition of a business, the Group assesses the financial assets acquired and liabilities assumed for
appropriate classification and designation in accordance with the contractual terms, economic conditions, the Group's
operating or accounting policies and other pertinent conditions in existence at the acquisition-date.
Where the business combination is achieved in stages, the Group remeasures its previously held equity interest in
the acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying
amount is recognised in profit or loss.
Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value.
Subsequent changes in the fair value of the contingent consideration classified as an asset or liability is recognised in
profit or loss. Contingent consideration classified as equity is not remeasured and its subsequent settlement is
accounted for within equity.
The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling
interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing
investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is
less than the fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the
difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition-date, but only after a
reassessment of the identification and measurement of the net assets acquired, the non-controlling interest in the
acquiree, if any, the consideration transferred and the acquirer's previously held equity interest in the acquirer.
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the
provisional amounts recognised and also recognises additional assets or liabilities during the measurement period,
based on new information obtained about the facts and circumstances that existed at the acquisition-date. The
measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the
acquirer receives all the information possible to determine fair value.
39
For personal use only
Total Brain Limited
Notes to the financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Total Brain 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
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into
account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary
shares and the weighted average number of shares assumed to have been issued for no consideration in relation to
dilutive potential ordinary shares.
Goods and Services Tax ('GST') and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is
not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or
as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement
of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax
authority.
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet
mandatory, have not been early adopted by the Group for the annual reporting period ended 30 June 2019. The
Group's assessment of the impact of these new or amended Accounting Standards and Interpretations, most
relevant to the Group, are set out below.
AASB 16 Leases
This standard is applicable to annual reporting periods beginning on or after 1 January 2019. The standard replaces
AASB 117 'Leases' and for lessees will eliminate the classifications of operating leases and finance leases. Subject
to exceptions, a 'right-of-use' asset will be capitalised in the statement of financial position, measured at the present
value of the unavoidable future lease payments to be made over the lease term. The exceptions relate to short-term
leases of 12 months or less and leases of low-value assets (such as personal computers and small office furniture)
where an accounting policy choice exists whereby either a 'right-of-use' asset is recognised or lease payments are
expensed to profit or loss as incurred. A liability corresponding to the capitalised lease will also be recognised,
adjusted for lease prepayments, lease incentives received, initial direct costs incurred and an estimate of any future
restoration, removal or dismantling costs. Straight-line operating lease expense recognition will be replaced with a
depreciation charge for the leased asset (included in operating costs) and an interest expense on the recognised
lease liability (included in finance costs). In the earlier periods of the lease, the expenses associated with the lease
under AASB 16 will be higher when compared to lease expenses under AASB 117. However, EBITDA (Earnings
Before Interest, Tax, Depreciation and Amortisation) results will be improved as the operating expense is replaced by
interest expense and depreciation in profit or loss under AASB 16. For classification within the statement of cash
flows, the lease payments will be separated into both a principal (financing activities) and interest (either operating or
financing activities) component. For lessor accounting, the standard does not substantially change how a lessor
accounts for leases.
40
For personal use only
Total Brain Limited
Notes to the financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
Impact of adoption of AASB 16
The Group will adopt AASB 16 from 1 July 2019 and has elected to use the modified transitional approach not to
restate comparatives. Furthermore the Group has elected to continue to account for leases as operating leases
where the lease term ends within 12 months of the date of initial application.
As detailed in note 25, the Group's undiscounted operating leases, on transition amounts to $84,622, of which 3
leases representing $78,465 will expire within 12 months and therefore will continue to be accounted for as operating
leases using the transitional provisions. The balance representing 1 lease amounting to $6,157 will be discounted
using the Group's incremental borrowing rate at the date of initial application and be capitalised as a finance lease as
at 1 July 2019.
New Conceptual Framework for Financial Reporting
A revised Conceptual Framework for Financial Reporting has been issued by the AASB and is applicable for annual
reporting periods beginning on or after 1 January 2020. This release impacts for-profit private sector entities that
have public accountability that are required by legislation to comply with Australian Accounting Standards and other
for-profit entities that voluntarily elect to apply the Conceptual Framework. Phase 2 of the framework is yet to be
released which will impact for-profit private sector entities. The application of new definition and recognition criteria as
well as new guidance on measurement will result in amendments to several accounting standards. The issue of
AASB 2019-1 Amendments to Australian Accounting Standards – References to the Conceptual Framework, also
applicable from 1 January 2020, includes such amendments. Where the Group has relied on the conceptual
framework in determining its accounting policies for transactions, events or conditions that are not otherwise dealt
with under Australian Accounting Standards, the Group may need to revisit such policies.
Note 3. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions
that affect the reported amounts in the financial statements. Management continually evaluates its judgements and
estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its
judgements, estimates and assumptions on historical experience and on other various factors, including expectations
of future events, management believes to be reasonable under the circumstances. The resulting accounting
judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions
that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to
the respective notes) within the next financial year are discussed below.
Share-based payment transactions
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the
equity instruments at the date at which they are granted. The fair value is determined by using Black-Scholes model
taking into account the terms and conditions upon which the instruments were granted. The accounting estimates
and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of
assets and liabilities within the next annual reporting period but may impact profit or loss and equity.
Determination of variable consideration
Judgement is exercised in estimating variable consideration which is determined having regard to past experience
with respect to goods or services that have a variable component. Revenue will only be recognised to the extent that
it is highly probable that a significant reversal in the amount of cumulative revenue recognised under the contract will
not occur when the uncertainty associated with the variable consideration is subsequently resolved.
Estimation of useful lives of assets
The Group determines the estimated useful lives and related depreciation and amortisation charges for its plant and
equipment and finite life intangible assets. The useful lives could change significantly as a result of technical
innovations or some other event. The depreciation and 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.
41
For personal use only
Total Brain Limited
Notes to the financial statements
30 June 2019
Note 3. Critical accounting judgements, estimates and assumptions (continued)
Goodwill and other intangible assets
The Group tests annually, or more frequently if events or changes in circumstances indicate impairment, whether
goodwill and other intangible assets have suffered any impairment, in accordance with the accounting policy stated in
note 2. Management have assessed the entire business as one cash-generating unit (‘CGU’). The recoverable
amount of this CGU has been determined based on fair value less costs of disposal, using a market capitalisation
approach as detailed in note 13.
Research and development costs
Research and development costs are only capitalised by the Group when the feasibility of completing the intangible
asset is valid and likely to result in a saleable asset.
Income tax
The Group is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required in
determining the provision for income tax. There are many transactions and calculations undertaken during the
ordinary course of business for which the ultimate tax determination is uncertain. The Group recognises liabilities for
anticipated tax audit issues based on the Group's current understanding of the tax law. Where the final tax outcome
of these matters is different from the carrying amounts, such differences will impact the current and deferred tax
provisions in the period in which such determination is made.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences only if the Group considers it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
Business combinations
As discussed in note 2, business combinations are initially accounted for on a provisional basis. The fair value of
assets acquired, liabilities and contingent liabilities assumed are initially estimated by the Group taking into
consideration all available information at the reporting date. Fair value adjustments on the finalisation of the business
combination accounting is retrospective, where applicable, to the period the combination occurred and may have an
impact on the assets and liabilities, depreciation and amortisation reported.
Note 4. Operating segments
Identification of reportable operating segments
The Group is organised into one operating segment being the development and commercialisation of brain health
products, primarily delivered to a range of users through the one Total Brain platform. This operating segment is
based on the internal reports that are reviewed and used by the Board of Directors (who are identified as the Chief
Operating Decision Makers ('CODM')) in assessing performance and in determining the allocation of resources.
There is no aggregation of operating segments.
The CODM reviews EBITDA (earnings before interest, tax, depreciation and amortisation). The accounting policies
adopted for internal reporting to the CODM are consistent with those adopted in the financial statements.
The information reported to the CODM is on a monthly basis.
Major customers
During the year ended 30 June 2019, approximately $1,000,000 (2018: $900,000) of the Group’s external revenue
was derived from sales to 2 corporate and affinity customers.
Geographical information
The majority of revenue is derived in the United States.
42
For personal use only
Total Brain Limited
Notes to the financial statements
30 June 2019
Note 5. Revenue
Revenue from contracts with customers
Total Brain* – Corporate
Total Brain* – Affinity
Total Brain* – All other
Clinical **
Discovery***
iSPOT****
Other revenue
Interest
Other revenue
Revenue
Consolidated
2019
$
2018
$
1,788,391
194,138
85,471
323,631
42,762
167,744
2,602,137
1,341,690
504,008
249,354
478,421
35,517
-
2,608,990
-
-
-
8,155
(1,358)
6,797
2,602,137
2,615,787
Revenue from contracts with customers is derived from the Group’s combined database which includes both BRID
and iSpot data. The revenue is split based on go to market channels as follows:
*
**
***
Total Brain revenue primarily comprises of fees received from customers to access the Group’s software
platform. Customers include:
Corporate - B2B customers who provide access to the Group’s software platform to their employees;
Affinity - Partners who provide access to the Group’s software platform to their members; and
All other - Other miscellaneous Total Brain revenue.
Clinical revenue comprises of revenue from clinics who provide access to the Group’s software platform to their
clients.
Discovery revenue comprises of revenue which is primarily received from academic institutions that use the
Group’s software platform to collect new data as part of their own studies.
**** iSpot revenue comprises of revenue received from customers who are provided access to the iSpot data.
Disaggregation of revenue
The disaggregation of revenue from contracts with customers is as follows:
Major revenue lines
Software license
Services and access fees
Timing of revenue recognition
Revenue transferred over time
Revenue transferred at a point in time
Consolidated
2019
$
2018
$
2,391,631
210,506
2,602,137
2,391,631
210,506
2,602,137
-
-
-
-
-
-
AASB 15 was adopted using the modified retrospective approach and as such comparatives have not been provided
for disaggregation of revenue.
43
For personal use only
Total Brain Limited
Notes to the financial statements
30 June 2019
Note 6. Expenses
Loss before income tax includes the following specific expenses:
Cost of sales
Cost of equipment and third-party drug trial expense
Depreciation
Plant and equipment
Amortisation
Development
Total depreciation and amortisation
Impairment
Goodwill
Development
Total impairment
Finance costs
Interest and finance charges paid/payable
Net foreign exchange loss
Net foreign exchange loss
Rental expense relating to operating leases
Minimum lease payments
Superannuation expense
Defined contribution superannuation expense
Share-based payments expense
Share-based payments expense
Research and development tax incentive costs
Research and development expenditure recognised as an expense
Note 7. Corporate and operating costs
Insurance and professional fees
Communications expense
Marketing and agent support expenses
Occupancy expenses
Travel expenses
Other expenses
44
Consolidated
2019
$
2018
$
318,585
122,207
46,790
36,819
371,699
53,831
418,489
90,650
-
1,380,680
5,081,097
8,487,143
1,380,680 13,568,240
2,320
523,353
45,562
14,855
146,270
148,619
326,042
211,670
148,790
1,206,097
149,386
84,647
Consolidated
2019
$
2018
$
808,182
624,276
827,207
649,661
303,617
119,393
1,188,791
399,773
274,468
286,609
236,458
156,219
3,332,336
2,542,318
For personal use only
Total Brain Limited
Notes to the financial statements
30 June 2019
Note 8. Income tax
Income tax benefit
Deferred tax - origination and reversal of temporary differences
Aggregate income tax benefit
Deferred tax included in income tax benefit comprises:
Decrease in deferred tax liabilities
Numerical reconciliation of income tax benefit and tax at the statutory rate
Loss before income tax benefit
Tax at the statutory tax rate of 27.5%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Share-based payments
Share of loss - joint ventures
Permanent differences from research and development refund
Effect of FX movement on translation
Sundry items
Current year tax losses not recognised
Prior year tax losses not recognised now recouped
Difference in overseas tax rates
Prior year (over) / under provisions
Income tax benefit
Consolidated
2019
$
2018
$
-
-
(846,340)
(846,340)
-
(846,340)
(8,570,754) (23,947,680)
(2,356,957)
(6,585,612)
40,917
-
94,829
213,772
12,590
788,317
(23,219)
564,054
204,236
1,777
(1,994,849)
1,109,868
581,052
4,538
299,391
(5,050,447)
497,884
3,823,635
568
(117,980)
-
(846,340)
Consolidated
2019
$
2018
$
Tax losses not recognised
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit @ 27.5%
27,100,000 20,000,000
7,452,500
5,500,000
The above potential tax benefit for tax losses has not been recognised in the statement of financial position. These
tax losses can only be utilised in the future if the continuity of ownership test is passed, or failing that, the same
business test is passed.
Brain Resource, Inc., incorporated in California USA has carry-forward unused tax losses of $15,600,000 as at 30
June 2019 (2018: $11,200,000). The Company recognised deferred tax assets in respect of these tax losses as at 30
June 2019 of $nil (2018: $nil). The losses remain available to offset future income tax, but the directors have chosen
not to recognise a deferred tax asset in respect of them, until it is demonstrated that the realisation of the deferred
tax is more likely than not.
45
For personal use only
Total Brain Limited
Notes to the financial statements
30 June 2019
Note 8. Income tax (continued)
The Australian based companies have carry-forward unused tax losses of $25,800,000 as of 30 June 2019 (2018:
$21,600,000). The Company concluded that $3,900,000 (2018: $3,500,000) of the deferred tax asset relating to
carry-forward unused tax losses in Australia is recoverable, within the requisite timeframes, based on budget
estimates for future taxable income as approved by the Company’s Board of Directors.
Deferred tax liability
Deferred tax liability comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Development costs
Losses carried forward
Tax losses not recognised as DTA
Provisions
Foreign exchange
Other
Deferred tax liability
Movements:
Opening balance
Credited to profit or loss
Closing balance
Note 9. Current assets - cash and cash equivalents
Cash at bank
Cash on deposit
Note 10. Current assets - trade and other receivables
Trade receivables
Less: Allowance for expected credit losses
Other receivables
Government grant receivable for research and development tax incentive (R&D)
46
Consolidated
2019
$
2018
$
3,852,561
(11,839,369)
7,936,033
(115,144)
233,966
(2,882)
3,648,185
(9,575,542)
6,063,700
(142,554)
204,235
(132,859)
65,165
65,165
65,165
-
911,505
(846,340)
65,165
65,165
Consolidated
2019
$
2018
$
5,214,802
-
6,590,972
25,000
5,214,802
6,615,972
Consolidated
2019
$
2018
$
654,498
(172)
654,326
6,834
150,000
156,834
634,836
(19,002)
615,834
176,372
525,000
701,372
811,160
1,317,206
For personal use only
Total Brain Limited
Notes to the financial statements
30 June 2019
Note 10. Current assets - trade and other receivables (continued)
Allowance for expected credit losses
The consolidated entity has recognised a loss of $13,354 (2018: $30,057) in profit or loss in respect of the expected
credit losses for the year ended 30 June 2019.
The ageing of the receivables and allowance for expected credit losses provided for above are as follows:
Expected
credit loss
rate
2019
%
Carrying
amount
2019
$
Allowance
for expected
credit
losses
2019
$
-
-
6.28%
516,050
135,713
2,735
654,498
-
-
172
172
Consolidated
2019
$
2018
$
19,002
32,786
(32,758)
(18,858)
-
30,794
(11,792)
-
172
19,002
Consolidated
2019
$
2018
$
89,935
-
89,935
89,935
-
-
-
-
Consolidated
Not overdue
0 to 3 months overdue
3 to 6 months overdue
Movements in the allowance for expected credit losses are as follows:
Opening balance
Additional provisions recognised
Receivables written off during the year as uncollectable
Unused amounts reversed
Closing balance
Note 11. Current assets - contract assets
Contract assets
Reconciliation
Reconciliation of the written down values at the beginning and end of the current and
previous financial year are set out below:
Opening balance
Additions
Closing balance
47
For personal use only
Total Brain Limited
Notes to the financial statements
30 June 2019
Note 12. Non-current assets - plant and equipment
Plant and equipment - at cost
Less: Accumulated depreciation
Consolidated
2019
$
2018
$
1,272,376
(1,025,027)
1,193,656
(972,020)
247,349
221,636
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set
out below:
Plant and
equipment
$
167,856
94,303
(3,704)
(36,819)
221,636
78,520
(6,017)
(46,790)
247,349
Consolidated
2019
$
2018
$
-
-
-
5,081,097
(5,081,097)
-
27,117,740 25,124,621
(1,978,200)
(8,487,143)
14,900,018 14,659,278
(2,349,899)
(9,867,823)
14,900,018 14,659,278
Consolidated
Balance at 1 July 2017
Additions
Exchange differences
Depreciation expense
Balance at 30 June 2018
Additions
Exchange differences
Depreciation expense
Balance at 30 June 2019
Note 13. Non-current assets - intangibles
Goodwill - at cost
Less: Impairment
Development - at cost
Less: Accumulated amortisation
Less: Accumulated impairment
48
For personal use only
Total Brain Limited
Notes to the financial statements
30 June 2019
Note 13. Non-current assets - intangibles (continued)
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set
out below:
Consolidated
Balance at 1 July 2017
Additions
Additions through business combinations (note 28)
R&D tax incentive
Impairment of assets
Amortisation expense
Balance at 30 June 2018
Additions
R&D tax incentive
Impairment of assets
Amortisation expense
Balance at 30 June 2019
Goodwill
$
Development
$
Total
$
- 22,420,786 22,420,786
-
1,646,395
5,081,097
5,081,097
-
(866,929)
(8,487,143) (13,568,240)
(5,081,097)
-
(53,831)
1,646,395
-
(866,929)
(53,831)
- 14,659,278 14,659,278
-
2,585,125
-
(592,006)
-
(1,380,680)
-
(371,699)
2,585,125
(592,006)
(1,380,680)
(371,699)
- 14,900,018 14,900,018
Impairment testing
The intangible assets are tested for impairment as a single Cash Generating Unit ('CGU'), as the individual assets do
not currently generate largely independent cash flows.
As at the reporting date, the intangible assets were tested for impairment, where the recoverable amount was based
on fair value less costs of disposal. Fair value is determined by the Directors and management based on an
assessment of the price that would be received to sell the intangibles of the Group, including the Brain Resource
International Database ('BRID') and iSPOT in an orderly transaction between market participants at the measurement
date.
The approach and key assumptions used in the assessment of fair value was predominantly based on reference to
the market capitalisation of the Company as at the reporting date and the Group’s other assets and liabilities. This
assessment was further validated using the revenue multiple valuation approach, utilising a revenue multiple average
of 6.7 (2018: 8) times revenue, as per the internet software industry comparatives for listed companies.
The carrying amount was higher than recoverable amount and therefore the intangible assets were written down to
recoverable amount resulting in a further impairment expense of $1,380,680 (2018: $13,568,240). As the valuation
was based on a combination of observable market data and unobservable inputs, the valuation was considered to be
level 2 in the fair value hierarchy.
Sensitivity
As disclosed in note 3, the Directors have made judgements and estimates in respect of impairment testing of
intangible assets. If there are any negative changes in the key assumptions on which the recoverable amount was
based, this would result in a further impairment charge.
That said, the Directors are actively exploring alternative revenue streams for the Group's differentiated iSPOT
depression and ADHD assets. It should be noted that where, in future periods, the Group generates revenue from
those assets thereby increasing the valuation of the intangible assets, the impairment loss can be reversed. However
goodwill can never be reversed.
49
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Total Brain Limited
Notes to the financial statements
30 June 2019
Note 14. Current liabilities - trade and other payables
Trade payables
Accrued expenses
Deferred income
Other payables
Refer to note 21 for further information on financial instruments.
Note 15. Current liabilities - contract liabilities
Contract liabilities
Reconciliation
Reconciliation of the written down values at the beginning and end of the current and
previous financial year are set out below:
Opening balance
Payments received in advance
Transfer to revenue - included in the opening balance
Closing balance
Consolidated
2019
$
2018
$
248,493
207,474
-
1,991
224,817
93,809
29,398
141,452
457,958
489,476
Consolidated
2019
$
2018
$
209,489
-
380,348
(170,859)
209,489
-
-
-
-
-
Unsatisfied performance obligations
The aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied at the
end of the reporting period was $209,489 as at 30 June 2019 ($nil as at 30 June 2018) and is expected to be
recognised as revenue in future periods as follows:
Within 6 months
6 to 12 months
Consolidated
2019
$
2018
$
112,741
96,748
209,489
-
-
-
50
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Total Brain Limited
Notes to the financial statements
30 June 2019
Note 16. Current liabilities - employee benefits
Annual leave
Long service leave
Note 17. Non-current liabilities - employee benefits
Long service leave
Note 18. Equity - issued capital
Consolidated
2019
$
2018
$
281,543
103,458
391,092
97,403
385,001
488,495
Consolidated
2019
$
2018
$
33,704
29,884
Consolidated
2019
Shares
2018
Shares
2019
$
2018
$
Ordinary shares - fully paid
777,688,418 531,259,868 64,753,937 58,080,521
Movements in ordinary share capital
Details
Date
Shares
Issue price
$
1 July 2017
2 August 2017
Balance
Issue of shares to key management personnel
Issue of shares for the conversion of the
convertible bonds and the exchange of
exchangeable convertible preference shares - non
cash received
Issue of shares
Issue of shares under Share Purchase Plan (SPP) 12 January 2018
Issue of shares under Share Purchase Plan (SPP) 2 February 2018
Transfer of equity component of convertible bond
Share issue transaction costs, net of tax
15 December 2017
19 December 2017
Balance
Issue of shares
Issue of shares
Issue of shares
Issue of shares
Issue of shares
Share issue transaction costs, net of tax
30 June 2018
22 March 2019
11 April 2019
1 May 2019
7 May 2019
9 May 2019
166,015,204
1,125,000
$0.0800
37,516,453
90,000
175,000,000
168,286,348
8,724,982
12,108,334
-
531,259,868
132,814,948
32,027,748
25,115,107
55,470,747
1,000,000
$0.0900
15,750,000
$0.0600 10,097,181
$0.0600
523,500
$0.0600
726,500
$0.0000
(5,738,665)
(884,448)
$0.0280
$0.0280
$0.0280
$0.0280
$0.0280
58,080,521
3,718,818
896,777
703,223
1,553,180
28,000
(226,582)
Balance
30 June 2019
777,688,418
64,753,937
51
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Total Brain Limited
Notes to the financial statements
30 June 2019
Note 18. Equity - issued capital (continued)
Ordinary shares
Ordinary shares entitle the holder to participate in any dividends declared and any proceeds attributable to
shareholders should the company be wound up, in proportions that consider both the number of shares held and the
extent to which those shares are paid up. The fully paid 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.
Share buy-back
There is no current on-market share buy-back.
Capital risk management
The Group'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 Group may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The Group would look to raise capital when an opportunity to invest in a business or company was seen as value
adding relative to the current Company's share price at the time of the investment. The Group 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 Group is not subject to any financing covenants.
The capital risk management policy remains unchanged from the 30 June 2018 Annual Report.
Note 19. Equity - reserves
Foreign currency reserve
Share-based payments reserve
Consolidated
2019
$
2018
$
581,846
3,651,896
395,053
3,503,106
4,233,742
3,898,159
Foreign currency reserve
The reserve is used to recognise exchange differences arising from the translation of the financial statements of
foreign operation to Australian dollars.
Share-based payments reserve
The reserve is used to recognise the value of equity benefits provided to employees and directors as part of their
remuneration, and other parties as part of their compensation for services.
52
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Total Brain Limited
Notes to the financial statements
30 June 2019
Note 19. Equity - reserves (continued)
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2017
Foreign currency translation
Share-based payments
Balance at 30 June 2018
Foreign currency translation
Share-based payments
Balance at 30 June 2019
Note 20. Equity - dividends
Foreign
currency
$
Share-based
payments
$
Total
$
-
395,053
-
664,939
-
2,838,167
664,939
395,053
2,838,167
395,053
186,793
-
3,503,106
-
148,790
3,898,159
186,793
148,790
581,846
3,651,896
4,233,742
There were no dividends paid, recommended or declared during the current or previous financial year.
Note 21. Financial instruments
Financial risk management objectives
The Group's activities expose it to a variety of financial risks: market risk (including foreign currency risk, price risk
and interest rate risk), credit risk and liquidity risk. The Group's overall risk management program focuses on the
unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of
the Group. These methods include sensitivity analysis in the case of interest rate, foreign exchange and other price
risks and ageing analysis for credit risk.
Risk management is carried out by senior finance executives ('finance') under policies approved by the Board of
Directors ('the Board'). These policies include identification and analysis of the risk exposure of the Group and
appropriate procedures, controls and risk limits. Finance identifies, evaluates and hedges financial risks within the
Group's operating units. Finance reports to the Board on a monthly basis.
Market risk
Foreign currency risk
The Group undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk
through foreign exchange rate fluctuations.
Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial
liabilities denominated in a currency that is not the entity's functional currency. The risk is measured using sensitivity
analysis and cash flow forecasting.
The carrying amount of the Group's foreign currency denominated financial assets and financial liabilities at the
reporting date were as follows:
Consolidated
US dollars
Assets
Liabilities
2019
$
2018
$
2019
$
2018
$
4,742,510
6,580,972
517,527
115,101
53
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Total Brain Limited
Notes to the financial statements
30 June 2019
Note 21. Financial instruments (continued)
The Group had net assets denominated in foreign currencies of $4,224,983 (assets of $4,742,510 less liabilities of
$517,527) as at 30 June 2019 (2018: $6,465,871 (assets of $6,580,972 less liabilities of $115,101)). Based on this
exposure, had the Australian dollars weakened/strengthened by 10% (2018: weakened/strengthened by 10%)
against these foreign currencies with all other variables held constant, the Group's profit before tax for the year would
have been $561,003 lower/higher (2018: $427,115 lower/higher) and equity would have been $462,106 lower/higher
(2018: $309,658 lower/higher). The percentage change is the expected overall volatility of the significant currencies,
which is based on management's assessment of reasonable possible fluctuations taking into consideration
movements over the last 12 months each year and the spot rate at each reporting date. The actual foreign exchange
loss for the year ended 30 June 2019 was $45,562 (2018: loss of $14,855).
Price risk
The Group is not exposed to any significant price risk.
Interest rate risk
The Group's main interest rate risk arises from short-term deposits. Interest rates applicable to cash financial assets
were 0.4% (2018: 0.4%) with maturities of less than 1 year. All other balances are non-interest-bearing.
The Group's exposure to market interest rates relates primarily to the short term deposits. The Board has formed the
view that these funds be held in either bank deposits or AAA short term bonds. Currently holdings are in cash
deposits with the National Australia Bank and Citibank. Based on an average cash balance, constant currency
weightings and an average interest rate, a +/-10% increase in interest rates would have equated to a change in the
after tax result of around -/+ 0% (2018: -/+0%).
As at the reporting date, the Group had the following variable rate short-term deposits outstanding:
Consolidated
2019
2018
Weighted
average
interest rate
%
Weighted
average
interest rate
%
Balance
$
Balance
$
Cash and short-term deposits
0.40%
5,214,802
0.40%
6,615,972
Net exposure to cash flow interest rate risk
5,214,802
6,615,972
An analysis by remaining contractual maturities is shown in 'liquidity and interest rate risk management' below.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to
the Group. The Group has a strict code of credit, including obtaining agency credit information, confirming references
and setting appropriate credit limits. The Group obtains guarantees where appropriate to mitigate credit risk. The
maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of
any provisions for expected credit losses of those assets, as disclosed in the statement of financial position and
notes to the financial statements. The Group does not hold any collateral.
The Group has adopted a lifetime expected loss allowance in estimating expected credit losses to trade receivables
through the use of a provisions matrix using fixed rates of credit loss provisioning. These provisions are considered
representative across all customers of the Group based on recent sales experience, historical collection rates and
forward-looking information that is available.
The Group has a credit risk exposure with a major US affinity group, which as at 30 June 2019 owed the Group
$355,957 (54% of trade receivables) (2018: $322,447 51% of trade receivables). This balance was within its terms of
trade and no impairment was made as at 30 June 2019. There are no guarantees against this receivable but
management closely monitors the receivable balance on a monthly basis and is in regular contact with this customer
to mitigate risk.
54
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Total Brain Limited
Notes to the financial statements
30 June 2019
Note 21. Financial instruments (continued)
Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of this
include the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure to make
contractual payments for a period greater than 1 year.
Liquidity risk
The Group’s objective is to maintain a balance between continuity of funding and flexibility, including through
accessing new equity funding. All Trade creditors and other payables and interest-bearing loans have a maturity
profile of being repayable within six months (2018: within six months).
The Group manages liquidity risk by maintaining adequate cash reserves by continuously monitoring actual and
forecast cash flows and matching the maturity profiles of financial assets and liabilities.
Remaining contractual maturities
The following tables detail the Group's remaining contractual maturity for its financial instrument liabilities. The tables
have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which
the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as
remaining contractual maturities and therefore these totals may differ from their carrying amount in the statement of
financial position.
Consolidated - 2019
Non-derivatives
Non-interest bearing
Trade and other payables
Contract liabilities
Total non-derivatives
Consolidated - 2018
Non-derivatives
Non-interest bearing
Trade and other payables
Total non-derivatives
Weighted
average
interest rate
%
1 year or less
$
Between 1
and 2 years
$
Between 2
and 5 years
$
Remaining
contractual
maturities
$
Over 5 years
$
-
-
250,484
209,489
459,973
-
-
-
-
-
-
-
-
-
250,484
209,489
459,973
Weighted
average
interest rate
%
1 year or less
$
Between 1
and 2 years
$
Between 2
and 5 years
$
Remaining
contractual
maturities
$
Over 5 years
$
-
395,667
395,667
-
-
-
-
-
-
395,667
395,667
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually
disclosed above.
Fair value of financial instruments
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value.
55
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Total Brain Limited
Notes to the financial statements
30 June 2019
Note 22. Key management personnel disclosures
Compensation
The aggregate compensation made to directors and other members of key management personnel of the Group is
set out below:
Short-term employee benefits
Post-employment benefits
Share-based payments
Note 23. Remuneration of auditors
Consolidated
2019
$
2018
$
1,935,408
435
74,882
1,337,753
12,894
889,216
2,010,725
2,239,863
During the financial year the following fees were paid or payable for services provided by Grant Thornton, the auditor
of the Company:
Audit services - Grant Thornton
Audit or review of the financial statements
Other services - Grant Thornton
Other services
Note 24. Contingent liabilities
Consolidated
2019
$
2018
$
113,500
110,000
5,000
35,000
118,500
145,000
The Group has a contingent liability in respect of an unresolved legal case regarding a dispute with a former staff
member. As the case is at an early state of proceedings, it is not possible to determine the likelihood or amount of
any settlement should the Group not be successful in litigating the case.
The Group has given bank guarantees as at 30 June 2019 of $10,500 (2018: $25,000) to various landlords.
Note 25. Commitments
Lease commitments - operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
Consolidated
2019
$
2018
$
82,709
1,913
111,969
54,782
84,622
166,751
Operating lease commitments includes contracted amounts for office premises and server hosting under non-
cancellable operating leases expiring within two years with, in some cases, options to extend. The leases have
various escalation clauses. On renewal, the terms of the leases are renegotiated.
56
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Total Brain Limited
Notes to the financial statements
30 June 2019
Note 26. Related party transactions
Parent entity
Total Brain Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 29.
Key management personnel
Disclosures relating to key management personnel are set out in note 22 and the remuneration report included in the
directors' report.
Transactions with related parties
There were no transactions with related parties during the current and previous financial year.
Receivable from and payable to related parties
There were no trade receivables from or trade payables to related parties at the current and previous reporting date.
Loans to/from related parties
The following balances are outstanding at the reporting date in relation to loans with related parties:
Current receivables:
Loan to key management personnel
Consolidated
2019
$
2018
$
-
102,553
In the prior year, the Company entered a short-term interest-free loan agreement with Mr Gagnon for US$59,954 and
other employees for US$14,546. Mr Gagnon and the employees subsequently purchased shares in the Company.
The loans were repaid during the current year.
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
Note 27. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Loss after income tax
Total comprehensive income
Parent
2019
$
2018
$
(8,383,962) (31,609,245)
(8,383,962) (31,609,245)
57
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Total Brain Limited
Notes to the financial statements
30 June 2019
Note 27. Parent entity information (continued)
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Share-based payments reserve
Accumulated losses
Total equity
Parent
2019
$
2018
$
11,248
1,197
20,414,240 21,974,397
-
910
194,340
192,742
64,753,937 58,080,520
3,503,106
(48,185,933) (39,801,971)
3,651,896
20,219,900 21,781,655
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2019 and 30 June 2018.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2019 and 30 June 2018.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2019 and 30 June
2018.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 2, except for
the following:
●
●
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be
an indicator of an impairment of the investment.
58
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Total Brain Limited
Notes to the financial statements
30 June 2019
Note 28. Business combinations
PoweringUpMBS Pty Ltd (prior period)
On 14 December 2017, the Company acquired control of PoweringUpMBS Pty Ltd by acquiring the remaining 50% of
ordinary shares for the total consideration transferred of $5,728,224. This investment was previously a 50% equity
interest in a joint venture company whose business was to develop a new Attention Deficit Hyperactivity Disorder
product. The acquisition was a part of the overall re-capitalisation of the group, whereby the Company announced on
25 October 2017 that it had secured a $10,000,000 investment by way of a placement of ordinary shares to fund the
Company’s aggressive growth plans in the USA.The fundraising was conditional on shareholder approval of a capital
restructure whereby the convertible bond (CB) holders (CB Holders) in the Company and the Exchangeable
Convertible Preference Share (ECPS) holders (ECPS Holders) in PoweringUpMBS Pty Ltd were to convert and
exchange all of their rights and interest in the CB’s and ECPS’s into ordinary shares in the Parent Company (Total
Brain Limited) and the Company would also issue options to entities nominated by the CB Holders and ECPS
Holders. PoweringUPMBS Pty Ltd then became a 100% wholly owned subsidiary of Total Brain Limited. The
acquired business contributed revenues of $12 and profit after tax of $124 to the Group for the period from 14
November 2017 to 30 June 2018. If the acquisition occurred on 1 July 2017, the full year contributions would have
been revenues of $2,616,918 and loss after tax of $23,185,774. The values identified in relation to the acquisition of
PoweringUpMBS Pty Ltd are final as at 30 June 2018.
Details of the acquisition are as follows:
Cash and cash equivalents
Financial assets
Other current assets
Net assets acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Representing:
Total Brain Limited shares issued to vendor
Prior investments in PoweringUpMBS Pty Ltd
Fair value
$
18,154
628,473
500
647,127
5,081,097
5,728,224
4,500,000
1,228,224
5,728,224
The fair value of the Company’s equity interest in PoweringUpMBS Pty Ltd held just before 14 December 2017 was
$1,228,224. No gain or loss was recognised as a result of remeasurement.
The fair value of the shares issued as consideration was determined by reference to the share price of the Company
on 14 December 2017, being $0.09 (50,000,000 shares at $0.09 = $4,500,000).
The Company has since impaired 100% of the goodwill acquired.
59
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Total Brain Limited
Notes to the financial statements
30 June 2019
Note 29. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in
accordance with the accounting policy described in note 2:
Name
BRC Operations Pty Ltd
BRC IP Pty Ltd
BRC Distribution Pty Ltd
BRC International Pty Ltd
BRC Development Pty Ltd
PoweringUpMBS Pty Ltd
Brain Resource, Inc.
MyBrainSolutions, Inc
Brain Resource Europe Limited
Principal place of business /
Country of incorporation
Australia
Australia
Australia
Australia
Australia
Australia
United States
United States
Ireland
Ownership interest
2018
2019
%
%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
Note 30. Reconciliation of loss after income tax to net cash used in operating activities
Consolidated
2019
$
2018
$
Loss after income tax benefit for the year
(8,570,754) (23,101,340)
Adjustments for:
Depreciation and amortisation
Impairment of intangibles
Share of loss - joint ventures
Share-based payments
Foreign exchange differences
Impairment of receivables
Research and development tax incentive
Finance costs - non-cash
Loss on conversion of convertible bond
Non-cash payment to supplier
Change in operating assets and liabilities:
Increase in trade and other receivables
Increase in prepayments
Increase/(decrease) in trade and other payables
Decrease in deferred tax liabilities
Decrease in employee benefits
Net cash used in operating activities
Note 31. Earnings per share
418,489
90,650
1,380,680 13,568,240
42,238
2,866,607
14,855
30,057
466,929
516,941
3,166,358
90,386
-
148,790
45,562
13,526
960,172
-
-
-
(128,815)
-
177,971
-
(93,013)
(341,464)
(197)
(244,841)
(846,341)
(197,624)
(5,647,392)
(3,878,546)
Consolidated
2019
$
2018
$
Loss after income tax attributable to the owners of Total Brain Limited
(8,570,754) (23,101,340)
60
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Total Brain Limited
Notes to the financial statements
30 June 2019
Note 31. Earnings per share (continued)
Weighted average number of ordinary shares used in calculating basic earnings per
share
589,995,007
362,265,256
Weighted average number of ordinary shares used in calculating diluted earnings per
share
589,995,007
362,265,256
Number
Number
Basic earnings per share
Diluted earnings per share
Cents
Cents
(1.45)
(1.45)
(6.38)
(6.38)
195,485,598 options over ordinary shares are not included in the calculation of diluted earnings per share because
they are anti-dilutive for the year ended 30 June 2019. These options could potentially dilute basic earnings per
share in the future.
Note 32. Share-based payments
A share option plan has been established by the Group and approved by shareholders at a general meeting,
whereby the Group may, at the discretion of the Nomination and Remuneration Committee, grant options over
ordinary shares in the Company to the personnel of the Group. The options are issued for nil consideration and are
granted in accordance with performance guidelines established by the Nomination and Remuneration Committee.
61
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Total Brain Limited
Notes to the financial statements
30 June 2019
Note 32. Share-based payments (continued)
Set out below are summaries of options granted under the plan:
2019
Grant date
Expiry date
price
Exercise
Balance at
the start of
the year
Granted
Expired/
forfeited/
other
Balance at
the end of
the year
Exercised
26/03/2014
14/04/2015
22/05/2017
01/07/2017
01/07/2017
01/07/2017
16/07/2017
16/07/2017
16/07/2017
24/07/2017
24/07/2017
24/07/2017
07/08/2017
07/08/2017
07/08/2017
14/12/2017
14/12/2017
14/12/2017
08/01/2018
08/01/2018
08/01/2018
02/02/2018
24/02/2018
28/02/2018
01/04/2018
01/04/2018
01/04/2018
01/04/2018
13/06/2018
13/06/2018
13/06/2018
13/06/2018
29/04/2019
29/04/2019
29/04/2019
26/03/2019
14/04/2020
22/05/2022
17/05/2022
17/05/2022
17/05/2022
16/07/2022
16/07/2022
16/07/2022
24/07/2022
24/07/2022
24/07/2022
07/08/2022
07/08/2022
07/08/2022
22/05/2022
22/05/2022
22/05/2022
07/01/2023
07/01/2023
07/01/2023
19/12/2018
23/02/2023
27/02/2023
31/03/2023
31/03/2023
31/03/2023
31/03/2023
12/06/2023
12/06/2023
12/06/2023
12/06/2023
28/04/2024
28/04/2024
28/04/2024
325,000
$0.3600
500,000
$0.3750
5,000,000
$0.0800
4,765,377
$0.0800
588,459
$0.1200
$0.1600
1,176,918
$0.0800 17,366,478
4,455,493
$0.1200
8,910,986
$0.1600
8,951,563
$0.0800
2,650,521
$0.1200
5,301,042
$0.1600
480,202
$0.0800
480,202
$0.1200
$0.1600
960,404
$0.0800 28,232,956
$0.1200
9,410,985
$0.1600 18,821,970
1,920,810
$0.0800
1,920,810
$0.1200
3,841,620
$0.1600
381,901
$0.0800
300,000
$0.0800
300,000
$0.0800
2,202,862
$0.0800
1,905,833
$0.1200
2,796,916
$0.1600
1,905,833
$0.2400
146,484
$0.0800
146,484
$0.1200
146,484
$0.1600
146,484
$0.2400
-
$0.0800
-
$0.1200
-
$0.1600
136,441,077
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
480,202
480,202
960,404
1,920,808
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(325,000)
-
-
500,000
-
5,000,000
-
4,765,377
-
588,459
-
1,176,918
- 17,366,478
-
4,455,493
-
8,910,986
-
8,951,563
-
2,650,521
-
5,301,042
-
480,202
-
480,202
-
960,404
- 28,232,956
-
9,410,985
- 18,821,970
-
1,920,810
-
1,920,810
-
3,841,620
(381,901)
-
-
300,000
-
300,000
(603,516)
1,599,346
(464,356)
1,441,477
(881,837)
1,915,079
(464,356)
1,441,477
(146,484)
-
(146,484)
-
(146,484)
-
(146,484)
-
-
480,202
-
480,202
-
960,404
(3,706,902) 134,654,983
Weighted average exercise price
$0.1150
$0.1300
$0.0000
$0.1600
$0.1140
62
For personal use only
Total Brain Limited
Notes to the financial statements
30 June 2019
Note 32. Share-based payments (continued)
2018
Grant date
Expiry date
price
Exercise
Balance at
the start of
the year
Granted
Expired/
forfeited/
other
Balance at
the end of
the year
Exercised
26/03/2014
14/04/2015
22/05/2017
01/07/2017
01/07/2017
01/07/2017
16/07/2017
16/07/2017
16/07/2017
24/07/2017
24/07/2017
24/07/2017
07/08/2017
07/08/2017
07/08/2017
14/12/2017
14/12/2017
14/12/2017
08/01/2018
08/01/2018
08/01/2018
02/02/2018
24/02/2018
28/02/2018
01/04/2018
01/04/2018
01/04/2018
01/04/2018
13/06/2018
13/06/2018
13/06/2018
13/06/2018
26/03/2019
14/04/2020
22/05/2022
17/05/2022
17/05/2022
17/05/2022
16/07/2022
16/07/2022
16/07/2022
24/07/2022
24/07/2022
24/07/2022
07/08/2022
07/08/2022
07/08/2022
22/05/2022
22/05/2022
22/05/2022
07/01/2023
07/01/2023
07/01/2023
19/12/2018
23/02/2023
27/02/2023
31/03/2023
31/03/2023
31/03/2023
31/03/2023
12/06/2023
12/06/2023
12/06/2023
12/06/2023
$0.3600
$0.3750
$0.0800
$0.0800
$0.1200
$0.1600
$0.0800
$0.1200
$0.1600
$0.0800
$0.1200
$0.1600
$0.0800
$0.1200
$0.1600
$0.0800
$0.1200
$0.1600
$0.0800
$0.1200
$0.1600
$0.0800
$0.0800
$0.0800
$0.0800
$0.1200
$0.1600
$0.2400
$0.0800
$0.1200
$0.1600
$0.2400
-
500,000
-
825,000
5,000,000
-
4,765,377
-
588,459
-
1,176,918
-
- 17,366,478
4,455,493
-
8,910,986
-
8,951,563
-
2,650,521
-
5,301,042
-
480,202
-
480,202
-
960,404
-
- 28,232,956
-
9,410,985
- 18,821,970
1,920,810
-
1,920,810
-
3,841,620
-
381,901
-
300,000
-
300,000
-
2,202,862
-
1,905,833
-
2,796,916
-
1,905,833
-
146,484
-
146,484
-
146,484
-
146,484
-
1,325,000 135,616,077
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(175,000)
325,000
(325,000)
500,000
-
5,000,000
-
4,765,377
-
588,459
-
1,176,918
- 17,366,478
-
4,455,493
-
8,910,986
-
8,951,563
-
2,650,521
-
5,301,042
-
480,202
-
480,202
-
960,404
- 28,232,956
-
9,410,985
- 18,821,970
-
1,920,810
-
1,920,810
-
3,841,620
-
381,901
-
300,000
-
300,000
-
2,202,862
-
1,905,833
-
2,796,916
-
1,905,833
-
146,484
-
146,484
-
146,484
-
146,484
(500,000) 136,441,077
Weighted average exercise price
$0.0000
$0.1140
$0.0000
$0.3700
$0.1150
63
For personal use only
Total Brain Limited
Notes to the financial statements
30 June 2019
Note 32. Share-based payments (continued)
Set out below are the options exercisable at the end of the financial year:
Grant date
Expiry date
26/03/2014
14/04/2015
22/05/2017
01/07/2017
01/07/2017
16/07/2017
24/07/2017
07/08/2017
14/12/2017
08/01/2018
02/02/2018
24/02/2018
28/02/2018
01/04/2018
29/04/2019
26/03/2019
14/04/2020
22/05/2022
17/05/2022
17/05/2022
16/07/2022
24/07/2022
07/08/2022
22/05/2022
07/01/2023
19/12/2018
23/02/2023
27/02/2023
31/03/2023
28/04/2024
2019
2018
Number
Number
-
500,000
5,000,000
4,765,377
1,176,918
325,000
500,000
5,000,000
4,765,377
588,459
21,821,971 17,366,478
11,602,084
8,951,563
960,404
-
47,054,926 37,643,941
-
381,901
-
-
-
-
1,920,810
-
120,000
120,000
2,072,948
480,202
97,595,640 75,522,719
The weighted average remaining contractual life of options outstanding at the end of the financial year was 3.05
years (2018: 3.27 years).
For the options granted during the current financial year, the valuation model inputs used to determine the fair value
at the grant date, are as follows:
Grant date
Expiry date
Share price Exercise
at grant date
price
Expected
volatility
Dividend
yield
Risk-free
interest rate at grant date
Fair value
29/04/2019
29/04/2019
29/04/2019
28/04/2024
28/04/2024
28/04/2024
$0.0279
$0.0279
$0.0279
$0.0800
$0.1200
$0.1600
28.07%
28.07%
28.07%
-
-
-
1.58%
1.58%
1.58%
$0.0007
$0.0002
$0.0000
Note 33. Events after the reporting period
On 29 August 2019, the Company announced that it had partnered with IBM (NYSE: IBM) whereby IBM will embed
Total Brain in IBM’s THRIVE360° of Mental Fitness platform as core functionality.
IBM’s THRIVE360° of Mental Fitness platform powers GRIT (Get Results in Transition) a collaboration between IBM
and The United States Department of Veterans Affairs (VA). GRIT is a digital solution for veterans, active-duty
service members, and reservists that provides a mobile experience to help them understand and strengthen their
mental fitness, social connections, and overall well-being.
GRIT is the first instantiation of the bigger platform called THRIVE360° of Mental Fitness, which IBM intends to
deploy with other communities under stress or in transition.
IBM will collaborate with Total Brain to monitor mental health and build mental fitness. Total Brain provides scientific
brain assessments and personalised brain and mind training to help users consolidate mental strengths and master
weaknesses.
Due to the early stages of the partnership with IBM, an estimate of the financial effect on the Group’s results in future
financial years cannot be made.
64
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Total Brain Limited
Notes to the financial statements
30 June 2019
Note 33. Events after the reporting period (continued)
No other matter or circumstance has arisen since 30 June 2019 that has significantly affected, or may significantly
affect the Group's operations, the results of those operations, or the Group's state of affairs in future financial years.
65
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Total Brain Limited
Directors' declaration
30 June 2019
In the directors' opinion:
●
●
●
●
the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards,
the Corporations Regulations 2001 and other mandatory professional reporting requirements;
the attached financial statements and notes comply with International Financial Reporting Standards as issued
by the International Accounting Standards Board as described in note 2 to the financial statements;
the attached financial statements and notes give a true and fair view of the Group's financial position as at 30
June 2019 and of its performance for the financial year ended on that date; and
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the directors
___________________________
Dr Evian Gordon
Chairman
30 August 2019
66
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Independent Auditor’s Report
To the Members of Total Brain Limited
Report on the audit of the financial report
Level 18, 145 Ann Street
Brisbane QLD 4000
Correspondence to:
GPO Box 1008
Brisbane QLD 4001
T +61 7 3222 0200
F +61 7 3222 0444
E info.qld@au.gt.com
W www.grantthornton.com.au
Opinion
We have audited the financial report of Total Brain Limited (the Company) and its subsidiaries (the Group), which
comprises the consolidated statement of financial position as at 30 June 2019, the consolidated statement of profit or loss
and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows
for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting
policies, and the Directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:
a
giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its financial performance for the
year then ended; and
b
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are
further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are
independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and
the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled
our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Material uncertainty related to going concern
We draw attention to Note 2 in the financial statements, which outlines the current uncertainties the Group faces in relation to
going concern. The Group incurred a net loss of $8,570,754 during the year ended 30 June 2019, which, when combined with
the items stated in Note 2, indicates that a material uncertainty exists that may cast significant doubt on the Group’s ability to
continue as a going concern. Our opinion is not modified in respect of this matter.
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.
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
www.grantthornton.com.au
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients
and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International
Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are
delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one
another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to
Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to
Grant Thornton Australia Limited.
Liability limited by a scheme approved under Professional Standards Legislation.
For personal use only
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
Revenue recognition (Note 5)
The Group has recognised $2.6m of revenue during the period
and has adopted AASB 15 Revenue from Contracts with
Customers for the first time.
AASB 15 Revenue from Contracts with Customers changes
the revenue recognition requirements and requires companies
to assess revenue recognition using a five step model.
This area is a key audit matter due to this first time adoption
including recognition and disclosure changes.
Intangibles impairment (Note 13)
The Group has internally generated intangible assets primarily
consisting of research databases and technology platforms,
totalling $14,900,018 as at 30 June 2019.
AASB 136 Impairment of Assets requires that an entity shall
assess at least annually whether there is any indication that
an asset may be impaired. If any indication exists, the entity
shall estimate the recoverable amount of the asset.
Irrespective of whether indicators exist, where the intangible
assets are not yet available for use or have an indefinite useful
life, an impairment test is required annually.
This area is a key audit matter due to the inherent subjectivity
involved in Management’s judgements in estimating the
recoverable amount as part of evaluating potential impairment.
How our audit addressed the key audit matter
Our procedures included, amongst others:
•
•
•
•
•
•
Understanding and documenting the key processes
and controls used to record revenue;
Reviewing revenue recognition policies and
Management’s assessment for the adoption of AASB
15;
Performing cut-off testing to assess whether revenue
has been recorded in the correct period by inspecting
supporting documentation;
Analytically reviewing revenue values and associated
ratios, with any items outside of audit expectations
investigated further;
Sampling revenue transactions statistically from the
general ledger and testing whether revenue
recognition is appropriate by agreeing through to a
sales contract, assessing the identification of
performance obligations and variable considerations,
and evaluating the timing of revenue recognition; and
Evaluating the adequacy of related disclosures in the
financial report.
Our procedures included, amongst others:
• Obtaining Management’s impairment model;
•
Assessing the methodology used by Management
against the requirements of Australian Accounting
Standard AASB 136;
Assessing Management’s determination of the
Group’s CGUs based on our understanding of the
business;
Evaluating the appropriateness of key assumptions
and inputs used in the calculations, by obtaining
corroborating evidence;
Undertaking a sensitivity analysis on key inputs;
Testing the mathematical accuracy of the model; and
Evaluating the adequacy of the disclosures relating
to intangible assets in the financial report.
•
•
•
•
•
Information other than the financial report and auditor’s report thereon
The Directors are responsible for the other information. The other information comprises the information included in the
Group’s annual report for the year ended 30 June 2019, but does not include the financial report and our auditor’s report
thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or
otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
For personal use only
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 Group’s ability 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 have 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.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance
Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.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 15 to 22 of the directors’ report for the year ended 30 June
2019.
In our opinion, the Remuneration Report of Total Brain Limited, for the year ended 30 June 2019, 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.
Grant Thornton Audit Pty Ltd
Chartered Accountants
CDJ Smith
Partner – Audit & Assurance
Brisbane, 30 August 2019
For personal use only
Total Brain Limited
Shareholder information
30 June 2019
The shareholder information set out below was applicable as at 21 August 2019.
Distribution of equitable securities
Analysis of number of equitable security holders by size of holding:
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Holding less than a marketable parcel
Equity security holders
Number
of holders Number
of ordinary of ordinary ordinary
Number
of holders
of options
over
shares
shares
shares
24
9
56
2,147
29,888
516,098
242 11,045,971
320 766,094,314
651 777,688,418
180
2,147,286
-
-
-
6
27
33
-
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
CITICORP NOMINEES PTY LIMITED
CS THIRD NOMINEES PTY LIMITED (HSBC CUST NOM AU LTD 13 A/C)
STUTTGART PTY LTD
MORGAN STANLEY AUSTRALIA SECURITIES (NOMINEE) PTY LTD (NO 1
ACCOUNT)
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
INVIA CUSTODIAN PTY LIMITED (TORRIBLE SUPER FUND A/C)
BNP PARIBAS NOMINEES PTY LTD (IB AU NOMS RETAILCLIENT DRP)
GARRETT WALKER
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
DR EVIAN GORDON
GLENEAGLE SECURITIES (AUST) PTY LTD
DBPC GROUP FINANCE PTY LTD (DBPC GROUP FINANCE A/C)
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
CEYX HOLDINGS PTY LTD
MR TIM YATES
COLEMAN FUNG
SPINITE PTY LTD
BAXTER MANOR PTY LTD
UBS NOMINEES PTY LTD
INVIA CUSTODIAN PTY LIMITED (TORRIBLE FAMILY A/C)
69
Ordinary shares
% of total
shares
Number
held
issued
213,373,445
50,625,000
39,000,001
36,513,319
33,171,748
25,573,111
22,180,978
12,575,452
11,568,277
11,240,248
11,000,000
10,250,000
9,196,393
9,000,000
7,154,406
7,154,406
6,655,429
6,517,545
5,900,000
5,852,635
27.44
6.51
5.01
4.70
4.27
3.29
2.85
1.62
1.49
1.45
1.41
1.32
1.18
1.16
0.92
0.92
0.86
0.84
0.76
0.75
534,502,393
68.75
For personal use only
Total Brain Limited
Shareholder information
30 June 2019
Unquoted equity securities
Options over ordinary shares issued
The following persons hold 20% or more of unquoted equity securities:
Name
Louis Gagnon
OZ Group
Class
Unlisted options
Unlisted options
Substantial holders
Substantial holders in the Company are set out below:
CITICORP NOMINEES PTY LIMITED
CS THIRD NOMINEES PTY LIMITED (HSBC CUST NOM AU LTD 13 A/C)
STUTTGART PTY LTD
Voting rights
The voting rights attached to ordinary shares are set out below:
Number
on issue
Number
of holders
195,485,598
33
Number
held
61,465,911
50,000,000
Ordinary shares
% of total
shares
Number
held
issued
213,373,445
50,625,000
39,000,001
27.44
6.51
5.01
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.
70
For personal use only
ANNUAL REPORT
Year Ended 30 June 2019
ir@totalbrain.com
totalbrain.com
ASX: TTB ABN 24 094 069 682
71
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