Talius : 2024 Annual Report

CHAIRMAN & MANAGING DIRECTOR'S LETTER

Dear Shareholders,

It is our pleasure to present the 2023 Annual Report of Talius Group Limited (Talius).

This year's report is particularly significant as it represents our inaugural presentation under the Talius name, following our comprehensive rebranding initiative completed in May 2023. This rebranding is not merely a change of name; it signifies a pivotal moment in our history, embodying our evolution, aspirations, and unwavering commitment to innovation and excellence.

2023 was a pivotal year for Talius, marked by significant achievements and strategic advancements. We are proud to announce our highest annual revenue to date, reaching $12.4 million. This financial milestone is complemented by our achievement of four consecutive cashflow positive quarters, including the last quarter of 2022, underscoring our robust financial health and operational efficiency.

Our strategic initiatives have propelled us to increase our market share in the home and retirement living sectors, and we have embarked on an ambitious journey to disrupt the nursing home market. Despite the ongoing volatility in the macroeconomic environment, our team has successfully navigated these challenges, achieving sales growth and enhancing our supply chain resilience.

The past year has seen Talius fortify its market position through additional substantial orders from leading partners like Keyton Retirement Villages (formerly known as Lendlease's Retirement Living), and the acquisition of new clients, including Uniting NSW.ACT. These achievements are a testament to our reputation as a pioneer in innovative care technologies. Moreover, our platform's subscriptions have grown to over 29,000, reflecting the increasing trust and reliance on our solutions.

We continue the investment in our platform. This ongoing investment is crucial for enhancing our technological capabilities, improving user experience, and expanding the range of services we offer.

Our team's strength and capabilities have expanded significantly, with new members joining us in this transformative phase. These additions are crucial as we gear up for the next level of growth and scalability.

Wish to thank the support from existing investors and warmly welcome the new investors who joined us during our capital raise in December 2023. Your trust and partnership fuel our commitment to delivering exceptional value to all our shareholders.

Looking ahead to 2024, Talius is poised for a momentous year. The challenges facing the aged care sector, including government financial constraints, skilled staff shortages, and a rapidly growing aged care demographic, present both challenges and opportunities. Talius is increasingly recognised as a key player in addressing these issues, with a strong pipeline promising to drive our progress towards profitability and beyond.

We would like to express our deepest appreciation to our dedicated staff and management team for their hard work and contributions throughout the year. A special thanks to our fellow Director, Ramsay Carter, for his continuous dedication and efforts.

As we step into 2024, we are confident that the initiatives and strategies we have in place will materialise into significant sales and further establish Talius as a leader both locally and internationally. We are at a turning point, and as market conditions improve, the potential for Talius to deliver substantial returns to our patient and supportive investors has never been greater.

In closing, we sincerely thank you, our shareholders, for your continued support in Talius. Your belief in our mission and purpose is the foundation of our success, and we look forward to sharing our future achievements with you.

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DIRECTORS' REPORT

DIRECTORS' REPORT

Your Directors present their report on the Consolidated Entity consisting of Talius Group Limited ("Talius" or "Company"), formerly HSC Technology Group Ltd, and the entities it controlled (together referred to as the "Consolidated Entity" or "Group") at the end of, or during, the year ended 31 December 2023.

DIRECTORS

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

Leylan Neep

Executive Chairman from 1 January 2023 to 31 May 2023

Non-Executive Chairman from 1 June 2023

BCom, FCPA, GAICD, FGIA, FCIS

Mr Neep is a highly experienced Director and C-Suite Executive who brings a wealth of corporate skills and market knowledge to his role at Talius. He has held senior roles across a range of both ASX-listed and private entities, possessing over two decades of expertise in the financial services industry.

Mr Neep has a proven track record in finance, governance and funds management and has been involved in several IPO's/ ASX listings and numerous capital raising efforts, including rights offers, institutional and private placements for both corporate entities and managed investment schemes.

He is a Fellow of CPA Australia (FCPA), a Fellow of Governance Institute of Australia (FGIA), and a Graduate of the Company Directors Course run by the Australian Institute of Company Directors (GAICD).

He has not been a Director of any other Australian listed company in the last three years.

Graham Russell

Managing Director

Mr. Russell has over 25 years' experience in Systems Integration and Sensor technology solutions across all verticals of Healthcare, Utilities, Mining and Governments. Mr Russell is incredibly passionate about helping our older generation stay independent and pioneering the adoption of seamless technology solutions to help families, care providers and the elderly.

Mr Russell has been instrumental in developing and localising assistive technology that is a cost effective, scalable solution using Artificial Intelligence and an integrated IoT platform to detect health deterioration, fall alerts and provide early intervention, including the Essence Care@home solutions in the APAC region. Mr Russell currently works with numerous National Aged Care providers, Government, Utility and Telecommunication companies throughout APAC to transform their clients' lives, connect with their families and provide operational efficiencies and financial returns to all involved.

Mr Russell was previously the CEO of the Ambush Group, a national Systems Integration business where he started as an Electronics Technician installing and integrating solutions like Nurse Call, CCTV, Access Control, Security, WiFi, Internet, Fibre solutions, etc for Hospitals, Residential Aged Care, Councils, Financial and Government facilities.

He has not been a Director of any other Australian listed company in the last three years.

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DIRECTORS' REPORT

Ramsay Carter

Non-Executive Director from 1 January 2023 to 31 January 2024

Executive Director from 1 February 2024

LLB, B. Int.Bus., MAICD

Mr. Carter brings over 20 years' experience in global investment banking holding senior positions in Australia, Tokyo, Hong Kong and Singapore. Most recently, he was Head of Global Capital Markets, Asia Pacific for Scotiabank. He has thorough knowledge and governance over multiple jurisdictions throughout his career, in a highly regulated industry, especially within Asia Pacific, UK and North America. Mr Carter is a proven leader with particular focus on clear lines of communication and accountability, alignment of interests and creating an environment of respect, diversity and challenge. Mr Carter has a Bachelor of Laws and International Business and is a member of AICD.

He has not been a Director of any other Australian listed company in the last three years.

DIRECTOR INTERESTS IN THE SHARES AND PERFORMANCE RIGHTS OF THE CONSOLIDATED ENTITY

As at the date of this report, the interests of the Directors in the shares and performance rights of Talius Group Limited are shown in the table below:

MEETINGS OF DIRECTORS

The following table sets out the number of meetings of the Company's Directors held during the year ended 31 December 2023 and the number of meetings attended by each Director.

Company Secretary

Stephen Rodgers

LLB

Stephen Rodgers is a lawyer with 30 years' experience and holds a Bachelor of Laws degree from QUT. After practicing law with several firms in Brisbane over a 12-year period he operated his own specialist commercial and property law practice for 7 years. Mr Rodgers then joined the successful team at Sunshine Gas Limited, where he was the in-house Legal and Commercial Counsel - a broad role which also included assisting the Company Secretary with many of the facets of that position.

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DIRECTORS' REPORT

During this period, Mr Rodgers gained invaluable experience in the operation and running of an ASX200 Coal Seam Gas company as well as being an instrumental member of the team which led the takeover negotiations and implementation of QGC's friendly acquisition of that Company.

PRINCIPAL ACTIVITIES

Talius provides a suite of technology enabled care solutions to the aged and disability sectors, across multiple verticals including retirement living, residential aged care, home, and community settings to improve the quality of life, later in life.

Talius' Software as a Service (SaaS) data analytics platform Talius Smart Care combines smart sensors with AI machine learning (powered by CSIRO) that delivers automated actions. Talius links awareness, analysis, and action through one platform allowing the care model to move from spot check care to sense-respond care. Talius helps protect and connect our elderly and people with disabilities with a scalable healthcare technology platform integrated with leading third-party providers to ensure end-to-end solutions for Connected Health.

ENVIRONMENTAL REGULATION AND PERFORMANCE

The Company's operations are not subject to any significant environmental regulation under Australian Commonwealth or State law.

REVIEW OF OPERATIONS

Talius Group Limited has made significant strides during the year in refining our sales strategies within the aged care sector, resulting in sustained sales growth across home care, retirement villages, and residential aged care facilities.

The Company concluded the year with the financial achievement of its highest annual revenue to date at $12.4 million. This financial success is further enhanced by a robust and growing subscription base, which now yields an annualised recurring revenue (ARR) of $1.9 million and growing.

Significant sales achievements were recorded during the year, particularly in hardware sales related to Emergency Call System upgrades. Our partnership with Keyton Retirement Villages (formerly known as Lendlease's Retirement Living) has been strengthened through additional substantial orders, reflecting our clients' continued confidence in our solutions.

Our client portfolio expanded significantly with the addition of Uniting NSW.ACT's Retirement Living division, opting for our next-generation assistive technology solutions across New South Wales and the Australian Capital Territory, all delivered via the Talius Smart Care Platform on a subscription basis.

The growth journey this year saw Talius leveraging our robust sales pipeline to scale our operations significantly. We made the strategic decision to grow our team in both size and capability, particularly within our service stream, reflecting our commitment to our clients. This expansion is a direct investment in our future, aimed at accelerating revenue growth across various lines of business.

In anticipation of the impending 3G network shutdown, Talius proactively participated in numerous tenders and proposals, collaborating closely with various providers to ensure a smooth transition. This proactive approach underscores our commitment to excellence and reliability during significant technological transitions.

A pivotal moment came at the close of the year with the signing of a Letter of Intent (LOI) with Hato Hone St John in New Zealand for the supply of Talius' emergency response systems and software, marking a significant step towards expanding our market reach.

Our residential aged care (RAC) division has seen considerable success, completing projects for notable clients like Australian Unity in Melbourne and ACH Group in Adelaide, thereby reinforcing our reputation as a trusted partner

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DIRECTORS' REPORT

in aged care. We increased our expenditure in RAC by refining our product suite tailored for this vertical, and now are poised to reap significant dividends in the coming years. Our innovation drive is evident through new projects with clients such as Temora for Whiddon and Leigh Place in Sydney, highlighting our commitment to improving aged care services.

Talius initiated multiple paid pilots expected to yield results in the upcoming year, focusing on how our data analytics improve operational efficiencies, care outcomes, and compliance requirements. These are in hospital-in-the-home, NDIS residential service, and home care environments.

Subscription growth has been pleasing, with our numbers exceeding 29,000 this year, driven by the successful onboarding of new customers onto the Talius Smart Care Platform.

This year also saw the completion of a strategic acquisition of eHomecare, enhancing our client base, technical team, and expected to contribute significantly to our annual recurring revenue, particularly through the Finley Regional Care account.

During the year, Talius was honoured with an Aged Care Research and Industry Innovation Australia (ARIIA) grant for a consortium-led feasibility study aimed at preventing falls in residential aged care using our Smart Care Platform. This collaboration with Whiddon, CSIRO, and Anchor Excellence represents our dedication to leveraging technology for the betterment of aged care.

Our R&D team has made significant progress in simplifying the integration of sensor devices, a crucial step towards global scalability and enhanced platform functionality. This focus on technology underscores our commitment to delivering efficient and personalised care solutions. We've also concentrated on refining data reporting to assist clients with compliance, particularly in relation to the Mandatory Quality Indicators Program, enhancing our service offering in workforce efficiency and compliance.

Exploring new licensing opportunities, particularly in Platform as a Service (PaaS), remains a priority, aiming to expand our market reach and fully leverage our platform's capabilities.

Our collaboration with CSIRO has been pivotal, adapting algorithms for early detection of deterioration in the residential aged care setting, demonstrating the value of autonomous data collection in addressing chronic workforce shortages and care needs.

New sales channels have been explored, and while Talius remains focused on its enterprise standard B2B and B2B2C offering, we were pleased to commence a collaboration with TVSN (Television Shopping Network), Australia's leading direct to consumer sales platform, to supply the Trelawear Jewelry pendant product, in conjunction with FallCall Mobile Application which connects the device to the Talius platform.

Talius Group Limited has entered into strategic partnerships and supplier agreements, notably a three-year distribution agreement with Genesis Biotech, an esteemed Australian company specialising in the supply of Therapeutic Goods Administration (TGA) approved medical devices. These devices are seamlessly integrated into the Talius Smart Care Platform, establishing a unified platform for comprehensive health data monitoring and management.

Significant team growth and strategic hires, including a new CFO and National Sales Manager, have strengthened our operational capabilities.

The year also saw a major corporate rebranding, transitioning from HSC Technology Group Ltd to Talius Group Limited, aligning our corporate identity with our technology platform and commitment to data-informed care solutions.

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DIRECTORS' REPORT

The successful completion of a $2.5 million capital raise, supported by new and existing investors, reflects strong market confidence in our direction and achievements. These funds will be instrumental in scaling the Talius platform, supporting international growth, and reinforcing our balance sheet for future ventures.

FINANCIAL RESULTS

The Group's revenues and other income increased substantially during the 2023 year to $12,439,444, an increase of 73% on the prior year. Revenue performance was driven by:

• growth in hardware sales of 71%, primarily attributed to sales made to key clients such as Chubb/VitalCall, Keyton Retirement Villages (previously known as Lendlease's Retirement Living), and Uniting NSW.ACT's Retirement Living division.
• growth in subscriptions on the Talius Smart Care Platform of 73%. This growth has been driven by the successful integration of new customers into the Talius Smart Care Platform from completion of various projects and recent sales.
• The continuation of major contracts with a number of clients in the residential aged care space.

The Group's total loss for the 2023 was $1,341,402, an improvement of 17% on the 2022 loss $1,623,135. The key movements compared to the prior year were:

• A $1,030,040 increase in gross profit (revenues less cost of sales) resulting from higher revenues. Hardware margin percentages fell compared to the prior period on account of more attractive pricing offered on hardware sale to large customers to secure ongoing software subscriptions. Software subscriptions grew from around 15,000 in December 2022 to over 29,000 in December 2023.
• Employee and consultant costs (including share based payments) increased 7% as Talius continued to invest in team resources to strengthen our business development team, technical support, and corporate services to set a strong foundation for future expected growth;
• Marketing, property, and administrative/corporate increased 127% on the prior period, due to:
  o Increases in marketing and promotional activities of $110,471;
  o Foreign exchange losses of $100,869 in 2023 versus foreign exchange gains in 2022 of $85,354; o Other increases of $126,418 commensurate with business growth during the year.
• Reversals of previous impaired receivables and inventories.

Net cash outflows from operations were $911,476 (2022: $2,281,656). Following four successive quarters of positive cash flow, the Company experienced a negative operational cash flow quarter. This was due to expected lighter sales compared to previous quarters combined with settlement of inventory purchases, primarily in relation to its contract with Keyton and inventories for Q1 2024 committed orders.

Talius successfully completed a well-supported placement raising $2,500,000 (before costs). The proceeds of the Placement, along with existing cash holdings, will be utilised for further buildout of the Talius platform. This investment will enable further scalability into proven vertical markets and facilitate international growth. Additionally, these funds will support general balance sheet requirements for the 2024 pipeline and beyond.

The net asset position of the Group at 31 December 2023 was $5,000,128. The Group's net working capital (current assets less current liabilities) is a surplus of $4,678,343.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

There were no significant changes during the year.

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DIRECTORS' REPORT

LIKELY DEVELOPMENTS AND FUTURE OPERATIONS

The Company will continue to develop and commercialise its assistive technology enabled care solutions to the aged and disability sectors, across multiple verticals including retirement living, residential aged care, home, and community settings.

After considering external factors such as the shut-down of the 3G telecommunications network and the final report from the Royal Commission into Aged Care, the Company expects continuing strong growth in the use of assistive technology.

The Company earns revenue through hardware sales and recurring software subscriptions. As subscriptions on its Talius Smart Care Platform continue to grow, the Company expects recurring SaaS revenue to increase as part of the overall revenue mix.

The Company will consider expanding the application of its SaaS solutions to other markets such as health care, and also consider the licensing of Talius as a 'platform as a service'.

SUSTAINABILITY AND ESG

Talius' purpose to 'improve the quality of life, later in life' is the driving force behind our commitment to the areas of sustainability and ESG. With a strong emphasis on the 'Social' aspect of ESG, we are dedicated to improving living conditions for the elderly and those with disabilities. This commitment is not merely a statement but a guiding principle that shapes our business strategies and innovations. Our objective is to ensure that our growth directly contributes to societal progress, making the world a more inclusive and supportive place for our target demographics.

In our financial year 2024, we plan to progress our approach by transitioning from informal practices to a structured ESG policy and reporting framework. This move is designed to align our operations with our core ethical values while also enhancing our capability to identify and manage ESG-related risks effectively.

Key initiatives will include conducting a comprehensive analysis of issues that are material to both our business and stakeholders. We will aim to establish a robust sustainability framework that not only mitigates risks but also identifies opportunities for creating value that benefits all stakeholders. Furthermore, we will implement performance metrics to transparently track and report our progress in achieving these sustainability goals.

BUSINESS RISKS

Talius is subject to risks a number of which may have a material adverse effect on operating and financial performance. Talius' Risk Management Policy can be found on its website. It is not possible to identify every risk that could affect the business or shareholders and the actions taken to mitigate these risks cannot provide absolute assurance that a risk will not materialise or have a material adverse effect on business strategies, assets or future performance of Talius. A non-exhaustive list (in no particular order) of material risks and relevant mitigation strategies implemented by the Company are set out below.

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DIRECTORS' REPORT

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