This project aims to gain a greater understanding of the changes in the brains of young people when they are developing a severe mental illness and to investigate the utility of an electrophysiological index of auditory sensory memory (mismatch negativity) as a predictor of transition to a schizophrenia spectrum disorder. Young people attending youth mental health centres in Newcastle, Orange and Sydney will be recruited over a 3.5-year period. Those meeting ultra-high risk (UHR) criteria as determined according to the Comprehensive Assessment of At Risk Mental States, will be followed up over a 12-month period. At baseline clinical, electrophysiological recordings, high-resolution structural and DTI magnetic resonance brain images, neurocognition and social cognition data are collected, with follow-up data collected after 12-months. This preliminary report describes correlations between baseline MMN amplitude data and symptoms and cognitive functioning. To date, baseline data have been obtained on 40 UHR participants. These preliminary results indicate associations between duration MMN and functional status, duration MMN and auditory verbal memory and frequency MMN and cognitive flexibility. Results suggest duration MMN may be tapping into underlying temporal lobe mechanisms, while frequency MMN may be tapping into underlying frontal lobe mechanisms and such deficits are occurring during the prodrome phase.