CONTROL BIONICS LIMITED — Interim / Quarterly Report 2022

Jul 27, 2022

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27 July 2022

ASX ANNOUNCEMENT (ASX:CBL)

QUARTERLY ACTIVITIES REPORT & APPENDIX 4C QUARTER ENDED 30 JUNE 2022

Highlights

• Q4 FY22 Cash Receipts from sales of $0.9m

• Successful launch into the Japanese market in early April with local partner Double R&D and new sales forecast to commence in FY23

• Continued strong growth in sales with 8% increase in unit sales relative to the previous quarter, including a number of new rental agreements

• • $5.2m cash at 30 June 2022

Control Bionics Limited (ASX: CBL), is pleased to announce its Activity Report and Appendix 4C for the quarter ended 30 June 2022.

Commenting on the quarter, Control Bionics CEO, Robert Wong said:

“Growth in unit sales is returning as the effects of COVID lockdowns continue to abate, and our investments in the right people, products and distribution channels continues to have a positive impact. During the quarter we were delighted to launch our Japanese operations with local distribution partner Double R&D and remain excited by the opportunities to deliver life changing communications technology to our Japanese clients. We expect a growing contribution to sales from Japan in FY23, with other new markets to follow.

Key operational investments are now in place, and the rate of new expenditure will start to fall and sales are forecast to grow as we enter the new financial year.”

Operational Performance

(a) North America

Q4 FY22 sales through North American operations were A$0.82m, consistent with the previous quarter.

(b) Australia

Stronger Q4 FY22 sales results for the Australian operations. Although Sales Revenue was consistent at A$0.25m, 7 new rental contracts were written which will continue to deliver income

Control Bionics Limited

Registered Office: Level 5, Suite 5.01, 697 Burke Road, Camberwell, Victoria, 3124, Australia T: +61 3 9897 3576 W: www.controlbionics.com ABN: 45 115 465 462

in FY23. The Sales pipeline in Australia remains strong including growing interest in rental based sales.

(c) New Market Development

The Company completed its initial customisation of its products for Japan ahead of a successful launch in early April at KidsFesta in Tokyo. The Company has an excellent local, experienced disability sector partner in Japan, Double R&D, who are actively promoting our products in the Japanese market in conjunction with our local country manager. Client assessments and trials have now commenced.

Additional products are currently in development for the Japanese market.

Work also continues on developing opportunities in other relevant new markets.

(d) Product development

The Company continued to develop and extend its product range in order to target expanded sales opportunities and new user groups. Notable actions in the quarter included:

• The company continues to develop new products based on its market leading NeuroNode technology. A miniaturized platform is already in use for specialised disability applications and is adding to our sales pipeline. New features are being developed for the miniaturized platform to enable a range of new applications within existing markets, and beyond to new consumer oriented markets and other specialty applications.

• Existing products are being repackaged and repurposed for new markets such as Japan, and for other new markets currently under development.

• Our unique wheelchair self-drive system continues its development in collaboration with Deakin University and is expected to start user trials in FY23.

Quarterly cashflows and cash at bank

The Group results reflected the following:

• Total net cash outflows of $1.7m, principally from operating activities of $1.47m.

• Cash balance at 30 June 2022 was $5.2m.

The significant impacts on cash flow during the quarter were as follows:

• Collections from customers/insurance funders continued to be a focus in the current quarter.

Business Strategy

Since the IPO in December 2020, the Company has embarked on a considered investment strategy to build out the business platform that maximises the long term sales potential of the NeuroNode technology in Australia, North America and more recently Japanese assistive technology markets. Management’s assessment of COVID-19 was that it would have a significant short to medium term impact, on top-line revenue, but would ultimately abate. The strategy has been to be ready as markets open with a strong footprint. Great progress has been made with the fundamental plan by investing in:

• growing and training specialist sales teams and expanding regions where we were not represented across Australia, North America, Japan and Singapore;

• launch of operations in Japan in April 2022;

• appointment of senior talent to lead critical operational aspects of the business;

• growing market awareness of NeuroNode technology and the brand with key specifiers in key regions;

• building out quality scalable support systems and resources to assist the business across international multi-language markets;

• building an insurance funding team in preparation for more insurance funded sales;

• • strengthening the product offering with improvements to the NeuroNode range, and augmenting the range with new products like COSMOS Connect and UNO Touch; and

• • Investment in R&D projects for future products and revenue streams.

As the Company rounds out these investments in FY22 and COVID-19 conditions abate, management expects to see solid growth in sales and productivity gains. The sales opportunity pipeline continues to grow, and is a strong leading indicator of the momentum of the business. It’s important to note however, with insurance reimbursement trial/sale requirements, the sales funnel can take up to 6-9 months to be realised.

ASX Additional information

Expenditure on business activities

Pursuant to Listing Rule 4.7C.1, a summary of the expenditure incurred on the above business activities for the quarter:

Expenditure Category	Amount $’000
Staff costs	1,227
Product manufacturing	795
Administration and corporate	266
Research and development	33
Advertising and marketing	61
Leased assets	41

Pursuant to Listing Rule 4.7C.2, Control Bionics provides the following comparison of its actual expenditure since admission to the ASX on 7 December 2020 against the 'use of funds’ statement in its Prospectus dated 26 October 2020.

June 2022	Prospectus estimate	Actual Expenditure to 30 June 2022
Sales and marketing	6,550,000	5,049,611
Research and development	3,000,000	1,495,901
Intellectual property protection	300,000	50,499
Regulatory and insurance approvals	500,000	515,515
Offer costs	1,500,000	208,2331
Working capital and reserves	3,150,000	8,013,920
Total uses	15,000,000	15,333,6792

1 Total offer costs were $1,579,864 of which $1,360,200 was incurred prior to the date of listing (7 December 2020) and $208,233 was incurred subsequent to the date of listing.

2 The company has now fully expended the funds raised from the Prospectus of December 2020 in pursuit of its business aims. The balance of funds expended against that projection have been provided from funds from operations.

The amount included in section 6.1 of the Appendix 4C is the payment of fees to directors.

This ASX announcement has been approved for release by the Board of Directors of Control Bionics Limited.

About Control Bionics:

Control Bionics is a medical device company assisting patients whose ability to communicate verbally or via text and social media is compromised by illnesses such as Motor Neurone Disease (MND) and Amyotrophic Lateral Sclerosis (ALS). Our core patented NeuroNode technology is a wireless wearable device that detects minute signals sent from the brain to any skeletal muscle and is captured as EMG (Electromyography) output. This output is then sent wirelessly via the NeuroNode to a personal computer, enabling speech and other computer controlled functions like email and texting. Our technology is integrated with eye gaze technology whereby the eye gaze enables a cursor to be moved about a computer screen, driven much like a mouse, and the NeuroNode acts like the mouse button. Control Bionics is the only such product to harness three modalities – touch, eye and NeuroNode control – which combined yield unique benefits in terms of the ability of patients to express themselves with significantly faster speed and less fatigue.

Control Bionics operates in North America, Australia, Singapore and Japan.

Investors and Media

Rob Wong - CEO robwong@controlbionics.com

Brett Crowley - Company Secretary brettcrowley@controlbionics.com

For further information visit the website: https://www.controlbionics.com/

Appendix 4C

Quarterly cash flow report for entities subject to Listing Rule 4.7B

Name of entity

Control Bionics Limited

ABN		**Quarter ended (“current quarter”) **
45 115 465 462		30 June 2022

Consolidated statement of cash flows	Current quarter ($A’000)	Year to date (12 months) ($A’000)
1. Cash flows from operating activities 1.1 Receipts from customers 1.2 Payments for (a) research and development (b) product manufacturing and operating costs (c) advertising and marketing (d) leased assets (e) staff costs (f) administration and corporate costs 1.3 Dividends received (see note 3) 1.4 Interest received 1.5 Interest and other costs of finance paid 1.6 Income taxes paid 1.7 Government grants and tax incentives 1.8 Other (provide details if material)1 1.9 Net cash from / (used in) operating activities	921 (33) (794) (65) (41) (1,227) (266) - 1 (1) - 30 -	4,105 (290) (3,132) (593) (185) (5,115) (1,460) - 2 (1) - 254 -
	(1,476)	(6,415)

2. Cash flows from investing activities 2.1 Payments to acquire or for: (a) entities (b) businesses (c) property, plant and equipment (d) investments (e) intellectual property (f) other non-current assets 2.2 Proceeds from disposal of: (a) entities (b) businesses (c) property, plant and equipment (d) investments (e) intellectual property (f) other non-current assets 2.3 Cash flows from loans to other entities 2.4 Dividends received (see note 3) 2.5 Other (provide details if material) 2.6 Net cash from / (used in) investing activities	- - (151) - - - - - - - - - - - -	- - (427) - - - - - - - - - - - -
	(151)	(427)
3. Cash flows from financing activities 3.1 Proceeds from issues of equity securities (excluding convertible debt securities) 3.2 Proceeds from issue of convertible debt securities 3.3 Proceeds from exercise of options 3.4 Transaction costs related to issues of equity securities or convertible debt securities 3.5 Proceeds from borrowings 3.6 Repayment of borrowings 3.7 Transaction costs related to loans and borrowings 3.8 Dividends paid 3.9 Other (provide details if material)1 3.10 Net cash from / (used in) financing activities	- - - - - (72) - - -	- - 14 - - (193) - - -
	(72)	(179)

4. 4.1 4.2 4.3 4.4 4.5 4.6	Net increase / (decrease) in cash and cash equivalents for the period Cash and cash equivalents at beginning of period Net cash from / (used in) operating activities (item 1.9 above) Net cash from / (used in) investing activities (item 2.6 above) Net cash from / (used in) financing activities (item 3.10 above) Effect of movement in exchange rates on cash held Cash and cash equivalents at end of period	6,908 (1,476) (151) (72) 5	12,331 (6,415) (427) (179) (96)	12,331 (6,415) (427) (179) (96)
		5,214	5,214
5. Reconciliation of cash and cash equivalents at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts		Current quarter $A’000		Previous quarter $A’000
5.1 Bank balances 5.2 Call deposits 5.3 Bank overdrafts 5.4 Other (provide details) 5.5 Cash and cash equivalents at end of quarter (should equal item 4.6 above)		5,214 - - -		6,908 - - -
		5,214		6,908
6. Payments to related parties of the entity and their associates			Current quarter $A’000
6.1 Aggregate amount of payments to related parties and their associates included in item 1 6.2 Aggregate amount of payments to related parties and their associates included in item 2			115*
			-

7. 7.1 7.2 7.3 7.4 7.5 7.6	Financing facilities Note: the term “facility’ includes all forms of financing arrangements available to the entity. Add notes as necessary for an understanding of the sources of finance available to the entity. Total facility amount at quarter end $A’000 Amount drawn at quarter end $A’000 Loan facilities - - Credit standby arrangements - - Other (please specify) – see below 48 48 Total financing facilities 48 48 Unused financing facilities available at quarter end - Include in the box below a description of each facility above, including the lender, interest rate, maturity date and whether it is secured or unsecured. If any additional financing facilities have been entered into or are proposed to be entered into after quarter end, include a note providing details of those facilities as well.	Total facility amount at quarter end $A’000	Amount drawn at quarter end $A’000
		-	-
		-	-
		48	48
		48	48
	External financing facility to fund payment of annual insurance obligations: •Lender: Bank of Queensland (BOQ) •Interest rate: 4.79% •Maturity date: 24 August 2022 •Unsecured

8.	Estimated cash available for future operating activities	$A’000
8.1 8.2 8.3 8.4 8.5 8.6	Net cash from / (used in) operating activities (item 1.9) (1,476) Cash and cash equivalents at quarter end (item 4.6) 5,214 Unused finance facilities available at quarter end (item 7.5) - Total available funding (item 8.2 + item 8.3) 5,214 Estimated quarters of funding available (item 8.4 divided by item 8.1) 4 Note: if the entity has reported positive net operating cash flows in item 1.9, answer item 8.5 as “N/A”. Otherwise, a figure for the estimated quarters of funding available must be included in item 8.5. If item 8.5 is less than 2 quarters, please provide answers to the following questions: 8.6.1 Does the entity expect that it will continue to have the current level of net operating cash flows for the time being and, if not, why not?	(1,476) 5,214 -
		5,214
		4
	Answer: Not applicable
	8.6.2 Has the entity taken any steps, or does it propose to take any steps, to raise further cash to fund its operations and, if so, what are those steps and how likely does it believe that they will be successful?
	Answer: Not applicable
	8.6.3 Does the entity expect to be able to continue its operations and to meet its business objectives and, if so, on what basis?
	Answer: Not applicable
	Note: where item 8.5 is less than 2 quarters, all of questions 8.6.1, 8.6.2 and 8.6.3 above must be answered.

Compliance statement

1 This statement has been prepared in accordance with accounting standards and policies which comply with Listing Rule 19.11A.

• 2 This statement gives a true and fair view of the matters disclosed.

Date: 27 July 2022

Authorised by: By the board

(Name of body or officer authorising release – see note 4)