CONTROL BIONICS LIMITED — Interim / Quarterly Report 2022

Apr 27, 2022

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28 April 2022

ASX ANNOUNCEMENT (ASX:CBL)

QUARTERLY ACTIVITIES REPORT & APPENDIX 4C QUARTER ENDED 31 MARCH 2022

Highlights

• Q3 FY22 Cash Receipts from sales of $1.3m

• Final preparations for the successful launch into the Japanese market in early April

• Q3 FY22 North America unit sales up 90% over Q3 FY21

• Key investments in people and infrastructure in FY22 in place to support planned sales growth

• $6.9m cash at 31 March 2022

Control Bionics Limited (ASX: CBL), is pleased to announce its Activity Report and Appendix 4C for the quarter ended 31 March 2022.

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

“After substantial investment in the right people, products and distribution channels, we are very pleased to see sales growth in the USA and a successful launch in Japan. I am excited about the significant growth opportunities for our products in Japan.

I am also delighted that our disability business in North America is showing promise with unit sales for the quarter up 90% over Q3 FY21.”

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

Operational Performance

(a) North America

Q3 FY22 sales through North American operations were A$0.95m.

Q3 is traditionally the slowest sales quarter in the North American market. However, North American unit sales have grown 90% over the same period in FY21.

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(b) Australia

Q3 FY22 sales for the Australian operations were A$0.26m. The sales pipeline in Australia remains strong, but revenue for the quarter was impacted by significant NDIS changes which have held up processing of orders. These changes are expected to result in faster processing of claims in Q4 and beyond.

The recently introduced rental plan strategy is showing strong interest from therapists, especially for late stage degenerative conditions like MND and is expected to create a meaningful revenue stream for the business.

(c) New Market Development

During Q3 the Company completed customisation of its products for Japan ready for a successful launch in early April at KidsFesta in Tokyo. The Company announced the appointment of experienced disability sector Japanese distributor, Double R&D who are very enthusiastic about the potential of our products in the Japanese market.

Singapore continues to develop with two of the top assessment centres purchasing our equipment for their organisations.

Work 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 UNO Touch system gained very positive market feedback after soft launch and is now being rolled out in Australia and North America.

• Latest NeuroNode software application and firmware launched in February 2022, will increase market penetration of NeuroNode Trilogy systems, particularly with cerebral palsy users.

• The Company is market testing a new miniaturised NeuroNode platform which has application for pediatric users as well as new medtech and consumer markets.

• CBL wheelchair self-drive system being developed in collaboration with Deakin University is at prototype stage and will soon start user trials.

Quarterly cashflows and cash at bank

The Group results reflected the following:

• Total net cash outflows of $1.6m, principally from operating activities of $1.46m.

• • Cash balance as at 31 March 2022 was $6.9m.

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

• A$0.14m R&D tax rebate received during the quarter.

• Collections from customers/insurance funders improved in the current quarter, generating a substantial increase in cash receipts relative to prior quarters.

Business Strategy

Since 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

• launching in Japan in April 2022

• appointing senior talent to lead critical operational aspects of the business

• market awareness of NeuroNode technology and 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

• 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 growing sales and productivity gains. The total identified sales opportunity pipeline is now valued at approximately $9.2m, which 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	1,448
Product manufacturing	786
Administration and corporate	467
Research and development	65
Advertising and marketing	127
Leased assets	33

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.

March 2022	Prospectus estimate	Actual Expenditure to 31 March 2022
Sales and marketing	6,550,000	4,189,770
Research and development	3,000,000	1,269,914
Intellectual property protection	300,000	50,499
Regulatory and insurance approvals	500,000	487,496
Offer costs	1,500,000	208,2331
Working capital and reserves	3,150,000	6,481,002
Total uses	15,000,000	12,686,914

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.

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 as 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		31 March 2022

Consolidated statement of cash flows	Current quarter ($A’000)	Year to date (9 months) ($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	1,335 (65) (786) (127) (33) (1,448) (467) - - - - 136 -	3,185 (257) (2,337) (528) (144) (3,888) (1,315) - 1 - - 224 -
	(1,456)	(5,060)

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	- - (149) - - - - - - - - - - - -	- - (276) - - - - - - - - - - - -
	(149)	(276)
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	- - - - - - - - -	- - 14 - - - - - -
	-	14

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	8,528 (1,456) (149) - (15)	12,331 (5,060) (276) 14 (101)	12,331 (5,060) (276) 14 (101)
		6,908	6,908
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)		6,908 - - -		8,527 - - -
		6,908		8,527
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 Note: if any amounts are shown in items 6.1 or 6.2, your quarterly activity report must include a explanation for, such payments.			133
			-
			description of, and an

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 120 120 Total financing facilities 120 120 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
		-	-
		-	-
		120	120
		120	120
	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) (1,456) Cash and cash equivalents at quarter end (item 4.6) 6,908 Unused finance facilities available at quarter end (item 7.5) - Total available funding (item 8.2 + item 8.3) 6,908 Estimated quarters of funding available (item 8.4 divided by item 8.1) 5 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?	(1,456) 6,908 -
		6,908
		5
	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: 28 April 2022

Authorised by: By the board

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