CONTROL BIONICS LIMITED — Interim / Quarterly Report 2023

Jul 24, 2023

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25 July 2023

ASX ANNOUNCEMENT (ASX:CBL)

QUARTERLY ACTIVITIES REPORT & APPENDIX 4C QUARTER ENDED 30 JUNE 2023

Highlights

• An excellent Q4 saw continued strong growth with $1.5m in sales revenue, up over 20% on Q3 and total revenue of over $1.9m including the R&D Tax Incentive.

• US sales continued their strong growth trajectory and finished the year with US$820k in recorded revenue in the last quarter.

• Australia had a record quarter invoicing more than A$430k in product sales. The rapid increase in growth (more than double Q3 sales) saw the business report just under A$300k in revenue for the quarter with remainder to be recognised in Q1 FY24.

• Q4 FY23 Cash Receipts from customers of $1.33m was up 15% over Q3 FY23 receipts, reflective of the strong quarter both subsidiaries enjoyed.

• Whilst revenue was up over 20%, we were able to reduce total operating costs for the quarter (down more than 7% over Q3), as cost reduction initiatives were realised.

• Unaudited operating revenue for FY23 of A$5.6m is a 27% increase over FY22 and a strong result for the business.

• The established strong growth trajectory from the core business is forecast to continue through FY24, with additional contributions from a range of new strategic initiatives.

• Just under $1m in cash at bank as at 30 June 2023, with the current rights issues which closes on Friday 28 July to further bolster cash reserves.

Control Bionics Limited (ASX: CBL), is pleased to announce its Quarterly Activity Report and Appendix 4C for the quarter ended 30 June 2023.

Commenting on the quarter, Control Bionics CEO, Jeremy Steele said:

“I’m delighted to report a strong end to FY23. Both the US and Australia experienced strong sales results in May and June.

We recently added resources to our Australia team, and we have seen immediate benefits, with Q4 delivering the strongest quarter of sales since our operations began. The US continued to deliver quarter on quarter growth with full year revenue growth of over 25%.

Following my recent time in Japan, we have adjusted our strategy for this market. We are now working more directly with hospitals, schools and clinics to drive sales and have recently deployed equipment to 6 sites to build market awareness.

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

Having now been with the business for 6 months, I recently released our updated strategy to the business and market, and I am encouraged by the progress we are already making. FY24 is set to be another significant year of growth for CBL.”

Operational Performance

(a) North America

Following a particularly strong Q3 FY23, it is encouraging to see further growth in the US with Q4 sales of US$820k. This increase in revenue has been delivered on a smaller cost base, demonstrating our continued focus on improved sales effectiveness and operational efficiencies.

(b) Australia

Australia had a record quarter for sales, with sales in excess of $430k. The additional sales and support resources added to the Australian team have made an immediate impact, and are expected to deliver further growth in FY24.

(c) New Market Development

We have refined our strategy for Japan, and while we continue to work with our distributor in Japan, we are now working directly with hospitals, doctors and clinics to drive demand from Japan. Our revised Japanese pricing combined with the new release of our Japanese language software we believe will drive new sales for us in the coming months.

(d) Product development

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

• We have committed to enhancing the business’ software capabilities, bringing Dr Tom Allen on as our Software Product Lead as well as a senior developer to bring back inhouse some of our core software capabilities to deliver on our core strategic initiatives.

• • In addition to the ongoing work to miniaturise our Neuronode technology, we are currently assessing opportunities to use our EMG technology in adjacent markets.

• With our recent investment in our software capabilities, we expect to release further updates to our Neuronode controller app before the end of the year. These enhancements are expected to drive demand as well as increase the potential uses and customers for the Neuronode, including in Japan.

• We are finalising the testing for DROVE such that we can secure TGA registration and commence sales. This is likely to occur during Q1FY24.

Quarterly cashflows and cash at bank

The Group results reflected the following:

• Total operating cash outflows of $0.475m was down significantly over Q3 FY23. The business received its R&D refund related to expenses incurred during FY22 (~$280k) however the majority of the improvement in cash generation was through improved operating performance combined with cost management.

• Cash balance as at 30 June 2023 was $0.936m.

• A rights issue is due to close on 28 July, with commitments and cash deposited of

over $1m as at the date of this announcement.

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 the Australian, North American and more recently Japanese assistive technology markets, and we are now open and ready for business in all of these markets.

We recently announced to the market our key strategic pillars for the coming 12 months. These are as follows:

• Drive growth in the US to reach monthly breakeven;

• Accelerate growth in Australia;

• Deliver first commercial sales of DROVE;

• Drive Neuronode sales globally as an unbundled accessory for use with any AAC system;

• Enhance our software;

• Assess opportunities to strengthen our 3[rd] party products; and

• Build an organisation where our people are supported, rewarded, given opportunities to grow and are respected.

We have already made progress on many of these pillars as can be seen in the quarter’s results.

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 (Note 1)	1,250
Product manufacturing	470
Administration and corporate	178
Research and development (Note 2)	59
Advertising and marketing	80
Leased assets	5

Notes

1. Includes staff costs directed towards R&D

2. Excludes staff costs directed towards R&D

Related Party Payments

Related party payments as noted in Item 6 of the Appendix 4C comprise a total amount of $69,721 paid to Executive Directors and their related parties and Board fees to NonExecutive 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)/ Amyotrophic Lateral Sclerosis (ALS), Spinal Cord Injury, Traumatic Brain Injury and Cerebral Palsy among others. 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 Electromyography (EMG) signals which are processed on personal computers, smartphones and tablets to generate text, text to speech, email and other computer controlled functions. 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 produces the only system to harness three modalities – touch, eye movement and EMG 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 recently extended its offering to mobility with the launch of DROVE – the autonomous wheelchair module. This world first solution allows powered wheelchair users the independence to operate their wheelchairs in their own homes for the first time.

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

Investors and Media

Jeremy Steele - CEO jsteele@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

Name of entity	Name of entity	Name of entity
Control Bionics Limited
ABN 45 115 465 462	**Quarter ended (“current quarter”) **
	30 June 2023
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	1,325 (59) (470) (80) (5) (1,250) (178) - 3 (10) - 280 -	5,475 (301) (3,391) (382) (50) (5,270) (1,080) - 20 (42) - 280 -
	(444)	(4,741)

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	- - - - (21) - - - - - - - - - -	- - (119) - (56) - - - - - (42) - - - -
	(21)	(217)
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) 3.10 Net cash from / (used in) financing activities	- - - - - 114 - - (29)	- - 749 - - 114 - - (161)
	85	702

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	1,312 (444) (21) 85 4	5,214 (4,741) (217) 702 (22)	5,214 (4,741) (217) 702 (22)
		936	936
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)		936 - - -		1,312 - - -
		936		1,312
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.			70
			-
			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 - - Total financing facilities - - 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
		-	-
		-	-
		-	-
		-	-

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) (444) Cash and cash equivalents at quarter end (item 4.6) 936 Unused finance facilities available at quarter end (item 7.5) - Total available funding (item 8.2 + item 8.3) 936 Estimated quarters of funding available (item 8.4 divided by item 8.1) 2.11 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?	(444) 936 -
		936
		2.11
	Answer: N/A
	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:N/A
	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: N/A
	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: 25 July 2023

Authorised by: By the Board

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