CONTROL BIONICS LIMITED — Interim / Quarterly Report 2024

Jan 29, 2024

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30 January 2024

ASX ANNOUNCEMENT (ASX:CBL)

QUARTERLY ACTIVITIES REPORT & APPENDIX 4C QUARTER ENDED 31 December 2023

Highlights

• Total revenue for the half was up 17% over the comparative period in FY23, with unaudited EBITDA up over 27% for the same period.

• Sales revenue was up only slightly due to timing of insurance approvals. Total revenue was bolstered by the accrual of R&D Tax Rebate for H1 FY24.

• The company raised a further $1.67m through a successful rights issue during the quarter.

• • Strong cash management saw cash used in operating activities drop from $1.5m in Q1 to $0.2m in Q2.

• Cash at the end of the quarter was $1.3m.

• Production is underway of our first commercial quantities of the NeuroStrip with first devices due in the coming weeks.

• Subsequent to the end of the quarter, the company raised a further $1.032m through placement of the rights issue shortfall. The $2.7m rights issue is now fully subscribed.

• Also after the end of the quarter, Control Bionics announced it had been awarded a A$575k grant in the US from the ALS Association to support our efforts to bring our autonomous wheelchair module, DROVE, to the US.

Control Bionics Limited (ASX: CBL), is pleased to announce its Activity Report and Appendix 4C for the quarter ended 31 December 2023.

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

“I am pleased with how the business finished the first half of FY24, with continued growth across the business. The revenue growth combined with our focus on cost management has seen us continue to progress towards our breakeven goals.

I am excited by the work our team has completed towards our key strategic pillars with significant progress on our software, hardware, DROVE and our latest product, the NeuroStrip. As these new products and product enhancements come to market in the coming weeks and months, this will underpin new growth for the business.

Australia has seen strong growth half on half, with almost 32% revenue growth in the second half of 2023 over the first half of the calendar year.”

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

US revenue for the quarter was flat over the first quarter of FY24 as the business experienced typical seasonal slowdowns that occur during Thanksgiving and Christmas. Cash receipts from customers were less than forecast in the US as debtors held on to cash in the run up to 31 December 2023. We expect to see cash receipts improve in the first quarter of calendar 2024. The US business is operating close to it’s budgeted revenue for FY24.

(b) Australia

Australia continues to demonstrate solid growth. The additions to the sales team in the first half of calendar 2023 are showing in sales performance. With the last quarter of CY23 revenue up 58% over the first quarter of calendar 2023. The business in Australia is experiencing ongoing delays with the NDIS. We have a strong working relationship with the NDIS and recognise that the organisation had been focused on the Government review for much of the last half of calendar 2023.

We have a significant volume of funding applications with the NDIS as at 31 December which gives us confidence for the performance of H2FY24.

(c) Japan

Our Japanese business is building momentum as the first market of our ‘NeuroNode Only’ strategy. We are both selling NeuroNodes and renting NeuroNodes (as a precursor to a sale) and our solution is resonating with ALS (MND) and Cerebral Palsy customers. We have more than 50 active opportunities in our pipeline and growing partnerships and market recognition.

(d) Product development

There has been a significant amount of activity from the team this quarter in product development as we move towards the release of a number of new products and enhancements to existing offerings. In particular:

• We’ve commenced manufacturing of the first commercial quantities of the NeuroStrip. Partnered with this is the release of our NeuroStrip App which allows for real time visualisation of raw EMG data from multiple NeuroStrips simultaneously, ready for new applications and clinical trials of this innovative device.

• Along with the recent update to the firmware for the NeuroNode/NeuroStrip we’ve finalised an update to our controller app to significantly improve the user experience. This will be released into production in the coming weeks.

• DROVE testing in advance of our Therapeutic Goods Administration registration is reaching completion having passed the required electrical testing.

Quarterly cashflows and cash at bank

The Group’s results reflect the following:

• Total operating cash outflows were down to $224k for the quarter (down from $1.48m in Q1FY24).

• Staff costs were down ~$400k over the previous quarter due to one off payments in Q1FY24.

• The business raised ~$1.7m in a rights issue in November 2023 which was subsequently fully subscribed via a shortfall placement of just over $1m in January 2024. In addition, the business received an R&D rebate of $480k during the quarter.

• The cash balance at 31 December was $1.3m.

Business Strategy

Control Bionics is executing on its previously stated strategic plan, that contains a number of pillars. Those pillars are:

• Drive growth in the US to reach monthly breakeven.

• Accelerate growth in Australia.

• Deliver first commercial sales of DROVE autonomous wheelchair controller.

• Drive NeuroNode sales globally as an unbundled accessory for use with any AAC system.

• Continue to enhance our software to improve performance and provide new applications.

• Assess opportunities to strengthen our supply chain and the key building blocks of our systems.

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

With the recently announced grant award of ~A$575k in the US from the ALS Association, we are now funded to assess the path for commercialisation of DROVE into the US. This project commences this month.

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)	1,254
Product manufacturing	30
Administration and corporate	287
Research and development(Note 2)	61
Advertising and marketing	157

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 6.1 of the Appendix 4C comprise a total amount of $75,595 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) 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 recently extended its offering to mobility with the launch of DROVE – the autonomous wheelchair module. DROVE allows powered 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 and Managing Director 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
Control Bionics Limited
ABN 45 115 465 462	**Quarter ended (“current quarter”) **
45 115 465 462	31 December 2023

Consolidated statement of cash flows	Current quarter ($A’000)	Year to date (6 months) ($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	1,087 (61) (30) (157) - (1,254) (287) - 3 (6) - 481 -	2,594 (127) (898) (278) - (2,878) (585) - 7 (18) - 481 -
	(224)	(1,702)

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	- - (506) - (14) (13) - - - - - - - - -	- - (510) - (28) (51) - - - - - - - - -
	(533)	(589)
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	1,708 - - (30) - - - - (74)	2,830 - - (30) - - - - (111)
	1,604	2,689

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	480 (224) (533) 1,604 (13)	936 (1,702) (589) 2,689 (20)	936 (1,702) (589) 2,689 (20)
		1,314	1,314
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)		1,314 - - -		480 - - -
		1,314		480
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.			76
			-
			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) (224) Cash and cash equivalents at quarter end (item 4.6) 1,314 Unused finance facilities available at quarter end (item 7.5) - Total available funding (item 8.2 + item 8.3) 1,314 Estimated quarters of funding available (item 8.4 divided by item 8.1) 5.87 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?	(224) 1,314 -
		1,314
	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:

30 January 2024

Authorised by: By the Board