Tel: (08) 9437 3466

www.cleansubsea.com.au Australian Marine Complex 20 Sparks Road Henderson WA 6166 Australia

• Capital Raising Strategy

• New Investment Opportunities

• Sustainable Ocean Summit

Hong Kong

• Envirocart™ Systems 1 at

Operational Status.

• Envirocart™ essential to

Franmarine meeting Naval Ship

Management’s expectations.

• NZMPI Trials to go ahead in

early Q3 FY2019

Q1 HIGHLIGHTS

Dear Shareholder,

On behalf of CleanSubSea’s Board and management team, I’m pleased to provide you with an update on the performance of your Company for Q1 FY2019.

We are pleased to confirm that the first Envirocart™ unit is back in the water and ready to complete work, with trial cleans slated for December 2018. This will be a major stepping platform to the very attractive Royal Australian Navy opportunity which management strongly believes will be a game changer for the Company.

With your continued support, we are confident that the real underlying value of the technology will be achieved once several units are commercially available, income streams are established and In-Water Hull Cleaning (IWHC) regulatory compliance standards become more aligned internationally.

We believe the recent ratification of the International Maritime Organisation’s (IMO) Ballast Water Treatment Convention and the recent release of the IMO Glofoul initiative is indicative of the industry’s immediate need for our Envirocart™ technology in managing biofouling and to minimise the spread of invasive marine species.

Our Australian Licensee, Franmarine has advised us that there is a significant increase in Vessel Biosecurity activity required to comply with the New Zealand Craft Risk Management (CRM) Policy prior to entering New Zealand territorial waters. By creating compliant CRM plans for a number of Cruise Lines as well as NSM, these plans will lead to a significant increase in IWHC activities.

Your Board has agreed to support and focus on these domestic near-term IWHC opportunities.

If you have any questions or would like to discuss any of the details presented in this newsletter, I’d encourage you to contact myself via email or phone.

Thank you for your ongoing support and commitment to CleanSubSea.

Roger Dyhrberg Executive Chairman & Managing Director

SHAREHOLDER AND INVESTOR UPDATE Q1 FY2019

Tel: (08) 9437 3466

www.cleansubsea.com.au Australian Marine Complex 20 Sparks Road Henderson WA 6166 Australia

OPERATIONS

Envirocart™ Trials The next commercial trial clean will be conducted shortly on a Royal Australian Naval (RAN) vessel in December 2018. Once this trial is successfully completed we expect confirmed use of the Envirocart technology for future naval cleans across RAN Fleet Command. Franmarine has once again begun to build a steady demand for cleans. Through our partnership with Franmarine, we are also pleased to confirm Envirocart™ has been selected for testing against the New Zealand Ministry of Primary Industries (NZMPI) Craft Risk management Framework. The trial is scheduled to take place early in Q3 FY2019. Once we have successfully completed this trial, we will be asked to establish in NZ IWHC operations using the Envirocart™ technology.

NERA The NERA grant is beginning to deliver tangible results with System 1 Envirocart™ maintenance and amendment near completion for upcoming commercial trails.

Naval Ship Management (NSM) The significance of these developments is possibly best summarised by Defence’s Prime Contractor, NSM, General Manager, Mr Joe Smith, who recently confirmed in the WA Defence Review Publication that NSM through their supply chain relationships such as Franmarine, is committed to reducing its client’s asset operating cost by the introduction of innovative solutions such as the Envirocart™, to defence. Franmarine has also confirmed their intention to establish commercial operations in NSW to support NSM. Further, provided they are successful with the NZMPI tender, Franmarine will look to leverage off that opportunity in to the New Zealand market.

Envirocart™ Maintenance and Repair After the successful clean on RAN Stuart (April 2018), in hindsight, the decision to halt operations until further capital was raised, was costly from a development perspective.

Although the Board reversed that decision in August 2018, the result was that to effectively assess and bring the system back up to operational standard, the entire system (filtration container, machinery container, magnetic drive, cleaning head and umbilical’s) needed to be dismantled for a full service and reassembled.

We are pleased to confirm that the maintenance and modifications are complete pending a full system trial completion. The net cost of these and modifications were in the vicinity of $160,000.

• Naval trials to recommence Q2 FY2019

• Through the NERA grant, System 1 of the Envirocart™ operational.

• Envirocart™ essential to Franmarine achieving its contractual agreement with NSM.

• Envirocart™ maintenance and repairs completed.

Tel: (08) 9437 3466

www.cleansubsea.com.au Australian Marine Complex 20 Sparks Road Henderson WA 6166 Australia

FINANCIALS & CAPITAL RAISING

The Company remains mindful of its cash flow outflow position with resources being allocated to the preparation of the current Envirocart™ system for the upcoming Australian Naval clean and the full review by Naval Fleet Command in the Q3 FY2019 timeframe.

The Board would also like to inform shareholders that a number of cost cutting initiatives have been implemented in the current financial year, including:

• Executive salary reductions of 20% from 1 July 2018; • Executive salaries suspended from 1 November 2018, until successful completion of the next capital

raising; and • Further reductions in operating costs.

The Company continues to investigate a number of funding options and will update shareholders in the fullness of time.

In the interim, the Board has received an offer for a short-term loan of up to $500,000, offered by our Licensee partner, Franmarine Underwater Services (Franmarine). As you may know, I am the majority shareholder and a director of Franmarine. I have (and will continue) to excuse myself of any discussions in relation to the proposed loan with the other Board members or advisors. I understand that the remaining Board has also sought independent advice in respect of the proposed loan terms and conditions. I will not be voting on any matter in respect of the proposed loan.

If accepted by the independent Directors, this short-term operating loan will enable more time to successfully conclude ongoing discussions with a large Dutch Engineering & Subsea sector leader and a large Japanese Trading Corporation. The company has also mandated Montpellier Advisory to identify potential cornerstone investment opportunities from the UAE. The initial response to my first round of meetings in the UAE has been outstanding, with Mr Stuart Thompson of Montpellier confirming a number of follow up requests for Company terms sheets from large institutional investors in UAE and Oman. Further, follow up, and next stage discussions are scheduled in December 2018.

We will keep all shareholders updated in respect of our capital raising plans.

CORPORATE

Board News I am delighted to report that our new non-executive Director, Capt. Walter Purio (CEO of LNG Fuel Institute), has hit the ground running with a number of introductions to several leading marine companies within his network. One introduction lead to my invitation to present the Envirocart™ technology at the World Ocean Council - Sustainable Ocean Summit in Hong Kong on 15 November 2018. This provided an opportunity to present the importance of our Envirocart™ capture and containment capability to an international audience. The presentation itself was very well received with numerous questions directed at compliance and regulatory approvals now being considered and implemented in a number of jurisdictions around the world.

• Initiatives to reduce operating

costs have been implemented

• Consideration of a short-term

loan, $500,000

• CSS assigns Montpellier to

explore investment opportunities

in UAE

• CSS addresses the World Ocean Council in Hong Kong.

• Walter Purio appointed as Director in July 2018

• Rory Anderson to seek shareholder approval be re-nominated as Director of CSS.

Tel: (08) 9437 3466

www.cleansubsea.com.au Australian Marine Complex 20 Sparks Road Henderson WA 6166 Australia

Capt. Purio’s significant maritime experience is detailed on our website. On review, I’m sure you’d be as confident as I am that his experience and extensive network will lead to ever increasing opportunities.

I also wish to add a particular word of thanks to Mr Rory Anderson. Under the Company’s constitution, Rory has served his full term as an Executive Director. He has kindly agreed to seek shareholder approval to be re-nominated for another term, at my request. Rory has remained a resilient and focused professional, implementing key operational steps on an ongoing basis against tight financial constraints during what have been exceptionally challenging circumstances. In addition to securing over $1.1 million in Research and Development tax incentive refundable offsets, Rory has continued to develop relationships in order to secure the important international licensing market. In particular, his proactive support of Franmarine’s initiative with securing an agreement with NSM to service the Royal Australian Navy and generate new near term Envirocart™ revenue streams, and the continuing relationship with UMC is strategically instrumental to re-establishing closed circuit IWHC operation in the UK and other jurisdictions. CEO resignation Mr Rob George tended his resignation on 9 July 2018 which the Company accepted. We thank Rob for his efforts during his time with the Company. The Company now looks forward to strengthening the executive management team at the appropriate time.

The Company acknowledges its large shareholder base and asks that if you are aware of any shareholders not receiving our newsletters to please forward on. Our more recent newsletters are also available on our website www.cleansubsea.com.au.

I look forward to providing further updates on our progress in due course.

Roger Dyhrberg

Executive Chairman & Managing Director

CleanSubSeaLimited

Australian Marine Complex 20 Sparks Road Henderson WA 6166, Australia

M : +61(0) 417 956 449 T : +61 8 9437 3466 roger@cleansubsea.com.au