Note 9. Current liabilities - Convertible Notes Consolidated 2025 2024 $ $ Borrowings - Convertible Notes Carrying amount at start of period - - Face value of notes issued 2,600,000 - Convertible notes conversion feature on issue (640,000) - Value of options issued and taken to equity settled option reserve (15,000) - Add Convertible note finance charges and accrued interest 426,164 - Current liability at end of the period 2,371,164 - Derivative Liability Carrying value at start of period - - Fair value of the convertible note conversion feature at issue 640,000 - Fair value movement to the end of the reporting period (532,000) - Derivative liability at end of period 108,000 - Total current liability 2,479,164 - Face value of convertible notes 2,600,000 - As announced by the Company on 27 September 2024 and 5 November 2024, the Company agreed to issue $2.6 million in Convertible Notes to professional and sophisticated investors, who are also shareholders of the Company. The $2.6 million in convertible note funding was received in January 2025, and the convertible notes subsequently issued. These convertible notes are secured over the 30 June 2025 Australian Government R&D Tax incentive scheme rebate, attract an interest rate of 12% per annum capitalised until the date the notes are fully repaid or converted into shares. Expiring on 2 January 2026, the notes have a conversion price of A$0.0992 (being a 20% discount to the average five-day VWAP ending 6 September 2024, namely A$0.1239) – or a lower price if the company undertakes a capital raise at any time before the expiry date. The note has a conversion floor price of A$0.07. Notes (including any capitalised interest) may be converted by Noteholders into fully paid ordinary shares in the Company (Shares) at any time up to the maturity date. No Notes have been converted as of the date of this report. Upon issue of the Convertible Notes on 7 January 2025, the Company valued the Convertible Notes using the Monte Carlo Simulation model to determine the value of the embedded derivative. The Monte Carlo Simulation is used to value complex financial instruments. Significant unobservable inputs in applying this technique include the Company’s future share price, exercise price, expiry date and volatility. As at 30 June 2025 the fair value of the embedded derivative is measured using significant unobservable inputs (Level 3 hierarchy). There has been no change in the Group’s valuation process, valuation techniques and types of inputs used in the fair value measurement at the end of the reporting period in comparison to the methodology upon inception. There have been no transfers between levels of fair value hierarchy during the period ended 30 June 2025. The convertible note valuations at inception included estimates of the volatility 90% and risk free interest rate of 3.9%. At 30 June 2025, the estimated volatility used was 90%, and risk free interest rate of 3.3%. As an incentive for participating in the issuance of the notes, the investors will receive a total of 520,000 unlisted options (50,000 per A$250,000 invested) at a strike price of A$0.1488, with a three-year term expiring on 10 September 2027. The Black Scholes option pricing model has been used to determine the value of the Options issued to the noteholders using an estimated volatility of 90% and risk free interest rate of 3.9%. Refer to Note 22, Matters subsequent to the end of the financial year for additional information on the extension of the convertible note maturity date to 2 January 2027, and the proposed issue of a Convertible Note, face value $1.25M to 4F Investments Pty Limited subject to shareholder approval at the AGM. Annual Report 2025 35
RkJQdWJsaXNoZXIy MjE2NDg3