Non Current Liabilites - Convertible Note

12 Months Ended

Jun. 30, 2023

Non Current Liabilites - Convertible Note

NOTE 16.

NON-CURRENT

LIABILITIES – CONVERTIBLE NOTE


	Consolidated
	June 30, 2023			June 30, 2022
	A$			A$
Convertible note at fair value at beginning of reporting period		1,452,950			2,526,870
Net change in fair value		139,048			324,736
Transfer to contributed equity on conversion of Convertible Notes		(461,805	)		(893,379	)
Transfer to accumulated losses on conversion of Convertible Notes		(294,747	)		(505,277	)

Convertible note at fair value at end of reporting period		835,446			1,452,950

On May 11, 2015, the Company entered into a subscription agreement with Ridgeback Capital Investments (Ridgeback) to invest in Convertible Notes and Warrants of the Company for cash consideration totaling $13,750,828, which was subject to shareholder approval at an Extraordinary General Meeting. Shareholder approval was received on July 31, 2015.

During FY2021, 75% of the Convertible Notes have been converted to ordinary shares. These have been done in three issuances of 25% each between March 2021 and June 2021. During FY2022, further 12.5% of the Convertible Notes have been converted to ordinary shares in March 2022. At the reporting date, 6.25% of the original Convertible Note balance remains outstanding. The outstanding notional amount of the Convertible Notes (including the accrual of 3% p.a interest) as at June 30, 202

was $1,063,358, which can be converted into 6,646,432 ordinary shares at an exercise price of $0.16 per share if Ridgeback elects to convert the Convertible Notes into ordinary shares. All Notes have been converted to ordinary shares at $nil consideration per the original subscription agreement.

The 13,750,828 Convertible Notes issued in 2015 have a face value of $1.00 per note which are exercisable at a price of approximately $0.16 per share (adjusted for post share consolidation and anti-dilution clause), mature on August 4, 2025 and accrue interest at a rate of 3% per annum which may also be converted into shares. Conversions may occur during the period (i) at least 3 months after the Issue Date and (ii) at least 15 business days prior to the maturity date into ordinary shares of the Company (subject to customary adjustments for rights or bonus issues, off market buybacks, issues at less than current market price, share purchase plan, dividend reinvestment plan at a discount, return of capital or dividend or other adjustment). If a change of control event, delisting event or event of default has occurred, Ridgeback may elect to convert the notes into shares or repayment of principal and interest. The Convertible Notes rank at least equal with all present and future unsubordinated and unsecured debt obligations of the Company and contain customary negative pledges regarding financial indebtedness, dividend payments, related party transaction and others.

Details of the warrants granted together with the convertible note at initial recognition date are

follows:

•

8,475,995

warrants were granted which are exercisable at a price of A$

0.025

per share on or before August 4, 2025

•

371,445,231 warrants were granted which are exercisable at a price of A$

0.0237

per share on or before August 4, 2020

All warrants may be settled on a gross or net basis and the number of warrants or exercise price may be adjusted for a pro rata issue of shares, a bonus issue or capital re-organisation. The Warrants do not confer any rights to dividends or a right to participate in a new issue without exercising the warrant.

As a result of the 10 to 1 share consolidation in November 2019, the above cited warrants have been restated in accordance with the subscription agreement. The exercise prices have been adjusted for the capital raising during the year under the anti-dilution clause of share purchase agreements.

The warrant expiry dates remain unchanged. The restated terms are as follows:

•

847,600 warrants with an exercise price of A$

0.248

per share

•

37,144,524 warrants with an exercise price of A$

0.235

per share

37,144,524 warrants with an exercise price of A$0.235 per share lapsed unexercised on August 4, 2020. None of the other warrants specified above have been exercised since initial recognition up to June 30, 2023.

(i) Fair value of convertible notes

The following assumptions were used to determine the initial fair value of the debt component of the convertible note which were based on market conditions that existed at the grant date:


Assumption	Convertible notes			Rationale
Historic volatility		85.0	%	Based on the Company’s historical volatility data
Share price	$	0.051		Closing market share price on July 31, 2015
Risk free interest rate		2.734	%	Based on Australian Government securities yields which match the term of the convertible note
Risk adjusted interest rate		15.0	%	An estimate of the expected interest rate of a similar non-convertible note issued by the company
Dividend yield		0.0	%	Based on the Company’s nil dividend history

The fair value of the convertible note is allocated between a financial liability for the traditional note component of the convertible note and into equity which represents the conversion feature. The traditional note component of the convertible note was initially recorded at fair value of $4.4m, based on the present value of the contractual cash flows of the note discounted at 15%. After initial recognition, the liability component of the convertible note has been measured at fair value as required by AASB 2 (IFRS 2). The remaining value of the convertible note was allocated to the conversion feature and recognized as equity.

After initial recognition, there were five subsequent conversions of convertible notes in total as follows and of which one conversion happened during the year ended 30 June 2023:

Conversion of 3,437,707 convertible notes on 18 March 2021 (25%)

Conversion of 3,437,707 convertible notes on 14 May 2021 (25%)

Conversion of 3,437,707 convertible notes on 7 June 2021 (25%)

Conversion of 1,718,853 convertible notes on 14 March 2022 (12.5%)

Conversion of 859,427 convertible notes on 14 October 2022 (6.25%)

859,427 convertible notes (i.e., 6.25% of the initial convertible notes) remain outstanding as at 30 June 2023, each with a face value of A$1.00. The liability component of the convertible note has been measured at fair value as required by AASB 2 – Share-based Payments.


	Note – Liability			Conversion feature – Equity
Fair value at issuance		4,419,531			41,431,774
Fair value movements		6,005,325			—
Conversion to ordinary shares		(9,589,410	)		(38,842,288	)

Balance at June 30, 2023		835,446			2,589,486