ANNUAL Report June 2024 Notes to the Consolidated Financial Statements 39 (c) Movements in Performance Rights No performance rights were issued nor outstanding at the end of the reporting period. 14. CONVERTIBLE NOTES On 17 September 2021, the Company issued 6,000,000 convertible notes with an aggregate principal value of $6,000,000. Subsequent to this issue, 2,000,000 notes plus accrued interest were converted into 30,832,307 ordinary shares on 29 and 30 September 2021. On 28 September 2023, the noteholders opted to fully exercise the convertible notes into EQR ordinary shares at a conversion price of $0.065 per share. The fair value of the liability component was estimated at the issuance date using an “Interest Rate Differential” methodology, which discounts the convertible notes’ cash flows at a commercial discount (interest) rate to a present value. The residual amount is assigned as the equity component and is included in reserves. A further issuance of $750,000 convertible notes occurred on 6 November 2023 with an aggregate principal value of $750,000. The notes are convertible at the option of the noteholders into ordinary shares at a conversion price of $0.100 per share at any time after issuance and up to the close of business on the maturity date. Noteholders have an option to redeem the notes at the end of 2 years at face value plus any accrued interest. Any convertible notes not converted will be redeemed on 6 November 2025 at the principal amount together with accrued but unpaid interest thereon. The notes carry interest at a coupon rate of 9.00% per annum (effective interest rate of 0.86% per month based on a 2-year amortisation period on estimated cashflow timing in line with the 2-year redemption option), which is payable annually in arrears. The convertible notes issued and converted during the period have been split into liability and equity components as follows: Debt ($) Equity ($) Number Opening balance at 1 July 2023 2,852,667 1,147,333 4,000,000 Nominal value of convertible notes issued 525,000 225,000 750,000 Notes converted during the period (2,852,667) (1,147,333) (4,000,000) Balance as at 30 June 2024 525,000 225,000 750,000 Debt Component – Convertible Notes 2024 $ Opening balance at 1 July 2023 3,494,215 Convertible note issue on 6 November 2023 525,000 Accrued interest at an effective interest rate 199,828 Interest paid at coupon rate (280,000) Capitalised borrowing costs 28,150 Liability derecognition upon conversion (3,422,556) Balance as at 30 June 2024 544,637 2023 Debt Component – Convertible Notes $ Opening balance at 1 July 2022 3,004,651 Accrued interest at an effective interest rate 586,963 Interest paid at coupon rate (280,000) Capitalised borrowing costs 182,601 Balance as at 30 June 2023 3,494,215 EQ Resources Limited Annual Report 2024 105
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