| Convertible loans are classified as financial liabilities and are initially recognised at the transaction price, net of any directly attributable transaction costs. Subsequently, they are measured at amortised cost using the effective interest method. Interest on the loans is recognised in the profit and loss account as it accrues. Where the lender has an option to convert the loan into equity, no separate equity component is recognised unless the conversion feature is substantive and separately measurable. In most cases, the entire instrument is treated as a liability until conversion occurs.
On 30 January 2024, the Company issued a convertible loan note with a principal value of £157,003. A further convertible loan note with a principal value of £158,386 was issued on 8 February 2024. Both notes mature nine months after their respective issue dates.
Under the terms of the loan agreements:
• The notes bear interest at 10% per annum if (i) they are redeemed at maturity, (ii) redeemed following a material breach, or (iii) an event of default occurs. Interest accrues daily and is payable on redemption.
• The notes are redeemable at the option of the noteholder on the maturity date or following a material breach, and are subject to immediate redemption upon certain insolvency events.
• The notes convert automatically into equity in the event of a qualifying fundraising or change of control, and may also be converted at the option of the noteholder by giving not less than five business days’ notice prior to maturity.
At the reporting date, no conversion or redemption notices had been served and no automatic conversion event had occurred. Accordingly, the loan notes have been classified as financial liabilities and measured at amortised cost.
The total carrying amount of the convertible loan notes at 30 November 2024 was £339,108, comprising principal of £315,389 and accrued interest of £23,719, which has been recognised in the profit and loss account. |