Morella : Half Year Financial Report

For personal use only

Morella Corporation Limited

ABN 39 093 391 774

HALF YEAR FINANCIAL REPORT

For the six months ended 31 December 2021

This half year financial report is for the six months ended 31 December 2021 and does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the Company's Annual Report for the year ended 30 June 2021 and any public announcements made by Morella Corporation Limited ABN 39 093 371 774 during the period in accordance with the continuous disclosure requirements of the Corporations Act 2001.

For personal use only

CONTENTS
	Page
Corporate Directory .......................................................................................	1
Directors' Report ...........................................................................................	2
Auditor's Independence Declaration .............................................................	5
Consolidated Statement of Profit and Loss....................................................	6
Consolidated Statement of Other Comprehensive Income............................	7
Consolidated Balance Sheet...........................................................................	8
Consolidated Statement of Changes in Equity...............................................	9
Consolidated Statement of Cash Flows .......................................................	10
Notes to the Financial Statements................................................................	11
Directors' Declaration..................................................................................	22
Independent Auditor's Review Report ........................................................	23

For personal use only

Corporate Directory

DIRECTORS

James Brown - Managing Director

Allan Buckler - Non‐Executive Director

Dan O'Neill - Non‐Executive Director

Beng Teik Kuan - Non‐Executive Director

CHIEF EXECUTIVE OFFICER

Alex Cheeseman

COMPANY SECRETARY

John Lewis

REGISTERED OFFICE

During the reporting period and up to 9 November 2021 Level 9, 863 Hay Street

Perth WA 6000

Telephone: [phone]

Facsimile: [phone]

Email: [e-mail]

Since 10 November 2021

Suite 5, 680 Murray Street

West Perth, 6005

Email: [e-mail]

Website: morellacorp.com

AUDITORS

PKF Perth

Level 5, 35 Havelock Street

Perth WA 6005

SHARE REGISTRY

Link Market Services Limited

Level 12, QV1 Building

250 St George's Terrace

Perth WA 6000

AUSTRALIAN SECURITIES EXCHANGE

Code: 1MC, 1MCOB

1

For personal use only

Morella Corporation Limited and Controlled Entities

Directors' Report

FOR THE HALF YEAR ENDED 31 DECEMBER 2021

Your directors have pleasure in presenting the interim financial statements of Morella Corporation Limited ("Morella" or "the Company") and its controlled entities ("the Group") for the half year ended 31 December 2021. The previous corresponding period of financial performance is the half year ended 31 December 2020 and of financial position is as at 30 June 2021. The directors report as follows:

DIRECTORS

The names of the directors in office during the financial year and up to the date of this report are as follows:

Mr James Brown

Mr Allan Buckler

Mr Dan O'Neill

Mr Beng Teik Kuan

OPERATING AND FINANCIAL REVIEW

Operating Results

The Group's operating loss after providing for income tax for the half‐year ended 31 December 2021 was $1,588,795 (2020: loss $113,486,913). The loss in the current period was principally related to restructuring and administration expenditure during the ASX re‐quotation process and offset by a net non‐cash foreign exchange gain.

REVIEW OF OPERATIONS

The Company's primary focus for the six months was the conclusion of all matters to enable the Company's securities to be re‐quoted on the ASX. This milestone was achieved on 14 December 2021.

Corporate

During the six months to 31 December 2021, The Group achieved re‐quotation on the ASX raising $8.599 million in cash as part of the process to fund its medium‐term exploration and operational activities. Subsequent to shareholder consent the Group was renamed to Morella Corporation Limited (ASX code: 1MC).

Exploration

Fish Lake Valey Lithium Project

On 12 October 2021 Morella executed the formal Earn‐in Option Agreement for 60% of the project with rights to acquire 100% of the Fish Lake Valley Project. Morella commenced planning activities to conduct an exploration program in order to develop an understanding of the true subsurface geological and hydrogeological nature of the project. Following an extensive review of all available historical information and drilling results (which were relatively shallow or surface focussed), the Company has formed the opinion that Fish Lake Valley is prospective as a potential project with economic size and scale.

In Order to understand the subsurface structure of the Fish Lake Valley basin, Morella has commissioned a passive seismic survey to be completed by two contracting parties. One contractor will undertake technical investigations from Western Australia, whilst the other contractor will conduct field work and capture data on the ground in Nevada, USA. The first phase of data collection was completed in late December, with the second phase scheduled for completion in January/February 2022, weather dependant.

Mallina Lithium Project

Morella formalised the earn‐in agreement for 51% of the project with Sayona Mining Limited in November 2021 which provides a clear pathway forward for the exploration and development of the Mallina Project.

A detailed review of the historical exploration work that has been conducted for the Mallina tenement (E47/2983) and confirms lithium mineralisation at Mallina. A three‐hole drill program has been planned to commence in March/April 2022 focussing on the Eastern Group Pegmatites.

On 20 October 2021, DMIRS formally notified the Morella of its successful Round 24 submission as part of the WA Government's Exploration Incentive Scheme (EIS). Morella will be co‐funded up to a maximum offer of $150,000 against direct drilling costs for the Mallina exploration program planned for early 2022. The EIS funding will support continued exploration and lithium resource development in the Pilbara and the Company welcomes this State Government initiative.

2

For personal use only

Morella Corporation Limited and Controlled Entities

Directors' Report (continued)

FOR THE HALF YEAR ENDED 31 DECEMBER 2021

Environment

There were no environmental breaches or incidents recorded during the reporting period

Other Assets ‐ Lithium Corporation

Morella holds a strategic equity position with US based Lithium Corporation (OTCQB: LTUM) which is an early‐stage exploration company with claims and land holding in the United States of America.

Divestment of Assets

Tabalong Coal Asset

The Tabalong Coal Project is a premium grade thermal coal deposit located in South Kalimantan, Indonesia. The project consists of five (5) Mining Licences (IUPs), with all five (5) IUPs granted for Operation Production. Morella holds 70% of three IUPs and 56% of the remaining two. The Company has previously stated its intention to divest its interests in Tabalong coal assets. It is pursuing a number of options for sale of the coal assets and information has been made available to a number of parties under confidentiality deed arrangements.

FUTURE DEVELOPMENTS, PROSPECTS AND BUSINESS STRATEGIES

The Groups' objective is to create shareholder value through the development and operation of profitable mining businesses and other supplementary activities that deliver strong cash flows for the Group, and resultant regular dividends for shareholders.

Key Business Strategies

Morella's strategic focus comprises:

• The targeted exploration of prospective lithium tenements in Tier 1 operating jurisdictions.
• Transitioning a passive investment in Lithium Corporation into an active Project interest through the development of the strategically located, US‐based, Fish Lake Valley Project.
• Partner and collaborate with other groups and entities, focused on delivering lithium and battery materials into the market, thus enabling the new energy/green revolution.
• Design future operations and lithium production processes that align and contribute to the global need to decarbonise the economy, with the transparent and regulatory compliance that emerging sophisticated markets like (the EU) will demand.
• Conducting its exploration and development activities in a sustainable manner across environment, health and safety, people and community considerations.
• Divestment of the Tabalong coal project.

MATTERS SUBSEQUENT TO THE END OF THE PERIOD

Subsequent to the end of the reporting period, the Company undertook the following:

21 January 2022 40,000,000 shares issued to Holcombe Ventures LLC and its principal Mr Mark Holcombe (Holcombe). The focus of the agreement is the provision of strategic market and management advisory services including project generation. Holcombe has an extensive global network, with a particular focus on the battery materials sector.

21 January 2022 2,000,000 shares issued to Mr Alex Cheeseman or his nominee pursuant to the Morella Executive Incentive Plan approved by Shareholders at the Company's AGM held on 30 November 2021.

28 February 2022 The company advises option holders of its 148,797,979 listed options exercisable at $0.20 each (ASX:1MCOB) (Listed Options) of their upcoming expiry on 28 February 2022. The Company notes that the Listed Options are substantially "out of the money" and does not anticipate holders exercising and converting the options. The Company intends to rely on item 5.3 of Appendix 6A of the Listing Rules and will not send out a personalised notice to the holders of these Listed Options.

The impact of the Coronavirus (COVID‐19) pandemic is ongoing for the consolidated entity up to 31 December 2021, it is not practicable to estimate the potential impact, positive or negative, after the reporting date. The situation continues to develop and is dependent on measures imposed by the Australian Government and other countries, such as maintaining social distancing requirements, quarantine, travel restrictions and any economic stimulus that may be provided.

3