12. SHARE CAPITAL (CONTINUED) Movements in the number of Loan Funded Shares were as follows: Loan Funded Shares Weighted Average Exercise Price Exercisable Weighted Average Exercise Price Outstanding at 31 December 2021 3,000,000 $1.84 – – Outstanding at 31 December 2022 3,000,000 $1.84 1,200,000 $1.84 The exercise price for 3.0 million Loan Funded Shares is $1.84 per share. Options to acquire ordinary shares During the year ended 31 December 2022, options to acquire 2,200,000 ordinary shares were issued to employees and consultants. Options to acquire ordinary shares vest subject to remaining an employee or consultant if and when the following non-market performance vesting conditions are met: 950,000 share options 500,000 share options 750,000 share options i. on acceptance by the US Food and Drug Administration of the filing of a New Drug Application for trofinetide – 40% – ii. when the Company determines to progress NNZ-2591 to a Phase 2b or Phase 3 clinical trial following a positive Phase 2 clinical trial outcome, or executes a partnering transaction for NNZ-2591 60% 40% 60% iii. when the Company executes a partnering transaction for trofinetide outside North America, or submits a Marketing Authorisation Application for trofinetide in the European Union, the United Kingdom, or Japan 40% 20% 40% Each of these vesting conditions shall be tested separately from the other vesting conditions. The first vesting condition (i) was met in September 2022. The estimated fair value of the options to acquire ordinary shares has been determined using the Black-Scholes valuation model. The significant inputs into the model were the share price on date of valuation, the estimated future volatility of the share price, the risk-free interest rate, a dividend yield of 0% and an expected life of 2.75 years. The estimated future volatility of the share price was derived by analysing the historic volatility of the share price on a daily basis during the two years prior to the issue date, as this period is reflective of the anticipated volatility in the future. Details of the options to acquire ordinary shares issued during the year ended 31 December 2022, the estimated fair value and variable inputs into the valuationmodel are shown in the table below. The exercise price for the options to acquire ordinary shares is the 5-day weighted average price at which the shares were traded on the ASX in the 5 days preceding the issue of the options. Number of shares under option 1,450,000 750,000 Issue date 3 February 2022 8 July 2022 Exercise price per share option $3.46 $3.83 Share price on date of valuation $3.90 $3.90 Fair value per share option $2.03 $1.79 Estimated future volatility 77.58% 68.20% Annual risk-free interest rate 1.40% 3.09% Movements in the number of Share Options were as follows: Share Options Weighted Average Exercise Price Exercisable Weighted Average Exercise Price Outstanding at 31 December 2021 – – – – Issued 2,200,000 $3.59 – – Outstanding at 31 December 2022 2,200,000 $3.59 200,000 $3.46 NOTES TO THE CONSOL I DATED F I NANC I A L STATEMENTS CON T I NU E D Neuren Pharmaceuticals Limited Annual Repor t 2022 40
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