Annual Report to shareholders

Corporate Directory 3

Directors' Report 4

Auditors' Independence Declaration 17

Consolidated Statement of Profit and Loss 18

Consolidated Statement of Other Comprehensive Income 19

Consolidated Balance Sheet 20

Consolidated Statement of Changes in Equity 21

Consolidated Statement of Cash Flows 22

Notes to the Financial Statements 23

Directors' Declaration 71

Independent Auditor's Report to the Members 72

Directors' Report

for the year ended 30 June 2025

James Brown - Managing Director Allan Buckler - Non-Executive Director Dan O'Neill - Non-Executive Director

Beng Teik Kuan - Non-Executive Director

John Lewis

Suite 5, 68 Murray Street West Perth WA 6005

Telephone: +61 (0) 429 596 535 Email: info@morellacorp.com

Website: https://www.morellacorp.com

PKF Perth Dynons Plaza

Level 8, 905 Hay Street

Perth WA 6000

MUFG Corporate Markets

(Formally Link Market Services Limited) Level 12, QV1 Building

250 St George's Terrace Perth WA 6000

Code: 1MC

Directors' Report

for the year ended 30 June 2025 (continued)

Your directors have pleasure in presenting the annual financial report of Morella Corporation Limited ("Morella" or "the Company") and its controlled entities ("the Group") for the financial year ended 30 June 2025.

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

COMPANY SECRETARY

The name of the secretary in office during the financial year and up to the date of this report is as follows: Mr John Lewis

PRINCIPAL ACTIVITIES

The principal activity have been centered around the Groups exploration tenements and conducting exploration programs on these tenements.

OPERATING AND FINANCIAL REVIEW

Overview

Morella Corporation Limited has made significant progress in its exploration and project development activities throughout the fiscal year. The company has focused on its core lithium projects, including the Tabba Tabba East, Fish Lake Valley, Mallina, and Mt Edon projects, located in Western Australia and the USA. These projects are pivotal for Morella's strategy to support the increasing demand for battery minerals essential for the global transition to green energy.

Review of Operations

Corporate Developments

During the year, the Group completed.

• A non-renounceable pro rata entitlement offer that closed on 22 August 2024 raising $3,154,780. Subscribers applied for and were issued 102,923,224 Fully Paid Ordinary (FPO) Shares and 23,939,756 Options, expiring on 31 August 2026, to subscribe for FPO Shares at an exercise price of $0.072.

• A capital re-structure by consolidating the issued capital on a 25:1 basis reducing the shares on issue to 247,153,103.

  The proceeds funding medium-term exploration and operational activities. Annual and half-yearly financial reports were completed, ensuring transparency and compliance with ASX requirements.

  Project Development

  Nevada USA Lithium Exploration

• North Big Smoky Lithium Project:

  Activities included geophysical surveys and soil sampling, which revealed high-grade lithium mineralization in various areas. The Carvers project identified significant lithium grades in soil sampling, with assays showing concentrations of up to 271 ppm. Shallow drilling commenced to test stratigraphy and assist in the design of future deep-hole programs.

• Fish Lake Valley Lithium Project:

  A 2D seismic reflection survey was completed, defining the deep rift basin geology beneath the playa, similar to structures at Albemarle's Silver Peak Lithium Brine Mine. Preliminary drilling results indicated the presence of lithium-bearing sediments, enhancing the understanding of the geological features. The company has planned further drilling activities based on these insights, aiming to tap into potential lithium brine resources.

  Directors' Report

  for the year ended 30 June 2025 (continued)

  Western Australia Lithium Exploration

• Mallina Lithium Project:

  Morella continued its exploration activities with a reverse circulation (RC) drilling program aimed at extending previously identified high-grade pegmatite intercepts. The drilling confirmed the presence of high-grade lithium oxide, with significant intercepts such as 16.4m at 1.24% Li2O. A total of 35 holes were drilled, completing 2,200 meters out of a planned 2,800 meters. The results indicated previously unknown areas of mineralization and extensions to existing zones. A follow-up drilling program is planned to further assess the mineralisation.

• Tabba Tabba East Lithium Project:

  Morella conducted successful soil sampling programs that identified significant lithium anomalies. The first phase of RC drilling was initiated to test these anomalies, with further drilling planned based on initial results. The drilling focuses on areas with underlying faults or structures, and the first phase consists of 15 RC holes, with the potential to expand based on early results.

• Mt Edon Project:

  Following positive results from previous exploration activities, a drilling program is planned for Q1 FY 2025. This program aims to target shallow lithium mineralized pegmatites identified in earlier explorations.

  Next Steps

  Morella Corporation plans to expand its exploration activities at Tabba Tabba East and Mallina based on recent positive drilling results. The Fish Lake Valley project will continue to advance with additional seismic surveys and further drilling to enhance resource definition. A drilling program at the Mt Edon project will also be executed, focusing on the identified lithium mineralized zones.

  Operating results

  The Group's operating loss after providing for income tax and non-controlling interests for the year ended 30 June 2025 was

  $1,233,148 (2024: loss $2,948,378). The Group's operating loss after providing for income tax from continuing operations for the year ended 30 June 2025 was $1,884,231 (2024: loss $2,999,977). The loss in 2025 includes non-cash costs as follows:

• Depreciation and amortisation of $96,549 and includes further financial costs as follows:

• Interest of $249,029

• Net foreign exchange Gain of $858,646

  Excluding the above items, the Group loss after tax was due to the Group's ongoing exploration activities and corporate administration.

  The Group's revenue from continuing operations for the year ended 30 June 2025 was $636,006 (2024: $526,200). The revenue in 2025 was derived from its exploration services.

  Financial position

  The Group cash and cash equivalents balance as at 30 June 2025 was $795,508 (2024: $420,820). The Group's cash flow from operating activities was negative $2,145,483 (2024: $3,054,839) predominantly due to costs of administration. The Group's cash flow from investing activities was negative $370,472 (2024: negative $4,362,235) predominantly due to the exploration expenditure on its tenements. The Group's net cash flow from financing activities provided was $2,899,443 (2024: used $86,818) predominantly due the capital raised in this period used to meet medium-term expenditure commitments.

  The net assets of the Group increased by $1,823,950 from $8,234,692 to $10,058,642 due predominantly to funding administration and investment in its exploration projects. For further information on the capitalised exploration expenditure please refer to Note 15.

  Directors' Report

  for the year ended 30 June 2025 (continued)

  Other Assets

  Lithium Assets - Lithium Corporation

  Morella acquired an interest in US-based, OTC listed Lithium Corporation in November 2012. Lithium Corporation is a junior exploration and mining company focused on creating shareholder value through the discovery and development of lithium and other energy related mineral resources. At the end of the reporting period Morella held 9.21% of the issued capital of Lithium Corporation.

  Coal Assets -Tabalong Coal

  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. The Board has considered the current climate and the ability to complete the sale of the project in the near term and determined it prudent to make an impairment to present a value of Nil in the financial statements whilst continuing to actively seek an appropriate sale counterparty.

  MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR

  Subsequent to the end of the financial year the following events occurred:

  *13 August 2025 the Company's application for E59/2990 - Dixson Well was granted. Located 60 km east of Paynes Find in Western Australia's Murchison Province, the Dixon Well Project (E59/2990) was secured by Morella after a data driven review of publicly available GSWA geochemical and soil sampling datasets. This analysis identified multiple titanium anomalies that warranted closer investigation.

  An initial site visit by Morella's technical team confirmed the presence of titanium mineralisation in quartz-ilmenite veins, with rock chip assays returning grades up to 17.0% TiO2 (titanium oxide).

  The next steps will include further mapping and systematic surface sampling to expand anomaly coverage. These programs are designed to refine drilling targets and better define the scale and potential of titanium mineralisation at the project.

  *10 September 2025 the Company completed its earn in option agreement with the execution of a binding Deed of Termination & Assignment with Lithium Corporation (LTUM) allowing the restructure its Fish Lake Valley (FLV) and North Big Smoky (NBS) lithium projects in Nevada, USA.

  Key Outcomes of the Agreement

• Morella gains 100% ownership of the restructured Fish Lake Valley South and North Big Smoky projects, consolidating its portfolio.

• Lithium Corporation retains 100% of the Fish Lake Valley North claims, streamlining both parties' project footprints.

• A 3.5% Net Smelter Royalty (NSR) is retained by LTUM, with Morella having the option to repurchase 50% of the NSR within five years.

• Future share issuances under the earn in option agreement with LTUM will occur over 18 months,

• The agreement fosters a cooperative relationship, with mutual Rights of First Refusal on future claims or NSR transfers.

*23 September 2025 the Company completed the sale of the unmarketable parcel facility as announced 13 May 2024.

The final number of Shares sold under the UMP Facility was 11,797,403 Shares (post-Consolidation) (294,935,048 Shares (pre-Consolidation)) held by 8,828 shareholders. The Company received 2,019 share retention forms from shareholders, holding 3,433,763 Shares (post-Consolidation) (85,844,064 Shares (pre-Consolidation)), who chose to retain their Shares despite being eligible for the UMP Facility. The shareholders whose shares were sold through the UMP Facility shall receive approximately $0.0175 per Share (post-Consolidation) ($0.0007 per Share (pre-Consolidation)), being the average price of shares sold on-market under UMP Facility, without having to pay brokerage or other costs.

No other significant events have occurred since 30 June 2025, which would require disclosure in the financial report.

Directors' Report

for the year ended 30 June 2025 (continued)

FUTURE DEVELOPMENTS, PROSPECTS AND BUSINESS STRATEGIES

The Group's objective is to create shareholder value through acquisition and development of lithium-based exploration tenements and other supplementary mining activities that deliver positive cash flows for the Group, and resultant value for shareholders.

Key Business Strategies

Morella's strategic focus comprises:

• Exploration and resource development across the suite of tenements and claims with which Morella has a right to lithium raw materials.

• Acquisition and exploration of additional tenements and project opportunities focussed on lithium and battery raw materials.

• Conducting its exploration operations sustainably and in consideration of the environment, health and safety, people and community relations.

• Divestment of the Tabalong coal project.

  Future Prospects and Material Business Risks

  The Company's future financial performance and financial outcomes are dependent upon a range of risk factors typically encountered by lithium exploration and mining companies. These include:

• Identify and successfully explore tenements suitable for resource development.

• Cost and access to funds for working capital, refinancing or project expansion purposes.

• Movements in the Australian Dollar / US Dollar exchange rate can impact on revenue and debt.

  DIVIDENDS

  There were no dividends paid or declared during the year ended 30 June 2025 (2024: Nil).

  SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

  Other than this and matters outlined in the Review of Operations, there has not arisen any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect substantially the operations or results of the Group in subsequent financial years.

  ENVIRONMENTAL PERFORMANCE

  The Group is committed to achieving a high standard of environmental performance and is subject to significant environmental regulation form both Commonwealth and State legislation in Australia to its mining, development and exploration activities. The Board of Directors is responsible for regular monitoring of environmental exposures and compliance with these environmental regulations. The Group complied with its environmental performance obligations during the year.

  Directors' Report

  for the year ended 30 June 2025 (continued)

  INFORMATION ON DIRECTORS

  Mr James Brown (Managing Director)

  Qualifications

  Graduate Diploma in Mining from University of Ballarat

  Experience

  Mr Brown is an experienced mining company executive with over 40 years' experience in the mining industry in Australia, United States, Africa and Indonesia, including the last 14 years in the Managing Director role at Morella. Mr Brown has successfully sourced, developed and operated numerous key global projects with a focus on lithium and battery materials. He has an extensive global network which has delivered key projects to Morella such as Fish Lake Valley, Mallina and more recently North Big Smoky project. Aside from securing key projects Mr Brown led the successful re-establishment of Morella via delivery of capital from his established network of global institutions and high net worth investors.

  Other current directorships in listed entities

  Sayona Mining Limited Greenwing Resources Limited

  Former directorships in last 3 years

  None

  Special responsibilities

  None

  Interests in shares and options

  As at the date of this report 2025 Mr Brown had interests in 18,266,537 ordinary shares and 1,551,205 Options expiring on 31 August 2026 in Morella Corporation Limited

  Mr Allan Buckler (Non-Executive Director)

  Qualifications

  Certificates in Mine Surveying and Mining, First Class Mine Managers Certificate and a Mine Surveyor Certificate issued by the Queensland Government's Department of Mines.

  Experience

  Mr Buckler has over 45 years' experience in the mining industry and has taken lead roles in the establishment of several leading mining and port operations in both Australia and Indonesia. Mr Buckler was appointed a director in December 2008.

  Other current directorships in listed entities

  Sayona Mining Limited

  Former directorships in last 3 years

  None

  Special responsibilities

  Member of the Audit & Risk Committee

  Member of the Remuneration & Nomination Committee

  Interests in shares and options

  As at the date of this report Mr Buckler had interests in 60,516,544 ordinary shares and 1,388,889 Options expiring on 31 August 2026 in Morella Corporation Limited

  Directors' Report

  for the year ended 30 June 2025 (continued)

  Mr Dennis O'Neill (Independent Non-Executive Director)

  Qualifications

  Bachelor of Science in geology from the University of Western Australia

  Experience

  Mr O'Neill was appointed a director in December 2008. He has held positions with a number of Australian and multinational exploration companies and has managed exploration programs in a diverse range of environments and locations including Botswana, North America, Southeast Asia, North Africa and Australasia. During his 36 years' experience, he has held executive management positions with ASX listed companies and has worked on a range of commodities including diamonds, gold, base metals, coal, oil and gas.

  Other current directorships in listed entities

  None

  Former directorships in last 3 years

  Sayona Mining Limited

  Special responsibilities

  Chairman of the Remuneration & Nomination Committee Member of the Audit & Risk Committee

  Interests in shares

  As at the date of this report Mr O'Neill had interests in 4,600,332 ordinary shares and 510,082 Options expiring on 31 August 2026 in Morella Corporation Limited

  Mr Beng Teik Kuan (Independent Non-Executive Director)

  Qualifications

  Bachelor of Engineering (University of Malaya)

  Experience

  Mr Kuan is an engineer with considerable experience in bulk handling and terminal operations, including responsibility for the development and management of the Pulau Laut Coal Terminal in South Kalimantan, Indonesia. He also has experience in Indonesia, Malaysia and Singapore with tin dredging operations, managing rubber, palm oil, and cocoa processing factories, and managing palm oil bulk terminals. He was appointed a director in November 2007.

  Other current directorships in listed entities

  None

  Former directorships in last 3 years

  None

  Special responsibilities

  Chairman of the Audit & Risk Committee

  Member of the Remuneration & Nomination Committee

  Interests in shares and options

  As at the date of this report Mr Kuan had interests in 6,866,205 ordinary shares and 586,590 Options expiring on 31 August 2026 in Morella Corporation Limited

  COMPANY SECRETARY

  Mr John Lewis - Mr Lewis has a Bachelor of Business Degree and is a Chartered Accountant with more than 30 years post qualification experience. Mr Lewis has extensive corporate governance and company reorganisation experience. Since 2007, Mr Lewis has worked predominantly in the resource development and mining sector in Australia and overseas as a Company Director, CFO and Company Secretary.

  Directors' Report

  for the year ended 30 June 2025 (continued)

  REMUNERATION REPORT (Audited)

  This report details the nature and amount of remuneration for directors and other key management personnel. It does not detail information on the remuneration of key management post this date.

  Remuneration Policy and link to performance

  The Company's policy is to remunerate fairly and in line with companies of similar size, operations and in the same industry. Individual remuneration decisions are made by the Remuneration & Nomination Committee taking into account the following factors:

  • The responsibility of the role;

  • Experience of the employee;

  • Past performance and future expectations; and

  • Industry conditions and trends.

In order to retain and attract key management personnel of sufficient calibre to facilitate the efficient and effective management of the Company's operations, the Remuneration & Nomination Committee may seek the advice of external advisors in connection with the structure of remuneration packages.

Remuneration packages may contain the following key elements:

1. Primary benefits - salary/fees, bonuses and non-monetary benefits;

2. Post-employment benefits - including superannuation and prescribed retirement benefits; and

3. Equity - performance rights granted under the Long-Term Incentive Plan as disclosed in Note 22 to the financial statements.

None of the Company's personnel remuneration packages are linked directly to the Company's profitability or other measure of performance. The Company maintains a Long-term Incentive Plan under which employees may be granted performance rights and share options which vest subject to service conditions being met. Directors may also be allocated performance rights and/or options as an incentive. During the 2025 year, no executive directors were issued with shares on the vesting of previously issued performance rights.

Performance-based remuneration

The Company currently has performance-based remuneration in place as disclosed in Note 22.

Group performance, shareholder wealth and director and executive remuneration

The Group has recorded the following earnings from continuing operations over the last five years:

* Definitions: EBITDA = Earnings before interest, tax, depreciation, and amortisation NPBT = Net profit before tax

NPAT = Net profit after tax & minority interest

Directors' Report

for the year ended 30 June 2025 (continued)

REMUNERATION REPORT (Audited) (continued) Key Management Personnel Remuneration Policy

The Remuneration & Nomination Committee reviews the remuneration packages of all directors and key management personnel on an annual basis. Remuneration packages are reviewed and determined with due regard to relevant market conditions and individual's experience and qualification and are benchmarked against comparable industry salaries.

Payment of bonuses and share based compensation benefits is discretionary.

Employment Contracts of Key Management Personnel

Contracts of employment are given to key management personnel at time of employment. Details are as follows:

James Brown, Managing Director - the agreement is of no fixed term and allows for payment of a monthly cash salary in US dollars, reviewed each year, plus allowances. Three months' notice of termination by either party is required, with a separation allowance equivalent to one year's salary and entitlements to be paid if employment is terminated by the Company.

Directors' Report

for the year ended 30 June 2025 (continued)

REMUNERATION REPORT (Audited) (continued)

Key Management Personnel Remuneration

(a) Annual leave taken and applied to the non-monetary benefit provided as per Mr. Brown's contract of employment.

No long service leave payments were made during the year (2024: nil)

Directors' Report

for the year ended 30 June 2025 (continued)

REMUNERATION REPORT (Audited) (continued)

1. Performance Rights

   Number of performance rights held by key management personnel

   The number of performance rights in the Company held during the financial year by each director of Morella Corporation Limited and other key management personnel of the Group, including their personally related parties, are set out below.

   Balance at the

   Granted as

   Shares issued/

   Balance at the

   Vesting

   2025	start of the year	compensation	rights lapsed	end of the year
   J Brown		- -	-	-		-
   A Buckler		- -	-	-		-
   D O'Neill		- -	-	-		-
   B Kuan		- -	-	-		-
   2024	Balance at the start of the year	Granted as compensation	Shares issued/ rights lapsed	Balance at the end of the year	Vesting
   J Brown		- 10,487,395	(10,487,395)	-		-
   A Buckler		- 1,573,109	(1,573,109)	-		-
   D O'Neill		- 1,573,109	(1,573,109)	-		-
   B Kuan		- 1,573,109	(1,573,109)	-		-
   b) Share holdings

   Number of shares held by key management personnel

   The number of shares in the Company held during the financial year by each director of Morella Corporation Limited and other key management personnel (KMP) of the Group, including their personally related parties, are set out below.

   	Balance at start of the year	Purchased / (sold)	Consolidation 25:1	Placement & Securities Purchase Plan	Other (a)	Balance at the end of the year
   2025
   J Brown	155,120,640	547,459	(148,915,813)	7,413,576	1,922,688	16,088,550
   A Buckler	786,106,621	2,929,360	(754,662,354)	24,061,570	983,976	59,419,173
   D O'Neill	51,008,181	-	(48,967,853)	1,252,669	983,976	4,276,973
   B Kuan	58,658,963	-	(56,312,603)	3,212,510	983,976	6,542,846

   a) Other share transactions comprise shares issued in lieu of salaries, director fees and interest on the funding facility.

   Directors' Report

   for the year ended 30 June 2025 (continued)

   REMUNERATION REPORT (Audited) (continued)

2. Share holdings (continued)

Number of listed options held by key management personnel

The number of listed options in the Company held during the financial year by each director of Morella Corporation Limited and other key management personnel (KMP) of the Group, including their personally related parties, are set out below.

Directors' Report

for the year ended 30 June 2025 (continued)

REMUNERATION REPORT (Audited) (continued) Performance Rights

In 2021 the Company established a new Long-Term Incentive Plan (LTIP) to assist in the reward and retention of directors and employees. There were no performance rights on issue as at 30 June 2025.

No performance rights were granted during the year to key management personnel and other senior staff.

Loan from Directors

The company has a total balance of loans from various directors totalling $3,403,435 (2024: $3,420,928) as at reporting date. Details relating to these loans are in Note 17 to the financial report.

End of remuneration report.

MEETINGS OF DIRECTORS

The following table sets out the number of directors' meetings (including meetings of committees of directors) held during the financial year and the number of meetings attended by each director (while they were a director or committee member). During the financial year there were 3 Directors' meetings, 2 Audit & Risk Committee meetings and no Remuneration & Nomination Committee meetings held.

Directors' Meetings Audit & Risk Committee Remuneration & Nomination

Committee

INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

The Company has entered into Deeds of Indemnity with all of its directors in accordance with the Company's Constitution. During the financial year the Company paid a premium to insure the directors, officers and managers of the Company and its controlled entities. The insurance contract requires that the amount of the premium paid is kept confidential.

OPTIONS

At 30 June 2025, there were no listed options over ordinary shares of Morella Corporation Limited outstanding.

WARRANTS

As at 30 June 2025, no warrants were outstanding.

Directors' Report

for the year ended 30 June 2025 (continued)

NON-AUDIT SERVICES

The Company's auditor PKF Perth, did not provide any non-audit services to the Company during the year ended 30 June 2025.

Details of the amounts paid or payable to the auditor for services provided during the financial year by the auditor are outlined in Note 29 to the financial statements.

The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.

The directors are of the opinion that the services as disclosed in Note 29 to the financial statements do not compromise the external auditor's independence requirements of the Corporations Act 2001 for the following reasons:

• all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and

• none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risks and reward.

ROUNDING OF AMOUNTS

The company is of a kind referred in Legislative Instrument 2016/191, relating to the 'rounding off' of amounts in the directors' report and financial report. Amounts in the directors' report and financial report have been rounded off to the nearest dollar, unless otherwise stated.

AUDITOR'S INDEPENDENCE DECLARATION

The auditor's independence declaration for the year ended 30 June 2025 has been received and is included on page 72 of the annual report.

Signed in accordance with a resolution of the Directors made pursuant to Section 298(2) of the Corporations Act 2001. On behalf of the Directors,

James Brown

Director

Singapore, 30 September 2025

AUDITOR'S INDEPENDENCE DECLARATION

TO THE DIRECTORS OF MORELLA CORPORATION LIMITED

In relation to our audit of the financial report of Morella Corporation Limited for the year ended 30 June 2025, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.

PKF PERTH

Alexandra Sofia

Baldeira Pereira Carvalho Partner

30 September 2025 PERTH, WESTERN AUSTRALIA

Consolidated Statement of Profit or Loss

for the year ended 30 June 2025

(Loss) per share from continuing and discontinued operations attributable to the ordinary equity holders of the Company:

Basic and diluted (loss) per share from continuing and discontinuing operations

6 (0.40) (0.05)

Basic and diluted (loss) per share from continuing operations 6 (0.61) (0.05) Basic and diluted (loss) per share from discontinued operations 6 0.21 -

The above Consolidated Statement of Profit and Loss should be read in conjunction with the accompanying Notes.

Consolidated Statement of Other Comprehensive Income

for the year ended 30 June 2025

The above Consolidated Statement of Other Comprehensive Income should be read in conjunction with the accompanying Notes.

Consolidated Balance Sheet

as at 30 June 2025

The above Consolidated Balance Sheet should be read in conjunction with the accompanying Notes.

.

Consolidated Statement of Changes in Equity

for the year ended 30 June 2025

Other Comprehensive income Foreign Exchange

Total comprehensive income for the year

Transactions with owners in their capacity as owners:

Employee share schemes - value of employee services

Share based payments transactions Sub-total

Balance as at 30 June 2024

Balance as at 30 June 2024 316,267,317 (301,591,817) - 525,126 (7,390,080) 424,146 8,234,692

Net Loss - (1,314,894) - - - 81,746 (1,233,148)

Other Comprehensive income Fair Value - - - 144,239 - - (144,239)

Other Comprehensive income Foreign Exchange

Total comprehensive income for the year

- - - - (639,603) 17,578 (622,025)

- (1,314,894) - 144,239 (639,603) 99,324 (1,710,934)

Transactions with owners in their capacity as owners:

Contributions of equity, net of transaction costs

Share based payments transactions Sub-total

Balance as at 30 June 2025

The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying Notes.

Consolidated Statement of Cash Flows

for the year ended 30 June 2025

Non-cash investing and financing activities

Share based payments 22 (419,104) (545,907)

The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying Notes.

Notes to the Financial Statements

for the year ended 30 June 2025

This financial report includes the consolidated financial statements and notes of Morella Corporation Limited (the Company) and controlled entities ('Consolidated Group' or 'Group'). Morella Corporation Limited is a company limited by shares, incorporated and domiciled in Australia, whose shares are publicly traded on the Australian Securities Exchange.

The separate financial statements of the parent entity, Morella Corporation Limited, have not been presented within this financial report as permitted by amendments made to the Corporations Act 2001.

The Group is a for-profit entity for financial reporting purposes under Australian Accounting Standards. The financial statements were authorised for issue on 30 September 2025 by the directors of the Company.

1. STATEMENT OF MATERIAL ACCOUNTING POLICIES

   1. Basis of preparation

      The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.

      Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").

      The following is a summary of the material accounting policies adopted by the Consolidated Group in the preparation of the financial report. The financial report has been prepared on an accrual's basis. The accounting policies have been consistently applied, unless otherwise stated.

      1. Going concern principle of accounting

         The Directors believe it is appropriate to prepare the consolidated financial statements on a going concern basis, which contemplates continuity of normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business.

         The Group has incurred a loss of $1,233,148 (2024: $2,948,378), had cash outflows from operating activities of $2,145,483 (2024: 3,054,839), concluded the year with cash and cash equivalents of $795,508 (2024: $420,820) and loans outstanding at year-end of $3,474,442 (2024: $3,520,024).

         The Group intends to raise additional funds to meet its planned and budgeted expenditure as well as regular corporate overheads.

         The Group is in negotiations to raise to raise further capital during the first quarter of FY 2026. Upon completion, the Directors believe that the Group has sufficient cash and will be able to meet its requirements to continue as a going concern. However, should the above planned activities to raise or conserve capital not be successful there is a material uncertainty surrounding the Group's ability to continue as a going concern and therefore realise its assets and dispose of its liabilities in the ordinary course of business and at the amounts stated in the financial report.

         Notes to the Financial Statements (continued)

         for the year ended 30 June 2025

         1. STATEMENT OF MATERIAL ACCOUNTING POLICIES (continued)

      2. New accounting standards for application in the current period

         New Accounting Standards and Interpretations not yet mandatory or early adopted Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the consolidated entity for the annual reporting period ended 30 June 2025. The consolidated entity has not yet assessed the impact of these new or amended Accounting Standards and Interpretations.

      3. Historical cost convention

         The financial statements have been prepared under the historical cost convention, except for, where applicable, the revaluation of financial assets and liabilities at fair value through profit or loss, financial assets at fair value through other comprehensive income, investment properties, certain classes of property, plant and equipment and derivative financial instruments.

      4. Critical accounting estimates

         The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas including a high degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 1(l).

   2. Carrying value of exploration and evaluation expenditure

      The Group has capitalised exploration and evaluation expenditure of $12,187,420 as at 30 June 2025 (2024:

      $10,649,560). This amount includes additions of $1,602,240 for administration and exploration costs and tenement costs written off of $64,380 (2024: $Nil) for the lithium project areas during the year. Exploration and evaluation expenditure is capitalised until the Company has completed its assessment of the existence or otherwise of recoverable resources. The ultimate recovery of the carrying value of exploration expenditure is dependent upon the successful development and commercial exploitation or, alternatively, sale of the interest in the tenements.

      Until exploration and evaluation activities have reached a stage where the assessment is complete, including the forecasting of cash flows to assess the fair value of the expenditure, there is an uncertainty as to the carrying value of the expenditure.

      The Directors are of the opinion that the exploration expenditure is recoverable for the amount stated in the financial report.

   3. Principles of consolidation

      1. Subsidiaries

         The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Morella Corporation Limited ('Company' or 'Parent Entity') as at 30 June 2025 and the results of the subsidiaries for the year then ended. Morella Corporation Limited and its subsidiaries together are referred to in this financial report as the Group or Consolidated Entity.

         The Group controls an entity when the Group is exposed to or has rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

         A list of controlled entities is contained in Note 25 to the financial statements. All Australian controlled entities have a June financial year-end and all other controlled entities have a December financial year end.

         All inter-company balances and transactions between entities in the Group, including any unrealised profits or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistencies with those policies applied by the Group.

         Notes to the Financial Statements (continued)

         for the year ended 30 June 2025

         1. STATEMENT OF MATERIAL ACCOUNTING POLICIES (continued)

         Where controlled entities have entered or left the Group during the year, their operating results have been included from the date control was obtained or until the date control ceased.

         Non-controlling interests, being that portion of the profit or loss and net assets of subsidiaries attributable to equity interests held by persons outside the Group, are shown separately within the equity section of the Consolidated Balance Sheet and in the Consolidated Statement of Profit and Loss. Losses applicable to the non-controlling interest in a consolidated subsidiary are allocated against the controlling interest except to the extent that the non-controlling interest has a binding obligation and is able to make additional investment to cover the losses. If in future years the subsidiary reports profits, such profits are allocated to the controlling interest until the non-controlling interest's share of losses previously absorbed by the controlling interest have been recovered.

         The acquisition method of accounting is used to account for business combinations by the Group.

      2. Associates

         Associates are all entities over which the Group has significant influence but not control or joint control, generally accompanying a shareholding between 20% and 50% of voting rights. Investments in associates are accounted for using the equity method of accounting, after initially being recognised at cost. The Group's investments in associates includes goodwill identified on acquisition.

         The Group's share of its associates post-acquisition profit or losses is recognised in profit or loss, and its share of post-acquisition other comprehensive income is recognised in other comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Dividends receivable from associates are recognised as a reduction in the carrying amount of the investment.

      3. Changes in ownership interests

         The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the Group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in a separate reserve within equity attributable to the owners of Morella Corporation Limited.

         When the Group ceases to have control, joint control or significant influence, any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognised in profit or loss. This fair value becomes the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, jointly controlled entity or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

         If the ownership interest in a jointly controlled entity or an associate is reduced but joint control or significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss where appropriate.

         Notes to the Financial Statements (continued)

         for the year ended 30 June 2025

         1. STATEMENT OF MATERIAL ACCOUNTING POLICIES (continued)

   4. Income tax

      The charge for current income tax expense is based on the result for the year adjusted for any non-assessable or disallowed items. It is calculated using the tax rates that have been enacted or are substantially enacted by the balance date for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.

      Morella Corporation Limited and some of its wholly-owned Australian subsidiaries have formed an income tax consolidated group under the tax consolidation regime. Each entity in the Group recognises its own current and deferred tax amounts, except for any deferred tax liabilities (or assets) resulting from unused tax losses and tax credits, which are immediately assumed by the parent entity. The current tax liability of each Group entity is then subsequently assumed by the parent entity. The Group notified the Australian Tax Office that it had formed an income tax consolidated group to apply from 1 July 2005. The tax consolidated group has entered a tax sharing agreement under which the wholly-owned entities fully compensate Morella Corporation Limited for any current tax payable assumed and are compensated by Morella Corporation Limited for any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to Morella Corporation Limited under the tax consolidated legislation.

      The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the head entity, which is issued as soon as practicable after the end of each financial year. The head entity may also require payment of interim funding amounts to assist with its obligations to pay tax instalments.

      Assets or liabilities arising under tax funding agreements within the tax consolidated entities are recognised as current amounts receivable from or payable to other entities in the Group.

      Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) wholly-owned tax consolidated entities.

      Notes to the Financial Statements (continued)

      for the year ended 30 June 2025

      1. STATEMENT OF MATERIAL ACCOUNTING POLICIES (continued)

   5. Segment reporting

      Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments has been identified as the Board of Directors.

   6. Property, plant, equipment

Each class of property, plant and equipment is carried at cost less, where applicable, any accumulated depreciation and impairment losses.

Property

Freehold land and buildings are measured on the cost basis.

The carrying amount of land and buildings is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets.

Plant and equipment

Plant and equipment are measured on the cost basis. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

The carrying amount of plant and equipment is reviewed annually to ensure it is not in excess of the recoverable amount from these assets.

Notes to the Financial Statements (continued)

for the year ended 30 June 2025

1. STATEMENT OF MATERIAL ACCOUNTING POLICIES (continued)

1. Property, plant, equipment and mine properties

   Depreciation

   The depreciable amount of all property plant and equipment assets excluding freehold land, is depreciated on a straight-line basis over their useful lives to the Group commencing from the time the asset is held ready for use. Assets classified as Leased assets are depreciated over the asset's useful life or over the shorter of the assets useful life and the lease term if there is no reasonable certainty that the Group will obtain ownership at the end of the lease term.

   The depreciation rates used for each class of depreciable assets are:

   Class of Fixed Asset Depreciation Rate

   Plant and equipment 10% - 50%

   The asset's residual values and useful lives are reviewed, and adjusted if appropriate, at each balance date.

   An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.

   Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in profit or loss.

2. Exploration and evaluation expenditure

   Exploration, evaluation and development expenditure incurred is accumulated in respect of each separately identifiable area of interest. These costs are only carried forward where the right of tenure for the area of interest is current and to the extent that they are expected to be recouped through the successful development and commercial exploitation of the area, or alternatively sale of the area, or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves.

   Exploration and evaluation expenditure assets acquired in a business combination are recognised at their fair value at the acquisition date.

   Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable, the exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified to mining development.

   Accumulated costs in relation to an abandoned area are written off in full against the result in the year in which the decision to abandon the area is made.

   A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.

   Notes to the Financial Statements (continued)

   for the year ended 30 June 2025

   1. STATEMENT OF MATERIAL ACCOUNTING POLICIES (continued)

3. Leases

   The Group lease various offices and a warehouse. Rental contracts are typically made for fixed terms but may have extension options. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes.

   Until the 2019 financial year, leases of property, plant and equipment were classified as either finance or operating leases. Payments made under operating leases (net of any incentive received from the lessor) were charged to the profit or loss on a straight-line basis over the period of the lease.

   From 1 July 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.

   Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments.

   • Fixed payments (including in-substance fixed payments), less any lease incentives receivable

   • Variable lease payment that are based on an index or a rate.

   • Amounts expected to be payable by the lessee under residual value guarantees.

   • The exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and

   • Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.

     The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee's incremental borrowing rate is used, being the rate that the lessees would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.

     Right-of-use assets are measured at cost comprising the following:

   • The amount of the initial measurement of lease liability.

   • Any lease payments made at or before the commencement date less any lease incentives received.

   • Any initial direct costs, and

   • Restoration costs.

Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT equipment.

Notes to the Financial Statements (continued)

for the year ended 30 June 2025

1. STATEMENT OF MATERIAL ACCOUNTING POLICIES (continued)

   1. Financial assets Investments and other financial assets

Investments and other financial assets are initially measured at fair value. Transaction costs are included as part of the initial measurement, except for financial assets at fair value through profit or loss. Such assets are subsequently measured at either amortised cost or fair value depending on their classification. Classification is determined based on both the business model within which such assets are held and the contractual cash flow characteristics of the financial asset unless an accounting mismatch is being avoided.

Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the consolidated entity has transferred substantially all the risks and rewards of ownership. When there is no reasonable expectation of recovering part or all of a financial asset, its carrying value is written off.

Financial assets at fair value through other comprehensive income

Financial assets at fair value through other comprehensive income include equity investments which the consolidated entity intends to hold for the foreseeable future and has irrevocably elected to classify them as such upon initial recognition.

Impairment of financial assets

The consolidated entity recognises a loss allowance for expected credit losses on financial assets which are either measured at amortised cost or fair value through other comprehensive income. The measurement of the loss allowance depends upon the consolidated entity's assessment at the end of each reporting period as to whether the financial instrument's credit risk has increased significantly since initial recognition, based on reasonable and supportable information that is available, without undue cost or effort to obtain.

Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month expected credit loss allowance is estimated. This represents a portion of the asset's lifetime expected credit losses that is attributable to a default event that is possible within the next 12 months. Where a financial asset has become credit impaired or where it is determined that credit risk has increased significantly, the loss allowance is based on the asset's lifetime expected credit losses. The amount of expected credit loss recognised is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life of the instrument discounted at the original effective interest rate.

For financial assets mandatorily measured at fair value through other comprehensive income, the loss allowance is recognised in other comprehensive income with a corresponding expense through profit or loss. In all other cases, the loss allowance reduces the asset's carrying value with a corresponding expense through profit or loss.

j) Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to prepare for their intended use or sale, are added to the cost of those assets and amortised over the life of the asset, until such time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognised as an expense in the period in which they are incurred.