4DS MEMORY LIMITED — Annual Report 2014

Dec 14, 2015

4D-S LIMITED A.C.N. 124 234 395 SPECIAL PURPOSE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2014

4D-S LIMITED A.C.N. 124 234 395

SPECIAL PURPOSE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2014

C O N T E N T S
	PAGE
Directors' Report	3
Auditor's Independence Declaration	6
Independent Auditor's Report	7
Directors' Declaration	10
Consolidated Statement of Comprehensive Income	11
Consolidated Statement of Financial Position	12
Consolidated Statement of Changes in Equity	13
Consolidated Statement of Cash Flows	14
Notes to the Consolidated Financial Statements	15

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4D-S LIMITED A.C.N. 124 234 395

DIRECTORS' REPORT

The directors present their report together with the financial statements of the Group consisting of 4D-S Limited (“4D-S” or the “Company”) and the entities it controlled for the financial year ended 30 June 2014.

DIRECTORS

The names of the directors in office at any time during or since the end of the year are:

Simon Panton	Non-executive Director
Kurt Pfluger	Non-executive Director
Tetsunori Kunimune	Non-executive Director
James Dorrian	Non-executive Chairman
David McAuliffe	Executive Director
Guido Arnout	Chief Executive Officer

Directors have been in office since the start of the financial year to the date of this report unless otherwise stated.

COMPANY SECRETARY

The following person held the position of Company Secretary during the financial year:

Simon Panton

RESULTS

The loss after tax of the Group for the financial year amounted to $1,999,070.

DIVIDENDS

No dividends have been paid or declared since the start of the financial year.

REVIEW OF OPERATIONS

During the year, the Group continued to focus on researching its core technology.

PRINCIPAL ACTIVITIES

The principal activity of the Group during the financial year was continued research in relation to a patented resistive memory (ReRAM) technology with potential application in mobile devices (smartphones, tablets and laptops) and data centres.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

Other than as set out elsewhere in this report, there were no significant changes in the state of affairs of the company that occurred during the year.

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4D-S LIMITED A.C.N. 124 234 395

DIRECTORS' REPORT (cont’d)

EVENTS SUBSEQUENT TO BALANCE DATE

A total of 217,258 options were issued to various parties in the year ended 30 June 2015.

The Group also raised approximately $600,000 through the issue of additional convertible notes, with subscription monies received between July 2014 and March 2015.

On 13 August 2015, the Board of ASX-listed company Fitzroy Resources Ltd (“Fitzroy”) announced it had signed a Bid Implementation Agreement (“BIA”) to merge with 4D-S. The transaction is proposed to be effected by means of scrip for scrip off market takeover offers by Fitzroy to acquire all the voting shares in 4D-S. Both parties have completed legal and financial due diligence and the transaction has the unanimous support and recommendation of both boards of directors. Major shareholders of 4D-S, holding 19.9% of the voting shares in the Company, have entered into pre-bid agreements with Fitzroy agreeing to accept the bid. As a result of the takeover bids, 4D-S will become a wholly owned subsidiary of Fitzroy.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS

Likely developments in the operations of the company and the expected results of those operations in future financial years have not been included in this report as the inclusion of such information is likely to result in unreasonable prejudice to the company.

ENVIRONMENTAL REGULATIONS

The company is not subject to any significant environmental regulations under a law of the Commonwealth or of a State or Territory.

OPTIONS

At the date of this report, a total of 1,237,782 options over unissued shares were in existence.

INDEMNIFICATION OF OFFICERS

No indemnities have been given or insurance premiums paid, during or since the end of the financial year, for any person who is or has been an officer or auditor of the Company.

PROCEEDINGS ON BEHALF OF THE COMPANY

No person has applied for leave of Court to bring proceedings on behalf of the company or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or any part of those proceedings.

The Company was not a party to any such proceedings during the year.

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4D-S LIMITED A.C.N. 124 234 395

DIRECTORS' REPORT (cont’d)

DIRECTORS’ MEETINGS

The nu m ber of m e etings hel d during th e year and t he numbe r of meetin g s attended by each directo r were as f o llows:

Numb e r of meeti n gs held

11

Numb e r of meeti n gs attende d : Simon P anton 11 Kurt P f luger 11 Tetsun o ri Kunim u ne 10 James D orrian 10 David M cAuliffe 9 Guido A rnout 4

AUDITOR INDEPENDENCE

Section 307C of t he Corporations Act 2001 req u ires our a u ditors, H L B Mann J udd, to provid e the direc t ors of the C ompany w ith an in d ependence declaratio n in relati o n to the audit o f the finan c ial report. T his indep e ndence de c laration is set out on the follow i ng page and forms part of t his directo r s’ report f o r the year e nded 30 J u ne 2014.

This re p ort is made in accord a nce with a resolution of the dire c tors.

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__ _ _ _ ___ _ __ _ SIMO N PANTON DIREC T OR

Perth, W estern A u stralia Dated: 2 Septemb e r 2015

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4D-S LIMITED A.C.N. 124 234 395

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AUDITOR’S INDEPENDENCE DECLARATION

As lead auditor for the audit of the financial report of 4D-S Limited for the year ended 30 June 2014, I declare that to the best of my knowledge and belief, there have been no contraventions of:

• a) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

• b) any applicable code of professional conduct in relation to the audit.

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Perth, Western Australia M R W Ohm 2 September 2015 Partner, HLB Mann Judd

HLB Mann Judd (WA Partnership) ABN 22 193 232 714

Level 4, 130 Stirling Street, Perth PO Box 8124 Perth BC 6849 Western Australia. Telephone +61 (08) 9227 7500. Fax +61 (08) 9227 7533 Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au Liability limited by a scheme approved under Professional Standards Legislation

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HLB Mann Judd (WA Partnership) is a member of

International, a world-wide organisation of accounting firms and business advisers

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4D-S LIMITED A.C.N. 124 234 395

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INDEPENDENT AUDITOR’S REPORT

To the members of 4D-S Limited

Report on the Financial Report

We have audited the accompanying financial report, being a special purpose financial report, of 4D-S Limited which comprises the consolidated statement of financial position as at 30 June 2014, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information and the directors’ declaration for the consolidated entity. The consolidated entity comprises the company and the entities it controlled at the year’s end or from time to time during the financial year.

Directors’ responsibility for the financial report

The directors of the company are responsible for the preparation of the financial report and have determined that the basis of preparation described in Note 1 to the financial report is appropriate to meet the requirements of the Corporations Act 2001 and is appropriate to meet the needs of members. The directors’ responsibility also includes such internal control as the directors determine is necessary to enable the preparation of a financial report that is free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

HLB Mann Judd (WA Partnership) ABN 22 193 232 714 Level 4, 130 Stirling Street, Perth PO Box 8124 Perth BC 6849 Western Australia. Telephone +61 (08) 9227 7500. Fax +61 (08) 9227 7533 Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au Liability limited by a scheme approved under Professional Standards Legislation

HLB Mann Judd (WA Partnership) is a member of International, a world-wide organisation of accounting firms and business advisers

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4D-S LIMITED A.C.N. 124 234 395

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INDEPENDENT AUDITOR’S REPORT (CONTINUED)

Our audit did not involve an analysis of the prudence of business decisions made by directors or management.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001 .

Basis for Qualified Opinion

The consolidated entity’s financial report for the year ended 30 June 2012 was not audited. As the year ended 30 June 2013 was our first period of audit and the terms of our engagement did not extend to the examination of balances as at 30 June 2012, we have not been able to obtain sufficient appropriate audit evidence to be satisfied that these balances are correctly stated. We therefore do not express an opinion on the comparative balances for 30 June 2013 in the consolidated statement of comprehensive income, the consolidated statement of cash flows and the consolidated statement of changes in equity.

Qualified Opinion

In our opinion, because of the matters described in the basis for qualified opinion paragraph above, we are unable to and do not express an opinion on the comparative balances in the consolidated statement of comprehensive income, the consolidated statement of cash flows and the consolidated statement of changes in equity for the year ended 30 June 2013.

In our opinion, the financial report of 4D-S Limited is in accordance with the Corporations Act 2001 , including:

• (a) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2014 and of its performance for the year ended on that date; and

• (b) complying with Australian Accounting Standards to the extent described in Note 1, and the Corporations Regulations 2001 ;

Emphasis of matter

Without further modifying our opinion, we draw attention to Note 1 in the financial report, which indicates that for the year ended 30 June 2014, the Group incurred a loss after tax of $1,999,070 (2013: loss of $1,377,663) which included share-based payments of $1,024,791 (2013: nil). The Group also had a deficiency of net assets of $5,495 as at 30 June 2014 (2013: net deficiency of $375,645). These conditions, along with other matters as set forth in Note 1, indicate the existence of a material uncertainty that may cast significant doubt about the consolidated entity’s ability to continue as a going concern and therefore, the consolidated entity may be unable to realise its assets and discharge its liabilities in the normal course of business.

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4D-S LIMITED A.C.N. 124 234 395

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INDEPENDENT AUDITOR’S REPORT (CONTINUED)

Basis of accounting

Without further modifying our opinion, we draw attention to Note 1 to the financial report, which describes the basis of accounting. The financial report has been prepared for the purpose of fulfilling the directors’ financial reporting responsibilities under the Corporations Act 2001. As a result, the financial report may not be suitable for another purpose.

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HLB Mann Judd Chartered Accountants

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M R W Ohm Partner

Perth, Western Australia 2 September 2015

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4D-S LIMITED A.C.N. 124 234 395

DIRECTORS’ DECLARATION

The di r ectors hav e determin e d that the G roup is n o t a reporting entity a n d that thi s special purpos e financial report sh o uld be pr e pared in a ccordance with the a ccounting policies describ e d in Note 1 to the fin a ncial state m ents.

The di r ectors ack n owledge t hat they h ave respo n sibility fo r the relia bi lity, accuracy and completeness of t h e accounti n g records of the com p any and h ave disclo s ed all mat e rial and releva n t informati o n for the p reparation of the fina n cial report.

The di r ectors dec l are that t h e financia l statements and not e s are in a c cordance w ith the Corpor a tions Act 2 0 01 and:

• (a) co m ply with Australian Accountin g Standar d s to the extent detail e d in Note 1 to the fi n ancial stat e ments and the Corpor a tions Regul a tions 2001 ; and

• (b) gi v e a true a n d fair vie w of the Gr o up’s finan c ial positio n as at 30 J u ne 2014 a n d of its pe r formance f or the yea r ended on that date i n accordan c e with the a ccounting policies de s cribed in N ote 1 to th e financial s tatements.

In the d irectors’ o p inion ther e are reaso n able grou n ds to belie v e that the Group wil l be able to pay i ts debts as and when t hey beco m e due and p ayable.

This declaration is made in a c cordance w ith the res o lution of t h e director s .

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SIMO N PANTON DIREC T OR

Perth, W estern A u stralia Dated: 2 Septemb e r 2015

P age 10

4D-S LIMITED

A.C.N. 124 234 395

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2014

Note	2014 $	2013 $
Revenue Foreign exchange loss Employee benefits expense Research expense 5 Share-based payment expense Other expenses Loss before income tax expense Income tax expense Loss for the year 13 Other comprehensive income Total comprehensive loss attributable to members of the entity	69 (14,809) (193,167) (104,526) (1,024,791) (661,846) (1,999,070) - (1,999,070) - (1,999,070)	257 (10,934) (371,146) (154,377) - (841,463)
		(1,377,663) -
		(1,377,663) -
		(1,377,663)

The accompanying notes form part of these financial statements

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4D-S LIMITED

A.C.N. 124 234 395

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2014

Note	2014 $	2014 $	2013 $
CURRENT ASSETS Cash and cash equivalents 2 Trade and other receivables 3 TOTAL CURRENT ASSETS NON-CURRENT ASSETS Property, plant and equipment 4 TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables 6 Borrowings 7 TOTAL CURRENT LIABILITIES TOTAL LIABILITIES NET (DEFICIENCY)/ASSETS EQUITY Issued capital 8 Reserves Accumulated losses TOTAL EQUITY	110,100 7,044 117,144 10,030 10,030 127,174 132,669 - 132,669		153,800 217,965
			371,765
			2,585
			2,585
			374,350
			65,884 684,111
			749,995
	132,669		749,995
	(5,495) 10,574,049 1,116,249 (11,695,793) (5,495)		(375,645)
			9,302,979 18,099 (9,696,723)
			(375,645)

The accompanying notes form part of these financial statements

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4D-S LIMITED A.C.N. 124 234 395

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2014

FOR THE YEAR ENDED 30 JUNE 2014
Note	Share Capital $	Accumulated Losses $	Share-based Payment Reserve $	Foreign Currency Translation Reserve $	Total $
Balance at 30 June 2012 Issue of share capital 8 Foreign currency translation Total comprehensive loss for the year Balance at 30 June 2013 Issue of share capital 8 Share-based payments Foreign currency translation Total comprehensive loss for the year Balance as at 30 June 2014	9,270,068 32,911 - - 9,302,979 1,271,070 - - - 10,574,049	(8,319,060) - - (1,377,663) (9,696,723) - - - (1,999,070) (11,695,793)	- - - - - - 1,024,791 - - 1,024,791	31,893 - (13,794) - 18,099 - - 73,359 - 91,458	982,901 32,911 (13,794) (1,377,663)
					(375,645) 1,271,070 1,024,791 73,359 (1,999,070)
					(5,495)

The accompanying notes form part of these financial statements

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4D-S LIMITED

A.C.N. 124 234 395

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2014

Note	2014 $	2013 $
Cash Flows from Operating Activities Payments to suppliers and employees Interest received Net cash outflows from operating activities 9 Cash Flows from Investing Activities Purchase of property, plant and equipment Net cash outflows from investing activities Cash Flows from Financing Activities Proceeds from borrowings Proceeds from the issue of shares Net cash inflows from financing activities Net decrease in cash held Cash at the beginning of the year Effect of exchange rate fluctuations on cash held Cash at the end of the year 2	(817,854) 69 (817,785) (12,214) (12,214) 648,457 145,298 793,755 (36,244) 153,800 (7,456) 110,100	(1,325,478) 257
		(1,325,221)
		(216)
		(216)
		472,785 36,659
		509,444
		(815,993) 983,586 (13,793)
		153,800

The accompanying notes form part of these financial statements

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4D-S LIMITED A.C.N. 124 234 395

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

The company is a public company limited by shares, incorporated and domiciled in Australia.

Reporting Basis and Conventions

The directors have prepared the financial statements on the basis that the company is a non-reporting entity because there are no users dependant on general purpose financial reports. This financial report is therefore a special purpose financial report that has been prepared in order to meet the requirements of the Corporations Act 2001.

The financial report has been prepared in accordance with the mandatory Australian Accounting Standards applicable to the entities reporting under the Corporations Act 2001 and the significant accounting polices disclosed below which the directors have determined are appropriate to meet the needs of members. Such accounting policies are consistent with the previous period unless stated otherwise.

The financial report has been prepared on an accruals basis. It is based on historical costs and does not take into account changing money values or, except where specifically stated, current valuations of non-current assets.

The material accounting policies have been adopted in the preparation of this report are as follows:

Changes in Accounting Policies on Initial Application of Accounting Standards

In the year ended 30 June 2014, the directors have reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to the company’s operations and effective for the current annual reporting period. The directors have also reviewed all new Standards and Interpretations that have been issued but are not yet effective for the year ended 30 June 2014.

As a result of this review the directors have determined that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on its business and therefore, no change is necessary to the accounting policies.

Intangible assets

Research and development expenditure

Expenditure on research activities is recognised as an expense in the period in which it is incurred. Where no internally-generated intangible asset can be recognised, development expenditure is recognised as an expense in the period as incurred.

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4D-S LIMITED A.C.N. 124 234 395

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Intangible assets (Continued)

An intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated:

• the technical feasibility of completing the intangible asset so that it will be available for use or sale;

• the intention to complete the intangible asset and use or sell it;

• the ability to use or sell the intangible asset;

• how the intangible asset will generate probable future economic benefits;

• the availability of adequate technical, financial and other resources to complete development and to use or sell the intangible asset; and

• the ability to measure reliably the expenditure attributable to the intangible asset during its development.

The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above.

Trade and Other Receivables

Trade and other receivables include amounts due from customers for goods sold and services performed in the ordinary course of business. Receivables expected to be collected within 12 months of the end of the reporting period are classified as current assets. All other receivables are classified as non-current assets.

Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method less any allowance for impairment.

Trade and Other Payables

Trade and other payables represent the liabilities for goods and services received by the entity that remain unpaid at the end of the reporting period. The balance is recognised as a current liability with the amounts normally paid within 30 days of recognition of the liability.

Property, Plant and Equipment

Plant and equipment are measured on the basis of cost.

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

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4D-S LIMITED A.C.N. 124 234 395

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Property, Plant and Equipment (Continued)

recoverable amount is assessed on the basis of the expected net cash flows which will be received from the assets employment and subsequent disposal. The expected net cash flows have been discounted to present values in determining recoverable amounts.

Depreciation

All fixed assets including capitalised leased assets, are depreciated over their estimated useful lives to the company commencing from the time the asset is held ready for use.

Employee Benefits

Provision is made for the company’s liability for employee benefits arising from services rendered by employees to balance date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled plus related on-costs.

Income Tax

The income tax expense/(benefit) for the year comprises current income tax expense/(benefit) and deferred tax expense/(benefit).

Current income tax expense charged to the profit and loss is the tax payable on taxable income calculated using the applicable income tax rates enacted or substantially enacted, as at reporting date. Current tax liabilities/ (assets) are therefore measured at the amounts expected to be paid to (recoverable from) the relevant taxation authority.

Deferred income tax expense reflects the movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses.

Current and deferred income tax expense/(benefit) is charged or credited directly to equity instead of profit or loss when the tax relates to items that are credited or charged directly to equity.

Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business

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4D-S LIMITED A.C.N. 124 234 395

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Tax (Continued)

combination, where there is no effect on accounting or taxable profit or loss.

Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantially enacted at reporting date. Their measurement also reflects the manner in which management expect to recover or settle the carrying amount of the related asset or liability.

Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised.

Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities, are not recognised where the timing of the reversal of the temporary differences can be controlled and it is not probable that the reversal will occur in the foreseeable future.

Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled.

Cash and Cash Equivalents

Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short term highly liquid investments with original maturities of three months or less and bank overdrafts. Bank overdrafts are shown within short term borrowings in current liabilities in the statement of financial position.

Impairment

At each reporting date, the company reviews the carrying value of its tangible assets to determine whether there is any indication that these assets have been impaired.

If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less the costs to sell and the value in use is compared to the

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4D-S LIMITED A.C.N. 124 234 395

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Impairment (Continued)

asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the statement of comprehensive income.

Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expenses. Receivables and payables in the statement of financial position are shown inclusive of GST.

Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows.

Revenue and Other Income

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the company and the revenue can be reliably measured.

Interest revenue is recognised as it accrues, taking into account the effective yield on the financial asset.

All revenue is stated net of the amount of goods and services tax (GST).

Foreign Currency Translation

Both the functional and presentation currency of 4D-S Limited is Australian dollars. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency.

Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance date.

All exchange differences in the consolidated financial report are taken to profit or loss

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4D-S LIMITED A.C.N. 124 234 395

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Foreign Currency Translation (Continued)

with the exception of differences on foreign currency borrowings that provide a hedge against a net investment in a foreign entity. These are taken directly to equity until the disposal of the net investment, at which time they are recognised in profit or loss.

Tax charges and credits attributable to exchange differences on those borrowings are also recognised in equity.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction.

Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss.

The functional currency of the foreign operation, 4D-S Inc is US dollars.

As at the balance date the assets and liabilities of these subsidiaries are translated into the presentation currency of 4D-S Limited at the rate of exchange ruling at the balance date and income and expense items are translated at the average exchange rate for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used.

The exchange differences arising on the translation are taken directly to a separate component of equity, being recognised in the foreign currency translation reserve.

On disposal of a foreign operation (i.e. a disposal of the Group’s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, or a partial disposal of an interest in a joint arrangement or an associate that includes a foreign operation of which the retained interest becomes a financial asset), all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of the Company are reclassified to profit or loss.

In addition, in relation to the partial disposal of a subsidiary that includes a foreign operation that does not result in the Group losing control over the subsidiary, the proportionate share of accumulated exchange differences are re-attributed to noncontrolling interests and are not recognised in profit or loss. For all other partial disposals (i.e. partial disposals of associates or jointly arrangements that do not result in the Group losing significant influence or joint control), the proportionate share of

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4D-S LIMITED A.C.N. 124 234 395

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Foreign Currency Translation (Continued)

the accumulated exchange differences is reclassified to profit or loss.

Goodwill and fair value adjustments to identifiable assets acquired and liabilities assumed through acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the rate of exchange prevailing at the end of the reporting period. Exchange differences are recognised in other comprehensive income.

Borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.

The fair value of the liability portion of a convertible note is determined using a market interest rate for an equivalent non-convertible note. This amount is recorded as a liability on an amortised cost basis until extinguished on conversion or maturity of the note. The remainder of the proceeds is allocated to the conversion option. This is recognised and included in shareholders’ equity, net of income tax effects.

Borrowings are removed from the statement of financial position when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other income or finance costs.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.

Issued Capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from

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4D-S LIMITED A.C.N. 124 234 395

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Issued Capital (Continued)

the proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a new business are not included in the cost of acquisition as part of the purchase consideration.

Share-based Payments

Equity settled transactions

The Group provides benefits to employees (including senior executives) of the Group in the form of share-based payments, whereby employees render services in exchange for shares or rights over shares (equity-settled transactions).

The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by an external valuer using a Black-Scholes model.

In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of 4D-S Limited (market conditions) if applicable.

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the vesting period).

The cumulative expense recognised for equity-settled transactions at each balance date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the Group’s best estimate of the number of equity instruments that will ultimately vest. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. The statement of comprehensive income charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only conditional upon a market condition.

If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any modification that increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification.

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4D-S LIMITED A.C.N. 124 234 395

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Share-based Payments (Continued)

If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph.

The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share.

Comparative Figures

Comparative figures have been adjusted to conform to changes in presentation for the current financial year where required by accounting standards or as a result of changes in accounting policy.

Going Concern

For the year ended 30 June 2014, the Group incurred a loss after tax of $1,999,070 (2013: loss of $1,377,663) which included share-based payments of $1,024,791 (2013: $nil). The Group also had a deficiency of net assets of $5,495 as at 30 June 2014 (2013: net deficiency of $375,645).

Notwithstanding the Group's deficiency of net assets, the financial report has been prepared on the going concern basis.

In considering the appropriateness of the going concern basis of preparation, the Directors have had regard to the following matters:

• Should the Group require additional funding, the Directors are confident that it would be available through the entity’s existing investors as well as new investors, based upon the Group’s previous ability to successfully raise funds through share capital raises at each point necessary.

• On 13 August 2015, the proposed reverse takeover of 4D-S Limited by Fitzroy Resources Limited (“Fitzroy”) was announced to the ASX. It has been unanimously recommended by the 4D-S Board, and Fitzroy has pre-bid acceptances in the amount of 19.99% of the Company’s voting shares. The Board expects that the reverse takeover will be completed successfully. As part of the reverse takeover transaction, Fitzroy will be raising A$2.75m at 2.5c (currently trading at around 4.5c). The A$2.75m capital raising is in addition to approximately A$1m in cash that Fitzroy has on hand (pre-transaction costs).

• Immediately prior to the ASX announcement of the reverse takeover, the 2014

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4D-S LIMITED A.C.N. 124 234 395

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Going Concern (Continued)

convertible noteholders all agreed to convert their 2014 convertible notes into preference shares in the Company. As a consequence, the Company issued 491,904 preference shares to extinguish the 2014 Convertible Note liability (including all accrued interest) of approximately US$645k.

• Immediately prior to the ASX announcement, the Company secured the balance of subscriptions under the A$700k 2015 Convertible Notes. As a consequence, the Company has or will receive a further approximately A$464,500, which (together with a A$50k exclusivity fee) will provide the Company with sufficient funding through to the completion of the reverse takeover. Under the 2015 convertible note terms, the Company being notified of the dispatch of offer pursuant to the reverse takeover will trigger the conversion of the A$700k convertible note liability into 311,632 ordinary shares in the Company.

Accordingly, the Directors are of the view that the going concern basis of preparation is appropriate. However, should the Group not be able to raise sufficient capital, there is a material uncertainty that may cause significant doubt as to the Group’s ability to continue as a going concern and therefore the Group may be unable to realise its assets and discharge its liabilities in the normal course of business and at the amounts stated in the financial report.

Critical Accounting Estimates and Judgements

The application of accounting policies requires the use of judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions are recognised in the period in which the estimate is revised if it affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Share-based payment expense

The Group measures the cost of equity-settled transactions by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined using a Black and Scholes model using appropriate and supportable assumptions.

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4D-S LIMITED A.C.N. 124 234 395

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

	2014 $	2013 $
2. CASH AND CASH EQUIVALENTS Cash at bank – AUD Cash at bank – USD 3. TRADE AND OTHER RECEIVABLES Current tax Prepayments Other debtors 4. PROPERTY, PLANT AND EQUIPMENT Fixtures and fittings Machinery Equipment Less: accumulated depreciation 5. RESEARCH EXPENDITURE Research expenditure	48,830 61,270 110,100 94 6,950 - 7,044 14,542 113,339 96,677 (214,528) 10,030 104,526	101,293 52,507
		153,800
		234 6,136 211,595
		217,965
		14,769 115,111 86,091 (213,386)
		2,585
		154,377

In June 2014, the Company entered into a joint development agreement ("JDA") with HGST, who help organisations harness the power of data through a broad portfolio of proven, smarter storage solutions, to develop the Company's RRAM technology. The directors have resolved to prepare the Company's financial statements on the basis that only payments incurred pursuant to the work scope contemplated by the JDA that are consistent with the Company's accounting policy will be capitalised as development costs in the Company's statement of financial position. Consequently, any expenditure by the 4D-S group companies up to 30 June 2014 has been expensed as incurred.

6. TRADE AND OTHER PAYABLES Other creditors and accruals

132,669 65,884

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4D-S LIMITED A.C.N. 124 234 395

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

		2014 $	2013 $
7. BORROWINGS Convertible notes Other loans payable The equity component of the convertible notes is not material to the financial statements. 8. ISSUED CAPITAL Fully paid ordinary shares Fully paid preference shares Capital raising expenses Fully paid ordinary shares: Opening balance Movements during the year Closing balance Fully paid preference shares: Opening balance Movements during the period Closing balance Capital raising expenses: Opening balance Movements during the period Closing balance (a) Ordinary shares At beginning of the period – fully paid At end of the period – fully paid		- - - 287,176 10,431,622 (144,749) 10,574,049 287,176 - 287,176 9,160,203 1,271,419 10,431,622 (140,652) (349) (144,749) 893,417 893,417	608,639 75,472
			684,111
			287,176 9,160,203 (144,400)
			9,302,979
			287,176 -
			287,176
			9,123,544 36,659
			9,160,203
			(140,652) (3,748)
			(144,400)
			No. 893,417
			893,417

Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held

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4D-S LIMITED A.C.N. 124 234 395

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

		2014 $	2013 $
8. ISSUED CAPITAL (CONTINUED) (b) Preference shares At beginning of the period – fully paid Shares issued during the period – fully paid Options exercised At end of the period – fully paid		No. 1,239,660 108,628 25,778 1,374,066	No. 1,234,660 - 5,000
			1,239,660

Preference shares entitle the holder to participate in dividends and the proceeds of winding up of the Company in proportion to the number of and amounts paid on the shares held and in preference to ordinary shareholders. Preference shares entitle the holder to participate in dividends on the same terms and in the same manner as holders of ordinary shares. In the event of winding up, preference shareholders shall be entitled to receive a return of capital equivalent to the issue price paid together with any declared but unpaid dividends in preference to any payment due to ordinary shareholders and will also be entitled to participate in the distribution of any surplus assets of the company on a pro-rata basis with the holders of all ordinary shares.

Each preference share shall entitle the holder to one vote at any general meeting of the Company, and the holders of preference shares shall be entitled to elect one member of the Company's Board of Directors but shall not be entitled to vote on any resolution in relation to the election of any other member of the Company's Board of Directors. Any issue of new securities in the Company requires the prior written consent of the holders of the majority of the preference shares.

Each preference share shall be convertible to one ordinary share at any time at the election of the holder, or shall automatically convert upon the successful completion of an initial public offering.

(c) Options over ordinary shares At beginning of the period Options issued during the period(i) At end of the period	No. 476,000 170,000 646,000	No. 476,000 -
		476,000

(i) The options on issue over ordinary shares were to Dr Guido Arnout pursuant to his employment services agreement with the Company dated December 2013. The 170,000 options issued have an exercise price of US$1 per share and an expiry date of 31 December 2017.

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4D-S LIMITED A.C.N. 124 234 395

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

		2014 $	2013 $
8. ISSUED CAPITAL (CONTINUED) (d) Options over preference shares At beginning of the period Options issued during the year(i) Options lapsed during the period(ii) Options exercised(ii) At end of the reporting period		No. 79,000 222,258 (28,222) (25,778) 247,258	No. 84,000 - (5,000)
			79,000

• (i) The options issued during the financial year over preference shares are comprised of two tranches as follows:

Tranche 1 – 5,000 options expiring 31 December 2017 with an exercise price of US$10.00

Tranche 2 – 15,000 options expiring 31 December 2017 with an exercise price of US$10.00

• (ii) A total of 25,778 options were exercised during the year and 28,222 options lapsed during the year.

9. RECONCILIATION OF CASH FLOWS FROM OPERATIONS WITH LOSS AFTER INCOME TAX EXPENSE

Loss after income tax expense Foreign exchange gain/loss Interest on convertible notes Other non-cash expenses Share-based payment expense Changes in assets and liabilities: Movement in current receivables Movement in current payables and borrowings Cash flows from operations	(1,999,070) 14,809 111,464 87,740 1,024,791 (643) (56,876) (817,785)	(1,377,663) 10,934 - 2,067 - (217,416) 256,857
		(1,325,221)

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4D-S LIMITED A.C.N. 124 234 395

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

2014	2013
$	$

10. RELATED PARTY DISCLOSURE

The consolidated financial statements include the financial statements of 4D-S Limited and the following subsidiaries:

and the following subsidiaries:
	% equity interest
	2014	2013
	%	%
4D-S, Inc. (incorporated in the USA)	100	100
4D-S Japan (incorporated in Japan)	100	100

11. SHARE-BASED PAYMENT RESERVE

The reserve is used to record the value of equity benefits provided to employees and directors as part of their remuneration.

The fair value of the equity-settled share options granted is estimated at the date of grant using the Black-Scholes model taking into account the terms and conditions upon which the options were granted.

		Series 1	Series 2
		(2014)	(2014)
	Expected volatility (%)	70	70
	Risk-free interest rate (%)	4	4
	Expected life of option (years)	4	4
	Exercise price ($)	10	1
	Grant date share price ($)	10	10
	Discount for lack of marketability (%)	40	40
12.	PARENT ENTITY INFORMATION

Current assets Current liabilities Net (deficiency)/assets Issued capital Accumulated losses Reserves Total equity	2014 $ 69,553 (75,944) (6,391) 10,574,049 (11,605,232) 1,024,791 (6,391)	2013 $ 334,854 (622,249)
		(287,395)
		9,302,979 (9,590,374) -
		(287,395)

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4D-S LIMITED A.C.N. 124 234 395

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

	2014 $ 2013 $
13. LOSS FROM ORDINARY ACTIVITIES Loss before income tax expense has been determined after: Interest income Foreign currency gain/loss Professional fees Interest on convertible notes Share-based payment expense Employee benefits expense Research expenses Lease expenses Travel expenses	69 257 (14,809) (10,934) (221,777) (396,539) (111,464) - (1,024,791) - (193,167) (371,146) (104,525) (154,377) (119,371) (77,436) (68,701) (109,983)

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