4DS MEMORY LIMITED — Interim / Quarterly Report 2017

Feb 26, 2017

Appendix 4D Half year report

ASX Appendix 4D

Half-Year Financial Report to 31 December 2016

1. Details of reporting period

1. Details of reporting period
Name of Entity	4DS MemoryLimited(“the Company”)
ABN	145 590 110
ReportingPeriod	31 December 2016
Previous CorrespondingPeriod	31 December 2015

2. Results for announcement to the market

2. Results for announcement to the market
				$
Revenues from ordinary activities	Up	10%	to	61,549
Loss for the half-year	Down	88%	to	1,251,678
Total comprehensive loss for the half-year attributable to members	Down	88%	to	1,253,359
		Amount Per Security		Franked Amount Per Security
Final Dividend		Nil		Nil
Interim Dividend		Nil		Nil
Previous Corresponding Period		Nil		Nil
Record Date for Determining Entitlements		Not Applicable

Brief explanation of any of the figures reported above necessary to enable figures to be understood:

The increase in net tangible asset backing per ordinary share for the half year is largely the result of the $3,995,720 raised from the issue of 117,647,059 ordinary shares in October and November 2016.

For further information, refer to the review of operations contained in the directors’ report, which forms part of the attached condensed consolidated financial statements.

3. Net tangible asset backing

3. Net tangible asset backing
	31 December 2016	31 December 2015
Net tangible backing per ordinary security	0.45 cents	0.37 cents

4. Details of entities over which control has been gained or lost during the period

N/A

5. Details of Dividends

No dividend has been paid or recommended to be paid for the half-year ended 31 December 2016.

Appendix 4D Page 1

Appendix 4D Half year report

6. Details of dividend reinvestment plans

N/A

7 Details of associate and joint venture entities

N/A

8. Foreign entities

N/A

9. Audit

This report has been based on accounts that have been subject to an audit review. There are no items of dispute with the auditor and the audit review is not subject to qualification.

Guido Arnout Managing Director

27 February 2017

Appendix 4D Page 2

4DS MEMORY LIMITED and Controlled Entities

ACN: 145 590 110

Interim Financial Report For the half year ended 31 December 2016

==> picture [146 x 106] intentionally omitted <==

4DS MEMORY LIMITED

ACN 145 590 110

CORPORATE DIRECTORY

Registered Office

Level 2, 50 Kings Park Road West Perth WA 6005 AUSTRALIA

PO Box 271 West Perth WA 6872 AUSTRALIA

Phone +61 8 6377 8043 Email david@4dsmemory.com Web www.4dsmemory.com

Share Registry

Automic Registry Services Level 2 267 St Georges Terrace Perth WA 6000 AUSTRALIA

Phone +61 8 9324 2099 Fax +61 8 9321 2337 Email info@automic.com.au Web www.automic.com.au

Securities Exchange listing

Australian Securities Exchange Limited ( ASX) ASX Code: 4DS

Legal Advisor

GTP Legal 68 Aberdeen Street Northbridge WA 6003 AUSTRALIA

Auditor

PKF Mack Level 4, 35-37 Havelock Street West Perth WA 6005 AUSTRALIA

• 2 -

4DS MEMORY LIMITED

ACN 145 590 110

CONTENTS	PAGE
DIRECTORS’ REPORT	4
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME	6
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION	7
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY	8
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS	9
CONDENSED NOTES TO THE FINANCIAL STATEMENTS	10
DIRECTORS’ DECLARATION	19
AUDITOR’S INDEPENDENCE DECLARATION	20
INDEPENDENT AUDITOR’S REVIEW REPORT	21

• 3 -

4DS MEMORY LIMITED

ACN 145 590 110

DIRECTORS’ REPORT

The Directors of 4DS Memory Limited ( 4DS Memory) (the Company ) and controlled entities (the Group or Consolidated Entity ) submit the following report for the half year ended 31 December 2016 ( Financial Period ).

DIRECTORS

The names and the particulars of the Directors of the Company during the half year and to the date of this report are:

Name	Status			Appointed
Dr Guido Arnout	Chief Executive	Officer	and	Appointed 7 December 2015
	Managing Director
Mr James Dorrian	Non-executive Chairman			Appointed 7 December 2015
Mr David McAuliffe	Executive Director			Appointed 7 December 2015
Mr Howard Digby	Non-Executive Director			Appointed 7 December 2015

COMPANY SECRETARY

Mr Peter Webse

REVIEW AND RESULTS OF OPERATIONS

The net loss of the Group after income tax for the half year ended 31 December 2016 amounted to $1,251,678 (31 December 2015: $10,647,454 net loss).

REVIEW OF ACTIVITIES

4DS Memory Limited was placed into a trading halt on 1 July 2016 pending the finalisation of a material announcement in relation to a joint development agreement.

On 4 July 2016, 4DS Memory Limited announced it has agreed to a 12-month renewal of a joint development agreement with HGST, a subsidiary of Western Digital Corporation.

On 18 October 2016, 4DS Memory Limited announced it has successfully developed and tested 40 nanometre (nm) interface switching resistive random access memory (ReRAM) cells. This milestone is a significant breakthrough as it represents a digital memory cell size which is smaller than the current large scale volume production sizes of existing non-volatile memory technology, 3D NANS Flash.

On 20 October 2016, the Company successful completed a placement of 117,647,059 new ordinary shares at an issue price of $0.034 per share to professional and sophisticated investors to raise $4 million.

The Placement shares will be issued via two tranches:

• The first tranche of 88,873,477 million shares is within the Company’s existing 15% placement capacity.

• The second tranche of 28,773,582 million shares is conditional upon approval of shareholders to be obtained at the Annual General Meeting held on 30 November 2016.

On 27 October 2016, the Company issued 88,873,477 Tranche 1 placement shares at $0.034. These funds will be used to fund the Company’s ongoing development activities relating to its Interface Switching ReRam, to achieve key strategic and technical milestones and for general working capital.

On 11 November 2016, the Company announced management changes with Mr David McAuliffe moving from NonExecutive Director to the position of Executive Director and the resignation of Ms Melanie Buffier as Corporate Strategy and Investor Relations Director.

On 14 November 2016, 7,5000,000 Incentive Options expiring 30 June 2020 with an exercise price of $0.05 have been cancelled.

On 30 November 2016, the Company issued the following:

• 28,773,582 Tranche 2 placement shares at $0.034 as per shareholders’ approval granted on 30 November 2016.

• 1,155,764 fully paid ordinary shares at $0.034 in satisfaction of 100% of the director’s fees owed to Mr James Dorrian to 30 November 2016 as per shareholders’ approval on 30 November 2016

• 3,000,0000 adviser options exercisable at $0.049 on or before 18 October 2019 issued to Shaw and Partners Limited as part of the fees for acting as lead manager to the placement.

• 4 -

4DS MEMORY LIMITED

ACN 145 590 110

DIRECTORS’ REPORT (CONTINUED)

On 5 December 2016, the Company announced the achievement of a key endurance milestone. Achieving this endurance milestone is essential to be a potential solution for storage class memory.

On 19 December 2016, all the Class 1 Performance Shares were converted into ordinary shares.

The Company continues to make important breakthroughs in characteristics such as cycling endurance, data retention and access speed and we look forward to informing shareholders of further technical developments, aimed at demonstrating commercial viability for Storage Class Memory, as they occur.

About 4DS Memory Limited

4DS Memory Limited (ASX: 4DS), with facilities located in Silicon Valley, is a semiconductor development company of non-volatile memory technology, pioneering Interface Switching ReRAM (IS ReRAM or Non-Filamentary ReRAM), for next generation gigabyte Storage Class Memory. Established in 2007, 4DS owns a patented IP portfolio, comprising 17 US patents granted and 6 patents pending, which has been developed in-house to create high density Storage Class Memory. 4DS has a joint development agreement with Western Digital subsidiary HGST, a global storage leader, which accelerates the evolution of 4DS’ technology.

Exploration Activities

As at June 30 June 2016, the Group retained a 49% interest in the Rookwood asset, with the joint venture being operated by Zenith Minerals Limited, which holds a 51% interest.

On 13 September 2016, Zenith executed a binding agreement with 4DS Memory Limited to acquire 4DS Memory Limited’s 49% interest in the Develin Creek copper-zinc-gold-silver project located in Queensland for $60,000.

SUBSEQUENT EVENTS

On the 19 January 2017 4DS announced the granting of its 17[th] patent in the USA, Heterojunction oxide non-volatile memory device, US 9,520,559.

On the 20 February 2017 4DS announced a technical update stating it has completed additional analysis of cycling endurance and data retention, and is initiating access speed testing for its IS ReRAM cells.

There have been no other matters or circumstances that have arisen since 31 December 2016 that have significantly affected or may significantly affect:

• the Group’s operations in future years; or

• the results of those operations in future years; or

• the Group’s state of affairs in future years.

AUDITOR’S INDEPENDENCE DECLARATION

The Auditor’s Independence Declaration to the Directors of the Consolidated Entity on page 20 forms part of the Directors’ Report for the half year ended 31 December 2016.

This report is signed in accordance with a resolution of the Board of Directors.

Guido Arnout Chief Executive Officer and Managing Director 27 February 2017

• 5 -

4DS MEMORY LIMITED

ACN 145 590 110

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE HALF YEAR ENDED 31 DECEMBER 2016

Note

Half year ended 31 December 2016 $ Half year ended 31 December 2015 $ 61,459 56,117 (383,523) (611,726) (4,741) (3,003) (305,866) (429,001) (525,206) (98,953) - (8,914,880) - (646,008) 89,410 - (183,211) - (1,251,678) (10,647,454) - - (1,251,678) (10,647,454) (1,681) (136,235) (1,253,359) (10,783,689) (0.0018) (6.11)

Revenue Corporate and administration expenses Depreciation expense Directors and employee expenses Research and development Excess consideration on 4DS transaction Share based payments Unrealised / realised foreign exchange Other expense Loss before income tax expense Income tax expense Loss for the year Items that may be reclassified subsequently to profit or loss Foreign currency translation (net of tax) Total comprehensive loss for the period net of tax Basic and diluted loss per share

The accompanying condensed notes form part of these financial statements.

• 6 -

4DS MEMORY LIMITED

ACN 145 590 110

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2016

Notes	31 December 2016 $ 30 June 2016 $
CURRENT ASSETS Cash and cash equivalents Trade and other receivables Other current assets TOTAL CURRENT ASSETS NON-CURRENT ASSETS Plant and equipment TOTAL NON-CURRENT ASSSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Employee benefits Borrowings TOTAL CURRENT LIABILITIES NET ASSETS EQUITY Issued capital 5 Reserves Accumulated losses TOTAL EQUITY	3,787,709 1,243,487 36,882 64,026 84,267 55,000
	3,908,858 1,362,513
	36,725 23,173
	36,725 23,173
	3,945,583 1,385,686
	86,662 84,189 - 7,551 17,206 -
	103,868 91,740
	3,841,715 1,293,946
	26,936,180 20,733,292 2,335,877 4,797,742 (25,430,342) (24,237,088)
	3,841,715 1,293,946

The accompanying condensed notes form part of these financial statements.

• 7 -

4DS MEMORY LIMITED

ACN 145 590 110

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE HALF YEAR ENDED 31 DECEMBER 2016

	Share Capital $ Accumulated Losses $ Share Based Payment Reserve $ Foreign Exchange Reserve $ Total $
Balance as at 1 July 2015 Transactions with owners in their capacity as owners: Issue of share capital net of costs Pre-acquisiton balance Total Comprehenisve Income Loss for the period Foreign currency translation differences Total comprehenive loss for the period Acquisition of Fitzroy Resources Limited Transactions with owners in their capacity as owners: Issue of Performance Shares Issue of share capital net of costs Extinguishment of 4D-S Limited Options Issue of Options Balance as at 31 December 2015	10,574,049 (13,000,645) 1,258,631 104,783 (1,063,182) 1,604,563 - - - 1,604,563
	12,178,612 (13,000,645) 1,258,631 104,783 541,381
	- (10,647,454) - - (10,647,454) - - - (136,235) (136,235)
	- (10,647,454) - (136,235) (10,783,689)
	5,969,680 (753,385) 753,385 - 5,969,680 - - 2,467,547 - 2,467,547 2,585,000 - - - 2,585,000 - 1,258,631 (1,258,631) - - - - 1,643,800 - 1,643,800
	20,733,292 (23,142,853) 4,864,732 (31,452) 2,423,719
	Issued capital $ Accumulated Losses $ Share Based Payment Reserve $ Foreign Exchange Reserve $ Total $
Balance as at 1 July 2016 Total Comprehenisve Income Loss for the period Foreign currency translation differences Total comprehenive loss for the period Transactions with owners in their capacity as owners: Conversion of Performance Shares Issue of share capital Capital raising cost Share based payment – advisor options Options lapsed Issue of shares in lieu of director fees Balance as at 31 December 2016	20,733,292 (24,237,088) 4,864,732 (66,990) 1,293,946 - (1,251,678) - - (1,251,678) - - - (1,681) (1,681)
	- (1,251,678) - (1,681) (1,253,359)
	2,467,547 - (2,467,547) - - 3,995,720 - - - 3,995,720 (299,675) - - - (299,675) - - 65,787 - 65,787 - 58,424 (58,424) - - 39,296 - - - 39,296
	26,936,180 (25,430,342) 2,404,548 (68,671) 3,841,715

The accompanying condensed notes form part of these financial statements.

• 8 -

4DS MEMORY LIMITED

ACN 145 590 110

CONDENSED CONSOLIDATED STATEMENT OF CASHFLOWS FOR THE HALF YEAR ENDED 31 DECEMBER 2016

	Half year ended 31 December 2016 $ Half year ended 31 December 2015 $
CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Interest received Payment for research and development Payment for business development Payments to suppliers and employees Net cash used for operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of fixed assets Proceeds from sale of shares Net cash provided by investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from the issue of shares and convertible notes Payment of capital raising cost Proceeds from lender Repayment to lender Cash acquired on acquisiton of a subsidiary Net cash provided by financing activities Net decrease in cash and cash equivalents held Cash and cash equivalents at 1 July Exchange rate changes on the balance of cash held in foreign currencies Cash and cash equivalents at 31 December	- 50,000 3,398 6,117 (590,402) - (143,805) - (685,610) (1,307,055)
	(1,416,419) (1,250,938)
	(18,293) (1,818) 112,626 -
	94,333 (1,818)
	3,995,721 579,129 (233,888) - 26,716 - (11,651) - - 3,083,093
	3,776,898 3,662,222
	2,454,812 2,409,466 1,243,487 9,106 89,410 (60)
	3,787,709 2,418,512

The accompanying condensed notes form part of these financial statements.

• 9 -

4DS MEMORY LIMITED

ACN 145 590 110

CONDENSED NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2016

NOTE 1: REPORTING ENTITY

The interim financial report ( Report ) of 4DS Memory Limited ( 4DS Memory ) (the Company ) and it’s controlled entities (the Group ) ( Consolidated Entity ) for the half year ended 31 December 2016 was authorised for issue in accordance with a resolution of the Directors on 27 February 2017.

4DS is a listed public company, trading on the Australia Securities Exchange, limited by shares, incorporated and domiciled in Australia.

The Group’s principal place of business and registered office is located at Level 2, 50 Kings Park Road, West Perth Western Australia 6005, Australia.

NOTE 2: BASIS OF PREPARATION

This consolidated Report for the half-year reporting period ended 31 December 2016 has been prepared in accordance with AASB 134 Interim Financial Reporting and the Corporations Act 2001.

This consolidated Report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June 2016 and any public announcements made by 4DS Memory during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001.

The Report has been prepared on an accruals basis and is based on historical costs modified by the revaluation of selected non-current assets, financial assets and financial liabilities for which the fair value basis of accounting has been applied.

The Report does not include full disclosures of the type normally included in an annual financial report. For the purposes of preparing the interim financial statements, the half-year has been treated as a discrete reporting period.

The same accounting policies and methods have been consistently applied by the Consolidated Entity in these interim financial statements as compared with the most recent annual financial statements, except as follows:

a) Adoption of new and revised accounting standards

In the Financial Period, the Company has reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to its operations and effective for annual reporting periods beginning on or after 1 July 2015. It has been determined by the Company 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 Company accounting policies. No retrospective change in accounting policy or material reclassification has occurred requiring the inclusion of a third Statement of Financial Position as at the beginning of the comparative financial period, as required under AASB 101.

NOTE 3: SEGMENT INFORMATION

The Company has identified its operating segment based on internal reports that are reviewed by the Board and management. There was only one operating segment being research and development of non-volatile memory technology, ReRAM for next generation storage in mobile and cloud

NOTE 4: CONTINGENT LIABILITIES

The Directors are not aware of any other contingent liabilities as at 31 December 2016 .

• 10 -

4DS MEMORY LIMITED

ACN 145 590 110

CONDENSED NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2016

NOTE 5: ISSUED CAPITAL	31	31	December 2016 $ 30 June 2016 $
Ordinary fully paid Shares (a) Movements in ordinary share capital Balance at 1 July 2015 Pre-Acquisition: Conversion of opening 4-DS Pty Ltd shares Settlement of 4-DS Pty Ltd convertible notes and preference shares Post-Acquisition: Issued capital – extinguish 4D-S Pty Ltd shares on reverse acquisition Issued capital – recognise 4DS Memory Shares Issued capital – acquisition of 4D-S Pty Ltd Issued capital – general placement Capital raising costs Balance 30 June 2016 Issued capital – tranche 1 placement Issued capital – tranche 2 placement Issued capital – in lieu of director fees Issued capital – pursuant to performance conditions not met Conversion of performance shares Capital raising costs – SBP Capital raising costs Balance 31 December 2016 (b) Movements in options Balance 1 July 2015 Extinguished for shares Value of 4DS Memory Limited options on issue at acquisition date Share based payment, transaction options (i) Share based payment, adviser options (ii) Share based payment, incentive options (iii) Balance 31 December 2015 Options cancelled/lapsed during the period (iii) Share based payment, adviser options (iv) Balance 31 December 2016			26,963,180 20,733,392
			Number of shares $
			893,417 10,574,049 97,775,556 - 34,416,638 1,604,563 (133,085,611) (12,178,612) 163,552,872 12,178,612 385,603,642 5,969,680 110,000,000 2,700,000 - (115,000)
			659,156,514 20,733,292
			88,873,477 3,021,698 28,773,582 974,022 1,155,764 39,296 4 - 67,604,019 2,467,547 - (65,787) - (233,888)
			845,563,360 26,936,180
		(i) (ii) (iii) (iii) (iv)	Number of options $
			820,524 1,258,631 (820,524) (1,258,631) 29,666,668 753,385 36,458,333 997,792 30,000,000 568,110 10,000,000 77,898
			106,125,001 2,397,185
			(7,500,000) (58,424) 3,000,000 65,787
			101,625,001 2,404,548

• 11 -

4DS MEMORY LIMITED

ACN 145 590 110

CONDENSED NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2016

NOTE 5: ISSUED CAPITAL (continued)

NOTE 5: ISSUED CAPITAL (continued)
(c) Movements in performance shares Balance 1 July 2015 Issued during the period Balance 31 December 2015 Conversion during the period Balance 31 December 2016	Number of shares $
	- - 67,604,019 2,467,547
	67,604,019 2,467,547 (67,604,019) (2,467,547)
	- -

Refer note 9 for assumptions and details of the issue of options and performance shares during the period.

(i) Transaction options

36,458,333 Options were issued 10 December 2015 as part of the 4D-S acquisition at $0.02 each expiring 30 June 2020. These options were valued using the Black and Scholes option valuation methodology taking into account the terms and conditions upon which the options were granted. Details of the assumptions used in the valuation of these options issued are as follows:

Item	Transaction Options
Number of options	36,458,333
Spot price ($)	0.05
Exercise price ($)	0.02
Valuation(grant) date	10December 2015
Expiry date	30 June 2020
Expiration period (years)	4.67
Vesting date	Nil
Exercise conditions	Nil
Value	$0.0273

Total value of $997,792 vested immediately and expensed as excess consideration.

(ii) Advisor options

30,000,000 Advisor Options were issued 10 December 2015 at $0.05 each expiring 30 June 2020 pursuant for services provided in relation to the acquisition 4D-S. These options were valued using the Black and Scholes option valuation methodology taking into account the terms and conditions upon which the options were granted. Details of the assumptions used in the valuation of these options issued are as follows:

• 12 -

4DS MEMORY LIMITED

ACN 145 590 110

CONDENSED NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2016

NOTE 5: ISSUED CAPITAL (continued)

**Item **	Transaction Options
Numberofoptions	30,000,000
Spot price ($)	0.05
Exercise price ($)	0.05
Valuation (grant) date	10 December 2015
Expiry date	30 June2020
Expirationperiod (years)	4.67
Vesting date	Nil
Exercise conditions	Nil
Value	$0.0189

Total value of $568,110 vested immediately and expensed as share based payments.

(iii) Employee incentive options

The following tranches of incentive options were issued to key management personnel on 18 December 2015:

• Tranche 1 – 2,500,000 incentive options at $0.05 each expiring 30 June 2020

• Tranche 2 – 2,500,000 incentive options at $0.05 each expiring 30 June 2020

• Tranche 3 – 2,500,000 incentive options at $0.05 each expiring 30 June 2020

• Tranche 4 – 2,500,000 incentive options at $0.05 each expiring 30 June 2020

Tranche 2, 3 and 4 options have market based vesting conditions, in that they can only be exercised if the share price of the Company achieves a 10 day volume weighted average price (“VWAP”) of greater than 10 cents, 15 cents and 20 cents respectively before expiry. These options were valued using the Black and Scholes option valuation methodology taking into account the terms and conditions upon which the options were granted. Details of the assumptions used in the valuation of these options issued are as follows:

**Item **	Tranche 1	Tranche 2	Tranche 3	Tranche 4
Number of options	2,500,000	2,500,000	2,500,000	2,500,000
Exercise price ($)	0.05	0.05	0.05	0.05
Valuation (grant) date	18 December 2015	18 December 2015	18 December 2015	18 December 2015
Expiry date	30 June2020	30 June2020	30 June2020	30 June2020
Expiration period (years)	4.65	4.65	4.65	4.65
Vesting date	nil	nil	nil	nil
Exercise conditions	nil	10 day VWAP of greater than $0.10	10 day VWAP of greater than $0.15	10 day VWAP of greater than $0.20
Value	$0.0189	$0.0064	$0.0037	$0.0027

Total value of $77,898 vested immediately and expensed as share based payments in financial year ended 30 June 2016. During the half year, the KMP resigned and 7,500,000 options were cancelled.

• 13 -

4DS MEMORY LIMITED

ACN 145 590 110

CONDENSED NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2016

NOTE 5: ISSUED CAPITAL (continued)

(iv) Advisor options

During the half year, the following options were issued:

• 3,000,000 adviser options were issued pursuant for services provided in relation to the placement exercisable at $0.049 on or before 18 October 2019.

3,000,000 Advisor Options were issued 2 December 2016 at $0.049 each expring 18 October 2019, pursuant for services provided in relation to the placement. These options were valued using the Black and Scholes option valuation methodology taking into account the terms and conditions upon which the options were granted. Details of the assumptions used in the valuation of these options issued are as follows:

**Item **	Advisor Options
Number of options	3,000,000
Exercise price ($)	0.049
Valuation(grant) date	2 December 2015
Expiry date	18 October 2019
Expirationperiod (years)	2.9
Vesting date	nil
Exercise conditions	nil
Value	$0.021929

Total value of $65,787 vested immediately and capitalised as capital raising cost.

NOTE 6: DIVIDENDS

The Company did not pay or propose any dividends in the half year to 31 December 2016.

NOTE 7: SUBSEQUENT EVENTS

On 23 January 2017, the Company has been granted another patent and bolsters the intellectual property which protects interface swtiching ReRAM technology.

There have been no other matters or circumstances that have arisen since 31 December 2016 that have significantly affected or may significantly affect:

• the Group’s operations in future years; or

• the results of those operations in future years; or

• the Group’s state of affairs in future years.

NOTE 8: COMMITMENTS

There has been no significant change in commitments since the last reporting date.

NOTE 9: PERFORMANCE SHARES

During the period, the following performance shares were converted to ordinary shares due to performance milestones being met:

67,604,019 Class 1 Performance Shares as part of the consideration for the acquisition.

Class 1 Performance shares

The Class 1 Performance Share are shares that will each convert into Share on a one for one basis upon satisfaction of a performance milestone, being 4DS Memory announcing that the Expert has delivered a report to 4DS Memory confirming that is has achieved “endurance consistency” (the Milestone ). Endurance consistency will be achieved on the first successful duplication of PDR cells in two wafers on one or more lots (that are different lots from the lot that defines the PQR), as measured by either:

• linear scale endurance yields for 400 cycles where the state current is read after each cycle; or

• logarithmic scale endurance yields for 10,000 cycles where the state current is read 4 times per decade,

that are higher than or equal to 90% for each of the 2 wafers where including all POR cells with sizes up to 3 times the smallest cell size in at least 2 die per wafer.

• 14 -

4DS MEMORY LIMITED ACN 145 590 110

CONDENSED NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2016

NOTE 9: PERFORMANCE SHARES AND OPTIONS (Continued)

The Class 1 Performance Share expire on 31 December 2018. To the extent that the Milestone has not been achieved on or before the expiry date, then the Class 1 Performance Shares will automatically consolidate to a nominal number and convert on a one for one basis to a nominal number of Shares.

On the basis that the Milestone is drafted with reference to technical criteria which may be outside the scope of expertise of most investors and analysts, ASX requires 4DS to provde the following “plain English” summary of the terms and conditions of the Milestone, so that ordinary investors and analysts can more readily understand the circumstances in which the Milestone will be taken to have been met:

• All silicon products used in mobile devices smartphones, tablets, laptops) and data centres (cold storage and the cloud) are very complex high-volume semiconductor products that need a very high degree of manufacturing consistency and operating consistency to be profitable for the chip maker and affordable for the chip buyer.

• Today’s high-density memory chips contain billions of memory cells together with the control circuits to select certain cells, read their state (“0” or “1”), or write a different state. The smaller the cells, the more data that can be packed into a single chip. Many memory chips are manufactured together on a wafer thrugh a complex sequence of depositing super thin materials and etching away certain sections of these depositions. When all process steps are completed, the wafer is cut into lots of individual memory chips which are then tested, packaged and sold.

• 4DS Memroy’s initial focus was to establish a baseline process that could manufacture individual memory cells of various sizes that perform the desired function consistently cell-to-cell on the same wafer and on wafers in the same lot (manufactured together). The first goals was demonstrate that 4DS Memory had a repeatable process that could manufacture cells on wafers in a new lot that behave very similar to cells on wafers maunfactured in an earlier lot (ie, lot-to-lot consistency)

• Having achieved, lot-to-lot consistency, 4DS Memory’s focus is to gradually improve the process in incremental steps to improve the fundamental behaviour of the cell (reading, writing, storing) while maintaining lot-to-lot consistency. The Milestone is specifically focused on 4DS Memroy ReRAM cells reaching a certain endurance level: how many time the state of the cell can be changed reliably from a “0” to a “1”.

• 4DS has entered into the Join Development Agreement with HGST Netherlands B.V., to investigate the scaling of 4DS ReRAM cells to small cell geometries for memory applications.

• Following the achievement of the Milestone, 4DS Memory will be well positioned to develop arrays of cells, and test chips.

• The Milestone is further detailed in the necessary technical terms in the full terms and conditions of the Class 1 Performance Shares to ensure that the Milestone can be verified and audited using clear metrics by an independent expert.

The deemed value per performance share is $0.0365. The company was in voluntary suspention on the grant date therefore the deemed value is based on the 30 day average of the closing price of the Company’s securities after relisting. Total value of $2,467,547 vested immediately and expensed as excess consideration.

NOTE 10 : REVERSE ACQUISITION

Reverse Acquisition

4DS Memory Limited (formerly Fitzroy Resources Limited) acquired all of the issued securities in 4D-S Pty Ltd by way of off-market takeover offers and private treaty offers.

Total consideration for all classes of 4D-S securities was the issue of 385,603,642 4DS Memory shares, 67,604,019 performance shares and 36,458,333 unlisted options each with an exercise price of $0.02 and an expiry date of 30 June 2020, giving 4D-S a controlling interest in 4DS memory and equating to a controlling interest in the combined group. 4D-S has thus been deemed the acquirer for accounting purposes. The acquisition of 4DS Memory by 4D-S is deemed to be a business combination, as 4DS Memory is considered to be a business under AASB 3 Business Combinations. As such, the consolidation of these two companies was on the basis of the continuation of 4D-S with fair value adjustments at acquisition date deemed to be 9 December 2015, whereby 4D-S was deemed to the accounting parent. The comparative information of 4DS Memory is subsequently of 4D-S for the period.

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4DS MEMORY LIMITED ACN 145 590 110

CONDENSED NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2016

NOTE 10 : REVERSE ACQUISITION (Continued)

Reverse Acquisition

As a result, the following principles and guidance on the preparation of the consolidated financial statements has been applied:

• Fair value adjustments arising at acquisition were made to 4DS Memory’s assets and liabilities, and not those of 4D-S;

• The cost of acquisition is based on the market value of 4DS Memory shares on completion date, plus the value of performace shares and options issued to the vendors of 4D-S but after subtracting the net assets of 4DS Memory on the completion date. The cost of acquistion, including the listing status of 4DS Memory does not qualify for recogniton as an intangible asset and therefoe has been expensed in the profit and loss for the period;

• • The amounts recognised as issued equity instruments in the consolidated financial statements have been determined by adding the cost of acquistion to the issued equity of 4D-S immediately before the acquisition;

• Retained earnings and other equity balances in the consolidated financial statements at the date of acquisition are retained earnings and other equity balances of 4D-S immediately before the acquisition; and

• The results for the period ended 30 June 2016 comprise the results of 4D-S for the full year and results of 4DS Memory Limited subsequent to the acquisition.

The pre-acquistion equity balances of 4DS Memory are eliminated against this increase in Share Capital of $5,969,680 on consolidation and the balance is deemed to be the amount paid fo the listing status of 4DS Memory, being $8,914,880 (recognised in the statemnt of profit or loss). This is tabled below:

	$
Market capitalisation of 4DS Memory at date of acquisition Value of performance shares issued as part of acquisition Value of options issued as part of acquisition Net fair value in 4DS Memory Limited at acquisition date Excess consideration on 4D-S acquisition	5,969,680 2,467,547 997,792 (520,139)
	8,914,880

The equity structure in the condensed consolidated financial statements (the number and type of equity instruments issued) at the date of the acquistion reflects the equity structure of 4DS Memory, including the equity instruments issed by 4DS Memory to effect the acquistion.

o The results for the year ended 30 June 2016 comprise the results of 4D-S and the results of 4DS Memory subsequent to the acquistion.

NOTE 11: LOSS PER SHARE

The following reflects income and share data used in the calculation of basic and diluted loss per share.

	31 December 2016	31 December 2015
	$	$
Net loss	(1,251,678)	(10,647,454)
	No.	No.
Weighted average number of ordinary shares in calculating basic
and diluted loss per share	699,899,548	174,286,392

Options are considered anti-dillutive in nature.

In calculating the weighted average number of ordinary shares outstanding (the denominator of the EPS Calculation) for the year ended 30 June 2016:

(1) The number of ordinary shares outstanding from 1 July 2015 to 9 December 2015 (acquisition date) are computed on the basis of the weighted average number of ordinary shares of 4D-S Pty Ltd (legal acquiree/

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4DS MEMORY LIMITED

ACN 145 590 110

CONDENSED NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2016

NOTE 11: LOSS PER SHARE (Continued)

• accounting acquirer) outstanding during the period multiplied by the exchange ratio established in the acquisition agreement; and

• (2) The number of ordinary shares outstanding from 10 December 2015 to the end of the year shall be the actual number of ordinary shares of 4DS Memory outstanding during that period 。

NOTE 12: FAIR VALUE HIERARCHY

The following tables detail the consolidated group’s assets and liabilities, measured or disclosed at fair value, using a three level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the group can access at the measurement date.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly

Level 3: Unobservable inputs for the asset or liability

The carrying value of financial assets represents the fair value that will be received in respect.

31 December 2016 Assets Financial assets Total assets Liabilities1 Total liabilities 30 June 2016 Assets Financial assets Total assets Liabilities Total liabilities	Level 1 Level 2 Level 3 Total $ $ $ $ - - - -
	- - - -
	17,206 - - 17,206
	17,206 - - 17,206
	Level 1 Level 2 Level 3 Total $ $ $ $ 55,000 - - 55,000
	55,000 - - 55,000
	- - - -
	- - - -

1 The borrowing from Hunter Premium Funding is short-term and bearing an interest of 8.4% per annum.

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4DS MEMORY LIMITED ACN 145 590 110

CONDENSED NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2016

NOTE 13: RELATED PARTY TRANSACTIONS

During the half year, 1,155,764 fully paid ordinary shares at $0.034 were issued in satisfaction of 100% of the director’s fees owed to Mr James Dorrian up to 30 November 2016 as per shareholders’ approval on 30 November 2016.

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4DS MEMORY LIMITED ACN 145 590 110

DIRECTORS’ DECLARATION

The Directors of 4DS Memory Limited declare that:

1. The financial statements and notes, as set out on pages 6 to 18 are in accordance with the Corporations Act 2001 and:

2. a) comply with Accounting Standard AASB 134: Interim Financial Reporting and the Corporations Regulations 2001; and

3. b) give a true and fair view of the Consolidated Entity’s financial position as at 31 December 2016 and its performance for the period ended on that date.

4. In the Directors’ opinion there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Board of Directors.

Guido Arnout Chief Executive Officer and Managing Director 27 February 2017

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AUDITOR’S INDEPENDENCE DECLARATION

TO THE DIRECTORS OF 4DS MEMORY LIMITED

In relation to our review of the financial report of 4DS Memory Limited for the half year ended 31 December 2016, 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.

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PKF MACK

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SIMON FERMANIS PARTNER

27 FEBRUARY 2017 WEST PERTH, WESTERN AUSTRALIA

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INDEPENDENT AUDITOR’S REVIEW REPORT

TO THE MEMBERS OF 4DS MEMORY LIMITED

Report on the Interim Financial Report

We have reviewed the accompanying interim financial report of 4DS Memory Limited (the Company ) and controlled entities ( Consolidated Entity ) which comprises the condensed consolidated statement of financial position as at 31 December 2016, the condensed consolidated statement of profit or loss and other comprehensive income, the condensed consolidated statement of changes in equity and the condensed consolidated statement of cash flows for the half-year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information and the Directors’ Declaration of the Consolidated Entity comprising the Company and the entities it controlled at 31 December 2016, or during the half year.

Directors’ Responsibility for the Interim Financial Report

The Directors of the Company are responsible for the preparation of the interim financial report that gives a true and fair view in accordance with the Australian Accounting Standards and the Corporations Act 2001 and for such internal controls as the directors determine is necessary to enable the preparation of the interim financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express a conclusion on the interim financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the interim financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the Consolidated Entity’s financial position as at 31 December 2016 and its performance for the half year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporation Regulations 2001. As the auditor of 4DS Memory Limited and the entities it controlled during the half year, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of an interim financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001. In accordance with the Corporations Act 2001, we have given the Directors of the company a written Auditor’s Independence Declaration.

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Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the interim financial report of 4DS Memory Limited is not in accordance with the Corporations Act 2001 including:

• (a) giving a true and fair view of the Consolidated Entity’s financial position as at 31 December 2016 and of its performance for the half-year ended on that date; and

• (b) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001.

==> picture [105 x 43] intentionally omitted <==

PKF MACK

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SIMON FERMANIS PARTNER

27 FEBRUARY 2017 WEST PERTH, WESTERN AUSTRALIA

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