4DS MEMORY LIMITED — Interim / Quarterly Report 2020

Feb 19, 2020

Appendix 4D Half year report

ASX Appendix 4D

Half-Year Financial Report to 31 December 2019

1. Details of reporting period

Name of Entity	4DS Memory Limited
ABN	43 145 590 110
ReportingPeriod	31 December 2019
Previous CorrespondingPeriod	31 December 2018

2. Results for announcement to the market

Key information	31 December 2019	31 December 2018	Increase/ (decrease)	Increase/ (decrease)	Amount change $
Revenues from ordinary activities	30,569	10,719	185%		19,850
Loss for the half-year	(2,931,177)	(2,318,039)	26%		(613,138)
Total comprehensive loss for the half-year attributable to members	(2,919,208)	(2,302,108)	27%		(617,100)
		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:

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 2019	31 December 2018
Net tangible backing per ordinary security	0.34 cents	0.44 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 2019.

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.

==> picture [85 x 33] intentionally omitted <==

Guido Arnout Managing Director

20 February 2020

Appendix 4D Page 2

4DS MEMORY LIMITED and Controlled Entities ACN: 145 590 110

Interim Financial Report For the half year ended 31 December 2019

==> picture [146 x 105] intentionally omitted <==

4DS Memory Limited and Controlled Entities

ACN: 145 590 110

==> picture [53 x 39] intentionally omitted <==

For the half year ended 31 December 2019

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 Perth Level 5, 35 Havelock Street West Perth WA 6005 AUSTRALIA

4DS Memory Limited and Controlled Entities

ACN: 145 590 110

==> picture [53 x 39] intentionally omitted <==

For the half year ended 31 December 2019

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

4DS Memory Limited and Controlled Entities

ACN: 145 590 110

==> picture [54 x 39] intentionally omitted <==

For the half year ended 31 December 2019

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 2019 ( 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:

eport 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

OPERATING RESULTS

The net loss of the Group after income tax for the half year ended 31 December 2019 amounted to $2,931,177 (31 December 2018 loss: $2,318,039).

REVIEW OF OPERATIONS

PRINCIPAL ACTIVITIES

4DS Memory Limited (ASX: 4DS), with facilities located in Silicon Valley, is a semiconductor company pioneering the development of a non volatile memory known as Interface Switching ReRAM, for next generation gigabyte Storage Class Memory. Established in 2007, 4DS owns an extensive intellectual property portfolio, comprising 22 granted US patents and an additional 11 patents either pending or being filed. The intellectual property portfolio has been developed in-house to create high density Storage Class Memory and is 100% owned. 4DS has a joint development agreement with Western Digital subsidiary HGST, a global storage leader, which accelerates the evolution of 4DS’ technology. 4DS also has a development agreement with Belgium based imec.

Highlights During the Half Year

• On 22 July 2019 announced the fast track granting of its 21[st] USA patent: Resistive Memory Device Having a Template Layer.

• On 14 August 2019 announced the fast track granting of its 22[nd] USA patent: Resistive Memory Device Having a Retention Layer.

• On 3 October 2019, the Company announced that the initial phase of integration of 4DS’ memory with imec’s proven CMOS platform had commenced in Q4 2019 with the production of an initial lot of 300mm wafers.

• On 28 November 2019, the Company extended its collaboration agreement with imec for additional 12 months having agreed on the terms and conditions of the extension which commenced 1 January 2020.

Placement, Issue of Securities and Release from Escrow

On 17 July 2019, the Company announced a placement of 65 million ordinary shares at an issue price of $0.05 per share to professional and sophisticated investors raising $3.25 million.

4

4DS Memory Limited and Controlled Entities

ACN: 145 590 110

==> picture [54 x 39] intentionally omitted <==

For the half year ended 31 December 2019

On 24 September 2019, 750,000 ordinary shares were issued following the exercise of unlisted options with expiry of 31 December 2019.

On 7 October 2019, 350,000 ordinary shares were issued following the exercise of unlisted options with expiry of 31 December 2019.

On 7 October 2019, 1,675,000 ordinary shares were issued following the exercise of unlisted options with expiry of 31 December 2019.

On 29 November 2019, the Company issued of the following:

• 655,737 fully paid ordinary shares at $0.061 in satisfaction of the Director’s fees owed to Mr. James Dorrian from 1 July 2018 until 30 June 2019 (being a total of $40,000) as per shareholders’ approval on 29 November 2019.

• 245,901 fully paid ordinary shares at $0.061 to David McAuliffe in satisfaction of salary accrued from 1 July 2018 until 31 December 2018 (being a total of $15,000) as per shareholders’ approval on 29 November 2019.

On 24 December 2019, 350,000 ordinary shares were issued following the exercise of unlisted options with expiry of 31 December 2019.

On 31 December 2019, 1,875,000 unlisted options having an exercise price of $0.05 each expired.

Incentive Options

On 28 August 2019, the Company issued 2,600,000 incentive options to its USA based employees and consultants. The options are exercisable at $0.052 each, of which 10% vest on a quarterly basis over ten quarters, with the options expiring on 28 August 2024.

SUBSEQUENT EVENTS

There have been no matters or circumstances that have arisen since 31 December 2019 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

A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 20.

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

==> picture [85 x 33] intentionally omitted <==

Guido Arnout Chief Executive Officer and Managing Director 20 February 2020

5

4DS Memory Limited and Controlled Entities

ACN: 145 590 110

==> picture [54 x 39] intentionally omitted <==

For the half year ended 31 December 2019

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE	CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
FOR THE HALF YEAR ENDED 31 DECEMBER 2019
	31 December 31 December
	2019 2018
Notes	$ $
Revenue Corporate and administration expenses Depreciation expense Directors and employee expenses Research and development Share based payments Unrealised / realised foreign exchange Other expenditures Loss before income tax expense Income tax expense Loss for the period Other Comprehensive Income 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 12	30,569 10,719 (127,165) (167,415) (62,144) (59,726) (155,757) (109,752) (2,019,620) (1,717,392) (409,848) (167,128) 11,535 35,436 (198,747) (142,781)
	(2,931,177) (2,318,039) - -
	(2,931,177) (2,318,039)
	11,969 15,931
	(2,919,208) (2,302,108)
	(0.0026) (0.0024)

The accompanying condensed notes form part of these financial statements.

6

4DS Memory Limited and Controlled Entities

ACN: 145 590 110

==> picture [54 x 39] intentionally omitted <==

For the half year ended 31 December 2019

CONSOLIDATED STATEMENT OF FINANCIAL POSITION	CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2019	31 December 30 June
	2019 2019
Notes	$ $
CURRENT ASSETS Cash and cash equivalents Trade and other receivables Prepayments Right-to-use asset 13 TOTAL CURRENT ASSETS NON-CURRENT ASSETS Plant and equipment 4 Right-to-use asset 13 TOTAL NON-CURRENT ASSSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Provisions Lease liabilities 13 TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Lease liabilities 13 TOTAL LIABILITIES NET ASSETS EQUITY Issued capital 7 Reserves Accumulated losses TOTAL EQUITY	3,570,185 2,167,613 8,435 5,868 110,774 47,289 105,190 -
	3,794,584 2,220,770
	268,785 318,162 315,570 -
	584,355 318,162
	4,378,939 2,538,932
	103,746 121,294 22,570 14,236 83,770 -
	210,086 135,530
	336,989 -
	547,075 135,530
	3,831,864 2,403,402
	39,983,579 36,025,887 4,456,273 4,066,248 (40,607,988) (37,688,733)
	3,831,864 2,403,402

The accompanying condensed notes form part of these financial statements.

7

4DS Memory Limited and Controlled Entities

ACN: 145 590 110

==> picture [54 x 39] intentionally omitted <==

For the half year ended 31 December 2019

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE HALF YEAR ENDED 31 DECEMBER 2019

	Share Based
	Issued capital Accumulated Payment Foreign Exchange Total
	Losses Reserve Reserve
	$ $ $ $ $
Balance as at 1 July 2018 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: Issue of share capital Capital raising cost Share based payment – advisor options Issue of employee options Issue of shares on exercise of options Issue of shares in lieu of director fees Balance as at 31 December 2018	31,836,715 (31,906,068) 3,332,080 (87,885) 3,174,842 - (2,318,039) - - (2,318,039) - - - 15,931 15,931
	31,836,715 (2,318,039) - 15,931 (2,302,108)
	3,151,250 - - - 3,151,250 (227,112) - - - (227,112) - - 21,032 - 21,032 - - 146,097 - 146,097 775,541 - (213,041) - 562,500 61,301 - - - 61,301
	35,597,695 (34,224,107) 3,286,168 (71,954) 4,587,802
	Share Based
	Issued capital Accumulated Payment Foreign Exchane Total
	Losses Reserve g Reserve
	$ $ $ $ $
Balance as at 1 July 2019 Total Comprehensive Income Loss for the period Foreign currency translation Total comprehenisive loss for the period Transactions with owners in their capacity as owners: Issue of share capital Share purchase plan Capital raising costs Issue of employee options Options lapsed Issue of shares on exercise of options Issue of shares in lieu of director fees Issue of shares in lieu of salary Balance as at 31 December 2019	36,025,887 (37,688,733) 4,139,079 (72,831) 2,403,402 - (2,931,177) - - (2,931,177) - - - 11,969 11,969
	- (2,931,177) - 11,969 (2,919,208)
	3,250,000 - - - 3,250,000 750,000 - - - 750,000 (273,428) - - - (273,428) - - 37,706 - 37,706 - 11,922 (11,922) - - 176,120 - 352,272 - 528,392 40,000 - - - 40,000 15,000 - - - 15,000
	39,983,579 (40,607,988) 4,517,135 (60,862) 3,831,864

The accompanying condensed notes form part of these financial statements.

8

4DS Memory Limited and Controlled Entities

ACN: 145 590 110

For the half year ended 31 December 2019

==> picture [54 x 39] intentionally omitted <==

CONSOLIDATED STATEMENT OF CASHFLOWS
FOR THE HALF YEAR ENDED 31 DECEMBER 2019	31 December 31 December
	2019 2018
Note	$ $
CASH FLOWS FROM OPERATING ACTIVITIES Interest received Insurance claim 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 Net cash (used)/provided by investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from the issue of shares Payment of capital raising costs Repayment to lender Issue of shares on exercise of options Net cash provided by financing activities Net increase 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	7,985 10,538 22,419 - (1,948,698) (1,676,164) (58,063) (91,711) (504,819) (382,485)
	(2,481,176) (2,139,822)
	(10,653) (94,708)
	(10,653) (94,708)
	4,000,000 3,151,250 (273,428) (227,112) - (3,173) 156,250 562,500
	3,882,822 3,483,465
	1,390,993 1,248,934 2,167,613 2,932,232 11,579 50,060
	3,570,185 4,231,226

The accompanying condensed notes form part of these financial statement

9

4DS Memory Limited and Controlled Entities

ACN: 145 590 110

==> picture [54 x 39] intentionally omitted <==

For the half year ended 31 December 2019

CONDENSED NOTES TO THE FINANCIAL STATEMENTS

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 2019 was authorised for issue in accordance with a resolution of the Directors on 20 February 2020.

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 2019 has been prepared in accordance with AASB 134 Interim Financial Reporting and the Corporations Act 2001. Compliance with AASB 134 ensures compliance with International Financial Reporting Standard IAS 34.

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 2019 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.

Initial Application of AASB 16: Leases

The Group has adopted AASB 16: Leases retrospectively from 1 July 2019. In accordance with AASB 16.C7 the comparatives for the 2018 reporting period have not been restated.

The Group has recognised a lease liability and right-of-use asset for all leases recognised as operating leases under AASB 117: Leases where the Group is the lessee.

Lease liabilities are shown at the present value of the remaining lease payments. The Group's incremental borrowing rate as at 1 July 2019 has been used to discount the lease payments.

The right-of-use assets for the remaining leases have been measured and recognised in the statement of financial position as at 31 December 2019 by taking into consideration the lease liability and the prepaid and accrued lease payments (that are related to the lease).

The following practical expedients have been used by the Group in applying AASB 16 for the first time:

• For a portfolio of leases that have reasonably similar characteristics, a single discount rate has been applied.

• Leases that have remaining lease term of less than 12 months as at 1 January 2019 have been accounted for in the same was as short-term leases.

• The use of hindsight to determine lease terms on contracts that have options to extend or terminate.

10

4DS Memory Limited and Controlled Entities

ACN: 145 590 110

==> picture [54 x 39] intentionally omitted <==

For the half year ended 31 December 2019

NOTES TO THE FINANCIAL STATEMENTS

NOTE 2: BASIS OF PREPARATION (CONTINUED)

• Applying AASB 16 to leases previously identified as leases under AASB 117: Leases and Interpretation 4: Determining whether an arrangement contains a lease without reassessing whether they are, or contain, a lease at the date of initial application.

• Not applying AASB 16 to leases previously not identified as containing a lease under AASB 117 and Interpretation 4.

Going Concern

The Group has net assets of $3,831,864 (30 June 2019: $2,403,402) as at 31 December 2019 and incurred a loss of $2,931,177 (31 December 2018: $2,318,039) and net operating cash outflow of $2,481,177 (31 December 2018: $2,139,822) for the period ended 31 December 2019.

The Group’s ability to continue as a going concern and meet its debts and future commitments as and when they fall due is dependent on the Company’s ability to raise sufficient working capital to ensure the continued implementation of the Group’s business plan.

The financial report has been prepared on a going concern basis. In arriving at this position, the Directors have had regard to the fact that the Company has, or in the Directors’ opinion will have access to, sufficient cash to fund administrative and other committed expenditure for a period of not less than 12 months from the date of this report.

In the event that the Group does not achieve the above actions, there exists significant uncertainty as to whether the Group will be able to continue as a going concern and realise its assets and extinguish its liabilities in the normal course of business.

11

4DS Memory Limited and Controlled Entities

ACN: 145 590 110

==> picture [54 x 39] intentionally omitted <==

For the half year ended 31 December 2019

NOTES TO THE FINANCIAL STATEMENTS

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: PLANT AND EQUIPMENT At cost Accumulated depreciation Less: Provision for impairment Total Plant and Equipment	31 December 2019 30 June 2019 844,057 831,718 (551,940) (490,224) (23,332) (23,332)
	268,785 318,162

NOTE 5: CONTINGENT LIABILITIES

The Company completed the winding up of Premier Coking Coal LLC including surrendering the relevant leases during the period ending 30 June 2015 and according has no ongoing commitments in this required. However, the Group remains a party to a claim with a third party in relation to a claim on a small portion of the Emmaus property lease above the Gilbert Seam. The Company considers this claim to be immaterial.

The Directors are not aware of any other contingent liabilities as at 31 December 2019.

NOTE 6: FINANCIAL INSTRUMENTS

The Company’s financial instruments consist of trade and other receivables, deposits paid, trade and other payables, and financial liabilities. These financial instruments are measured at amortised cost, less any provision for non-recovery. The carrying amounts of the financial assets and liabilities approximate their fair value.

NOTE 7: ISSUED CAPITAL

Ordinary fully paid Shares

(a) Movements in ordinary share capital Balance 1 July 2018 Placement shares Issued capital – in lieu of Director fees Issued capital – in lieu of Salary Issued capital Exercised of unlisted options Capital raising costs Balance 30 June 2019 Placement shares Share purchase plan Exercised of unlisted options Issued capital – in lieu of Director fees Issued capital – in lieu of Salary Capital raising costs Balance 31 December 2019	Number of shares $
	964,564,544 31,836,715 70,027,777 3,151,250 2,152,454 95,000 495,365 21,301 2,777,777 125,000 15,000,000 1,034,055 - (237,434)
	1,055,017,917 36,025,887
	65,000,000 3,250,000 15,000,000 750,000 3,125,000 176,120 655,737 40,000 245,901 15,000 - (273,428)
	1,139,044,055 39,983,579

12

4DS Memory Limited and Controlled Entities

ACN: 145 590 110

==> picture [54 x 39] intentionally omitted <==

For the half year ended 31 December 2019

NOTES TO THE FINANCIAL STATEMENTS

NOTE 7: ISSUED CAPITAL (CONTINUED)

(b) Movements in options Balance 1 July 2018 Options exercised, advisor options Share based payment, employee options Share based payment, adviser options Balance 30 June 2019 Share based payment, employee options Options vesting, employee options Options exercised, advisor options Options expired, advisor options Balance 31 December 2019	Number of options $
	121,233,333 3,332,080 (15,000,000) (284,055) 25,780,000 1,070,022 880,000 21,032
	132,893,333 4,139,079
	2,600,000 37,706 - 372,142 (3,125,000) (19,870) (1,875,000) (11,922)
	130,493,333 4,517,135

NOTE 8: SHARE BASED PAYMENTS

The following share based payment arrangements were entered into during the period ended 31 December 2019:

On 29 November 2019, the Company issued of the following:

• 655,737 fully paid ordinary shares at $0.061 in satisfaction of the Director’s fees owed to Mr. James Dorrian from 1 July 2018 until 30 June 2019 (being a total of $40,000) as per shareholders’ approval on 29 November 2019.

• 245,901 fully paid ordinary shares at $0.061 to David McAuliffe in satisfaction of salary accrued from 1 July 2018 until 31 December 2018 (being a total of $15,000) as per shareholders’ approval on 29 November 2019.

Incentive Options

On 28 August 2019, the Company issued 2,600,000 incentive options to its USA based employees and consultants. The options are exercisable at $0.052 each, of which 10% vest on a quarterly basis over ten quarters, with the options expiring on 28 August 2024.

Fair value of options

The fair value of share options granted have been valued using a Black Scholes Methodology, taking into account the terms and conditions upon which the unlisted share options were granted.

A summary of the inputs used in the valuation of the options is as follows:

13

4DS Memory Limited and Controlled Entities

ACN: 145 590 110

==> picture [54 x 39] intentionally omitted <==

For the half year ended 31 December 2019

NOTES TO THE FINANCIAL STATEMENTS

NOTE 8: SHARE BASED PAYMENTS (CONTINUED)

Unlisted Share Options	Employee Incentive Options
Exercise price	$0.052
Share price at date of issue	$0.052
Grant date	28 August 2019
Expected volatility	105.86%
Expiry date	28 August 2024
Risk free interest rate	0.70%
Value per option	$0.0399
Number of options	2,600,000
Total value of options	$103,805

For the period ending 31 December 2019 a share based payment expense of $409,848 was recognised in line with option vesting periods. An amount of $372,142 was recognised as a vesting expense from options issued in a prior period.

NOTE 9: DIVIDENDS

The Company did not pay or propose any dividends in the half year to 31 December 2019.

NOTE 10: SUBSEQUENT EVENTS

There have been no other matters or circumstances that have arisen since 31 December 2019 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 11: COMMITMENTS

Material commitments

The Company entered into an agreement with imec on the 31 October 2017 to develop a transferrable production compatible process flow for its interface Switching ReRAM technology and to demonstrate this process on imec’s megabit test chip. On 31 October 2019, an amendment to the collaboration agreement was signed where both parties agreed to add extra activities to the project and therefore extend the duration of the agreement and additional payment terms.

From 1 January 2020 the Company shall pay imec a total of 1,000,000 Euro, with payments made quarterly until 1 October 2020.

There has been no other significant change in commitments since the last reporting date other than reported above.

14

4DS Memory Limited and Controlled Entities

ACN: 145 590 110

==> picture [54 x 39] intentionally omitted <==

For the half year ended 31 December 2019

NOTES TO THE FINANCIAL STATEMENTS

NOTE 12: LOSS PER SHARE

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

		31 December
	31 December 2019	2018
	$	$
Net loss	(2,931,177)	(2,318,039)
	No.	No.
Weighted average number of ordinary shares in calculating
basic and diluted loss per share	1,126,548,395	988,195,328
Loss per share	($0.0026)	($0.0024)
Options are considered anti-dillutive in nature.

NOTE 13: LEASES

The group leases office space. Rental contract is typically made for a fixed period of 4 years, with extension options available on the office lease. Lease terms are negotiated on an individual basis and contain a range of terms and conditions. The rental contact was renewed with the lease started from December 2019 and a month rental waiver was granted.

Until the 2019 financial year, leases were classified as operating leases. Payments made under the group’s operating leases (net of any incentives received from the lessor) were charged to profit or loss on a straightline basis over the period of the lease.

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

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of fixed lease payments (including in-substance fixed payments), less any lease incentive receivable.

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

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

• The amount of the initial measurement of lease liability;

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

• Any initial direct costs; and

• Restoration costs.

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

15

4DS Memory Limited and Controlled Entities

ACN: 145 590 110

==> picture [54 x 39] intentionally omitted <==

For the half year ended 31 December 2019

NOTES TO THE FINANCIAL STATEMENTS

NOTE 13: LEASES (CONTINUED)

Impact of the New Accounting Policy on Amounts Recognised in the Financial Statements

The change in accounting policy affected the following items in the balance sheet on 1 July 2019:

• Lease liabilities – increase by $420,760; and

• Right of use assets – increase by $420,760.

The net impact on accumulated losses on 1 July 2019 was nil.

Impact on the statement of cash flows

The application of AASB 16 has an impact on the consolidated statement of cash flows of the Group.

Under AASB 16, leases must present:

• Short-term lease payments, payments of leases of low-value assets and variable lease payments not included in the measurement of the lease liabilities as part of the operating activities (the Group has included these payments as part of payments to suppliers and employees)

• Cash paid for the interest portion of lease liabilities as either operating activities or financing activities as permitted by AASB 107 Statement of Cash Flows (The Group has opted to include interest paid as part of operating activities)

• Cash payments for principal portion of leases liabilities, as part of financing activities.

Impact on segment disclosures and earnings per share

The adoption of AASB 16 had no impact on the group’s segment disclosures. The adoption of AASB 16 did not have significant impact on the Company’s earnings per shares.

Lease liabilities

The lease liability of $420,760 recognised at 31 December 2019 is comprised of minimum lease payments over the lease contract.

The Group had no finance leases at 31 December 2019

The value of the right of use asset at 31 December 2019 has been determined solely with direct reference to the lease liability value at the same date. There are no leases with initial direct costs or removal and restoration costs requiring an adjustment to the value of the right of use asset.

Right of use assets

Right of use assets are subsequently measured using the cost model, that is, right of use asset less accumulated amortisation and accumulated impairment losses, adjusted for any remeasurements. Leases are to be remeasured upon occurrence of any of the following events:

• Change in original assessment of lease term or purchase/termination options.

• Change in estimate of residual guarantee; and/or

• Change in index or rate affecting payments.

Practical expedients applied

In applying AASB 16 for the first time, the group has used the following practical expedients permitted by the standard:

• The use of a single discount rate to a portfolio of leases with reasonably similar characteristics; and

16

4DS Memory Limited and Controlled Entities

ACN: 145 590 110

==> picture [54 x 39] intentionally omitted <==

For the half year ended 31 December 2019

NOTES TO THE FINANCIAL STATEMENTS

NOTE 13: LEASES (CONTINUED)

� The use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.

The Group has also elected not to reassess whether a contract is, or contains a lease, at the date of initial application. Instead, for contracts entered into before the transition date the Group relied on its assessment made applying AASB 117 and Interpretation 4 Determining whether an Arrangement contains a Lease.

The right of use asset and lease liabilities have arisen upon adoption of AASB 16 Leases from 1 July 2019.

(i) AASB 16 related amounts recognised in the balance sheet

Right of use assets Leased buildings: Opening balance Addition for the half-year ended Depreciation expense for the half-year ended Net carrying amount Current Non-current Total Lease liabilities Maturity analysis – contractual undiscounted cash flows Less than one year One to five years More than five years Total undiscounted leases liabilties at 31 December 2019 Lease liabilities included in the statement of financial position as at 31 December 2019 Current Non-current Total	31 December 2019 30 June 2019 $ $ - - 420,760 - - -
	420,760 -
	105,190 - 315,570 -
	420,760 -
	109,016 - 378,647 - - -
	487,663 -
	83,770 - 336,989 -
	420,759 -

17

4DS Memory Limited and Controlled Entities

ACN: 145 590 110

==> picture [54 x 39] intentionally omitted <==

For the half year ended 31 December 2019

NOTES TO THE FINANCIAL STATEMENTS

NOTE 13: LEASES (CONTINUED)

(ii) AASB 16 related amounts recognised in the statement of profit or loss

(ii) AASB 16 related amounts recognised in the statement of profit or loss
	2019	2018
	$	$
Depreciation charge related to right-of-use assets	-	-
Interest expense on lease liabilities (under finance cost)	-	-
Short-term leases expense	-	-
Low-value asset leases expense	-	-
(iii) AASB 16 related amounts recognised in the statement of cash flows
Total half-yearly cash outflows for leases	-	-

Short -term leases and leases of low-value assets

The Group currently does not have any short-term leases.

The Group applies the low-value assets recognition exemption to leases of office equipment that are considered low value (AUD 10,000 or less). Lease payments on short-term leases and leases of low-value assets are recognised as expense on straight-line basis over the lease term.

Significant judgment in determining the lease term of contracts with renewal options

The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.

The Group applied judgment in evaluating whether it is reasonable certain to exercise the option to renew, That is, it considered all relevant factors that create an economic incentive to exercise the renewal.

18

4DS Memory Limited and Controlled Entities

ACN: 145 590 110

==> picture [54 x 39] intentionally omitted <==

For the half year ended 31 December 2019

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 2019 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

==> picture [86 x 33] intentionally omitted <==

Guido Arnout Chief Executive Officer and Managing Director 20 February 2020

19

PKF Perth

AUDITOR’S INDEPENDENCE DECLARATION

==> picture [143 x 120] intentionally omitted <==

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 2019, 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.

==> picture [155 x 40] intentionally omitted <==

PKF PERTH

==> picture [187 x 59] intentionally omitted <==

SHANE CROSS

PARTNER

20 FEBRUARY 2020 WEST PERTH, WESTERN AUSTRALIA

Level 4, 35 Havelock Street, West Perth, WA 6005 PO Box 609, West Perth, WA 6872

T: +61 8 9426 8999 F: +61 8 9426 8900 www.pkfperth.com.au

PKF Perth is a member firm of the PKF International Limited family of legally independent firms and does not accept any responsibility or liability for the actions or inactions of any individual member or correspondent firm or firms.

Liability limited by a scheme approved under Professional Standards Legislation.

20

PKF Perth

INDEPENDENT AUDITOR’S REVIEW REPORT

==> picture [143 x 120] intentionally omitted <==

TO THE MEMBERS OF 4DS MEMORY LIMITED

Report on the Interim Financial Report

Conclusion

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 2019, 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 2019, or during the half year.

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 2019 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.

Emphasis of Matter

Without modifying our conclusion, we draw attention to Note 2 in the financial report, which confirmed that the consolidated entity incurred a net loss after tax of $2,931,177 during the half year ended 31 December 2019. These conditions, along with other matters as set out in Note 2, 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.

The financial report of the consolidated entity does not include any adjustments in relation to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that might be necessary should the consolidated entity not continue as a going concern.

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.

Level 4, 35 Havelock Street, West Perth, WA 6005 PO Box 609, West Perth, WA 6872

T: +61 8 9426 8999 F: +61 8 9426 8900 www.pkfperth.com.au

PKF Perth is a member firm of the PKF International Limited family of legally independent firms and does not accept any responsibility or liability for the actions or inactions of any individual member or correspondent firm or firms.

Liability limited by a scheme approved under Professional Standards Legislation.

21

PKF Perth

Directors’ Responsibility for the Interim Financial Report

==> picture [143 x 120] intentionally omitted <==

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 2019 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.

==> picture [155 x 40] intentionally omitted <==

PKF PERTH

==> picture [187 x 59] intentionally omitted <==

SHANE CROSS PARTNER

20 FEBRUARY 2020 WEST PERTH, WESTERN AUSTRALIA

22