4DS Memory Limited

Successfully Raised $3.15 Mn through Share Placement:  4DS Memory Limited (ASX: 4DS)was incorporated in 2007, and it is based in West Perth, Australia. It is being currently headed by Mr. Guido Arnout – the Chief Executive Officer (CEO), MD & Executive Director. The company is mainly engaged in the development of resistive random-access memory (ReRAM) which is a non-volatile memory. It has state-of-art R&D facility at Silicon Valley, California. The company is a current owner of 20 US-granted patents. These patents are developed from the in-house intellectual property of the company. The company is first to introduce non-volatile Interface Switching ReRAM, which is used for high-density and high-volume Storage Class Memory. Besides this, the company underwent a joint development agreement (JDA) with HGST (A subsidiary) in July 2014 to investigate the scaling of 4DS ReRam cells to small cell geometrics for memory applications. In 2017, the company has formed a collaboration with imec to develop a production-compatible process for the 300mm production tools which helps them to build a megabit memory.

Recently, the company has successfully raised the total capital of $3.15 Mn via share placement event against the issued ordinary shares of 70 million at a price of A$ 0.045. The shares will be issued within the company’s placement capacity of 15%. The proceeds from the placement will be used to fund the company’s development activities in relation to its interface switching ReRam and to achieve key strategic and technical milestones with imec.

 

 
Focus on High density and High Volume(Source: Company Reports)

During the year, loss after income tax expense amounted to $ 5.2 million in FY18 against $2.56 million in FY17 at the back of rising R&D expenses and higher share-based placement costs incurred during the period. As a result, basic and diluted loss per share stood at 0.006 cents per share against 0.003 cps in the previous corresponding period. As on 30 June 2018, the Group had consolidated net assets of $ 3.17 million (FY17: $ 2.54 million) with the cash balance of $ 2.93 million against cash reserve of $ 2.57 million in FY17. Apparently, the current ratio stood at 16.34x in FY18 which is higher than the industry median of 2.36x. It reflects decent balance sheet position as on June 30, 2018. Meanwhile, the share price has risen 17.39% in the past six months as at December 18, 2018 but is trading below the average of 52-week High and Low level.With the revenue and earnings of the company plunging Y-O-Y, the company performance is slightly under pressure. Although the cash and total assets increased marginally, it is wise to look at the company’s performance going forward. Therefore, based on foregoing, we have a wait and watch view on the stock at the current market price of $ 0.052.
 

Flamingo AI Limited

Improving Financials: Flamingo AI Limited (ASX: FGO) is a micro-cap information technology company with the market capitalization of circa $20.91 Mn as of December 19, 2018. It was officially listed on ASX in 1986 and is based in Sydney, Australia. It focusses on improving customer experience by using artificial intelligence (AI) and machine learning. The company expanded its business in New York to be amongst the leading financial service companies. The company generates its revenue through paid pilot, monthly recurring revenue (MRR), usage fees, and revenue share. Recently, the company has secured a contract through Statement of Work (SoW) with Nationwide Mutual Insurance Company in the United States for the use of machine learning based analytics application, LIBBY. According to the management, this deal reinforces the relationship with Nationwide who is a client of Flamingo AI’s since 2015. Moreover, the Company has signed another extension of the contract with CUA Health Ltd. The objective of this contract is to extend the use of the Company’s Cognitive Virtual Assistant, called ‘Sam’ that guides CUA’s customers through their full Health Insurance purchase experience and transaction.

During the FY18, the revenue increased by 9% on a YoY basis to $0.52 Mn in FY18 from $0.48 Mn in FY17.This was lower than expected revenue growth due to longer sales cycles. However, loss after income tax expense amounted to $ 8.21 Mn in FY18 from $11.95 Mn in FY17, signifying substantial growth of ~31.5% on Y-o-Y basis despite the rise of employee expenses, increased depreciation and amortization expense, rising travel and entertainment expenses, and occupancy costs during the same period. As a result, basic loss per share stood at 0.69 cents per share from 1.91 cps in the previous year. On the balance sheet front, the total assets of the company increased to $13,650,362 in FY18 as compared to $ 5,204,310 in FY17, a significant increase of more than 1.5 times approximately, mainly driven by a substantial increase in cash & cash equivalents. As at 30 September 2018, the company had cash and cash equivalent of $9.19 Mn. On the analysis front, the current ratio of the company stood at 8.57x as at 30 June 2018, representing the high liquidity of the firm. RoE also improved from -579.1% to -100.0% in FY18 over the prior year. This improved performance shows that the group is refining its performance with its objectives and has a potential for further growth.


Cash Receipts and Cash Burn (Source: Company Reports)

Meanwhile, the share price has fallen 51.28% in the past six months as of December 18, 2018 and trading close to its lower range. On the other hand, Flamingo AI is placed well to capitalize on the large market opportunity for AI in financial services. With its market-leading, proprietary AI technology platform, innovative products, and world-class management team, the company is poised to grow and capitalize on long-term growth. Although the company is expecting to improve its financial performance in the coming year, it is advisable to keep an eye on the stock. With a significant cash burn, net loss and high initial investments, the gestation period for the company might be on the higher side. Hence, considering the current market scenario and past stock performance, we suggest a wait and watch strategy on the stock at the current market price of $0.017.
 

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