The Brainchip Holdings Ltd (ASX: BRN) share price will be front and centre today after announcing its FY21 financial result overnight.
Unlike most ASX shares, Brainchip reports on a January 1 to December 31 financial year.
BrainChip has created a neuromorphic processing chip, which allegedly mimics the human brain (hence the name BrainChip) in artificial intelligence applications.
Brainchip share price on watch after FY21 report
Key financial results for the year ending 31 December include:
- Revenue of $1.6 million, up from $0.2 million in FY20
- Expenses of $21.2 million, increasing 89% year-on-year
- Loss of $20.9 million, down from $26.8 million in FY20
The Brainchip share price achieved several milestones over the past year.
Ten patents were approved. Manufacturing partnerships were established. And the company welcomed a new CEO.
But the biggest step forward was the shift from concept to product.
The company began shipping development kits to prospective customers of its proprietary Akida chip.
“Most significantly, it was the year that BrainChip evolved from an R&D company into a company that supplies breakthrough edge AI technology to markets like automotive, transportation, aerospace, healthcare, and industrial IoT”
It’s important to remember the testing kits do not guarantee new customers and revenue.
Testing kits are merely a way of showing customers what the chip could do.
But it’s a notable step in Brainchip moving from an idea towards an investable business.
If and when the company announces customer contracts, that will validate the use case of the technology and lead to an uplift in revenue.
Capital raising likely in 2022
Brainchip’s share price of $1.26 implies it’s worth over $2.1 billion.
That’s plenty of blue sky for a business that is recording just $1.6 million in revenue.
But Brainchip remains loss-making, meaning it spends more than it receives in revenue.
With just $19.3 million of cash, the business will likely need to raise more capital from investors.
Assuming the current burn rate, Brainchip will require a cash injection at some point in 2022.
Overall, the FY21 report didn’t provide much more colour on the business.
Rather, it summarised the progress Brainchip has made over the past year and how it’s positioned going into 2022.
Given it still has no material revenue and the massive expectations baked into the Brainchip share price, I’m avoiding the business for now.
But if you’re looking for share ideas, check out 22 ASX shares I’m excited about it 2022.