Why are Brainchip shares sinking today?

Brainchip Holdings Ltd (ASX: BRN) shares are under pressure on Thursday.

In morning trade, the struggling semiconductor company’s shares are down 3% to 16 cents.

This leaves them trading within a whisker of a multi-year low.

Why are Brainchip shares sinking?

Investors have been hitting the sell button again today after the company released yet another dismal quarterly update.

According to the release, the company recorded a cash inflow of just US$0.4 million for the three months ended 31 December.

That’s an average of approximately US$130,000 a month for a company that entered the commercialisation stage a few years ago and has a market capitalisation over $360 million.

Unsurprisingly given its tiny cash inflows, Brainchip continues to burn cash. It revealed payments to suppliers and employees of US$4.3 million for the three months. Though, one small positive was that this was lower than the prior quarter when it spent US$5.2 million.

At the end of the quarter, the company had a cash balance of US$31.7 million. This is up from US$13.9 million in the prior quarter due to the successful completion of a US$22.8 million fully underwritten institutional placement in November.

Management notes that this capital raising was done to support the commercialisation of the Akida neuromorphic technology platform and the development of next-generation edge AI products. Though, time will tell if these funds accomplish anything other than paying the salaries of its leaders.

What else did it announce?

Brainchip also provided the market with an update on what it has been working on during the quarter.

This includes a strategic partnership with Blue Ridge Envisioneering, which is a Parsons (NYSE: PSN) entity. It notes that BRE is a Virginia-based innovator delivering next-generation solutions to the defence and intelligence sectors.

The terms of the agreement include an initial order of 10,000 chips, supporting the deployment of edge-AI systems that maintain full performance without cloud connectivity. It said:

Parsons will integrate BrainChip’s Akida neuromorphic processors into its mission-ready platforms to enhance adaptive performance in constrained and dynamic defence environments. The agreed supply framework with Parsons includes committed volumes for manufacturing scale, continuity-of-supply provisions, and tiered pricing for high-volume deployment.

It also advised that it received an initial order for 1,200 AKD1500 chips from Nex Novus for use in its Neuromorphyx Neuro Blocks product. Management believes AKD1500 will accelerate an MCU supporting neuromorphic evaluation of multi-sensor data. And while it concedes that the order size is minor, it feels it represents further market demand for the AKD1500.

Time will tell if this leads to more orders, but I wouldn’t hold my breath.

The post Why are Brainchip shares sinking today? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.