'Clearly not acceptable': Brainchip share price sinks 12% on half-year results

Brainchip is the gift that keeps giving to short sellers.

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The Brainchip Holdings Ltd (ASX: BRN) share price is under significant pressure again on Monday.

In morning trade, the struggling semiconductor company's shares are down 12% to a new multi-year low of 28.5 cents.

Why is the Brainchip share price sinking?

Investors have been hitting the sell button after the company delivered yet another abject set of results. Here's how it performed in the first half of FY 2023:

  • Revenue of US$115,606
  • Total expenses up 30% to US$16.85 million
  • Losses doubled to US$17.15 million
  • Net tangible assets of 1.18 cents per share
  • Cash and cash equivalents balance of US$21.8 million

What happened during the half?

For the six months ended 30 June, Brainchip continued its impressive run of generating as much revenue as a coffee shop from the suburbs.

Revenue came in at US$115,606 for the period, which equates to a monthly income of US$19,268.

One thing that is growing, other than management's use of hyperbole in its announcements, is its expenses. Total expenses increased more than 30% during the six months to US$16.85 million.

This ultimately led to the company doubling its half-year loss to a whopping US$17.15 million.

This leaves Brainchip's balance sheet in a precarious position with cash and cash equivalents of just over US$21 million. In light of this, shareholders may want to prepare for further dilutive capital raisings via LDA Capital in the next 12 months.

'Clearly not acceptable'

One small positive is that management appears to acknowledge that these results are not befitting the salaries and performance rights they have been receiving for some time.

BrainChip's CEO, Sean Hehir, commented:

While the results are clearly not acceptable, they were anticipated. The focus on accelerating development on the 2nd generation Akida architecture which will allow us to reach new customers and solve bigger challenges on higher value applications drove incremental cost. Our commitment to releasing this market-leading product in the shortest time possible drove an increase in labour cost over the same period last year. Further adding to the expanded loss was the non-cash item of RSUs issued to our former Chairman, which added additional expense.

Hehir also appears to be backtracking slightly from comments last month that stated Brainchip is "experiencing its highest ever level of commercial engagements." Today, the underfire CEO said:

In anticipation of 2nd generation Akida, we have seen a lot more traction from serious prospects and very detailed evaluations, however decisions are being delayed until formal release of the platform. The depth and quality of these engagements gives me strong confidence in the strategy and growth potential of BrainChip.

Following today's decline, the Brainchip share price is now down 68% over the last 12 months. This demonstrates the danger of investing in story stocks rather than focusing on fundamentals. The latter arguably points to the company deserving to trade on a sub-$100 million market capitalisation until it can demonstrate that it has a viable business model and/or a product businesses actually want.

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.

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