Brainchip share price under pressure after worrying quarterly update

Brainchip is burning through cash like its kindling. Here's what happened during the quarter.

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

In early trade, the semiconductor company's shares dropped 8% to 17 cents.

Its shares have bounced back slightly, possibly due to short sellers buying back shares to lock in gains.

Why is the Brainchip share price sinking?

The catalyst for the weakness in the Brainchip share price today has been the release of yet another abject quarterly update.

That update revealed that the company achieved an average of US$9,000 in cash receipts each month during the three months ended 30 September. This is probably less than your local sandwich shop. But that sandwich shop doesn't have a market capitalisation of $300 million like Brainchip does, because that would be ludicrous, right?

Nor is that sandwich shop burning through cash like Brainchip is doing. It spent approximately US$4 million on operating activities during the period.

This includes US$718,000 in staff costs, which means that for every dollar Brainchip is spending on staff, it is generating 3.8 cents in cash receipts.

At the end of the period, Brainchip's cash balance had dropped by US$4 million to US$17.8 million. According to its cash flow report, this gives it an estimated five quarters of funding.

Though, it seems unlikely that it will wait that long until it seeks to shore up its balance sheet. This could mean another dilutive capital raising via LDA Capital is on the way in the coming months.

Nevertheless, the company's under-fire CEO, Sean Hehir, remains positive on the future. He said:

The period from June to September 2023 saw continued progress in the execution of our commercial and corporate strategies focusing on the ongoing development and availability of the 2nd Generation Akida technology platform to lead customers. These goals were achieved in the final days of September after a significant and sustained effort by our entire team.

I am pleased to see continued growth and expansion of our commercial ecosystem partnerships, especially with the Edge box seeding the market which will expand the adoption our technology. These achievements coupled with the traction we're seeing with IP licensing prospects, gives me confidence in our strategy and that over time our technology will proliferate across a wide range of industry applications and platforms.

The Brainchip share price has lost approximately 80% of its value over the last 12 months.

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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