BrainChip Holdings Ltd (ASX: BRN) is ending 2024 on a high note, announcing today a US$1.8 million (A$2.8 million) contract with the Air Force Research Laboratory (AFRL) for advanced radar signalling processing. This partnership underscores BrainChip’s ambition to remain at the cutting edge of neuromorphic artificial intelligence (AI) technology, but it comes amidst a backdrop of financial challenges outlined in the company’s recent half-year results.
AFRL Contract: A Strategic Win
The AFRL contract, awarded under the US Small Business Innovation Research (SBIR) program, will see BrainChip deploy its proprietary Temporal Event Neural Network (TENNs) algorithm framework on the Akida 2.0 platform. The aim? To refine radar processing capabilities such as micro-Doppler signature analysis—critical for activity discrimination in military contexts.
Sean Hehir, CEO of BrainChip, highlighted the importance of this work, stating:
"This partnership showcases how neuromorphic computing can achieve significant benefits of low-power, high-performance compute in the most mission-critical use cases."
The contract also involves BrainChip partnering with a yet-unnamed aerospace and defence giant. Milestone payments will begin in January 2025, providing much-needed revenue consistency over the next year.
A Year of Mixed Results
While the AFRL deal is a positive step, BrainChip’s half-year results paint a more sobering picture. For the six months ending 30 June 2024, the company reported a net loss of A$11.5 million, an improvement on the A$17.1 million loss recorded in the same period last year. Revenue, however, fell slightly to A$106,693, underscoring the challenges of monetising cutting-edge AI technology in its early stages.
On the expense side, the company has worked hard to reduce costs, cutting total expenses by 31% compared to the previous year. Still, BrainChip acknowledged the strain of inconsistent revenue streams and a challenging macroeconomic environment, with management impairing intangible assets by A$576,037 as a precautionary measure.
Raising Capital to Bolster Resilience
In response to its financial pressures, BrainChip executed a multi-faceted capital raise in mid-2024, netting approximately A$25 million. This included a fully underwritten share placement, a share sale to LDA Capital, and a share purchase plan for existing shareholders. The funds have been earmarked for ongoing product development and operational resilience.
A Pivot Towards Strategic Partnerships
Despite its financial hurdles, BrainChip has made progress in diversifying its revenue streams. The half-year results highlighted post-period agreements with Airbus Defence and Space and Frontgrade Gaisler to integrate Akida technology into space applications. These partnerships are aligned with growing demand for ultra-low-power AI in niche markets such as defence and aerospace.
What Lies Ahead
BrainChip’s ability to secure high-profile contracts like the AFRL deal demonstrates the market’s confidence in its technology. However, the company remains in a delicate position. It must balance cost-cutting with investment in R&D to maintain its technological edge while also managing stakeholder expectations amidst inconsistent revenues.
The year ahead will likely hinge on BrainChip’s capacity to deliver on its AFRL contract and convert other pipeline opportunities into tangible results. With Akida 2.0 poised for broader adoption in 2025, there’s potential for a turnaround, but it’s a high-stakes journey.
As BrainChip looks to transition from a pioneering tech outfit to a commercially viable operation, the AFRL contract could serve as a key inflection point. Investors, meanwhile, will be hoping this is the start of a more stable chapter in the company’s evolving story.
