Company Overview:  BrainChip Holdings Limited, formerly Aziana Limited, is an Australia-based company, which is engaged in the development of neural computing technology. The Company focuses on its spiking neuron adaptive processor (SNAP) technology and licensing the SNAP technology with technology partners. The Company operates through the technological development of designs segment. The Company's SNAP offer a complete development solution for companies entering the neuromorphic semiconductor chip market. SNAP is a core enabling technology in Neuromorphic semiconductor chips that possesses various applications, such as gaming, cyber security, robotic technology and stock market forecasting, among others. SNAP also implements learning rules in hardware, enabling autonomous features extraction (AFE) directly from input data without the need for any software processing. Its subsidiaries include BrainChip Inc., AZK Merger Subsidiary Inc., Aziana Exploration Corporation and Eternal Resources Pty Ltd.


BRN Details

BrainChip is a leading developer of software and hardware accelerated solutions for artificial intelligence (AI) based applications and has an Al-powered video analysis software suite which delivers high-speed object search and allows facial classification for law enforcement, counter terrorism and for intelligence agencies. The software’s one-shot object training, a unique characteristic of spiking neural networks creates a spiking neural network model of an object in its initial captured orientation. In the past six months, BrainChip Studio and BrainChip Accelerator have been recognised globally as the most advanced video analytical offerings for the law enforcement and were recognised by the Security Today Magazine in the United States along with Milipol Innovation Award in France. Based on recurring positive feedback from customers, BRN will continue to enhance its products to expand its applications and capabilities. It performed well in 2017 and has established a foundation for growth and the Management is helping to build an enduring brand for the Group in the Artificial Intelligence market.
 

Video Analytics’ Market Size (Source: Company Reports)
 
Release of New version of BrainChip Studio: BrainChip Holdings has released an upgraded version of BrainChip Studio (version 2018.1). New features of the 2018.1 release have made it easier to find the objects from a variety of camera views, enabling large-scale Linux deployments, and adding API which simplifies integration with other applications. The new version auto-generates the rotated models. Further, BrainChip Studio 2018.1 now runs on Linux and enables cost-effective large-scale server installations. As an added benefit, the streamlined nature of the Linux OS provides a 10 per cent performance improvement for the BrainChip Studio. The 2018.1 version can be controlled with an API-level interface and this enables the functionality of BrainChip Studio to be integrated into third party applications, either at the off-the-shelf video surveillance software or at the end-user’s custom software. This version can be resold by OEM customers or can be integrated into the cloud-based SaaS frameworks. BrainChip Studio 2018.1 and BrainChip Accelerator have been made available and will be demonstrated during the ISC West tradeshow to be held in Las Vegas between 11 to 13 April 2018.
 

BrainChip Studio (Source: Company Reports)
 
Decent Financial Position: 2017 was a year of great progress and the Group executed its strategic and tactical plans efficiently. The Group raised its capital from 2 sources and the total cash injections amounted to $20,888,073 which helped the Company to build a sustainable business in selected target markets for the Civil and Commercial Surveillance and for Public Safety. The Board utilised these funds to further advance the research, development and commercialisation of products and technology and towards repayment of various loans and advances which were held by the Group. The Group reported a net loss after income tax of $13,774,013 for the year 2017 and whereas for 2016 it was $5,098,102. This increase was due to the share-based expenses of $6,941,360 (2016: $1,075,382) which represents the portion of the vesting expense of the options and of Performance Rights and due to an increase of $2,439,940 in Administrative expense. As on 31 December 17, the Group had consolidated net assets of $18,066,470 (2016: 5,266,618) which included the cash reserves of $16,049,330 (2016: $3,593,951).
 

Financial Performance (Source: Company Reports)
 
Collaborations and Operational Achievements: The Company’s Game Statistics and Game Outcome solutions were placed in field trial at a leading casino in Las Vegas. The Group announced a collaboration with Safran for the development of a machine vision inspection system. Development of AKIDA (a system-on-a-chip Neuromorphic Processor Unit) has also commenced. Further, BrainChip Accelerator was launched which was the first Neuromorphic Hardware solution for facial and pattern recognition and the group also shipped its first Accelerator to a major European automobile manufacturer. In January 2018, the Company and the Gaming Partners International Corporation entered into a licensing, development and into a revenue sharing agreement which was related to the joint development of video analytic products for the deployment of casino currency security worldwide, for the game table operations and lastly for the payer behaviour applications. Under this, BRN will receive a total license fees of US$500,000 and a non-recurring engineering fee of US$100,000 for developed products and revenue sharing for sale of the developed products. The Company requested a waiver for the Listing Rule 6.23.3 to the ASX to seek the shareholders approval to extend the expiration dates for 45,800,000 unquoted options by three to five years after the date of grant to ten years after the date of the grant.
 

Performance of BrainChip against Leading Deep Learning Models (Source: Company Reports)
 
Other key updates: BrainChip Studio and Accelerator were to be exhibited at Stand G32 at Security and Counter Terrorism Expo (SCTX) 2018 which was held on 6-7 March 18. Thus, the group is attaining lot of traction based on the technology. The Group retained Mr Luis Coello to serve the Company as Director of Sales and Business Development for Europe, Middle East and Africa, and he has an experience of 20 years in surveillance and in video analytics in Europe. He will assist the Group in strengthening its position in the market with the help of law enforcement and intelligence agencies in Europe.

Opportunities and exposure to different risks: As the Company develops products for more advanced technologies, the commercial viability of new products increases. The timing of new product development is a key factor in sales growth. New technology carries an inherit risk of delay and quality.  Sales of software and hardware solutions require lengthy lead times and sophisticated engagement with customers and failure to recruit, hire or train the sales representatives in a timely and in effective manner can reduce the revenue growth. New financial risks can arise from expanding the geographic reach of the Company. Security breach is a major risk which can lead to the loss of information. While the group has an exposure to the aforementioned risks and others relating to intellectual property, the technology being developed and pipeline in hand still hold value.

Stock Performance: As per the March quarter rebalance of S&P/ASX indices, BRN has been added to All Ordinaries, effective from March 19, 2018. The Group is now pursuing the next phase of its growth vision which is to provide a best-in class AI processor based on its proprietary technology. With the production releases of BrainChip Studio and Accelerator, it is now able to build its sales infrastructure. Company’s Artificial Intelligence expertise helps in addressing the challenges of achieving high quality video analytics in the difficult casino environment. By seeing the AI landscape there are very few players and M&A becomes a key indicator for valuation, so BRN’s main aim is to become the best company in the sector and this would catch attention as a potential buy-out target. The Company expects to have continuous sales growth with its original equipment manufacturers, integrators and other partners. It is associated with prestigious clients like France Homeland Security, Paris Police, Safran, Lockport etc. The ROE though in a negative zone, is still improving gradually. BRN is expected to benefit from its large sales pipeline, Akida development, growing revenue, and capital position. The stock price rose by 6 per cent in the past five days post falling about 12.5 per cent in the past three months, and it has further room for growth. We give a “Speculative Buy” recommendation at the current market price of $0.165
 

BRN Daily Chart (Source: Thomson Reuters)

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