FortifAI Faces Commercialisation Test After Revenue Falls 56%

NOL8 Acquisition Drives a $29 Million Loss

FortifAI Limited (ASX:FTI) has put a $50.3 million valuation on its newly acquired NOL8 intellectual property, but the accounting cost of buying into the technology helped produce a $29 million statutory loss for FY26. The result includes a $19.8 million non-cash expense representing consideration paid above the fair value of identifiable assets acquired, plus $5.4 million in share-based payments.

FortifAI completed the acquisition of FastAI in February, issuing 155 million shares and 150 million performance rights to acquire the NOL8 technology licence and associated intellectual property. The transaction was treated as an asset acquisition rather than a business combination. Grant Thornton gave the financial statements an unqualified audit opinion, while identifying the valuation and recoverable amount of the NOL8 intangible as key audit matters because the assessment relies heavily on unobservable assumptions about reconstruction costs, development time and technological obsolescence.

Legacy Gaming Revenue Falls Sharply

The operating picture beneath the acquisition accounting was weaker. Revenue from MKL Studio fell 56% to $1.9 million, from $4.3 million a year earlier, while total income was $2.3 million. FortifAI attributed the decline to lower royalty and contract receipts in an increasingly competitive market, although employee benefits expense fell 39% to $3.6 million as the business was rightsized.

On the company’s preferred normalised measure, which excludes the acquisition-related expense and share-based payments, the loss after tax was $3.7 million, compared with $0.8 million in FY25. That adjustment offers a clearer view of the underlying operating burden, but it does not remove the central commercial question: MKL Studio needs to recover while NOL8 is still being developed and has yet to generate revenue.

Funding Supports the Next Stage

FortifAI raised $20 million through two strategic placements during the year, including $5 million at $0.30 a share in February and $15 million at $0.715 in May. It finished June with $20.4 million in cash and no borrowings, while operating cash outflow improved to $1.9 million from $3.8 million in the prior year.

The balance sheet gives management room to pursue product development, commercial capability and market access, but the annual report also says additional funding may be sought to accelerate NOL8’s growth. Directors said further capital was not necessary for going concern over the forecast period, while acknowledging that funding availability will influence the timing and scale of the broader commercialisation plan.

Commercial Proof Moves Into FY27

NOL8 Version 1.0 was released on 29 June as a platform for live testing and proof-of-concept work, rather than commercial use. The company says Version 2.0 is anticipated near the end of calendar 2026. After year end, NOL8 became available through Equinix Fabric, with joint proof-of-concept engagements open to selected customers and general availability planned for later this year.

That timetable gives FY27 a fairly specific test. FortifAI will need to demonstrate that partner access and product testing can become binding design partnerships, enterprise agreements and bookings, while also managing a portfolio of 200.1 million performance rights disclosed as at 22 September. The report also records a ransomware incident affecting MKL Studio, which the company does not expect to have a material operational or financial impact, but cybersecurity remains one of the risks it expressly flags.