Mr. Anoosh Manzoori reports

SPARC AI ADVANCES DEVELOPMENT OF GEOSPATIAL AI CHIP

Sparc AI Inc. has provided an update on operations.

Restructure and financing

On Aug. 4, 2023, the company completed a restructure, and 18,951,061 shares were cancelled, resulting in an issued share capital of just 9,090,536 shares. As part of the restructure, the company divested a subsidiary with $1.3-million in liabilities but retained all patents and intellectual property. On Dec. 4, 2023, the company completed a private placement (oversubscribed) of $371,875. The board supported the private placement by taking 44 per cent of the allocation.

The company currently has just 12,484,316 shares on issue. The funds raised in the private placement are covering all required development work to embed the company's IP (intellectual property) into a microchip and all working capital for the next 12 months. Furthermore, the company plans to submit an R&D (research and development) refund claim at the end of the year, which may extend the company's financing runway to the middle of 2025. The development work is expected to be completed in the next 90 days, marking a significant milestone for the company as it will have a commercial-ready product and can start taking orders and generating revenue.

Development update

The company is working closely with an embedded system engineering and software company to assist with the development of a mobile application and a microchip with embedded Sparc AI patented code and algorithms. The works are progressing as planned and within budget.

The development team has conducted a thorough examination of the patent, dissecting its methodologies, processes and technologies. The company is also taking the opportunity to update the code base, make its platform more scalable, secure and robust, and add more functionality. A summary of the development work for the past four weeks is as follows.

The team has made significant progress in developing code capable of retrieving precise readings of the camera's position and orientation. This functionality is pivotal in ensuring an optimal view of points of interest, aligning with the Sparc patent's specifications.

The integration of the VMAS Z service enabled the company to access altitude data for various latitude/longitude positions. This service plays a crucial role in obtaining altitude information necessary for calculations and processes.

The implementation of the slip-target function has been developed to allow for the accurate calculation of expected height at specified locations. This calculation is based on distance travelled and changes in altitude, as prescribed by the Sparc patent.

The code base can also effectively iterate through retrieved latitude/longitude/altitude tuples, comparing retrieved altitude with calculated height to identify hits or near-misses. This process aligns with the patent's methodology for pinpointing matching co-ordinates of points of interest.

Looking ahead, the company's focus now shifts toward camera integration, mobile app development, integration into microchip and comprehensive integration testing. This phase marks a critical step forward in realizing the company's objectives and functionality.

Business model

The company has completed a detailed review of its business model. Under previous management, the business model involved bespoke and customized solutions per client engagement. This resulted in a high cost and long sales lead times. The model was not scalable and resulted in a low-margin, low-volume revenue model.

The new Sparc AI microchip will allow the company to provide a simple plug-and-play solution to new customers. Customers can plug the chip into their devices or drones and test and launch. Sparc AI plans to charge a fixed fee for the microchip and a software-as-a-service (SaaS) recurring monthly fee for the application. The company will offer tiered pricing based on the capability and functionality of the chip and application, allowing Sparc AI to build a high-margin recurring revenue model. For customers that may require additional integration or customization, Sparc AI will refer its development partner to undertake this work. This allows Sparc AI to generate additional revenue without the fixed cost of hiring expensive development teams to remain on standby.

Management is currently building a short list of potential clients, distributors and partners in Australia and the United States. The company will be targeting the markets in military, security, surveillance, search and rescue, and reconnaissance activities.

Sparc's market timing

GPS (Global Positioning System) is operated by the U.S. Space Force, and there are currently 31 satellites that run the entire GPS system. To calculate a location, four satellites are required with an accuracy between 30 centimetres to 500 centimetres. The primary causes of GPS denial include interference, spoofing, signal blockage and GPS constellation failure.

In GPS-denied environments or situations where the GPS signals are not available, Sparc AI can record geospatial data using its proprietary patented algorithms to create new navigation systems and applications. Alternative GPS technologies for identifying locations are complex and expensive and may provide approximate estimations only, which include gravity anomaly, magnetic anomaly, celestial and lidar technologies. They may also require connections to the Internet or satellite, which result in solutions that are not covert. Further, these systems appear to measure the location of the sensors only, not the location of distant objects at different locations to the sensor.

A report from the Committee on Armed Services, U.S. Senate, raises the need to develop GPS alternatives, and the Department of Defence is exploring several alternatives. According to Grand View Research, the market size of global positioning systems is $94-billion (U.S.).

The company is developing the Sparc AI microchip at a time when the military, government and corporates are actively looking for a solution to GPS-denied environments.

The company looks forward to providing further updates to the market.

We seek Safe Harbor.