Research and stock info

Why Sparc, Why Now

Every once in a while you stumble across a stock that just makes sense. Call it whatever you want, when a company is capable, has some kind of innovative or disruptive technology that will be highly attractive, but is also near the beginning point of its story (think news flows and growth potential from a low market cap) – This is the moment where money is made.

Sparc is relatively new entrant to the publicly listed Graphene tech scene. Formed out an AJC.AX consolidation, name change and acquisition of Graphene Technology Solutions Ltd (GTS) with GTS management taking over the board of directors positions in the relisting of SPN.AX. GTS had already established cooperative agreements with both the University of Adelaide (UA) and the ARC Graphene Research Hub (A collective partnership of Universities, Industry stakeholders and the Australian research council to commercialise graphene technology in Australia). In essence, Sparc is the commercialisation and monetisation arm for the University of Adelaide’s patented graphene technologies. This being achieved through UA’s significant SPN shareholding, while Sparc utilises the technology licenses at zero cost.

PCT/AU2016/050417 - Water Purification and Soil Remediation - Water purification, oil removal from water and soil remediation;https://patents.google.com/patent/WO2016191802A1/en?oq=PCT%2fAU2016%2f050417

PCT/AU2017/050990 - Marine and Protective Coatings - Coating for anti-corrosion, anti-fouling, wear resistance, drag resistance and fire retardant;https://patents.google.com/patent/WO2018045436A1/en?oq=PCT%2fAU2017%2f050990

PCT/AU2018/05018 - Sound Absorption – High performance acoustic foams having high performance acoustic absorption, as well as increased moisture insulation and fire-retardant properties.https://patents.google.com/patent/WO2018157208A1/en?oq=PCT%2fAU2018%2f050185

Commercialisation is the core focus and business strategy of Sparc. As such, bringing nearest term technologies from R&D stage to market stage not only benefits shareholders, but is a key term for conversion of Management’s performance shares. The main product priorities for SPN are as follows (source – CEO Business Strategy Update 13 May 2021 https://hotcopper.com.au/threads/ann-ceo-strategy-update.6057581/);

Environment - Industrial Materials - Product Enhancement

This workstream will be concerned with optimising the performance of materials through the addition of Graphene based products. The technology platform being developed is concerned with the ability to disperse and stabilise Graphene based products allowing these to be incorporated into a range of materials. Employing in-house expertise, Sparc has established Know-How as it relates to the incorporation of Graphene based products into polymeric and building materials which can be deployed in global industrial markets.

Activities are currently focused on:

Coatings – 12 coatings projects underway

Concrete – Development of in-house expertise and targeting niche applications

Composites - applying proprietary graphene dispersion techniques to enhance composites

Coatings- Sparc expertise in Graphene based products for Coatings will eventually deliver products across a multitude of paint and coatings categories. As an update,12 specific projects have been recognised within this business unit to date with commercialisation work now underway. Projects include anticorrosive, antifouling, fireproofing, corrosion under insulation (CUI) and antibacterial coating categories.

A number of specific programs relating to anticorrosive coatings, testing to relevant ISO standards, which are critical to global adoption. These programmes are now well advanced, and the Company is expecting comprehensive results from these programs in Q4 CY2021. Given positive results from earlier test programs, discussions regarding collaboration withboth domestic and international Coatings companies have already commenced.

The Company has invested in the testing equipment required to conduct corrosion resistance testing in accordance with ISO 12944 and related industry standards and has developed significant internal expertise and IP in this area. Progress in the other areas will be achieved in cooperation with various industry and academic partners. Several NDAs associated with this work are also now in place.

Concrete- Graphene additive product developed by Sparc is currently being evaluated by a major concrete manufacturing company. In support of Know-How developed by Sparc Technologies, work with thisindustry partner is being conducted under a Non-Disclosure Agreement. In addition to this project, work has already commenced on recognising applications within the broader cementitious product portfolio where graphene enhanced concrete can benefit numerous niche products.

Composites- Testing is about to commence with work being undertaken by asignificant industry partner under a Non-Disclosure Agreement. More details will be released around this program when they become available to the Company.

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Sustainability and Remediation - Extraction

This workstream is concerned with developing products that will serve to both optimise, or where applicable, disrupt current industry practise regarding extraction, which currently mostly uses activated carbon. The technology platform being developed uses Graphene based products to optimise the extraction of targeted materials, some which are toxic and others that are valuable minerals. Utilising our exclusive licensing agreement with the University of Adelaide, Sparc has developed an understanding of how to functionalise Graphene for this purpose and in doing so, exploit the unique adsorbent characteristics inherent in this material.

Adsorbent materials can be used to extract precious materials and for remediation purposes. Sparc has active programs in each of these areas, namely:

-Tailings

-PFAS

Tailings- Research undertaken by our strategic partners has indicated that Graphene can be functionalised to deliver above industry accepted extraction yields of precious metals (Ag, Au, Cu). Activities are now focused on confirming these results with an industry partner.

PFAS- Research undertaken by the University of Adelaide has indicated that Graphene can be functionalised to deliver exceptional results in the extraction of PFAS materials from aqueous solutions. Activities are now focused working with an industry partner to test the graphene technology in the field. Please refer to previous ASX announcements 11 February 2021 and 27 April 2021.

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Health – ‘Living a Better Life’

The company is also currently collaborating with several major industry partners in the biomedical and health space. Whilst considered an emerging market for Sparc Technologies, the company is working on two applications of graphene in medical technology. First, the company is developing technology for wearable graphene biosensors which will allow for remote, real-time monitoring of health. Second, the company is working on the enhancement of medical-grade materials through the deposition of graphene in order to enhance properties that are of interest to established players in this market.

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As seen from the above, focus is primarily on Coatings, Concrete and Composites. No surprise given that two of these are multi-billion dollar global markets with coatings and concrete valued at $44B and $350B, respectively.

For me, the coatings angle represents the best pathway to revenues. The applications that could benefit from disruptive technology are numerous; Global shipping and sea faring industries, recreational boating, Oil and gas – platforms, plants and pipelines, Auto industry, Civil Infrastructure, to name a few. All these sectors require a mix of Sparcs potential product benefits – anti-corrosion (think less maintenance), drag efficiency (think ESG and fuel/energy conservation), UV protection, anti-microbe (think vessel fouling which can cut at sea speeds by up to 50%). I also think this pathway is likely to come into play first, with most of our NDAs involving coatings industry participants and having our CEO and Technical manager being from Akzo Nobel (Akzo Nobel is a global coatings conglomerate which owns known brands such as Dulux, International Paint, Sikkens, AWLgrip, Taubmans, Hammerite, Interpon and many more). If SPN can prove up their additives technology to groups such as this, partnerships should entail, and should propel the market cap up to the 100’s of millions.

Current MC: $36.1M undiluted @ 61.5c

SOI: 56M

Unlisted Options: 8.8M

Performance shares (Management): 7M

Sub holders: Uni of Adelaide – 3.8M, Carjay Investments – 3.1M, Cane Asset Management – 2.6M

Top 20 ownership: 41.77%

Directors and Management Shareholding: 17%