SEDAR Interim Financial Statements

SPARQ SYSTEMS INC. UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024 (Expressed in Canadian dollars) The accompanying unaudited condensed interim financial statements for the three and nine months ended September 30, 2025 and 2024 have been prepared by management, reviewed by the Audit Committee and approved by the Board of Directors of the Company. In accordance with National Instrument 51-102 Continuous Disclosure Obligations of the Canadian Securities Administrators, the Company herewith discloses that the accompanying unaudited condensed interim financial statements have not been reviewed by an auditor. The accompanying notes are an integral part of these consolidated financial statements 1 SPARQ SYSTEMS INC. CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited) (Expressed in Canadian dollars) As at: Note September 30, 2025 December 31, 2024 $ $ Assets Current Assets Cash and cash equivalents 5,295,418 6,944,918 Accounts and other amounts receivable 4 943,840 1,744,495 Inventory 5 1,606,109 2,298,049 Prepaid expenses and deposits 51,699 82,458 Total current assets 7,897,066 11,069,920 Property, plant and equipment 6 660,801 758,488 Total assets 8,557,867 11,828,408 Liabilities Current Liabilities Accounts payable and accrued liabilities 437,301 179,139 Lease liability – current portion 8 152,087 150,584 Total current liabilities 589,388 329,723 Lease liability 8 212,159 284,403 Total liabilities 801,547 614,126 Shareholders’ Equity Share Capital 9 38,957,068 38,957,068 Contributed Surplus 9,11 8,539,540 8,476,570 Warrants 7,9 458,605 458,605 Deficit (40,198,893) (36,677,961) Total shareholders’ equity 7,756,320 11,214,282 Total liabilities and shareholders’ equity 8,557,867 11,828,408 Going concern (Note 2(e)) Commitments and contingencies (Note 13) Approved on behalf of the Board of Directors: “Praveen Jain”, Director “Nishith Goel”, Director The accompanying notes are an integral part of these consolidated financial statements 2 SPARQ SYSTEMS INC. CONDENSED INTERIM CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024 (Unaudited) (Expressed in Canadian dollars) Three months ended September 30 Nine months ended September 30 Note 2025 2024 2025 2024 $ $ $ $ Revenue 1,081,250 360,285 1,243,937 379,505 Cost of sales 5 (981,953) (334,987) (1,135,810) (345,295) Inventory write downs - - (11,926) (51,846) Gross margin 99,297 25,298 96,201 (17,636) Expenses Research and development 12(a) 418,507 276,823 1,132,224 810,804 Sales and marketing 51,194 16,476 141,058 62,146 General and administration 532,001 585,228 1,769,421 1,657,996 Depreciation of property and equipment 6 74,900 36,590 223,323 102,132 Stock-based compensation 11 34,344 32,220 62,970 1,742,559 Total expenses 1,110,946 947,337 3,328,996 4,375,637 Loss before other income (expenses) (1,011,649) (922,039) (3,232,795) (4,393,273) Other income (expense) Interest and accretion 7,8 (13,376) (1,687) (43,860) (108,994) Loss on derecognition of derivative liability - - - (98,402) Interest income 15 19,382 10,199 19,946 Foreign exchange gain (loss) 112,728 (67,336) (254,476) (105,924) 99,367 (49,641) (288,137) (293,374) Net loss and comprehensive loss for the period (912,282) (971,680) (3,520,932) (4,686,647) Basic and diluted loss per share (0.01) (0.01) (0.03) (0.05) Weighted average shares outstanding 10 116,935,108 115,7 --- 35,112 116,935,108 96,826,968 The accompanying notes are an integral part of these consolidated financial statements 3 SPARQ SYSTEMS INC. CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024 (Unaudited) (Expressed in Canadian dollars) Number of Common Contributed Shares Shares Surplus Warrants Deficit Total Note $ $ $ $ $ Balance, December 31, 2023 82,444,752 26,462,308 6,577,322 - (31,023,617) 2,016,013 Stock based compensation 11 - - 1,742,559 - - 1,742,559 Private placement financing 9 30,889,720 12,355,888 - - - 12,355,888 Issue costs - cash 9 (904,658) - - - (904,658) Issue costs - equity 9 625,000 (368,279) - 368,279 - - Recognition of bonus warrants - - - 158,051 - 158,051 Conversion of loan 1,775,640 710,256 - - - 710,256 Net loss for the period - - - - (4,686,648) (4,686,648) Balance, September 30, 2024 115,735,112 38,255,515 8,319,881 526,330 (35,710,265) 11,391,461 Balance, December 31, 2024 116,935,108 38,957,068 8,476,570 458,605 (36,677,961) 11,214,282 Stock-based compensation 11 - - 62,970 - - 62,970 Net loss for the period - - - - (3,520,932) (3,520,932) Balance, September 30, 2025 116,935,108 38,957,068 8,539,540 458,605 (40,198,893) 7,756,320 The accompanying notes are an integral part of these consolidated financial statements 4 SPARQ SYSTEMS INC. CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024 (Unaudited) (Expressed in Canadian dollars) Note 2025 2024 $ $ Operating activities: Net loss for the period (3,520,932) (4,686,648) Items not involving cash Depreciation expense 6 223,319 102,132 Loss on derecognition of derivative liability - 98,402 Interest and accretion 7,8 43,861 92,416 Stock-based compensation 11 62,970 1,742,559 Changes in non-cash working capital: Accounts and other amounts receivable 800,655 (370,498) Inventory 691,940 (32,922) Prepaid expenses and deposits 30,759 39,039 Accounts payable and accrued liabilities 258,161 (1,357,316) Cash flow used in operating activities (1,409,267) (4,372,836) Investing activities Acquisition of equipment 6 (87,454) (83,497) Cash flow used in investing activities (87,454) (83,497) Financing activities: Loan proceeds 7 - 175,000 Proceeds from private placements - 12,355,888 Issue costs - (910,908) Lease payments 8 (152,779) (26,317) Cash flow (used in) from financing activities (152,779) 11,593,663 Net increase (decrease) in cash and cash equivalents (1,649,500) 7,137,330 Cash and cash equivalents at beginning of the period 6,944,918 287,832 Cash and cash equivalents at end of the period 5,295,418 7,425,162 SPARQ SYSTEMS INC. NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024 (Unaudited) (Expressed in Canadian dollars) 5 1. Nature of business Sparq Systems Inc. (formerly SPARQ Corp.) (the “Company”) was incorporated under the Business Corporations Act (Ontario) on November 13, 2018. The address of the Company’s registered and head office is 945 Princess Street, Box 212, Kingston, Ontario K7L 0E9. The common shares are listed for trading on the TSX Venture Exchange (the “TSXV”) under the symbol “SPRQ”. The common shares are also quoted for trading on the OTCQB under the symbol “SPRQF” and on the Frankfurt Stock Exchange under the symbol “M26”. The Company designs and manufactures next generation single-phase microinverters for residential and commercial solar electr --- ic applications. The Company has developed a proprietary photovoltaic (“PV”) solution called the Quad; the Quad inverter optimizes four PV modules with a single microinverter, simplifying design and installation, and lowering cost for solar power installations when compared to existing market offerings. 2. Basis of presentation, measurement, and consolidation a) Statement of compliance These unaudited condensed interim consolidated financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting, and follow the same accounting policies and methods of computation as the most recent annual consolidated financial statements, except as disclosed in the notes. They have been prepared in compliance with IFRS Accounting Standards (“IFRS”) and its interpretations as issued by the International Accounting Standards Board (“IASB”). These financial statements were authorized for issue by the Board of Directors of the Company on November 27, 2025. b) Basis of presentation These unaudited condensed interim consolidated financial statements have been prepared on a historical cost basis except for certain financial instruments and share-based compensation transactions which have been measured at fair value. c) Basis of consolidation These unaudited condensed interim consolidated financial statements include the accounts of the Company and its majority-owned subsidiary, SPARQ Systems India Private Limited (“SPARQ India”), which was incorporated under the laws of India. Inter-company transactions and balances between the Company and SPARQ India have been eliminated on consolidation. SPARQ India has a reporting date of December 31. Profit or loss and other comprehensive loss of subsidiaries acquired or disposed of during the year are recognized from the effective date of acquisition, or up to the effective date of disposal, as applicable. d) Functional and presentation currency The functional currency of the Company and its subsidiaries is determined using the currency of the primary economic environment in which each entity operates. The functional and presentation currency of the Company and its subsidiaries is the Canadian dollar. SPARQ SYSTEMS INC. NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024 (Unaudited) (Expressed in Canadian dollars) 6 e) Going concern assumption These unaudited condensed interim consolidated financial statements have been prepared on a going concern basis in accordance with IFRS. The going concern basis of presentation assumes that the Company will continue in operation for the foreseeable future and be able to realize its assets and discharge its liabilities and commitments in the normal course of business. As at September 30, 2025, the Company had a deficit of $40,198,893 (December 31, 2024 - $36,677,961) and, for the nine months ended September 30, 2025, incurred a net loss of $3,520,932 (September 30, 2024 – $4,686,647) and negative cash flows from operating activities of $1,409,267 (September 30, 2024 – $4,372,836). The Company has used debt and equity financing from both related and unrelated sources to supplement its operations and will continue to be reliant on additional debt and/or equity financing in order to fully develop its business plan. Although the Company has been successful in raising funds to date, there can be no assurance that adequate or sufficient funding will be available in the future or available und --- er terms acceptable to the Company, or that the Company will be able to generate sufficient returns from operations. The ability of the Company to continue as a going concern and to realize the carrying value of its assets and discharge its liabilities and commitments when due is dependent on the Company generating revenue and debt and/or equity financing sufficient to fund its cash flow needs. These circumstances indicate the existence of material uncertainty that casts significant doubt on the ability of the Company to meet its business plan and its obligations as they come due, and accordingly the appropriateness of the use of the accounting principles applicable to a going concern. These unaudited condensed interim consolidated financial statements do not reflect adjustments that would be necessary if the going concern assumption were not appropriate. If the going concern basis were not appropriate for these consolidated financial statements, then adjustments would be necessary in the carrying value of the assets and liabilities, the reported expenses and the classifications used in the consolidated statement of financial position. Such differences in amounts could be material. 3. Material accounting policy information These unaudited condensed interim consolidated financial statements reflect the accounting policies described in Note 3 to the audited financial statements for the year ended December 31, 2024 and accordingly, should be read in conjunction with such audited financial statements and the notes thereto. Standards, amendments and interpretations not yet effective There are new accounting standards and amendments to accounting standards and interpretations that are effective for annual periods beginning on or after January 1, 2026, that have not been applied in preparing the unaudited condensed interim consolidated financial statements for the nine months ended September 30, 2025. Except as disclosed below, these standards and interpretations are not expected to have a material impact on the Company's consolidated financial statements. On May 30, 2024, the IASB issued amendments to IFRS 9 and IFRS 7 Classification and Measurement of Financial Instruments. These amendments clarify the date of recognition and derecognition of some financial assets and liabilities, with a new exception for some financial liabilities settled through an electronic cash transfer system; add new disclosures for certain instruments with contractual terms that can change cash flows, such as some instruments with features linked to the achievement of environment, social and governance targets; and update the disclosures for equity instruments designated at fair value through other comprehensive income. These amendments apply to annual reporting periods beginning on or after January 1, 2026. Earlier application is permitted. The Company is currently assessing the impact and efforts related to the amendments to IFRS 9 and IFRS 7. SPARQ SYSTEMS INC. NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024 (Unaudited) (Expressed in Canadian dollars) 7 On April 9, 2024, the IASB issued IFRS 18 Presentation and Disclosure in Financial Statements to improve reporting of financial performance. IFRS 18 replaces IAS 1 Presentation of Financial Statements. It carries forward many requirements from IAS 1. IFRS 18 applies to annual reporting periods beginning on or after January 1, 2027. Earlier app --- lication is permitted. The key new concepts introduced in IFRS 18 relate to: (i) the structure of the statement of profit or loss; (ii) required disclosures in the financial statements for certain profit or loss performance measures that are reported outside an entity’s financial statements; and (iii) enhanced principles on aggregation and disaggregation which apply to the primary financial statements and notes. The Company is currently assessing the impact and efforts related to adopting IFRS 18. 4. Accounts receivable September 30, 2025 December 31, 2024 Accounts receivable $ 1,567,098 $ 1,683,260 Sales tax receivable 53,398 61,235 $ 1,620,496 $ 1,744,495 5. Inventory September 30, 2025 December 31, 2024 Finished goods $ 281,277 $ 203,837 Raw materials 1,505,484 2,274,864 1,786,761 2,478,701 Provision (180,652) (180,652) $ 1,606,109 $ 2,298,049 During the nine months ended September 30, 2025, the Company recognized cost of sales of $1,135,812 (2024 - $345,295), and inventory write down of $11,926 (2024 - $51,846) which was comprised of inventory for items no longer expected to be manufactured and sold. SPARQ SYSTEMS INC. NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024 (Unaudited) (Expressed in Canadian dollars) 8 6. Property and equipment 7. Loans On November 27, 2023, the Company entered into an unsecured loan agreement with an arm's length party for a principal amount of $500,000 (the "November 2023 Loan"). The November 2023 Loan bears interest at a rate of 12% per annum and the principal and accrued interest on the November 2023 Loan are payable on the later of: (i) May 27, 2024; and (ii) the date on which the Company completes an equity or debt financing. The proceeds of the November 2023 Loan were used for the Company's working capital requirements and other general corporate purposes. In connection with the November 2023 Loan, the lender was issued warrants to purchase up to 1,000,000 common shares (each, a "Bonus Warrant"). Each Bonus Warrant entitled the holder to purchase one (1) common share in the capital of the Company at a price per share equal to the greater of: (i) $0.15; and (ii) the closing trading price of the common shares on the first date that the Company announces a proposed equity or debt financing. The Bonus Warrants were exercisable for a period of one year from the date of their issuance. The Bonus Warrants were considered a cost of issuance. The conversion feature of the Bonus Warrants meets the definition of a derivative liability instrument because the conversion rate is variable and therefore does not meet the fixed-for- fixed criteria outlined under IFRS. As a result, the conversion feature is required to be recorded as a derivative liability at fair value and marked-to-market each period with the changes in fair value each period being charged or credited to income. The Bonus Warrants were allocated an estimated fair value of $59,649 using the Monte Carlo pricing model. On May 6, 2024, in accordance with the terms of the Bonus Warrants, the exercise price of each Bonus Warrant was deemed to be $0.405 per share, as this was the Market Price (as defined in the policies of the TSXV) on the first date prior to the Company announcing a proposed financing. Since the fixed-for-fixed criteria was met, the derivative liability was derecognized, and the Bonus Warrants were recognized as equity. During the year ended December 31, 2024, the Co --- mpany received an additional $168,750 in loans (together with the November 2023 Loan, the “Loans”) with the same terms and conditions as the November 2023 Loan. Equipment Furniture and fixtures Computer equipment Computer software Leasehold improvements Right of use asset Total $ $ $ $ $ $ $ Cost Balance, December 31, 2023 794,511 27,027 75,404 20,590 23,154 76,109 1,016,795 Additions 72,711 - 15,944 13,025 - 453,024 554,704 Balance, December 31, 2024 867,222 27,027 91,348 33,615 23,154 529,133 1,571,499 Additions 68,432 - 6,887 12,135 - 38,178 125,632 Balance, September 30, 2025 935,654 27,027 98,235 45,750 23,154 567,311 1,697,131 Accumulated depreciation Balance, December 31, 2023 466,670 25,303 65,403 14,275 13,907 12,276 597,834 Depreciation 88,466 440 7,486 13,215 2,361 103,209 215,177 Balance, December 31, 2024 555,136 25,743 72,889 27,490 16,268 115,485 813,011 Depreciation 79,298 330 8,947 10,337 1,770 122,637 223,319 Balance, September 30, 2025 634,434 26,073 81,836 37,827 18,038 238,122 1,036,330 Net book value Balance, December 31, 2024 312,086 1,284 18,459 6,125 6,886 413,648 758,488 Balance, September 30, 2025 301,220 954 16,399 7,923 5,116 329,189 660,801 SPARQ SYSTEMS INC. NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024 (Unaudited) (Expressed in Canadian dollars) 9 On June 10, 2024, the Company settled the Loans (comprised of $668,750 in principal and $41,506 in interest) in full by issuing an aggregate of 1,775,640 common shares at a deemed issuance price of $0.40 per common share. During the nine months ended September 30, 2025, interest and accretion charged on the Loans was $nil (September 30, 2024 - $51,401). 8. Lease liability Balance, December 31, 2023 65,554 Lease interest 42,036 Addition 453,024 Lease payments (125,627) Balance, December 31, 2024 $ 434,987 Lease interest 43,860 Addition 38,179 Lease payments (152,779) Balance, September 30, 2025 $ 364,246 Allocated as: Current $ 152,087 Long Term $ 212,159 On August 1, 2023, the Company entered into a 31 month lease for office space. The term of the lease will expire on February 27, 2026, with no further options to renew at the current terms. Under the lease, the Company is required to pay a monthly base rent of $2,924. At the commencement of the lease, the lease liability was measured at the present value of the lease payments that were not paid at that date. The lease payments are discounted using an interest rate of 13.57%, which was estimated to be Company’s incremental borrowing rate in Canada. On January 1, 2024, the Company entered into a lease for office space. The term of the lease will expire on December 31, 2027. Under the lease, the Company is required to pay a monthly base rent of $12,931, with an annual increase of 2.5%. At the commencement of the lease, the lease liability was measured at the present value of the lease payments that were not paid at that date. The lease payments are discounted using an interest rate of 13.50%, which was estimated to be Company’s incremental borrowing rate in Canada. On January 1, 2025, the Company entered into a lease for office space for SPARQ India. The term of the lease will expire on December 31, 2029. Under the lease, the Company is required to pay a monthly base rent of $843, with an annual increase of 5%. At the commencement of the lease, the lease liability was measured at the present value of the lease payments that were not paid at --- that date. The lease payments are discounted using an interest rate of 13.50%, which was estimated to be Company’s incremental borrowing rate in Canada. 9. Share capital Authorized An unlimited number of common shares. Issued As at September 30, 2025, 116,935,108 (December 31, 2024 - 116,935,108) common shares were issued and outstanding. No common shares were issued during the nine months ended September 30, 2025. SPARQ SYSTEMS INC. NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024 (Unaudited) (Expressed in Canadian dollars) 10 The following common shares were issued during the year ended December 31, 2024: • On May 31, 2024, the Company closed the first tranche of a brokered private placement of common shares (the “Offering”) by issuing 11,938,745 common shares at a price of $0.40 per common share for aggregate gross proceeds of $4,775,498. Pollitt & Co. Inc. (the “Agent”) was engaged as the sole agent and bookrunner for the Offering to offer the common shares on a best efforts agency basis. In connection with the closing of the first tranche of the Offering, the Agent received: (i) a cash commission of $239,212; and (ii) 361,442 compensation warrants (each, a “Compensation Warrant”) exercisable at $0.40 per common share for a period of two years from the closing of the first tranche of the Offering. • On June 7, 2024, the Company closed the second tranche of the Offering by issuing 18,950,975 common shares at a price of $0.40 per common share for aggregate gross proceeds of $7,580,390 (for a total of $12,355,888 for both tranches). In connection with the closing of the second tranche of the Offering, the Agent received: (i) a cash commission of $450,823; (ii) 1,107,059 Compensation Warrants exercisable at $0.40 per common share for a period of two years from the closing of the second tranche of the Offering; and (iii) a corporate advisory fee of $250,000 which was satisfied through the issuance of 625,000 common shares. The expenses of the Offering totalled $214,622. The net proceeds of the Offering are intended to be used for working capital and general corporate purposes. The Compensation Warrants issued in connection with the first tranche and second tranche of the Offering were allocated an estimated fair value of $458,605, using the Black-Scholes option pricing model with the weighted average assumptions of an expected forfeiture rate of 0%, a risk-free interest rate of 4.26%, an expected dividend yield of 0%, an expected stock price volatility of 166%, and an expected life of two years. • On November 26, 2024, 1,000,000 common shares were issued on the exercise of 1,000,000 Bonus Warrants at $0.405 per Bonus Warrant for proceeds of $405,000. The Bonus Warrants had a recorded value of $242,936, which was re-allocated from warrants to share capital on the exercise. • On November 29, 2024, 199,996 common shares were issued on the exercise of 199,996 stock options (“Options”) at $0.385 per share for proceeds of $77,000. The Options had a recorded value of $66,943, which was re-allocated from contributed surplus to share capital on the exercise. Warrants Number of Warrants Weighted average exercise price # $ Balance, December 31, 2023 1,000,000 0.15 Exercise price of Bonus Warrants became fixed (note 7) - 0.405 Exercise of Bonus Warrants (1,000,000) (0.405) Compensation Warrants issued 1,468,501 0.40 Balance, December 31, 2024 1,468,501 0.40 Balance, September 30 --- , 2025 1,468,501 0.40 As at September 30, 2025 the Company had the following warrants outstanding: Number of Warrants Exercise Expiry Outstanding Price ($) Date Remaining Life (years) 361,442 0.40 05/31/2026 0.67 1,107,059 0.40 06/07/2026 0.69 1,468,501 SPARQ SYSTEMS INC. NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024 (Unaudited) (Expressed in Canadian dollars) 11 10. Loss per share Loss per share is calculated by dividing loss by the weighted average number of common shares outstanding during the year. In computing diluted earnings per share, an adjustment is made for the dilutive effect of outstanding Options, warrants and other convertible instruments. In periods where a net loss is reported all outstanding Options, warrants and other convertible instruments are excluded from the calculation of diluted loss per share, as they are all anti-dilutive. 11. Stock-based compensation The Company has an omnibus equity incentive plan (the “Omnibus Plan”) which provides for a wide range of incentive awards, including Options, deferred share units (“DSUs”), restricted share units (“RSUs”), performance share units (“PSUs”) and other share-based awards (“Other Share-Based Awards”, and together with Options, DSUs, RSUs, PSUs, “Awards”) to attract, retain and motivate Employees, Directors, Officers and Consultants of the Company (as such terms are defined in the Omnibus Plan). The Omnibus Plan is a “rolling up to 10% and fixed up to 10%” Security Based Compensation Plan, as defined in Policy 4.4 - Security Based Compensation of the TSXV. The Omnibus Plan is a: (a) “rolling” plan pursuant to which the number of common shares that are issuable pursuant to the exercise of Options granted under the Omnibus Plan shall not exceed 10% of the issued and outstanding common shares as at the date of any Option grant; and (b) “fixed” plan under which the number of common shares that are issuable pursuant to all Awards other than Options granted under the Omnibus Plan and under any other security based compensation arrangement, in aggregate is a maximum of 11,693,510 common shares, in each case, subject to adjustment as provided in the Omnibus Plan and any subsequent amendment to the Omnibus Plan. Shareholders approved the initial adoption of the Omnibus Plan at the Company’s annual and special meeting held on June 1, 2022. The following details all Options and DSUs granted under the Omnibus Plan during the nine months ended September 30, 2025 and the year ended December 31, 2024. No RSUs, PSUs or Other Share-Based Awards have been issued as of the date hereof. Stock options Number of Options Weighted average exercise price # $ Balance, December 31, 2023 6,492,000 0.46 Exercised (199,996) 0.385 Granted (i) 4,624,702 0.41 Granted (ii) 200,000 0.71 Balance, December 31, 2024 11,116,706 0.45 Granted (iii) 50,000 0.86 Granted (iv) 50,000 0.75 Balance, September 30, 2025 11,216,706 0.45 (i) On June 28, 2024, 4,624,702 Options were granted to directors, officers and employees of the Company with an exercise price of $0.41 per share. The Options are exercisable for a period of five years and vested immediately upon grant. The Options were allocated an estimated fair value of $1,711,133 using the Black-Scholes option pricing model to estimate the fair value using the weighted average assumptions of an expected forfeiture rate of 0%, a risk-free interest rate of 3.15%, an expected dividend yield o --- f 0%, an expected stock price volatility of 145%, and an expected life of five years. SPARQ SYSTEMS INC. NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024 (Unaudited) (Expressed in Canadian dollars) 12 (ii) On October 18, 2024, 200,000 Options were granted to a director of the Company with an exercise price of $0.75 per share. The Options are exercisable for a period of five years and vested immediately upon grant. The Options were allocated an estimated fair value of $127,544 using the Black-Scholes option pricing model to estimate the fair value using the weighted average assumptions of an expected forfeiture rate of 0%, a risk-free interest rate of 3.09%, an expected dividend yield of 0%, an expected stock price volatility of 143%, and an expected life of five years. (iii) On May 23, 2025, 50,000 Options were granted to an employee of the Company with an exercise price of $0.86 per share. The Options are exercisable for a period of five years and vest one year from the date of grant. The Options were allocated an estimated fair value of $38,100 using the Black-Scholes option pricing model to estimate the fair value using the weighted average assumptions of an expected forfeiture rate of 0%, a risk-free interest rate of 2.87%, an expected dividend yield of 0%, an expected stock price volatility of 138%, and an expected life of five years. (iv) On June 26, 2025, 50,000 Options were granted to an investor relations consultant of the Company (the “IR Consultant”) with an exercise price of $0.75 per share. The Options were exercisable for a period of five years and vested 12,500 per quarter (September 26, 2025, December 26, 2025, March 26, 2026 and June 26, 2026). The Options were allocated an estimated fair value of $37,485 using the Black- Scholes option pricing model to estimate the fair value using the weighted average assumptions of an expected forfeiture rate of 0%, a risk-free interest rate of 2.87%, an expected dividend yield of 0%, an expected stock price volatility of 138%, and an expected life of five years. The underlying expected stock price volatility for the calculation of the fair value of the Options is based on historical data of similar companies, as the Company has limited historical data itself on which it could be based. The risk-free interest rate is based on the yield of a Government of Canada benchmark bond in effect at the time of grant with an expiry commensurate with the expected life of the Options. The Options have various vesting terms. In total, $28,626 of stock-based compensation expense relating to Options was included in the statements of loss and comprehensive loss for the nine months ended September 30, 2025 (nine months ended September 30, 2024 – $1,710,339), and credited to contributed surplus. As at September 30, 2025 the Company had the following Options outstanding: Number of Options Exercise Expiry Number of Options Weighted Average Outstanding Price ($) Date Exercisable Remaining Life (years) 112,000 0.25 8/9/2029 112,000 3.86 5,025,000 0.50 12/31/2026 5,025,000 1.25 275,000 0.50 02/24/2027 275,000 1.40 200,004 0.385 11/22/2027 74,993 2.15 500,000 0.285 12/01/2027 125,000 2.17 30,000 0.18 04/20/2027 23,750 1.56 150,000 0.18 04/20/2028 97,500 2.56 4,624,702 0.41 06/28/2029 4,624,702 3.75 200,000 0.75 10/18/2029 200,000 4.16 50,000 0.86 05/23/2030 - 4.65 50,000 0.75 06/26/2030 12,500 4.74 11,216,706 10,570,445 2.47 The weighted --- average exercise of the Options is $0.45 per share (December 31, 2024 - $0.45). SPARQ SYSTEMS INC. NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024 (Unaudited) (Expressed in Canadian dollars) 13 DSUs Under the Omnibus Plan, the Company will redeem vested DSUs, subject to earlier expiration or cancellation in accordance with the Omnibus Plan by either (in the sole discretion of the board of directors of the Company): (i) issuing common shares from treasury; (ii) delivering common shares acquired on the open market; (iii) making a lump sum payment equal to the value of the issuable number of common shares; or (iv) any combination thereof. On the date of grant, the DSUs are recognized at their fair value based on the price of the common shares on that date. On November 30, 2023, 550,817 DSUs were granted to employees of the Company. The DSUs vested on November 30, 2024. On the date of grant the DSUs had a fair value of $0.11 per DSU and expensed over their vesting period. On May 23, 2025, 1,162 DSUs were granted to an employee of the Company. The DSUs vest one year from the date of grant. On the date of grant the DSUs had a total fair value of $1,000 and are being expensed over their vesting period. As at September 30, 2025, 551,979 DSUs were issued and outstanding. In total, $83 (2024 - $5,050) of stock-based compensation expense relating to DSUs was included in the consolidated statements of loss and comprehensive loss for the nine months ended September 30, 2025 and credited to contributed surplus. 12. Related party transactions (a) During the nine months ended September 30, 2025, the Company was charged $300,000 (nine months ended September 30, 2024 - $250,000) for consulting services provided by PE Consultants Inc., an entity which is controlled by Praveen Jain, the Chief Executive Officer of the Company. These expenses have been recorded in research and development and general and administrative expenses. As at September 30, 2025, $nil (December 31, 2024 – $nil) of this amount is included in accounts payable and accrued liabilities. (b) During the nine months ended September 30, 2025, the Company was charged $27,000 (nine months ended September 30, 2024 - $27,000) for consulting services provided by CFO Advantage Inc., an entity which is controlled by Kyle Appleby, the Chief Financial Officer of the Company. These expenses have been recorded in general and administrative expenses. As at September 30, 2025, $12,000 (December 31, 2024 – $3,000) of this amount is included in accounts payable and accrued liabilities. (c) On June 16, 2022, the Company signed a manufacturing agreement (the “Manufacturing Agreement”) with Ti- Lane Precision Electronic Company Limited (“Ti-Lane”) to manufacture turn-key Q1200 microinverters for the Company on a high volume basis at Ti-Lane’s facility based in GuangDong Province, China. The Manufacturing Agreement had an initial term of three years and was mutually terminated by the Company and Ti-Lane on November 30, 2024. Ti-Lane is a shareholder of the Company and is controlled by Baojun (Robbie) Luo, one of the Company’s directors. During the nine months ended September 30, 2024, the Company was charged $340,975, under the Manufacturing Agreement. During the nine months ended September 30, 2025, the Company incurred $23,917 in charges from Ti-Lane for residual services following termination. As at September 30, 2025, $nil (December 3 --- 1, 2024 - $2,345) of this amount is included in accounts payable and accrued liabilities. SPARQ SYSTEMS INC. NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024 (Unaudited) (Expressed in Canadian dollars) 14 (d) Transactions with related parties are incurred during the course of normal operations and initially recorded at fair value. Key management includes directors and officers of the Company. Compensation awarded to key management was comprised of the following for the three and nine months ended September 30, 2025: Three months ended September 30 Nine months ended September 30 2025 2024 2025 2024 Short-term compensation $ 109,000 $ 109,000 $ 327,000 $ 277,000 Share-based payments - - - 1,229,445 Total $ 109,000 $ 109,000 $ 327,000 $ 1,506,445 13. Commitments and contingencies Commitments On July 31, 2013, the Company entered into a licensing agreement (the “PARTEQ Agreement”) with PARTEQ Research and Development Innovations for commercial rights to certain power generation, conversion, and switching technologies used in its products. Pursuant to the terms of the PARTEQ Agreement, the Company is obligated to pay 1% of specified net sales generated from the sale of products using the licensed technology. Contingencies From time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course of business. As at September 30, 2025 and December 31, 2024, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of the Company’s operations. There are also no proceedings in which any of the Company’s directors, officers or affiliates is an adverse party or has a material interest adverse to the Company’s interest. The Company has received a payment demand from one of its suppliers with respect to a prior purchase order. The total amount of the demand is approximately $1.38 million although management of the Company is of the belief that the supplier is in default of the purchase order and therefore the Company does not have an obligation to make such payment. No provision has been recorded with respect to this demand. 14. Financial risk management The Company is exposed in varying degrees to a variety of financial instrument related risks. The Company mitigates these risks by assessing, monitoring and approving the Company’s risk management processes: a) Credit risk Credit risk is the risk of a potential loss to the Company if one party of a financial instrument fails to meet its contractual obligations. The maximum credit exposure as at September 30, 2025 and December 31, 2024 relates to the carrying amount of cash and cash equivalents and accounts receivable. To reduce credit risk, all significant cash balances are placed with major financial institutions. Therefore, credit risk is low. The Company may provide credit to customers in the normal course of business. In such cases, it would perform ongoing credit evaluations and establish an allowance for expected credit losses based on historical experience and forward-looking information consistent with management’s expectations. The Company does not normally require a guarantee. As at September 30, 2025, 99% of the Company’s trade accounts receivables were comprised of outstanding balances from one customer (December 31, 2024 - 99%). SPARQ SYSTEMS INC. NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEME --- NTS FOR THE THREE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024 (Unaudited) (Expressed in Canadian dollars) 15 The Company’s expected credit loss allowance is estimated using historical loss information, current industry conditions and payment practices, as well as reasonable and supportable forecasts of future economic conditions. Credit risk is assessed based on days outstanding and utilizes both internal credit assessments and publicly available credit information. As a result, the allowance reflects anticipated effects caused by recent market deterioration. As at September 30, 2025, the current expected credit loss allowance was $Nil (December 31, 2024 - $Nil). b) Liquidity risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations associated with financial liabilities. The Company manages liquidity risk through the effective management of its capital structure. The Company’s approach to managing liquidity is to ensure that it will have sufficient liquidity at all times to settle obligations and liabilities when due. The Company has the following contractual obligations: Less than 1 year 1 to 5 years Total Carrying $ $ $ value Accounts payable and accrued liabilities 1,113,957 - 1,113,957 1,113,957 Lease liability 152,087 212,159 364,246 364,246 September 30, 2025 1,266,044 212,159 1,478,203 1,478,203 Less than 1 year 1 to 5 years Total Carrying $ $ $ value Accounts payable and accrued liabilities 179,139 - 179,139 179,139 Lease liability 150,584 284,403 434,987 434,987 December 31, 2024 329,723 284,403 614,126 614,126 c) Interest rate risk Interest rate risk relates to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s exposure to interest rate risk is limited primarily to cash balances (earning interest at market rates). Lease liabilities bear fixed rates. The other financial assets and liabilities of the Company do not represent interest risk because they do not bear interest. The Company does not use financial derivatives to decrease its exposure to interest risk. d) Tariff uncertainty In 2025, the United States implemented targeted trade actions that may affect certain inputs relevant to the Company. These measures are continuously evolving. Due to the current macroeconomic uncertainty relating to the tariffs, the potential financial impact (if any) on the Company’s costs and supply chain cannot be reasonably estimated at this time. While the extent of the impact cannot be quantified at this time, these measures may have an adverse effect on the Company’s operations. e) Foreign exchange risk The Company is exposed to foreign exchange risk from various currencies, primarily the US dollar. Foreign exchange risk arises from sales and purchase transactions as well as recognized financial assets and liabilities that are denominated in a currency other than the Canadian dollar, which is the functional currency of the Company. SPARQ SYSTEMS INC. NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024 (Unaudited) (Expressed in Canadian dollars) 16 The Company’s primary objective in managing its foreign exchange risk is to preserve sales values and cash flows and reduce variations in performance. Although management monitors exposure to such fluctuations, it does not employ any external hedging strategies to counteract the foreign curr --- ency fluctuations. The following amounts were denominated in foreign currency: Currency September 30, 2025 December 31, 2024 Cash US Dollar $ 3,705,998 $ 3,868,986 Accounts Receivable US Dollar $ 5,685 $ 1,169,825 Accounts Payable US Dollar $ 2,451 $ 2,956 On September 30, 2025, an increase of 1% in the value of US dollar will result in a gain of approximately $371,000 (December 31, 2024 - $28,690). Similarly, a decrease of 1% in the value of US dollar will have similar effects but in opposite direction. 15. Capital management The Company’s objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide returns for shareholders. The Company considers the items included in shareholders’ equity of $7,756,320 as capital as at September 30, 2025 (December 31, 2024 - $11,214,282). The Company manages the capital structure and makes adjustments in response to changes in economic conditions and the risk characteristics of the underlying assets. The Company’s primary objective with respect to its capital management is to ensure that it has sufficient cash resources to fund the Company’s business. To secure the additional capital necessary to pursue these plans, the Company intends to raise additional funds through equity or debt financing. The Company is not subject to any capital requirements imposed by a regulator. 16. Subsequent events The agreement with the IR Consultant was terminated on October 24, 2025. As a result, 12,500 vested Options remain exercisable until February 22, 2026, and the remaining 37,500 Options have been terminated. On November 27, 2025, the Company granted an aggregate of $91,352 of DSUs to certain executive and non- executive employees with an effective grant date of November 27, 2025. The DSUs vest one year following the date of grant. The number of DSUs granted will be determined by the quotient of $91,352 divided by the greater of: (i) the Market Price (as such term is defined in the Corporate Finance Manual of the TSX Venture Exchange) on the date of grant; and (ii) the volume-weighted average trading price of the common shares five business days after the last day of the Company’s black-out period. (i) (ii)