Sparq Systems Inc.

Pre-2022: MJ Innovation Capital Corp. Capital Pool Company (CPC) shell on TSXV. Qualifying Transaction with SPARQ Systems Inc. completed, creating SPARQ Corp.

2022: First full year as SPARQ Corp. Developing Quad microinverter technology. Pre-revenue. Cash: $9.3M at start, $4.6M at year-end. 82.4M shares outstanding.

2023: Amalgamation completed, renamed to SPARQ Systems Inc. Cash crisis: $288K by year-end. First revenue recognized ($190K). Jio Things partnership announced (Feb 2024, reported in FY2023 MD&A). Going concern language escalated to "significant doubt."

2024: Major financing raised (cash peaked $9.7M at Q2). CTO Dr. Majid Pahlevani appointed. Revenue jumped to $1.65M. Shares diluted to 101.7M. Jio purchase orders: 6,000 then 10,000 Q2000 units.

2025: Commercial production commenced in India (IL JIN manufacturing partner, May 2025). Revenue: $2.35M (+42% YoY). Cash declining: $6.4M Q1 to $4.8M FY. Shares: 116.9M. TSX Venture 50 recognition (Feb). CTO named IEEE Fellow (Dec). Going concern language persists but cites "initial phase of commercial operations."

2026: 60 MW purchase order (30,000 Q2000 units) for Indian market (Mar 2026).

Technical differentiation: Proprietary architecture eliminates short-life electrolytic capacitors, reduces power semiconductor stress. Designed to match or exceed PV module operational life. Zero-export operation capability. Advanced differential geometric control methods.

Burn rate: ~$1.2-1.5M/quarter. At $4.8M cash (FY2025), approximately 3 quarters runway without new financing or revenue scaling. FY2025 net loss headline improved 14% vs FY2024, but this is driven by SBC dropping from $1.97M to $73K. Operational losses (ex-SBC) increased from $3.69M to $4.81M. Shares grew 42% from FY2022 to FY2025 (82.4M to 116.9M). Gross margin is negative: the company sells microinverters below cost.

Revenue is concentrated in Q3/Q4, likely tied to Jio purchase order fulfillment cycles. Q1 2025 recorded zero revenue. Hardware sales recognized at shipment. Revenue growth trajectory is positive but lumpy quarter-to-quarter.

Critical finding: Cost of sales exceeds revenue in both FY2024 and FY2025. However, the breakdown reveals this is closer to breakeven than the headline suggests.

COGS decomposition (FY2025): Total COGS $2,358,812 = Product cost ($2,123,704) + Obsolescence/impairment ($100,625, non-recurring, old product lines discontinued) + Other ($134,483, includes warranty cost and shipping). Stripping the one-time impairment: adjusted COGS $2,258,187 vs revenue $2,349,458 = adjusted gross profit of $91,271 (3.9% margin). The company is at the inflection point.

SBC masking: The 14% improvement in net loss is driven almost entirely by SBC dropping from $1.97M to $73K. Stripping SBC, operational losses increased from $3.69M (FY2024) to $4.81M (FY2025). The headline improvement is an accounting artifact.

Warranty deferral: Hardware sales include a 12-year warranty component. Revenue is split: hardware recognized at shipment, warranty deferred over 12 years. FY2025 warranty provision: $96,168 (new, was $0 in FY2024). Some total sales value is not yet in reported revenue.

No shares issued during FY2025. All dilution occurred in FY2024: brokered private placement of 30,889,720 shares at $0.40/share ($12.36M gross, $11.43M net after $905K issue costs). Agent: Pollitt & Co. Inc. Plus 1,775,640 shares for loan conversion and 1,199,996 from warrant/option exercises. 5.03M options at $0.50 expiring Dec 31, 2026 are the largest single block.

Their words: "The relationship between cost of finished goods sold and revenue reflects the Company's ongoing transition from initial production to more efficient manufacturing. Gross margins remained modest during the year as the Company continued to operate below optimal production scale and incurred higher per-unit costs associated with commissioning activities. Management expects margins to improve as production volumes increase, and manufacturing efficiencies are realized."

Manufacturing timeline: IL JIN facility optimization completed Q4 2025. Facility is "currently meeting customer demand." First three quarters of 2025 were commissioning and process controls implementation.

Liquidity: Working capital dropped 44% ($10.7M to $6.0M). Cash burn from operations: $1.87M in FY2025. The FY2024 raise was $11.43M via private placement (which drove the 82.4M to 116.9M dilution). Management states current resources cover 12 months of current liabilities, but "will require additional financing to fund ongoing operations beyond that period."

Inflection point: Manufacturing just reached optimization. If margins turn positive at current scale, the story changes. If they don't, the next raise will dilute further from 116.9M shares. The 60 MW purchase order (Mar 2026) is the first test of post-optimization economics.

"Significant doubt" language appeared at Q3 2023 when cash hit $414K and persisted for 7 consecutive periods, even after the company raised to $9.7M. FY2025 shows slight softening: "may cast" vs "cast" and references "initial phase of commercial operations" as mitigation. The company has never been free of going concern language in the SEDAR filing record.

Concentration risk: The FY2023 MD&A identifies the Manufacturing and Supply Agreement with Jio as a "Key Contract Risk." Revenue appears heavily dependent on this single partnership. The agreement provides for volume commitments in initial years until capacity stabilizes. If the Jio relationship deteriorates, the company's revenue trajectory and commercial validation collapse simultaneously.

IL JIN Electronics serves as Sparq's contract manufacturer in India, enabling "Make in India" production. Commercial production commenced May 2025. This reduces Sparq's capital requirements for manufacturing infrastructure but creates dependency on a third-party production partner.

Every data point in this document traces to a SEDAR filing ID. No analyst opinions. No press coverage. No derivative sources. Primary source only. Note: SPRQ files most news releases via Newsfile only; SEDAR NR coverage is sparse (5 of estimated 50+ total releases).