Mr. Lynn Mueller reports

SHARC ENERGY ANNOUNCES 2023 YEAR END FINANCIAL RESULTS

Sharc International Systems Inc. has filed financial results for the year ended Dec. 31, 2023. All figures are in dollars and in accordance with international financial reporting standards unless otherwise stated.

Fourth quarter and year-end financial highlights:

• As of April 29, 2024, the company has a sales pipeline of $16.9-million and a sales order backlog of $3.1-million. This represents a $2.3-million increase or 288-per-cent growth in sales order backlog. Sales pipeline saw a marginal decrease of 5 per cent since Nov. 28, 2023, disclosure reflecting the deliberate efforts by the company to refill the pipeline once projects convert to the order book. The combined pipeline showed an aggregate growth of 8 per cent or $1.4-million from the previous disclosure on Nov. 28, 2023. Entering 2024, the $3.1-million sales order backlog, which historically converts to revenue within an average of 12 months from disclosure, marked a historic milestone for the company. This figure represents a 15-per-cent improvement compared with the previous highest revenue year in company history, recorded in the 2021 fiscal year.
• Working capital is $2.5-million, which includes $1.2-million of cash, as of Dec. 31, 2023. The company no longer holds any debt, except for standard operating payables and liabilities, due to the 100-per-cent conversion to equity of $3.95-million in maturing convertible debt during the year ended Dec. 31, 2023. The leadership team is currently in discussions with multiple working capital facility lenders to utilize the expanding sales order backlog as a strategic tool to facilitate the financing required for the company's continuing growth initiatives.
• During the three months ended Dec. 31, 2023, the company reported revenues of ($100,000), a loss of $600,000 and an adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) loss of $900,000. In the same period in the prior year, the company reported revenue of $800,000 and an adjusted EBITDA loss of $700,000; however, the loss improved 53 per cent from $1.3-million in comparison.
• During year-end 2023, the company reported revenues of $1.6-million, a loss of $3.9-million and an adjusted EBITDA loss of $2.4-million. Revenue decreased 18 per cent versus year-end 2022 of $1.9-million, the loss improved 19 per cent versus YE 2022 of $4.8-million and adjusted EBITDA loss improved 7 per cent versus 2022 comparative of $2.6-million.
• Gross margin for YE 2023 improved to 43 per cent compared with 29 per cent for YE 2022. The improvement can be attributed to a shift to a supply and service revenue mix versus general contracting in 2022. Sales mix and gross margin in 2023 are reflective of what management expects going forward.

Hanspaul Pannu, chief financial officer and chief operating officer of Sharc, said: "We entered 2023 poised for what we anticipated to be the most prosperous revenue year in the company's history. While we acknowledge that our pipeline is susceptible to external factors like fluctuating interest rates and construction delays, which are beyond our direct influence, we remain optimistic. With the ongoing expansion and maturation of our pipeline, we foresee a gradual mitigation of these risks and a corresponding smoothing out of revenue volatility."

Mr. Pannu added: "We now enter into 2024 with a sales order backlog, or expected revenue, of $3.1-million, which is roughly $500,000 shy of the company's total revenue reported in the 2022 and 2023 fiscal years combined. This represents a 15-per-cent increase from the largest revenue year reported in the company's history in 2021. There are several projects indicating signs of conversion from sales pipeline to sales order backlog, which would further grow the company's order book and revenue in 2024. These positive forward-looking signals indicate the company's pipeline has reached a maturity where its sales pipeline to sales order backlog conversion rate is accelerating. The company continues to increase the overall pipeline with a strong outlook and opportunity to accelerate growth."

Mr. Pannu concluded: "As we continue to balance our working capital and our sales pipeline, the company is now able to leverage its accelerating conversion to sales order backlog to gain access to working capital facilities that will support the growth of Sharc Energy in the near and long term. Securing these solutions will provide the company with necessary balance sheet flexibility while reducing the reliance on equity investment. Sharc Energy is currently in the process of reviewing and soliciting term sheets from lenders."

Lynn Mueller, chief executive officer and chairman of the company, said: "To augment the growing pipeline and support sustainable long-term growth for shareholders, we hired Michael Albertson, a 40-year veteran, to our executive team as the president of Sharc Energy U.S. Michael comes with extensive industry experience and a proven track record. The addition of Michael has already begun to pay off, highlighted by the continued growth of our pipeline. Michael has brought credibility to Sharc Energy that is immeasurable as we continue to grow and see new opportunities."

Mr. Albertson said: "It has been less than a year since I have joined Sharc Energy, and I am continuously amazed by the response to our waste water energy transfer technology and the value proposition it provides. The outlook for the WET industry remains staggeringly positive. The team has established strong relationships and inroads while working through some exciting opportunities within adjacent sectors to multifamily residential, including correctional facilities, thermal energy networks also commonly referred to as district energy and the geo-exchange industry. We expect to secure our first correctional facility installation this year, and we anticipate this to be a significant growth opportunity going forward.

"TEN solutions for decarbonization of thermal energy loads continue to grow in awareness and acceptance in North America with Sharc learning of projects being planned across the continent. In the greater Vancouver, British Columbia, region alone, there are several municipal or utility supported TENs ranging in size and scale, similar to the False Creek Neighborhood Energy Utility or lelem projects, in different stages of development that will increase Sharc Energy's local footprint over the next few years. In the United States, legislation allowing or mandating utilities to develop thermal energy network demonstration projects or pilots have been passed in four states, including the state of New York, where the company has installations in progress, projects in design and a growing list of leads looking to implement WET TENs," added Mr. Albertson.

Mr. Albertson continued: "We continue to educate and bring awareness within the geo-exchange industry of the value proposition of using WET technology as a stand-alone or hybrid system with positive progress to date. The underlying principle remains the same, leveraging the earth or waste water as a thermal medium allowing for heating, cooling and hot water. The geo-exchange industry understands the why behind our WET technology and is in an incredible position to leverage it for their projects. I remain humbled to have this opportunity of bringing attention to our WET technology."

Year-end 2024 highlights and subsequent events

Appointment of Mr. Albertson as Sharc U.S. president

The company announced the strategic addition of 40-plus-year industry veteran Mr. Albertson to its executive team as the president of Sharc U.S. Mr. Albertson, with his extensive experience and proven record as a renewable thermal energy expert with a focus on thermal energy networks and district energy networks, is set to play a pivotal role in driving the company's growth and revenue generation.

• Appointment of Peter Busby to the board of directors: The company announced the addition of renowned sustainable architect Mr. Busby to the board of directors. Mr. Busby is a principal at Perkins & Will, a global design practice founded in 1935, with over 28 offices and more than 2,500 employees. The company will leverage Mr. Busby's expertise to better engage with architects worldwide and increase awareness of Sharc within the industry and drive lead generation for its products.
• Appointment of Dermot Sweeny to the board of directors: Mr. Sweeny was appointed to the board of directors on Oct. 17, 2023. Mr. Sweeny's firm, Sweeny & Co., has achieved numerous awards from reputable institutions, like the Canadian Green Building Council and the Urban Land Institute, for its sustainable building designs. This strategic appointment highlights Sharc's continuing commitment to creating significant value for its shareholders by bringing together industry experts who passionately embrace its vision of advancing sustainability.
• False Creek Neighbourhood Energy Utility expansion: During fourth quarter 2022, the company commenced work on the supply and maintenance agreement with the City of Vancouver for the provision and maintenance of five Sharc systems for the False Creek NEU expansion. This project is expected to increase the capacity of the current 3.2-megawatt WET system to 9.8 megawatts, making it the largest operating WET project in North America upon completion, with an additional carbon emission reduction of an estimated 4,400 tonnes per year. The major components of the Sharc WET systems have been delivered to site. The final milestones for the supply contract, including commissioning and field testing of the Sharc WET systems, are anticipated to complete in third quarter/fourth quarter 2024.
• Purchase order received for Whitney Young retrofit featured in Nyserda Empire Building challenge: The company has received a purchase order for a Sharc 660 WET system for the Whitney Young Manor recapitalization project in Yonkers, N.Y. The Whitney Young Manor will undergo a $22-million renovation, with nearly $12-million allocated to the project's decarbonization effort, inclusive of all energy efficiency measures. The retrofit project will showcase how to leverage a recapitalization opportunity to comprehensively retrofit energy systems and modernize an affordable housing complex. The system shipped in first quarter 2024.
• Purchase order received for phase 1 of transformative $1.2-billion development to create 2,400 affordable homes, a medical clinic and retail in Brooklyn, N.Y.: The company has completed the final submittal process with its New York State representative Highmark and has received a purchase order for a Sharc 660 WET system to be included in the first phase of a transformative $1.2-billion redevelopment in Brooklyn's East New York neighbourhood led by Apex Building Company, L+M Development Partners, RiseBoro Community Partnership and Services for the Underserved. The system shipped in first quarter 2024.
• Pirahna's reach expands into California: The company received a purchase order for four Piranha T15 WET systems for a 26-storey mixed-use development in Berkeley, Calif. This project marks the largest individual Piranha project in the company's history to date and marks the continued expansion of the company into California. These units are expected to ship in third quarter/fourth quarter 2024.
• Snowmass Base Village, Colorado, installs Piranha: A Piranha T15 WET system will be installed in Aura's 21 slope-side residences, powered 100 per cent by renewable energy resources within the residential building. Aura's team is led by East West Partners, a developer of high-end mountain resort communities, and supported by Sharc's Colorado distributor, Long Building Technologies. This unit shipped in second quarter 2023.
• Piranhas in Canada's capital: HTS Ontario, a representative of Sharc products, has been selected to supply two Piranha T15 WET systems to be installed in Ottawa. This deal is a key milestone as it marks the beginning of HTS's growing Sharc pipeline turning over and it validates the company's strategy to support and leverage its representative network to help increase awareness and sales for its products in key markets. These units shipped in first quarter 2023.
• Partnership with Subterra Renewables: The company and Subterra Capital Partners Inc., a leading full-service geothermal drilling provider with a proprietary energy-as-a-service model known as Aura, announced on April 27, 2023, a $200-million strategic partnership to revolutionize the renewable thermal energy transfer landscape across North America. By combining Sharc's innovative WET technology with Subterra's geothermal exchange systems, the partnership aims to bring unparalleled solutions to the market, capturing a greater share for both companies.
• Piranha receives North American certification: The Piranha WET system has completed testing in compliance with CSA/UL standards 60335-2-40 and NSF 5. The Piranha series will bear the Electrical Testing Laboratories listed mark, indicating to distributors and customers that the product is compliant to North American standards, and provides a pathway for the Piranha series to gain compliance in key North American markets requiring state approval.
• Raised $3.98-million through security exercises: In 2023, to the date of this news release, the company raised gross proceeds of $3.77-million through the exercise of warrants and $210,000 through the exercise of debenture warrants.
• Conversion of convertible debt face value of $3.95-million: In 2023, the company converted $3.95-million of convertible debt. This represents 100 per cent of convertible debt previously held on the balance sheet, resulting in the company becoming debt-free outside of standard operating payables and liabilities.

For complete financial information for the year ended Dec. 31, 2023, please see the audited annual financial statements and management's discussion and analysis, filed on SEDAR+.

About Sharc International Systems Inc.

Sharc is a world leader in energy recovery from the waste water sent down the drain every day. Sharc's systems recycle thermal energy from waste water, generating one of the most energy-efficient and economical systems for heating, cooling and hot water production for commercial, residential and industrial buildings.

Sharc is publicly traded in Canada (Canadian Securities Exchange: SHRC), the United States (OTCQB: INTWF) and Germany (Frankfurt Stock Exchange: IWIA).

We seek Safe Harbor.