Mr. Alan Thorgeirson reports

SPARX ENTERS INTO DEFINITIVE AGREEMENT FOR REORGANIZATION AND SALE OF OPERATING ASSETS

Further to the news release dated Jan. 8, 2024, Sparx Technology Inc. has entered into a definitive share purchase agreement dated effective March 26, 2024, with Blok Sports LLC, a privately held, third party corporate entity headquartered in Los Angeles, Calif. Pursuant to the SPA, Sparx will sell all of the issued and outstanding shares of its U.S. operating subsidiary, iPowow USA Inc., to Blok. The company and Blok are arm's-length parties.

Blok is an early-stage, venture-backed technology company founded in 2019 by Mitchell Chun, its current chief executive officer, which has developed a suite of social sports betting, fan engagement, and artificial-intelligence-driven content and analytic solutions. Blok's core offering is a regulated decentralized sports betting exchange developed using next-generation blockchain technology to ensure an unparalleled level of trust, fairness and transparency for its users around the globe.

In furtherance of the sale transaction and prior to its completion, Sparx's Canadian operating subsidiary, Sparx Technology Corp. (Subco), will transfer all of its operating assets and material contracts to iPowow. In addition, through the sale transaction, an aggregate of approximately $1.44-million of consolidated indebtedness of Sparx will be extinguished. It is anticipated that following completion of the sale transaction, Sparx will have no operating assets and approximately $150,000 in remaining liabilities.

It is also anticipated that an aggregate of 26,814,154 currently outstanding common shares of Sparx will be cancelled on closing of the sale transaction, pursuant to the terms of a surplus escrow agreement dated March 23, 2022.

As consideration for the sale transaction, Sparx is expected to receive common units of Blok, representing approximately 4.5 per cent of the Blok units issued and outstanding on a posttransaction basis. In addition, Sparx is entitled to receive approximately 12 per cent of up to an additional 3.2 million Blok units, which may be issued by Blok, subject to iPowow achieving certain revenue milestones from defined customers over a period of 16 months following completion of the sale transaction.

Upon completion of the sale transaction, Sparx has agreed to deposit approximately 20 per cent of its Blok units into escrow for a period of one year to support indemnity obligations concerning certain representations, warrants and covenants set out in the SPA. Certain other significant members of Blok have also deposited Blok units into escrow under the same terms.

Completion of the sale transaction is subject to a number of conditions, including: (i) completion of a $500,000 (U.S.) financing by Blok; (ii) the receipt by Sparx of an independent fairness opinion in respect of the aggregate consideration (including the debt assumptions) to be received by Sparx in the sale transaction; and (iii) all necessary regulatory, creditor, and shareholder and member approvals.

Sparx chief executive officer Alan Thorgeirson commented: "We are excited about the opportunity to build the Sparx business under the Blok umbrella and believe this reorganization transaction will allow our stakeholders an opportunity to realize further value through a stake in the combined entity. We believe that the operating efficiencies and synergies to be achieved by the combination of the two companies will provide a stronger platform to attract additional financing and further grow the business. Through this transaction, Sparx, as a public company, will position itself to pursue alternative transactions to enhance shareholder value."

In connection with the restructuring, the company intends to complete a share consolidation on the basis of one postconsolidated common share for 13 preconsolidated common shares, and also intends to complete a non-brokered private placement to raise $250,000 through the issuance of five million subscription receipts at a price of five cents per subscription receipt.

The proceeds of the subscription receipt financing will be held in escrow, subject to the satisfaction of the following conditions:

1. Completion of the consolidation;
2. Completion by Sparx of a name change acceptable to the parties and regulatory authorities;
3. Completion of the sales transaction;
4. Completion of the escrow cancellation;
5. Completion of the management change (as defined below);
6. The company having less than $150,000 in remaining indebtedness;
7. The transfer by Sparx of ownership of Subco to a third party, for nominal consideration, which shall include an assumption of any excess indebtedness;
8. The company obtaining shareholder approval to the change of control contemplated in the subscription receipt financing;
9. The company obtaining final TSX Venture Exchange approval to all matters relating to the sale transaction and other restructuring steps discussed herein.

Upon satisfaction of the escrow conditions, each subscription receipt will automatically convert into one postconsolidation common share of the company for no additional consideration. In the event that the escrow conditions are not met, each subscription receipt will be cancelled, and the subscription funds will be returned to the subscribers.

The company will not pay any finders' fees in connection with the sale transaction or the subscription receipt financing.

Upon closing of the sale transaction, escrow share cancellation, consolidation and the conversion of the subscription receipts, it is expected that Sparx will have approximately 8,560,629 postconsolidated common shares issued and outstanding.

It is expected that The Emprise Special Opportunities Fund (2017) Limited Partnership will subscribe for four million subscription receipts, which will result in LP2017 owning 4,071,231 (47.56 per cent) postconsolidation common shares of the company.

The company intends to use the proceeds of the subscription receipt financing for general working capital purposes. Closing of the subscription receipt financing remains subject to the approval of the exchange.

As part of the closing of the sale transaction, the company intends to apply to the exchange to have its listing transferred to the NEX board, a separate trading board of the exchange, which provides a trading forum for companies that have fallen below the exchange's continuing listing standards.

Upon completion of the sale transaction, the current board of directors and management team of the company will resign, and Scott Ackerman (chief executive officer, chief financial officer and corporate secretary), Doug McFaul and Peter Dickie will join as directors and officers of the company.

The company also announces that its annual general and special meeting will be held in Vancouver, B.C., on May 17, 2024, at 10 a.m. Vancouver time. In addition to the standard items of business at general meetings, shareholders will be asked to approve resolutions for the company to proceed with the sales transaction, the consolidation and the change of control contemplated in connection with the subscription receipt financing.

Full details on the AGSM will be contained in the management information circular prepared for the meeting, which will be mailed to the company's shareholders and available for review under the company's profile at SEDAR+.

About Sparx Technology Inc.

Sparx is an interactive media technology company whose principal activities are providing media companies and sports teams with technologies to engage audiences. The patented Sparx platform enables broadcasters, streamers and video producers to engage viewers for longer, generate new revenue opportunities and create lean-forward experiences for audiences eager to join the action. Millions of users can connect to the Sparx platform and interact simultaneously on their mobile phone, tablet or computer anywhere in the world in real time.

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