UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
FORM 1-K
ANNUAL REPORT
PURSUANT TO REGULATION A
For the fiscal year
ended June 30, 2024
| Sparx Holdings Group, Inc. |
| (Exact name of issuer as
specified in its charter) |
| Nevada |
|
92-3402117 |
(State or other
jurisdiction of
incorporation or
organization) |
|
(I.R.S. Employer
Identification Number) |
1800d Mineral Spring Avenue,
#164
North Providence, RI 02904
(Issuer
Mailing Address)
401-830-9878
(Issuer’s
telephone number, including area code)
Common
Stock
(Title
of each class of securities issued pursuant to Regulation A)
pART II
Sparx
Holdings Group, Inc.
TABLE OF CONTENTS
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Table of Contents
In this report, the terms “Sparx”, “Sparx
Holdings”, “Sparx Holdings Group”, “we”, “us”, “our” or “the Company”
refers to Sparx Holdings Group, Inc., a Nevada Corporation.
FORWARD-LOOKING
STATEMENTS
The following information contains certain forward-looking
statements. Forward-looking statements are statements that estimate the happening of future events and are not based on historical fact.
Forward-looking statements may be identified by the use of forward-looking terminology, such as “may,” “could,”
“expect,” “estimate,” “anticipate,” “plan,” “predict,” “probable,”
“possible,” “should,” “continue,” or similar terms, variations of those terms or the negative of
those terms. The forward-looking statements specified in the following information have been compiled by our management on the basis
of assumptions made by management and considered by management to be reasonable. Our future operating results, however, are impossible
to predict and no representation, guarantee, or warranty is to be inferred from those forward-looking statements.
Item
1. Business
We are a technology company incorporated in the state of Nevada on June
30, 2021, and headquartered in Rhode Island with a mission to provide new generation fire protection to businesses and building
owners that operate within infrastructures that cannot be adequately or reasonably protected by traditional fire sprinklers1.
We intend with Sparx Technologies, LLC (“Sparx”) to revolutionize the fire protection industry with a commercially available
wireless battery-powered electronic fire sprinkler network and develop the industry’s first commercially available wireless battery-powered
electronic fire sprinkler system that can be adapted to a variety of different applications and customers.
On August 29, 2022, we entered into and consummated a Patent License
Agreement (“Agreement”) with Sparx Technologies, LLC, a limited liability company (“Licensor”). Licensor is
solely owned and controlled by Ms. Cassandra DeNunzio, our CEO and director. Ms. DeNunzio is the sole and first named inventor under
a provisional patent application with a Serial No. 63/304,302 filed with the United States Patent Office (“USPTO”) on
January 28, 2022, relating to the fire protection industry and particularly a commercially available battery-operated wireless
electronic fire sprinkler network. The Patent License Agreement is referenced herein as EX-10.1 to the Form 8-K filed with the
Securities and Exchange Commission on August 29, 2022. As a result of the Agreement, we adopted the existing operations and business
plan of Sparx Technologies, LLC pursuant to the terms and conditions of the patent licensing agreement and ceased to be a shell
company.
In partial consideration for the exclusive license granted by Licensor
to the Company, the Company paid Sparx Holdings, LLC, a limited liability company, controlled and solely owned by Ms. DeNunzio, a non-refundable
license fee upon execution of the Agreement in the amount of One Hundred Million shares (100,000,000) of the Company’s common stock
(the “Initial License Fee”). The Initial License Fee is consideration for the grant and continuation of the license pursuant
to a five-year term. Licensor shall have no obligation or liability to return any portion of the Initial License Fee. The Company shall
pay Licensor a royalty of fifty percent (50%) of Licensee’s Net Sales of all Licensed Products developed and sold by the Company.
Ownership of the licensed technology prior to, during the course or as a result of the Agreement, will be the sole and exclusive property
of Licensor.
Our Chief Executive Officer and Director, Cassandra DeNunzio has agreed
to lend us equipment at no cost resulting in us having in-house capabilities to design and build innovative electronic fire
protection products and solutions. Ms. DeNunzio has extensive industry knowledge, familiarity with local specifications and regulations,
fire codes and expertise in the design and test engineering of fire detection, suppression, and extinguishment technology and their components
and systems. We have available to us, the equipment, capabilities, and expertise to create prototype electronic circuits, assemble and
reflow printed circuit boards, benchtop test electrical assemblies with DC and AC power supplies, troubleshoot designs with multimeters,
and create wiring harnesses.
The Company has now begun to finalize the prototype Sparx™ Smart
Sprinkler System and has started working towards the design and development for the remaining system components to complete the Sparx™
Smart Sprinkler System. Sparx has created prototype sprinkler Sensing and Activation Units designed to mount onto traditional fire sprinklers.
These units are designed to allow for early fire detection through flame, gas, smoke, and temperature sensors. Sparx has created a second
version of this prototype with a smaller diameter capable of temperature and smoke sensing, with the electrical design diameter of only
about 5.3 inches. A mechanical housing must still be designed for this smaller prototype version. These devices are designed for early
fire detection, wireless battery-powered communication, and sprinkler activation. The remaining components needed for the system prototype
include a base station, or Hub, that the sprinkler Sensing and Activation Units communicate with and an installation and commissioning
tool. Our prototype Hub has a few features left to be implemented including integration with our installation and commissioning tool.
We have begun the first iteration for our installation and commissioning tool, which is a computer software program that allows sprinkler
installers to map where each sprinkler is located in space. This information can be used by the Hub to make intelligent, addressable
sprinkler activations in the event of a fire. The Hub currently monitors the network of sprinkler Sensing and Activation Units, collects
data from these devices, and makes intelligent decisions to activate sprinklers in the event of a fire.
As mentioned elsewhere in this annual report, a utility patent has
been filed with the USPTO that covers the technology we are developing. The Company plans to commercialize Licensor’s wireless fire
suppression technology into a fire protection/fire safety product line and seek listing or approval from third-party testing bodies.
Our plan is to provide superior protection against highly challenging fires for a range of premises, including commercial buildings
and industrial sites, through the application of our advanced proprietary wireless mesh network fire suppression system technology.
We plan to design, develop, integrate, install, test, manufacture, produce, and market our wireless mesh network fire suppression
system in an effort to commercialize our products.
On January 20, 2023, Sparx Technologies, LLC filed a utility patent application
with the USPTO under 35 USC 111(a) for a Mesh Network Fire Suppression System and Associated Methods with Serial No. 18/099,584. A prior
provisional application with Serial No. 63/304,302 was issued by the USPTO on January 28, 2022.
In addition, an international patent application (PCT) was also filed with
the USPTO on January 23, 2023, resulting in international patent pending status. An international application Serial No. PCT/US23/11314
was issued by the USPTO. Sparx relies on a combination of patent, trademark, copyright, trade secret, and contractual protections to establish
and protect its intellectual proprietary rights.
On June 14, 2024, Sparx Technologies, LLC filed with USPTO a provisional
patent application with Serial No. 63/660,134 for a pyrotechnic release mechanism for a sprinkler head.
The Basics of Our Technology
We plan to use the Sparx™ Smart Sprinkler System to expand the capabilities
of traditional fire sprinklers and offer effective and efficient protection for applications that traditional fire sprinklers may not
adequately cover. The principal product that Sparx intends to offer is our Sparx™ Smart Sprinkler System. The principal market for
our products is building owners and companies with highly challenging fire protection needs including buildings with high-ceiling heights,
highly flammable commodities like exposed expanded Group A plastics, or for scenarios where our technology could be less expensive than
installing and maintaining fire pumps and large water storage tanks. The method of distribution of our products will be through fire sprinkler
and fire protection distributors or directly through Sparx and our products will be serviced by licensed or certified technicians for
fire detection equipment and fire sprinklers.
An image of a traditional fire sprinkler is shown below.
The image above shows a
traditional fire sprinkler with labeled components
A traditional fire sprinkler system consists of two essential components:
a water supply and a fire sprinkler head. The sprinkler head comprises a plug, a trigger mechanism, a frame, and a deflector plate. The
plug holds back the water, while the trigger mechanism activates the sprinkler head when the temperature reaches a specific threshold.
This threshold typically ranges from 135 to 286 degrees Fahrenheit and is determined by the designers based on the specific environment
and application. The trigger mechanism can be a glass bulb filled with liquid that expands when heated causing the glass to break or two
metal plates held together by a solder point that separates when heated.
When a fire starts, the hot air rises and spreads
along the ceiling until it reaches a sprinkler head. When the temperature threshold is met, the trigger mechanism is activated, and the
plug is released, allowing the water to flow through the sprinkler head. The water hits the deflector plate, causing the water droplets
to disperse over a larger area. The water will continue to flow until the water supply runs out or the fire department arrives and manually
shuts off the water via the system’s control valve.
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A common misconception perpetuated by popular media
is that every sprinkler in a room activates at the same time during a fire. Modern fire sprinkler heads are designed to operate independently.
This means that a specific sprinkler head will activate and release water, only if it has individually reached a certain temperature threshold.
Traditional fire sprinkler systems can encounter
various obstacles that may compromise their effectiveness including unpredictable operating sequences, unintentional cooling of adjacent
areas after sprinkler activation, and a phenomenon known as 'sprinkler skipping,' whereby sprinklers closer to the fire may fail to activate
before those located further away. These factors can put lives and property at risk, highlighting the need for modern and innovative fire
suppression technologies.
Our system is being designed to provide effective
fire suppression by automatically activating a group of sprinklers directly above the fire. This method ensures water delivery to the
base of the fire and wets adjacent areas to prevent the fire from spreading. Our system's unique capability to automatically activate
an optimal group of sprinklers for fire suppression or extinguishment distinguishes us from traditional fire sprinkler solutions that
rely solely on the heat produced by a fire to activate the necessary sprinklers. We believe our technology offers greater predictability,
precision, and efficiency in controlling fires.
Recognizing the critical role of rapid sprinkler
response in suppressing fires, we strive to respond promptly to catch smaller fires that are easier to contain or extinguish with fire
sprinklers. Fires can exhibit distinct behaviors depending on the commodities and storage configurations involved. Some fires may smoke
or smolder during their early stages, while other fires may rapidly reach the ceiling with high heat release rates. The exclusive dependence
on a fixed temperature threshold by traditional sprinklers is not the most effective approach for timely detection in all fire scenarios.
We have integrated multi-sensor technology into our fire sprinkler designs, featuring flame, gas, smoke, and temperature sensors to provide
comprehensive and advanced fire detection.
The SparxTM Smart Sprinkler System
Sparx is in the process of designing and developing a fire sprinkler system
capable of electronic detection, communication, and actuation. By leveraging cutting-edge electronic and software technologies, we aspire
to enhance the capabilities of traditional fire sprinklers allowing us to serve applications that otherwise could not be protected. Our
wireless battery-powered fire sprinklers come equipped with advanced sensing capabilities, including flame, gas, smoke, and temperature
sensors. Using our multi-sensor technology, we can detect fires at their earliest stages, even before they have a chance to grow significantly.
Our unique approach to fire safety is critical because fires tend to spread rapidly, and the larger they become, the more challenging
they are to control. We believe our ability to respond quickly and efficiently will open up new opportunities for various fire protection
scenarios.
We are using mesh networking topology to allow our fire sprinklers to communicate
with each other and provide seamless coordination of fire suppression efforts. A mesh network is a local area network in which nodes (in
this case, sprinklers) connect directly, dynamically, and non-hierarchically to each other, working together to efficiently route data.
Our fire sprinklers communicate with each other and to a central base station in the network, providing unparalleled situational awareness
compared to traditional systems. Using environmental data gathered by our fire sprinklers, the base station makes informed decisions about
which sprinklers to actuate in the event of a fire, ensuring optimal suppression or extinguishment. By controlling the number of sprinkler
operations, the base station avoids over-stressing the water supply and minimizes water damage, all while achieving the desired level
of fire suppression. With our mesh networking topology and advanced sensing capabilities, we believe we can respond quickly, efficiently,
and with superior activation precision, making it possible to protect even the most challenging fire scenarios.
Our wireless, battery-powered system is designed to
expand the capabilities of traditional fire sprinklers, enabling them to detect and respond to fire conditions faster and with
greater precision than ever before. Our technology seamlessly integrates with existing traditional fire sprinkler systems,
harnessing the proven safety and reliability of these established solutions. We plan to take advantage of the carefully engineered
spray patterns and stringent testing standards for traditional fire sprinklers and use our technology to augment their
functionality. We believe that by combining our technology with traditional fire sprinklers it will allow us to provide effective
and reasonable fire protection solutions in applications that may not have been possible with traditional fire sprinklers alone.
Each Sparx™ Smart Sprinkler contains electronics housed near the
sprinkler threads and wrench flats. The electronics include sensors used for detecting fire, a communication module, a replaceable battery
pack, actuation circuitry used for automatically triggering sprinkler operation in the event of a fire, and monitoring circuitry used
to supervise the integrity of necessary electrical components.
Sparx™ Smart Sprinklers have the ability to communicate with other
using modules that are FCC Certified (USA), operate on the Industrial, Scientific, and Medical (ISM) band, and are RoHS compliant. The
electronics in the network are designed to enter low-power sleep modes and wake periodically to sample environmental conditions to prolong
battery-life. The electronics and battery packs for Sparx™ Smart Sprinklers are designed to last for reasonable periods of time
(i.e. years). The base station for the network will be able to provide notification if there are any low-battery warnings or any other
issues with the network that should be addressed. The base station will also be able to display a history of any troubles, supervisory
signals, or alarms that are reported in the network.
Our inaugural Sparx™ Smart
Sprinkler System prototype, which is currently in the research and development phase, has been purposefully engineered to interface with
traditional fire sprinkler system technology with minimal modifications. We’ve opted for wireless battery-powered sprinkler Sensing
and Activation Units to save warehouse and storage customers from the high costs and laborious efforts associated with installing wired
electronic fire sprinkler systems. Wired electronic fire sprinkler systems necessitate the hiring of electrical contractors to run conduit
along the ceiling between sprinkler heads, connecting wires to numerous junction boxes, and troubleshooting issues such as shorts, opens,
and ground faults at the ceiling-level.
The image above shows a
labeled drawing of the Sparx™ Smart Sprinkler prototype, viewed from the side with transparent electronics enclosures.
Note that the enclosures
in the image above are transparent for the purpose of this picture, but the actual product will have fully opaque enclosures.
The image above shows the
Sparx™ Smart Sprinkler prototype, tilted upwards, viewed from the side.
The image above illustrates
the Sparx™ Smart Sprinkler prototype connected to a water supply.
The image above depicts the
Sparx™ Smart Sprinkler prototype tilted downwards, exposing the sprinkler threads. The prototype includes a baseplate that sits
around the sprinkler head above the wrench flats, similar to a recessed sprinkler escutcheon. The sprinkler can be installed with the
baseplate, and after the sprinkler is threaded into the pipe, the electronics enclosures are able to be attached to the baseplate by the
installer in the field. The electronics enclosures are designed to sit around the perimeter of the sprinkler threads and pipe connection.
The image above depicts an actual photo of the
first version of the Sparx™ Smart Sprinkler prototype Sensing and Activation Unit mounted on a traditional fire sprinkler. The
Sensing and Activation Unit is the red device in the photo which houses a battery pack and critical electronics for wireless communication,
fire detection, and sprinkler activation circuitry.
We have designed an actuating mechanism that interfaces with traditional
5mm bulb-type fire sprinklers. The mechanism simply clips onto the outside surface of the glass bulb with an ordinary amount of force
(no tools required), allowing for quick and easy installation by a sprinkler manufacturer. A short wiring harness connects the clip to
the housed electronics at the sprinkler threads and wrench flats, which can be connected by an installer during the sprinkler installation
process. To ensure proper circuit integrity and fire safety, both the short wiring harness and actuating mechanism within the clip are
electrically monitored. Additionally, a proximity sensor can be incorporated onto the clip to verify proper fit of the clip mechanism
against the glass bulb for added reliability.
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In the event of a fire, when a sprinkler head is provided with an actuation
instruction via software, the clip mechanism will cause the glass bulb to break which allows water to flow out of the sprinkler head.
The clip mechanism is designed to quickly provide ample heat to the glass bulb, allowing it to shatter, causing the sprinkler plug to
be pushed out by water flowing through the sprinkler. This clip mechanism allows our advanced software and hardware to decide when to
operate fire sprinklers, as opposed to traditional fire sprinklers which activate only from the heat produced by a fire.
The image above shows a Sparx™
Smart Sprinkler prototype with the attached clip mechanism that we have designed to allow the sprinkler to be operated via an electrical
signal. The clip comprises a small heating element that rapidly heats the bulb until it shatters when provided with ample power from the
electronics assembly that this mechanism connects to.
Sparx Technologies, LLC has been working on an actuating mechanism for
larger early suppression fast response (ESFR) type sprinklers. This mechanism replaces the traditional link parts on an ESFR sprinkler
and adds a pyrotechnic actuator. The actuator is a single-shot device that is designed to activate the sprinkler quickly and with minimal
energy. This technology will potentially allow for better protection in applications such as storage and warehousing.
The image above shows a traditional fire sprinkler
(the Viking VK510) that has been modified by Sparx with an electronically activated sprinkler link and pyrotechnic actuator.
We are currently finishing up development of our
Sparx™ Smart Sprinkler prototype that can interface with traditional 5mm bulb-type sprinklers and our electronically activated
sprinkler link mechanism prototype for ESFR sprinklers. Currently, we are focused on completing the rest of the Sparx™ Smart
Sprinkler System. We are developing a base station which we call our Hub, an installation tool, and a web-based dashboard for
building owners and maintenance managers to monitor their system's health and status. We believe the base station is a critical
component of the Sparx™ Smart Sprinkler System because it manages when sprinklers enter low-power sleep modes, makes decisions
on sprinkler actuation during a fire, and notifies users of any troubles, supervisory signals, or alarms present in the network. A
picture of our prototype Hub is shown below.
The image above shows our prototype Hub (below)
with the sprinkler Sensing and Activation Unit and attached sprinkler (above). The Hub is designed to monitor sprinkler Sensing and Activation
Units, collect data from sprinkler Sensing and Activation Units, and wirelessly communicate sprinkler activation instructions to Sensing
and Activation Units in the event of a fire.
To facilitate optimal sprinkler actuation during a fire, the system needs
to know the locations of all Sparx™ Smart Sprinklers within a design area. Our installation and commissioning tool will enable
installers to easily and accurately map out sprinkler locations and feed that information back to the base station.
The installation tool is a computer-based software program. The first version
of our installation and commissioning tool has been developed and allows for the installer to input building information, upload building
floor plans, easily draw sprinkler branch lines on top of building floor plans, populate sprinklers, and show a device list to allow installers
to match sprinkler Sensing and Activation Units up to the various sprinklers on the building floor plan. A screenshot of the installation
and commissioning tool is shown below.
The image above shows a screenshot of the installation and commissioning
tool for mapping sprinklers in space. This tool is important so the sprinkler activation algorithm that lives on the Hub can determine
the best sprinklers to operate in the event of a fire.
Additional work still needs to be performed to allow the installation
and commissioning tool to effectively, and consistently, communicate with our Hub.
In addition, we plan to create a web-based interface that allows building
owners and maintenance managers to monitor their system's health and status, set up notification settings, and receive alerts via text
messages or emails when the system needs maintenance or if there are any troubles, supervisory signals, or alarm conditions indicating
the presence of fire and sprinkler activation.
While we expect to encounter some challenges during the system's development,
we are confident that we can overcome them. Our team has already tackled the hardest technical challenges, such as developing a reliable
network architecture that enables low-power battery operation and creating a fire sprinkler prototype capable of electronic detection
and actuation. With our sights set on completing the remaining components, we look forward to delivering an advanced and robust wireless
battery-powered electronic fire sprinkler system to our future customers.
We welcome partnership opportunities with traditional fire sprinkler companies
interested in integrating their traditional fire sprinkler products with our technology.
Internal Verification and Validation Testing
As we continue to develop our base station technology and installation
interface tool for sprinkler mapping, we are also working to conduct preliminary verification and validation testing on our fire sprinkler
prototype. Our aim is to conduct comprehensive testing before submitting our product to third-party approval agencies for listing and
approval. Third-party testing is crucial for the fire-sprinkler industry as it enables effective marketing of products, but it can also
be costly. Thus, we seek to conduct as much preliminary testing as possible to identify and address any design changes before third-party
testing, in order to streamline and expedite the listing or approval process.
We will be conducting various tests on our fire sprinkler prototype based
on existing standards from third-party approval agencies, like UL or FM. Our internal testing program will include conducting spray testing
to ensure our technology does not interfere with sprinkler spray patterns, mechanical testing like rough-usage tests, high-temperature
exposure tests, vibration tests, corrosion tests and electrical testing including set-point accuracy tests, transient tests, dielectric
voltage-withstand tests, and more. We will also plan to internally conduct small-scale fire tests to confirm our Sparx™ Smart Sprinkler
System works as intended before we conduct large-scale fire tests at third-party testing bodies like UL or FM.
Third-Party Testing
To effectively market our products, third-party testing
is necessary. UL and FM are two of the most common third-party entities in the United States that provide listing, approval, or certification
services. UL is a reputable testing institute that is one of the largest public safety testing labs in the world, while FM also has an
international reputation for testing and is well-regarded in the industry. In contrast to UL, FM is an insurance company that provides
insurance coverage to customers that use products that they have approved or certified to their own testing standards.
Our initial objective is to obtain UL Listing to
fill an industry gap for providing adequate and reasonable sprinkler protection in storage and warehousing applications. We would also
like to obtain FM Approval for the Sparx™ Smart Sprinkler System, but we believe that there may be additional testing with FM due
to our product’s novelty in the fire sprinkler industry. Our plan is to first work with UL to see how our product performs in large-scale
testing, before working with FM on a test program for FM Approval. The third-party testing required for our product will most likely include
mechanical and electrical testing, as well as large-scale fire testing.
Our product's first application will be focused on
providing adequate suppression for a storage application that cannot be currently protected with reasonable water demand. We want to ensure
that our first application for testing is in line with the fire protection requirements for the average clear heights of the current proposed
industrial developments for storage and warehousing. We plan to allocate a significant portion of our funding towards conducting large-scale
fire tests, which can be expensive due to the need for experienced personnel and state-of-the-art test labs that can handle fire hazards.
Fire tests for high-storage heights must be conducted in at least three scenarios, as fires can originate directly under a single sprinkler
head, between two sprinkler heads, or among four sprinkler heads. We estimate the cost of each large-scale fire test for high-storage
heights to range anywhere from $250k to $1M.
Following a test program with UL, we may decide to pursue FM Approval so
we can sell our products to more customers, conduct performance-based design solutions for individual customers, or work towards conquering
other challenging fire suppression applications.
Commercial Scale Up and Revenue Stream
After successfully completing a comprehensive test
program with a highly reputable third-party testing body, we aim to take our business to the next level by increasing our inventory and
expanding our marketing efforts to reach storage and warehousing customers. Our marketing campaigns will highlight our advanced technology
and will showcase the ease of use when implementing our products. We are also committed to establishing strong relationships with fire
protection code consultants and engineers and sprinkler installation and service companies to ensure that our product is recognized as
a top option in the market.
Our revenue streams will be predominately generated from the sale of, what
we believe to be, our superior products that we anticipate offering. We also anticipate generating additional revenue from our innovative
software-as-a-service (SaaS) tool.
Our primary revenue source will be our product revenue
model, which is based on differentiating our products as specialty goods. Our target customers are warehouses and storage facilities
with certain applications that require fire protection options beyond what traditional fire sprinklers can offer. Our goal is not to
directly compete with traditional fire sprinkler protection, but to complement traditional fire sprinklers with, what we believe to be,
our superior technology. This product revenue stream will provide the financial foundation to cover our expenses, invest in new products,
and expand our business. By positioning our products as specialty goods, we can create a perception of high value and exclusivity among
our customers, enabling us to charge premium prices. Additionally, our unique selling proposition of wireless, battery-powered electronic
fire sprinkler technology that can interface with traditional fire sprinklers is not currently available in the market, reducing competition.
We believe that the quality and performance of our products will lead to increased customer loyalty and distinctive brand identity due
to their premium quality and their ability to adequately and reasonably provide protection in applications that are considered highly
challenging for fire suppression.
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Our company is also planning to offer
specialized training services for companies that provide licensed inspection, testing, and maintenance services for fire protection
systems. We understand the importance of ongoing maintenance and servicing for fire sprinkler systems, which is why we aim to guide
these companies in the proper installation and servicing of our revolutionary Sparx™ Smart Sprinkler System. We believe our
training program will provide us with indirect sales revenue by creating an ecosystem of knowledgeable and confident users who are
more likely to recommend and promote the Sparx™ Smart Sprinkler System. It is crucial for those installing and servicing our
system to have the knowledge and confidence necessary to ensure proper installation and functionality. Our training program will
cover all aspects of installing and servicing our system, from basic installation and troubleshooting to more advanced maintenance
and repair. We believe that as our future customers become more proficient in using our products, they can also become advocates for
it. This is particularly true in the fire protection industry where we believe word-of-mouth recommendations can be critical to
success. In addition, we believe our future training program can also help build trust and credibility with our customers. By
investing in training and education, we believe we would be demonstrating a commitment to supporting our customers and ensuring
their success with the Sparx™ Smart Sprinkler System. This can help to build long-term relationships with our customers and
increase their loyalty to our brand. We believe that this will not only generate indirect sales for our company but will also
enhance the quality of service provided to our customers, resulting in increased customer loyalty.
We also believe that our future revenue stream may include our
subscription-based SaaS tool that offers customers the convenience of accessing our software application to monitor the health and
status of their fire sprinkler system, wherever and whenever they need to. Additionally, we intend for our future customers to have
the ability to choose to receive timely notifications via SMS or email alerts in case of any trouble, supervisory signals, or alarm
conditions present in their system. This service is beneficial to customers to gain insight to their system whenever and wherever
they want to, even if they are away from the warehouse. Regular inspection, testing, and maintenance is necessary for all fire
sprinkler systems, and for electronic fire sprinkler systems, there may be additional requirements such as retrieving reports from
the system to verify that sprinklers are detecting temperatures within a normal range. With the establishment of timely
notifications for inspection, testing, and maintenance needs, we believe building owners and warehouse maintenance managers can
proactively manage the requirements for their fire sprinkler system, resulting in peace of mind that their fire sprinkler systems
will perform when needed. We believe our SaaS tool may provide us with a predictable and steady revenue stream generated by
recurring subscriptions and can help provide stability and predictability for our business over time.
Intellectual Property
Sparx Technologies, LLC filed a provisional patent application
with a Serial No. 63/304,302 filed with the United States Patent Office (“USPTO”) on January 28, 2022, a utility patent application
filed with the USPTO on January 20, 2023 with Serial No. 18/099,584, and an international application filed with the USPTO on January
23, 2023 with Serial No. PCT/US23/11314 intended to protect Sparx’s battery-powered wireless fire sprinkler technology. Sparx relies
on a combination of patent, trademark, copyright, trade secret, and contractual protections to establish and protect its intellectual
proprietary rights.
Sparx Technologies, LLC filed federal trademark registration applications
in the U.S. for the SPARX word mark and logo covering use with our goods and services which are pending examination.
On June 14, 2024, Sparx Technologies, LLC filed with USPTO a provisional
patent application with Serial No. 63/660,134 for a pyrotechnic release mechanism for a sprinkler head.
We believe it is important to our success that we:
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Obtain and maintain patents and other legal protections covering our proprietary art, materials, technology, inventions, applications of such, and improvements we consider important to our business; |
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• |
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Prosecute our patent and trademark applications and enforce our intellectual
property rights;
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• |
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Preserve the confidentiality of our trade secrets; and |
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Operate without infringing the patents, trademarks or proprietary rights of third parties. |
Our Approach
We believe that there is a lot of room for innovation to meet the
fire protection needs of today's modern businesses and building owners. The design of fire sprinklers has not changed significantly over
the last fifty or so years and still consists of mostly simple mechanical components1. Traditional sprinklers cultivated from
19th century science use the same physical element to detect fires as they do to cause water to flow. Traditional fire sprinklers
can face many complications because the heat-sensitive operating element shares two important primary functions, fire detection and sprinkler
actuation. If a fire starts near the ground under a storage rack in a tall warehouse, significant fire spread can occur by the time a
fire is detected at the ceiling, where sprinklers are commonly located. A single sprinkler could operate and a phenomenon known as sprinkler
skipping can occur that will cause sprinklers farther away from the fire origin to activate earlier than those that are closer and fire
can continue to spread2. Our patent pending technology will allow for the decoupling of fire detection from sprinkler activation
and will provide us with the ability to have greater control over sprinkler operations and respond to fires very early on in fire development.
We believe that we can disrupt the fire sprinkler industry with our ability to leverage electronics and software in fire sprinkler system
design by fundamentally changing the way the industry approaches fire suppression.
We intend to create a framework for fire protection that will
allow for wireless communication and electronic detection and actuation of sprinklers. With this framework, we will be able to use
the same basic hardware components, and program application-specific algorithms3 tailored to the building, environment,
and the structure and commodities the system is designed to protect. Our advanced algorithms are computation instructions designed
to regulate the sampling of sensor data by fire sprinklers and accurately detect the presence of fire. When a fire condition is
detected, the algorithm automatically triggers the most optimal fire sprinklers to suppress that fire via software, resulting in
effective and efficient fire suppression. Our framework will allow us to make minimal, non-invasive changes when applying our patent
pending technology from one customer-specific application to the next, allowing us to formulate solutions for various highly
challenging fires quickly and effectively. Having the ability to pull additional levers with software and algorithms will give us
the edge we need to deliver where traditional sprinklers cannot. We believe we will be able to use software to change the way
sprinklers respond to fires without redesigning the physical components of the sprinkler itself. We believe this flexibility and
adaptability will give Sparx an advantage when it comes to making design changes and expanding our product offerings.
1Murphey,
Dakota. “A History of Fire Sprinklers - IFSEC Global: Security and Fire News and Resources.” IFSEC Global | Security and Fire
News and Resources. IFSEC Global | Security and Fire News and Resources, May 1, 2019. https://www.ifsecglobal.com/fire-news/a-history-of-fire-sprinklers/.
2Xin, Yibing.
“SMART Sprinkler for Highly Challenging Fires.” SFPE Europe, Issue 20 (Q4 2020). https://www.sfpe.org/publications/sfpeeuropedigital/sfpeeurope20.
3Our application specific algorithms will contain a set
of instructions that govern which sprinklers are needed for operation and when those sprinklers must operate in the event of a fire.
The instructions may be different for various applications depending on factors like building layout, ceiling heights, commodity, how
the commodity is stored, etc.
-6-
Table of Contents
Item 2. Management’s Discussion
and Analysis of Financial Condition and Results of Operations
The following
discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the
related notes included in this annual report. The following discussion contains forward-looking statements that reflect our plans,
estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Please
refer to the above section titled, “Forward Looking Statements” for more information.
General
Note: For a
comprehensive description of our business, please refer to our Form 1-A filed with the Securities and Exchange Commission on March
31, 2023.
On
August 29, 2022, we entered into and consummated a Patent License Agreement (“Agreement”) with Sparx Technologies, LLC, a
limited liability company (“Licensor”). Licensor is solely owned and controlled by Ms. Cassandra DeNunzio, our CEO and Director.
Ms. DeNunzio is the sole and first named inventor under a provisional patent application with a Serial No. 63/304,302 filed with the
United States Patent Office (“USPTO”) on January 28, 2022, relating to the fire protection industry and particularly a commercially
available battery-operated wireless electronic fire sprinkler network. The Patent License Agreement, referenced herein, is included as
EX-10.1 to the Form 8-K we filed with the Securities and Exchange Commission on August 29, 2022. As a result of the Agreement, we adopted
the existing operations and business plan of Sparx Technologies, LLC pursuant to the terms and conditions of the patent licensing agreement
and ceased to be a shell company.
In
partial consideration for the exclusive license granted by Licensor to the Company, the Company paid Sparx Holdings, LLC, a limited liability
company, controlled and solely owned by Ms. DeNunzio, a non-refundable license fee upon execution of the Agreement in the amount of One
Hundred Million shares (100,000,000) of the Company’s common stock (the “Initial License Fee”). The Initial License
Fee is consideration for the grant and continuation of the license pursuant to a five-year term. Licensor shall have no obligation or
liability to return any portion of the Initial License Fee. The Company shall pay Licensor a royalty of fifty percent (50%) of Licensee’s
Net Sales of all Licensed Products developed and sold by the Company. Ownership of the licensed technology prior to, during the course
or as a result of the Agreement, will be the sole and exclusive property of Licensor.
The
Company intends to commercialize the Licensor’s wireless fire suppression technology, transforming it into a comprehensive fire
protection and safety product line, while seeking approval from third-party testing bodies. Our aim is to offer enhanced protection against
challenging fires across diverse premises, including commercial buildings and industrial sites, through the deployment of our advanced
proprietary wireless mesh network fire suppression system technology. We are committed to designing, developing, integrating, installing,
testing, manufacturing, producing, and marketing our initial wireless mesh network fire suppression system, branded as the “Sparx™
Smart Sprinkler System.”
Currently,
the Company has finished constructing the first version of its prototype Sparx™ Smart Sprinkler System and has begun fine-tuning
the prototype system based on initial bench testing and other internal evaluations. As the Company refines its initial prototype, it
is currently working on—and plans to continue developing—additional and improved versions. While the goal is to reduce the
overall size of the Sensing and Activation Units, described in more detail below, it is unclear when these fine-tuned prototypes will
be completed. There are many variables that make it impossible to predict future completion dates of future iterations of the Sparx™
Smart Sprinkler System. Some of these variables include but are not limited to available funding, the presence or absence of partnerships
with third parties, scarcity of materials or hardware, available funding, and limited staffing. Additionally, the Company is focused
on enhancing the overall reliability of the system to ensure consistent performance.
The Sparx™ Smart Sprinkler System consists of Sensing and Activation
Units designed to interface with traditional fire sprinkler parts. The Sensing and Activation Units allow fire sprinklers to detect fires
early on in their development using temperature, smoke, flame, and gas sensors. The Company has also developed the first version of its
prototype Hub which collects and analyzes data from Sensing and Activation Units. The Company has equipped the Hub to seamlessly operate
on backup battery power in the event of power loss. The Hub also includes a touchscreen interface so users can easily view system health
and status. The Company has integrated software to allow the Hub to wirelessly communicate to Sensing and Activation Units and trigger
sprinkler activations.
As previously mentioned, it is anticipated that throughout ongoing
and future testing phases, the prototype system will undergo several revisions and iterations. The Company cannot accurately predict, at this
juncture, when a market-ready version of the prototype system will be available. At some point, when the Company believes a
market-ready version of its system is ready, it will need to undergo further rigorous testing to obtain the various certifications
required for sale. This process is described in more detail below under “Testing.”
 |
 |
|
Pictured above: Inactivated bulb style sprinkler
head with Sparx™ Sensing and Activation Unit (fits around bulb style sprinkler head) |
Pictured above: Activated bulb style sprinkler
head with Sparx™ Sensing and Activation Unit (fits around bulb style sprinkler head) |
One can view our functioning prototype here: https://www.youtube.com/watch?v=BtlJBlV4qFk
 |
 |
Pictured above: Our main control “Hub”
which acts as a central communication station between our Sensing and Activation units. |
Pictured above: “Hub Touch Screen” which displays real time data communicated by
the system, including but not limited to alarm conditions, environmental data, warnings, logs, etc. |
-7-
Table of Contents
On
January 20, 2023, Sparx Technologies, LLC filed a utility patent application with the USPTO under 35 USC 111(a) for a Mesh Network Fire
Suppression System and Associated Methods with Serial No. 18/099,584. A prior provisional application with Serial No. 63/304,302 was issued
by the USPTO on January 28, 2022.
In
addition, an international patent application (PCT) was also filed with the USPTO on January 23, 2023, resulting in international patent
pending status. An international application Serial No. PCT/US23/11314 was issued by the USPTO.
On September 19, 2022, Sparx Technologies, LLC filed Trademark Applications
with the USPTO under Application Serial No. 97/597085 and Serial No. 97/597092 to register our brand name “SPARX” and Sparx
design logo, respectively. Licensor has provided us permission, informally, to utilize the brand name SPARX and design logo. There are
no terms of consideration pursuant to this arrangement and no formal agreement. On October 3, 2023, both Trademark Applications were approved
for publication by the USPTO.
On June 14, 2024, Sparx Technologies, LLC filed with USPTO a provisional
patent application with Serial No. 63/660,134 for a pyrotechnic release mechanism for a sprinkler head.
The Company has no employees at
this time and relies upon the services of our sole officer Cassandra DeNunzio, who is also a director, and Jeffrey DeNunzio another director.
From time to time, the Company may utilize outside contractors to assist with the development of its technology.
Financing
Management intends to finance operating expenses through contributions to capital from related parties, proceeds from the sale(s) of its
common stock, or alternative means of financing that have not yet been determined. There is no assurance that management's plan will be
successful or that it will have sufficient funds to fulfill its business objectives.
Regardless of funding, we will explore potential
business opportunities and partnerships with other companies that could benefit both the Company and help us secure the capital or
resources needed to advance our business agenda. Although the Company has not yet formed any formal partnerships or agreements with
unrelated parties, we are actively seeking such opportunities and have begun informal discussions with various companies in or
related to our industry.
As with any speculative business initiative,
despite our efforts, there is no guarantee that our efforts to pursue business opportunities, partnerships, or related activities
will be successful or lead to any tangible results. However, we believe that in the absence of available funds to advance our business agenda, it is essential to forge the relationships
mentioned earlier to support our goals.
Testing
The
Company believes securing additional capital is necessary to execute its business agenda effectively. Presently, the Company foresees
that a significant portion of its funding over the next twelve months, and potentially beyond, will be allocated towards internal testing
and third-party testing of its prototype Sparx™ Smart Sprinkler System. Subsequently, upon achieving a market-ready version of
the Sparx™ Smart Sprinkler System, the Company will need to assess the associated costs of bringing the product to mass market.
However, as the prototype is still undergoing testing and may undergo revisions, these costs have not been definitively determined at
this stage.
The
Company believes that its current funding levels are likely insufficient to cover the large-scale testing required to bring its
product to market. This is one of several reasons the Company is actively seeking potential business opportunities and partnerships
with other companies, as well as informal relationships with businesses in similar industries. These partnerships could be mutually
beneficial and help the Company secure the capital or resources needed to advance its business agenda.
To
effectively market our future products, third-party testing is necessary. UL and FM are two of the most common third-party entities
in the United States that provide listing, approval, or certification services within the fire protection industry. UL is a reputable
testing institute that is one of the largest public safety testing labs in the world, while FM also has an international reputation
for testing and is well-regarded in the industry. In contrast to UL, FM is an insurance company that provides insurance coverage to
customers that use products that they have approved or certified to their own testing standards.
Our
initial objective is to obtain UL Listing to fill an industry gap for providing adequate and reasonable sprinkler protection in storage
and warehousing applications. We would also like to obtain FM Approval for the Sparx™ Smart Sprinkler System, but we believe that
there may be additional testing with FM due to our product’s novelty in the fire sprinkler industry. Our plan is to first work with
UL to see how our product performs in large-scale testing, before working with FM on a test program for FM Approval. The third-party testing
required for our product will most likely include mechanical and electrical testing, as well as large-scale fire testing.
Our
product's first application will be focused on providing adequate suppression for a storage application that cannot be currently
protected with reasonable water demand. We want to ensure that our first application for testing is in line with the fire protection
requirements for the average clear heights of the current proposed industrial developments for storage and warehousing. We plan to
allocate a significant portion of our funding towards conducting large-scale fire tests, which can be expensive due to the need for
experienced personnel and state-of-the-art test labs that can handle fire hazards. Fire tests for high-storage heights must be
conducted in at least three scenarios, as fires can originate directly under a single sprinkler head, between two sprinkler heads,
or among four sprinkler heads. We estimate the cost of each large-scale fire test for high-storage heights to range anywhere from
$250k to $1M. As reflected in our balance sheet, we currently lack the necessary funding to carry out these tests and are actively
exploring financing options. Currently, our testing has been constrained to internal testing and bench testing.
Following
a test program with UL, we may decide to pursue FM Approval so we can sell our products to more customers, conduct
performance-based design solutions for individual customers, or work towards conquering other challenging fire suppression
applications.
Results of Operations
Assets
As of June 30, 2024,
and June 30, 2023, we had cash and cash equivalents of $74,552 and $100,219, respectively. As of June 30, 2024, and June 30, 2023, we
had total assets of $95,162 and $125,219, respectively. As of June 30, 2024, our total assets consist primarily of cash and an ROU lease
asset. As of June 30, 2023, our total assets consist primarily of cash and a stock subscription receivable.
Liabilities
As of June
30, 2024, and June 30, 2023, we had total liabilities of $21,825 and $600, respectively. The variance is primarily
attributable to a right-of-use lease liability as of June 30, 2024.
-8-
Table of Contents
Revenues
We have not realized any revenues for
the year ended June 30, 2024, and June 30, 2023.
While we have
plans to monetize our Sparx™ Smart Sprinkler System in the future, we currently do not have a market-ready product available
for sale. We are in the ongoing process of developing our Sparx™ Smart Sprinkler System. We believe that additional testing
and revisions will be required before we can consider bringing it to market. Additionally, we believe that we will need additional
capital and or resources to fulfill our business agenda which is monetizing our Sparx™ Smart Sprinkler System.
Operating Expenses
Our total
operating expenses were $109,559 and $47,685 for the year ended June 30, 2024, and 2023, respectively.
For the year ended
June 30, 2024, our operating expenses consisted of research & development, marketing, and
general & administrative expenses.
For the year ended
June 30, 2023, our operating expenses consisted of research & development and
general & administrative expenses.
The Company
believes that the differences observed in the above comparative periods are primarily due to increased activities, which have led to
higher overall costs. These costs include research and development expenses, marketing expenses related to the advancement of our
Sparx™ Smart Sprinkler System, and general & administrative expenses. As mentioned earlier, while our Sparx™ Smart
Sprinkler System has been developed, it will likely undergo further refinements.
Net Loss
Our net loss was
$119,559 and $47,685 for the year ended June 30, 2024, and 2023, respectively. We believe the variance is due to
the same reasons as those noted above under “Operating Expenses.”
Operating Activities
For the year ended
June 30, 2024, and June 30, 2023, we had net cash used in operating activities of $(108,943) and $(31,085) respectively. The variance is
primarily due to a higher net loss for the year ended June 30, 2024. We attribute this increase in
loss to our increased pursuit of business objectives, leading to heightened business activity.
Financing Activities
During the year ended June
30, 2024, 1,525,000 shares of common stock were sold to 7 shareholders at $.02 per share for proceeds totaling $30,500.
During the year ended June 30,
2023, the Company sold 5,000,000 shares of our Common Stock to a non-related party at $.02 per share for total proceeds of
$100,000.
During the year ended June
2023, the Company issued 75,000 shares of our Common Stock to a non-related party in exchange for
services related to the Company.
On June 27, 2023, a non-related
party signed a share purchase agreement for 1,250,000 shares of common stock for proceeds totaling $25,000. The Company was paid
for this subscription the following fiscal year, on July 10, 2023.
Compensation
The Company’s
stock-based compensation expense for the years ended June 30, 2024, and 2023, was $0 and $16,000 respectively.
On
March 15, 2024, we issued one share of our Series Z Super Voting Preferred Stock to Ms. Cassandra DeNunzio and one share of our Series
Z Super Voting Preferred Stock to Mr. Jeffrey DeNunzio as compensation for services rendered to the Company (see Note 6 - Preferred Shares).
Liquidity and
Capital Resources
Management
plans to fund operating expenses through capital contributions from related parties, proceeds from the sale of common stock, or other
financing methods that have not yet been fully determined. However, there is no guarantee of success in these efforts or that adequate
funds will be available to meet the company's business objectives. Additionally, there is no assurance that management will be able to
provide funding or that they will have the means to do so. It should be noted that there are no agreements in place with any of the Company's
officers or directors regarding funding.
Currently, we have limited capital resources and
no access to bank financing or other external funding. To meet our future goals, we believe must secure additional capital.
While we are actively seeking additional capital, we cannot guarantee that we will secure such capital. We may explore various
financing options, including issuing equity or debt securities or obtaining credit facilities. However, even if we raise the
required funds, unforeseen costs or cash needs may arise, necessitating alternative financing. Moreover, issuing additional equity
or debt securities could dilute existing stockholders' ownership or grant superior rights to new investors. If we fail to secure
additional financing on acceptable terms, we may need to reduce operations, slowing our progress, or temporarily halt operations
until we secure adequate funding.
Regardless of funding, we will explore potential
business opportunities and partnerships with other companies that could benefit both the Company and help us secure the capital or
resources needed to advance our business agenda. Although the Company has not yet formed any formal partnerships or agreements with
unrelated parties, we are actively seeking such opportunities and have begun informal discussions with various companies in or
related to our industry.
As with any speculative business initiative, despite
our efforts, there is no guarantee that our efforts to pursue business opportunities, partnerships, or related activities will be successful
or lead to any tangible results. However, we believe that in the absence of available funds to advance our business agenda, it is essential to forge the relationships
mentioned earlier to support our goals.
Contractual
Obligations and Off-Balance Sheet Arrangements
We
have the following contractual obligations:
1)
Equiniti- Transfer Agent pursuant to Registrar Agreement. The address is 1110 Centre Pointe Curve, Suite 101, Mendota Heights, MN
55120. The phone number is 651-453-2139.
2)
Sparx Technologies, LLC patent license agreement executed on August 29, 2022. (see Note 5 to our financial statements
below).
3) On December 29, 2023, the Company entered into a lease agreement with Lisa DeNunzio, a related party and the mother of our CEO and directors.
This lease is for a term of five years, beginning January 1, 2024. The monthly rent is $500, totaling $30,000 over the lease duration.
The leased space may be used for the Company’s operations and storage. Additionally, the Company estimated the present value of
the lease payments using an estimated incremental borrowing rate of 15%. (see Note 8 to our financial statements below).
We
do not have any off-balance sheet arrangements.
-9-
Table of Contents
Item 3. Directors and Officers
Biographical information regarding the officers and directors of the Company,
who will continue to serve as officers and directors of the Company are provided below:
| Name |
|
Age |
|
Position |
| Cassandra DeNunzio |
|
32 |
|
Chief Executive Officer, Chief Financial Officer, President, Secretary, Treasurer and Director 1 |
| Jeffrey DeNunzio |
|
34 |
|
Director 2 |
1 Ms. Cassandra DeNunzio was appointed Director on May 18, 2022.
She also serves as our Chief Executive Officer, Chief Financial Officer, President, Secretary, and Treasurer.
2 On June 30, 2021, Jeffrey DeNunzio
was appointed Chief Executive Officer, Chief Financial Officer, President, Secretary, Treasurer, and Director of the Company. On May
18, 2022, Mr. Jeffrey DeNunzio resigned as the Company’s Chief Executive Officer, Chief Financial Officer, President,
Secretary, and Treasurer. Cassandra DeNunzio was immediately appointed to such vacant positions. Jeffrey DeNunzio remains a Director
of the Company.
Ms. Cassandra DeNunzio, age 32,
attended the University of New Hampshire on a full merit-based scholarship and graduated Summa cum Laude with her Bachelor
of Science Degree in Electrical Engineering (BSEE) in 2014. In 2016, she received her Master of Science Degree in Electrical Engineering
(MSEE) from Columbia University in the City of New York, and in 2019 she received her Master of Business Administration (MBA) Degree from
Arkansas State University. In February of 2016, she took a position as an Electrical Engineer for Johnson Controls International
Plc (JCI), formerly Tyco Fire Protection Products. During her tenure at JCI, Ms. DeNunzio designed and developed new technology products,
worked alongside approval agencies to test ground-breaking ideas, and assisted customers in implementing solutions. Her accolades include presenting
and winning awards for her works at internal research conferences and receiving recognition as an inventor on numerous patent
applications filed with the United States Patent and Trademark Office (USPTO). Cassandra left her position at JCI in October of 2020 and
worked for Science Applications International Corporation (SAIC) as a defense contractor. She held the position of Senior Electrical Engineer
for SAIC for about 9 months while working on projects and contracts for the U.S. Navy. On August 22, 2021, Ms. DeNunzio founded Sparx
Technologies, LLC, an emerging fire protection technology company committed to developing innovative products to protect businesses and
building owners against highly challenging fires. Ms. DeNunzio filed a provisional patent application on January 28, 2022 with Sparx Technologies,
LLC to protect the company's commercial vision to employ software and electronics in fire sprinkler design.
Mr. Jeffrey DeNunzio, age 34, graduated Cum Laude
from Roger Williams University in 2012, with a double major in Legal Studies and Psychology. Prior to his graduation, and to the present
day, he has acted as a research specialist and consultant for numerous publicly traded companies as well as private developmental stage
companies. His experience spans from small start up stage companies, to multi million dollar publicly listed companies. His business acumen
and customized consultation strategies have spanned across various industries, including, but not limited to, hemp, crypto currency, real
estate and healthcare. He has resurrected defunct corporate charters, originated Form 10 Shell Companies, written and filed S-1 Registration
Statements, Form 1-A Registration Statements and also prepared the ongoing SEC filings necessary for companies to remain in good standing
with the Securities and Exchange Commission. Mr. DeNunzio has vast experience in corporate structuring, reverse triangular mergers and
spearheading the business operations and trading processes of various companies of both domestic and foreign origin.
From 2012 to Present, Mr. DeNunzio has served as President of V Financial
Group, Inc. where he assists issuers with edgarization services and various related consulting services.
Jeffrey DeNunzio also served as the sole officer and director Better
For You Wellness, Inc., formerly known as, Fast Track Solutions, Inc., from December 1, 2020 through July 30, 2021. Additionally, he
served as sole officer and director of Japan Food Tech Holdings, Inc., formerly known as, Catapult Solutions, Inc., from
February 26, 2021 through July 23, 2022.
Familial Relationships of Officers, Directors, and Significant
Employees
Mr. Jeffrey DeNunzio and Ms. Cassandra DeNunzio are siblings (brother and sister).
Involvement
in Certain Legal Proceedings
Our
officer and directors have not been involved in any of the following events during the past ten
years:
| 1. |
bankruptcy
petition filed by or against any business of which such person was a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that time; |
| 2. |
any conviction in a criminal
proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); |
| 3. |
being subject to any order,
judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily
enjoining, barring, suspending or otherwise limiting his/her involvement in any type of business, securities or banking activities;
or |
| 4. |
being found by a court
of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal
or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated. |
| 5. |
Such person was found by
a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and
the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated; |
| 6. |
Such person was found by
a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities
law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed,
suspended or vacated; |
| 7. |
Such person was the subject
of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed,
suspended or vacated, relating to an alleged violation of:(i) Any Federal or State securities or commodities law or regulation; or(ii)
Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent
injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal
or prohibition order; or(iii) Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity;
or |
| 8. |
Such person was the subject
of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as
defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of
the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary
authority over its members or persons associated with a member. |
-10-
Table of Contents
Executive
Compensation
On August 29, 2022, in partial consideration for
the exclusive license granted by Sparx Technologies, LLC to the Company, the Company paid Sparx Holdings, LLC, a limited liability
company, controlled and solely owned by Ms. Cassandra DeNunzio, a non-refundable license fee upon execution of patent license
agreement in the amount of One Hundred Million (100,000,000) shares of the Company’s common stock with a par value of $0.0001.
There is no option or non-cash compensation plan at this time.
On
March 15, 2024, we filed a Certificate of Designation amending our Articles of Incorporation and designating the rights and restrictions
of 2 shares of our Series Z Super Voting Preferred Stock, par value $.0001 per share, pursuant to resolutions approved by our Board of
Directors on March 15, 2024.
On
March 15, 2024, the Board of Directors authorized the issuance of one share of Series Z Super Voting Preferred Stock to our CEO
and Director, Ms. Cassandra DeNunzio, and one share of Series Z Super Voting Preferred Stock to our Director Jeffrey DeNunzio with an
80% voting designation.
The following table sets forth the executive
compensation of the Company's executive officer(s) and director(s) for the last two fiscal years ended June 30, 2024 and June 30,
2023.
| Name |
|
Year |
|
Salary |
|
Bonus |
|
Stock
Award(s) |
|
Option|
Awards |
|
All Other
Compensation |
|
Total |
|
| Cassandra DeNunzio,
CEO, CFO and Director1 |
|
2023 |
|
None |
|
None |
|
$10,000 |
|
None |
|
None |
|
$10,000 |
|
| Cassandra DeNunzio,
CEO, CFO, and Director2 |
|
2024 |
|
None |
|
None |
|
$0.0001 |
|
None |
|
None |
|
$0.0001 |
|
| Jeffrey DeNunzio, Director |
|
2023 |
|
None |
|
None |
|
None |
|
None |
|
None |
|
None |
|
| Jeffrey DeNunzio, Director2 |
|
2024 |
|
None |
|
None |
|
$0.0001
|
|
None |
|
None |
|
$0.0001 |
|
1) Cassandra DeNunzio is deemed to be the indirect beneficial owner of
100,000,000 common shares issued by us with a par value of $0.0001 on August 29, 2022, to Sparx Holdings, LLC.
2) On March 15, 2024, we issued one share of Series Z Super Voting Preferred stock to both Jeffrey DeNunzio and Cassandra DeNunzio. Each
share has a par value of $0.0001, making its value (based on par value) $0.0001.
Summary of Compensation
Stock Option Grants
We have not granted any stock options to our executive
officer or directors since our incorporation.
Employment Agreements
We do not have an employment or consulting agreements
with any officer or director.
Director Compensation
Our Board of Directors does not currently receive
any consideration for their services as members of the Board of Directors. The Board of Directors reserves the right in the future to
award the members of the Board of Directors cash or stock based consideration for their services to the Company, which awards, if granted
shall be in the sole determination of the Board of Directors.
Executive Compensation Philosophy
Our Board of Directors determines the compensation
given to our executive officers in their sole determination. Our Board of Directors reserves the right to pay our executive or any future
executives a salary, and/or issue them shares of common stock issued in consideration for services rendered and/or to award incentive
bonuses which are linked to our performance, as well as to the individual executive officer’s performance. This package may also
include long-term stock based compensation to certain executives, which is intended to align the performance of our executives with our
long-term business strategies. Additionally, while our Board of Directors has not granted any performance base stock options to date,
the Board of Directors reserves the right to grant such options in the future, if the Board in its sole determination believes such grants
would be in the best interests of the Company.
Incentive Bonus
The Board of Directors may grant incentive bonuses
to our executive officer and/or future executive officers in its sole discretion, if the Board of Directors believes such bonuses are
in the Company’s best interest, after analyzing our current business objectives and growth, if any, and the amount of revenue we
are able to generate each month, which revenue is a direct result of the actions and ability of such executives.
Long-term, Stock Based Compensation
In order to attract, retain and motivate executive
talent necessary to support the Company’s long-term business strategy we may award our executive and any future executives with
long-term, stock-based compensation in the future, at the sole discretion of our Board of Directors, which we do not currently have any
immediate plans to award.
-11-
Table of Contents
Item 4. Security Ownership of Management and Certain
Securityholders
As of October 28, 2024 we have 285,350,031 shares
of common stock issued and outstanding and 2 shares of Series Z Super Voting Preferred Stock issued and outstanding.
The following table sets forth information as to
common and preferred stock issued, outstanding, and beneficially owned as of October 28, 2024 by (i) each person known to us to be
the beneficial owner of more than 5% of any voting class of our equity; (ii) each Director; (iii) each Executive Officer; and (iv)
all of our Directors and Executive Officers as a group. Unless otherwise indicated in the footnotes following the table, the persons
as to whom the information is given had sole voting and investment power over the shares of common equity shown as beneficially
owned by them. Beneficial ownership is determined in accordance with Rule 13d-3 under the Exchange Act, which generally means that
shares subject to options currently exercisable or exercisable within 60 days of the date hereof are considered to be beneficially
owned, including for the purpose of computing the percentage ownership of the person holding such options, but are not considered
outstanding when computing the percentage ownership of each other person.
If in the event an address is not included
within the below table for a beneficial owner, it should be assumed that the address is that appearing on the cover page of this
annual report. The below table does not include information regarding our Series A Convertible Preferred Stock, as such shares have
no voting rights, until otherwise converted into shares of common stock.
| Name and Address of Beneficial Owner |
|
Amount and Nature of
Beneficial Ownership (Common Stock) |
|
Approximate Percentage
of Class (Common) |
|
Amount and Nature of
Beneficial Ownership (Series Z Super Voting
Preferred Stock) 5 |
|
Approximate Percentage of Class
(Series Z Super Voting Preferred Stock) 5 |
Approximate
Total Voting Percentage 5 |
| |
|
|
|
|
|
|
|
|
|
| Officers and Directors |
|
|
|
|
|
|
|
|
|
| Jeffrey DeNunzio (1) |
|
19,500 |
|
0.0068% |
|
1 |
|
100% |
40.0068% |
| Cassandra DeNunzio (2) |
|
100,000 |
|
0.0350% |
|
1 |
|
100% |
40.0350% |
| 5%
or Greater Shareholders (of any class) |
|
|
|
|
|
|
|
|
|
| NVC Holdings, LLC (3) |
|
150,000,000 |
|
52.57% |
|
- |
|
- |
10.51% |
| Sparx Holdings, LLC (4) |
|
100,000,000 |
|
35.04% |
|
- |
|
- |
7.00% |
| Total Voting Percentage (5% or greater shareholders and Officers/ Directors as a group) |
|
250,119,500 |
|
87.65% |
|
- |
|
- |
97.55% |
| _________________________________________ |
|
|
|
|
|
|
|
|
|
(1) Jeffrey DeNunzio serves as our Director. Jeffrey DeNunzio directly
owns 19,500 shares of our Common Stock. These shares were acquired in open market transactions.
(2) Ms. Cassandra DeNunzio serves as our Chief Executive Officer, Chief
Financial Officer, President, Secretary, Treasurer, and Director. Ms. DeNunzio directly owns 100,000 shares of our Common Stock. These
shares were acquired in open market transactions.
(3) NVC Holdings, LLC, a Wyoming Limited Liability Company is the direct
and beneficial owner of 150,000,000 shares of our Common Stock. Mr. Jeffrey DeNunzio and Sparx Holdings, LLC are its members. Together
they share equal membership interest in NVC Holdings, LLC. Cassandra DeNunzio is deemed to be an indirect beneficial owner of our common
stock since she is the sole member of Sparx Holdings, LLC.
(4) Sparx Holdings, LLC, a Wyoming Limited Liability Company
is the direct and beneficial owner of 100,000,000 shares of our Common Stock. Cassandra DeNunzio is deemed to be an indirect beneficial
owner of our common stock since she is the sole member of Sparx Holdings, LLC.
(5) The Series Z Super Voting Preferred Stock shall have full
voting rights and powers on all matters subject to a vote by the shareholders of the Company’s Common Stock and shall be entitled
to notice of any shareholders meeting in accordance with the Bylaws of the Company, and shall be entitled to vote with respect to any
question upon which shareholders of Common Stock or shareholders of any other class or series of voting capital stock having the right
to vote, including, without limitation, the right to vote for the election of directors, voting together with the shareholders of Common
Stock or holders of any other class or series of voting capital stock having the right to vote, as one class.
For
so long as at least one share of Series Z Super Voting Preferred Stock is issued and outstanding, the Holders of Series Z Super Voting
Preferred Stock shall vote together as a single class with the shareholders of any other class or series of shares entitled to vote with
the Common Stock, with the Holders of Series Z Super Voting Preferred Stock being entitled to eighty percent (80%) of the total votes
on all such matters regardless of the actual number of Series Z Super Voting Preferred Stock then outstanding, and the shareholders of
voting capital stock and any other shares entitled to vote being entitled to their proportional share of the remaining 20% of the total
votes based on the their respective voting power.
The
Holders of Series Z Super Voting Preferred Stock shall have no liquidation rights and will not entitled to any dividends. Series Z Super
Voting Preferred Stock is not convertible into any other shares of the Company.
Item 6. Other Information
On
September 20, 2024, we sold 14,000 shares of our Series A Convertible Preferred Stock, “Series A shares,” to
approximately 16 investors, generating total gross proceeds of $14,000. These sales were made pursuant to the Company’s
Regulation CF offering conducted via the funding portal, Netcapital Funding Portal, Inc., a Delaware Corporation. The associated
third-party fees from the aforementioned sales were approximately $686.
Additionally,
on September 20, 2024, the company issued 140 shares of our Series A Convertible Preferred Stock to Netcapital Funding Portal, Inc.,
a Delaware Corporation, in exchange for their services related to the Company's above mentioned crowdfunding offering.
Please
note that all holders of the Company’s Series A Convertible Preferred Stock are recorded under the name Cust Corp., a Delaware
Corporation, referred to as “the Record Owner.”
The
transfer agent for our Series A Convertible Preferred Stock is Equity Stock Transfer, LLC.
Our
Series A shares have no voting rights. Series A shares will automatically convert into an equivalent dollar amount of the
Company’s common shares 366 days after the end of close of Regulation Crowdfunding offering(s) conducted via Netcaptial
Funding Portal, Inc. The Company may have multiple closings. Series A shares have a stated value of $1.
-12-
Table of Contents
Item
7. Financial Statements
Sparx Holdings Group, Inc.
Audited Financial Statements and Notes
For the Fiscal Year Ended June 30, 2024 and
June 30, 2023
Table
of Contents
| Report of Independent Registered Public Accounting Firm |
F1 |
| |
|
| Balance Sheet as of June 30,
2024, and Restated Balance Sheet as of June 30, 2023 (Audited) |
F2 |
| |
|
| Statement
of Operations for the Years Ended June 30, 2024, and June 30, 2023 (Audited) |
F3 |
| |
|
| Statement of Changes in Stockholders’ Deficit for the Years Ended June
30, 2024, and June 30, 2023 (Audited) |
F4 |
| |
|
| Statement
of Cash Flows for the Years Ended June 30, 2024, and June 30, 2023 (Audited) |
F5 |
| |
|
| Notes
to the Audited Financial Statements |
F6-F12 |
-13-
Table of Contents
MICHAEL GILLESPIE & ASSOCIATES, PLLC
CERTIFIED PUBLIC ACCOUNTANTS
Vancouver, WA 98666
206.353.5736
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the shareholders and the board of directors of Sparx Holdings Group,
Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Sparx Holdings Group,
Inc., as of June 30, 2024 and 2023 (restated) and the related statements of operations, changes in stockholders’ deficit, cash flows,
and the related notes (collectively referred to as “financial statements”) for the years then ended. In our opinion, the financial
statements present fairly, in all material respects, the financial position of the Company as of June 30, 2024 and 2023 (restated) and
the results of its operations and its cash flows for the years then ended.
Going Concern
The accompanying financial statements have been prepared
assuming the Company will continue as a going concern. As discussed in Note #3 to the financial statements, although the Company has limited
operations it has yet to attain profitability. This raises substantial doubt about its ability to continue as a going concern. Management’s
plan in regard to these matters is also described in Note #3. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding
of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess
the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/S/ MICHAEL GILLESPIE & ASSOCIATES, PLLC
We have served as the Company’s auditor since 2024.
PCAOB ID 6104
Vancouver, Washington
October 25, 2024
-F1-
Table of Contents
Sparx
Holdings Group, Inc.
Balance
Sheets
(Audited)
| |
|
June 30, 2024 |
|
|
June
30, 2023 (Restated) |
|
| |
|
|
|
|
|
|
| ASSETS |
|
|
|
|
|
|
| CURRENT ASSETS |
|
|
|
|
|
|
| Cash and cash equivalents |
$ |
74,552 |
|
$ |
100,219 |
|
| Stock subscription receivable |
|
- |
|
|
25,000 |
|
| Prepaid expenses |
|
1,062 |
|
|
- |
|
| TOTAL CURRENT ASSETS |
|
75,614 |
|
|
125,219 |
|
| ROU Lease asset |
|
19,548 |
|
|
- |
|
| TOTAL ASSETS |
|
95,162 |
|
|
125,219 |
|
| |
|
|
|
|
|
|
| LIABILITIES AND STOCKHOLDERS’ DEFICIT |
|
|
|
|
|
|
| CURRENT LIABILITIES |
|
|
|
|
|
|
| ROU lease liability |
$ |
3,288 |
|
$ |
- |
|
| Accrued Expenses and other payables |
|
2,277 |
|
$ |
600 |
|
| TOTAL CURRENT LIABILITIES |
|
5,565 |
|
|
600 |
|
| ROU Lease liability |
|
16,260 |
|
|
- |
|
| |
|
|
|
|
|
|
| TOTAL LIABILITIES |
$ |
21,825 |
|
$ |
600 |
|
| |
|
|
|
|
|
|
| Stockholders’ Equity (Deficit) |
|
|
|
|
|
|
| Preferred stock ($.0001 par value, 5,000,000 shares authorized; 500,000 shares designated as Series A Convertible Preferred Stock (“Series A”); 0 Series A issued and outstanding as of June 30, 2024 and June 30, 2023; 2 preferred shares designated as Series Z Super Voting Preferred Stock (“Series Z”) 2 and 0 shares of Series Z issued and outstanding as of June 30, 2024, and June 30, 2023, respectively) |
|
- |
|
|
- |
|
| Common stock ($.0001 par value, 500,000,000 shares authorized, 285,350,031 and 283,825,031 issued and outstanding as of June 30, 2024 and June 30, 2023, respectively) |
|
28,535 |
|
|
28,383 |
|
| Additional paid-in capital |
|
212,498 |
|
|
129,374 |
|
| Stock subscription |
|
- |
|
|
25,000 |
|
| Accumulated deficit |
|
(167,697) |
|
|
(58,138) |
|
| Total Stockholders’ Equity (Deficit) |
|
73,336 |
|
|
124,619 |
|
| |
|
|
|
|
|
|
| TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY (DEFICIT) |
$ |
95,162 |
|
$ |
125,219 |
|
The
accompanying notes are an integral part of these audited financial statements.
-F2-
Table of Contents
Sparx Holdings Group, Inc.
Statements of Operations
(Audited)
| |
|
Year Ended
June 30, 2024 |
|
Year Ended
June 30, 2023 |
| |
|
|
|
|
| Operating expenses |
|
|
|
|
| |
|
|
|
|
| Research & Development |
$ |
14,777 |
$ |
842 |
| Marketing |
|
19,334 |
|
- |
| General & Administrative |
|
75,448 |
|
46,843 |
| Total operating expenses |
|
109,559 |
|
47,685 |
| |
|
|
|
|
| Net loss |
$ |
(119,559) |
$ |
(47,685) |
| |
|
|
|
|
| Basic and Diluted net loss per common share |
$ |
(0.00) |
$ |
(0.00) |
| |
|
|
|
|
| Weighted average number of common shares outstanding - Basic and Diluted |
|
285,287,908 |
|
257,152,507 |
The
accompanying notes are an integral part of these audited financial statements.
-F3-
Table of Contents
Sparx Holdings Group, Inc.
Statement of Changes in
Stockholders’ Deficit
For the Years Ended June
30, 2024 and June 30, 2023
(Audited)
| |
|
|
Common Shares |
|
Par Value Common Shares |
|
Preferred Shares |
|
Par Value Preferred Shares |
|
|
Additional Paid-in Capital |
|
Stock Subscription |
|
Accumulated Deficit |
|
Total |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balances, June 30, 2022 |
|
|
178,750,031 |
$ |
17,875 |
|
- |
$ |
- |
|
$ |
(7,422) |
$ |
- |
$ |
(10,453) |
$ |
- |
| Common shares sold |
|
|
5,000,000 |
|
500 |
|
- |
|
- |
|
|
99,500 |
|
- |
|
- |
|
100,000 |
| Common shares issued as compensation |
|
|
100,075,000 |
|
10,008 |
|
- |
|
- |
|
|
5,993 |
|
- |
|
- |
|
16,000 |
| Stock subscription |
|
|
- |
|
- |
|
- |
|
- |
|
|
- |
|
25,000 |
|
- |
|
25,000 |
| Expenses paid on behalf of the Company and contributed to capital |
|
|
- |
|
- |
|
- |
|
- |
|
|
28,803 |
|
- |
|
- |
|
28,803 |
| Contributions to capital |
|
|
- |
|
- |
|
- |
|
- |
|
|
2,501 |
|
- |
|
- |
|
2,501 |
| Net loss |
|
|
- |
|
- |
|
- |
|
- |
|
|
- |
|
- |
|
(47,685) |
|
(47,685) |
| Balances,
June 30, 2023 (Restated) |
|
|
283,825,031 |
$ |
28,383 |
|
- |
$ |
- |
|
$ |
129,375 |
$ |
25,000 |
$ |
(58,138) |
$ |
124,619 |
| Common shares sold |
|
|
1,525,000 |
|
153 |
|
- |
|
- |
|
|
30,347 |
|
(25,000) |
|
- |
|
5,500 |
| Preferred Series Z shares issued as compensation |
|
|
- |
|
- |
|
2 |
|
- |
|
|
- |
|
- |
|
- |
|
- |
| Expenses
paid on behalf of the Company and contributed to capital |
|
|
- |
|
- |
|
- |
|
- |
|
|
52,777 |
|
- |
|
- |
|
52,777 |
| Net
loss |
|
|
- |
|
- |
|
- |
|
- |
|
|
- |
|
- |
|
(109,559) |
|
(109,559) |
| Balances,
June 30, 2024 |
|
|
285,350,031 |
$ |
28,535 |
|
2 |
$ |
- |
|
$ |
212,498 |
$ |
- |
$ |
(167,697) |
$ |
73,336 |
The
accompanying notes are an integral part of these audited financial statements.
-F4-
Table of Contents
Sparx Holdings Group, Inc.
Statements of Cash Flows
(Audited)
| |
|
Year
Ended June 30, 2024 |
|
|
Year
Ended
June
30,
2023 |
| CASH
FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
| Net
loss |
$ |
(109,559) |
|
$ |
(47,685) |
| Adjustment
to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
| Share-based
compensation |
|
- |
|
|
16,000 |
| Changes
in current assets and liabilities: |
|
|
|
|
|
| Prepaid
expense |
|
(1,062) |
|
|
- |
| Accrued
expenses and other payables |
|
1,677 |
|
|
600 |
| Net
cash used in operating activities |
|
(108,943) |
|
|
(31,085) |
| |
|
|
|
|
|
| CASH
FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
| Cash
from the sale of common shares |
$ |
30,500 |
|
$ |
100,000 |
| Expenses
contributed to capital |
|
52,777 |
|
|
28,803 |
| Cash
contributions to the Company from related party |
|
- |
|
|
2,501 |
| Net
cash provided by financing activities |
|
83,277 |
|
|
131,304 |
| Net
change in cash |
$ |
(25,667) |
|
$ |
100,219 |
| Beginning
cash balance |
|
100,219 |
|
|
- |
| Ending
cash balance |
$ |
74,552 |
|
$ |
100,219 |
| |
|
|
|
|
|
| SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION: |
|
|
|
|
|
| Interest
paid |
$ |
- |
|
$ |
- |
| Income
taxes paid |
$ |
- |
|
$ |
- |
The
accompanying notes are an integral part of these audited financial statements.
-F5-
Table of Contents
Sparx
Holdings Group, Inc.
Notes to the Audited Financial Statements
SPARX
HOLDINGS GROUP, INC.
NOTES TO THE AUDITED
FINANCIAL STATEMENTS
Note 1 - Organization and Description
of Business
Sparx Holdings Group, Inc. (“the
Company”), formerly Prime Time Holdings, was incorporated on June 30, 2021 in the State of Nevada.
On May 18, 2022,
Ms. Cassandra DeNunzio was appointed as the Company’s Chief Executive Officer, Chief Financial Officer, President, Secretary, Treasurer,
and Director. Following the appointment of Ms. Cassandra DeNunzio, the Company began to seek business opportunities in the area of fire
suppression technologies.
The Company has no employees at this
time and relies upon the services of our sole officer Cassandra DeNunzio, who is also a director, and Jeffrey DeNunzio, another director.
Jeffrey DeNunzio is the brother of Cassandra DeNunzio.
The Company has a fiscal year end
of June 30th .
Note 2 - Summary of Significant
Accounting Policies
Basis of Presentation
This summary of significant accounting
policies is presented to assist in understanding the Company's financial statements. These accounting policies conform to accounting principles,
generally accepted in the United States of America, and have been consistently applied in the preparation of the financial statements..
Use of Estimates
The preparation of financial statements
in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. In the opinion of management, all adjustments necessary in order
to make the financial statements not misleading have been included. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly
liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents
at June 30, 2024 and June 30, 2023 were $74,552 and $100,219 respectively.
Leases
Lease right
of use (“ROU”) assets and liabilities are recognized at commencement date of the lease, based on the present value of lease
payments over the lease term. We determine if a contract is a lease at the inception of the arrangement. We review all options to extend,
terminate, or purchase the ROU assets, and when reasonably certain to exercise, we include the option in the determination of the
lease term and lease liability. The lease ROU asset also includes any lease payments made and excludes any lease incentives. When readily
determinable, we use the implicit rate in determining the present value of lease payments. When leases do not provide an implicit rate,
we use our incremental borrowing rate based on the information available at the lease commencement date, including the lease term. We
recognize ROU assets and liabilities for all leases with a lease term of 12 months or longer.
Income Taxes
The Company accounts for income
taxes under ASC 740, “Income Taxes.” Under the asset and liability method of ASC 740, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts
of existing assets and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely
than not that the Company will not realize tax assets through future operations. No deferred tax assets or liabilities were recognized
at June 30, 2024 and June 30, 2023.
-F6-
Table of Contents
Basic Earnings (Loss) Per Share
The Company computes basic and diluted
earnings (loss) per share in accordance with ASC Topic 260, Earnings per Share. Basic earnings (loss) per share is computed
by dividing net income (loss) by the weighted average number of common shares outstanding during the reporting period. Diluted earnings
(loss) per share reflects the potential dilution that could occur if stock options and other commitments to issue common stock were exercised
or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company.
The Company does not have any potentially
dilutive instruments as of June 30, 2024 and, thus, anti-dilution issues are not applicable.
Fair Value of Financial Instruments
The Company’s
balance sheet includes certain financial instruments. The carrying amounts of current assets and current liabilities approximate their
fair value because of the relatively short period of time between the origination of these instruments and their expected realization.
ASC 820, Fair Value Measurements
and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an
exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants
on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions
developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about
market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair
value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy
are described below:
- Level 1 - Unadjusted quoted prices
in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
- Level 2 - Inputs other than quoted
prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices
for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are
not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are
derived principally from or corroborated by observable market data by correlation or other means.
- Level 3 - Inputs that are both
significant to the fair value measurement and unobservable.
Fair value estimates discussed herein
are based upon certain market assumptions and pertinent information available to management as of June 30, 2024. The respective carrying
value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments.
These financial instruments include accrued expenses.
Related Parties
The Company follows ASC 850, Related
Party Disclosures, for the identification of related parties and disclosure of related party transactions.
Share-Based Compensation
ASC 718, “Compensation
– Stock Compensation”, prescribes accounting and reporting standards for all share-based payment transactions in which
employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other
equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including
grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That
expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the
requisite service period (usually the vesting period).
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Table of Contents
The Company accounts for stock-based
compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50, “Equity – Based Payments
to Non-Employees.” Measurement of share-based payment transactions with non-employees is based on the fair value
of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair
value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.
The Company had no
stock-based compensation plans as of June 30, 2024.
The Company’s stock-based compensation
expense for the years ended June 30, 2024 and 2023 was $0 and $16,000 respectively.
Recently Issued Accounting Pronouncements
The Company has implemented all new
accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other
new pronouncements that have been issued that might have a material impact on its financial position or results of operations.
Note 3 - Going Concern
The Company’s financial statements
are prepared in accordance with generally accepted accounting principles applicable to a going concern that contemplates the realization
of assets and liquidation of liabilities in the normal course of business.
The Company demonstrates adverse
conditions that raise substantial doubt about the Company's ability to continue as a going concern for one year following the issuance
of these financial statements. These adverse conditions are negative financial trends, specifically operating loss, working capital deficiency,
and other adverse key financial ratios.
The Company has not established any
source of revenue to cover its operating costs. Management plans to fund operating expenses with related party contributions to capital.
There is no assurance that management's plan will be successful. The financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the
event that the Company cannot continue as a going concern.
Note 4 - Income Taxes
The Company has not
recognized an income tax benefit for its operating losses generated based on uncertainties concerning its ability to generate taxable
income in future periods. The tax benefit for the period presented is offset by a valuation allowance established against deferred tax
assets arising from the net operating losses, the realization of which could not be considered more likely than not. In future periods,
tax benefits and related deferred tax assets will be recognized when management considers realization of such amounts to be more likely
than not. As of June 30, 2024, the Company has incurred a net loss of approximately $167,697 which resulted in a net operating loss
for income tax purposes. The loss results in a deferred tax asset of approximately $35,216 at the effective statutory rate of 21%. The
deferred tax asset has been offset by an equal valuation allowance. Given our inception on June 30, 2021, and our fiscal year end of June
30, 2024, we have completed three taxable fiscal years.
Potential benefits of income tax losses are not
recognized in the accounts until realization is more likely than not. In
assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of
the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future
taxable income during the periods in which those temporary differences become deductible. The Company has incurred a net
operating loss carryforward of $167,697 which begins expiring in 2036. The Company has adopted ASC 740, “Accounting for Income
Taxes”, as of its inception. Pursuant to ASC 740 the Company is required to compute tax asset benefits for non-capital losses carried
forward. The potential benefit of the net operating loss has not been recognized in these financial statements because the Company cannot
be assured it is more likely than not it will utilize the loss carried forward in future years.
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Table of Contents
Significant components of the Company’s deferred
tax assets are as follows:
| |
|
June 30, |
|
| |
|
|
|
| |
|
2024 |
|
2023 |
|
| Deferred tax asset, generated from net operating loss |
|
$ |
35,216 |
|
$ |
12,209 |
|
| Valuation allowance |
|
|
(35,216) |
|
|
(12,209) |
|
| |
|
$ |
— |
|
$ |
— |
|
The reconciliation of the
effective income tax rate to the federal statutory rate is as follows:
| Federal income tax rate 21.0% |
|
|
21.0 |
% |
| Increase in valuation allowance (21.0%) |
|
|
(21.0 |
%) |
| Effective income tax rate 0.0% |
|
|
0.0 |
% |
Due to the change in ownership provisions
of the Tax Reform Act of 1986, net operating loss carryforwards for Federal income tax reporting purposes are subject to annual limitations.
Should a change in ownership occur, net operating loss carryforwards may be limited as to use in future years.
Note 5 - Commitments
and Contingencies
The Company follows ASC 450-20, Loss Contingencies, to
report accounting for contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and
penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be
reasonably estimated. There were no commitments or contingencies as of June 30, 2024 except for the following:
On August 29, 2022, we entered into
and consummated a Patent License Agreement (“Agreement”) with Sparx Technologies, LLC, a limited liability company (“Licensor”).
Licensor is solely owned and controlled by Ms. Cassandra DeNunzio, our CEO and Director. Ms. DeNunzio is the sole and first named inventor
under a provisional patent application with a Serial No. 63/304,302 filed with the United States Patent Office (“USPTO”) on
January 28, 2022, relating to the fire protection industry and particularly a commercially available battery-operated wireless electronic
fire sprinkler network.
As a result of the Agreement, we
adopted the existing operations and business plan of Sparx Technologies, LLC pursuant to the terms and conditions of the patent licensing
agreement and ceased to be a shell company.
In partial consideration for the
exclusive license granted by Licensor to the Company, the Company paid Sparx Holdings, LLC, a limited liability company, controlled and
solely owned by Ms. DeNunzio, a non-refundable license fee upon execution of the Agreement in the amount of One Hundred Million shares
(100,000,000) of the Company’s common stock (the “Initial License Fee”). The Initial License Fee is consideration for
the grant and continuation of the license pursuant to a five-year term. Licensor shall have no obligation or liability to return any portion
of the Initial License Fee. The Company shall pay Licensor a royalty of fifty percent (50%) of Licensee’s Net Sales of all Licensed
Products developed and sold by the Company. Ownership of the licensed technology prior to, during the course or as a result of the Agreement,
will be the sole and exclusive property of Licensor.
The consummation of the Agreement
is deemed to be a related party transaction given Cassandra DeNunzio serves as our sole officer, and as a member of our Board of Directors.
She is also the sole member and controller of Sparx Technologies, LLC.
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Table of Contents
Note 6 - Shareholder Equity
Preferred Stock
The authorized preferred stock of
the Company consists of 5,000,000 shares with a par value of $0.0001; 500,000 preferred shares designated as Series A
Convertible Preferred Stock (“Series A”) and 2 preferred shares designated as Series Z Super Voting Preferred Stock (“Series
Z”).
As of June 30, 2024 and there were no Series A shares outstanding for both
periods and 2 and 0 Series Z shares outstanding, respectively.
On March 15, 2024, the Board of Directors authorized the issuance of one
share of Series Z Super Voting Preferred Stock to our CEO and Director, Ms. Cassandra DeNunzio, and one share of Series Z Super Voting
Preferred Stock to our Director Jeffrey DeNunzio with an 80% voting designation.
On March 15, 2024, we filed a Certificate of Designation amending our Articles
of Incorporation and designating the rights and restrictions of 2 shares of our Series Z Super Voting Preferred Stock, par value $.0001
per share, pursuant to resolutions approved by our Board of Directors on March 15, 2024. In addition, on March 15, 2024, we filed a Certificate
of Designation amending our Articles of Incorporation and designating the rights and restrictions of 500,000 shares of our Series A Convertible
Preferred Stock, par value $.0001 per share, pursuant to resolutions approved by our Board of Directors on March 15, 2024.
The Series A shares have no voting rights. Series A shares will automatically
convert into an equivalent dollar amount of the Company’s common shares 366 days after the end of close of Regulation Crowdfunding
offering(s). The Company may have multiple closings. Series A shares have a stated value of $1.
The Series Z Super Voting Preferred Stock shall have full voting rights
and powers on all matters subject to a vote by the shareholders of the Company’s Common Stock and shall be entitled to notice of
any shareholders meeting in accordance with the Bylaws of the Company, and shall be entitled to vote with respect to any question upon
which shareholders of Common Stock or shareholders of any other class or series of voting capital stock having the right to vote, including,
without limitation, the right to vote for the election of directors, voting together with the shareholders of Common Stock or holders
of any other class or series of voting capital stock having the right to vote, as one class.
For so long as at least one share of Series Z Super Voting Preferred Stock
is issued and outstanding, the Holders of Series Z Super Voting Preferred Stock shall vote together as a single class with the shareholders
of any other class or series of shares entitled to vote with the Common Stock, with the Holders of Series Z Super Voting Preferred Stock
being entitled to eighty percent (80%) of the total votes on all such matters regardless of the actual number of Series Z Super Voting
Preferred Stock then outstanding, and the shareholders of voting capital stock and any other shares entitled to vote being entitled to
their proportional share of the remaining 20% of the total votes based on the their respective voting power.
The Holders of Series Z Super Voting Preferred Stock shall have no liquidation
rights and will not entitled to any dividends. Series Z Super Voting Preferred Stock is not convertible into any other shares of the Company.
Common Stock
The authorized preferred stock of
the Company consists of 500,000,000 shares with a par value of $0.0001. There were 285,350,031 and 283,825,031 shares
of common stock issued and outstanding as of June 30, 2024 and June 30, 2023, respectively.
During the year ended June 30, 2024,
1,525,000 shares of common stock were sold to 7 shareholders at $.02 per share for proceeds totaling $30,500.
-F10-
Table of Contents
During the year ended June 30,
2023, the Company sold 5,000,000 shares of our Common Stock to a non-related party at $.02 per share for total
proceeds of $100,000.
During the year ended June 30, 2023,
the Company issued 75,000 shares of our Common Stock to a non-related party in exchange for services related to the Company.
During the year ended June 30, 2023,
100,000,000 shares of Common Stock of the Issuer were issued to Sparx Holdings, LLC. The issuance was partial consideration pursuant to
a "Patent License Agreement" that the Issuer entered into with Sparx Technologies, LLC. Ms. Cassandra DeNunzio is the sole member
and manager of Sparx Technologies, LLC and Sparx Holdings, LLC (see Note 5).
Stock subscription
On June 27, 2023, a non-related
party signed a share purchase agreement for 1,250,000 shares of common stock for proceeds totaling $25,000. The Company was paid for
this subscription the following fiscal year, on July 10, 2023.
Additional Paid-In Capital
During the period ended June 30,
2024, the Company’s director, Jeffrey DeNunzio, paid expenses on behalf of the Company totaling approximately $11,797.
During the period ended June 30, 2024, Thomas DeNunzio, a shareholder of the Company and the father of the Company’s CEO and directors,
paid approximately $40,980 in expenses on behalf of the Company.
The Company’s director, Jeffrey
DeNunzio, paid expenses on behalf of the company totaling $28,803 during the year ended June 30, 2023.
These payments were made with no
expectation of repayment and are posted as additional paid-in capital.
The Company’s CEO, Cassandra
DeNunzio, contributed cash totaling $2,501 to the Company during the year ended June 30, 2023. These contributions were made with no expectation
of repayment and are posted as additional paid-in capital.
Note 7 - Related-Party Transactions
Office Space
We utilize the home office space
and equipment of our management at no cost.
Lease
On December 29, 2023, the Company entered into a lease agreement with Lisa DeNunzio, a related party and the mother of our CEO and directors.
The lease has a term of five years, starting on January 1, 2024, with a monthly rent of $500, totaling $30,000 over the lease period.
The leased space may be used by the Company for operations and storage (see Note 8).
Preferred Series Z shares
On March 15, 2024,
we issued one share of our Series Z Super Voting Preferred Stock to Ms. Cassandra DeNunzio and one share of our Series Z Super Voting
Preferred Stock to Mr. Jeffrey DeNunzio as compensation for services rendered to the Company (see Note 6 - Preferred Shares).
Research and
Development
During the year ended June 30, 2024, we paid $10,000
to our CEO and director, Cassandra DeNunzio, in exchange for services she provided to the Company related to research and development.
-F11-
Table of Contents
Note 8 -
Lease Assets and Liabilities
On December 29, 2023, the
Company entered into a lease agreement with Lisa DeNunzio, a related party and the mother of our CEO and directors. This lease is
for a term of five years, beginning January 1, 2024. The monthly rent is $500, totaling $30,000 over the lease duration. The leased
space may be used for the Company’s operations and storage. Additionally, the Company estimated the present value of the lease
payments using an estimated incremental borrowing rate of 15%.
The table
below presents the financial information associated with our leases. As noted above, we adopted Topic 842 using a transition
method that does not require application to periods prior to adoption:
| |
Balance Sheet Classification |
June 30, 2024 |
June 30, 2023 |
| |
|
|
|
|
|
| Right-of-use assets |
Lease asset long |
$ |
19,548 |
$ |
- |
| Current lease liabilities |
Short-term lease liability |
|
3,288 |
|
- |
| Non-current lease liabilities |
Lease liability long term |
|
16,260 |
|
- |
| |
|
|
|
|
|
| Maturities of lease liabilities as of June 30, 2024 are as follows: |
|
| |
|
|
|
|
|
| 2024 |
3,000 |
|
|
|
|
| 2025 |
6,000 |
|
|
|
|
| 2026 |
6,000 |
|
|
|
|
| 2027 |
6,000 |
|
|
|
|
| 2028 |
6,000 |
|
|
|
|
| Total |
27,000 |
|
|
|
|
| Add (Less): Imputed interest |
(7,452) |
|
|
|
|
| Present
value of lease liabilities |
19,548 |
|
|
|
|
Note
9 - Restatement
On
June 27, 2023, a non-related party signed a share purchase agreement for 1,250,000 shares of common stock for proceeds totaling $25,000.
The Company was paid for this subscription the following fiscal year, on July 10, 2023.
The June 30, 2023 Balance Sheet and Statement of Equity were
restated to account for the foregoing stock subscription in the fiscal year ended June 30, 2023.
Note
10 - Subsequent Events
Management
has reviewed the financial transactions for the Company subsequent to the period ended June 30, 2024 and has found that there was nothing
material to disclose except the following:
The Company was paid for the $25,000
stock subscription on July 10, 2023 (see Note 6 Stock subscription).
On September 20, 2024, Sparx
Holdings Group, Inc. sold 14,000 shares of its Series A Convertible Preferred Stock, “Series A shares” to approximately
16 investors, generating total gross proceeds of $14,000. These sales were made pursuant to the Company’s Regulation CF
offering conducted via the funding portal, Netcapital Funding Portal, Inc., a Delaware Corporation. The associated third-party fees
from the aforementioned sales were approximately $686.
Additionally, on September 20,
2024, the company issued 140 shares of its Series A Convertible Preferred Stock to Netcapital Funding Portal, Inc., a Delaware
Corporation, in exchange for their services related to the Company's above mentioned crowdfunding offering.
Please note that all holders of
the Company’s Series A Convertible Preferred Stock are recorded under the name Cust Corp., a Delaware Corporation.,
referred to as “the Record Owner.”
The transfer agent for our
Series A Convertible Preferred Stock is Equity Stock Transfer, LLC.
Our
Series A shares have no voting rights. Series A shares will automatically convert into an equivalent dollar amount of the Company’s
common shares 366 days after the end of close of Regulation Crowdfunding offering(s) conducted via Netcaptial Funding Portal, Inc. The
Company may have multiple closings. Series A shares have a stated value of $1.
-F12-
Table of Contents
Item
8. Exhibits
The
following exhibits are filed as part of this Annual Report. Each exhibit listed below is incorporated by reference to the corresponding
SEC filing, which is documented immediately after the table.
____________________
| (1) |
Filed
as EX-3.2 to Form 10-12G with the Securities and Exchange Commission on July 26, 2021 |
| (2) |
Filed
as EX-31 to Form 8-K filed with the Securities and Exchange Commission on July 22, 2022. |
| (3) |
Filed
as EX1A-2B to our Offering Statement (1-A) filed with the Securities and Exchange Commission on March 31, 2023. |
| (4) |
Filed
as EX1U-2A (i) to Form 1-U filed with the Securities and Exchange Commission on March 18, 2024 |
| (5) |
Filed
as EX1U-2A (ii) to Form 1-U filed with the Securities and Exchange Commission on March 18, 2024 |
-14-
Table of Contents
Signatures
Pursuant to the
requirements of Regulation A, the issuer has caused the annual report on Form 1-K to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of North Providence, R.I. on October 28, 2024.
| |
Sparx Holdings Group, Inc. |
| |
|
| |
By:
|
/s/ Cassandra DeNunzio |
| |
|
Chief Executive Officer, Chief Financial Officer
(Principal Executive Officer, Principal
Financial Officer) |
Pursuant to the requirements
of Regulation A, this report has been signed below by the following person on behalf of the issuer and in the capacities and on the
date indicated.
| By:
/s/ Cassandra DeNunzio |
|
Cassandra DeNunzio, Chief Executive Officer,
Chief Financial Officer, Director
(Principal Executive Officer, Principal
Financial Officer) |
|
| Date:
October 28, 2024 |
|
| |
|
-15-
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