Sparx Holdings Group, Inc. 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED September 30, 2023 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to COMMISSION FILE NUMBER: 000-56315 Sparx Holdings Group, Inc. (Exact name of registrant as specified in its charter) Nevada 92-3402117 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 780 Reservoir Avenue #123 Cranston, RI 02910 (Mailing Address of Principal Executiv e Offices) Issuer's telephone number: 508-443-1859 Issuers website: https://sparx-fire.com/ Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [X] Yes [ ] No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or a small reporting company. See definition of large accelerated filer, accelerated filer and small reporting company in Rule 12b-2 of the Securities Exchange Act of 1934. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☒ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of November 14, 2023, there were 285,350,031 shares of the Registrant’s common stock, par value $0.0001 per share, issued and outstanding. -1- Table of Contents INDEX Page PART I - FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS F1 BALANCE SHEET as of September 30, 2023 (unaudited) and June 30, 2023 F1 STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED September 30, 2023 (Unaudited), and for the THREE months ended September 30, 2022 (UnAUDITED) F2 STATEMENT OF CHANGES IN STOCKHOLDERS’ (DEFICIT) FOR THE PERIOD ENDED SEPTEMBER 30, 2023 (UNAUDITED) AND SEPTEMBER 30, 2022 (UNAUDITED) F3 STATEMENT OF CASH FLOWS FOR THE three MONTHS ENDED September 30, 2023 (uNAUDITED), AND FOR THE THREE MONTHS ENDED September 30, 2022 (uNAUDITED) F4 NOTES TO THE UNAUDITED FINANCIAL STATEMENTS F5-F7 ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS 3 ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 5 ITEM 4 CONTROLS AND PROCEDURES 6 PART II-OTHER INFORMATION ITEM 1 LEGAL PROCEEDINGS 7 ITEM 1A RISK FACTORS ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 7 ITEM 3 DEFAULTS UPON SENIOR SECURITIES 7 ITEM 4 MINE SAFETY DISCLOSURES 7 ITEM 5 OTHER INFORMATION 7 ITEM 6 EXHIBITS 7 SIGNATURES 8 -2- Table of Contents PART I - FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS Sparx Holdings Group, Inc. Balance Sheet September 30, 2023 (Unaudited) June 30, 2023 ASSETS CURRENT ASSETS Cash and cash equivalents $ 107,159 $ 100,219 TOTAL ASSETS 107,159 100,219 LIABILITIES AND STOCKHOLDERS’ DEFICIT CURRENT LIABILITIES Accrued Expenses $ - $ 600 TOTAL LIABILITIES $ - $ 600 Stockholders’ Equity (Deficit) Preferred stock ($ .0001 par value, 5,000,000 shares authorized; 0 issued and outstanding as of September 30, 2023 and June 30, 2023) - - Common stock ($ .0001 par value, 500,000,000 shares authorized, 285,350,031 and 283,825,031 issued and outstanding as of September 30, 2023 and June 30, 2023, respectively) 28,535 28,383 Additional paid-in capital 174,787 129,374 Accumulated deficit (96,163) (58,138) Total Stockholders’ Equity (Deficit) 107,159 99,619 TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY (DEFICIT) $ 107,159 $ 100,219 The accompanying notes are an integral part of these unaudited financial statements. -F1- Table of Contents Sparx Holdings Group, INC. STATEMENT OF OPERATIONS (UNAUDITED ) Three Months September 30, 2023 Three Months September 30, 2022 Operating expenses Research & Development $ 1,095 $ - General & Administrative 36,930 14,775 Total operating expenses 38,025 14,775 Net loss $ ( 38,025 ) $ ( 14,775 ) Basic and Diluted net loss per common share $ ( 0.00 ) $ ( 0.00 ) Weighted average number of common shares outstanding - Basic and Diluted 285,499,204 196,684,814 The accompanying notes are an integral part of these unaudited financial statements. -F2- Table of Contents Sparx Holdings Group, INC. STATEMENT OF CHANG ES IN STOCKHOLDERS’ (DEFICIT) FOR THE PERIOD ENDED SEPTEMBER 30, 2023 (UNAUDITED) Common Shares Par Value Common Shares Additional Paid-in Capital Accumulated Deficit Total Balances, June 30, 2023 283,825,031 $ 28,383 $ 129,374 $ ( 58,138 ) $ 99,619 Common shares sold 1,525,000 152 30,348 - 30,500 Expenses paid on behalf of the Company and contributed to capital - - 15,065 - 15,065 Net loss - - - ( 38,025 ) ( 38,025 ) Balances, September 30, 2023 285,350,031 $ 28,535 $ 174,787 $ ( 96,163 ) $ 107,159 SPARX HOLDINGS GROUP, INC. STATEMENT OF CHANGES IN STOCKHOLDERS’ (DEFICIT) FOR THE PERIOD ENDED SEPTEMBER 30, 2022 (UNAUDITED) Common Shares Par Value Common Shares Additional Paid-in Capital Accumulated Deficit Total Balances, June 30, 2022 178,750,031 $ 17,875 $ ( 7,422 ) $ ( 10,453 ) $ - Shares issued as compensation 100,000,000 10,000 - - 10,000 Expenses paid on behalf of the Company and contributed to capital - - 4,775 - 4,775 Net loss - - - ( 14,775 ) ( 14,775 ) Balances, September 30, 2022 278,750,031 $ 27,875 $ ( 2,647 ) $ ( 25,228 ) $ - The accompanying notes are an integral part of these unaudited financial statements. -F3- Table of Contents Sparx Holdings Group, INC. STATEMENT OF CASH FLOWS (UNAUDITED) Three Months September 30, 2023 Three Months September 30, 2022 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ ( 38,025 ) $ ( 14,775 ) Adjustment to reconcile net loss to net cash used in operating activities: Expenses contributed to capital 15,065 4,775 Share-based compensation - 10,000 Changes in current assets and liabilities: Accrued expenses ( 600 ) - Net cash used in operating activities ( 23,560 ) - CASH FLOWS FROM FINANCING ACTIVITIES Cash from the sale of common shares $ 30,500 $ - Net cash provided by financing activities 30,500 - Net change in cash $ 6,940 $ - Beginning cash balance 100,219 - Ending cash balance 107,159 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid $ - $ - Income taxes paid $ - $ - The accompanying notes are an integral part of these unaudited financial statements. -F4- Table of Contents Sparx Holdings Group, INC. NOTES TO THE UNAUDITED FINANCIAL STATEMENTS Note 1 - Organization and Description of Business Sparx Holdings Group, Inc. (“the Company”), formerly known as “Prime Time Holdings, Inc.”, was incorporated on June 30, 2021 in the State of Nevada. 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. The Patent License Agreement was filed as an exhibit to our Form 8-K, as filed with the SEC on August 29, 2022. It is included herein by reference. The Company is seeking business opportunities in the area of fire suppression technologies. Currently, the company is developing a battery-operated wireless electronic fire sprinkler network, which it has named the “Sparx™ Smart Sprinkler System.” The development of the Sparx™ Smart Sprinkler System is in its early stages, with a full prototype of the entire system nearing completion. The Sparx™ Smart Sprinkler System is being designed to seamlessly integrate with conventional sprinklers typically found in warehouses and commercial spaces. It distinguishes itself through its sensor-based design, with initial tests showing prompt detection of fire hazards. The Sparx™ Smart Sprinkler System is intended to activate targeted sprinkler heads surrounding the fire's origin and halt its potential spread. The Company has elected June 30 th as its year end. -F5- Table of Contents 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. These financial statements should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s most recent audited financial statements contained within the Company’s Annual Report on Form 10-K, filed with the SEC on September 8, 2023 (the “2023 Annual Report”). In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim period presented have been reflected herein. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full fiscal year. Notes to the consolidated financial statements, which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period as reported in the 2023 Annual Report, have been omitted. 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 September 30, 2023 and June 30, 2023 were $ 107,159 and $ 100,219 respectively. 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 September 30, 2023 and June 30, 2023. Basic Earnings (Loss) Per Share 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 September 30, 2023. 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. -F6- Table of Contents 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). 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 September 30, 2023. The Company’s stock-based compensation for the periods ended September 30, 2023 and September 30, 2022 were $0 and $10,000 respectively. Recently Issued Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 is amended by ASU 2018-01, ASU2018-10, ASU 2018-11, ASU 2018-20 and ASU 2019-01, which FASB issued in January 2018, July 2018, July 2018, December 2018 and March 2019, respectively (collectively, the amended ASU 2016-02). The amended ASU 2016-02 requires lessees to recognize on the balance sheet a right-of-use asset, representing its right to use the underlying asset for the lease term, and a lease liability for all leases with terms greater than 12 months. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from current GAAP. The amended ASU 2016-02 retains a distinction between finance leases (i.e. capital leases under current GAAP) and operating leases. The classification criteria for distinguishing between finance leases and operating leases will be substantially similar to the classification criteria for distinguishing between capital leases and operating leases under current GAAP. The amended ASU 2016-02 also requires qualitative and quantitative disclosures designed to assess the amount, timing, and uncertainty of cash flows arising from leases. A modified retrospective transition approach is permitted to be used when an entity adopts the amended ASU 2016-02, which includes a number of optional practical expedients that entities may elect to apply. We have no assets and or leases that we believe will be impacted in the foreseeable future by the newly adopted accounting standard(s) mentioned above. 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 or from the sale of common stock pursuant to its active Regulation A Offering. There is no assurance that management's plan(s) 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 September 30, 2023, the Company has incurred a net loss of approximately $ 96,163 which resulted in a net operating loss for income tax purposes. The loss results in a deferred tax asset of approximately $20,194 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, 2023, we have completed only three taxable fiscal years. 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, Los s 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 September 30, 2023 except for the following: On August 29, 2022, we entered into and consummated a Patent License Agreement (“Agreement”) with Sparx Holdings, 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. 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. There were no shares of Preferred Stock issued and outstanding as of September 30, 2023 and June 30, 2023. Common Stock The authorized Common 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 September 30, 2023 and June 30, 2023, respectively. During the period ended September 30, 2023, 1,525,000 shares of Common Stock were sold to 7 investors at $.02 per share for proceeds totaling $30,500. The aforementioned investors are non-related parties. On or about May 3, 2023, the Company sold 5,000,000 shares of our Common Stock to an investor at $.02 per share for total proceeds of $100,000. The aforementioned investor is a non-related party. On or about January 4, 2023, the Company issued 75,000 shares of our Common Stock to a non-related party in exchange for services related to the Company. Additional Paid-In Capital During the period ended September 30, 2023, the Company’s director, Jeffrey DeNunzio, paid expenses on behalf of the Company totaling $ 15,065 . The Company’s director, Jeffrey DeNunzio, paid expenses on behalf of the company totaling $ 27,303 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 $ 4,001 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. Note 8 - Subsequent Events Management has reviewed financial transactions for the Company subsequent to the period ended September 30, 2023 and has found that there was nothing material to disclose. -F7- Table of Contents ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-Looking Statements Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Company Overview We are a fire protection technology company incorporated in the state of Nevada on June 30, 2021, and headquartered in Cranston, Rhode Island with a mission to provide fire protection to businesses and building owners that operate within infrastructures that cannot be reasonably protected by traditional fire sprinklers. Traditional fire sprinklers are primarily mechanical devices that contain a heat-sensitive element that could be in the form of a glass bulb or a fusible metal link that will rupture or melt at a certain temperature threshold, activating the sprinkler and allowing water to flow. Traditional sprinklers will not turn on all at once. Each one activates independently, on its own. We intend, with Sparx Technologies, LLC (“Sparx”), to pioneer the fire protection industry with a commercially available wireless electronic fire sprinkler network and develop the industry’s first commercially available wireless electronic fire sprinkler system that can be adaptable for 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. 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 scope of the provisional patent includes the following: A. System details for a fire sprinkler system that communicates wirelessly. B. Algorithm descriptions and flowcharts for power reduction which allow for the creation of a battery-powered wireless fire sprinkler product. C. Potential methods for fire detection and electronic sprinkler actuation. D. Explanations detailing the system architecture for a wireless fire sprinkler network. E. Device descriptions and functions for participating network devices. Our Chief Executive Officer and Director, Casandra 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 prototype electronic circuits, assemble simple 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 final components of a prototype stage, battery-operated wireless electronic sprinkler network, to be utilized in wireless fire suppression technology. The Company has named the system the, “Sparx™ Smart Sprinkler System.” The prototype is in the development stages and will require further bench testing and field testing in simulated fire scenarios, in order for the Company to move closer to being able to bring the system to market. -3- Table of Contents Third-Party Testing To effectively market our Sparx™ Smart Sprinkler System, 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 available cash reserves 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. Additional Information The Company has recently launched a website, sparx-fire.com to provide development updates. The website has been designed by our sole officer, Cassandra DeNunzio. On or about January 4, 2023, the Company issued 75,000 shares of our Common Stock to a non-related party in exchange for their services related to designing a component of the battery-operated wireless electronic sprinkler network that is currently being developed by Sparx Technologies, LLC. As mentioned previously, the battery-operated wireless electronic sprinkler network, remains in the prototype stages of development 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. The Company plans to commercialize Licensor’s wireless fire suppression technology into a fire protection/fire safety product line and seek approval from regulators. We plan to offer our advanced proprietary wireless sprinkler technology in the design, installation, and system integration to protect a variety of premises including commercial buildings and industrial sites from highly challenging fires. Our Approach We believe that there is a lot of room for innovation and opportunity 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 components 1 . Traditional sprinklers cultivated from 19 th century science use the same physical element to detect fires as they do to cause water to flow. Because the heat-sensitive operating element of traditional fire sprinklers shares two important primary functions, this technology can face significant complications. 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. Because detection and activation are combined functions of traditional sprinkler technology, 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 spread 2 . The patent pending technology in the product(s) we seek to offer, 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. In combination with Sparx Technologies, LLC, 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 algorithms 3 tailored to the building, environment, and the structure and commodities the system is designed to protect. Our framework will allow us to make minimal, non-invasive changes when applying our 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 will be able to use software to change the way sprinklers respond to fires without redesigning the physical components of the sprinkler itself. This flexibility and adaptability will give Sparx an advantage when it comes to making design changes and expanding our product offerings. 1 Murphey, 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/. 2 Xin, Yibing. “SMART Sprinkler for Highly Challenging Fires.” SFPE Europe , Issue 20 (Q4 2020). https://www.sfpe.org/publications/sfpeeuropedigital/sfpeeurope20. 3 Our 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. -4- Table of Contents Current Status of our Technology We cannot currently provide a specific estimate for when our Sparx™ Smart Sprinkler System will be ready for market release or when we will begin UL and/or FM testing. When we have a clear timeline for these efforts, we intend to notify our investors. As mentio ned above, we believe we are in the final stages of developing our initial prototype. Our goal is to have a complete prototype system, rather than just individual components, ready for further beta testing by the end of the year. We have been making significant strides towards the finalization of our "hub," a pivotal component of the patent-pending technology behind the Sparx™ Smart Sprinkler System. The Sparx™ Smart Sprinkler System comprises a hub that collects information, such as heat, carbon dioxide levels, flame presence, and smoke content from Sensing and Activation Units installed at each fire sprinkler in the system. The hub has the ability to force open traditional fire sprinklers that are integrated with our patent-pending activation technology. Presently, we are continuing to work on the development of the proprietary software embedded within the hub. This software is engineered to facilitate seamless communication with multiple Sensing and Activation Units and show the user if any alarms are present within the system. The hub itself is designed as a sleek touchscreen device which will be mounted on an electrical box containing important electronics, battery back-up power, and circuitry to provide effective system operation. The hub will be able to be mounted on walls or flat surfaces, offering users essential information related to the health and status of the Sparx™ Smart Sprinkler System, alerts, and pertinent data. Above is an image showcasing the current state of the touchscreen development for the hub. Liquidity and Capital Resources Our cash balance is $107,159 as of September 30, 2023 and $100,219 as of June 30, 2023. Our cash balance is not sufficient to fund our planned future operations for any substantive period of time. In order to implement our plan of operations for the next twelve-month period, we require further funding. After a twelve-month period, we may need additional financing but currently do not have any arrangements for such financing aside from the Regulation A, Tier II Offering which is currently active and underway. Information related to our offering circular can be found in our Offering Statement, initially filed with the SEC on March 31, 2023, and subsequently qualified by the Commission on April 11, 2023. Our Offering Statement was further supplemented on May 1, 2023, May 5, 2023, May 11, 2023 and May 16, 2023. If we need additional cash and cannot raise it, we will either have to scale back, or suspend operations until we do raise the cash we need. To date we have relied entirely on funds provided to us by our officers and directors, and until we have additional sources of funding, we intend to continue to rely upon our officers and directors to fund our operations. Currently we have one officer, Cassandra DeNunzio, and two Directors, Cassandra DeNunzio and Jeffrey DeNunzio. Assets Our total assets as of September 30, 2023, and June 30, 2023, were $107,159 and $100,219, respectively. Total assets were comprised of cash and cash equivalents. The Company’s Sparx™ Smart Sprinkler System prototype, is not recognized on the balance sheet. Revenues We have not generated any revenue to date. Operating Expenses Our general and administrative expenses were $36,930 for the three months ended September 30, 2023 and $14,775 for the three months ended September 30, 2022. Our Research and Development fees were $1,095 and $0 for the three months ended September 30, 2023 and September 30, 2022, respectively. Our total operating expenses were $38,025 and $14,775 for the three months ended September 30, 2023 and September 30, 2022 respectively. For both periods total operating expenses primarily consisted of General and Administrative Expenses. The variance in total operating expenses was primarily due to an increase in business activity for the period ended September 30, 2023. Net Loss We have recorded a net income/ loss of $(38,025) for the three months ended September 30, 2023, and a net income/ loss of $(14,775) for the three months ended September 30, 2022. The variance in net loss is attributable to an increase in the level of our overall operations. Until we are able to generate revenue to cover our operating expenses, we expect our net loss to continue to increase as we further our operations. Additional Paid-In Capital During the period ended September 30, 2023, the Company’s director, Jeffrey DeNunzio, paid expenses on behalf of the Company totaling $15,065. The Company’s director, Jeffrey DeNunzio, paid expenses on behalf of the company totaling $27,303 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 $4,001 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. 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 ope rating 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 or from the sale of common stock pursuant to its active Regulation A Offering. There is no assurance that management's plan(s) 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. ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this Item. -5- Table of Contents ITEM 4 CONTROLS AND PROCEDURES Management’s Report on Disclosure Controls and Procedures We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer, and our chief financial officer, Cassandra DeNunzio, (who is acting as our principal executive officer, principal financial officer and principle accounting officer) to allow for timely decisions regarding required disclosure. As of September 30, 2023, the end of the fiscal period covered by this report, we carried out an evaluation, under the supervision of our chief executive officer, and chief financial officer, Cassandra DeNunzio, of the effectiveness of the design and the operation of our disclosure controls and procedures. Our officer concluded that the disclosure controls and procedures were not effective as of the end of the period covered by this report due to material weaknesses identified below. The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: domination of management by a limited individuals without adequate compensating controls, lack of a majority of outside directors on the board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures, inadequate segregation of duties consistent with control objectives and lack of well-established procedures to identify, approve and report related party transactions. These material weaknesses were identified by our Chief Executive Officer, who also serves as our Chief Financial Officer in connection with the above evaluation. Inherent limitations on effectiveness of controls Internal control over financial reporting has inherent limitations which include but is not limited to the use of independent professionals for advice and guidance, interpretation of existing and/or changing rules and principles, segregation of management duties, scale of organization, and personnel factors. Internal control over financial reporting is a process which involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis, however these inherent limitations are known features of the financial reporting process and it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Changes in Internal Control over Financial Reporting There have been no changes in our internal controls over financial reporting that have occurred for the most recent fiscal quarter ending September 30, 2023, that have materially or are reasonably likely to materially affect, our internal controls over financial reporting. -6- Table of Contents PART II-OTHER INFORMATION ITEM 1 LEGAL PROCEEDINGS There are no legal proceedings against the Company and the Company is unaware of such proceedings contemplated against it. ITEM 1A RISK FACTORS As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this Item. ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 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 was filed as an exhibit to our Form 8-K, as filed with the SEC on August 29, 2022. It is incorporated herein by reference. 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. The 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. On or about January 4, 2023, the Company issued 75,000 shares of our Common Stock to a non-related party in exchange for their services related to designing a component of a battery-operated wireless electronic sprinkler network that is currently being developed by Sparx Technologies, LLC. The battery-operated wireless electronic sprinkler network, remains in the prototype stages of development. No consideration was exchanged pursuant to this transaction. As mentioned above, we have a vested interest in Sparx Technologies, LLC as we intend to sell products developed by Sparx Technologies, LLC. A summary of the terms of our arrangement with Sparx Technologies, LLC are detailed above. Full terms can be found in Exhibit 10.1, included herein by reference via hyperlink, to our Form 8-K filed with the Securities and Exchange Commission on August 29, 2022. ITEM 3 DEFAULTS UPON SENIOR SECURITIES None ITEM 4 MINE SAFETY DISCLOSURES Not applicable. ITEM 5 OTHER INFORMATION None ITEM 6 EXHIBITS (a) Exhibits required by Item 601 of Regulation S-K. Exhibit No. Description 3.1 Certificate of Incorporation (1) 3.1 (i) Certificate of Amendment (2) 3. 2 Amended and Restated By-laws (3) 10.1 Patent License Agreement (4) 31 Certification of the Company’s Principal Executive and Principal Financial Officer pursuant to the Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (5) 32 Certification of the Company’s Principal Executive and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (5) 101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). 101.SCH Inline XBRL Taxonomy Extension Schema 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase 101.LAB Inline XBRL Taxonomy Extension Label Linkbase 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase 104 Cover Page Interactive Data File (embedded within the Inline XBRL document). (1) Filed as an exhibit to the Company's Form 10-12G, as filed with the SEC on July 26, 2021, and incorporated herein by this reference. (2) Filed as an exhibit to the Company's Form 8-K, as filed with the SEC on July 22, 2022, and incorporated herein by this reference. (3) Filed as an exhibit to the Company's Form 1-A, as filed with the SEC on March 31, 2023, and incorporated herein by this reference. (4) Filed as an exhibit to the Company’s Form 8-K, as filed with the SEC on August 29, 2022, and incorporated herein by this reference. (5) Filed herewith. -7- Table of Contents SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, there unto duly authorized. Sparx Holdings Group, Inc. (Registrant) By: /s/ Cassandra DeNunzio Cassandra DeNunzio Chief Executive Officer and Chief Financial Officer, (Principal Executive Officer and Principal Financial Officer) Dated: November 14, 2023 -8-