Sparx Holdings Group, Inc. 10-Q

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