10-Q: Sparta Commercial Services Reports Q1 Loss, Revenue Up 133%

Sentiment:

Quarterly Report 19 September 2025 5:30 PM

📋All filings for Sparta Commercial Services, INC

Sparta Commercial Services, Inc. reported a reduced net loss for Q1 2025, driven by significant revenue growth in merchant financing and wellness products, despite ongoing going concern issues and internal control weaknesses.

Delay expectedSparta Crypto, Inc.'s proprietary state-of-the-art platform is scheduled to launch in 2026, but the company states it can make no assurances that the described plan will reach implementation, indicating potential for delay or non-completion.

Capital raiseThe company received $95,000 from the sale of common shares to accredited investors during the three months ended July 31, 2025.Net proceeds from notes payable amounted to $166,000 during the three months ended July 31, 2025.Subsequent to July 31, 2025, the company issued 342,042 shares valued at $20,000 to accredited investors related to equity investments.Management is actively pursuing additional equity financing through discussions with investment bankers, private equity groups, and private investors.The company estimates needing approximately $1,000,000 in additional financing over the next twelve months to conduct operations.

Better than expectedTotal revenue increased by 133% year-over-year.Net loss attributed to common stockholders decreased by 50% year-over-year.Loss from operations improved significantly.Merchant financing and wellness products segments showed strong revenue growth.

Summary

Total revenue for the three months ended July 31, 2025, increased by 133% to $96,688, up from $41,551 in the prior year period.
Net loss attributed to common stockholders significantly improved to $(482,329) for Q1 2025, compared to $(963,173) for Q1 2024.
Basic and diluted loss per share improved to $(0.01) for Q1 2025, from $(0.03) in Q1 2024.
Merchant financing revenue saw a substantial increase to $52,590 in Q1 2025 from $2,145 in Q1 2024.
Wellness products revenue grew to $11,330 in Q1 2025 from $5,062 in Q1 2024.
Operating expenses decreased by 2% to $367,549 in Q1 2025, primarily due to lower compensation and consulting costs.
The company continues to face a going concern warning, with an accumulated deficit of $69,401,313 and a working capital deficit of $9,960,973 as of July 31, 2025.
Management concluded that disclosure controls and procedures were not effective due to material weaknesses in internal control over financial reporting.
The company estimates needing approximately $1,000,000 in additional financing over the next twelve months to conduct operations.

Sentiment

Score: 3

Explanation: While the company showed significant revenue growth and a reduced net loss, the severe going concern warning, substantial accumulated deficit, and material weaknesses in internal controls indicate a highly precarious financial position. The need for significant future capital raises and the uncertainty surrounding the crypto platform launch further dampen sentiment.

Positives

Total revenue increased by 133% to $96,688 for the three months ended July 31, 2025, compared to $41,551 in the prior year.
Net loss attributed to common stockholders decreased by 50% to $(482,329) for Q1 2025, a significant improvement from $(963,173) in Q1 2024.
Loss from operations improved to $(279,333) in Q1 2025 from $(343,794) in Q1 2024.
Merchant financing revenue experienced substantial growth, reaching $52,590 in Q1 2025 from $2,145 in Q1 2024.
Wellness products revenue more than doubled to $11,330 in Q1 2025 from $5,062 in Q1 2024.
Operating expenses decreased by 2% year-over-year, primarily due to a reduction in compensation and consulting fees.
Net cash used in operating activities improved to $(346,671) in Q1 2025 from $(449,461) in Q1 2024.

Negatives

The company has incurred recurring losses and generated negative cash flows from operating activities since inception, raising substantial doubt about its ability to continue as a going concern.
As of July 31, 2025, the company had an accumulated deficit of $69,401,313 and a working capital deficit of $9,960,973.
Cash and cash equivalents decreased significantly to $45,332 as of July 31, 2025, from $131,003 as of April 30, 2025.
Total liabilities increased to $11,744,282 as of July 31, 2025, from $11,349,644 as of April 30, 2025.
Information technology revenue slightly decreased to $32,768 in Q1 2025 from $34,344 in Q1 2024.
Loans payable to related parties increased to $639,748 as of July 31, 2025, from $363,233 as of April 30, 2025.

Risks

The company's recurring losses and negative cash flows from operating activities since inception raise substantial doubt about its ability to continue as a going concern.
Cash balance and revenues are not currently sufficient to cover operating expenses for the next twelve months.
There is no assurance that efforts to secure additional equity financing will be successful, and any additional equity financing may be dilutive to stockholders.
Debt financing, if available, may require interest payments and involve restrictive covenants limiting operating flexibility.
Material weaknesses exist in internal control over financial reporting, including a lack of documented policies and procedures, no audit committee, risk of management override, and ineffective separation of duties.
Disclosure controls and procedures were deemed not effective as of July 31, 2025.
The company's ability to attract and retain quality personnel is dependent on generating increased revenues and obtaining financing to offer competitive salaries.
The proprietary state-of-the-art platform by Sparta Crypto, Inc. is scheduled to launch in 2026, but there are no assurances that the plan will reach implementation.

Future Outlook

The company anticipates an increase in its employment base during the next twelve months if its business plan is fully implemented, contingent on generating increased revenues and obtaining additional financing. The Sparta Crypto, Inc. platform is scheduled to launch in 2026, though no assurances are given regarding its implementation. Management estimates needing approximately $1,000,000 in additional capital over the next twelve months to fund operations.

Management Comments

Management is devoting substantially all its efforts to developing its business and raising capital.
Management is actively pursuing additional equity financing through discussions with investment bankers, private equity groups, and private investors to improve liquidity.
Management believes that despite significant deficiencies in internal controls, the consolidated financial statements for the three months ended July 31, 2025, are fairly stated, in all material respects, in accordance with U.S. GAAP.

Industry Context

Sparta Commercial Services operates across diverse sectors including FinTech, Financial Services, E-Commerce & Mobile Technology, and Health and Wellness. Its FinTech subsidiary, Agoge Global USA, Inc., is targeting the cross-border trade finance market between the U.S. and Brazil, a $252 billion market, by addressing inefficiencies with blockchain-enabled platforms. The company's municipal financing program continues to serve a niche market for essential equipment. Its E-commerce and Mobile Technology segment provides customizable solutions for small-to-medium businesses, while its Health and Wellness segment focuses on U.S.-sourced nutritional supplements. The company aims to compete by focusing on underserved markets and deploying proprietary technology.

Comparison to Industry Standards

Management Changes

Role	Previous Person	New Person	Effective Date	Reason
CEO	NA	Anthony L. Havens	NA	Existing employment agreement, received five-year options to purchase 376,256 shares.
Vice President of Operations	NA	Sandra L. Ahman	NA	Existing employment agreement, received five-year options to purchase 125,419 shares.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Internal Control Weaknesses	Identified material weaknesses in internal control over financial reporting, including lack of documented policies and procedures, absence of an audit committee, risk of management override, and lack of effective separation of duties.	July 31, 2025	These deficiencies resulted in a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis. Disclosure controls and procedures were deemed not effective.

Legal Proceedings

As of July 31, 2025, there is no pending litigation against Sparta. All prior litigation has been discontinued, settled, or otherwise resolved with no liability whatsoever against Sparta.

Related Party Transactions

Loans payable to related parties (officers and directors) aggregated $639,748 as of July 31, 2025, an increase from $363,233 as of April 30, 2025.

Stakeholder Impact

Shareholders face significant dilution risk from potential future equity financing and the ongoing accumulated deficit.
Employees may see an increase in the employment base if the business plan is fully implemented, but this is contingent on successful financing and revenue generation.
Creditors face elevated risk due to the company's going concern warning and substantial liabilities.
Customers in FinTech, Municipal Financing, E-Commerce, and Health & Wellness segments may benefit from continued service offerings, but the company's financial instability poses a long-term risk to service continuity.

Next Steps

Management will continue to pursue additional equity financing through discussions with investment bankers, private equity groups, and private investors.
The company plans to adjust planned operations and development on a more limited scale if unable to generate sufficient liquidity or raise capital.
Management is evaluating steps to address material weaknesses in internal controls, aiming to implement procedures for segregation of duties where possible.
Sparta Crypto, Inc.'s proprietary platform is scheduled to launch in 2026.

Key Dates

Date	Description
2007	Launch of the Municipal Financing program.
July 31, 2018	Executive office sublease expired and continues on a month-to-month basis.
August 2020	New World Health Brands, Inc. began offering nutritional supplements.
September 2020	Sparta Crypto, Inc. established.
March 3, 2022	SpartaPayIQ cryptocurrency payment gateway formally announced.
December 2022	Agoge Global USA, Inc. formed as a subsidiary of Sparta Crypto, Inc.
November 2023	FASB issued ASU 2023-07, Segment Reporting (Topic 280).
December 15, 2023	Effective date for ASU 2023-07 for fiscal years beginning after this date.
April 30, 2024	Previous fiscal year-end for comparison in financial statements.
July 31, 2024	End of prior year's quarterly period for comparison.
December 15, 2024	Effective date for ASU 2023-07 for interim periods within fiscal years beginning after this date.
April 30, 2025	Fiscal year-end for which audited consolidated financial statements were filed in Form 10-K.
July 31, 2025	End of the current quarterly reporting period.
August 13, 2025	Form 10-K for the year ended April 30, 2025, filed with the SEC.
September 19, 2025	Filing date of the current Form 10-Q.
2026	Sparta Crypto, Inc.'s proprietary state-of-the-art platform is scheduled to launch.
April 30, 2026	End of the full year for which Q1 2025 results are not necessarily indicative.

Recommendation

strong sell

Despite a significant increase in revenue and a reduced net loss, the company's severe going concern warning, substantial accumulated deficit, and working capital deficit indicate a highly unstable financial position. The identified material weaknesses in internal controls and the explicit need for significant additional financing with no current commitments present fundamental risks to the company's viability. The potential for further dilution and the uncertainty surrounding future operations make this a high-risk investment with a strong likelihood of further value erosion.

Keywords

FinTech, Merchant Financing, Wellness Products, Mobile Technology, Vehicle History Reports, Municipal Financing, SEC Filing, 10-Q, Going Concern, Internal Controls, SRCO

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