10-Q: Sparta Commercial Services Reports Q3 Loss, Revenue Up 71%

Sparta Commercial Services, Inc. reported a reduced net loss for the nine months ended January 31, 2026, driven by a 71% revenue increase, primarily from merchant financing, despite ongoing liquidity challenges and significant accumulated deficits.

Summary

• Net loss for the nine months ended January 31, 2026, improved to $1,399,213 from $1,788,457 in the prior year.
• Total revenue increased by 71% to $288,157 for the nine months ended January 31, 2026, compared to $168,357 in the same period last year.
• Merchant financing revenue saw a substantial increase to $158,705 for the nine months ended January 31, 2026, up from $54,365 in the prior year.
• The company continues to face significant liquidity issues, with an accumulated deficit of $70,342,036 and a working capital deficit of $10,467,055 as of January 31, 2026.
• Cash and cash equivalents decreased to $70,116 as of January 31, 2026, from $131,003 as of April 30, 2025.
• Net cash used in operating activities improved to $725,087 for the nine months ended January 31, 2026, from $1,179,977 in the prior year.
• The company issued 1,938,656 warrants and 4,560,000 stock options during the nine months ended January 31, 2026.
• Material weaknesses in internal control over financial reporting were identified, including a lack of documented policies, no audit committee, risk of management override, and insufficient segregation of duties.

Sentiment

Score: 2

Explanation: StockSavvy.ai views this as a highly negative filing due to severe ongoing liquidity issues, a substantial accumulated deficit, explicit going concern warnings, and critical internal control weaknesses, despite some revenue growth.

Positives

• Total revenue increased by 71% for the nine months ended January 31, 2026, reaching $288,157.
• Merchant financing revenue significantly grew to $158,705, up from $54,365 in the prior year.
• Net loss attributed to common stockholders improved to $1,423,052 for the nine months ended January 31, 2026, from $1,791,717 in the prior year.
• Basic and diluted loss per share improved to $0.03 for the nine months ended January 31, 2026, from $0.05 in the prior year.
• Net cash used in operating activities decreased to $725,087, indicating improved operational cash efficiency compared to $1,179,977 in the prior year.
• A gain of $40,035 was recognized from the change in fair value of derivative liabilities for the nine months ended January 31, 2026, compared to a loss of $467,620 in the prior year.

Negatives

• The company has an accumulated deficit of $70,342,036 as of January 31, 2026.
• A working capital deficit of $10,467,055 exists as of January 31, 2026.
• Cash and cash equivalents decreased to $70,116 as of January 31, 2026, from $131,003 as of April 30, 2025.
• Interest expense on notes significantly increased to $688,021 for the nine months ended January 31, 2026, from $493,257 in the prior year.
• The company's cash balance and revenues are not sufficient to cover operating expenses for the next twelve months, raising substantial doubt about its ability to continue as a going concern.
• Weighted average shares outstanding increased to 42,883,737 for the nine months ended January 31, 2026, from 33,948,761 in the prior year, indicating dilution.
• Loans payable to related parties (officers and directors) totaled $646,776 as of January 31, 2026.
• Accrued payroll tax liabilities were approximately $284,777 as of January 31, 2026, with ongoing negotiations with the IRS.

Risks

• Going Concern Uncertainty: The company has incurred recurring losses and negative cash flows from operating activities since inception, with an accumulated deficit of $70,342,036 and a working capital deficit of $10,467,055 as of January 31, 2026. Its current cash and revenues are insufficient to cover operating expenses for the next twelve months, raising substantial doubt about its ability to continue as a going concern.
• Liquidity and Capital Needs: The company requires approximately $1,000,000 in additional financing over the next twelve months to conduct operations, and there is no assurance that such financing will be available on favorable terms or at all.
• Dilution Risk: Any additional equity financing sought to address liquidity issues may be dilutive to existing stockholders, and new equity securities could have senior rights, preferences, or privileges.
• Internal Control Weaknesses: Material weaknesses in internal control over financial reporting exist, including a lack of documented policies and procedures, absence of an audit committee, risk of management override due to high involvement in day-to-day operations, and insufficient segregation of duties. This raises a reasonable possibility of material misstatements in financial statements not being prevented or detected timely.
• Dependence on Management Efforts: The company's existence is dependent upon management's ability to develop profitable operations and raise capital, with no assurance of success.
• Uncertainty of Sparta Crypto Platform Launch: The Sparta Crypto platform is scheduled to launch in 2026, but the company can make no assurances that the described plan will reach implementation.
• Debt Financing Covenants: If debt financing is obtained, it may involve restrictive covenants that could limit operating flexibility.

Future Outlook

The company anticipates needing approximately $1,000,000 in additional financing over the next twelve months to support operations, as current cash and revenues are insufficient. There is no assurance that this financing will be secured on favorable terms. The Sparta Crypto platform is scheduled to launch in 2026, but its implementation is not guaranteed. The company expects its employee base to increase if its business plan is fully implemented, contingent on generating increased revenues and obtaining financing. Management is actively pursuing additional equity financing through discussions with investment bankers, private equity groups, and private investors.

Management Comments

• Management is devoting substantially all its efforts to developing its business and raising capital and there can be no assurance that the Company’s efforts will be successful.
• Management is currently evaluating the steps to address these material weaknesses [in internal controls].
• Management believes that adequate provisions have been made for all payroll tax obligations; however, the ultimate amount payable may differ from recorded amounts due to changes in tax regulations, audit outcomes, or other factors.
• We can make no assurances that our business operations will develop and provide us with significant cash to continue operations.

Industry Context

StockSavvy.ai notes that Sparta Commercial Services operates across diverse sectors including FinTech, E-Commerce, and Health & Wellness, reflecting a strategy to diversify revenue streams. The significant growth in merchant financing, particularly through Agoge Global USA, Inc. targeting cross-border trade for Brazilian importers, positions the company in a high-growth niche within the FinTech space. However, the broader industry context for a multi-disciplined parent corporation with a history of recurring losses and going concern issues often involves intense competition and challenges in achieving economies of scale across disparate business lines. The planned launch of Sparta Crypto in 2026 indicates an attempt to capitalize on the digital currency market, a sector known for its volatility and regulatory complexities.

Comparison to Industry Standards

• Sparta's accumulated deficit of over $70 million and recurring net losses are significantly below industry standards for established, profitable companies.
• The working capital deficit of over $10 million indicates severe short-term liquidity issues, which is a red flag compared to healthy industry benchmarks that typically show positive working capital.
• The reliance on continuous capital raises and the explicit "going concern" warning from auditors are critical deviations from the financial stability expected of publicly traded companies.
• While a 71% revenue increase is positive, the absolute revenue figure of $288,157 for nine months is very small for a publicly traded company operating across multiple sectors, especially when compared to the scale of operations of successful FinTech or E-commerce players. For example, a typical small-cap FinTech company might generate tens of millions in revenue annually.
• The identified material weaknesses in internal controls, including the lack of an audit committee and segregation of duties, fall significantly short of corporate governance best practices and regulatory expectations for public companies, unlike larger, more mature industry peers that have robust control frameworks.

Management Changes

Corporate Governance

Legal Proceedings

• No pending litigation against Sparta as of January 31, 2026. All prior litigation has been discontinued, settled, or resolved with no liability.

Related Party Transactions

• Loans payable to related parties (officers and directors) aggregated $646,776 as of January 31, 2026, and $636,233 as of April 30, 2025.

Stakeholder Impact

• Shareholders: Face significant dilution risk from ongoing equity financing, substantial accumulated deficits, and the uncertainty of the company's going concern status. The stock options issued to management and warrants to investors also contribute to potential dilution.
• Employees: Potential for increased employment base is contingent on successful capital raises and revenue growth, which are uncertain given the company's financial state.
• Creditors: Hold significant notes payable, including convertible notes, and face risks associated with the company's liquidity and going concern issues. Loans payable to related parties also exist.
• Customers: Continued operations and service delivery for FinTech, E-commerce, and Health & Wellness products depend on the company's ability to secure financing and achieve profitable operations.

Next Steps

• Management is actively pursuing additional equity financing to address liquidity problems.
• Management is evaluating steps to address identified material weaknesses in internal controls.
• The Sparta Crypto platform is scheduled to launch in 2026, though implementation is not assured.
• Agoge Global USA, Inc. is seeking debt financing to scale its platform.
• The company is in negotiation with the IRS regarding accrued payroll taxes and expects to settle within the next 12 months.
• The company anticipates its employment base may increase during the next twelve months, contingent on increased revenues and financing.

Key Dates

Recommendation

The company faces severe financial distress, evidenced by recurring losses, a substantial accumulated deficit, a significant working capital deficit, and an explicit "going concern" warning from both management and auditors. While revenue growth is noted, it is insufficient to offset operational costs and debt obligations. Material weaknesses in internal controls further undermine investor confidence. The ongoing need for capital raises, coupled with no firm commitments, suggests high risk of further dilution or potential operational cessation. A seasoned investor would view these factors as overwhelmingly negative, indicating a high probability of significant capital loss.

Keywords

FinTech Services, Financial Services, E-Commerce Technology, Health and Wellness, Merchant Financing, SEC Filing, Quarterly Report, Going Concern, Liquidity, Capital Raise, Internal Controls, Sparta Commercial Services, SRCO, Agoge Global USA, Sparta Crypto, New World Health Brands