Quarterly Report for Quarter Ending July 31, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

The following discussion of our financial condition and results of operations should be read in conjunction with (1) our interim unaudited, condensed consolidated financial statements and their explanatory notes included as part of this quarterly Report and (2) our annual audited consolidated financial statements and explanatory notes for the year ended April 30, 2026, as disclosed in our annual Report on Form 10-K for that year as filed with the S.E.C.

"FORWARD-LOOKING" INFORMATION

This report on Form 10-Q contains various statements that may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, Rule 175 promulgated thereunder, Section 21E of the Securities Exchange Act of 1934, as amended, and Rule 3b-6 promulgated thereunder which represent our expectations and beliefs, including, but not limited to, statements concerning the Company's business and financial plans and prospects and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. The words "believe," "expect," "anticipate," "estimate," "project," and other similar expressions can, but not always, identify forward-looking statements, which speak only as of the date such statement was made. We base these forward-looking statements on our current expectations and projections about future events, our assumptions regarding these events and our knowledge of facts at the time the statements are made. These statements by their nature involve substantial risks and uncertainties, certain of which are beyond our control, and actual results may differ materially depending on a variety of important factors. Risks and uncertainties that could cause our financial performance to differ materially from our goals, plans, expectations and projections expressed in forward-looking statements include those set forth in our filings with the Securities and Exchange Commission ("SEC"), including Item 1A of the Company's Annual Report of Form 10-K for the year ended April 30, 2026. Forward-looking statements speak only as of the date they are made. The Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made or to reflect the occurrence of unanticipated events. You should consider any forward-looking statements in light of this explanation, and we caution you about relying on forward-looking statements.

General Overview

Sparta Commercial Services, Inc. ("Sparta," "we," "us," or the "Company") is a Nevada corporation with headquarters in New York, New York, and a corporate website at www.spartacommercial.com, with subsidiary addresses in Stamford, CT. We operate as a multi-disciplined parent corporation across four primary business sectors: FinTech Services, Financial Services, E-Commerce & Mobile Technology, and Health and Wellness. Our operations are conducted through wholly owned subsidiaries and joint ventures that provide specialized financing products, technology-driven solutions, and consumer wellness offerings.

Agoge Global USA, Inc. is a fintech company revolutionizing cross-border trade for Brazilian importers by offering staged financing and automated payment solutions. Through a joint venture with Brazil's WeDev Group, Agoge provides a proprietary platform that simplifies and accelerates invoice payments, customs clearance, and regulatory compliance. The system reduces costly delays, lowers transaction fees, and improves cash flow by enabling importers to pay suppliers, freight, and customs fees in stages-giving them time to sell goods before loans mature. Positioned in a $252 billion market, Agoge is targeting small-to-midsize importers across high-demand sectors and is seeking debt financing to scale its platform and meet growing client demand.

Sparta's subsidiary, Sparta Crypto, Inc., www.SpartaCrypto.com, was established in September 2020, and is in the process of completing a proprietary state-of-the-art platform designed to connect users of widely adopted digital currencies with sellers of various goods and services. The platform is scheduled to launch in 2026, and the Company can make no assurances that the described plan will reach implementation. In addition, the Company completed and tested a cryptocurrency payment gateway called SpartaPayIQ, www.SpartaPayIQ.com, which was formally announced on March 3, 2022.

In 2007, the Company introduced a new initiative, Municipal Financing, (www.spartamunicipal.com), which since inception and through the current date has provided financing over 100 jurisdictions to date. Sparta's Municipal Finance program is also currently available to all nonprofit organizations, institutions and entities. All nonprofit organizations which adhere to IRS guidelines, including 501 (c) 3 of the Internal Revenue Code, are eligible. Both public nonprofits, also known as public charities, supported with publicly collected funds, and private nonprofits, also known as private foundations, supported by an individual or business entity, qualify for the program.

Consumers, retailers, municipals, nonprofits, auction houses, banks, and insurance companies scrutinize title history reports for the vital information needed and factored into crucial business decisions affecting the bottom line. Vehicle History Reports are a staple of Sparta's E-Commerce Technology subsidiary iMobile Solutions, Inc. Whether a vehicle is intended for business or recreational use, Sparta's Vehicle History Reports are highly regarded for accuracy and completeness. They have been sold across all 50 states and in 62 countries worldwide. They provide a trusted layer of assurance to vehicle buyers and are available on our websites as well as on various dealership websites. They include Cyclechex (Motorcycle History Reports at www.cyclechex.com), RVchex (Recreational Vehicle History Reports at www.rvchex.com), and Truckchex (Heavy Duty Truck History Reports at www.truckchex.com).

The Company's E-Commerce and Mobile Technology subsidiary name change to iMobile Solutions, Inc., from Specialty Reports, Inc., in 2016, signifies its ever-broadening service offerings in the evolving technology landscape. With iMobile App (www.imobileapp.com), the Company provides mobile technology services, including web and mobile application creation, development, and management for a wide range of businesses to increase revenue, build brand recognition, and improve customer engagement. Our ever-broadening business base of mobile applications includes vehicle dealerships and racetracks, private clubs and country clubs, schools and entertainment venues, restaurants, grocery stores, and various other merchant types. (www.imobileapp.com/app-gallery). The Company also designs, launches, maintains, and hosts websites for businesses incorporating SEO (search engine optimization), social media marketing, and online reviews to improve their presence online.

We provide specific, tailored action plans for our clients' websites that include services such as eCommerce, CRM (Customer Relationship Management), development, and integration. This custom software helps businesses communicate with customers and can also be used for employees to communicate internally. The CRM software can be web-based, integrated with a mobile app, or both. We work with clients to understand their unique needs and incorporate the features and requirements that are most important to them and will facilitate their business growth and success. Correspondingly, the Company designs and builds custom kitchen ordering software for independent grocery stores, delicatessens, and other food service businesses. The software can be designed in various ways, including mobile devices and in-store ordering. The kitchen ordering software is enabled with payment integration, text messaging notification, wireless printing, and other features. iMobile Solutions, Inc. provides a turn-key solution for businesses looking to simplify or streamline their kitchen ordering process. Additionally, we offer text messaging services, which supplement business marketing strategies to gain and retain brand loyalty among its clients, customers, and investors. Our text messaging platform allows clients to manage, schedule, and analyze text message performance quickly.

In August 2020, we launched an online B to C website: www.newworldhealthbrands.com, featuring high-quality nutritional supplements, including vitamins and minerals, such as, Iodine for children and adults, Boron, copper/Zinc/Selenium, Magnesium, Spermidine, Vitamin B Complex, Vitamin C and PQQ, with more products to come. All health and wellness offerings are exclusively sourced and manufactured in the United States and adhere to strict U.S. standards and guidelines to ensure the safety and quality of our products. Sparta's commitment to high standards and transparency is tantamount to being a trusted brand.

RESULTS OF OPERATIONS

Below is a summary of the results of operations for the three months ended July 31, 2026, and 2025.

Revenues

Revenues totaled $47,698 for the three months ended July 31, 2026, compared to $96,688 for the three months ended July 31, 2025. Revenues decreased by $48,990 or 51% due primarily to a decrease in merchant financing fees.

Cost of Revenue

The cost of revenue consists of costs and fees paid to third parties to construct and maintain mobile apps, as well as fees for subscription services related to vehicle history reports.

Operating Expenses

Operating expenses were $496,870 during the three months ended July 31, 2026, compared to $367,549 during the three months ended July 31, 2025, an increase of $129,321, or 35% primarily due to an increase in compensation and related costs of $63,058, general office expense of $6,904, and provision for credit losses $105,900 offset by a decrease in accounting and legal fees of $28,385 and decrease in consulting fees of $18,156.

The following are the major expense categories:

		July 31, 2026				July 31, 2025				Increase (Decrease)				%
Compensation and Related cost			256,700				193,649				63,058				33	%
Accounting and Legal Fees			1,140				29,525				(28,385	)			-96	%
Consulting Fees			48,709				66,865				(18,156	)			-21	%
Rent and Lease			18,000				18,000				-				0	%
Provision for credit loss			105,900				-				105,900				100	%
General office Expenses			66,414				59,510				6,904				12	%
			496,870				367,549				129,321				35	%

Other income (expense)

During the three months ended July 31, 2026, other expense of $79,204 is comprised primarily of financing costs of $187,104 and loss on extinguishment of debt of $36,802 offset by a gain of the change in valuation of derivative liabilities of $143,226, and other commission income of $1,476.

During the three months ended July 31, 2025, other expense of $195,058 is comprised primarily of financing costs of $167,796 and a loss of the change in valuation of derivative liabilities of $36,686, offset by other commission income of $9,624.

Net Income (Loss)

Our net loss attributed to common stockholders for the three months ended July 31, 2026, was $499,518 compared to a net loss of $482,329 for the three months ended July 31, 2025, primarily due to the change in valuation of derivative liabilities and change in financing costs for the three months ended July 31, 2026, as compared for the three months ended July 31, 2025.

LIQUIDITY AND CAPITAL RESOURCES

As of July 31, 2026, we had an accumulated deficit of $72,289,995 and a total stockholders' deficit of $13,589,446. The net cash flow used by operations was $233,393 for the three months ended July 31, 2026. This deficit results primarily from our net loss of $535,277 an increase in loans receivable related to Agoge Global USA, Inc. of $105,900, offset by increases in non-cash expenses of $101,537 and increases in accounts payable and accrued expenses of $301,478.

We met our cash requirements during the period through revenue of $47,698 and proceed from the sale of common shares of $60,000 and proceed from convertible notes $110,000.

We do not anticipate incurring significant research and development expenditures, and we do not anticipate the sale or acquisition of any significant property, plant or equipment, during the next twelve months. At July 31, 2026, we had 4 full-time employees and three part-time employees. If we fully implement our business plan, we anticipate our employment base may increase during the next twelve months. As we continue to expand, we will incur additional cost for personnel. This potential increase in personnel is dependent upon our generating increased revenues and obtaining sources of financing. There is no guarantee that we will be successful in raising the funds required or generating sufficient revenues to fund the potential increase in the number of employees. Our employees are not represented by a union.

While we have raised capital to meet our working capital and financing needs in the past, additional financing is required in order to meet our current and potential future cash flow deficits from operations.

We continue to seek additional financing, which may be in the form of senior debt, subordinated debt or equity. We currently have no commitments for financing that are not at the investor's election. There is no guarantee that we will be successful in raising the funds required to support our operations.

We estimate that we will need approximately $1,000,000 in addition to our normal operating cash flow to conduct operations during the next twelve months. However, there can be no assurance that additional private or public financing, including debt or equity financing, will be available as needed, or, if available, on terms favorable to us. Any additional equity financing may be dilutive to stockholders and such additional equity securities may have rights, preferences or privileges that are senior to those of our existing common or preferred stock. Furthermore, debt financing, if available, will require payment of interest and may involve restrictive covenants that could impose limitations on our operating flexibility. However, if we are not successful in generating sufficient liquidity from operations or in raising sufficient capital resources, on terms acceptable to us, this could have a material adverse effect on our business, results of operations, liquidity and financial condition, and we will have to adjust our planned operations and development on a more limited scale.

The effect of inflation on our revenue and operating results was not significant. Our operations are located in North America and there are no seasonal aspects that would have a material effect on our financial condition or results of operations.

AUDITOR'S OPINION EXPRESSES DOUBT ABOUT THE COMPANY'S ABILITY TO CONTINUE AS A "GOING CONCERN"

The independent auditors report on our April 30, 2026, and 2025 financial statements included in the Company's Annual Report states that the Company's historical losses and the lack of revenues raise substantial doubts about the Company's ability to continue as a going concern due to the losses incurred and its lack of significant operations. If we are unable to develop our business, we have to discontinue operations or cease to exist, which would be detrimental to the value of the Company's common stock. We can make no assurances that our business operations will develop and provide us with significant cash to continue operations.

In order to improve the Company's liquidity, the Company's management is actively pursuing additional financing through discussions with investment bankers, financial institutions and private investors. There can be no assurance that the Company will be successful in its effort to secure additional financing.

We continue to experience net operating losses. Our ability to continue as a going concern is subject to our ability to develop profitable operations. We are devoting substantially all of our efforts to developing our business and raising capital. Our net operating losses increase the difficulty in meeting such goals and there can be no assurances that such methods will prove successful.

Product Research and Development

We do not anticipate incurring significant research and development expenditures during the next twelve months.

Acquisition or Disposition of Plant and Equipment

We do not anticipate the acquisition or sale of any significant property, plant or equipment during the next twelve months.

Number of Employees

For the period ended July 31, 2026, we have had four full-time employees and three part-time employees.

Inflation

The impact of inflation on our costs and the ability to pass on cost increases to our customers overtime is dependent upon market conditions. We are not aware of any inflationary pressures that have had any significant impact on our operations over the past year, and we do not anticipate that inflationary factors will have a significant impact on future operations.

CRITICAL ACCOUNTING POLICIES

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect our reported assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities. We base our estimates and judgments on historical experience and on various other assumptions, we believe to be reasonable under the circumstances. Future events, however, may differ markedly from our current expectations and assumptions. While there are a number of significant accounting policies affecting our financial statements, we believe the following critical accounting policy involves the most complex, difficult and subjective estimates and judgments.

Revenue Recognition

The Company acts as the principal in its revenue transactions as it is the primary obligor. The Company's main source of revenue is comprised of the following:

	●	Information Technology-Sparta creates mobile applications (mobile apps) for small and medium-size businesses under the tradename iMobileApp. Sparta provides Vehicle Title History Reports (Cyclechex.com, RVchex.com, and TruckChex.com) containing valuable information for consumers, dealers, insurers, auction houses, and lenders including verifying the specific make, model, and year of a pre-owned vehicles, as well as any Brands that have been placed on the titles. Revenues from mobile app products are generally recognized upon delivery. Revenues from History Reports are typically recognized upon delivery/download. Prepayments received from customers before delivery (if any) are recognized as deferred revenue and recognized upon delivery. The Company records deferred revenues when cash payments are received or due before our performance, including refundable amounts.
	●	Wellness products- Our Wellness products feature high-quality dietary supplements, including vitamins and minerals, such as, Iodine for children and adults, Boron, Copper/Zinc/Selenium, and Magnesium Complex. In addition to our B to C website: www.newworldhealthbrands.com, our Wellness products are also offered on various on-line marketplaces. Revenues from New World Health Brands products are generally recognized upon delivery.
	●	Merchant financing - Sparta offers Brazilian importers staged financing and automated payment solutions. The system reduces costly delays, lowers transaction fees, and improves cash flow by enabling importers to pay suppliers, freight, and customs fees in stages-giving them time to sell goods before loans mature. Revenues from merchant financing are recognized monthly based on the outstanding balance of the loans.

The Company acts as a principal in its revenue transactions as the Company is the primary obligor in the transactions.

Revenues from mobile app products and New World Health Brands products are generally recognized upon delivery. Revenues from History Reports are generally recognized upon delivery / download. Prepayments received from customers before delivery (if any) are recognized as deferred revenue and recognized upon delivery. The Company records deferred revenues when cash payments are received or due in advance of our performance, including amounts which are refundable.

Information Technology:

The Company recognizes revenue when the following criteria have been met persuasive evidence of an arrangement exists, no significant Company obligations remain, collection of the related receivable is reasonably assured, and the fees are fixed or determinable. The Company acts as a principal in its revenue transactions as the Company is the primary obligor in the transactions.

Revenues from mobile app products are generally recognized upon delivery. Revenues from History Reports are generally recognized upon delivery / download. Prepayments received from customers before delivery (if any) are recognized as deferred revenue and recognized upon delivery.

New World Health Brands:

Revenues from New World Health Brands products are generally recognized upon delivery.

Stock-Based Compensation - Stock Options

The Company grants stock options to employees, officers, directors and other eligible recipients under stock option agreements that may provide for either Incentive Stock Options or Non-Qualified Stock Options. The options generally provide the holder with the right to purchase shares of the Company's common stock at a specified exercise price during the contractual term of the award and may become exercisable in installments based on the vesting provisions of the applicable agreement.

The Company accounts for stock-based compensation in accordance with ASC Topic 718, Compensation-Stock Compensation. Stock-based compensation expense is measured based on the grant-date fair value of the award and is recognized over the requisite service period during which the award vests.

The fair value of stock options is estimated using an option-pricing model based on the terms of the individual award and relevant valuation assumptions, including the market price of the Company's common stock, exercise price, expected term, expected stock price volatility, risk-free interest rate and expected dividend yield.

For stock options that vest in installments, compensation cost is recognized over the applicable requisite service period in accordance with the vesting provisions of the award. The Company accounts for forfeitures, modifications, cancellations and settlements of stock option awards in accordance with the applicable provisions of ASC 718.

Warrants Issued in Connection with Subscription Agreements

The Company may issue warrants to purchase shares of its common stock in connection with subscription agreements and other equity financing transactions. The Company evaluates warrants and other freestanding equity-linked instruments at issuance to determine the appropriate classification as equity or liabilities in accordance with applicable accounting guidance, including ASC Topic 815, Derivatives and Hedging.

Warrants that are indexed to the Company's own stock and meet the applicable requirements for equity classification are recorded as a component of stockholders' equity and are not subsequently remeasured. Warrants that do not qualify for equity classification are accounted for as liabilities, initially measured at fair value and subsequently remeasured at fair value at each reporting date, with changes in fair value recognized in earnings.

When common stock and warrants are issued together in a financing transaction, the Company allocates the proceeds among the instruments issued in accordance with their respective accounting classification and the applicable accounting guidance. Issuance costs are allocated to the instruments issued based on the applicable accounting treatment for each instrument.

Principles of Consolidation and Noncontrolling Interests

The consolidated financial statements include the accounts of the Company and its subsidiaries over which the Company has a controlling financial interest. All significant intercompany accounts and transactions have been eliminated in consolidation.

Noncontrolling interests represent the portion of the equity in consolidated subsidiaries that is not attributable, directly or indirectly, to the Company. Noncontrolling interests are presented as a separate component in the statements of changes in stockholders' deficit in the consolidated balance sheets. Net income or loss, as applicable, are attributed to the Company and the noncontrolling interests based on their respective ownership interests.

Changes in the Company's ownership interest in a consolidated subsidiary that do not result in a loss of control are accounted for as equity transactions. If the Company ceases to have a controlling financial interest in a subsidiary, the Company deconsolidates the subsidiary and recognizes any resulting gain or loss in accordance with applicable accounting guidance.

Inventories

The Company's inventories represent finished goods, consist of products available for sale and are accounted for using the first-in, first-out (FIFO) method and valued at the lower of cost or net realizable value. Inventory consists of finished goods for the Company's New World Health Brands business.

Convertible Instruments

The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with professional standards for "Accounting for Derivative Instruments and Hedging Activities" ("ASC 815-40").

The Company accounts for convertible instruments (when it has determined that the embedded conversion options should not be bifurcated from their host instruments) in accordance with professional standards when "Accounting for Convertible Securities with Beneficial Conversion Features," as those professional standards pertain to "Certain Convertible Instruments." Accordingly, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their earliest date of redemption. The Company also records when necessary deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. ASC 815-40 provides that, among other things, generally, if an event is not within the entity's control could or require net cash settlement, then the contract shall be classified as an asset or a liability.

Derivative Liabilities

ASC 815 generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as freestanding derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument subject to the requirements of ASC 815. ASC 815 also provides an exception to this rule when the host instrument is deemed to be conventional, as described.

RECENT ACCOUNTING PRONOUNCEMENTS

Recently adopted accounting pronouncements require public companies to disclose the impact of new standards on their financial statements, including details about the standard, the adoption date, method of adoption, and expected effects. These disclosures help investors understand how changes in accounting principles will affect a company's financial performance and position.

Other accounting standards and amendments to existing accounting standards that have been issued and have future effective dates are not applicable or are not expected to have a significant impact on the Company's consolidated financial statements.

Off-Balance Sheet Arrangements

We do not maintain off-balance sheet arrangements, nor do we participate in non-exchange traded contracts requiring fair value accounting treatment.