SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Jan. 31, 2024

Business

General Overview

Sparta Commercial Services, Inc. (“Sparta,” “we,” “us,” or the “Company”) is a Nevada corporation with headquarters in New York City. We are a multi-disciplined parent corporation operating across three business sectors – Financial Services, E-Commerce & Mobile Technology, and Health and Wellness.

Sparta’s historic roots were in the Powersports industry until the financial crisis that began 2008. The Company provided consumer retail installment loans and leases through authorized motorcycle dealerships in 33 states, with financing lines of credit provided by institutional lenders. In 2007, the Company introduced a Municipal Financing program which has financed over 100 jurisdictions to date.

Vehicle History Reports are a staple of Sparta’s E-Commerce Technology subsidiary iMobile Solutions, Inc. Whether a vehicle is intended for personal, business or recreational use, Sparta’s Vehicle History Reports are highly regarded for accuracy and completeness and have been sold across all 50 states and in 62 countries worldwide.

With iMobile App, the Company additionally provides mobile technology services, including web and mobile application creation, development and management, text messaging services, CRM (Customer Relationship Management) tools, and custom kitchen ordering systems for a wide range of businesses to increase revenue, build brand recognition, and improve customer engagement.

Sparta’s subsidiary, New World Health Brands, Inc., offers high quality dietary supplements.

Sparta’s subsidiary, Sparta Crypto, Inc., 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; and has completed and tested a cryptocurrency payment gateway called SpartaPayIQ. Agoge Global USA, Inc. (“Agoge”) was formed as a subsidiary of Sparta Crypto, Inc. in December 2022 and entered into a Joint Venture Agreement with WeDev Group of Brazil to facilitate cross-border transactions between importers and exporters of goods from the U.S. and Brazil and is expected to launch in last fiscal quarter of 2024

Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements as of January 31, 2024 and for the nine months ended January 31, 2024 and 2023 have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission, including Form 10-Q and Regulation S-K. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments), which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations. The Company believes that the disclosures provided are adequate to make the information presented not misleading.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and explanatory notes for the year ended April 30, 2023 as disclosed in the Company’s Form 10-K for that year as filed with the Securities and Exchange Commission on August 15, 2023.

The results of operations for the nine months ended January 31, 2024 are not necessarily indicative of the results to be expected for any other interim period or the full year ending April 30, 2024.

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation. The third-party ownership of the Company’s subsidiary is accounted for as noncontrolling interest in the consolidated financial statements. Changes in the noncontrolling interest are reported in the statement of changes in deficit.

Estimates

Estimates

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, which require management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and the disclosures of revenues and expenses for the said period. Accordingly, actual results could differ from those estimates.

Revenue Recognition

Revenue Recognition

During the first quarter of 2018, the Company adopted A.S.U. 2014-09, Revenue from Contracts with Customers (Topic 606), using the cumulative-effect method. The new standard requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The adoption did not impact our consolidated financial statements other than enhancing our disclosures related to our revenue-generating activities.

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

SCHEDULE OF DISAGGREGATION REVENUE

	3-months ended				9-months ended
Revenue	Jan 2024		Jan 2023		Jan 2024		Jan 2023
Information technology	$	30,071	$	60,120	$	128,142	$	173,559
New World Health	$	6,665	$	3,550	$	23,291	$	15,483
Total		36,736		63,670		151,433		189,042

Revenues from mobile app products and New World Health Brands 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.

Cash Equivalents

Cash Equivalents

All liquid investments with three months or less maturity are cash equivalents for the accompanying financial statements.

Fair Value Measurements

Fair Value Measurements

The Company has adopted ASC 820, “Fair Value Measurements (“ASC 820”).” ASC 820 establishes a three-level fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The scale gives the highest priority to unadjusted quoted prices in active markets and the lowest priority to unobservable inputs to fair value measurements of certain assets and Liabilities. The three levels of the fair value hierarchy under ASC 820 are described below:

	●	Level 1 — Quoted prices for identical instruments in active markets. Level 1 assets and liabilities include debt and equity securities, derivative contracts traded in an active exchange market, and certain highly liquid securities actively traded in over-the-counter markets.
	●	Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.
	●	Level 3 — Unobservable inputs supported by little or no market activity and significant to the fair value measurements. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques based on significant unobservable inputs, as well as management judgments or estimates that are significant to the valuation.

This hierarchy requires the Company to use observable market data when available and to minimize the use of unobservable inputs when determining fair value. Observable inputs may not always be available for some products or in certain market conditions.

Income Taxes

Income Taxes

We utilize ASC 740, “Income Taxes,” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at year-end based on enacted laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income.

The Company recognizes the impact of a position in the financial statements only if that position is more likely than not to be sustained upon examination by taxing authorities based on the technical merits of the position. Our practice recognizes interest or penalties related to income tax matters in income tax expense.

Stock-Based Compensation

Stock-Based Compensation

We account for our stock-based compensation under ASC 718 “Compensation–Stock Compensation” using the fair value-based method. Under this method, compensation cost is measured at the grant date based on the value of the award. It is recognized over the service period, usually the vesting period. This guidance establishes standards for accounting transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services based on the fair value of the entity’s equity instruments, or the issuance of those equity instruments may settle that.

We use the fair value method for equity instruments granted to non-employees and the Black-Scholes model to measure options’ fair value. The stock-based fair value compensation is determined as of the date of the grant or at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.

Inventories

Inventories

The Company’s inventories represent finished goods, consisting of available products. They 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 business.

Property and Equipment

Property and Equipment

Property and equipment are recorded at cost. Minor additions and renewals are expensed in the year incurred. Significant additions and renewals are capitalized and depreciated over their estimated useful lives. Depreciation is calculated using the straight-line method over the estimated useful lives. The estimated useful lives of significant depreciable assets are as follows:


Leasehold improvements	3 years
Furniture and fixtures	7 years
Website costs	3 years
Computer Equipment	5 years
	5 years

Concentrations of Credit Risk

Concentrations of Credit Risk

Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash, cash equivalents, and receivables. The Company places its cash and temporary cash investments with high-credit quality institutions. At times, such investments may be more than the FDIC insurance limit.

Net Loss Per Share

Net Loss Per Share

The Company uses ASC 260-10, “Earnings Per Share” for calculating the basic and diluted loss per share. The Company computes basic loss per share by dividing net loss and net loss attributable to common shareholders by the weighted average number of common shares outstanding. Common equivalent shares are excluded from the computation of net loss per share if their effect is anti-dilutive.

Derivative Liabilities

Derivative Liabilities

The Company assessed the classification of its derivative financial instruments as of January 31, 2024, and April 30, 2024, which consist of convertible instruments and rights to shares of the Company’s common stock. It determined that such derivatives meet the criteria for liability classification under ASC 815.

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 conventional, as described.

Convertible Instruments

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.”

The Company assessed the classification of its derivative financial instruments as of January 31, 2024 and April 30, 2023, which consist of convertible instruments and rights to shares of the Company’s common stock and determined that such derivatives meet the criteria for liability classification under ASC 815.

Reclassifications

Reclassifications

Certain reclassifications have been made to conform with prior periods’ data to the current presentation. These reclassifications did not affect reported losses.

Recent Accounting Pronouncements-

Recent Accounting Pronouncements-

No recent pronouncements have been made or adopted in the quarter ended January 31, 2024. All of the pronouncements that affect our business have been adopted.

SPARTA COMMERCIAL SERVICES, INC. 10-Q/A