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
"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
General Overview
Sparta's roots are in the Powersports industry. The Company provided retail
installment loans and leases through authorized motorcycle dealerships in 33
states, with financing provided by institutional lenders. The Company also
maintained a full underwriting and servicing platform for its portfolio.
Notwithstanding the discontinuance of our initial focus on consumer loans and
leases post Lehman and during the 2008 financial crisis; in 2007, the Company
had introduced a new initiative, Municipal Financing, (www.spartamunicipal.com),
which has financed 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
Vehicle History Reports are a staple of Sparta's E-Commerce Technology
subsidiary iMobile
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The Company's E-Commerce and Mobile Technology subsidiary name change to iMobile
Sparta created its subsidiary,
Sparta's response to the onset of the COVID 19 pandemic in early 2020 quickly
took shape with thorough investigations into evolving customer trends in health
and wellness. As a result, we expanded New World Health Brands and developed a
new product line of natural dietary supplements. In
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Sparta's newest subsidiary,
RESULTS OF OPERATIONS
Comparison of the three Months Ended
For the three months ended
Revenues
Revenues totaled
Cost of Revenue
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
Expenses incurred during the current three months period consisted primarily of the following expenses: Increase 2022 2021 (Decrease) % Salaries and related Expenses 167,830 133,615 34,215 25.61 % Advertising and Marketing 3,431 - 3,431 100.00 % General office Expenses 41,788 48,764 (6,976 ) -14.31 % Legal and Professional Fees 289,907 49,560 240,347 484.96 % Taxes and Licenses 4,692 - 4,962 100.00 % SEC related Expenses 5,515 - 5,515 100.00 % Office Rent 16,250 18,085 (1,835 ) 10.15 % Software Development Cost 1,500 - 1,500 100.00 % Bad Debts 41,969 - 41,969 100 % Non cash expenses - - % 572,882 250,024 Other (income) expense
Other (income) expense is comprised primarily of interest and financing costs
18 Net income (loss)
Our net income attributable to common stockholders for the three months ended
LIQUIDITY AND CAPITAL RESOURCES
As of
We met our cash requirements during the period through proceeds from the sale of
stock
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
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
The effect of inflation on our revenue and operating results was not
significant. Our operations are located in
GOING CONCERN ISSUES
The Company's historical losses and the lack of revenues raise substantial doubts about the Company's ability to continue as a going concern. 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.
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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 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.
The primary issues management will focus on in the immediate future to address this matter include: seeking additional credit facilities from institutional lenders; seeking institutional investors for debt or equity investments in our Company; short term interim debt financing: and private placements of debt and equity securities with accredited investors.
To address these issues, we have engaged a financial advisory firm to advise and assist us in negotiating and raising capital.
INFLATION
The impact of inflation on the costs of the Company, and the ability to pass on cost increases to its customers over time is dependent upon market conditions. The Company is not aware of any inflationary pressures that have had any significant impact on the Company's operations over the past quarter, and the Company does not anticipate that inflationary factors will have a significant impact on future operations.
OFF-BALANCE SHEET ARRANGEMENTS
The Company does not maintain off-balance sheet arrangements, nor does it participate in non-exchange traded contracts requiring fair value accounting treatment.
CRITICAL ACCOUNTING POLICIES
The preparation of our financial statements in conformity with accounting
principles generally accepted in
Revenue Recognition
During the first quarter of 2018, the Company adopted ASU 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 have an impact in our consolidated financial statements, other than the enhancement of our disclosures related to our revenue-generating activities.
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.
20 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
The Company adopted Financial Accounting Standards Board Accounting Standard Codification Topic 718 ("ASC 718-10"), which records compensation expense on a straight-line basis, generally over the explicit service period of three to five years.
ASC 718-10 requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the Company's Consolidated Statement of Operations. The Company is using the Black-Scholes option-pricing model as its method of valuation for share-based awards. The Company's determination of fair value of share-based payment awards on the date of grant using an option-pricing model is affected by the Company's stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to the Company's expected stock price volatility over the term of the awards, and certain other market variables such as the risk free interest rate.
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
21 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
For information regarding recent accounting pronouncements and their effect on the Company, see "Recent Accounting Pronouncements" in Note A of the Notes to Consolidated Financial Statements contained herein.
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