**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-KSB**





(Mark
      One)





**x**
            **ANNUAL
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934****For
                the fiscal year ended April 30, 2007**o
            TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934For
                the transition period from __________ to __________.Commission
                file number:**0-9483**





**SPARTA
                COMMERCIAL SERVICES, INC.**(Name
                of small business issuer in its
                charter)





**NEVADA**
            
            **30-0298178**(State
                or other jurisdiction of incorporation or organization)
            
            (I.R.S.
                Employer Identification No.)**462
                Seventh Ave, 20th Floor, New York, NY**
            
            10018(Address
                of principal executive offices)
            
            (Zip
                Code)





Issuer’s
      telephone number: **(212)
      239-2666**





Securities
      registered under Section 12(b) of the Exchange Act: None





Securities
      registered under Section 12(g) of the Exchange Act:





**Common
                Stock, par value $0.001**(Title
                of class)





Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act. o





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such reports), and (2) has been subject
      to such filing requirements for the past 90 days. Yes x No o





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of registrant’s knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB. o





Indicate
      by check whether the registrant is a shell company (as defined in Rule 12b-2
      of
      the Exchange Act).


Yes
o No x





The
      issuer’s revenues for its most recent fiscal year: $787,997.





The
      aggregate market value of voting and non-voting stock of the issuer held by
      non-affiliates on April 30, 2007 was $5,075,053.





As
      of
      April 30, 2007, we had 123,216,157 shares of common stock issued and
      outstanding.





**DOCUMENTS
      INCORPORATED BY REFERENCE**





None.





Transitional
      Small Business Disclosure Format (check one): YES o NO x







**SPARTA
      COMMERCIAL SERVICES, INC.**





**TABLE
      OF CONTENTS**





Page**PART
                I**Item
                1.
            Description
                of Business
            3Item
                2.
            Description
                of Property
            12Item
                3.
            Legal
                Proceedings
            12Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            12**PART
                II**Item
                5.
            Market
                for Common Equity and Related Stockholder Matters and Small Business
                Issuer Purchases of Equity Securities
            13Item
                6.
            Management’s
                Discussion and Analysis or Plan of Operations
            15Item
                7.
            Financial
                Statements
            22Item
                8.
            Changes
                In and Disagreements With Accountants on Accounting and Financial
                Disclosure
            48Item
                8A.
            Controls
                and Procedures
            48Item
                8B.
            Other
                Information
            48**PART
                III**Item
                9.
            Directors,
                Executive Officers, Promoters, Control Persons and Corporate Governance;
                Compliance With Section 16(a) of the Exchange Act
            49Item
                10.
            Executive
                Compensation
            51Item
                11.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            55Item
                12.
            Certain
                Relationships and Related Transactions, and Director
                Independence
            57Item
                13.
            Exhibits
            58Item
                14.
            Principal
                Accountant Fees and Services
            60Signatures
            
            61






2


**PART
      I**





**ITEM
              1.**
            **DESCRIPTION
                OF BUSINESS**





**General
      Overview**





Sparta
      Commercial Services, Inc. (“Sparta” “we,” “us,” or the “Company”) is a Nevada
      corporation.





Our
      business plan is to provide dealers of powersports vehicles with an alternative
      source of financing for new and used motorcycles. We developed proprietary
      web-based solutions for processing, financing and leasing of new and used
      powersports vehicles. Currently, we offer a private label program, lease and
      retail installment sales finance contracts to numerous dealerships in
      powersports industry. Our business model focuses on select motorcycles (i.e.,
      550cc and higher), 4-stroke all-terrain vehicles (ATVs), and select scooters.
      Our management believes that the emphasis on these specific products eliminates
      a number of vehicles that often under-perform due to the demographics of the
      purchaser and/or excessive depreciation in the market value of certain vehicle
      models. Additionally, we offer a police motorcycle leasing program to
      municipalities.





Our
      offices are located at 462 Seventh Avenue, 20 th Floor,
      New York, NY 10018, telephone number: (212) 239-2666. We maintain a website
      at:
      www.spartacommercial.com.





**Our
      Organization History**





Our
      company was incorporated under the laws of the State of Nevada on May 13, 1980
      under the name Tomahawk Oil and Minerals, Inc. and engaged in oil and gas
      exploration activities.





On
      November 6, 1983, the company changed its corporate name to Tomahawk Industries,
      Inc.





In
      1984,
      Tomahawk entered the business of installing energy recovery and energy saving
      devices.





In
      July
      1987, Tomahawk filed for protection under Chapter 11 of the U. S. Bankruptcy
      Code and operated as a debtor-in-possession. The petition for bankruptcy
      protection was denied. Tomahawk ceased all business operations, liquidated
      its
      former subsidiary and abandoned all net assets remaining by April 30, 1988.
      Tomahawk effectively had no operations, assets or liabilities since its fiscal
      year ended April 30, 1988 through February 27, 2004.





On
      February 27, 2004, pursuant to an Agreement and Plan of Reorganization, we
      acquired Sparta Commercial Services, LLC, in a transaction viewed as a reverse
      acquisition. Under the terms of the agreement, we acquired all of the
      outstanding membership interests in Sparta Commercial Services, LLC in exchange
      for the agreement to issue such number of shares of our common stock as would
      represent approximately 91.75% percent of our outstanding shares. Sparta
      Commercial Services, LLC also entered into a consulting agreement for business
      and financial services with Glenn A. Little, the former principal of Tomahawk.
      The agreement is for a term of one year. Mr. Little received a fee of $100,000
      pursuant to the consulting agreement.





As
      a
      result of the acquisition, a change in control occurred in the ownership and
      management of Tomahawk. In connection with the acquisition, the managing member
      of Sparta, Anthony Havens, was appointed President and Chairman of Tomahawk.
      The
      former directors and officers of Tomahawk resigned as of the acquisition date.





On
      August
      25, 2004, we changed our corporate name from “Tomahawk Industries, Inc.” to
“Sparta Commercial Services, Inc.”





On
      September 13, 2004, we filed a Certificate of Amendment to the Articles of
      Incorporation with the Secretary of State of the State of Nevada increasing
      the
      authorized capital from 200,000,000 to 700,000,000 shares, of which 690,000,000
      shares are common stock, par value $0.001 and 10,000,000 shares are preferred
      stock, par value $0.001.





3


Effective
      December 27, 2004, pursuant to a Certificate of Amendment to the Articles of
      Incorporation with the Secretary of State of the State of Nevada, our authorized
      capital was reduced from 700,000,000 shares, of which 690,000,000 shares were
      common stock and 10,000,000 shares are preferred stock, to 350,000,000 shares,
      of which 340,000,000 shares are common stock and 10,000,000 shares are preferred
      stock. In connection with the decrease in authorized capital, we effected a
      1:200 reverse stock split, with fractional shares paid in cash, followed
      immediately by a 25:1 forward stock split.





On
      December 28, 2004, we filed a Certificate of Designation with the Secretary
      of
      State of the State of Nevada in connection with its 10,000,000 shares are
      preferred stock, designating 35,850 shares as Series A Redeemable Preferred
      Stock.





**Our
      Business**





We
      are a
      specialized consumer finance company engaged primarily in the origination of
      leases and the purchase of retail installment sales contracts of new and used
      motorcycles, scooters, and ATVs. We believe that the market for consumer finance
      programs for motorcycles and ATVs is underserved by traditional lenders.





We
      are
      developing relationships with vehicle dealers and manufacturers to provide
      our
      financing programs to their customers. We also seek to provide motorcycle,
      scooter, and all-terrain vehicle manufacturers a private label version of our
      financing programs for their customers. Additionally, we offer a police
      motorcycle leasing program to municipalities.





**Business
      Overview**





Sparta’s
      business model has been designed to generate revenue from several
      sources:





·
            Retail
                installment sales contracts and
                leases;


·
            Municipal
                Leasing of Police Motorcycles;


·
            Private
                label programs for manufacturers and
                distributors;


·
            Ancillary
                products and services, such as private label gap coverage;
                and


·
            Remarketing
                of off-lease and repossessed
                vehicles.





Sparta’s
      management believes that by offering dealers (and their customers) the option
      of
      either financing or leasing, Sparta will be able to capture a greater share
      of
      the dealer’s business. Additionally, by offering both alternatives, once
      profitability is achieved, Sparta believes that it will be in a position to
      achieve greater cash-flow than it could by offering only one of these
      alternatives because depreciation generated by Sparta’s leasing activities will
      reduce income tax due on income resulting from Sparta’s retail installment sales
      contracts.





**Retail
      Installment Sales Contracts and Leases**





Retail
      Installment Sales Contracts (RISC) - Sparta purchases retail installment sales
      contracts from both franchised and independent powersports dealers who qualify
      as Sparta Authorized Dealers and/or as Private Label Authorized Dealers under
      Sparta’s Private Label Programs. Sparta has developed policies and procedures
      for credit evaluation, collections, insurance follow up, and asset recovery.
      Sparta imposes strict credit criteria to determine which retail installment
      sales contract applications to approve. This credit criterion has been developed
      to be in compliance with the credit criterion required by our lenders. The
      dealers understand that if they consummate a credit transaction with a buyer
      on
      whose application we have given them a conditional approval that Sparta will
      purchase that contract if it is in full compliance with all terms and conditions
      of that approval and contained in our dealer agreement.





4


To
      insure
      that Sparta’s Credit Evaluation Process and Collateral Guidelines are
      consistently applied and that the credit/underwriting decision process provides
      rapid decisioning to Sparta Authorized Dealers and the Private Label Dealers,
      Sparta has developed a point of sale credit application and contract decisioning
      system. This system is named “ ***iPLUS*** **Ô** ”
and
      is
      structured as an Application Service Provider (“ASP”) and has the capability of
      providing the dealer with conditional approvals in less than sixty seconds,
      seven days a week, twenty-four hours a day. This technology provides quick,
      consistent credit decisions for our dealer network and reduces the number of
      credit analysts required, thereby, reducing Sparta’s personnel expense.
      Depending on Sparta’s arrangement with its lending sources, in the case of
      consumer finance contracts, Sparta may finance its purchase of the contracts
      by
      borrowing from a lending source and pledging the retail finance contracts as
      collateral for the loan.





All
      of
      the installment sale contracts will be secured by qualified, titled motorcycles
      with 550+cc and higher engines, 4-stroke all-terrain vehicles (ATVs), or select
      scooters. Customer financing needs are projected to range from approximately
      $5,000 to $35,000. Contract terms of 24 to 60 months will be offered.





Leases
      -
      Sparta purchases qualified vehicles for lease to customers of its Sparta
      Authorized Dealers and/or Private Label Dealers. While the steps in the leasing
      process are almost identical to those in the installment sales contract process,
      the major difference is that when a lease “approval” is transmitted to a dealer,
      the “approval” describes the terms and conditions under which Sparta will
      purchase a specific vehicle from the dealer and lease it to the applicant.
      Unlike an installment service contract which finances a customer’s purchase of a
      vehicle owned by the customer, the lease contract contains the payment terms
      and
      conditions under which Sparta will allow the customer to use (lease) the
      vehicle, which is owned by Sparta, and also contains a vehicle purchase price
      option which provides the customer with the right to purchase the vehicle at
      the
      lease-end. Depending on Sparta’s arrangement with its lending sources, in the
      case of leases, Sparta may finance its purchase of leased vehicles by borrowing
      from a lending source and assigning or pledging the lease and leased vehicle
      as
      collateral for the loan. Lease terms range from 24 to 60 months, although most
      lease terms are either 36 or 60 months. Leases generally have lower monthly
      payments than retail installment sales contracts because they finance only
      part
      of the vehicle with the balance being financed by the lessor.





In
      July
      2006, we announced an agreement for routing of motorcycle loan applications
      with
      a Fortune 500 global diversified financial provider. In October 2006, this
      agreement was extended for a minimum of one year. Under the agreement the
      company electronically transmits to Sparta loan applications which meet Sparta’s
      lending/leasing criteria. Our ***iPLUS*** **TM** underwriting system will immediately approve or decline the application, and,
      if
      approved, notify the applicant through the internet within minutes. This
      agreement will allow consumers to be pre-approved before they even start
      shopping. We will pay that company a fee for each funded transaction. In January
      2007, this application went “live” in 12 states with plans to roll out to 38
      additional states over a mutually agreed schedule.





Additionally,
      we have a limited referral program with netLoan Funding, LLC under which select
      customers, wishing to finance specific powersports vehicles, are referred to
      netLoan Funding LLC by eBay Motors and eLoan, and are then referred
      electronically to us. To date, this program has not met our expectations and
      is
      under review.





**Municipal
      Leasing of Police Motorcycles**





In
      February 2007, Sparta launched a new Municipal Leasing Program designed
      expressly to meet the needs of law enforcement agencies throughout the U.S.
      Sparta estimates that the annual municipal market for new law enforcement
      motorcycles exceeds $200 million annually, based upon extensive discussions
      that
      the company conducted among Harley-Davidson, Honda, and BMW dealers, with those
      brands being the most prominent in the municipal environment. Sparta believes
      that most of these agencies have historically been purchasing these vehicles
      with few, if any, financing alternatives, therefore, we developed a leasing
      alternative for governmental organizations to acquire the motorcycles they
      need,
      and reduce their capital outlays at the same time.





5


**Private
      Label Programs for Manufacturers and Distributors**





To
      date,
      we have entered into four "private label" 5-year financing agreements with
      the
      U.S. distributors of major manufacturers of scooters and ATVs. Under these
      agreements, we allow the manufacturer to put its name on our finance and lease
      products, and offer such financing facilities to its dealers for their
      customers. We own the retail installment sales contracts and leases generated
      under these "private label" programs, and derive revenues from sales of the
      distributor's product line to the dealer's customers. The private label program
      also expands our dealer base by the number of dealerships in the distributor's
      chain, thereby generating additional opportunities to sell our own financial
      services to these dealers for their customers interested in non-"private label"
      vehicles.





These
      four distributors have over 1,200 dealers who, in addition to becoming our
      Private Label dealers, can sign up to become our Authorized Dealers, which
      will
      enable them to use us as a source for financing their non-private label
      vehicles.





In
      May
      2007, Sparta announced the launch of a consumer leasing program for Moto Guzzi
      and Aprilia, the two motorcycle brands distributed by Piaggio Group Americas,
      Inc. The program will enable all Moto Guzzi and Aprilia dealers to offer
      Sparta's Flex Lease product to their customers as alternatives to traditional
      installment loan financing. Piaggio Group's US dealer network currently numbers
      approximately 400, including retailers of Vespa and Piaggio, the two well known
      brands of scooters also distributed by the Piaggio Group. Among those dealers,
      more than 180 carry the Moto Guzzi and/or Aprilia brands. Piaggio Group
      Americas, Inc. is a subsidiary of Piaggio & C. S.p.A., based in Pontedera,
      Italy.





**Revenue
      From Ancillary Products And Services**





We
      expect
      to receive additional revenue related to servicing our portfolio, such as lease
      acquisition fees, late payment fees, vehicle disposition fees at lease-end,
      early termination fees, charges for excess wear-and-tear on leased vehicles,
      and
      from ancillary products and services.





We
      are
      being positioned as a full service organization providing products and services
      to its dealers that are costly to obtain on an individual dealer basis. Also,
      we
      offer a private label GAP (Guaranteed Auto Protection) plan for our
      dealers:





**Gap
      Coverage** - Sparta
      markets its private label gap coverage on a fee basis to customers through
      dealers. This coverage protects the customer should the vehicle be stolen or
      wrecked and the holder’s primary insurance is not adequate to cover their payoff
      to the creditor that holds the lien on the vehicle.





Sparta
      intends to continue to evaluate additional ancillary products and services
      and
      believes that it can create products and services to meet dealers' needs,
      creating company brand loyalty in the dealer community and generating other
      revenue streams.





**Revenue
      From Remarketing** **Off-Lease
      And Repossessed Vehicles** ****





**Re-leasing
      to Original Lessees** -
      Management commences its re-leasing efforts as early as eleven months prior
      to
      the end of the scheduled lease term. Lessees’ options are expected to include:
      extending the lease, returning the vehicle to Sparta or buying the vehicle
      at
      the buy-out option price established at the beginning of the lease. Sparta’s
      policy requires lessees who wish to return their vehicles, return the vehicle
      to
      the originating dealer. If the lessee has moved, then the vehicle should be
      returned to the Sparta Authorized Dealer closest to the lessee. If this is
      impracticable, then Sparta will arrange to have the vehicle transported at
      the
      lessee’s expense.





6


**Returned
      Leased Vehicles** -
      When a
      vehicle is returned to a Sparta Authorized Dealer at the end of the scheduled
      lease term, the dealer will inspect it for excessive wear and mileage over
      maximum levels specified under the lease agreement and prepare it for
      resale/lease. All Sparta Authorized Dealers and all Sparta Private Label Dealers
      are contractually bound to charge no more than cost plus ten-percent for repairs
      and to provide free storage for all consignment vehicles. Thereafter, Sparta
      plans to consign the vehicle to the originating dealer for sale or re-lease
      to a
      new party. Should the dealer decline to take the vehicle on consignment, it
      will
      be electronically marketed on the Classified Pages of the Sparta web site.
      Sparta believes the market for used vehicles is significant, and the opportunity
      to remarket the same vehicle numerous times is a key selling point with
      prospective dealerships. Sparta believes that using its dealer network in such
      a
      manner will result in a better overall economic return on its portfolio as
      well
      as strengthen dealer relationships.





**Repossessed
      Vehicles** -
      All
      repossessed vehicles are similarly returned to the originating Sparta Authorized
      Dealer to be reconditioned (if needed) for consignment sale or re-lease in
      the
      same manner and conditions as returned vehicles.





**Second
      Chance Express** -
      Sparta
      allows its Authorized Dealers to offer its inventory of returned or repossessed
      vehicles not only to customers with approved credit applications but, also
      to
      customers with less than prime credit. Applicants with low credit scores are
      evaluated under Sparta’s Second Chance Express Program. This unique
      finance/lease product is designed to offer a financing program tailored to
      this
      non-prime customer. The program allows Sparta to serve those customers who
      can
      offset their credit risk with higher down payments. A key benefit of this
      program to Sparta is that the minimum down-payment requirement is 20% in order
      to bring the amount financed in line with the current wholesale value of the
      vehicle. Under the Second Chance Express Program, Sparta pays its dealers a
      commission on any Sparta inventory vehicle, held on consignment on their “floor”
or offered on the Sparta Classified Web Page, for which they arrange a sale
      or
      finance.





**Credit
      and Collections**





**Policies
      and Procedures**





Based
      on
      management's experience in vehicle financing and leasing, we have developed
      policies and procedures for credit evaluation, collections, insurance follow
      up,
      and asset recovery. We impose strict credit and demographic criteria to
      determine which retail installment sales contracts and lease applications are
      approved.





**Credit
      Evaluation Process and Collateral Guidelines**





To
      insure
      that Sparta’s Credit Evaluation Process and Collateral Guidelines are
      consistently applied and that the credit/underwriting decision process provides
      rapid decisioning to Sparta Authorized Dealers and the Private Label Dealers,
      Sparta has worked closely with a leading provider of interactive credit
      accessing and decisioning solutions, to develop the ***iPLUS*** **Ô** point
      of
      sale credit application and contract decisioning system.





***iPLUS*** **Ô** ****** **Internet
      Purchasing Leasing Underwriting Servicing)**





Sparta’s
      retail installment sales contract and leasing programs are delivered through
      a
      proprietary, web-based, credit application processing system. This system is
      named ***iPLUS*** **Ô** ** and
      is
      structured as an Application Service Provider (“ASP”) and has the capability of
      providing the dealer with conditional approvals seven days a week, twenty-four
      hours a day. This system also provides the powersports dealer with system
      capabilities comparable to those of new car franchises. Sparta believes ***iPLUS*** **Ô** will
      provide the Sparta Authorized Dealers and Private Label Dealers with a
      competitive advantage and will increase Sparta’s ability to garner a larger
      share of the dealer’s business. Although we intend to add additional
      features, ***iPLUS*** **Ô** is
      currently being utilized by us.





7


Major
      features of ***iPLUS*** **Ô** ****** include:





·
            100%
                WEB Browser Based (www.spartacommercial.com)


·
            User
                friendly system


·
            No
                costly software required by the
                users


·
            Operates
                on any dial-up connection as slow as
                28.8


·
            Requires
                Internet Explorer 5.5 or above, Adobe Acrobat Reader 5.0 or above,
                both
                available at no charge on the
                Internet


·
            Integrated
                scorecard and decision engine


·
            Integrated
                credit bureau retrieval and review (can access any of the 3 major
                bureaus)


·
            Once
                application is submitted; decisions in seconds/7 Days a Week /24
                Hours a
                Day


·
            Easy
                to complete customer application


·
            Dealer
                application management


·
            Dealer
                Desking Tool - Profit Manager (Assists dealer in structuring any
                approved
                application.)


·
            Prints
                approved customer contract and contract
                package


·
            Captures
                information in electronic format


·
            Complete
                underwriting documentation and control
                system


·
            Dealer
                communication


·
            Allows
                the dealer to track the entire decisioning, underwriting, and funding
                process in real time.





Additionally,
      this technology provides quick, consistent credit decisions for our dealer
      network and reduces the number of credit analysts required, thereby, reducing
      Sparta’s personnel expense.





Sparta
      has established program guidelines that are an integral function of the ***iPLUS*** **Ô** decision
      process. These program guidelines establish and clarify credit criteria such
      as
      credit tiers, maximum amount financed, term and rate, dealer rate participation,
      deal structure, buyer profile, credit bureau parameters, budget parameters,
      and
      eligible collateral, including maximum loan-to-value ratios for each of its
      retail installment sales contracts and lease contracts, depending on the
      applicant’s credit rating and stability. Sparta has developed its own credit
      rating system by using an empirical score card and then assigning its own rating
      based on Sparta’s experience. This rating is used as the basis to determine the
      terms and conditions under which an applicant is approved or
      declined.





Sparta
      conducts both applicant credit risk and asset evaluation before approving
      financing. Sparta’s policy is that it will not finance more than 100% of a
      vehicle’s retail value, but Sparta may lend an additional 10% above retail value
      to cover add-ons, extended warranty and other costs. Should the customer seek
      financing above this threshold, Sparta intends to ask for a down payment from
      the borrower or lessee to close the gap between selling price and retail value.
      The size of the down payment will be a function of the applicant’s credit
      rating, stability, budget, and the value of the underlying asset.





**Collection
      Procedures**





Approving
      retail installment sales contracts and leases that comply with the policies
      and
      procedures established by Sparta is just the first step. A principal factor
      in
      the success of Sparta’s business model is its ability to track contract and
      lease performance.





A
      third
      party provides the software Sparta uses to manage its assets, customer base,
      collections, insurance, and accounting systems. Using a variety of basic and
      customized reports generated by this software, Sparta monitors its customers’
compliance with their obligations under retail installment sales contracts
      or
      lease contracts. These reports are accessed on a real-time basis by employees
      of
      Sparta and are distributed to management personnel for review. The reports
      include delinquency reports, collection tickler (promises) reports, insurance
      status reports, termination reports, inventory reports, maturing contract
      reports, etc.





8


Sparta
      requires continuous physical damage insurance on all financed vehicles and
      continuous liability and physical damage insurance coverage on all leased
      vehicles. In addition, Sparta is required to be listed as Additional Named
      Insured and Loss Payee. Continuous insurance is critical, and Sparta intends
      to
      quickly repossess a vehicle if coverage lapses. Lapsed or cancelled policies
      will be covered by a “blanket” VSI insurance policy, which Sparta intends to
      purchase. Any lapse in insurance coverage for any reason will lead to automatic
      repossession of leased vehicles.





**Using
      Diversification to Reduce Portfolio Risk**





Management
      will reduce portfolio risk not only by carefully screening applicants and
      monitoring covenant compliance, but also by diversifying its financing
      activities across credit tiers and Sparta’s list of motorcycle, ATV and scooter
      models that it will finance or lease.





**Credit
      Tiers** -
      Sparta
      expects that it will maintain a portfolio dominated by A/B credit applicants
      over C applicants in the ratio of at least 70/30. Management anticipates that
      it
      will be able to rebalance its portfolio by training its sales force to work
      closely with dealerships in their territories to help Sparta maintain its
      conservative 70/30 target.





Sparta
      will also be able to manage this ratio by revising the variables in its various
      programs (terms and conditions under which Sparta will lease vehicles or
      purchase retail installment contracts), such as minimum income, debt ratios,
      payment to income ratios, minimum down payment required, acquisition fees (paid
      by dealer), discounts (paid by dealer), etc.





**Sparta
      Approved Vehicle Models** -
      Advance rates and other credit restrictions will be in effect for certain models
      and years based on the relevant facts and circumstances.





**Market
      Information**





As
      reported in the 2006 Annual Statistical Report of the Motorcycle Industry
      Council), retail sales of new motorcycles have grown steadily from 1991 through
      2006. North American registrations of new 651cc and higher motorcycles reached
      543,000 in 2006. This represents a 5% increase over 2005. Registrations have
      increased for 15 consecutive years. Retail sales of new and used motorcycles
      reached $10.7 billion in 2004.





U.S.
      sales of new ATVs were estimated to be 747,581 units in 2006, a 4.2% decline
      from 2005 as reported in Powersports Business Magazine in the February 12,
      2007
      issue.





Estimated
      U.S scooter unit sales for calendar 2007 are estimated to be 56,613 up
      approximately 3.56% from calendar year 2006, according to the August 2007 issue
      of Dealernews.





**Sales
      and Marketing**





Normally,
      vehicle finance programs are sold primarily at the dealer level, rather than
      the
      consumer level. Our strategy is to utilize a direct sales force that promotes
      our products and services to qualified dealers, train them, and provide them
      with point-of-sale marketing materials. Our vehicle financing programs are
      already gaining market acceptance as evidenced by the four Private Label
      Contracts. This direct sales force will be comprised of Marketing Group and
      a
      Dealer Support Group.





The
      Marketing Group will continue to work directly with the manufacturers and
      distributors to obtain additional Private Label affiliations and to monitor
      our
      competition. The Private Label partners will assist us directly in training
      the
      Private Label Dealers. This will be done at the manufacturers/distributors
      place
      of business, at industry shows, or with a group of dealers in a common
      geographic area.





9


The
      Dealer Support Group accepts dealer application packages from dealers that
      want
      to be either or both our Authorized Dealers or Private Label Dealers. They
      then
      notify the approved dealers that they have been approved and provide them with
      the required information to process applications and print contracts
      through ***iPLUS*** **Ô** ***,*** including a Dealer Sign Up packet. The Dealer Support Group is available to
      directly assist dealers by telephone and follow up with dealers on conditional
      approvals to assist dealers in forwarding the funding packages to us for
      purchase. This group will also accept all incoming calls from dealers, answering
      their inquiry or directing them, if necessary, to the appropriate department.





Authorized
      dealers are able to advertise both new and used vehicles in the Classified
      Section of our website, at no cost to the dealer. Sparta plans to use this
      feature of the website to remarket its own inventory (both repossessed and
      returned end-of-term vehicles) throughout the country. Our exclusive
“Second-Chance Express” program for customers with a poor or limited credit
      history was created to help re-market our inventory. Incentives are in place
      for
      authorized dealers who sell or lease either our inventory vehicle at their
      dealership or one that is at another dealership in our network.





With
      the
      exception of the netLoan program and the program with the Fortune 500 company
      both described under the “Retail Installment Sales Contracts and Leases” section
      above, we do not market or sell directly to consumers, but we expect consumers
      to visit our website. We have provided a consumer oriented PowerPoint
      presentation for their review. Additionally, visiting consumers will be able
      to
      view our advertising, news and find general information about vehicle makes
      and
      models, road rallies, and other areas of powersports interest. They will also
      be
      able to utilize our Dealer Locator to find the nearest Authorized dealer or
      Private Label Dealer in their area. Consumers will be able to view the
      Classified Section of the website and any consumer inquiring about the program
      will be directed to our nearest authorized dealer.





**Competition**





The
      consumer finance industry is highly fragmented and highly competitive. Broadly
      speaking, Sparta competes with commercial banks, savings & loans, industrial
      thrift and credit unions, and a variety of local, regional and national consumer
      finance companies. While there are numerous financial service companies that
      provide consumer credit in the automobile markets, including banks, other
      consumer finance companies, and finance companies owned by automobile
      manufacturers and retailers, most financial service companies are reluctant
      to
      lend to motorcyclists. Customers who approach these lending sources to take
      out
      installment loans are often encouraged to pursue personal loans
      instead.





There
      are
      few companies that provide nationwide dealer-based leasing options in the
      motorcycle industry segment, and these tend to be private label factory programs
      supporting their own brands. Because of their narrow focus (such as requiring
      that the equipment be covered by the brand's warranty); these companies have
      met
      with limited success.





Independent
      consumer financial services companies and large commercial banks that
      participated in this market have withdrawn substantially from the motorcycle
      loan niche over the past two years or have toughened their underwriting
      criteria. Sparta believes that those companies may have suffered as a result
      of
      compromising their underwriting criteria for the sake of volume. In addition,
      management believes that our competitors' practice of financing all makes and
      models of a particular manufacturer results in lower overall portfolio
      performance because of the poor demographics associated with some of those
      product lines. The marketplace also includes small competitors such as local
      credit unions, local banks and a few regional players.





Sparta
      competes for customers with commercial banks, savings and loans, credit unions,
      consumer financing companies, and manufacturers finance subsidiaries.
      Additionally, some powersports manufacturers such as Harley-Davidson and BMW
      have subsidiaries that provide financing.





The
      more
      significant competitors of Sparta include: GE Retail Services, Capital One
      and
      HSBC/Household Bank. To management’s knowledge, none of these firms offer leases
      for powersports vehicles.





10


The
      largest of these firms, GE Retail Services, markets both directly to dealers
      in
      Powersports market and through Co Branded private label programs. GE recently
      has co-branded with Yamaha, Suzuki, Kawasaki, Moto Guzzi, Aprillia Brands and
      other national manufacturers and distributors of Powersports and recreational
      products such as Coachmen Industries. GE also offers dealer and distributor
      floor plan financing and private label credit cards.





Capital
      One markets a product for Capital One Bank, offering consumer direct and dealer
      indirect consumer contracts to the powersports industry. They offer smaller
      dealers the ability to have customers apply via the web site affiliate program
      and larger dealers can go direct to Capital One finance. Typical terms range
      from 30 to 60 months with a minimum of individuals approved for a product named
      “The Blank Check”. Capital
      One Auto Finance, America's largest online vehicle lender, provides vehicle
      loans to customers directly via the Internet, as well as through a nationwide
      dealership network.





While
      some of Sparta’s larger competitors have vast sources of capital and may be able
      to offer lower interest rates due to lower borrowing costs, and longer terms
      (up
      to 108 months) Sparta believes that the combination of management’s experience,
      expedient service, availability of the lease option and ***iPLUS*** **Ô** give
      Sparta an advantage over its competitors.





**Regulation**





Our
      planned financing operations are subject to regulation, supervision and
      licensing under various federal, state and local statutes and ordinances.
      Additionally, the procedures that we must follow in connection with the
      repossession of vehicles securing contracts are regulated by each of the states
      in which we plan to do business. Accordingly, the laws of such states, as well
      as applicable federal law, govern our operations. Compliance with existing
      laws
      and regulations has not had a material adverse affect on our operations to
      date.
      Our management believes that we maintain all requisite licenses and permits
      and
      are in material compliance with all applicable local, state and federal laws
      and
      regulations. We will periodically review our office practices in an effort
      to
      ensure such compliance.





The
      following constitute certain of the federal, state and local statutes and
      ordinances with which we must comply:





·
            Fair
                Debt Collection Act. The Fair Debt Collection Act and applicable
                state law
                counterparts prohibit us from contacting customers during certain
                times
                and at certain places, from using certain threatening practices and
                from
                making false implications when attempting to collect a
                debt.





·
            Truth
                in Lending Act. The Truth in Lending Act requires us and the dealers
                we do
                business with to make certain disclosures to customers, including
                the
                terms of repayment, the total finance charge and the annual percentage
                rate charged on each Contract or direct
                loan.





·
            Consumer
                Leasing Act. The Consumer Leasing Act applies to any lease of consumer
                goods for more than four months. The law requires the seller to disclose
                information such as the amount of initial payment, number of monthly
                payments, total amount for fees, penalties for default, and other
                information before a lease is
                signed.





·
            The
                Consumer Credit Protection Act of 1968. The Act required creditors
                to
                state the cost of borrowing in a common language so that the consumer
                could figure out what the charges are, compare costs, and shop for
                the
                best credit deal.





·
            Equal
                Credit Opportunity Act. The Equal Credit Opportunity Act prohibits
                creditors from discriminating against loan applicants on the basis
                of
                race, color, sex, age or marital status. Pursuant to Regulation B
                promulgated under the Equal Credit Opportunity Act, creditors are
                required
                to make certain disclosures regarding consumer rights and advise
                consumers
                whose credit applications are not approved of the reasons for the
                rejection.





·
            Fair
                Credit Reporting Act. The Fair Credit Reporting Act requires us to
                provide
                certain information to consumers whose credit applications are not
                approved on the basis of a report obtained from a consumer reporting
                agency.






11






·
            Gramm-Leach-Bliley
                Act. The Gramm-Leach-Bliley Act requires us to maintain privacy with
                respect to certain consumer data in our possession and to periodically
                communicate with consumers on privacy
                matters.





·
            Soldiers'
                and Sailors' Civil Relief Act. The Soldiers' and Sailor's Civil Relief
                Act
                requires us to reduce the interest rate charged on each loan to customers
                who have subsequently joined, enlisted, been inducted or called to
                active
                military duty.





·
            Electronic
                Funds Transfer Act. The Electronic Funds Transfer Act prohibits us
                from
                requiring our customers to repay a loan or other credit by electronic
                funds transfer ("EFT"), except in limited situations that do not
                apply to
                us. We are also required to provide certain documentation to our
                customers
                when an EFT is initiated and to provide certain notifications to
                our
                customers with regard to preauthorized
                payments.





·
            Telephone
                Consumer Protection Act. The Telephone Consumer Protection Act prohibits
                telephone solicitation calls to a customer's home before 8 a.m. or
                after 9
                p.m. In addition, if we make a telephone solicitation call to a customer's
                home, the representative making the call must provide his or her
                name, our
                name, and a telephone number or address at which our representative
                may be
                contacted. The Telephone Consumer Protection Act also requires that
                we
                maintain a record of any requests by customers not to receive future
                telephone solicitations, which must be maintained for five
                years.





·
            Bankruptcy.
                Federal bankruptcy and related state laws may interfere with or affect
                our
                ability to recover collateral or enforce a deficiency
                judgment.





**Employees**





As
      of
      April 30, 2007, we had 25 full-time employees.





None
      of
      our employees are covered by a collective bargaining agreement. We have never
      experienced a work stoppage and we believe that we have satisfactory working
      relations with our employees.





**ITEM
              2.**
            **DESCRIPTION
                OF PROPERTY**





Our
      executive offices are located at 462 Seventh Avenue, 20th Floor, New York,
      NY
      10018. We have an agreement for use of office space at this location under
      a
      lease expiring on November 30, 2007. The office space contains approximately
      7,000 square feet. The annual rate is $167,280 (annualized) for the first six
      months of calendar year 2006, $174,080 (annualized) for the second six months
      of
      calendar year 2006, and $178,432 for the calendar year 2007.





We
      believe that our existing facilities will be adequate to meet our needs for
      the
      foreseeable future. Should we need additional space, management believes it
      will
      be able to secure additional space at commercially reasonable rates. Our offices
      are adequately covered by insurance for claims arising out of such
      occupancies.





**ITEM
              3.**
            **LEGAL
                PROCEEDINGS**





As
      at
      April 30, 2007, we were not a party to any material pending legal proceeding.
      From time to time, we may become involved in various lawsuits and legal
      proceedings, which arise in the ordinary course of business.





**ITEM
              4.**
            **SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY
                HOLDERS**





Not
      applicable.





12


**PART
      II**





**ITEM
              5.**
            **MARKET
                FOR THE COMMON EQUITY AND RELATED****STOCKHOLDER MATTERS AND****SMALL
                BUSINESS ISSUER PURCHASES OF EQUITY
                SECURITIES.**





**Market
      Information**





Our
      common stock is currently quoted on the OTC Bulletin Board under the symbol
      “SRCO”. The following table sets forth, for the calendar periods indicated, the
      range of the high and low last reported bid prices of our common stock, as
      reported by the OTCBB. The quotations represent inter-dealer prices without
      retail mark-ups, mark-downs or commissions, and may not necessarily represent
      actual transactions.


High
              
              LowFiscal
                  Year 2006 (May 1, 2005 - April 30, 2006)First
                  quarter (May 1, 2005 - July 31, 2005)
              
              $
              1.01
              
              $
              0.25Second
                  quarter (August 1, 2005 - October 31, 2005)
              
              $
              0.96
              
              $
              0.59Third
                  quarter (November 1, 2005 - January 31, 2006)
              
              $
              0.81
              
              $
              0.41Fourth
                  quarter (February 1, 2006 - April 30, 2006)
              
              $
              0.73
              
              $
              0.42Fiscal
                  Year 2007 (May 1, 2006 - April 30, 2007First
                  quarter (May 1, 2006 - July 31, 2006
              
              $
              0.54
              
              $
              0.18Second
                  quarter (August 1, 2006 - October 31, 2006)
              
              $
              0.27
              
              $
              0.09Third
                  quarter (November 1, 2006 - January 31, 2007)
              
              $
              0.15
              
              $
              0.06Fourth
                  quarter (February 1, 2007 - April 30, 2007)
              
              $
              0.11
              
              $
              0.05





**Holders**





The
      approximate number of holders of record of our common stock as of April 30,
      2007
      was 3,009, excluding stockholders holding common stock under nominee security
      position listings.





**Dividends**





We
      have
      never declared any cash dividends on our common stock. Future cash dividends
      on
      the common stock, if any, will be at the discretion of our Board of Directors
      and will depend on our future operations and earnings, capital requirements
      and
      surplus, general financial condition, contractual restrictions, and other
      factors that the Board of Directors may consider important. The Board of
      Directors does not intend to declare or pay cash dividends in the foreseeable
      future. It is the current policy to retain all earnings, if any, to support
      future growth and expansion.





As
      of
      April 30, 2007, we had outstanding 19,795 shares of Series A Convertible
      Preferred Stock, $.001 par value. The shares pay a 6% annual dividend which
      may
      be paid in cash or shares of common stock at the Company’s option. We have not,
      as of July 30, 2007, distributed any dividends, in cash or in shares of common
      stock.





13


**Recent
      Sales of Unregistered Securities**





From
      November 2006 through April 30, 2007, in
      transactions deemed to be exempt from registration under the Securities Act
      in
      reliance on Section 4(2) of the Securities Act, the
      Company sold to thirteen accredited investors six months unsecured notes in
      the
      aggregate amount of $775,259. The notes bear interest at the simple rate of
      6%
      per year. At the Company’s option, the notes are convertible into shares of
      common stock at prices ranging from $0.047 to $0.059 per share. The notes mature
      in six months from the issuance on various dates through October 19, 2007.





During
      the fiscal year ended April 30, 2007, in
      transactions deemed to be exempt from registration under the Securities Act
      in
      reliance on Section 4(2) of the Securities Act, the
      Company issued 250,000 shares of common stock, valued at $48,500, to lenders
      as
      additional costs related to loans received by the Company. This amount was
      charged to financing cost. ****





From
      May
      1, 2007 to July 24, 2007, in transactions deemed to be exempt from registration
      under the Securities Act in reliance on Section 4(2) of the Securities Act,
      the
      Company sold to sixteen accredited investors six month unsecured notes in the
      aggregate amount of $457,000. The notes bear interest at the simple interest
      rate of 6% per year. At the Company’s option, the notes are convertible into
      shares of common stock at prices ranging from $0.03 to $0.055 per share. The
      notes mature in six months from the issuance on various dates through January
      24, 2008.




In
        August
        2007, the Company entered into a three month agreement with a consultant
        which
        agreement calls for cash payments by the Company of $3,000 of which $1,000
        has
        been paid and the issuance to the consultant of a minimum of 600,000 shares
        of
        the Company’s restricted common stock and up to a maximum of 1,100,000 shares of
        restricted common stock based upon the consultants performance under the
        agreement.





14


**ITEM
              6.**
            **MANAGEMENT’S
                DISCUSSION AND ANALYSIS**





**“FORWARD** - **LOOKING”
      INFORMATION**





This
      report on Form 10-KSB contains certain "forward-looking statements" within
      the
      meaning of Section 21E of the Securities Exchange Act of 1934, as amended,
      which
      represent our expectations and beliefs, including, but not limited to statements
      concerning the Company's expected growth. The words "believe," "expect,"
      "anticipate," "estimate," "project," and similar expressions identify
      forward-looking statements, which speak only as of the date such statement
      was
      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.





The
      following discussion and analysis should be read in conjunction with the
      information set forth in the audited consolidated financial statements for
      the
      years ended April 30, 2007 and April 30, 2006 and footnotes found in the
      Company's Annual Report on Form 10-KSB.





Unless
      otherwise stated, the discussion and analysis refers to the business of Sparta
      Commercial Services, Inc. and does not refer to the operations for our former
      business which was essentially a non-operating shell company.





**RESULTS
      OF OPERATIONS**




**COMPARISON
      OF THE YEAR ENDED APRIL 30, 200** **7
      TO THE YEAR ENDED APRIL 30, 2006**





For
      the
      year ended April 30, 2007, we have generated limited sales revenues, have
      incurred significant expenses, and have sustained significant losses. We believe
      we will continue to earn increasing revenues from operations in fiscal 2008
      as
      we have completed our transition to an operating company.





**Revenues**





Revenues
      totaled $787,997 in fiscal 2007 compared to revenues of $169,106 in fiscal
      2006.
      Fiscal 2007 revenues were primarily comprised of $425,806 in income from
      Operating Leases, $282,808 in interest income from Retail Installment Sales
      Contracts, $24,033 in Preferred Provider and Private Label Fees, $55,350 in
      other fee income.





**Costs
      and Expenses**





The
      Company incurred employee compensation and benefit costs of $1,805,345 for
      the
      year ended April 30, 2007 compared with $1,228,856 in fiscal 2006. The increase
      is related to the costs of the Company increasing its employee base during
      the
      year from 15 employees at fiscal year end 2006 to 25 at fiscal year end 2007.
      As
      the Company continues to expand, the Company will incur additional costs for
      personnel. In order for the Company to attract and retain quality personnel,
      management anticipates it will continue to offer competitive salaries and issue
      common stock to consultants and employees.





The
      Company paid $280,000 and $337,221 to its Chairman and Chief Executive Officer,
      in fiscal 2007 and 2006, respectively. These payments were charged to
      operations, and are included in the compensation costs shown above.





In
      connection with placement transactions, the Company expensed non-cash costs
      of
      $0 for the year ended April 30, 2007 and $406,665 to issue warrants to the
      private placement agent for the year ended April 30, 2006. These amounts were
      charged to financing costs. During
      the fiscal year ended April 30, 3007 the Company expensed $494,230
      as the value of stock based compensation issued to consultants versus $333,600
      in the prior fiscal year. Additionally, during the fiscal year ended April
      30,
      3007 the Company expensed $313,107 as the value of employee stock and option
      based compensation as compared to $53,806 in the prior fiscal year. The Company
      has expensed non-cash costs of $0 and $1,775,000 for the fiscal years ended
      April 30, 2007 and 2006, respectively. This charge was for the intrinsic value
      of the imbedded beneficial conversion feature for the Preferred Stock holders.
      At April 30, 2007 and April 30, 2006, accrued preferred dividends of $118,770
      and $141,255, respectively, were charged to retained earnings. Additionally,
      for
      the fiscal year ended April 30, 2007, the Company charged $154,913 to financing
      costs representing interest charged and the value of shares issued for penalty
      interest as compared to $1,059,575
      charged in fiscal 2006 for the value of shares issuable for the payment of
      notes
      and interest thereon ($323,672), the value of kicker shares and consulting
      shares ($688,435) and for Company’s failure to timely file a registration
      statement in connection with a private placement ($47,468).




15





The
        Company incurred consulting costs of $789,325 for the year ended April 30,
        2007,
        as compared to $2,552,304
        for the year ended April 30, 2006. Of the costs incurred in fiscal 2007,
        $494,230 were non-cash charges for stock issued for consulting. Of the costs
        incurred in fiscal 2006, $2,285,604
        were non-cash charges representing the market value of shares of the Company’s
        common stock issued to a private placement agent and to consultants, $143,443
        was for consulting costs and $123,257
        was for organizational consulting expenses.





The
      Company incurred legal and accounting fees of $236,939 for the year ended April
      30, 2007, as compared to $335,938 for the year ended April 30, 2006. The
      decrease in costs is related primarily to legal and accounting expenses
      associated with finalizing the private placement in the prior fiscal
      year.





The
        Company incurred other operating expenses of $1,121,369 for the year ended
        April
        30, 2007. Notable expenses in this category are: general office expenses
        of
        $260,472, rent of $213,570, loss reserve expense of $146,917, travel and
        entertainment of $133,967, utilities of $96,706, web development of $85,580,
        credit bureaus of $67,385, marketing of $62,730, maintenance contracts of
        $30,637 and taxes of $23,405. In fiscal 2006, other operating costs totaled
        $879,193. Notable expenses in this category are: general office expenses
        of
        $287,410, rent of $142,584, loss reserve expense of $30,794, travel and
        entertainment of $92,079, utilities of $61,694, web development of 34,462,
        credit bureaus of $14,561, marketing of $ 44,693, maintenance of $38,917
        and
        taxes of $875.





Interest
      costs for the fiscal year ended April 30, 2007 were $227,829 as compared to
      $17,780 for the fiscal year ended April 30, 2006. Depreciation and amortization
      for the fiscal year ended April 30, 2007 was $323,146 as compared to $112,904
      for the fiscal year ended April 30, 2006.





**Net
      Loss**





Our
      net
      loss attributable to common shareholders for the year ended April 30, 2007
      decreased $3,819,535 to $4,053,237 from a loss of $7,872,772, for the year
      ended
      April 30, 2006. The decrease in net loss attributable to common shareholders
      was
      primarily due to: the $1,775,000 (100%) decrease in the beneficial conversion
      discount on the convertible preferred stock, the $905,084 decrease in non-cash
      financing costs from $1,059,577 to $154,491, the $673,742 decrease in total
      operating expenses from $5,239,944to $4,639,380 and the $618,891increase in
      revenues from $169,106 to $787,997.





Our
      net
      loss per common share (basic and diluted) attributable to common shareholders
      was $0.03 for the year ended April 30, 2007 and $0.08 for the year ended April
      30, 2006.





**LIQUIDITY
      AND CAPITAL RESOURCES**





As
          of
          April 30, 2007, the Company had a working capital deficit of $2,773,486.
          The
          Company generated a deficit in cash flow from operations of $2,120,559
          for the
          year ended April 30, 2007. This deficit is primarily attributable to the
          Company's net loss from operations of $3,934,467, adjusted for equity based
          compensation of $441,527, stock based financing costs of $55,160, depreciation
          and amortization of $323,146 allowance for loss reserve of $49,245 and
          a
          decrease in warrant liability of $299,658 and to changes in the balances
          of
          current assets, primarily a decrease in loan proceeds receivable of $389,998
          and
          pre-paid expenses of $29,052 and current liabilities, primarily an increase
          in
          accounts payable of $852,700 and an increase in restricted cash of $172,440.
          Deferred revenue increased $46,765 , interest receivable increased $25,832 and
          accrued registration penalty decreased $13,285.


Cash
        flows used in investing activities for the year ended April 30, 2007 were
        $2,477,169 comprising of $710,398 for the purchase of leased vehicles, purchase
        of Retail Installment Sales Contracts in the amount of $1,750,3171, and the
        purchase of property and equipment of $16,454.





The
      Company met its cash requirements during the period through net proceeds from
      the issuance of notes of $1,342,519 and obtaining net loans of $2,295,859 and
      warrant exercise of $125,000.





16


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 projected
      cash
      flow deficits from operations and development. We are seeking financing in
      the
      form of equity in order to provide the necessary working capital. We currently
      have no commitments for financing. There is no guarantee that we will be
      successful in raising the funds required.





We
      estimate that we will need approximately $2,000,000 in addition to our normal
      operating cash flow to conduct operations during the next twelve months. Based
      on capital received from equity financing to date, and certain indications
      of
      interest to purchase our equity, we believe that we have a reasonable chance
      to
      raise sufficient capital resources to meet projected cash flow deficits through
      the next twelve months. 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 the Company. Any additional
      equity financing may be dilutive to shareholders and such additional equity
      securities may have rights, preferences or privileges that are senior to those
      of the Company's 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 the operating flexibility
      of the Company. 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 the Company's revenue and operating results was not
      significant. The Company's operations are located in North America and there
      are
      no seasonal aspects that would have a material effect on the Company's 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, 2007 and 2006 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.





**PLAN
      OF OPERATIONS**





**Addressing
      the Going Concern Issues**





In
      order
      to improve the Company's liquidity, the Company's management is actively pursing
      additional equity financing through discussions with investment bankers and
      private investors. There can be no assurance the Company will be successful
      in
      its effort to secure additional equity 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 equity investments in our company;
                and


·
            initiating
                negotiations to secure short term financing through promissory notes
                or
                other debt instruments on an as needed
                basis.





To
      address these issues, we are negotiating the potential sale of securities with
      investment banking companies to assist us in raising capital. We are also
      presently in discussions with several institutions about obtaining additional
      credit facilities.




17


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





**Number
      of Employees**





From
      our
      inception through the period ended April 30, 2007, we have relied on the
      services of outside consultants for services and currently have twenty-five
      full-time employees. In order for us to attract and retain quality personnel,
      we
      anticipate we will have to offer competitive salaries to future employees.
      If we
      fully implement our business plan, we anticipate our employment base may
      increase by approximately 20% during the next twelve months. As we continue
      to
      expand, we will incur additional cost for personnel. This projected increase
      in
      personnel is dependent upon our generating revenues and obtaining sources of
      financing. There is no guarantee that we will be successful in raising the
      funds
      required or generating revenues sufficient to fund the projected increase in
      the
      number of employees.





**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.





**CRITICAL
      ACCOUNTING POLICIES**





The
      preparation of our consolidated 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 consolidated financial statements; we believe the following
      critical accounting policy involves the most complex, difficult and subjective
      estimates and judgments:





**Revenue
      Recognition**





We
      purchase Retail Installment Sales Contracts (“RISC”) from motorcycle dealers and
      we originate leases on new and used motorcycles and other powersports vehicles
      from motorcycle dealers throughout the United States.





The
      RISCs
      are secured by liens on the titles to the vehicles. The RISCs are accounted
      for
      as loans. Upon purchase, the RISCs appear on the Company’s balance sheet as RISC
      loans receivable current and long term. When the RISC is entered into our
      accounting system, based on the customer’s APR (interest rate), an amortization
      schedule for the loan on a simple interest basis is created. Interest is
      computed by taking the principal balance times the APR rate then divided by
      365
      days to get your daily interest amount. The daily interest amount is multiplied
      by the number of days from the last payment to get the interest income portion
      of the payment being applied. The balance of the payment goes to reducing the
      loan principal balance.





18


Our
      leases are accounted for as either operating leases or direct financing leases.
      At the inception of operating leases, no lease revenue is recognized and the
      leased motorcycles, together with the initial direct costs of originating the
      lease, which are capitalized, appear on the balance sheet as "motorcycles under
      operating leases-net". The capitalized cost of each motorcycle is depreciated
      over the lease term, on a straight-line basis, down to the original estimate
      of
      the projected value of the motorcycle at the end of the scheduled lease term
      (the "Residual"). Monthly lease payments are recognized as rental income. An
      acquisition fee classified as fee income on the financial statements is received
      and recognized in income at the inception of the lease. Direct financing leases
      are recorded at the gross amount of the lease receivable, and unearned income
      at
      lease inception is amortized over the lease term.





We
      realize gains and losses as the result of the termination of leases, both at
      and
      prior to their scheduled termination, and the disposition of the related
      motorcycle. The disposal of motorcycles, which reach scheduled termination
      of a
      lease, results in a gain or loss equal to the difference between proceeds
      received from the disposition of the motorcycle and its net book value. Net
      book
      value represents the residual value at scheduled lease termination. Lease
      terminations that occur prior to scheduled maturity as a result of the lessee's
      voluntary request to purchase the vehicle have resulted in net gains, equal
      to
      the excess of the price received over the motorcycle's net book
      value.





Early
      lease terminations also occur because of (i) a default by the lessee, (ii)
      the
      physical loss of the motorcycle, or (iii) the exercise of the lessee's early
      termination. In those instances, the Company receives the proceeds from either
      the resale or release of the repossessed motorcycle, or the payment by the
      lessee's insurer. We record a gain or loss for the difference between the
      proceeds received and the net book value of the motorcycle.





We
      charge
      fees to manufacturers and other customers related to creating a private label
      version of our financing program including web access, processing credit
      applications, consumer contracts and other related documents and processes.
      Fees
      received are amortized and booked as income over the length of the
      contract.





**Stock-Based
      Compensation**





On
      December 16, 2004, the Financial Accounting Standards Board (“FASB”) issued FASB
      Statement No. 123R (revised 2004), "Share-Based Payment" which is a revision
      of
      FASB Statement No. 123, "Accounting for Stock-Based Compensation". Statement
      123R supersedes APB opinion No. 25, "Accounting for Stock Issued to Employees",
      and amends FASB Statement No. 95, "Statement of Cash Flows". Generally, the
      approach in Statement 123R is similar to the approach described in Statement
      123. However, Statement 123R requires all share-based payments to employees,
      including grants of employee stock options, to be recognized in the income
      statement based on their fair values. Pro-forma disclosure is no longer an
      alternative. On April 14, 2005, the SEC amended the effective date of the
      provisions of this statement. The effect of this amendment by the SEC is that
      the Company will have to comply with Statement 123R and use the Fair Value
      based
      method of accounting no later than the fourth quarter of 2006. Management has
      elected to apply Statement 123R in the third quarter of fiscal year
      2006.





**Website
      Development Costs**





We
      have
      incurred costs to develop a proprietary web-based private label financing
      program for processing including web access, processing credit applications,
      consumer contracts and other related documents and processes. We elected to
      recognize the costs of developing its website and related intellectual property
      the website development costs in accordance with Emerging Issue Task Force
      ("EITF") No. 00-02, "Accounting for Website Development Costs."" As such, the
      Company expenses all costs incurred that relate to the planning and post
      implementation phases of development of its website. Direct costs incurred
      in
      the development phase are capitalized and recognized over the estimated useful
      life. Costs associated with repair or maintenance for the website are included
      in cost of net revenues in the current period expenses.





19


**RECENT
      ACCOUNTING PRONOUNCEMENTS**




In
      March
      2006, the FASB issued FASB Statement No. 156, Accounting for Servicing of
      Financial Assets - an amendment to FASB Statement No. 140. Statement 156
      requires that an entity recognize a servicing asset or servicing liability
      each
      time it undertakes an obligation to service a financial asset by entering into
      a
      service contract under certain situations. The new standard is effective for
      fiscal years beginning after September 15, 2006. The adoption of SFAS No. 156
      did not have a material impact on the Company's financial position and results
      of operations.





In
      June
      2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation
      No. 48, “Accounting for Uncertainty in Income Taxes - an interpretation of
      FASB Statement No. 109” (FIN 48). FIN 48 prescribes a recognition threshold
      and measurement attribute for financial statement recognition and measurement
      of
      a tax position taken or expected to be taken in a tax return, and also provides
      guidance on de-recognition, classification, interest and penalties, accounting
      in interim periods, disclosure, and transition. FIN 48 is effective for fiscal
      years beginning after December 15, 2006. The Company does not expect that
      the adoption of FIN 48 will have an impact on the Company’s financial position
      and results of operations.





In
      September 2006, the SEC staff issued Staff Accounting Bulletin (SAB) No. 108,
      “Considering the Effects of Prior Year Misstatements when Quantifying
      Misstatements in Current Year Financial Statements” (SAB 108). SAB 108 was
      issued in order to eliminate the diversity of practice in how public companies
      quantify misstatements of financial statements, including misstatements that
      were not material to prior years’ financial statements. We will initially apply
      the provisions of SAB 108 in connection with the preparation of our annual
      financial statements for the year ending April 30, 2007. We have evaluated
      the
      potential impact SAB 108 may have on our financial position and results of
      operations and do not believe the impact of the application of this guidance
      will be material.





20


In
      September 2006, the FASB issued SFAS 157 `Fair Value Measurements'. This
      Statement defines fair value, establishes a framework for measuring fair value
      in generally accepted accounting principles ("GAAP"), and expands disclosures
      about fair value measurements. This Statement applies under other accounting
      pronouncements that require or permit fair value measurements, the Board having
      previously concluded in those accounting pronouncements that fair value is
      the
      relevant measurement attribute. Accordingly, this Statement does not require
      any
      new fair value measurements. However, for some entities, the application of
      this
      Statement will change current practice. This Statement is effective for
      financial statements issued for fiscal years beginning after November 15, 2007,
      and interim periods within those fiscal years. Adoption of SFAS 157 will not
      have a significant impact on our results of operations or financial
      condition.





In
      September 2006, the FAS issued SFAS No. 158, Employers’ Accounting for Defined
      Benefit Pension and Other Postretirement Plans, which requires employers to
      recognize the over-funded or under-funded status of a defined benefit
      postretirement plan (other than a multiemployer plan) as an asset or liability
      in its statement of financial position and to recognize changes in that funded
      status in the year in which the changes occur through comprehensive income
      of a
      business entity. The Company does not believe that the pronouncement will have
      a
      material affect on its financial statements as it does not participate in
      defined benefit pension plans.





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities - Including an amendment of FASB
      Statement No. 115,” which permits entities to measure many financial instruments
      and certain other items at fair value. The objective is to improve financial
      reporting by providing entities with the opportunity to mitigate volatility
      in
      reporting earnings caused by measuring related assets and liabilities
      differently without having to apply complex hedge accounting provisions. This
      Statement is expected to expand the use of fair value measurement, which is
      consistent with the Board’s long-term measurement objectives for accounting for
      financial instruments. This Statement is effective as of the beginning of the
      Company’s first fiscal year that begins after November 15, 2007.





**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.





21


**ITEM
              7:**
            **FINANCIAL
                STATEMENTS**





PageReport
                of Registered Independent Certified Public Accounting Firm
            23Consolidated
                Balance Sheets as of April 30, 2007 and 2006
            24Consolidated
                Statements of Losses for the years ended April 30, 2007 and 2006
            25Consolidated
                Statement of Deficiency in Stockholders’ Equity for the two years ended
                April 30, 2007
            26Consolidated
                Statements of Cash Flows for the years ended April 30, 2007 and 2006
            27Notes
                to Consolidated Financial Statements
            28
                - 47






22


RBSM
        LLP


CERTIFIED
      PUBLIC ACCOUNTANTS









REPORT
      OF REGISTERED INDEPENDENT CERTIFIED PUBLIC ACCOUNTING FIRM





Board
      of
      Directors


Sparta
      Commercial Services, Inc.


New
      York,
      New York





We
      have
      audited the accompanying consolidated balance sheet of Sparta Commercial
      Services, Inc., as of April 30, 2007 and 2006, and the related consolidated
      statements of losses, deficiency in stockholders' equity and cash flows for
      each
      of the two years in the period ended April 30, 2007. These financial statements
      are the responsibility of the company's management. Our responsibility is to
      express an opinion on the financial statements based upon our
      audits.





We
      have
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States of America). Those standards require
      that we plan and perform the audit to obtain reasonable assurance about whether
      the financial statements are free of material misstatement. An audit includes
      examining, on a test basis, evidence supporting the amounts and disclosures
      in
      the financial statements. An audit also includes assessing the accounting
      principles used and significant estimates made by management, as well as
      evaluating the overall financial statement presentation. We believe that our
      audits provide a reasonable basis for our opinion.





In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the consolidated financial position of Sparta Commercial
      Services, Inc. at April 30, 2007 and 2006, and the results of its operations
      and
      its cash flows for each of the two years in the period ended April 30, 2007,
      in
      conformity with accounting principles generally accepted in the United States
      of
      America.





The
        accompanying financial statements have been prepared assuming the company
        will
        continue as a going concern. As discussed in the Note Q to the accompanying
        financial statements, the company has suffered recurring losses from operations
        that raises substantial doubt about the company's ability to continue as
        a going
        concern. Management's plans in regard to these matters are also described
        in
        Note Q. The financial statements do not include any adjustments that might
        result from the outcome of this uncertainty.







/s/
        R B S
        M  LLP


RBSM
        LLP


Certified
      Public Accountants


New
      York,
      New York


July
      15,
      2007




23


**SPARTA
        COMMERCIAL SERVICES, INC.**


**CONSOLIDATED
        BALANCE SHEETS**


**APRIL
        30, 2007 AND 2006**





**APRIL
                  30,****2007**
              
              **2006****ASSETS****Current
                  assets:**Cash
                  and cash equivalents
              
              $
              22,032
              
              $
              856,382RISC
                  loan receivable, current, net ofreserve
                  of $13,821 and $5,090, respectively (NOTE
                  D)
              
              
              569,052
              
              
              206,986Interest
                  receivables
              
              
              25,832
              
              
              —Loan
                  proceeds receivable
              
              
              —
              
              
              389,998Prepaid
                  expenses and other current assets
              
              
              27,137
              
              
              56,189Inventory
                  (NOTE C)
              
              
              20,784
              
              
              —**Total
                  current assets**
              
              
              664,837
              
              
              1,509,555Motorcycles
                  and other vehicles under operating leases, net ofaccumulated
                  depreciation of $221,800 and $75,873, respectively andloss
                  reserve of $26,059 and $16,409, respectively. (NOTE B)
              
              
              1,088,686
              
              
              667,286Property
                  and equipment, net of accumulated depreciation andamortization
                  of $97,047 and $53,249, respectively (NOTE E)
              
              
              94,200
              
              
              121,544RISC
                  loan receivables, net of current portion andloss
                  reserve of $45,517 and 14,653 , respectively. (NOTE D)
              
              
              1,923,767
              
              
              595,895Restricted
                  cash
              
              
              284,943
              
              
              112,503Deposits
              
              
              50,692
              
              
              48,967**Total
                  assets**
              
              $
              4,107,125
              
              $
              3,055,750**LIABILITIES
                  AND DEFICIENCY IN  STOCKHOLDERS' EQUITY****Current
                  liabilities:**Accounts
                  payable and accrued expenses
              
              $
              1,219,067
              
              $
              424,692Accrued
                  equity based compensation
              
              
              40,310
              
              
              333,600Accrued
                  equity based penalties
              
              
              2,380
              
              
              47,468Notes
                  payable – Senior Lender (NOTE F)
              
              
              787,282
              
              
              358,549Notes
                  payable -Other (NOTE G)
              
              
              1,140,259
              
              
              —Loans
                  payable - related parties (NOTE H)
              
              
              202,260
              
              
              —Deferred
                  revenue (NOTE A)
              
              
              46,765
              
              
              186,245**Total
                  current liabilities**
              
              
              3,438,323
              
              
              1,350,554Notes
                  payable - Senior Lender long term portion (NOTE F)
              
              
              2,197,925
              
              
              330,799Warrant
                  liability
              
              
              —
              
              
              834,924**Total
                  liabilities**
              
              
              5,636,248
              
              
              2,516,277**Deficiency
                  in Stockholders' Equity**Preferred
                  stock, $0.001 par value; 10,000,000 shares authorized of which
                  35,850
                  shareshave
                  been designated as Series A convertible preferred stock, with a
                  stated
                  valueof
                  $100 per share, 19,795 and 19,795 shares issued and outstanding,
                  respectively
              
              
              1,979,500
              
              
              1,979,500Common
                  stock, $0.001 par value; 340,000,000 shares authorized, 123,216,157
                  and114,180,301
                  shares issued and outstanding, respectively
              
              
              123,216
              
              
              114,180Common
                  stock to be issued, 0 and 5,838,302 shares, respectively.
              
              
              —
              
              
              5,838Common
                  stock subscribed
              
              
              —
              
              
              330,000Additional
                  paid-in capital
              
              
              14,595,827
              
              
              12,553,884Deferred
                  compensation
              
              
              (24,000
              )
              
              (293,500
              )Accumulated
                  deficit
              
              
              (18,203,666
              )
              
              (14,150,429
              )**Total
                  deficiency in stockholders' equity**
              
              
              (1,529,123
              )
              
              539,473**Total
                  liabilities and deficiency in stockholders'
                  equity**
              
              $
              4,107,125
              
              $
              3,055,750







See
        accompanying notes to consolidated financial statements.


24


**SPARTA
        COMMERCIAL SERVICES, INC.**
 **CONSOLIDATED
        STATEMENT OF LOSSES**
 
 **For
                    the Year Ended****April
                    30,****2007**
                
                **2006****Revenue**Rental
                    Income, Leases
                
                $
                425,806
                
                $
                136,700Interest
                    Income, Loans
                
                
                282,808
                
                
                —Other
                
                
                79,383
                
                
                32,406$
                787,997
                
                $
                169,106**Operating
                    expenses:**General
                    and administrative
                
                
                4,316,234
                
                
                5,127,040Depreciation
                    and amortization
                
                
                323,146
                
                
                112,904**Total
                    operating expenses**
                
                
                4,639,380
                
                
                5,239,944**Loss
                    from operations**
                
                
                (3,851,383
                )
                
                (5,070,838
                )**Other
                    expense:**Interest
                    expense and financing cost, net
                
                
                (382,742
                )
                
                (1,077,355
                )Change
                    in value of warrant liabilities
                
                
                299,658
                
                
                198,176Loss
                    on sale of asset
                
                
                —
                
                
                (6,500
                )**Net
                    loss**
                
                
                (3,934,467
                )
                
                (5,956,517
                )**Preferred
                    dividend payable**
                
                
                118,770
                
                
                141,255**Preferred
                    dividend-beneficial conversion****discount
                    on convertible preferred**
                
                
                —
                
                
                1,775,000**Net
                    loss attributed to common stockholders**
                
                $
                (4,053,237
                )
                $
                (7,872,772
                )**Basic
                    and diluted loss per share**
                
                $
                (0.03
                )
                $
                (0.06
                )**Basic
                    and diluted loss per share attributed to****common
                    stockholders**
                
                $
                (0.03
                )
                $
                (0.08
                )**Weighted
                    average shares outstanding (basic and diluted)**
                
                
                122,061,446
                
                
                95,479,102
 
  See
          accompanying notes to consolidated financial
          statements.


25


**SPARTA
          COMMERCIAL SERVICES, INC.**
 **CONSOLIDATED
          STATEMENT OF (DEFECIENCY IN) STOCKHOLDERS’ EQUITY**
 **FOR
          THE TWO YEARS ENDED APRIL 30, 2007**
 
 Preferred
                        Stock
                    
                    Common
                        Stock
                    
                    Common
                        Stock
                      to
                        be issued
                    
                    Stock
                    
                    Additional
                      Paid
                        in
                    
                    Deferred
                    
                    AccumulatedShares
                    
                    Amount
                    
                    Shares
                    
                    Amount
                    
                    Shares
                    
                    Amount
                    
                    Subscribed
                    
                    Capital
                    
                    Compensation
                    
                    Deficit
                    
                    Total**Balance,
                        April 30, 2005**
                    
                    
                    18,100
                    
                    
                    1,810,000
                    
                    
                    86,005,415
                    
                    
                    86,005
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    3,930,629
                    
                    
                    —
                    
                    
                    (6,277,658
                    )
                    
                    (451,024
                    )Preferred
                        shares sold for cash
                    
                    
                    17,750
                    
                    
                    1,775,000
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    1,775,000Cost
                        of preferred sales
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    (182,484
                    )
                    
                    —
                    
                    
                    —
                    
                    
                    (182,484
                    )Shares
                          issued upon conversionof preferred
                    
                    
                    (16,055
                    )
                    
                    (1,605,500
                    )
                    
                    10,291,666
                    
                    
                    10,291
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    1,595,209
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —Sale
                        of shares for cash
                    
                    
                    —
                    
                    
                    —
                    
                    
                    11,717,067
                    
                    
                    11,717
                    
                    
                    5,838,302
                    
                    
                    5,838
                    
                    
                    —
                    
                    
                    2,960,391
                    
                    
                    —
                    
                    
                    —
                    
                    
                    2,977,946Common
                        stock subscribed
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    330,000
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    330,000Warrants
                        issued for services
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    406,665
                    
                    
                    —
                    
                    
                    —
                    
                    
                    406,665Warrants
                        issued to placement agent
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    (1,033,100
                    )
                    
                    —
                    
                    
                    —
                    
                    
                    (1,033,100
                    )Shares
                        issued for financing cost
                    
                    
                    —
                    
                    
                    —
                    
                    
                    464,745
                    
                    
                    465
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    242,805
                    
                    
                    —
                    
                    
                    —
                    
                    
                    243,270Shares
                          issued for repayments ofnotes and accrued interest
                    
                    
                    —
                    
                    
                    —
                    
                    
                    651,124
                    
                    
                    651
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    485,802
                    
                    
                    —
                    
                    
                    —
                    
                    
                    486,453Shares
                        issued for severance
                    
                    
                    —
                    
                    
                    —
                    
                    
                    113,637
                    
                    
                    114
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    85,114
                    
                    
                    —
                    
                    
                    —
                    
                    
                    85,228Shares
                        issued for services
                    
                    
                    —
                    
                    
                    —
                    
                    
                    3,500,000
                    
                    
                    3,500
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    2,235,500
                    
                    
                    (293,500
                    )
                    
                    —
                    
                    
                    1,945,500Shares
                        issued upon cashless exercise of warrants
                    
                    
                    —
                    
                    
                    —
                    
                    
                    1,436,647
                    
                    
                    1,437
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    (1,437
                    )
                    
                    —
                    
                    
                    —
                    
                    
                    —Employee
                        options expense
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    53,806
                    
                    
                    —
                    
                    
                    —
                    
                    
                    53,806Beneficial
                          conversion featureand warrants deemed preferred
                          dividend
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    1,775,000
                    
                    
                    —
                    
                    
                    (1,775,000
                    )
                    
                    ——Payments
                        for fractional shares
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    (16
                    )
                    
                    —
                    
                    
                    —
                    
                    
                    (16
                    )Accrued
                        preferred dividend
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    (141,254
                    )
                    
                    (141,254
                    )Net
                        loss
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    (5,956,517
                    )
                    
                    (5,956,517
                    )**Balance,
                        April 30, 2006**
                    
                    
                    19,795
                    
                    $
                    1,979,500
                    
                    
                    114,180,301
                    
                    $
                    114,180
                    
                    
                    5,838,302
                    
                    $
                    5,838
                    
                    $
                    330,000
                    
                    $
                    12,553,884
                    
                    $
                    (293,500
                    )
                    $
                    (14,150,429
                    )
                    $
                    539,473Shares
                        issued
                    
                    
                    —
                    
                    
                    —
                    
                    
                    5,838,302
                    
                    
                    5,838
                    
                    
                    (5,838,302
                    )
                    $
                    (5,838
                    )
                    
                    0
                    
                    
                    0
                    
                    
                    
                    
                    
                    —
                    
                    
                    —Shares
                        issued
                    
                    
                    
                    
                    
                    
                    
                    
                    551,001
                    
                    
                    551
                    
                    
                    
                    
                    
                    
                    
                    
                    (330,000
                    )
                    
                    329,449
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —Shares
                        issued for financing cost
                    
                    
                    —
                    
                    
                    —
                    
                    
                    250,000
                    
                    
                    250
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    48,250
                    
                    
                    
                    
                    
                    —
                    
                    
                    48,500Shares
                          issued for accruedexpenses
                    
                    
                    —
                    
                    
                    —
                    
                    
                    988,077
                    
                    
                    988
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    469,396
                    
                    
                    —
                    
                    
                    —
                    
                    
                    470,384Deferred
                        compensation recorded
                    
                    
                    —
                    
                    
                    —
                    
                    
                    350,000
                    
                    
                    350
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    55,650
                    
                    
                    269,500
                    
                    
                    —
                    
                    
                    325,500Sock
                      compensation recorded
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    20,000
                    
                    
                    —
                    
                    
                    —
                    
                    
                    20,000Employee
                        options expense
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    313,108
                    
                    
                    —
                    
                    
                    —
                    
                    
                    313,108Shares
                        issued for services
                    
                    
                    —
                    
                    
                    —
                    
                    
                    417,000
                    
                    
                    417
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    108,003
                    
                    
                    —
                    
                    
                    —
                    
                    
                    108,420Warrants
                        exercised
                    
                    
                    —
                    
                    
                    —
                    
                    
                    641,476
                    
                    
                    642
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    124,358
                    
                    
                    —
                    
                    
                    —
                    
                    
                    125,000Warrant
                        liability
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    567,069
                    
                    
                    —
                    
                    
                    —
                    
                    
                    567,069Warrant
                        compensation
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    6,660
                    
                    
                    —
                    
                    
                    —
                    
                    
                    6,660Accrued
                        preferred dividend
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    (118,770
                    )
                    
                    (118,770
                    )Net
                        loss
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    (3,934,467
                    )
                    
                    (3,934,467
                    )**Balance,
                        April 30, 2007**
                    
                    
                    19,795
                    
                    $
                    1,979,500
                    
                    
                    123,216,157
                    
                    $
                    123,216
                    
                    
                    —
                    
                    $
                    —
                    
                    $
                    —
                    
                    $
                    14,595,827
                    
                    $
                    (24,000
                    )
                    $
                    (18,203,666
                    )
                    $
                    (1,529,123
                    )
 
 See
          accompanying notes to consolidated financial
          statements.


26


**SPARTA
          COMMERCIAL SERVICES, INC.**
 **CONSOLIDATED
          STATEMENT OF CASH FLOWS**
 
 **For
                    the Year Ended****April
                    30,****2007**
                
                **2006****CASH
                    FLOWS FROM OPERATING ACTIVITIES:**Net
                    loss
                
                $
                (3,934,467
                )
                $
                (5,956,517
                )Adjustments
                    to reconcile net loss to net cashused
                    in operating activities:Depreciation
                    and amortization
                
                
                323,146
                
                
                112,904Allowance
                    for loss reserve
                
                
                49,245
                
                
                36,152Amortization
                    of deferred revenue
                
                
                (186,245
                )
                
                (13,200
                )Amortization
                    of deferred compensation
                
                
                325,500
                
                
                362,004Equity
                    based compensation
                
                
                441,527
                
                
                2,056,130Stock
                    based finance cost
                
                
                55,160
                
                
                973,607Change
                    in fair value of penalty warrant and warrant liability
                
                
                (299,658
                )
                
                (198,176
                )Loss
                    on sale of assets
                
                
                —
                
                
                6,500Changes
                    in operating assets and liabilities:(Increase)
                    decrease in:Lease
                    payments receivable
                
                
                —
                
                
                29,603Interest
                    receivable
                
                
                (25,832
                )
                
                —Prepaid
                    expenses and other assets
                
                
                29,052
                
                
                (51,939
                )Loan
                    proceeds receivable
                
                
                389,998
                
                
                (389,998
                )Other
                    current assets
                
                
                (1,725
                )
                
                2,450Restricted
                    cash
                
                
                (172,440
                )
                
                (112,503
                )Increase
                    (decrease) in:Accounts
                    payable and accrued expenses
                
                
                852,700
                
                
                (213,717
                )Deferred
                    revenue
                
                
                46,765
                
                
                176,345Accrued
                    registration penalty
                
                
                (13,285
                )
                
                47,468Net
                    cash used in operating activities
                
                
                (2,120,559
                )
                
                (3,132,887
                )**CASH
                    FLOWS FROM INVESTING ACTIVITIES:**Proceeds
                    from sale of asset
                
                
                —
                
                
                25,000Cost
                    of asset sold
                
                
                —
                
                
                (31,500
                )Payments
                    for motorcycles and other vehicles
                
                
                (710,398
                )
                
                (658,842
                )Purchases
                    of RISC contracts
                
                
                (1,750,317
                )
                
                (815,942
                )Purchases
                    of property and equipment
                
                
                (16,454
                )
                
                (52,606
                )Net
                    cash used by investing activities
                
                
                (2,477,169
                )
                
                (1,533,890
                )**CASH
                    FLOWS FROM FINANCING ACTIVITIES:**Proceeds
                    from sale of preferred stock, net
                
                
                —
                
                
                1,592,517Proceeds
                    from sale of common stock, net
                
                
                —
                
                
                2,977,945Repayment
                    of affiliate advances
                
                
                —
                
                
                (25,000
                )Proceeds
                    from notes from banks
                
                
                2,736,494
                
                
                737,271Payments
                    on notes from banks
                
                
                (440,635
                )
                
                (197,923
                )Proceeds
                    from other notes
                
                
                1,140,259
                
                
                —Loan
                    proceeds from other related parties
                
                
                202,260
                
                
                —Exercise
                    of warrants
                
                
                125,000
                
                
                330,000Payments
                    for fractional shares
                
                
                —
                
                
                (16
                )Net
                    cash provided by financing activities
                
                
                3,763,378
                
                
                5,414,794**Net
                    increase(decrease) increase in cash**
                
                
                (834,350
                )
                
                748,017**Cash
                    and cash equivalents, beginning of period**
                
                $
                856,382
                
                $
                108,365**Cash
                    and cash equivalents, end of period**
                
                $
                22,032
                
                $
                856,382**Cash
                    paid for:**Interest
                
                $
                225,763
                
                $
                15,788Income
                    taxes
                
                $
                6,781
                
                $
                —
 
  See
          accompanying notes to consolidated financial
          statements.


27





**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**APRIL
      30, 2007 AND 2006**






**NOTE
      A - SUMMARY OF ACCOUNTING POLICIES**





A
      summary
      of the significant accounting policies applied in the preparation of the
      accompanying financial statements follows.





**Business
      and Basis of Presentation**





Sparta
        Commercial Services, Inc., (the *"Company"* )
        was
        formed on May 13, 1980 under the laws of the State of Nevada.





The
      Company is in the business as an originator and indirect lender for retail
      installment loan and lease financing for the purchase or lease of new and used
      motorcycles (specifically 550cc and higher) and utility-oriented 4-stroke all
      terrain vehicles (ATVs). The Company was in the development stage till January
      31, 2005, as defined by Statement of Financial Accounting Standards No. 7
      ( *"SFAS
      No. 7"* ).





The
        consolidated financial statements include the accounts of the Company and
        its
        wholly owned subsidiary, Sparta Commercial Services, LLC. Sparta Commercial
        Services, LLC was inactive during the periods presented and
        was
        dissolved in February 2007. All significant intercompany transactions and
        balances have been eliminated in the consolidated financial
        statements.





**Estimates**





The
      preparation of the financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect certain reported amounts and disclosures. Accordingly, actual results
      could differ from those estimates.





**Revenue
      Recognition**





The
        Company originates leases on new and used motorcycles and other powersports
        vehicles from motorcycle dealers throughout the United States. The Company’s
        leases are accounted for as either operating leases or direct financing leases.
        At the inception of operating leases, no lease revenue is recognized and
        the
        leased motorcycles, together with the initial direct costs of originating
        the
        lease, which are capitalized, appear on the balance sheet as *“motorcycles
        under operating leases-net”* .
        The
        capitalized cost of each motorcycle is depreciated over the lease term, on
        a
        straight-line basis, down to the Company’s original estimate of the projected
        value of the motorcycle at the end of the scheduled lease term (the *“Residual”* ).
        Monthly lease payments are recognized as rental income. Direct financing
        leases
        are recorded at the gross amount of the lease receivable (principal
        amount of the contract plus the calculated earned income over the life of
        the
        contract), and theunearned income at lease inception is amortized over
        the lease term.





The
      Company purchases Retail Installment Sales Contracts (“RISC”) from motorcycle
      dealers. The RISCs are secured by liens on the titles to the vehicles. The
      RISCs
      are accounted for as loans. Upon purchase, the RISCs appear on the Company’s
      balance sheet as RISC loan receivable current and long term. Interest income
      on
      these loans is recognized when it is earned.





28


**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**APRIL
      30, 2007 AND 2006**


**NOTE
      A - SUMMARY OF ACCOUNTING POLICIES (continued)**





The
      Company realizes gains and losses as the result of the termination of leases,
      both at and prior to their scheduled termination, and the disposition of the
      related motorcycle. The disposal of motorcycles, which reach scheduled
      termination of a lease, results in a gain or loss equal to the difference
      between proceeds received from the disposition of the motorcycle and its net
      book value. Net book value represents the residual value at scheduled lease
      termination. Lease terminations that occur prior to scheduled maturity as a
      result of the lessee’s voluntary request to purchase the vehicle have resulted
      in net gains, equal to the excess of the price received over the motorcycle’s
      net book value.





Early
      lease terminations also occur because of (i) a default by the lessee, (ii)
      the
      physical loss of the motorcycle, or (iii) the exercise of the lessee’s early
      termination. In those instances, the Company receives the proceeds from either
      the resale or release of the repossessed motorcycle, or the payment by the
      lessee’s insurer. The Company records a gain or loss for the difference between
      the proceeds received and the net book value of the motorcycle.





The
        Company charges fees to manufacturers and other customers related to creating
        a
        private label version of the Company’s financing program including web access,
        processing credit applications, consumer contracts and other related documents
        and processes. Fees received are amortized and booked as income over the
        length
        of the contract. At April 30, 2007 and 2006, the Company had recorded deferred
        revenue related to these contracts of $46,765,
        including unearned income from operating leases of $8,748and $186,245,
        including unearned income from operating leases of
        $9,900 respectively.





The
      Company evaluates its operating and retail installment sales leases on an
      ongoing basis and has established reserves for losses, based on current and
      expected future experience.




**Inventories**
 
 Inventories
          are valued at the lower of cost or market, with cost determined using the
          first-in, first-out method and with market defined as the lower of replacement
          cost or realizable value.





**Website
      Development Costs**





The
      Company recognizes website development costs in accordance with Emerging Issue
      Task Force ( *"EITF"* )
      No.
      00-02, *"Accounting
      for Website Development Costs."* As such,
      the Company expenses all costs incurred that relate to the planning and post
      implementation phases of development of its website. Direct costs incurred
      in
      the development phase are capitalized and recognized over the estimated useful
      life. Costs associated with repair or maintenance for the website are included
      in cost of net revenues in the current period expenses.





**Cash
      Equivalents**





For
      the
      purpose of the accompanying financial statements, all highly liquid investments
      with a maturity of three months or less are considered to be cash
      equivalents.





**Income
      Taxes**





Deferred
      income taxes are provided using the asset and liability method for financial
      reporting purposes in accordance with the provisions of Statements of Financial
      Standards No. 109, *"Accounting
      for Income Taxes"* .
      Under
      this method, deferred tax assets and liabilities are recognized for temporary
      differences between the tax bases of assets and liabilities and their carrying
      values for financial reporting purposes and for operating loss and tax credit
      carry forwards. Deferred tax assets and liabilities are measured using enacted
      tax rates expected to apply to taxable income in the years in which those
      temporary differences are expected to be removed or settled. The effect on
      deferred tax assets and liabilities of a change in tax rates is recognized
      in
      the statements of operations in the period that includes the enactment date.
      Temporary differences between taxable income reported for financial reporting
      purposes and income tax purposes are insignificant.





29


**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**APRIL
      30, 2007 AND 2006**


**NOTE
        A - SUMMARY OF ACCOUNTING POLICIES (continued)**





**Impairment
      of Long-Lived Assets**





The
      Company has adopted Statement of Financial Accounting Standards No. 121 (SFAS
      121). The Statement requires that long-lived assets and certain identifiable
      intangibles held and used by the Company be reviewed for impairment whenever
      events or changes in circumstances indicate that the carrying amount of an
      asset
      may not be recoverable. SFAS No. 121 also requires assets to be disposed of
      be
      reported at the lower of the carrying amount or the fair value less costs to
      sell.





**Comprehensive
      Income**





Statement
      of Financial Accounting Standards No. 130 ( *"SFAS
      130"* ),
      Reporting Comprehensive Income," establishes standards for reporting and
      displaying of comprehensive income, its components and accumulated balances.
      Comprehensive income is defined to include all changes in equity except those
      resulting from investments by owners and distributions to owners. Among other
      disclosures, SFAS 130 requires that all items that are required to be recognized
      under current accounting standards as components of comprehensive income be
      reported in a financial statement that is displayed with the same prominence
      as
      other financial statements. At April 30, 2007 and 2006, the Company has no
      items
      of other comprehensive income.





**Segment
      Information**





The
      Company does not have separate, reportable segments under Statement of Financial
      Accounting Standards No. 131, Disclosures about Segments of an Enterprise and
      Related Information ( *"SFAS
      131"* ).
      SFAS
      establishes standards for reporting information regarding operating segments
      in
      annual financial statements and requires selected information for those segments
      to be presented in interim financial reports issued to stockholders. SFAS 131
      also establishes standards for related disclosures about products and services
      and geographic areas. Operating segments are identified as components of an
      enterprise about which separate discrete financial information is available
      for
      evaluation by the chief operating decision maker, or decision making group,
      in
      making decisions how to allocate resources and assess performance. The
      information disclosed herein, materially represents all of the financial
      information related to the
      Company 's
      principal operating segment.





**Stock
      Based Compensation**





The
      Company adopted SFAS No. 123(R) during third quarter of Fiscal year 2006, which
      no longer permits the use of the intrinsic value method under APB No. 25. The
      Company uses the modified prospective method to adopt SFAS No. 123(R), which
      requires compensation expense to be recorded for all stock-based compensation
      granted on or after January 1, 2006, as well the unvested portion of previously
      granted options. The Company is recording the compensation expense on a
      straight-line basis, generally over the explicit service period of three to
      five
      years. The Company made no stock-based compensation grants prior to the adoption
      of Statement 123(R) and therefore has no unrecognized stock compensation related
      liabilities or expense unvested or vested prior to 2006.





We
      have
      selected the Black-Scholes method of valuation for share-based compensation
      and
      have adopted the modified prospective transition method under SFAS 123R, which
      requires that compensation cost be recorded, as earned, for all unvested stock
      options outstanding at the beginning of the third quarter of adoption of SFAS
      123R. As permitted by SFAS 123R, prior periods have not been restated. The
      charge is being recognized in non cash compensation, which is included in
      stock-based compensation expense, on a straight-line basis over the remaining
      service period after the adoption date based on the options’ original estimate
      of fair value. Prior to the adoption of SFAS 123R, the Company applied the
      intrinsic-value-based method of accounting prescribed by Accounting Principles
      Board Opinion No. 25 (“APB 25”), “Accounting for Stock Issued to Employees.”
Under this method, compensation cost was recorded only if the market price
      of
      the underlying stock on the grant date exceeded the exercise price. As permitted
      by SFAS 123, the Company elected the disclosure only requirements of SFAS 123.
      The fair-value based method used to determine historical pro forma amounts
      under
      SFAS 123 was similar in most respects to the method used to determine
      stock-based compensation expense under SFAS 123R.




30


**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**APRIL
      30, 2007 AND 2006**


**NOTE
        A - SUMMARY OF ACCOUNTING POLICIES (continued)**





The
      following tables illustrates the effect that adoption of SFAS No. 123(R) had
      on
      the Company's year ended April 30, 2007 results and cash flows as well as the
      parameters used in the valuation of options granted in the first nine months
      of
      2006.


Under
                      Pre-SFAS
                    No.123
                      (R)
                    Accounting
                  
                  SFAS
                      No.
                    123(
                      R) Impact
                  
                  Actual
                    Year
                      Ended
                    April
                      30, 2007Earnings
                      before taxes
                  
                  $
                  (3,621,360
                  )
                  $
                  (313,107
                  )
                  $
                  (3,934,467
                  )Net
                      Earnings
                  
                  
                  (3,621,360
                  )
                  $
                  (313,107
                  )
                  $
                  (3,934,467
                  )**Net
                      Earnings**Basic
                      EPS
                  
                  $
                  (0.03
                  )
                  $
                  -
                  
                  $
                  (0.03
                  )Diluted
                      EPS
                  
                  
                  (0.03
                  )
                  
                  -
                  
                  
                  (0.03
                  )**Cash
                      Flows**Operating
                      Activities
                  
                  $
                  (2,120,559
                  )
                  $
                  -
                  
                  $
                  (2,120,559
                  )Financing
                      Activities
                  
                  $
                  3,763,378
                  
                  
                  -
                  
                  
                  3,763,378


Prior
      to
      the adoption of FASB No. 123R, during the third quarter of Fiscal 2006, the
      Company recorded employee stock based compensation pursuant to APB No. 25.
      Had
      compensation costs for the Company's stock options been determined based on
      the
      fair value at the grant dates for the awards, the Company's net loss and losses
      per share for the period prior to the adoption of FAS 123R would have been
      as
      follows:





Year
                  Ended April 30, 2006Net
                  income (loss), as reported
              
              $
              (5,956,517
              )*Add:*Total
                  stock based employee compensation expenseas
                  reported under intrinsic value method (APB No. 25)
              
              
              —*Deduct:*Total
                  stock based employee compensation expenseas
                  reported under fair value based method (SFAS No. 123)
              
              
              (24,710
              )Proforma
                  net income (loss)
              
              $
              (5,981,227
              )Net loss
                attributable to Common Stockholders' (PROFORMA)Net
                  income (loss) per share:
              
              $
              (7,897,482
              )Basic-
                  as reported
              
              $
              (0.08
              )Basic-
                  proforma
              
              $
              (0.08
              )




31


**SPARTA
        COMMERCIAL SERVICES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **APRIL
        30, 2007 AND 2006**


**NOTE
        A - SUMMARY OF ACCOUNTING POLICIES (continued)**





The
      fair
      value for stock awards was estimated at the date of grant using the
      Black-Scholes option valuation model with the following weighted average
      assumptions for the years ended April 30, 2007 and 2006:





2007
              
              2006Significant
                  assumptions (weighted-average):Risk-free
                  interest rate at grant date
              
              
              5
              %
              
              3
              %Expected
                  stock price volatility
              
              
              131
              %
              
              60
              %Expected
                  dividend payout
              
              
              -
              
              
              -Expected
                  option life (in years)
              
              
              5
              
              
              5





We
      apply
      SFAS No. 123 in valuing options granted to consultants and estimate the fair
      value of such options using the Black-Scholes option-pricing model. The fair
      value is recorded as consulting expense as services are provided. Options
      granted to consultants for which vesting is contingent based on future
      performance are measured at their then current fair value at each period end,
      until vested.





**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
      trade receivables. The Company places its cash and temporary cash investments
      with high credit quality institutions. At times, such investments may be in
      excess of the FDIC insurance limit. The Company periodically reviews its trade
      receivables in determining its allowance for doubtful accounts. At April 30,
      2007 and 2006, allowance for doubtful accounts receivables was $59,338 and
      $19,743, respectively.





**Allowance
      for Loan Losses**




The
      Company has loss reserves for its portfolio of Leases and for its portfolio
      of
      Retail Installment Sales Contracts ( *“RISC”* ).
      The
      allowance for Lease and RISC losses is increased by charges against earnings
      and
      decreased by charge-offs (net of recoveries). To the extent actual credit losses
      exceed these reserves, a bad debt provision is recorded; and to the extent
      credit losses are less than the reserve, additions to the reserve are reduced
      or
      discontinued until the loss reserve is in line with the Company’s reserve ratio
      policy. Management’s periodic evaluation of the adequacy of the allowance is
      based on the Company’s past lease and RISC experience, known and inherent risks
      in the portfolio, adverse situations that may affect the borrower’s ability to
      repay, the estimated value of any underlying collateral, and current economic
      conditions.




The
      Company charges-off receivables when an individual account has become more
      than
      120 days contractually delinquent. In the event of repossession, the asset
      is immediately sent to auction or held for release. If the asset is not disposed
      of prior to being 120 days contractually delinquent it will be charged-off
      at
      that time.





**Derivative
      Financial Instruments**





In
      connection with the private placement described in Preferred Stock Series A
      note, the Company granted 1,755,537 common stock purchase warrants to the
      placement agent. The warrants are exercisable immediately, have an exercise
      price of $0.215 per share and expire in five years. The warrants were valued
      at
      $1,033,100 using the Black-Sholes pricing model. The assumption ranges used
      in
      the Black-Scholes model are as follows:  (1) dividend yield of
      0%; (2) expected volatility of 174% - 177%, (3) risk-free
      interest rate of 3.65% - 4.7%, and (4) expected life of 2
      years.





32


**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**APRIL
      30, 2007 AND 2006**





**NOTE
        A - SUMMARY OF ACCOUNTING POLICIES (continued)**





Since
      the
      warrants contain registration rights for the underlying shares and since the
      delivery of such registered shares was not deemed controllable by the Company,
      we recorded the net value of the warrants at the date of issuance as a warrant
      liability on the balance sheet at April 30, 2006 of $834,924. A Registration
      Statement under Form SB-2, including the shares underlying the warrants, was
      declared effective by the Securities and Exchange Commission on May 31, 2006.
      Therefore, the change in the fair value from April 30, 2006 to May 31, 2006
      was
      included in other income (expense) for the year ended April 30, 2007, in
      accordance with EITF 00-19, *“Accounting
      for Derivative Financial Instruments Indexed to, and Potentially Settled in,
      a
      Company’s Own Stock”* .
      The
      fair value of the warrants was $567,069 and $834,924 at May 31, 2006 and
      April 30, 2006, respectively. Additionally, as the Registration Statement
      covering the underlying shares was declared effective, the accrued warrant
      liability at May 31, 2006 was credited to additional-paid in capital. The amount
      credited to additional-paid-in capital was $567,069.





**Property
      and Equipment**





Property
      and equipment are recorded at cost. Minor additions and renewals are expensed
      in
      the year incurred. Major 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. Estimated useful lives
      of
      major depreciable assets are as follows:




Leasehold
                improvements
            
            
            3
                yearsFurniture
                and fixtures
            
            
            7
                yearsWebsite
                costs
            
            
            3
                yearsComputer
                Equipment
            
            
            5
                years





**Advertising
      Costs**





The
      Company follows a policy of charging the costs of advertising to expenses
      incurred. During the years ended April 30, 2007 and 2006, the Company incurred
      advertising costs of $26,670 and $36,594, respectively.





**Net
      Loss Per Share**





The
      Company uses SFAS No. 128, “ *Earnings
      Per Share* ”
for
      calculating the basic and diluted loss per share. We compute basic loss per
      share by dividing net loss and net loss attributable to common shareholders
      by
      the weighted average number of common shares outstanding. Diluted loss per
      share
      is computed similar to basic loss per share except that the denominator is
      increased to include the number of additional common shares that would have
      been
      outstanding if the potential shares had been issued and if the additional shares
      were dilutive. Common equivalent shares are excluded from the computation of
      net
      loss per share if their effect is anti-dilutive.





Per
      share
      basic and diluted net loss attributable to common stockholders amounted
      to $0.03 and $0.08 for the years ended April 30, 2007 and 2006,
      respectively. At April 30, 2007 and 2006, 31,028,051 and 27,069,527 potential
      shares, respectively, were excluded from the shares used to calculate diluted
      earnings per share as their inclusion would reduce net loss per share.


**Liquidity**
 
 As
          shown
          in the accompanying financial statements, the Company has incurred a net
          loss of
          $3,934,467 and $5,956,517 during the years ended April 30, 2007 and 2006,
          respectively. The Company’s current liabilities exceeded its current assets by
          $2,773,486 as of April 30, 2007.




**Reclassifications**





Certain
      reclassifications have been made to conform to prior periods' data to the
      current presentation. These reclassifications had no effect on reported
      losses.





33


**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**APRIL
      30, 2007 AND 2006**





**NOTE
        A - SUMMARY OF ACCOUNTING POLICIES (continued)**





**New
      Accounting Pronouncements**





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities - Including an amendment of FASB
      Statement No. 115,” which permits entities to measure many financial instruments
      and certain other items at fair value. The objective is to improve financial
      reporting by providing entities with the opportunity to mitigate volatility
      in
      reporting earnings caused by measuring related assets and liabilities
      differently without having to apply complex hedge accounting provisions. This
      Statement is expected to expand the use of fair value measurement, which is
      consistent with the Board’s long-term measurement objectives for accounting for
      financial instruments. This Statement is effective as of the beginning of the
      Company’s first fiscal year that begins after November 15, 2007. We are
      currently assessing the impact of SFAS No. 159 on our financial position and
      results of operations.





In
      September 2006, the Financial Accounting Standards Board (FASB) issued SFAS
      157
      `Fair Value Measurements'. This Statement defines fair value, establishes a
      framework for measuring fair value in generally accepted accounting principles
      ("GAAP"), and expands disclosures about fair value measurements. This Statement
      applies under other accounting pronouncements that require or permit fair value
      measurements, the Board having previously concluded in those accounting
      pronouncements that fair value is the relevant measurement attribute.





Accordingly,
      this Statement does not require any new fair value measurements. However, for
      some entities, the application of this Statement will change current practice.
      This Statement is effective for financial statements issued for fiscal years
      beginning after November 15, 2007, and interim periods within those fiscal
      years. Adoption of SFAS 157 will not have a significant impact on our results
      of
      operations or financial condition.





In
      March
      2006, the FASB issued FASB Statement No. 156, Accounting for Servicing of
      Financial Assets - an amendment to FASB Statement No. 140. Statement 156
      requires that an entity recognize a servicing asset or servicing liability
      each
      time it undertakes an obligation to service a financial asset by entering into
      a
      service contract under certain situations. The new standard is effective for
      fiscal years beginning after September 15, 2006. The adoption of SFAS No. 156
      did not have a material impact on the Company's financial position and results
      of operations.





In
      February 2006, the FASB issued SFAS 155, which applies to certain "hybrid
      financial instruments," which are instruments that contain embedded derivatives.
      The new standard establishes a requirement to evaluate beneficial interests
      in
      securitized financial assets to determine if the interests represent
      freestanding derivatives or are hybrid financial instruments containing embedded
      derivatives requiring bifurcation. This new standard also permits an election
      for fair value remeasurement of any hybrid financial instrument containing
      an
      embedded derivative that otherwise would require bifurcation under SFAS 133.
      The
      fair value election can be applied on an instrument-by-instrument basis to
      existing instruments at the date of adoption and can be applied to new
      instruments on a prospective basis. The adoption of SFAS No. 155 did not have
      a
      material impact on the Company's financial position and results of
      operations.





In
      May
      2005 the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections,
      a
      replacement of APB Opinion No. 20 and FASB Statement No. 3." SFAS 154 requires
      retrospective application to prior periods' financial statements for changes
      in
      accounting principle, unless it is impracticable to determine either the
      period-specific effects or the cumulative effect of the change. SFAS 154 also
      requires that retrospective application of a change in accounting principle
      be
      limited to the direct effects of the change. Indirect effects of a change in
      accounting principle, such as a change in non-discretionary profit-sharing
      payments resulting from an accounting change, should be recognized in the period
      of the accounting change. SFAS 154 also requires that a change in depreciation,
      amortization, or depletion method for long-lived, non-financial assets be
      accounted for as a change in accounting estimate affected by a change in
      accounting principle. SFAS 154 is effective for accounting changes and
      corrections of
      errors
      made in fiscal years beginning after December 15, 2005. Early adoption is
      permitted for accounting changes and corrections of errors made in fiscal years
      beginning after the date this Statement is issued. The adoption of SFAS No.
      154
      did not have a material impact on the Company's financial position and results
      of operations.




34


**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**APRIL
      30, 2007 AND 2006**





**NOTE
      A - SUMMARY OF ACCOUNTING POLICIES (continued)**




In
      June
      2006, the FASB issued FASB Interpretation No. 48, “Accounting for
      Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109”
(FIN 48). FIN 48 prescribes a recognition threshold and measurement attribute
      for financial statement recognition and measurement of a tax position taken
      or
      expected to be taken in a tax return, and also provides guidance on
      de-recognition, classification, interest and penalties, accounting in interim
      periods, disclosure, and transition. FIN 48 is effective for fiscal years
      beginning after December 15, 2006. The Company does not expect that the
      adoption of FIN 48 will have an impact on the Company’s financial position and
      results of operations.





In
      September 2006, the SEC staff issued Staff Accounting Bulletin (SAB) No. 108,
      “Considering the Effects of Prior Year Misstatements when Quantifying
      Misstatements in Current Year Financial Statements” (SAB 108). SAB 108 was
      issued in order to eliminate the diversity of practice in how public companies
      quantify misstatements of financial statements, including misstatements that
      were not material to prior years’ financial statements. The Company will
      initially apply the provisions of SAB 108 in connection with the preparation
      of
      its annual financial statements for the year ending April 30, 2007. The Company
      has evaluated the potential impact SAB 108 may have on our financial position
      and results of operations and do not believe the impact of the application
      of
      this guidance will be material.





On
      December 21, 2006, the Financial Accounting Standards Board ("FASB") issued
      FASB
      Staff Position (FSP) Emerging Issues Task Force ("EITF") 00-19-2, "Accounting
      for Registration Payment Arrangements," which requires an issuer to account
      for
      a contingent obligation to transfer consideration under a registration payment
      arrangement in accordance with FASB Statement No. 5, Accounting for
      Contingencies and FASB Interpretation 14, Reasonable Estimation of the Amount
      of
      Loss. Registration payment arrangements are frequently entered into in
      connection with issuance of unregistered financial instruments, such as equity
      shares or warrants. A registration payment arrangement contingently obligates
      the issuer to make future payments or otherwise transfer consideration to
      another party if the issuer fails to file a registration statement with the
      SEC
      for the resale of specified financial instruments or fails to have the
      registration statement declared effective within a specific period. The FSP
      requires issuers to make certain disclosures for each registration payment
      arrangement or group of similar arrangements. The FSP is effective immediately
      for registration payment arrangements and financial instruments entered into
      or
      modified after the FSP's issuance date. For previously issued registration
      payment arrangements and financial instruments subject to those arrangements,
      the FSP is effective for financial statements issued for fiscal years beginning
      after December 15, 2006. We do not expect the adoption of this FSP to have
      a
      significant impact on our financial condition or results of
      operations.





**NOTE
      B - MOTORCYCLES AND OTHER VEHICLES UNDER OPERATING LEASES**





Motorcycles
      and other vehicles under operating leases at April 30, 2007 and 2006 consist
      of
      the following:


**2007**
              
              **2006**Motorcycles
                  and other vehicles
              
              $
              1,336,545
              
              $
              759,568Less:
                  accumulated depreciation
              
              
              (221,800
              )
              
              (75,873
              )Motorcycles
                  and other vehicles, net of accumulated depreciation
              
              
              1,114,745
              
              
              683,695Less:
                  estimated reserve for residual values
              
              
              (26,059
              )
              
              (16,409
              )Motorcycles
                  and other vehicles under operating leases, net
              
              $
              1,088,686
              
              $
              667,286






35


**SPARTA
        COMMERCIAL SERVICES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **APRIL
        30, 2007 AND 2006**


At
      April
      30, 2007, motorcycles and other vehicles are being depreciated to their
      estimated residual values over the lives of their lease contracts. Depreciation
      expense for vehicles for the years ended April 30, 2007 and 2006 was $279,348
      and $75,033, respectively. Certain of the assets are pledged as collateral
      for
      the note described in Note E.





The
      following is a schedule by years of minimum future rentals on non cancelable
      operating leases as of April 30, 2007:


Year
                  ending April 30,2008
              
              $
              369,6882009
              
              
              206,2082010
              
              
              89,4002011
              
              
              68,5882012
              
              
              14,849Total
              
              $
              748,733




**NOTE
      C - INVENTORY**





Inventory
        is comprised of repossessed vehicles and vehicles which have been returned
        at
        the end of their lease. Inventory is carried at the lower of depreciated
        cost or
        market, applied on a specific identification basis. At April 30, 2007, the
        Company had repossessed vehicles of value $20,784, which will be
        resold.




**NOTE
        D - RETAIL (RISC) LOAN RECEIVABLES**





RISC
        loan
        receivables, which are carried at cost, were $2,552,157 and $822,624 at April
        30, 2007 and 2006, respectively. The following is a schedule by years of
        future
        payments related to these receivables. Certain of the assets are pledged
        as
        collateral for the note described in Note F.





Year
                  endingApril
                  30,2008
              
              $
              825,4822009
              
              
              811,7082010
              
              
              775,0902011
              
              
              729,7472012
              
              
              362,0783,504,105Less:
                  interest portion
              
              
              (951,948
              )2,552,157Less:
                  allowance for doubtful receivables
              
              
              (59,338
              )2,492,819Less:
                  current receivables, net of allowance
              
              
              (569,052
              )$
              1,923,767






36


**SPARTA
        COMMERCIAL SERVICES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **APRIL
        30, 2007 AND 2006**


**NOTE
      E - PROPERTY AND EQUIPMENT**





Major
      classes of property and equipment at April 30, 2007 and 2006 consist of the
      followings:


**2007**
                
                **2006**Computer
                    equipment , softwareand furniture
                
                $
                191,247
                
                $
                174,793Less:
                    accumulated depreciation and amortization
                
                
                (97,047
                )
                
                (53,249
                )Net
                    property and equipment
                
                $
                94,200
                
                $
                121,544




Depreciation
      and amortization expense was $43,798 and $37,871 for the years ended April
      30,
      2007 and 2006, respectively.




**NOTE
      F - NOTES PAYABLE**





The
        Company finances certain of its leases through a third party. The repayment
        terms are generally one year to five years and the notes are secured by the
        underlying assets. The weighted average interest rate at April 30, 2007 is
10.02%.





At
      April
      30, 2007, the notes payable mature as follows:


Year
                    ended April 30
                
                Amount2008
                
                $
                787,2822009
                
                
                769,1852010
                
                
                507,7362011
                
                
                539,9022012
                
                
                381,102$
                2,985,207Less
                    current portion
                
                
                (787,252
                )$
                2,197,925




**NOTE
      G - NOTES PAYABLE OTHERS**





*a.*
            During
                the year ended April 30, 2007, the Company sold to five accredited
                investors’ bridge notes in the aggregate amount of $275,000. Three 45-day
                bridge notes aggregating $175,000, one 90-day note in the amount
                of
                $100,000 were originally scheduled to expire on various dates through
                November 30, 2006, together with simple interest at the rate of 10%.
                The
                notes provide that 100,000 shares of the Company's restricted common
                stock
                are to be issued as “Equity Kicker” for each $100,000 of notes purchased,
                or any pro rated portion thereof. The Company had the right to extend
                the
                maturity date of notes for 30 to 45 days. The notes provided that
                in the
                event of extension, the lenders will be entitled for “additional equity”
                equal to 60% of the “Equity Kicker” shares. In the event of default on
                repayment by the Company, the “Equity Kicker” and the “Additional Equity”
                to be issued to the lender shall be increased by 50% for each month
                or
                portion thereof, as penalty, that such default has not been cured.
                During
                default period interest will be at the rate of 20%. The repayments,
                in the
                event of default, of the notes are to be collateralized by certain
                security interest as per the terms of the agreement.






37




**SPARTA
        COMMERCIAL SERVICES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **APRIL
        30, 2007 AND 2006**


**NOTE
      G - NOTES PAYABLE OTHERS (continued)**





The
      maturity dates of the notes were subsequently extended to various dates between
      December 5, 2006 to December 30, 2006, with simple interest rate of 10%, and
      Additional Equity in the aggregate amount of 165,000 restricted shares of common
      stock to be issued. Thereafter, the Company was in default on repayment of
      these
      notes and was subject to 20% interest rate and the “Additional Equity” equal to
      50% increased shares for each month or portion thereof, as penalty, until such
      default was cured. As of April 30, 2007, the Company is obliged to issue
      1,181,333 kicker, additional kicker and default shares valued at $110,217 to
      such creditors. On July 15, 2007 each of the noteholders signed an amendment
      to
      their notes extending the due date to September 14, 2007.





*b.*
            During
                the year ended April 30, 2007, the Company sold to twelve accredited
                investors six months unsecured notes in the aggregate amount of $775,259.
                All notes bears 6% simple interest, payable in cash or shares, at
                the
                Company’s option, with principal and accrued interest payable at maturity.
                Should the Company opt to convert these notes at maturity, these
                notes
                will be convertible into shares of common stock at a price equal
                to a 40%
                discount from the lowest closing price of the Company’s common stock for
                the five trading days immediately preceding the receipt of funds
                by the
                Company from the purchaser of note. All notes will mature in six
                months on
                various dates through October 19,
                2007.





*c.*
            During
                the year ended April 30, 2007, the Company sold one accredited investor
                six months unsecured notes in the aggregate amount of $50,000. The
                note
                bears 6% simple interest. The Company had the right to extend the
                maturity
                date of notes up to 45 days. In the event of default on repayment
                by the
                Company, interest will be at the rate of 10% or the highest applicable
                rate allowable under law for default period. The notes will mature
                in six
                months on October 19, 2007.





*d.*
            During
                the year ended April 30, 2007, the Company sold one accredited investor
                seven months unsecured notes in the aggregate amount of $40,000.
                The note
                bears 8% simple interest and interest may be paid in cash or shares
                of the
                Company. The note and interest owing thereon will become due and
                payable
                immediately in the event of default on repayment by the Company.
                The notes
                will mature in seven months on November 5,
                2007.




**NOTE
      H - LOANS PAYABLE TO RELATED PARTIES**





During
      the year ended April 30, 2007, the Company borrowed from a Director and officer
      $180,000 and $8,500, respectively on a demand basis without interest. The
      Company also owes $13,760 to another Director and Officer an interest free
      demand loan received on August 24, 2006. As of April 30, 2007, aggregated loans
      payable to officers were $202,260. These loans are classified as current on
      the
      Company’s balance sheet.





At
      April
      30, 2007, included in accounts payable, is $3,863 due to American motorcycle
      Leasing Corp., a company controlled by the Company's Chief Executive Officer
      and
      a director, for the purchase of motorcycles.




38


**SPARTA
        COMMERCIAL SERVICES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **APRIL
        30, 2007 AND 2006**


**NOTE
      I - RELATED PARTY TRANSACTIONS**





The
      Company entered in to a licensing agreement relating to the use of a proprietary
      operating system, with an entity controlled by the Company's President and
      Chief
      Executive Officer. During the years ended April 30, 2007 and 2006, the Company
      charged to operations $0 and $67,000, respectively, in connection with the
      licensing agreement.





The
        Company entered into a purchase option agreement with American Motorcycle
        Leasing Corp., an entity controlled by the Company's President and a significant
        shareholder, on November 2, 2004 at a cost to Sparta Commercial Services
        of
        $250,000. This agreement granted Sparta Commercial Services the right, for
        a two
        year period, to purchase portions of a certain portfolio of equipment leases
        that American Motorcycle Leasing Corp. owns. The portfolio is secured by
        a first
        priority security interest in favor of Citibank, N.A. or its assigns. The
        cost
        of $250,000 has been charged to operations in fiscal 2005. As of April 30,
        2005,
        payments against this obligation of $81,000 were made. The balance of $169,000
        was paid during the year ended April 30, 2006.





During
      the year ended April 30, 2006, the Company purchased certain of its vehicles
      from American Motorcycle Leasing Corp. These purchases aggregated $105,748.
      At
      April 30, 2007 and 2006, the Company had payable to American Motorcycle Leasing
      Corp. in the amounts of $3,863 and $20,224, respectively, related to such
      purchases.





In
      January 2005, the Company received a loan of $25,000 from an officer. This
      loan
      is non-interest bearing and is payable on demand. The loan was repaid during
      the
      year ended April 30, 2006.





**NOTE
      J - EQUITY INSTRUMENTS**





The
        Company is authorized to issue 10,000,000 shares of preferred stock with
        $0.001
        par value per share and $100 stated value per share, of which 35,840 shares
        have
        been designated as Series A convertible preferred stock, and 340,000,000
        shares
        of common stock with $0.001 par value per share. As of April 30, 2007 and
        2006,
        the Company has issued and outstanding 19,795 and 19,795
        shares of preferred stock issued and outstanding, respectively. The Company
        has
        123,216,157 and 114,180,301 shares of common stock issued and outstanding
        as of
        April 30, 2007 and 2006, respectively.





**Common
      Stock**





During
      May 2006, the Company issued 550,000 shares of common stock, valued at $286,000,
      for accrued expenses recorded during the year end April 30, 2006.


During
          May 2006, the Company issued 551,001 shares of common stock, valued at
          $330,000,
          for subscription received in advance for the year ended April 30,
          2006.




During
      July 2006, the Company issued 320,000 shares of common stock, valued at
      $132,600, for accrued expenses recorded during the year end April 30,
      2006.





During
      July 2006, the Company issued 48,077 shares of common stock, valued at $13,285,
      related to penalty provision accrued during the year end April 30,
      2006.





During
      July 2006, the Company issued 70,000 shares of common stock, valued at $38,500,
      for accrued costs related to loans received by the Company during the year
      end
      April 30, 2006.





During
        July 2006, the Company issued 5,838,302 shares of common stock for shares
        subscribed for in March 2006.





39




**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**APRIL
      30, 2007 AND 2006**




**NOTE
      J - EQUITY INSTRUMENTS (continued)**





During
      the year ended April 30, 2007, the Company received $125,000 upon the exercise
      of 641,476 warrants. The shares were issued September and October,
      2006.





During
      October 2006, the Company issued 550,001 shares of common stock for shares
      subscribed for in November 2005.





During
      the year ended April 30, 2007, the Company issued 250,000 shares of common
      stock, valued at $48,500, as additional costs related to loans received by
      the
      Company. This amount was charged to financing cost during the nine months ended
      January 31, 2007.





During
      the year ended April 30, 2007, the Company issued an aggregate of 417,000 shares
      of common stock, pursuant to a consulting agreement. The shares have been valued
      at $108,420.





During
      September 2006, the Company issued 350,000 shares of common stock, pursuant
      to a
      consulting agreement. The shares have been valued at $56,000.





During
      December 2006, the Company granted 100,000 common stock purchase warrants to
      a
      placement agent for future investments services. The warrants were exercisable
      immediately, have an exercise price per share equal to 110% per share of the
      closing bid price of the closing bid price of a share of the Company’s common
      stock on the date of this warrant and expire in three years. The warrants were
      valued at $6,660 using the Black-Sholes pricing model and expensed. The
      assumption ranges used in the Black-Scholes model are as
      follows:  (1) dividend yield of 0%; (2) expected volatility
      of 158%, (3) risk-free interest rate of 4.62%, and
      (4) expected life of 3 years.





During
      the year ended April 30, 2007, the Company granted options to purchase an
      aggregate of 4,500,000 shares of common stock to one employee and one Director.
      At grant date, 1,000,000 options vested immediately. The vested and unvested
      options have been valued at $636,433 using the Black-Sholes option pricing
      model
      with the following assumptions: (1) dividend yield of 0%; (2) expected
      volatility of 131%; (3) risk-free interest rate of 5.04% and 5.24%, vest over
      a
      36 month period and expire if unexercised in five years.





During
      the years ended April 30, 2007 and 2006, the Company expensed $807,338 and
      $2,597,014, respectively, in non-cash charges related to stock and option
      compensation expense.





**Preferred
      Stock Series A**





During
      the year ended April 30, 2006,, the Company issued 17,750 preferred shares
      at a
      stated value of $100 per share and warrants to purchase 5,689,108 shares of
      common stock, exercisable for three years at $0.195 per share, for aggregate
      gross proceeds of $1,775,000 received from investors. In connection with the
      private placement, during the three months ended July 31, 2005, the Company
      issued as compensation to the placement agent warrants to purchase 1,137,822
      shares of common stock, exercisable for five years at $0.172 per share. The
      warrants, which were valued at $406,665 using the Black-Scholes option pricing
      model, were recognized as an expense during the year. The warrants, which were
      valued at $406,665 using the Black-Scholes option pricing model, were recognized
      as an expense during the quarter. The assumptions used in the Black Scholes
      model are as follows: (1) dividend yield of 0%; (2) expected volatility of
      188%,
      (3) weighted average risk-free interest rate of 3.65%, and (4) expected life
      of
      2 years.





40




**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**APRIL
      30, 2007 AND 2006**




**NOTE
      J - EQUITY INSTRUMENTS (continued)**





In
      accordance with EITF 00-27, a portion of the proceeds were allocated to the
      warrants based on their relative fair value, which totaled $931,800 using the
      Black Scholes option pricing model. Further, the Company attributed a beneficial
      conversion feature of $843,200 to the series `A' preferred shares based upon
      the
      difference between the conversion price of those shares and the closing price
      of
      our common shares on the date of issuance. The assumptions used in the Black
      Scholes model are as follows: (1) dividend yield of 0%; (2) expected volatility
      of 188%, (3) weighted average risk-free interest rate of 3.65%, and (4) expected
      life of 2 years as the conversion feature and warrants are immediately
      exercisable. Both the fair value of the class `C' warrants and the beneficial
      conversion feature were recorded as a dividend and were included in the
      financial statements of that period.





In
      connection with the private placement described above, the Company granted
      1,755,537 common stock purchase warrants to the placement agent. The warrants
      were exercisable immediately, have an exercise price of $0.215 per share and
      expire in five years. The warrants were valued at $1,033,100 using the
      Black-Sholes pricing model. The assumption ranges used in the Black-Scholes
      model are as follows:  (1) dividend yield of 0%;
      (2) expected volatility of 174% - 177%, (3) risk-free interest
      rate of 3.65% - 4.7%, and (4) expected life of 2
      years.





Since
      the
      warrants contain registration rights for the underlying shares and since the
      delivery of such registered shares was not deemed controllable by the Company,
      we recorded the net value of the warrants at the date of issuance as a warrant
      liability on the balance sheet at April 30, 2006 of $834,924. A Registration
      Statement under Form SB-2, including the shares underlying the warrants, was
      declared effective by the Securities and Exchange Commission on May 31, 2006.
      Therefore, the change in the fair value from April 30, 2006 to May 31, 2006
      was
      included in other income (expense) for three months ended January 31, 2007,
      in
      accordance with EITF 00-19, *“Accounting
      for Derivative Financial Instruments Indexed to, and Potentially Settled in,
      a
      Company’s Own Stock”* .
      The
      fair value of the warrants was $567,069 and $834,924 at May 31, 2006 and
      April 30, 2006, respectively. Additionally, as the Registration Statement
      covering the underlying shares was declared effective, the accrued warrant
      liability at May 31, 2006 was credited to additional-paid in capital. The amount
      credited to additional-paid-in capital was $567,069.





**NOTE
      K - INCOME TAXES**





Financial
      Accounting Standard No. 109 requires the recognition of deferred tax liabilities
      and assets for the expected future tax consequences of events that have been
      included in the financial statement or tax returns. Under this method, deferred
      tax liabilities and assets are determined based on the difference between
      financial statements and tax bases of assets and liabilities using enacted
      tax
      rates in effect for the year in which the differences are expected to reverse.
      Temporary differences between taxable income reported for financial reporting
      purposes and income tax purposes are insignificant.





At
      April
      30, 2007 and 2006, the Company has available for federal income tax purposes
      a
      net operating loss carry forward of approximately $13,280,000 and $9,650,000,
      expiring in the year 2027 and 2026, respectively, that may be used to offset
      future taxable income. The Company has provided a valuation reserve against
      the
      full amount of the net operating loss benefit, since in the opinion of
      management based upon the earnings history of the Company; it is more likely
      than not that the benefits will not be realized. Also, due to change in the
      control after reverse acquisition of Sparta Commercial Services, Inc., the
      Company's past accumulated losses to be carried forward may be
      limited.





41




**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**APRIL
      30, 2007 AND 2006**




**NOTE
      K - INCOME TAXES (continued)**





Components
      of deferred tax assets as of April 30, 2007 and 2006 are as
      follows:





April
                30,2007
            
            2006Non
                current:Net
                operating loss carry forward
            
            $
            4,515,000
            
            $
            3,281,000Valuation
                allowance
            
            
            (4,515,000
            )
            
            (3,281,000
            )Net
                deferred tax asset
            
            $
            -
            
            $
            -





The
      valuation allowance increased by $1,234,000 and $1,751,000 during the year
      ended
      April 30, 2007 and 2006, respectively.





**NOTE
      L - LOSSES PER COMMON SHARE**





The
      following table presents the computation of basic and diluted loss per
      share:





**2007**
            
            **2006**Net
                loss available for common shareholders
            
            $
            (3,934,467
            )
            $
            (7,872,772
            )Basic
                and diluted loss per share
            
            $
            (0.03
            )
            $
            (0.08
            )Weighted
                average common shares outstanding-basic diluted
            
            
            122,061,446
            
            
            95,479,102




**NOTE
      M - STOCK OPTIONS AND WARRANTS**





On
      April
      29, 2005, the Company issued to the Chief Operating Officer non qualified stock
      options to purchase 875,000 shares of the company's common stock at an exercise
      price of $0.605 per share. The options have a five year life.





During
      December 2005, the Company granted options to purchase an aggregate of 160,000
      shares of common stock to two employees. The options have been valued at $75,795
      using the Black-Sholes option pricing model with the following assumptions:
      (1) dividend yield of 0%; (2) expected volatility of 177%,
      (3) risk-free interest rate of 4.38%, and (4) expected life
      of 3 years. The options have an exercise price of $0.59, vest over a 38
      month period and expire if unexercised in ten years.





During
      the year ended April 30, 2007, the Company granted options to purchase an
      aggregate of 4,500,000 shares of common stock to one employee and one Director.
      At grant date, 1,000,000 options vested immediately. The vested and unvested
      options have been valued at $636,433 using the Black-Sholes option pricing
      model
      with the following assumptions: (1) dividend yield of 0%; (2) expected
      volatility of 131%; (3) risk-free interest rate of 5.04% and 5.24%, vest over
      a
      36 month period and expire if unexercised in five years.





The
      Company adopted SFAS No. 123(R) during third quarter of Fiscal year 2006, which
      no longer permits the use of the intrinsic value method under APB No. 25. The
      Company uses the modified prospective method to adopt SFAS No. 123(R), which
      requires compensation expense to be recorded for all stock-based compensation
      granted on or after January 1, 2006, as well the unvested portion of previously
      granted options. The Company is recording the compensation expense on a
      straight-line basis, generally over the explicit service period of three years.
      The Company made no stock-based compensation grants prior to the adoption of
      Statement 123(R) and therefore has no unrecognized stock compensation related
      liabilities or expense unvested or vested prior to 2006.




42


**SPARTA
        COMMERCIAL SERVICES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **APRIL
        30, 2007 AND 2006**


**NOTE
      M - STOCK OPTIONS AND WARRANTS (continued)**





The
      following table summarizes common stock options outstanding and the related
      exercise price;








Options
                Outstanding
            
            
            
            Options
                ExercisableNumber
              Outstanding
            
            Weighted
                Average
              Remaining
                Contractual
              Life
                (Years)
            
            Weighted
              Average
              Exercise
              Price
            
            Number
              Exercisable
            
            Weighted
              Average
              Exercise
              Price5,535,000
            
            3.9
            
            $0.26
            
            1,600,000
            
            $0.34





Transactions
      involving stock options issued to employees are summarized as
      follows:


Number
                of
                Shares
              
              Weighted
                  Average
                Price
                Per
                  ShareOutstanding
                  at April 30, 2004
              
              
              —
              
              $
              —Granted
              
              
              875,000
              
              
              0.61Exercised
              
              
              —
              
              
              —Canceled
                  or expired
              
              
              —
              
              
              —Outstanding
                  at April 30, 2005
              
              
              875,000
              
              $
              0.61Granted
              
              
              160,000
              
              $
              0.59Exercised
              
              
              —
              
              
              —Canceled
                  or expired
              
              
              —
              
              
              —Outstanding
                  at April 30, 2006
              
              
              1,035,000
              
              $
              0.60Granted
              
              
              4,500,000
              
              $
              0.18Exercised
              
              
              —
              
              
              —Canceled
                  or expired
              
              
              —
              
              
              —Outstanding
                  at April 30, 2007
              
              
              5,535,000
              
              $
              0.26




The
      weighted-average fair value of stock options granted during the years ended
      April 30, 2007 and 2006 was $0.262 and $0.47, respectively, and the
      weighted-average significant assumptions used to determine those fair values,
      using a Black-Scholes option pricing model are as follows:





Significant
                Assumptions (weighted average):
            
            2007
            
            2006Risk
                free interest rate at grant date:
            
            5.1%
            
            4.3%Expected
                stock price volatility
            
            
            131
            %
            
            177
            %Expected
                dividend payout
            
            
            0
            
            
            0Expected
                options life in years(a)
            
            
            5
            
            
            3





(a)
            The
                expected option/warrant life is based on vested
                dates.




There
      was
      no intrinsic value for the options granted during the year ended April 30,
      2007.
      The options granted in prior years had an intrinsic value of
      $82,500.





43




**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**APRIL
      30, 2007 AND 2006**




**NOTE
      M - STOCK OPTIONS AND WARRANTS (continued)**





There
      was
      no intrinsic value to vested or non-vested options at April 30,
      2007.





At
      the
      years ended April 30, 2007 and 2006, total compensation expense related to
      non-vested awards not yet recognized was $587,703. This amount will be
      recognized over a weighted-average period of 3 years. Compensation for fixed
      award with graded vesting is recognized on a graded-vesting method.





b)
            The
                following table summarizes the changes in warrants outstanding and
                the
                related prices for the shares of the Company's common stock issued
                to
                non-employees of the Company.




Warrants
                    Outstanding
                
                
                
                Warrants
                    ExercisableExercise
                
                Number
                
                Weighted
                    Average Remaining Contractual
                  Life
                
                Weighted
                    Average Exercise
                
                Number
                
                Weighted
                    Average ExercisePrices
                
                Outstanding
                
                (Years)
                
                Price
                
                Exercisable
                
                Price$0.195
                
                
                10,948,917
                
                
                1.00
                
                $
                0.195
                
                
                10,948,917
                
                $
                0.195$0.215
                
                
                1,755,537
                
                
                3.75
                
                $
                0.215
                
                
                1,755,537
                
                $
                0.215$0.088
                
                
                100,000
                
                
                2.60
                
                $
                0.088
                
                
                100,000
                
                $
                0.08812,804,454
                
                
                1.38
                
                $
                0.197
                
                
                12,804,454
                
                $
                0.197




Transactions
      involving stock warrants issued to non-employees are summarized as
      follows:


Number
                of
                Shares
              
              Weighted
                Average
                Price
                  Per
                ShareOutstanding
                  at April 30, 2004
              
              
              —
              
              $
              —Granted
              
              
              6,786,544
              
              
              0.194Exercised
              
              
              —
              
              
              —Outstanding
                  at April 30, 2005
              
              
              6,786,544
              
              $
              0.194Granted
              
              
              8,582,465
              
              $
              0.196Exercised
              
              
              (1,923,079
              )
              $
              0.172Canceled
                  or expired
              
              
              (100,000
              )
              $
              0.195Outstanding
                  at April 30, 2006
              
              
              13,345,930
              
              $
              0.198Granted
              
              
              100,000
              
              $
              0.088Exercised
              
              
              (641,476
              )
              $
              0.195Outstanding
                  at April 30, 2007
              
              
              12,804,454
              
              $
              0.197






44


**SPARTA
        COMMERCIAL SERVICES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **APRIL
        30, 2007 AND 2006**


**NOTE
      M - STOCK OPTIONS AND WARRANTS (continued)**





The
      weighted-average fair value of stock warrants granted to non-employees during
      the years ended April 30, 2007 and 2006 was $0.06 and $0.50, respectively,
      and
      the weighted-average significant assumptions used to determine those fair
      values, using a Black-Scholes option pricing model are as follows:





**2007**
            
            **2006**Significant
                assumptions (weighted-average):Risk-free
                interest rate at grant date
            
            
            4.62
            %
            
            3.9
            %Expected
                stock price volatility
            
            
            158
            %
            
            181
            %Expected
                dividend payout
            
            
            -
            
            
            -Expected
                option life-years
            
            
            3
                yrs
            
            
            2
                yrs




The
      amount of the expense charged to operations for compensatory warrants granted
      in
      exchange for services was $6,600 and $406,665 for the years ended April 30,
      2007
      and 2006, respectively.




**NOTE
      N - COMMITMENTS AND CONTINGENCIES**





**Operating
      Lease Commitments**





In
      October 2004, the Company entered into a lease agreement with an unrelated
      party
      for office space in New York City from December 1, 2004 through November 30,
      2007. Total lease rental expense for the years ended April 30, 2007 and 2006,
      was $212,220 and $142,584, respectively. Commitment for minimum rentals under
      non-cancelable leases at April 30, 2007 is $104,973 for the year ended April
      30,
      2008.





**Employment
      and Consulting Agreements**





The
      Company does not have employment agreements with any of its non-executive
      employees.





The
      Company has consulting agreements with outside contractors to provide marketing
      and financial advisory services. The Agreements are generally for a term of
      12
      months from inception and renewable automatically from year to year unless
      either the Company or Consultant terminates such engagement by written
      notice.





We
      entered into an employment agreement, dated as of July 12, 2004, with Anthony
      L.
      Havens, our Chief Executive Officer. The employment is for a term of five years.
      The employment term is to be automatically extended for one five-year period,
      and additional one-year periods, unless written notice is given three months
      prior to the expiration of any such term that the term will not be extended.
      He
      is entitled to six weeks of paid vacation per year, and health insurance, short
      term and long term disability insurance, retirement benefits, fringe benefits,
      and other employee benefits on the same basis as is generally made available
      to
      other senior executives. He did not receive any equity compensation as part
      of
      this agreement.





On
      November 1, 2004, the Company entered into an employment agreement with Richard
      P. Trotter, pursuant to which the Company agreed to issue 125,000 shares of
      common stock during the course of the agreement. The grant of shares is subject
      to vesting and subject to continued employment. At April 30, 2007, 75,000 shares
      vested and are yet to be issued, and the remainder of the shares are to vest,
      subject to proportionate adjustment in the event of employment termination
      for
      any incomplete vesting period, as follows: 25,000 shares on November 1, 2007;
      12,500 shares on November 1, 2008; and 12,500 on November 1, 2009. During the
      years ended April 30, 2007 and 2006, the Company has recorded $20,000 as expense
      for each year as per this employment agreement.





45




**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**APRIL
      30, 2007 AND 2006**




**NOTE
      N - COMMITMENTS AND CONTINGENCIES (continued)**





We
      entered into an employment agreement, effective September 22, 2006, with Anthony
      W. Adler, to serve as our Executive Vice President and interim Chief Financial
      Officer. The term of employment is three years. The employment term may be
      extended for one year upon written agreement by the Company and Mr. Adler.
      He
      was granted options for 4,000,000 shares of our common stock. The grant of
      options is subject to vesting and subject to continued employment. On September
      22, 2006, options for 800,000 shares vested, on September 22, 2007 options
      for
      an additional 800,000 shares will vest and on September 22, 2009 and 2010
      respectively options for an additional 1,200,000 shares will vest subject to
      proportionate adjustment in the event of employment termination for any
      incomplete vesting period, He is entitled to four weeks of paid vacation during
      the first year of employment, and five weeks per year thereafter. He is entitled
      to health insurance and other employee benefits on the same basis as is made
      generally available to other employees. He is entitled to reimbursement of
      reasonable business expenses incurred by him in accordance with company
      policies.





**Litigation**





The
      Company is subject to legal proceedings and claims which arise in the ordinary
      course of its business. Although occasional adverse decisions or settlements
      may
      occur, the Company believes that the final disposition of such matters should
      not have a material adverse effect on its financial position, results of
      operations or liquidity.





**NOTE
      O - NON-CASH FINANCIAL INFORMATION**





During
      the year ended April 30, 2007 the Company:





·
            Issued
                870,000 shares of common stock for expense accrued during the year
                ended
                April 30, 2006. The shares have been valued at $418,600.





·
            Issued
                70,000 shares of common stock, valued at $38,500, for accrued additional
                costs related to loans received by the Company during the year end
                April
                30, 2006.





·
            Issued
                48,077 shares of common stock, valued at $13,285, related to penalty
                provision accrued during the year end April 30,
                2006.





·
            Issued
                550,001 shares of common stock for subscription $330,000 received
                during
                the year end April 30, 2006.




**NOTE
      P - SUBSEQUENT EVENTS**





During
      the period from April 30, 2007 to July 24, 2007, the Company sold to sixteen
      accredited investors six months unsecured notes in the aggregate amount of
      $457,000. All notes bears 6% simple interest, payable in cash or shares, at
      the
      Company’s option, with principal and accrued interest payable at maturity.
      Should the Company opt to convert these notes at maturity, these notes will
      be
      convertible into shares of common stock at prices ranging from $0.03 to $0.055
      per share. All notes will mature in six months on various dates through January
      24, 2008.





On
      May
      15, 2007 the Company borrowed from one of its investors $60,000 on a no
      interest, demand basis.




In
        August 2007, the Company entered into a three
        month agreement with a consultant which agreement calls for cash payments
        by the
        Company of $3,000 of which $1,000 has been paid and the issuance to the
        consultant of a minimum of 600,000 shares of the Company’s restricted common
        stock and up to a maximum of 1,100,000 shares of restricted common stock
        based
        upon the consultants performance under the agreement.




46





**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**APRIL
      30, 2007 AND 2006**




**NOTE
      Q - GOING CONCERN MATTERS**





The
      accompanying financial statements have been prepared on a going concern basis,
      which contemplates the realization of assets and the satisfaction of liabilities
      in the normal course of business. As shown in the accompanying financial
      statements during the period October 1, 2001 (date of inception) through April
      30, 2007, the Company incurred loss of $18,203,666 and its current liabilities
      exceed its current assets by $2,773,486. These factors among others may indicate
      that the Company will be unable to continue as a going concern for a reasonable
      period of time.





The
      Company's existence is dependent upon management's ability to develop profitable
      operations. Management is devoting substantially all of its efforts to
      developing its business and raising capital and there can be no assurance that
      the Company's efforts will be successful. While, the planned principal
      operations have commenced, no assurance can be given that management's actions
      will result in profitable operations or the resolution of its liquidity
      problems. The accompanying statements do not include any adjustments that might
      result should the Company be unable to continue as a going concern.





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





47






**ITEM
              8.**
            **CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING****AND
                FINANCIAL DISCLOSURE**





None.





**ITEM
              8A.**
            **CONTROLS
                AND PROCEDURES**





Disclosure
      controls and procedures are controls and other procedures that are designed
      to
      ensure that information required to be disclosed by us in the reports that
      we
      file or submit under the Exchange Act is recorded, processed, summarized and
      reported, within the time periods specified in the Securities and Exchange
      Commission’s rules and forms. Disclosure controls and procedures include,
      without limitation, controls and procedures designed to ensure that information
      required to be disclosed by us in the reports that we file under the Exchange
      Act is accumulated and communicated to our management, including our principal
      executive and financial officers, as appropriate to allow timely decisions
      regarding required disclosure.





Our
      management, with the participation of our Chief Executive Officer and Principal
      Financial Officer, evaluated the effectiveness of our disclosure controls and
      procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) of the Exchange
      Act)
      as of the end of the period covered by this report. Based
      upon that evaluation, our Chief Executive Officer and Principal Financial
      Officer concluded that the Company's disclosure controls and procedures were
      effective .





There
      were no changes in our internal control over financial reporting during the
      quarter ended April 30, 2007 to which this report relates that have materially
      affected, or are reasonably likely to materially affect, our internal control
      over financial reporting.





**ITEM
              8B.**
            **OTHER
                INFORMATION**





Not
      applicable.





48


**PART
      III**





**ITEM
              9.**
            **DIRECTORS,
                EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATION GOVERNANCE;
                COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
                ACT**





**Our
      Management**





Our
      executive officers and directors and their respective ages and positions as
      of
      May 12, 2007 are as follows:





Name
            
            Age
            
            PositionAnthony
                L. Havens
            
            53
            
            Chief
                Executive Officer, President, and ChairmanKristian
                Srb
            
            52
            
            DirectorJeffrey
                Bean
            
            53
            
            DirectorAnthony
                W. Adler
            
            67
            
            Executive
                Vice President and Principal Financial OfficerRichard
                P. Trotter
            
            63
            
            Chief
                Operating OfficerSandra
                L. Ahman
            
            43
            
            Vice
                President, Secretary and Director





**Anthony
      L. Havens, Chief Executive Officer, President, and
      Chairman.** On
      February 27, 2004, Mr. Havens became our Chief Executive Officer, President
      and
      Chairman of the Board. Mr. Havens has been the Managing Member and Chief
      Executive Officer of Sparta Commercial Services, LLC since its inception in
      2001
      and the acting Chief Financial Officer since July 2005. He is involved in all
      aspects of Sparta's operations, including providing strategic direction, and
      developing sales and marketing strategies. From 1994 to 2004, Mr. Havens has
      been Chief Executive Officer and a director of American Motorcycle Leasing
      Corp.
      He co-founded American Motorcycle Leasing Corp. in 1994, and developed its
      operating platform and leasing program to include a portfolio which includes
      both prime and sub-prime customers. Mr. Havens has over 20 years of experience
      in finance and investment banking.





**Kristian
      Srb, Director.** Mr. Srb
      joined our board of directors in December 2004. Mr. Srb has been a director
      of
      American Motorcycle Leasing Corp. from 1994 to the present. Mr. Srb was
      President of American Motorcycle Leasing Corp. from 1994 to 1999. Since 1999,
      Mr. Srb has engaged in private investment activities. He has over 16 years
      experience in international brand development and management, including for
      13
      years with Escada A.G.





**Jeffrey
      Bean, Director.** Mr. Bean
      joined our Board of Directors in December 2004. Mr. Bean is the founding partner
      of GoMotorcycle.com. Formed in January 1999, GoMotorcycle.com is currently
      engaged in the sale of motorcycle parts and accessories over the Internet.
      Prior
      to founding GoMotorcycle.com, Mr. Bean was an institutional broker and trader
      at
      Refco, Inc. from 1985 to 1997. From 1977 to 1985, Mr. Bean was President of
      Thomaston Press, Ltd., a sales printing concern. He received a B.A. degree
      from
      the University of Virginia.





**Anthony
      W. Adler, Executive Vice President and Principal Financial Officer.** From
      March 2004 to August 2006, Mr. Adler was a full time consultant to the Company,
      and in September 2006, joined Sparta as Executive Vice President and also as
      principal financial officer. From 1995 to March 2004, he was Chief Financial
      Officer of American Motorcycle Leasing Corp. From 1993 to 1994 Mr. Adler was
      Chief Executive Officer of Innotek, Inc., a public company engaged in the
      development and distribution of skin-care products. Prior to 1993, Mr. Adler
      served in numerous executive capacities including Director of Research and
      Vice
      President, Corporate Finance for two New York Stock Exchange Member Firms.
      Mr.
      Adler holds an MBA from New York University and a BA from Columbia
      College.





49


**Richard
      P. Trotter, Chief Operating Officer.** Mr.
      Trotter has been our Chief Operating Officer since November 2004. From 2001
      to
      2004, Mr. Trotter was President, Chief Credit Officer, of American Finance
      Company, Inc., purchasing retail automobile installment contracts from
      independent automobile dealers nationwide. From 1996 to 2001, he was Senior
      Vice
      President of Originations for Consumer Portfolio Services, Inc., one of the
      nation's leading purchasers of non-prime retail automobile installment
      contracts. From 1994 to 1996, he was Senior Vice President of Marketing for
      Consumer Portfolio Services, Inc. His experience also includes positions as
      Chief Operating Officer, Executive Director and President, and Chief Credit
      Officer for banks and financial institutions in California. Mr. Trotter has
      over
      30 years experience in financial institutions and over 20 years experience
      specializing in the automobile lending, servicing, and collecting
      industry.





**Sandra
      L. Ahman, Vice President, Secretary and Director.** On March
      1, 2004, Sandra Ahman became Vice President of Operations and Secretary of
      Sparta, and a Director on June 1, 2004. She has been a Vice President of Sparta
      Commercial Services, LLC since formation. From 1994 to 2004, she was Vice
      President of Operations of American Motorcycle Leasing Corp. Prior to joining
      American Motorcycle Leasing Corp., Ms. Ahman was with Chatham Capital Partners,
      Ltd. Before joining Chatham in 1993, she was Manager, Human Resources for Comart
      and Aniforms, a sales promotion and marketing agency in New York, where she
      worked from 1986 to 1993. For the past 14 years, Ms. Ahman has been a volunteer
      with The Children's Aid Society in New York City, a membership of 500 committed
      volunteers, serving from 2000 to 2002 as President of its Associates Council,
      from 2002 to 2005 as Chairman of the Associates Council, and since 2002 as
      a
      member of the Advisory Council of their Board of Trustees.





**Board
      of Directors, Committees and Meetings**





Our
      directors are elected annually to serve for one year and hold office until
      the
      next annual meeting of the shareholders and until their successors are elected
      and qualified. Our Board of Directors may increase the size of the Board of
      Directors. Any director who fills a position created by the Board of Directors
      serves until the next annual meeting of the shareholders. Our officers are
      elected by the Board of Directors at the first meeting after each annual meeting
      of our shareholders, and hold office until their death, resignation or removal
      from office.





There
      are
      no family relationships among our executive officers or directors. None
      of
      our directors or officers are directors of another reporting company. None
      of
      the directors and officers during the past five years have been: involved in
      a
      bankruptcy petition or a pending criminal proceeding; convicted in a criminal
      proceeding (excluding traffic and minor offenses); subject to any order,
      judgment, or decree, permanently or temporarily enjoining, barring, suspending
      or otherwise limiting his involvement in any type of business, securities or
      banking activities; or found by a court, the SEC or the CFTC to have violated
      a
      federal or state securities or commodities law.





During
      the fiscal year that ended on April 30, 2007, the Board of Directors did not
      hold any formal meetings. Matters were undertaken by written consent by the
      Board of Directors.





Our
      Board
      does not maintain a separate audit, nominating or compensation committee.
      Functions customarily performed by such committees are performed by our Board
      as
      a whole. We are not required to maintain such committees under the applicable
      rules of the Over-the-Counter Bulletin Board. None of our independent directors
      qualify as an "audit committee financial expert."





The
      Board
      of Directors has not adopted a specific process with respect to security holder
      communications, but security holders wishing to communicate with the Board
      of
      Directors may do so by mailing such communications to the Board of Directors
      at
      our offices.





50


**Conflicts
      of Interest**





Certain
      management employees of our company have worked for American Motorcycle Leasing
      Corp. and will continue to do so on a limited basis for the near future as
      we
      transition from a development stage company and commence active operations.
      While our business plans differ from those of American Motorcycle Leasing Corp.,
      we operate in the same industry as American Motorcycle Leasing Corp. Mr. Havens
      was an officer, director and significant equity owner of American Motorcycle
      Leasing Corporation through 2004. Pursuant to a license agreement between Sparta
      Commercial Services and American Motorcycle Leasing Corp., Sparta Commercial
      Services issued 330,433 membership interests to American Motorcycle Leasing
      Corp., which were exchanged for 34,256,941 shares of our common stock. Officers
      and directors of Sparta who are also shareholders of American Motorcycle Leasing
      Corp. disclaimed ownership of, and entitled to, any of those shares. Issues
      could arise with respect to the taking of corporate opportunities of each other.
      Any competition with American Motorcycle Leasing Corp. could adversely affect
      our business, operating results and financial condition. Accordingly, we may
      be
      subject to legal proceedings and claims, including claims of alleged
      infringement of the intellectual property, competition, conflict of interest,
      and other business governance related claims. Such claims, even if not
      meritorious, could result in the expenditure of significant financial and
      managerial resources.





**Code
      of Ethics**





We
      have
      not yet adopted a "code of ethics", as defined by the SEC, which applies to
      our
      Chief Executive Officer, Chief Financial Officer, principal accounting officer
      or controller and persons performing similar functions. We are in the process
      of
      drafting and adopting a Code of Ethics.





**Section
      16(a) Beneficial Ownership Reporting Compliance**





Section
      16(a) of the Securities Exchange Act of 1934, as amended, requires Sparta’s
      executive officers, directors, and persons who beneficially own more than ten
      percent of Sparta's common stock to file with the Securities and Exchange
      Commission initial reports of beneficial ownership and reports of changes in
      beneficial ownership of Sparta’s common stock. Such persons are also required by
      Securities and Exchange Commission regulations to furnish Sparta with copies
      of
      all such Section 16(a) forms filed by such person. Based solely on a review
      of
      the copies of such reports furnished to Sparta in connection with the fiscal
      year ended April 30, 2007, Sparta is not aware of any material delinquencies
      in
      the filing of such reports.





**ITEM
              10.**
            **EXECUTIVE
                COMPENSATION**





**Summary
      Compensation Table**




The
      table
      below sets forth information concerning the compensation we paid to our most
      highly compensated executive officers who served during our fiscal year ended
      April 30, 2007 (“Named
      Executive Officers”).





Name
              and
                Principal Position
            
            Year
            
            Salary
              ($)
            
            Bonus
              ($)
            
            Stock
              Awards
              ($)(a)(b)
            
            Option
              Awards
              ($)(a)(c)
            
            Non-Equity
              Incentive
              Plan
              Compensation
              ($)
            
            Nonqualified
              Deferred
              Compensation
              Earnings
              ($)
            
            All
              Other
              Compensation
              ($)
            
            Total
              ($)Anthony
                L. Havens
              Chief
                Executive Officer
            
            
            2007
            
            
            280,000
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            280,000Anthony
                W. Adler (1)
              Executive
                Vice
              President
                and Principal
              Financial
                Officer
            
            
            2007
            
            
            138,500
            
            
            0
            
            
            0
            
            
            212,347
            
            
            0
            
            
            0
            
            
            21,000
            
            
            371,847Richard
                P. Trotter
              Chief
                Operating Officer
            
            
            2007
            
            
            200,000
            
            
            0
            
            
            20,000
            
            
            49,420
            
            
            0
            
            
            0
            
            
            0
            
            
            269,420Sandra
                L. Ahman
              Vice
                President, Secretary and Director
            
            
            2007
            
            
            100,000
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            100,000





(a)
            See note M to financial statements for assumptions
              made
              in the valuation.  (b)
            For
                Mr. Trotter, refers to the value of 25,000 shares of restricted stock
                that
                vested in fiscal year 2007.






51





Pursuant
                to an employment agreement dated November 1, 2004, Mr. Trotter is
                entitled
                to up to 125,000 shares of common stock, of which an aggregate of
                75,000
                shares have vested, and 50,000 shares remains subject to future vesting
                as
                follows: 25,000 shares on November 1, 2007; 12,500 shares on November
                1,
                2008; and 12,500 on November 1, 2009.


(c)
            For Mr. Adler, refers to the value of 800,000 stock
              options that vested in fiscal year 2007. Pursuant to an option agreement
              dated September 22, 2006, Mr. Adler is entitled to up to 4,000,000
              options
              subject to vesting. The options are exercisable for a period of five
              years
              from the vesting date at $0.1914 per share. On September22, 2006 stock options to purchase 800,000 shares vested, with 800,000
              options to vest on September 22, 2007 and 1,200,000 options each to
              vest
              on September 22, 2008 and September 22,
              2009.





For
                Mr. Trotter, refers to the value of 175,000 stock options that vested
                in
                fiscal year 2007. Pursuant to an option agreement dated April 29,
                2005,
                Mr. Trotter is entitled to up to 875,000 stock options, subject to
                vesting. The stock options are exercisable for five years from the
                vesting
                date at $0.605 per share. Options to purchase 175,000 shares vested
                on
                April 29, 2005, additional options to purchase 175,000 shares vested
                on
                April 29, 2006, additional options to purchase 175,000 shares vested
                on
                April 29, 2007 and the remaining options are to vest in equal installments
                over the next two anniversary dates of the agreement.




(1)
            Mr.
                Adler became an officer on September 22, 2006**.**




**Outstanding
      Equity Awards at Fiscal Year End**





The
      following table sets forth information concerning outstanding option awards
      held
      by the Name Executive Officers as at April 30, 2007.





Option
                Awards
            
            Stock
                AwardsName
            
            Number
                of
              Securities
              Underlying
              Unexercised
              Options
              (#)
              Exercisable
            
            Number
                of
              Securities
              Underlying
              Unexercised
              Options
              (#)
              Unexercisable
            
            Equity
              Incentive
              Plan
              Awards:
              Number
                of
              Securities
              Unexercised
              Unearned
              Options
              (#)
            
            Option
              Exercise
              Price
              ($)
            
            Option
              Expiration
              Date
            
            Number
                of
              Shares
                or
              Units
                of
              Stock
                That
              Have
                not
              Vested
              (#)
            
            Market
              Value
                of
              Shares
                or
              Units
                of
              Stock
                That
              Have
                Not
              Vested
              ($)
            
            Equity
              Incentive
              Plan
              Awards:
              Number
                of
              Unearned
              Shares,
              Units
                or
              Other
              Rights
                That
              Have
                Not
              Vested
              (#)
            
            Equity
              Incentive
              Plan
              Awards:
              Market
                or
              Payout
              Value
                of
              Unearned
              Shares,
              Units
                or
              Other
              Rights
                That
              Have
                Not
              Vested
              ($)Anthony
                W. Adler (1)
            
            
            800,000
            
            
            -
            
            
            3,200,000
            
            
            0.1914
            
            
            9/21/2011
            
            
            -
            
            
            -
            
            
            -
            
            
            -Richard
                P. Trotter (2)
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            50,000
            
            
            4,500Richard
                P. Trotter (3)
            
            
            175,000
            
            
            -
            
            
            -
            
            
            0.605
            
            
            4/29/2010
            
            
            -
            
            
            -
            
            
            -
            
            
            -Richard
                P. Trotter (3)
            
            
            175,000
            
            
            -
            
            
            -
            
            
            0.605
            
            
            4/29/2011
            
            
            -
            
            
            -
            
            
            -
            
            
            -Richard
                P. Trotter (3)
            
            
            175,000
            
            
            -
            
            
            -
            
            
            0.605
            
            
            4/29/2012
            
            
            -
            
            
            -
            
            
            -
            
            
            -Richard
                P. Trotter (3)
            
            
            -
            
            
            -
            
            
            175,000
            
            
            0.605
            
            
            4/29/2013
            
            
            -
            
            
            -
            
            
            -
            
            
            -Richard
                P. Trotter (3)
            
            
            -
            
            
            -
            
            
            175,000
            
            
            0.605
            
            
            4/29/2014
            
            
            -
            
            
            -
            
            
            -
            
            
            -





(1)
            Pursuant to an option agreement dated September
              22, 2006,
              Mr. Adler is entitled to up to 4,000,000 options subject to vesting.
              The
              options are exercisable for a period of five years from the vesting
              date
              at $0.1914 per share. On September 22, 2006 stock options to purchase
              800,000 shares vested, with 800,000 options to vest on September 22,
              2007
              and 1,200,000 options each to vest on September 22, 2008 and September
              22,
              2009.  (2)
            Pursuant to an employment agreement dated November
              1,
              2004, Mr. Trotter is entitled to up to 125,000 shares of common stock,
              of
              which an aggregate of 75,000 shares have vested, and 50,000 shares
              remains
              subject to future vesting as follows: 25,000 shares on November 1,
              2007;
              12,500 shares on November 1, 2008; and 12,500 on November 1,
              2009.  (3)
            Pursuant
                to an option agreement dated April 29, 2005, Mr. Trotter is entitled
                to up
                to 875,000 stock options, subject to vesting. The stock options are
                exercisable for five years from the vesting date at $0.605 per share.
                Options to purchase 175,000 shares vested on April 29, 2005, additional
                options to purchase 175,000 shares vested on April 29, 2006, additional
                options to purchase 175,000 shares vested on April 29, 2007 and the
                remaining options are to vest in equal installments over the next
                two
                anniversary dates of the agreement.






52




**Compensation
      of Directors**





The
      following table sets forth the compensation we paid to non-employee directors
      in
      fiscal year 2007.





Name
            
            Fees
                Earned or
              Paid
                in Cash
              ($)
            
            Stock
              Awards
              ($)
            
            Option
              Awards
              ($)
            
            Non-Equity
              Incentive
                Plan
              Compensation
              ($)
            
            Nonqualified
              Deferred
              Compensation
              Earnings
              ($)
            
            All
                Other
              Compensation
              ($)(a)
            
            Total
              ($)Jeffrey
                Bean (1)
            
            
            —
            
            
            —
            
            $
            24,053
            
            
            —
            
            
            —
            
            
            —
            
            $
            24,053




(a)
            Refers
                to perquisites and other personal benefits, including reimbursement
                for
                reasonable out-of-pocket expenses incurred in connection with attendance
                at Board meetings, unless the aggregate amount of such compensation
                is
                less than $10,000.




(1)
            For
                Mr. Bean, refers to the value of stock options that vested in fiscal
                year
                2007. On October 23, 2006, we granted Mr. Bean stock options to purchase
                up to 500,000 shares of our common stock, subject to a vesting schedule,
                exercisable at $0.12 per share until October 23, 2011. Stock options
                to
                purchase 200,000 shares vested on the date of grant, and the balance
                of
                the options are to vest in equal installments on the first, second
                and
                third anniversary dates of the date of grant. No vesting shall occur
                unless Mr. Bean is serving as a director on the vesting date, and
                unvested
                stock options will terminate automatically upon Mr. Bean ceasing
                to serve
                on the Board of Directors.





**Management
      Employment Agreements**





Employment
      Agreement with CEO





We
      entered into an employment agreement, dated as of July 12, 2004, **** with
      Anthony L. Havens who serves as our Chief Executive Officer. The employment
      is
      for a term of five years. The employment term is to be automatically extended
      for one five-year period, and additional one-year periods, unless written notice
      is given three months prior to the expiration of any such term that the term
      will not be extended. His base salary is at an annual rate of $280,000. He
      is
      entitled to defer a portion of his base salary each year. He is entitled to
      annual increases in his base salary and other compensation as may be determined
      by the Board of Directors. He is entitled to a $1,000,000 term insurance policy.
      He is entitled to six weeks of paid vacation per year, and health insurance,
      short term and long term disability insurance, retirement benefits, fringe
      benefits, and other employee benefits on the same basis as is generally made
      available to other senior executives. He is entitled to reimbursement of
      reasonable business expenses incurred by him in accordance with company
      policies. If terminated, he is entitled to three months of severance for up
      to
      six months of service for each year of employment, plus full participation
      in
      all standard employee benefits during the period of severance payments. The
      employment agreement provides for termination for cause. If he resigns for
      good
      reason or is terminated without cause within twelve months after a change in
      control, he is entitled to receive an additional lump sum payment equal to
      the
      greater of the severance payment or the balance of his base salary for the
      remaining employment term, continued coverage under any welfare benefits plans
      for two years, and full vesting of any account balance under a 401(k)
      plan. **** For
      purposes of the employment agreement, a change in control refers
      to:





·
            a
                change in voting power, due to a person becoming the beneficial owner
                of
                50% or more of the voting power of our securities and our largest
                shareholder;


·
            during
                any period of two consecutive years, individuals who at the beginning
                of
                such period constitute the Board of Directors, including later approved
                directors, ceasing to consisted a majority of the Board of
                Directors;


·
            a
                merger or consolidation of our company with a third party, after
                which our
                shareholders do not own more than 50% of the voting power;
                or


·
            a
                sale of all or substantially all of our assets to a third
                party.







53




If
      we
      elect not to renew the employment agreement, he shall be entitled to receive
      severance equal to thirty months of his base salary plus standard employment
      benefits. If we fail to fully perform all or any portion of our post-termination
      obligations, we are be obligated to pay to him an amount equal to five times
      the
      value of the unperformed obligation.




Employment
      Agreement with EVP





We
      entered into an employment agreement, effective September 22, 2006, with Anthony
      W. Adler, to serve as our Executive Vice President and interim Chief Financial
      Officer. The term of employment is three years. The employment term may be
      extended for one year upon written agreement by the Company and Mr. Adler.
      His
      initial base salary is at an annual rate of $185,000. He is entitled to annual
      increases in his base salary and other compensation as may be determined by
      the
      Board of Directors. He is entitled to a grant of options for 4,000,000 shares
      of
      our common stock. The grant of options is subject to vesting and subject to
      continued employment. On September 22, 2006, options for 800,000 shares vested,
      on September 22, 2007 options for an additional 800,000 shares will vest and
      on
      September 22, 2009 and 2010, respectively, options for an additional 1,200,000
      shares will vest. subject to proportionate adjustment in the event of employment
      termination for any incomplete vesting period, He is entitled to four weeks
      of
      paid vacation during the first year of employment, and five weeks per year
      thereafter. He is entitled to health insurance, short term and long term
      disability insurance, retirement benefits, fringe benefits, and other employee
      benefits on the same basis as is made generally available to other employees.
      He
      is entitled to reimbursement of reasonable business expenses incurred by him
      in
      accordance with company policies. The employment agreement provides for
      termination for cause. If terminated without cause, he is entitled to severance.
      As severance, he shall be receive his full base salary through the end of the
      then current employment term





Employment
      Agreement with COO





We
      entered into an employment agreement, effective November 1, 2004, with Richard
      P. Trotter, to serve as our Chief Operating Officer. The term of employment
      is
      one year. The employment term is to be automatically extended for one two-year
      period, and an additional two-year period, unless written notice is given three
      months prior to the expiration of any such term that the term will not be
      extended. His initial base salary was at an annual rate of $160,000. On May
      1,
      2005, his base salary increased to $200,000. He is entitled to annual increases
      in his base salary and other compensation as may be determined by the Board
      of
      Directors. He is entitled to a grant of 125,000 shares of our common stock.
      The
      grant of shares is subject to vesting and subject to continued employment.
      On
      November 1, 2004, 25,000 shares vested and on November 1, 2005, and an
      additional 25,000 shares vested on November 1, 2005. An additional 75,000 shares
      are subject to vesting at a future date, subject to proportionate adjustment
      in
      the event of employment termination for any incomplete vesting period, as
      follows: 25,000 shares on November 1, 2006; 25,000 shares on November 1, 2007;
      12,500 shares on November 1, 2008; and 12,500 on November 1, 2009. He is
      entitled to three weeks of paid vacation during the first year of employment,
      and four weeks per year thereafter. He is entitled to health insurance, short
      term and long term disability insurance, retirement benefits, fringe benefits,
      and other employee benefits on the same basis as is made generally available
      to
      other employees. He is entitled to reimbursement of reasonable business expenses
      incurred by him in accordance with company policies. The employment agreement
      provides for termination for cause. If terminated without cause, he is entitled
      to severance. As severance, he shall be entitled to one week's base salary
      as of
      the date of termination for the first full year of service, and thereafter,
      two
      weeks' base salary for each succeeding year of service, up to an aggregate
      of
      four months of such base salary.





54




**ITEM
              11.**
            **SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                STOCKHOLDER MATTERS**





**Securities
      Authorized for Issuance under Equity Compensation Plans**





The
      following table summarizes our equity compensation plan information as of April
      30, 2007.





Plan
                category
            
            Number
                of securities to be issued upon exercise of outstanding options,
              warrants
                and rights
            
            Weighted-average
                exercise price of outstanding options,
              warrants
                and rights
            
            Number
                of securities remaining available for
              future
                issuance under
              equity
                compensation planEquity
                compensation plans approved by securities holders
            
            
            160,000
            
            $
            0.59
            
            
            8,340,000Equity
                compensation plans not approved by security holders
            
            
            5,575,000
            
            $
            0.248
            
            
            0Total
            
            
            5,735,000
            
            $
            0.258
            
            
            8,340,000





In
      July
      2004, we adopted a **** stock
      incentive compensation plan. The plan authorized our Board of Directors to
      grant
      securities, including stock options, to employees, directors and others, in
      the
      aggregate amount of 8,500,000 shares of common stock. Securities issued under
      the plan may be stock awards, non-qualified options, incentive stock options,
      or
      any combination of the foregoing. **** In
      general, stock options granted under the plan have a maximum duration of ten
      years from the date of the grant and are not transferable. The per share
      exercise price of any incentive stock option granted under the plan may not
      be
      less than the fair market value of the common stock on the date of grant.
      Incentive stock options granted to persons who have voting control over ten
      percent or more of our capital stock are granted at 110% of fair market value
      of
      the underlying common stock on the date of grant and expire five years after
      the
      date of grant. No options may be granted after July 1, 2014. During the year
      ended April 30, 2007, no stock options were granted under this plan.





On
      April
      29, 2005, pursuant to an option agreement with Richard Trotter, our Chief
      Operating Officer, we issued stock options to purchase up to 875,000 shares
      of
      our common stock. Subject to vesting, the stock options are exercisable for
      five
      years from the vesting date at $0.605 per share. Options to purchase 175,000
      shares vested on April 29, 2005, additional options to purchase 175,000 shares
      each vested on April 29, 2006 and April 29, 2007, and the remaining options
      are
      to vest in equal installments over the next three anniversary date of the
      agreement.





In
      April
      2005, we issued warrants to purchase 200,000 shares of our common stock to
      Jaffoni & Collins Incorporated pursuant to a consulting agreement for public
      relations services. The warrants are exercisable for three years at $0.195
      per
      share. In April 2006, 100,000 of these options were cancelled. In March 2006,
      this contract was cancelled and we rescinded 100,000 of such
      options.





On
      September 22, 2006, pursuant to an option agreement with Anthony W. Adler,
      our
      Executive Vice President,, we issued stock options to purchase up to 4,000,000
      shares of a common stock. Subject to vesting, the stock options are exercisable
      for five years from the vesting date at $0.1914 per share. On September 22,
      2006, stock options to purchase 800,000 shares vested, on September 22, 2007
      an
      additional 800,000 shares will vest, and 1,200,000 shares each will vest on
      September 22, 2008 and September 22, 2009.





On
      October 23, 2006, pursuant to an option agreement with Jeffrey Bean, one of
      our
      Directors, we issued stock options to purchase up to 500,000 shares of a common
      stock. Subject to vesting, the stock options are exercisable for five years
      from
      the vesting date at $0.12 per share. On October 23, 2006, stock options to
      purchase 200,000 shares vested, and the remaining options are to vest in equal
      installments over the next three anniversary dates of the
      agreement.





55


On
      December 16, 2006, pursuant to an option agreement with Loofbourrow and
      Associates, a consultant, we issued options to purchase up to 100,000 shares
      of
      our common stock exercisable at $.08 per share. The options are fully
      vested.





**Common
      Stock Ownership**





The
      table
      below sets forth information regarding the beneficial ownership of our common
      stock as of April 30, 2007 by:





·  each
      person known by us to be the beneficial owner of more than 5% of our common
      stock;




·  each
      of
      our directors;




·  each
      of
      our executive officers; and




·  our
      executive officers and directors as a group.





Beneficial
      ownership is determined in accordance with the rules of the SEC and includes
      voting and investment power. Under SEC rules, a person is deemed to be the
      beneficial owner of securities which may be acquired by such person upon the
      exercise of options and warrants or the conversion of convertible securities
      within 60 days from the date on which beneficial ownership is to be determined.
      Each beneficial owner's percentage ownership is determined by dividing the
      number of shares beneficially owned by that person by the base number of
      outstanding shares, increased to reflect the beneficially-owned shares
      underlying options, warrants or other convertible securities included in that
      person's holdings, but not those underlying shares held by any other person.





Unless
      indicated otherwise, the address for each person named is c/o Sparta Commercial
      Services, Inc., 462 Seventh Ave, 20th Floor, New York, NY 10018.





**Name**
            
            **Number
                of Shares Beneficially Owned**
            
            **Percentage
                of Class Beneficially Owned**Anthony
                L. Havens (1)
            
            
            32,133,250
            
            
            26.1Kristian
                Srb (2)
            
            
            33,066,562
            
            
            26.9Jeffrey
                Bean (3)
            
            
            216,000
            
            
            *Anthony
                W. Adler (4)
            
            
            2,005,000
            
            
            1.6Richard
                P. Trotter (5)
            
            
            600,000
            
            
            *Sandra
                L. Ahman
            
            
            580,865
            
            
            *All
                current directors and named officers as a group(6
                in all)
            
            
            68,601,677
            
            
            55.0





*
            Represents
                less than 1%




(1)
            Mr.
                Havens' minor son owns 200,000 shares of common stock in a trust
                account.
                Mr. Havens is not the trustee for his son's trust account, and does
                not
                have direct voting control of such shares. Mr. Havens does not have
                the
                sole or shared power to vote or direct the vote of such shares, and,
                as a
                result, Mr. Havens disclaims beneficial ownership of such shares
                held in
                his son's trust account.




(2)
            Includes
                62,500 shares of common stock held by Mr. Srb’s minor daughter, for which
                Mr. Srb may be deemed to have beneficial ownership of such shares.




(3)
            Includes
                200,000 vested stock options. Pursuant to an option agreement, Mr.
                Bean is
                entitled to up to 500,000 options subject to vesting. Options to
                purchase
                200,000 shares vested on October 23, 2006. 100,000 additional options
                each
                are to vest on October 23, 2007, 2008 and
                2009.




(4)
            Includes
                800,000 vested stock options. Pursuant to an option agreement, Mr.
                Adler
                is entitled to up to 4,000,000 options subject to voting. Options
                to
                purchase 800,000 shares vested on September 22, 2006. 800,000 additional
                options vest on September 22, 2007 and options to purchase 1,000,000
                shares each are to vest on September 22, 2008 and September 22,
                2009.






56




(5)
            Includes
                75,000 vested shares, of which only 25,000 shares have been issued.
                Pursuant to an employment agreement, Mr. Trotter is entitled to up
                to
                125,000 shares of common stock, of which an aggregate of 75,000 shares
                have vested, and 50,000 shares remains subject to future vesting
                as
                follows: 25,000 shares on November 1, 2007; 12,500 shares on November
                1,
                2008; and 12,500 on November 1, 2009. Also includes 525,000 vested
                stock
                options. Pursuant to an option agreement, Mr. Trotter is entitled
                to up to
                875,000 stock options to purchase shares of our common stock, subject
                to
                vesting. The stock options are exercisable for five years from the
                vesting
                date at $0.605 per share. On each of November 1, 2004, 2005 and 2006,
                stock options to purchase 175,000 shares vested, and the remaining
                options
                are to vest in equal installments over the next two anniversary dates
                of
                the agreement.





**Changes
      in Control**





We
      do not
      have any arrangements that may result in a change in control.





**ITEM
              12.**
            **CERTAIN
                RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE**





**Transactions
      with Related Parties**





On
      August
      2, 2004, pursuant to an employment agreement with Daniel J. Lanjewar, our former
      Chief Financial Officer, we agreed to issue 568,175 shares of our common stock
      in a transaction deemed exempt from registration pursuant to Section 4(2) of
      the
      Securities Act. The grant of shares was subject to vesting and subject to
      continued employment. On January 1, 2005, 113,635 shares vested, and the
      reminder of the shares were to vest in equal portions on July 1, 2005, July
      1,
      2006, July 1, 2007, and July 1, 2008, subject to proportionate adjustment in
      the
      event of employment termination for any incomplete vesting period. In April
      2005, Mr. Lanjewar resigned as our Chief Financial Officer, and was vested
      with
      an additional 113,637 shares of common stock.





We
      entered into a purchase option agreement with American Motorcycle Leasing Corp.
      an entity controlled by a director of the Company and formerly controlled our
      President and Chief Executive Officer, on November 2, 2004 at a cost to Sparta
      Commercial Services of $250,000. This agreement granted Sparta Commercial
      Services the right, for a two year period, to purchase portions of a certain
      portfolio of equipment leases that American Motorcycle Leasing Corp. owns.
      The
      portfolio is secured by a first priority security interest in favor of Citibank,
      N.A. or its assigns. The cost of $250,000 has been charged to operations in
      fiscal 2005. As of April 30, 2005, payments against this obligation of $81,000
      were made. In June, 2005, an additional $20,000 was paid.





In
      January 2005, we received a loan of $25,000 from Kristian Srb, one of our
      directors. This loan was non-interest bearing and was payable on demand and
      has
      subsequently been repaid.





On
      April
      29, 2005, pursuant to an option agreement with Richard Trotter, our Chief
      Operating Officer, we agreed to issue options to purchase up to 875,000 shares
      of our common stock. Subject to vesting, the stock options are exercisable
      for
      five years from the vesting date at $0.605 per share. Options to purchase
      175,000 shares vested on April 29, 2005, additional options to purchase 175,000
      shares each vested on April 29, 2006 and 2007, and the remaining options are
      to
      vest in equal installments over the next three anniversary date of the
      agreement.





On
      September 22, 2006, pursuant to an option agreement with Anthony W. Adler,
      our
      Executive Vice President, we issued options to purchase up to 4,000,000 shares
      of our common stock. Subject to vesting the stock options aye exercisable for
      five years from the vesting date at $0.1914 per share. Options to purchase
      800,000 shares vested on September 22, 2006. 800,000 additional options vest
      on
      September 22, 2007 and options to purchase 1,000,000 shares each vest on
      September 22, 2008 and September 22, 2009.





57


On
      October 23, 2006, pursuant to an option agreement with Jeffrey Bean, a Director,
      , we issued options to purchase up to 500,000 shares of our common stock.
      Subject to vesting the stock options are exercisable for five years from the
      vesting date at $0.12 per share. Options to purchase 200,000 shares vested
      on
      October 23, 2006. 100,000 additional options each vest on October 23, 2007,
      2008
      and 2009.





During
      the fiscal year ended April 30, 2007, we received a $180,000 non-interest
      bearing demand loan from Kristian Srb, one of our directors.





During
      the fiscal year ended April 30, 2007, we received a $14,760 non-interest bearing
      demand loan from Sandra Ahman, one of our officers and a director, of which
      $1,000 was repaid during the year.





During
      the fiscal year ended April 30, 2007, we received a $8,500 non-interest bearing
      demand loan from Richard Trotter, one of our officers.





We
      believe that the terms of all of the above transactions are commercially
      reasonable and no less favorable to us than we could have obtained from an
      unaffiliated third party on an arm's length basis. Our policy requires that
      all
      related parties recuse themselves from negotiating and voting on behalf of
      our
      company in connection with related party transactions.





**Director
      Independence**





None
      of
      our directors are deemed independent. In determining independence, we are
      applying the independence standards of the American Stock Exchange.




**ITEM
      13. EXHIBITS**





The
      following exhibits are filed with this report:


Exhibit
                  Number
              
              Description
                  of ExhibitExhibit
                  2.1
              
              Agreement
                  and Plan of Reorganization, dated as of February 27, 2004 (Incorporated
                  by
                  reference to Exhibit 2 of Form 10-KSB filed on August 13,
                  2004)Exhibit
                  3(i)(1)
              
              Articles
                  of Incorporation of Tomahawk Oil and Minerals, Inc. (Incorporated
                  by
                  reference to Exhibit 3(i) (1) of Form 10-KSB filed on August 13,
                  2004)Exhibit
                  3(i)(2)
              
              Certificate
                  of Amendment of Articles of Incorporation, November 1983 (Incorporated
                  by
                  reference to Exhibit 3(i) (2) of Form 10-KSB filed on August 13,
                  2004)Exhibit
                  3(i)(3)
              
              Certificate
                  of Amendment of Articles of Incorporation for name change, August
                  2004
                  (Incorporated by reference to Exhibit 3(i) of Form 8-K filed on
                  August 27,
                  2004)Exhibit
                  3(i)(4)
              
              Certificate
                  of Amendment of Articles of Incorporation for increase in authorized
                  capital, September 2004 (Incorporated by reference to Exhibit 3(i)
                  of Form
                  8-K filed on September 17, 2004)Exhibit
                  3(i)(5)
              
              Certificate
                  of Amendment of Articles of Incorporation for decrease in authorized
                  capital, December 2004 (Incorporated by reference to Exhibit 3(i)
                  of Form
                  8-K filed on December 23, 2004)Exhibit
                  3(i)(6)
              
              Certificate
                  of Designation for Series A Redeemable Preferred Stock, December
                  2004
                  (Incorporated by reference to Exhibit 3(i) of Form 8-K filed on
                  January 4,
                  2005)Exhibit
                  3(ii)(1)
              
              By-laws
                  (Incorporated by reference to Exhibit 3(ii) (1) of Form 10-KSB
                  filed on
                  August 13, 2004)Exhibit
                  3(ii)(2)
              
              By-laws
                  Resolution (Incorporated by reference to Exhibit 3(ii) (2) of Form
                  10-KSB
                  filed on August 13, 2004)Exhibit
                  3(ii)(3)
              
              Board
                  of Directors Resolutions amending By-laws (Incorporated by reference
                  to
                  Exhibit 3(ii) of Form 10-QSB filed on December 15,
                  2004)Exhibit
                  4.1
              
              2005
                  Stock Incentive Compensation Plan (Incorporated by reference to
                  Exhibit 4
                  of Form 10-KSB filed on August 13,
                  2004)
   58
   Exhibit
                  10.1
              
              Service
                  Agreement with American Motorcycle Leasing Corp. (Incorporated
                  by
                  reference to Exhibit 10.1 of Form 10KSB filed on August 13,
                  2004)Exhibit
                  10.2
              
              License
                  Agreement with American Motorcycle Leasing Corp. (Incorporated
                  by
                  reference to Exhibit 10.1 of Form 10KSB filed on August 13,
                  2004)Exhibit
                  10.3
              
              Amended
                  License Agreement with American Motorcycle Leasing Corp. (Incorporated
                  by
                  reference to Exhibit 10.1 of Form 10KSB filed on August 13,
                  2004)Exhibit
                  10.4
              
              Purchase
                  Option Agreement with American Motorcycle Leasing Corp., dated
                  November 2,
                  2004 (Incorporated by reference to Exhibit 10.8 of Form 10-KSB
                  filed on
                  July 25, 2005)Exhibit
                  10.5
              
              Lease
                  for office facilities (Incorporated by reference to Exhibit 10
                  of Form
                  10-QSB filed on December 15, 2004)Exhibit
                  10.6
              
              Form
                  of Employment Agreement with Anthony Havens (Incorporated by reference
                  to
                  Exhibit 10.4 of Form 10-KSB filed on August 13, 2004)Exhibit
                  10.7
              
              Employment
                  Agreement with Richard Trotter (Incorporated by reference to Exhibit
                  10 of
                  Form 8-K filed on October 29, 2004)Exhibit
                  10.8
              
              Option
                  Agreement with Richard Trotter (Incorporated by reference to Exhibit
                  10.1
                  of Form 8-K filed on May 5, 2005)Exhibit
                  10.9
              
              Employment
                  Agreement with Anthony W. Adler (Incorporated by reference to Exhibit
                  10.1
                  of Form 8-K filed on October 2, 2006)Exhibit
                  10.10
              
              Stock
                  Option Agreement with Jeffrey Bean, dated October 23, 2006 (Incorporated
                  by reference to Exhibit 10.1 of Form 8-K filed on October 24,
                  2006)Exhibit
                  10.11
              
              Master
                  Loan and Security Agreement - Motor Vehicles (Incorporated by reference
                  to
                  Exhibit 10.1 of Form 8-K filed on July 28, 2005)Exhibit
                  10.12
              
              Master
                  Loan and Security Agreement (Installment Sale Contract) (Incorporated
                  by
                  reference to Exhibit 10.2 of Form 8-K filed on July 28,
                  2005)Exhibit
                  10.13
              
              Form
                  of Warrant included in Units (Incorporated by reference to Exhibit
                  10.1 of
                  Form 10-QSB filed on March 22, 2006)Exhibit
                  10.14
              
              Form
                  of Loan Agreement, December 2005 (Incorporated by reference to
                  Exhibit
                  10.1 of Form 10-QSB filed on March 22, 2006)Exhibit
                  10.15
              
              Form
                  of Subscription Agreement (Incorporated by reference to Exhibit
                  10.1 of
                  Form 8-K filed on January 4, 2006)Exhibit
                  10.16
              
              Form
                  of Promissory Note (Incorporated by reference to Exhibit 10.3 of
                  Form
                  10-QSB filed on December 18, 2006)Exhibit
                  10.17
              
              Form
                  of Promissory Note (Incorporated by reference to Exhibit 10.4 of
                  Form
                  10-QSB filed on December 18, 2006)Exhibit
                  10.18
              
              Consulting
                  Agreement with Christopher Kennan (Incorporated by reference to
                  Exhibit
                  10.15 of Form 10-KSB filed on August 22, 2006)Exhibit
                  10.19
              
              Consulting
                  Agreement with American Capital Ventures, Inc. (Incorporated by
                  reference
                  to Exhibit 10.16 of Form 10-KSB filed on August 22,
                  2006)Exhibit
                  11
              
              Statement
                  re: computation of per share earnings is hereby incorporated by
                  reference
                  to “Financial Statements” of Part I - Financial Information, Item 1 -
                  Financial Statements, contained in this Form 10-QSB.Exhibit
                  31.1*
              
              Certification
                  of Chief Executive Officer pursuant to Securities Exchange Act
                  Rule
                  13a-14(a)/15d-14(a)Exhibit
                  31.2*
              
              Certification
                  of Principal Financial Officer pursuant to Securities Exchange
                  Act Rule
                  13a-14(a)/15d-14(a)Exhibit
                  32.1*
              
              Certification
                  of Chief Executive Officer pursuant to 18 U.S.C. Section
                  1350Exhibit
                  32.2*
              
              Certification
                  of Chief Financial Officer pursuant to 18 U.S.C. Section
                  1350





*
      Filed
      herewith.





59


**ITEM
              14.**
            **PRINCIPAL
                ACCOUNTANT FEES AND
                SERVICES**





**Audit
      Fees**





Fees
        for
        audit services provided by RBSM
        LLP
        (formerly Russell
        Bedford Stefanou Mirchandani LLP) ,
        our
        principal independent registered public accounting firm during the years
        ended
        April 30, 2007 and 2006 were $150,390 and $44,200, respectively. Audit services
        consisted primarily of the annual audits, review of our financial statements,
        and services that are normally provided by our accountants in connection
        with
        statutory and regulatory filings or engagements for those fiscal years.





**Audit-Related
      Fees**





There
      were no fees billed for services reasonably related to the performance of the
      audit or review of our financial statements by our principal independent
      registered public accounting firm outside of those fees disclosed above under
      the caption Audit Fees for fiscal years ended April 30, 2007 and
      2006.





**Tax
      Fees**





Fees
      for
      tax services provided by our principal independent registered public accounting
      firm during the years ended April 30, 2007 and 2006 were $0. Tax services
      related primarily to the preparation of company tax filings with regulatory
      agencies.





**All
      Other Fees**





There
      were no other fees billed for services.





**Pre-Approval
      Policies and Procedures**





The
      Board
      of Directors approved all of the services described above, and all fees paid.
      The Board of Directors is responsible for matters typically performed by an
      audit committee. We do not presently have a separate audit committee of the
      Board of Directors. The Board of Directors considered whether, and determined
      that, the auditor's provision of non-audit services was compatible with
      maintaining the auditor's independence. The Board of Directors did not have
      pre-approval policies and procedures in place during our fiscal years ended
      April 30, 2006. In fiscal year 2007, we implemented a policy whereby, prior
      to
      engaging our accountants to perform a particular service, we will obtain an
      estimate for the service to be performed and begin pre-approving all
      services.





60


**SIGNATURES**





In
      accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.




SPARTA COMMERCIAL SERVICES, INC.By:
            /s/ Anthony L. HavensAnthony
              L. HavensChief Executive OfficerDate:
                August 14, 2007




In
      accordance with the Exchange Act, this report has been signed below by the
      following persons on behalf of the registrant and in the capacities indicated
      and on the dates indicated:


By:
              /s/ Anthony L. HavensAnthony
                  L. Havens
                Chief
                  Executive Officer, President
                and
                  Chairman of the BoardDate: August 14, 2007
  By:
                /s/ Anthony W. AdlerAnthony
                    W. Adler
                  Executive
                    Vice President, and
                  Interim
                    Principal Financial OfficerDate: August 14, 2007
 By:
                  /s/ Sandra L. AhmanSandra
                      L. Ahman
                    Vice
                      President and DirectorDate: August 14,
                    2007
 By:
                    /s/ Kristian SrbKristian
                        Srb
                      DirectorDate: August 14,
                      2007
 By:
                      /s/ Jeffrey BeanJeffrey
                          Bean
                        DirectorDate:
                          August 14, 2007




61