**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, 2008**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: $1,129,691.





The
      aggregate market value of voting and non-voting stock of the issuer held by
      non-affiliates on April 30, 2008 was $7,418,303.





As
      of
      July 28, 2008, we had 157,908,075 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
            11Item
                3.
            Legal
                Proceedings
            11Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            11**PART
                II**Item
                5.
            Market
                for Common Equity and Related Stockholder Matters and Small Business
                Issuer Purchases of Equity Securities
            12Item
                6.
            Management’s
                Discussion and Analysis or Plan of Operations
            14Item
                7.
            Financial
                Statements
            21Item
                8.
            Changes
                In and Disagreements With Accountants on Accounting and Financial
                Disclosure
            51Item
                8A.
            Controls
                and Procedures
            51Item
                8B.
            Other
                Information
            51**PART
                III**Item
                9.
            Directors,
                Executive Officers, Promoters, Control Persons and Corporate Governance;
                Compliance With Section 16(a) of the Exchange Act
            52Item
                10.
            Executive
                Compensation
            54Item
                11.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            57Item
                12.
            Certain
                Relationships and Related Transactions, and Director
                Independence
            60Item
                13.
            Exhibits
            61Item
                14.
            Principal
                Accountant Fees and Services
            63Signatures
            
            64





2


**PART
      I**





**ITEM
      1. DESCRIPTION OF BUSINESS**





**General
      Overview**





Sparta
      Commercial Services, Inc. (“Sparta” “we,” “us,” or the “Company”) is a Nevada
      corporation. We are an independent financial services provider, offering both
      retail installment sales contract and lease financing to the powersports
      industry.





Our
      principal business is to provide financing programs, primarily to purchasers
      and
      lessees of new and used motorcycles, scooters, and utility all-terrain vehicles
      (ATVs) who meet our credit criteria and program parameters. Additionally, we
      offer fleet leasing to dealers and owners of motorcycle rental fleets and
      provide, on both a direct and a pass through basis, equipment leasing to
      municipalities, including, but not limited to, police motorcycles.





We
      have,
      and continue to develop, relationships with powersports dealers and
      manufacturers to provide our financing programs to their customers. We also
      seek
      to provide motorcycle, scooter, and all-terrain vehicle manufacturers private
      label versions of our financing programs for their customers.





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








**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 (550cc and higher), scooters, and 4-stroke ATVs. We believe that
      the
      market for consumer finance programs for motorcycles and ATVs is underserved
      by
      traditional lenders.





We
      have
      and continue to develop 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
      an
      equipment leasing program to municipalities, including, but not limited to,
      police motorcycles.





**Business
      Overview**





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





·  Retail
      installment sales contracts and leases;


·  Municipal
      leasing of equipment;


·  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.




3


**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 Authorized Sparta Dealers and/or
      as Authorized Private Label 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 customer 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.





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 Authorized Sparta Dealers and the Authorized Private Label
      Dealers, Sparta has developed a point of sale credit application and contract
      decisioning system. This system is named “ ***iPLUS*** ***Ò*** ”
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 installment sales
      contracts as collateral for the loan.





All
      of
      the retail 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 $40,000. Contract terms of 24 to 60 months are offered.





**Leases** -
      Sparta
      purchases qualified vehicles for lease to customers of its Authorized Sparta
      Dealers and/or Authorized 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 a retail installment sales 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.
      Unlike Retail Installment Sales Contracts, Sparta can and does charge
      acquisition fees for each of its leases. These fees range from $290 to $490
      per
      lease depending on the amount of the lease.





In
      July
      2006, we announced an agreement for accepting and processing motorcycle credit
      applications from a Fortune 500 global diversified financial provider. Under
      the
      agreement, the company electronically transmits to Sparta loan applications
      which meet Sparta’s lending/leasing criteria. In May 2008, this agreement was
      terminated as said company decided to cease doing business in the motorcycle
      industry.





In
      May
      2006, we entered into a limited Marketing Agreement with netLoan Funding, LLC
      (“netLoan”). eBay Motors is under an agreement with netLoan whereby eBay Motors
      customers wishing to finance powersports vehicles are referred to the netLoan
      web site. Under our agreement with netLoan, these customers are then redirected
      from the netLoan web site electronically to a co-branded Sparta ***iPLUS*** ***Ò***  web
      site
      where their credit applications are processed. In April 2008, this agreement
      was
      amended and expanded to include referrals from eLoan’s and NADA’s (National
      Automotive Dealers Association) motorcycle web pages and to include credit
      applications from these three sources for all motorcycles over 550cc. We pay
      netLoan a fee for each funded lease or contract processed through this
      co-branded web site. To date, the value of this program is still under review.




4


**Municipal
      Leasing of Equipment, including, but not limited to 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, alone, exceeds $300 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 remain within their budgets at the same time. We
      have
      partnered with a wholly owned subsidiary of a state chartered bank which
      specializes in municipal financing. Under this relationship, the Company
      originates for this subsidiary and negotiates the leases on behalf of it and
      the
      municipality. The Company receives an upfront origination fee and a structured
      commission for each closed lease.





**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"
      brand of 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 Sparta Dealers,
      which will enable them to use us as a source for financing their non-private
      label brand of 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
      retail installment sales 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 or the lease of the vehicle.





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




5


**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 Authorized Sparta Dealer closest to the lessee. If this is
      impracticable, then Sparta will arrange to have the vehicle transported at
      the
      lessee’s expense.





**Returned
      Leased Vehicles** - When a
      vehicle is returned to an Authorized Sparta 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 prepares it for
      resale/lease. All Sparta Authorized Dealers and all Authorized 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 Authorized Sparta
      Dealer to be reconditioned (if needed) for consignment sale or re-lease in
      the
      same manner as returned vehicles.





**Second
      Chance Express** - Sparta
      allows its Authorized Sparta 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 our Authorized Sparta Dealers and our Authorized Private
      Label Dealers, Sparta has worked closely with a leading provider of interactive
      credit accessing and decisioning solutions, to develop the ***iPLUS*** **Ò** point
      of
      sale credit application decisioning and contract system.





***iPLUS*** **Ò** ****** **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*** ***Ò*** 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*** ***Ò*** p rovides
      the Authorized Sparta Dealers and Authorized Private Label Dealers with a
      competitive advantage and increases Sparta’s ability to garner a larger share of
      the dealer’s business.




6


Major
      features of ***iPLUS*** ***Ò*** i nclude:





·  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


·  Contract
      and lease calculator (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*** ***Ò*** 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
      criteria 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. Should the customer seek financing above this threshold, Sparta
      asks
      for a down payment from the borrower or lessee to close the gap between selling
      price and 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 agreements. 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.





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 is
      permitted to repossess a vehicle if coverage lapses. Any lapse in insurance
      coverage for any reason will lead to reinstatement of insurance coverage or
      repossession of leased vehicle.




7


**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.





**Portfolio
      Performance** -
      Contracts and leases over 30 days delinquent were 3.12% of total portfolio
      balances at April 30, 2006, 1.88% at April 30, 2007 and 2.85% at April 30,
      2008.
      Cumulative net losses and charge-offs as a percent of cumulative portfolio
      originations were zero at April 30, 2006, 1.53% at April 30, 2007 and 1.17%
      at
      April 30, 2008. Additionally, as of April 30, 2008 the Company maintained a
      cash
      reserve with its Senior Lender equal to 8.84% of the outstanding loan balance
      with that lender.





**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
      516,100 in 2007, a 5% decline from 2006 Sparta estimates that the 2007 US retail
      market for new and used 600cc+ motorcycles was $8.8 billion.





U.S.
      sales of new ATVs were estimated to be 637,600 units in 2007, a 15% decline
      from
      2006 as reported in Powersports Business Magazine in the February 11, 2008
      issue.





Estimated
      U.S scooter unit sales for calendar 2007 are estimated to be 54,000 down
      approximately 4.6% from calendar year 2007, according to Powersports Business
      Magazine in the February 11, 2008 issue.





**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 Services 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.





The
      Dealer Support Group accepts dealer application packages from dealers that
      want
      to be either or both our Authorized Sparta Dealers or Authorized 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*** ***Ò*** ,including
      a Dealer Sign Up packet. The Dealer Services Group is available to directly
      assist dealers by telephone and follow up with dealers on conditional approvals
      to assist dealers in forwarding the funding




8


packages
      to us for purchase. This group also accepts all incoming calls from dealers,
      answering their inquiry or directing them, if necessary, to the appropriate
      department.





Authorized
      Sparta 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 Sparta 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 Sparta Dealers
      or Authorized 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
      retail installment sales contracts 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 tightened 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.





A
      significant competitor of Sparta is GE Retail Services. To management’s
      knowledge, this firm does not offer leases for powersports
      vehicles.





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.





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*** **Ò** give
      Sparta an advantage over its competitors.




9


**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 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 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.





·
            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
                can
                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.





·
            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, if requested to do
                so.





·
            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.







10





·
            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, 2008, we had 18 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, 2012. The office space contains approximately
      7,000 square feet. The annual rate is $285,600 (annualized) for the first eleven
      months of calendar year 2008, and $292,740 for the last calendar month of 2008
      and the first eleven months for the calendar year 2009.





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, 2008, 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.




11


**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 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
              
              $
              0.05Fiscal
                  Year 2008 (May 1, 2007 - April 30, 2008)First
                  quarter (May 1, 2007 - July 31, 2007)
              
              $
              0.10
              
              $
              0.045Second
                  quarter (August 1, 2007 - October 31, 2007)
              
              $
              0.095
              
              $
              0.04Third
                  quarter (November 1, 2007 - January 31, 2008)
              
              $
              0.065
              
              $
              0.03Fourth
                  quarter (February 1, 2008 - April 30, 2008)
              
              $
              0.159
              
              $
              0.045




**Holders**





The
      approximate number of holders of record of our common stock as of April 30,
      2008
      was 3,010 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, 2008, we had outstanding 825 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 April
      30, 2008, distributed any dividends, in cash or in shares of common stock.





**Recent
      Sales of Unregistered Securities**





During
      the quarter ended April 30, 2008, 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 months
      unsecured notes in the aggregate amount of $689,600. 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. At the Company’s
      option, the notes are convertible into shares of common stock raging from,
      $0.03
      to $0.08 per share. All notes will mature in six months on various dates through
      October 30, 2008.


12


On
      February 4, 2008, in a transaction deemed to be exempt from registration under
      the Securities Act in reliance on Section 4(2) of the Securities Act, the
      Company issued 75,000 shares of its restricted common stock to an accredited
      investor in consideration of a $25,000 loan to the Company. In February 2008,
      this loan was converted into a six month, 6% convertible note due August 4,
      2008. At the Company’s option, the notes are convertible into shares of common
      stock at $0.0336 per share.





On
      February 5, 2008, in a transaction deemed to be exempt from registration under
      the Securities Act in reliance on Section 4(2) of the Securities Act, the
      Company issued 75,000 shares of its restricted common stock to an accredited
      investor in consideration of a $25,000 loan to the Company. In February 2008,
      this loan was converted into a six month, 6% convertible note due August 5,
      2008. At the Company’s option, the notes are convertible into shares of common
      stock at $0.0336 per share.





On
      February 14, 2008, in a transaction deemed to be exempt from registration under
      the Securities Act in reliance on Section 4(2) of the Securities Act, the
      Company, pursuant to a consulting agreement, issued to the consultant 1,000,000
      shares of restricted common stock valued at $80,000. The consulting agreement,
      unless cancelled, required the Company to issue up to 4,000,000 additional
      shares of restricted common stock to the consultant, in tranches of 1,000,000
      shares each, on the three, six, nine and twelve month anniversary dates of
      the
      agreement. The agreement was cancelled as of March 31, 2008 with no further
      issuance of shares required.





In
      February 2008, pursuant to the terms and provisions of their 10% short-term
      loans issued in August and September 2006, the Company issued to four accredited
      investors 440,000 shares of its restricted common stock valued at
      $40,800.





In
      February 2008, pursuant to the terms and provisions of a 10% short-term loan
      issued in December 2007, the Company issued to an accredited investor 100,000
      shares of its restricted common stock valued at $5,000.





In
      February 2008, 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 to an accredited investor 12,500 shares of its restricted common stock
      valued at $750 as an inducement for a December 2007, 10% short-term loan.





In
      February 2008, pursuant to the terms and provisions of a 12% Note issued in
      September 2007, the Company issued to an accredited investor, 100,000 shares
      of
      its restricted common stock valued at $6,000.





In
      March
      2008, pursuant to the terms and provisions of their 10% Bridge Loans issued
      in
      August and September 2006, the Company issued to four accredited investors
      220,000 shares of its restricted common stock valued at $28,600.





In
      March
      2008, pursuant to the terms and provisions of a 10% Bridge Loans issued in
      December 2007, the Company issued to an accredited investor 200,000 shares
      of
      its restricted common stock valued at $20,000.





In
      March
      2008, pursuant to the terms and provisions of a 12% Note issued in September
      2007, the Company issued to an accredited investor, 100,000 shares of its
      restricted common stock valued at $11,000.





In
      April
      2008, pursuant to the terms and provisions of their 10% short-term loans issued
      in August and September 2006, the Company issued to four accredited investors
      220,000 shares of its restricted common stock valued at $15,400.





In
      April
      2008, pursuant to the terms and provisions of a 10% short-term loan issued
      in
      December 2007, the Company issued to an accredited investor 100,000 shares
      of
      its restricted common stock valued at $10,000.





In
      April
      2008, pursuant to the terms and provisions of a 12% note issued in September
      2007, the Company issued to an accredited investor, 100,000 shares of its
      restricted common stock valued at $13,000.


13


**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 financial statements for the years ended
      April 30, 2008 and April 30, 2007 and footnotes found in the Company's Annual
      Report on Form 10-KSB.





**RESULTS
      OF OPERATIONS**


**COMPARISON
      OF THE YEAR ENDED APRIL 30, 2008 TO THE YEAR ENDED APRIL 30,
      2007**





For
      the
      year ended April 30, 2008, we have generated increased revenues, have incurred
      significant expenses, and have sustained significant losses. We believe we
      will
      continue to earn increasing revenues from operations in fiscal
      2009.





**Revenues**





Revenues
      totaled $1,129,691 in fiscal 2008 compared to revenues of $787,997 in fiscal
      2007. Fiscal 2008 revenues were primarily comprised of $615,531 in interest
      income from Retail Installment Sales Contracts, $391,029 in income from
      Operating and Finance Leases, $27,400 in Preferred Provider Program Fees,
      $34,112 in Commissions on municipal lease transactions, and $61,619 in other
      fee
      income.





**Costs
      and Expenses**





The
      Company incurred employee compensation and benefit costs of $1,720,945 for
      the
      year ended April 30, 2008compared with $1,805,345 in fiscal 2007. The decrease
      is related to the reduced costs the Company recognized in decreasing its
      employee base during the year from 25 employees at fiscal yearend 2007 to 18
      at
      fiscal yearend 2008. If 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 $322,020 and $280,000 to its Chairman and Chief Executive Officer,
      in fiscal 2008 and 2007, 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
      in
      the form of shares of restricted common stock or warrants of $449,926for the
      year ended April 30, 2008 and $154,913 for the year ended April 30, 2007. These
      amounts were charged to financing costs. During
      the fiscal year ended April 30, 3008, the Company expensed $177,000
      as the value of stock based compensation issued to consultants versus $494,230
      in the prior fiscal year. Additionally, during the fiscal year ended April
      30,
      3008, the Company expensed $261,850 as the value of employee stock and option
      based compensation as compared to $313,107 in the prior fiscal year. At April
      30, 2008 and April 30, 2007, accrued preferred dividends of $28,422 and
      $118,770, respectively, which were charged to retained earnings.





The
      Company incurred consulting costs of $215,399 for the year ended April 30,
      2008,
      as compared to $315,095 for the year ended April 30, 2007. This decrease was
      the
      result of reduced reliance on outside consultants. The Company incurred legal
      and accounting fees of $226,933 for the year ended April 30, 2008, as compared
      to $236,939 for the year ended April 30, 2007.


14


The
      Company incurred other operating expenses of $1,043,238 for the year ended
      April
      30, 2008. Notable expenses in this category are: general office expenses of
      $254,495, rent of $225,953, loss reserve expense of $125,252, travel and
      entertainment of $92,411, utilities of $82,719, web development of $89,387,
      credit bureaus of $43,728, lease booking fees of $47,125, marketing of $40,902,
      maintenance contracts of $18,039 and taxes of $23,208. The Company incurred
      other operating expenses of $1,151,518 for the year ended April 30, 2007.
      Notable expenses in this category are: general office expenses of $290,621,
      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. Interest costs for the fiscal year ended April 30, 2008 were $702,233
      as compared to $227,829 for the fiscal year ended April 30, 2007. Depreciation
      and amortization for the fiscal year ended April 30, 2008 was $274,773 as
      compared to $323,146 for the fiscal year ended April 30, 2007.





**Net
      Loss**





Our
      net
      loss attributable to common shareholders for the year ended April 30, 2008
      decreased $32,461 (0.8%) to $4,020,776 from a loss of $4,053,237, for the year
      ended April 30, 2007. The decrease in net loss attributable to common
      shareholders was primarily due to: the $669,392 (14.4%) decrease in total
      operating expenses from $4,639,380 to $3,969,988,the $341,694 (43.7%) increase
      in revenues from $ $787,997 to $1,129,691, the $769,517 (201%) increase in
      interest expense and financing costs from $382,7420 to $1,152,259, and the
      $299,456 (99%) reduction in change in value (decrease) of warrant liabilities
      from $299,658 to $202.





Our
      net
      loss per common share (basic and diluted) attributable to common shareholders
      was $0.03 for the year ended April 30, 2008 and $0.03 for the year ended April
      30, 2007.





**LIQUIDITY
      AND CAPITAL RESOURCES**





As
      of
      April 30, 2008, the Company had a deficit net worth of $4,271,095. The Company
      generated a deficit in cash flow from operations of $2456,7531 for the year
      ended April 30, 2008. This deficit is primarily attributable to the Company's
      net loss from operations of $3,992,354, adjusted for equity based compensation
      of $488,700, stock based financing costs of $449,926, depreciation and
      amortization of $274,773, allowance for loss reserve of $26,147 and forgiveness
      of preferred dividends payable of $215,253 and to changes in the balances of
      current assets, primarily a increase in pre-paid expenses of $9,887, a increase
      in interest receivable of $32,550 and current liabilities, primarily an increase
      in accounts payable of $281,621 and an increase in restricted cash of $159,959.
      Cash flows used in investing activities for the year ended April 30, 200 were
      $2,256,393 comprising of $403,951 for the purchase of leased vehicles, and
      purchase of Retail Installment Sales Contracts in the amount of $1,852,442.The
      Company met its cash requirements during the period through net proceeds from
      the issuance of notes of $2,715,100 and obtaining net senior loans of
      $2,044,657.





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.


15


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, 2008 and 2007 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
      pursuing 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.





**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, 2008, we have relied on the
      services of outside consultants for services and currently have eighteen
      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 30% 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.


16




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





**Revenue
      Recognition**





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.





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.


17


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.





**RECENT
      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 ” (“SFAS No. 159”).  SFAS No. 159 permits entities
      to choose to measure many financial instruments and certain other items at
      fair
      value.  Most of the provisions of SFAS No. 159 apply only to entities
      that elect the fair value option. However, the amendment to SFAS No. 115
“Accounting for Certain Investments in Debt and Equity Securities” applies to
      all entities with available-for-sale and trading securities.  SFAS No.
      159 is effective as of the beginning of an entity’s first fiscal year that
      begins after November 15, 2007.  Early adoption is permitted as of the
      beginning of a fiscal year that begins on or before November 15, 2007, provided
      the entity also elects to apply the provision of SFAS No. 157, “Fair Value
      Measurements”.  The adoption of SFAS No. 159 is not expected to have a
      material impact on its financial position, results of operations or cash
      flows.





In
      December 2007, the FASB issued SFAS No. 141(R), *"Business
      Combinations"* ("SFAS No. 141(R)"), which establishes principles and requirements for how
      an acquirer recognizes and measures in its financial statements the identifiable
      assets acquired, the liabilities assumed, and any noncontrolling interest in
      an
      acquiree, including the recognition and measurement of goodwill acquired in
      a
      business combination. SFAS No. 141R is effective as of the beginning of the
      first fiscal year beginning on or after December 15, 2008. Earlier adoption
      is prohibited and the Company is currently evaluating the effect, if any that
      the adoption will have on its financial position results of operations or cash
      flows.





In
      December 2007, the FASB issued SFAS No. 160, *"Noncontrolling
      Interest in Financial Statements, an amendment of ARB
      No. 51”* (“SFAS
      No. 160”), which will change the accounting and reporting for minority
      interests, which will be recharacterized as noncontrolling interests and
      classified as a component of equity within the balance sheets. SFAS No. 160
      is
      effective as of the beginning of the first fiscal year beginning on or after
      December 15, 2008. Earlier adoption is prohibited and the Company is
      currently evaluating the effect, if any that the adoption will have on its
      financial position results of operations or cash flows.


18


In
      June 2007, the Accounting Standards Executive Committee issued Statement of
      Position 07-1, “Clarification of the Scope of the Audit and Accounting Guide
      Investment Companies and Accounting by Parent Companies and Equity Method
      Investors for Investments in Investment Companies” (“SOP 07-1”). SOP 07-1
      provides guidance for determining whether an entity is within the scope of
      the
      AICPA Audit and Accounting Guide Investment Companies (the “Audit Guide”). SOP
      07-1 was originally determined to be effective for fiscal years beginning on
      or
      after December 15, 2007, however, on February 6, 2008, FASB issued a
      final Staff Position indefinitely deferring the effective date and prohibiting
      early adoption of SOP 07-1 while addressing implementation issues.





In
      June
      2007, the FASB ratified the consensus in EITF Issue No. 07-3, “Accounting
      for Nonrefundable Advance Payments for Goods or Services to be Used in Future
      Research and Development Activities” (EITF 07-3), which requires that
      nonrefundable advance payments for goods or services that will be used or
      rendered for future research and development (R&D) activities be deferred
      and amortized over the period that the goods are delivered or the related
      services are performed, subject to an assessment of recoverability.
      EITF 07-3 will be effective for fiscal years beginning after
      December 15, 2007. The Company does not expect that the adoption of
      EITF 07-3 will have a material impact on its financial position, results of
      operations or cash flows.





In
      December 2007, the FASB ratified the consensus in EITF Issue No. 07-1,
“Accounting for Collaborative Arrangements” (EITF 07-1). EITF 07-1
      defines collaborative arrangements and requires collaborators to present the
      result of activities for which they act as the principal on a gross basis and
      report any payments received from (made to) the other collaborators based on
      other applicable authoritative accounting literature, and in the absence of
      other applicable authoritative literature, on a reasonable, rational and
      consistent accounting policy is to be elected. EITF 07-1 also provides for
      disclosures regarding the nature and purpose of the arrangement, the entity’s
      rights and obligations, the accounting policy for the arrangement and the income
      statement classification and amounts arising from the agreement. EITF 07-1
      will be effective for fiscal years beginning after December 15, 2008, which
      will be the Company’s fiscal year 2009, and will be applied as a change in
      accounting principle retrospectively for all collaborative arrangements existing
      as of the effective date. The Company has not yet evaluated the potential impact
      of adopting EITF 07-1 on our financial position, results of operations or
      cash flows.





In
      March
      2008, the FASB” issued SFAS No. 161, “Disclosures about Derivative Instruments
      and Hedging Activities - an amendment to FASB Statement No. 133” (“SFAS No.
      161”).   SFAS No. 161 is intended to improve financial standards for
      derivative instruments and hedging activities by requiring enhanced disclosures
      to enable investors to better understand their effects on an entity's financial
      position, financial performance, and cash flows.  Entities are
      required to provide enhanced disclosures about: (a) how and why an entity uses
      derivative instruments; (b) how derivative instruments and related hedged items
      are accounted for under SFAS No. 133 and its related interpretations; and (c)
      how derivative instruments and related hedged items affect an entity’s financial
      position, financial performance, and cash flows.  It is effective for
      financial statements issued for fiscal years beginning after November 15, 2008,
      with early adoption encouraged.  We are currently evaluating the
      impact of SFAS No. 161, if any, will have on our financial position, results
      of
      operations or cash flows.





In
      April
      2008, the FASB issued FSP No. FAS 142-3, “Determination of the Useful Life of
      Intangible Assets”. This FSP amends the factors that should be considered in
      developing renewal or extension assumptions used to determine the useful life
      of
      a recognized intangible asset under SFAS No. 142, “Goodwill and Other
      Intangible Assets”.   We are required to adopt FSP 142-3 on September
      1, 2009, earlier adoption is prohibited.  The guidance in FSP 142-3
      for determining the useful life of a recognized intangible asset shall be
      applied prospectively to intangible assets acquired after adoption, and the
      disclosure requirements shall be applied prospectively to all intangible assets
      recognized as of, and subsequent to, adoption.  We are currently
      evaluating the impact of FSP 142-3 on our financial position, results of
      operations or cash flows.





In
      May
      2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted
      Accounting Principles" ("SFAS No. 162").  SFAS No. 162
      identifies the sources of accounting principles and the framework for selecting
      the principles used in the preparation of financial statements of
      nongovernmental entities that are presented in conformity with generally
      accepted accounting principles (the GAAP hierarchy).  SFAS No.
      162 will become effective 60 days following the SEC's approval of the
      Public Company Accounting Oversight Board amendments to
      AU Section 411, "The Meaning of Present Fairly in Conformity With
      Generally Accepted Accounting Principles."  We do not expect the
      adoption of SFAS No. 162 will have a material effect on our financial
      position, results of operations or cash flows.


19


In
      May
      2008, the FASB issued FSP Accounting Principles Board ("APB") 14-1 "Accounting
      for Convertible Debt Instruments That May Be Settled in Cash upon Conversion
      (Including Partial Cash Settlement) " ("FSP APB 14-1").  FSP
      APB 14-1 requires the issuer of certain convertible debt instruments that
      may be settled in cash (or other assets) on conversion to separately account
      for
      the liability (debt) and equity (conversion option) components of the instrument
      in a manner that reflects the issuer's non-convertible debt borrowing
      rate.  FSP APB 14-1 is effective for fiscal years beginning after
      December 15, 2008 on a retroactive basis.  We are currently
      evaluating the potential impact, if any, of the adoption of FSP APB 14-1 on
      our financial position, results of operations or cash flows.





Other
      recent accounting pronouncements issued by the FASB (including its Emerging
      Issues Task Force), the AICPA, and the SEC did not, or are not believed by
      management to, have a material impact on the Company’s present or future
      financial statements.








**Off-Balance
      Sheet Arrangements**





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








20





**TEM** **7:
      FINANCIAL STATEMENTS**





PageReport
                of Registered Independent Public Accounting Firm
            22Balance
                Sheets as of April 30, 2008 and 2007
            23Statements
                of Losses for the years ended April 30, 2008 and 2007
            24Statement
                of Deficiency in Stockholders’ Equity for the two years ended April 30,
                2008
            25Statements
                of Cash Flows for the years ended April 30, 2008 and 2007
            26Notes
                to Financial Statements
            27
                - 50









21














REPORT
      OF
      REGISTERED INDEPENDENT PUBLIC ACCOUNTING FIRM





Board
      of
      Directors


Sparta
      Commercial Services, Inc.


New
      York,
      New York





We
      have
      audited the accompanying balance sheet of Sparta Commercial Services, Inc.,
      as
      of April 30, 2008 and 2007, and the related statements of losses, deficiency
      in
      stockholders' equity and cash flows for each of the two years in the period
      ended April 30, 2008. 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 financial position of Sparta Commercial Services, Inc.
      at
      April 30, 2008 and 2007, and the results of its operations and its cash flows
      for each of the two years in the period ended April 30, 2008, 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


New
      York,
      New York


August
      11, 2008






22





**SPARTA
      COMMERCIAL SERVICES, INC.**


**BALANCE
      SHEETS**







**April
                30,**
            
            
            **April
                30,****2008**
            
            
            **2007****ASSETS**Cash
                and cash equivalents
            
            $
            68,642
            
            $
            22,032RISC
                loan receivables, net of reserve of $86,312 and $59,338, respectively
                (NOTE D)
            
            
            4,260,002
            
            
            2,492,819Motorcycles
                and other vehicles under operating leases net of accumulated depreciation
                of $336,100 and $ 221,800 respectively, and loss reserve of $25,231
                and $
                26,059, respectively (NOTE B)
            
            
            1,251,631
            
            
            1,088,686Interest
                receivable
            
            
            58,382
            
            
            25,832Accounts
                receivable
            
            
            37,024
            
            
            27,137Inventory
                (NOTE C)
            
            
            79,069
            
            
            20,784Property
                and equipment, net of accumulated depreciation and amortization of
                $129,986 and $97,047, respectively (NOTE E)
            
            
            61,261
            
            
            94,200Restricted
                cash
            
            
            444,902
            
            
            284,943Deposits
            
            
            48,967
            
            
            50,692**Total
                assets**
            
            $
            6,309,879
            
            $
            4,107,125**LIABILITIES
                AND DEFICIENCY IN STOCKHOLDERS' EQUITY****Liabilities:**Accounts
                payable and accrued expenses
            
            $
            1,461,955
            
            $
            1,219,067Accrued
                equity based compensation
            
            
            -
            
            
            40,310Accrued
                equity based penalties
            
            
            2,178
            
            
            2,380Notes
                payable-Senior Lender (NOTE F)
            
            
            5,029,864
            
            
            2,985,207Convertible
                Notes Payable (NOTE G)
            
            
            2,665,359
            
            
            775,259Notes
                payable-Other (NOTE G)
            
            
            1,147,500
            
            
            365,000Loans
                payable-related parties (NOTE H)
            
            
            244,760
            
            
            202,260Other
                liabilities
            
            
            6,741
            
            
            -Deferred
                revenue
            
            
            22,617
            
            
            46,765**Total
                liabilities**
            
            
            10,580,974
            
            
            5,636,248**Deficiency
                in Stockholders' Equity:**Preferred
                stock, $.001 par value; 10,000,000 shares authorized of which 35,850
                shares have been designated as Series A convertible preferred stock,
                with
                a stated value of $100 per share, 825 and 19,795 shares issued and
                outstanding, respectively
            
            
            82,500
            
            
            1,979,500Common
                stock, $.001 par value; 340,000,000 shares authorized, 130,798,657
                and
                123,216,157 shares issued and outstanding, respectively
            
            
            130,799
            
            
            123,216Common
                stock to be issued, 12,160,210, and 0, respectively
            
            
            12,160
            
            
            -Additional
                paid-in-capital
            
            
            17,727,889
            
            
            14,595,827Deferred
                compensation
            
            
            -
            
            
            (24,000
            )Accumulated
                deficit
            
            
            (22,224,442
            )
            
            (18,203,666
            )**Total
                deficiency in stockholders' equity**
            
            
            (4,271,094
            )
            
            (1,529,123
            )**Total
                Liabilities and deficiency in stockholders’
equity**
            
            $
            6,309,879
            
            $
            4,107,125





See
      accompanying notes to financial statements.






23





**SPARTA
      COMMERCIAL SERVICES, INC.**


**STATEMENT
      OF LOSSES**






**For
                the Year Ended****April
                30,****2008**
            
            **2007****Revenue**Rental
                Income, Leases
            
            **$**
            391,029
            
            **$**
            425,806Interest
                Income, Loans
            
            
            615,531
            
            
            282,808Other
            
            
            123,131
            
            
            79,383$
            1,129,691
            
            $
            787,997**Operating
                expenses:**General
                and administrative
            
            
            3,695,215
            
            
            4,316,234Depreciation
                and amortization
            
            
            274,773
            
            
            323,146**Total
                operating expenses**
            
            
            3,969,988
            
            
            4,639,380**Loss
                from operations**
            
            
            (2,840,297
            )
            
            (3,851,383
            )**Other
                expense:**Interest
                expense and financing cost, net
            
            
            (1,152,259
            )
            
            (382,742
            )Change
                in value of warrant liabilities
            
            
            202
            
            
            299,658**Net
                loss**
            
            
            (3,992,354
            )
            
            (3,934,467
            )**Preferred
                dividend**
            
            
            28,422
            
            
            118,770**Net
                loss attributed to common stockholders**
            
            $
            (4,020,776
            )
            $
            (4,053,237
            )**Basic
                and diluted loss per share**
            
            $
            (0.03
            )
            $$
            (0.03
            )**Basic
                and diluted loss per share attributed to****common
                stockholders**
            
            $
            (0.03
            )
            $$
            (0.03
            )**Weighted
                average shares outstanding**
            
            
            127,304,396
            
            
            122,061,446





See
      accompanying notes to financial statements.





24


**SPARTA
      COMMERCIAL SERVICES, INC.**


**STATEMENT
      OF (DEFECIENCY IN) STOCKHOLDERS’ EQUITY**


**FOR
      THE TWO YEARS ENDED APRIL 30, 2008**




Common
                  Stock
              
              
              
              
              
              AdditionalPreferred
                  Stock
              
              
              Common
                  Stock
              
              
              to
                  be issued
              
              
              Stock
              
              
              Paid
                  in
              
              
              Deferred
              
              
              AccumulatedShares
              
              
              Amount
              
              
              Shares
              
              
              Amount
              
              
              Shares
              
              
              Amount
              
              
              Subscribed
              
              
              Capital
              
              
              Compensation
              
              
              Deficit
              
              
              Total**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
              )
              $
              539,473-
              
              
              
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Shares
                  issued
              
              
              -
              
              
              -
              
              
              5,838,302
              
              
              5,838
              
              
              -5,838,302
              
              
              ($5,838
              )
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Shares
                  issued
              
              
              -
              
              
              -
              
              
              551,001
              
              
              551
              
              
              -
              
              
              -
              
              
              -330,000
              
              
              329,449
              
              
              -
              
              
              -
              
              
              -Shares
                  issued for financing cost
              
              
              -
              
              
              -
              
              
              250,000
              
              
              250
              
              
              -
              
              
              -
              
              
              -
              
              
              48,250
              
              
              
              
              
              -
              
              
              48,500Shares
                  issued for accrued
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -expenses
              
              
              -
              
              
              -
              
              
              988,077
              
              
              988
              
              
              -
              
              
              -
              
              
              -
              
              
              469,396
              
              
              -
              
              
              -
              
              
              470,384Deferred
                  Compensation recorded
              
              
              -
              
              
              -
              
              
              350,000
              
              
              350
              
              
              -
              
              
              -
              
              
              -
              
              
              55,650
              
              
              269,500
              
              
              -
              
              
              325,500Stock
                  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
              )
              
              -118,770Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (3,934,467
              )
              
              -3,934,467-
              
              
              
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -**Balance,
                  April 30, 2007**
              
              
              19,795
              
              $
              1,979,500
              
              
              123,216,157
              
              
              123,216
              
              
              -
              
              $
              0
              
              $
              0
              
              $
              14,595,827
              
              
              (24,000
              )
              
              (18,203,666
              )
              
              (1,529,123
              )-
              
              
              
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Shares
                  issued
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Shares
                  issued upon conversion
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -of
                  preferred
              
              
              (18,970
              )
              
              (1,897,000
              )
              
              -
              
              
              -
              
              
              12,160,210
              
              
              12,160
              
              
              -
              
              
              1,884,840
              
              
              -
              
              
              -
              
              
              -Shares
                  issued for financing cost
              
              
              -
              
              
              -
              
              
              4,982,500
              
              
              4,983
              
              
              -
              
              
              -
              
              
              -
              
              
              403,818
              
              
              -
              
              
              -
              
              
              408,800Deferred
                  Compensation recorded
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              24,000
              
              
              -
              
              
              24,000Stock
                  Compensation recorded
              
              
              -
              
              
              -
              
              
              2,600,000
              
              
              2,600
              
              
              -
              
              
              -
              
              
              -
              
              
              174,400
              
              
              -
              
              
              -
              
              
              177,000Employee
                  Stock Compensation recorded
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              20,000
              
              
              -
              
              
              -
              
              
              20,000Employee
                  options expense
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              261,850
              
              
              -
              
              
              -
              
              
              261,850Warrant
                  compensation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              189,503
              
              
              -
              
              
              -
              
              
              189,503Accrued
                  preferred dividend
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (28,422
              )
              
              (28,422
              )Forgiveness
                  of preferred dividend payable
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              215,649
              
              
              -
              
              
              -
              
              
              215,649Adjusting
                  prior years accrued Preferred Dividend
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (17,997
              )
              
              -
              
              
              -
              
              
              (17,997
              )Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (3,992,354
              )
              
              (3,992,354
              )-
              
              
              
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -**Balance,
                  April 30, 2008**
              
              
              825
              
              $
              82,500
              
              
              130,798,657
              
              $
              130,799
              
              
              12,160,210
              
              $
              12,160
              
              $
              -
              
              $
              17,727,889
              
              
              -
              
              
              (22,224,442
              )
              
              (4,271,095
              )


25


**SPARTA
      COMMERCIAL SERVICES, INC.**


**STATEMENT
      OF CASH FLOWS**







**For
                the Fiscal Years**
              **Ended
                April 30,****2008**
            
            **2007****CASH
                FLOWS FROM OPERATING ACTIVITIES**Net
                Loss
            
            $
            (3,992,354
            )
            $
            (3,934,467
            )Adjustments
                to reconcile net loss to net cash used in
            
            
            -
            
            
            -operating
                activities:
            
            
            -
            
            
            -Depreciation
                and Amortization
            
            
            274,773
            
            
            323,146Allowance
                for loss reserves
            
            
            26,147
            
            
            49,245Amortization
                of deferred revenue
            
            
            (24,148
            )
            
            (186,245
            )Amortization
                of deferred compensation
            
            
            24,000
            
            
            325,500Equity
                based compensation
            
            
            488,700
            
            
            441,527Stock
                based finance cost
            
            
            449,926
            
            
            55,160Forgiveness
                of dividend payable
            
            
            215,253
            
            
            -Change
                in fair value of penalty warrant and warrant liability
            
            
            -
            
            
            (299,658
            )-
            
            
            -Changes
                in operating assets and liabilities:
            
            
            -
            
            
            -(Increase)
                decrease in:
            
            
            -
            
            
            -Interest
                receivable
            
            
            -
            
            
            (25,832
            )Other
                receivable
            
            
            (32,550
            )
            
            -Prepaid
                expenses and other assets
            
            
            (9,887
            )
            
            29,052Loan
                proceeds receivable
            
            
            -
            
            
            389,998Other
                current assets
            
            
            -
            
            
            (1,725
            )Restricted
                cash
            
            
            (159,959
            )
            
            (172,440
            )Deposits
            
            
            1,725
            
            
            -Increase
                (decrease) in:
            
            
            -
            
            
            -Accounts
                payable and accrued expenses
            
            
            281,621
            
            
            852,700Deferred
                revenue
            
            
            -
            
            
            46,765Accrued
                registration penalty
            
            
            -
            
            
            (13,285
            )Net
                cash used in operating activities
            
            
            (2,456,753
            )
            
            (2,120,559
            )-
            
            
            -**CASH
                FLOWS FROM INVESTING ACTIVITIES:**
            
            
            -
            
            
            -Payments
                for motorcycles and other vehicles
            
            
            (403,951
            )
            
            (710,398
            )Purchase
                of RISC contracts
            
            
            (1,852,442
            )
            
            (1,750,317
            )Purchase
                of property plant and equipment
            
            
            -
            
            
            (16,454
            )Net
                cash used in investing activities
            
            
            (2,256,393
            )
            
            (2,477,169
            )-
            
            
            -**CASH
                FLOWS FROM FINANCING ACTIVITIES**
            
            
            -
            
            
            -Proceeds
                from notes from senior lender
            
            
            4,071,831
            
            
            2,736,494Payments
                on notes from senior lender
            
            
            (2,027,174
            )
            
            (440,635
            )Proceeds
                from convertible notes
            
            
            1,890,100
            
            
            -Proceeds
                from other notes
            
            
            782,500
            
            
            1,140,259Loan
                proceeds from other related parties
            
            
            42,500
            
            
            202,260Exercise
                of warrants
            
            
            -
            
            
            125,000Net
                cash provided by financing activities
            
            
            4,759,757
            
            
            3,763,378-
            
            
            -**Net
                Increase (decrease) in cash**
            
            $
            46,610
            
            
            (834,350
            )-**Unrestricted
                cash and cash equivalents, beginning of period**
            
            $
            22,032
            
            $
            856,382**Unrestricted
                cash and cash equivalents , end of period**
            
            $
            68,642
            
            $
            22,032-
            
            
            -**Cash
                paid for:**
            
            
            -
            
            
            -Interest
            
            $
            400,868
            
            $
            225,763Income
                taxes
            
            $
            23,208
            
            $
            -





See
      accompanying notes to financial statements.




26


**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**APRIL
      30, 2008 AND 2007**





**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"* ).





**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 the unearned 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.





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.




27


**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**APRIL
      30, 2008 AND 2007**





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





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, 2008 and 2007, the Company had recorded deferred
      revenue related to these contracts of $22,617and $46,765 respectively, including
      unearned income from operating leases of $0 and $8,748 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.


28


**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**APRIL
      30, 2008 AND 2007**





**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, 2008 and 2007, 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




29


**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**APRIL
      30, 2008 AND 2007**





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





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.





The
      following tables illustrates the effect that adoption of SFAS No. 123(R) had
      on
      the Company's year ended April 30, 2008 results and cash flows as well as the
      parameters used in the valuation of options granted in the year ended April
      30,
      2008.






Under
                Pre-SFAS
              No.123
                (R)
              Accounting
            
            
            SFAS
                No.
              123(
                R) Impact
            
            
            Actual
              Year
                Ended
              April
                30, 2008Earnings
                before taxes
            
            $
            (3,730,504
            )
            $
            (261,850
            )
            $
            (3,992,354
            )Net
                Earnings
            
            
            (3,730,504
            )
            $
            (261,850
            )
            $
            (3,992,354
            )**Net
                Earnings**Basic
                EPS
            
            $
            (0.03
            )
            $
            -
            
            $
            (0.03
            )Diluted
                EPS
            
            
            (0.03
            )
            
            -
            
            
            (0.03
            )**Cash
                Flows**Operating
                Activities
            
            $
            (2,736,101
            )
            $
            -
            
            $
            (2,736,101
            )Financing
                Activities
            
            $
            4,759,757
            
            
            -
            
            
            4,759,757





30


**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**APRIL
      30, 2008 AND 2007**





**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, 2008 and 2007:





2008
            
            2007Significant
                assumptions (weighted-average):Risk-free
                interest rate at grant date
            4.76%
            
            5%Expected
                stock price volatility
            143%
            
            131%Expected
                dividend payout
            -
            
            -Expected
                option life (in years)
            4
            
            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





**Allowance
      for 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 periodically reviews its Lease and RISC receivables
      in
      determining its allowance for doubtful accounts. At April 30, 2008 and 2007,
      allowance for doubtful RISC accounts receivable was $86,312 and $59,338
      respectively, and its allowance for doubtful Lease account receivable was
      $25,231 and $26,059 respectively.





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.





**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.




31


**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**APRIL
      30, 2008 AND 2007**





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





Since
      the
      warrants contained 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, 2008 and 2007, the Company incurred
      advertising costs of $24,274 and $26,670, 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 $0.03 for the years ended April 30, 2008 and 2007,
      respectively. At April 30, 2008 and 2007, 87,421,173 and 31,028,051 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
      $3,992,354 and $3,934,467 during the years ended April 30, 2008 and 2007,
      respectively. The Company’s liabilities exceed its assets by $4,271,095 as of
      April 30, 2008.




32


**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**APRIL
      30, 2008 AND 2007**





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





**Reclassifications**





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





**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 ” (“SFAS No. 159”).  SFAS No. 159 permits entities
      to choose to measure many financial instruments and certain other items at
      fair
      value.  Most of the provisions of SFAS No. 159 apply only to entities
      that elect the fair value option. However, the amendment to SFAS No. 115
“Accounting for Certain Investments in Debt and Equity Securities” applies to
      all entities with available-for-sale and trading securities.  SFAS No.
      159 is effective as of the beginning of an entity’s first fiscal year that
      begins after November 15, 2007.  Early adoption is permitted as of the
      beginning of a fiscal year that begins on or before November 15, 2007, provided
      the entity also elects to apply the provision of SFAS No. 157, “Fair Value
      Measurements”.  The adoption of SFAS No. 159 is not expected to have a
      material impact on its financial position, results of operations or cash
      flows.





In
      December 2007, the FASB issued SFAS No. 141(R), *"Business
      Combinations"* ("SFAS No. 141(R)"), which establishes principles and requirements for how
      an acquirer recognizes and measures in its financial statements the identifiable
      assets acquired, the liabilities assumed, and any noncontrolling interest in
      an
      acquiree, including the recognition and measurement of goodwill acquired in
      a
      business combination. SFAS No. 141R is effective as of the beginning of the
      first fiscal year beginning on or after December 15, 2008. Earlier adoption
      is prohibited and the Company is currently evaluating the effect, if any that
      the adoption will have on its financial position results of operations or cash
      flows.





In
      December 2007, the FASB issued SFAS No. 160, *"Noncontrolling
      Interest in Financial Statements, an amendment of ARB
      No. 51”* (“SFAS
      No. 160”), which will change the accounting and reporting for minority
      interests, which will be recharacterized as noncontrolling interests and
      classified as a component of equity within the balance sheets. SFAS No. 160
      is
      effective as of the beginning of the first fiscal year beginning on or after
      December 15, 2008. Earlier adoption is prohibited and the Company is
      currently evaluating the effect, if any that the adoption will have on its
      financial position results of operations or cash flows.





In
      June 2007, the Accounting Standards Executive Committee issued Statement of
      Position 07-1, “Clarification of the Scope of the Audit and Accounting Guide
      Investment Companies and Accounting by Parent Companies and Equity Method
      Investors for Investments in Investment Companies” (“SOP 07-1”). SOP 07-1
      provides guidance for determining whether an entity is within the scope of
      the
      AICPA Audit and Accounting Guide Investment Companies (the “Audit Guide”). SOP
      07-1 was originally determined to be effective for fiscal years beginning on
      or
      after December 15, 2007, however, on February 6, 2008, FASB issued a
      final Staff Position indefinitely deferring the effective date and prohibiting
      early adoption of SOP 07-1 while addressing implementation issues.





In
      June
      2007, the FASB ratified the consensus in EITF Issue No. 07-3, “Accounting
      for Nonrefundable Advance Payments for Goods or Services to be Used in Future
      Research and Development Activities” (EITF 07-3), which requires that
      nonrefundable advance payments for goods or services that will be used or
      rendered for future research and development (R&D) activities be deferred
      and amortized over the period that the goods are delivered or the related
      services are performed, subject to an assessment of recoverability.
      EITF 07-3 will be effective for fiscal years beginning after
      December 15, 2007. The Company does not expect that the adoption of
      EITF 07-3 will have a material impact on its financial position, results of
      operations or cash flows.





In
      December 2007, the FASB ratified the consensus in EITF Issue No. 07-1,
“Accounting for Collaborative Arrangements” (EITF 07-1). EITF 07-1
      defines collaborative arrangements and requires collaborators to present the
      result of activities for which they act as the principal on a gross basis and
      report any payments received from (made




33


**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**APRIL
      30, 2008 AND 2007**





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





to)
      the
      other collaborators based on other applicable authoritative accounting
      literature, and in the absence of other applicable authoritative literature,
      on
      a reasonable, rational and consistent accounting policy is to be elected.
      EITF 07-1 also provides for disclosures regarding the nature and purpose of
      the arrangement, the entity’s rights and obligations, the accounting policy for
      the arrangement and the income statement classification and amounts arising
      from
      the agreement. EITF 07-1 will be effective for fiscal years beginning after
      December 15, 2008, which will be the Company’s fiscal year 2009, and will
      be applied as a change in accounting principle retrospectively for all
      collaborative arrangements existing as of the effective date. The Company has
      not yet evaluated the potential impact of adopting EITF 07-1 on our
      financial position, results of operations or cash flows.





In
      March
      2008, the FASB” issued SFAS No. 161, “Disclosures about Derivative Instruments
      and Hedging Activities - an amendment to FASB Statement No. 133” (“SFAS No.
      161”).   SFAS No. 161 is intended to improve financial standards for
      derivative instruments and hedging activities by requiring enhanced disclosures
      to enable investors to better understand their effects on an entity's financial
      position, financial performance, and cash flows.  Entities are
      required to provide enhanced disclosures about: (a) how and why an entity uses
      derivative instruments; (b) how derivative instruments and related hedged items
      are accounted for under SFAS No. 133 and its related interpretations; and (c)
      how derivative instruments and related hedged items affect an entity’s financial
      position, financial performance, and cash flows.  It is effective for
      financial statements issued for fiscal years beginning after November 15, 2008,
      with early adoption encouraged.  We are currently evaluating the
      impact of SFAS No. 161, if any, will have on our financial position, results
      of
      operations or cash flows.





In
      April
      2008, the FASB issued FSP No. FAS 142-3, “Determination of the Useful Life of
      Intangible Assets”. This FSP amends the factors that should be considered in
      developing renewal or extension assumptions used to determine the useful life
      of
      a recognized intangible asset under SFAS No. 142, “Goodwill and Other
      Intangible Assets”.   We are required to adopt FSP 142-3 on September
      1, 2009, earlier adoption is prohibited.  The guidance in FSP 142-3
      for determining the useful life of a recognized intangible asset shall be
      applied prospectively to intangible assets acquired after adoption, and the
      disclosure requirements shall be applied prospectively to all intangible assets
      recognized as of, and subsequent to, adoption.  We are currently
      evaluating the impact of FSP 142-3 on our financial position, results of
      operations or cash flows.





In
      May
      2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted
      Accounting Principles" ("SFAS No. 162").  SFAS No. 162
      identifies the sources of accounting principles and the framework for selecting
      the principles used in the preparation of financial statements of
      nongovernmental entities that are presented in conformity with generally
      accepted accounting principles (the GAAP hierarchy).  SFAS No.
      162 will become effective 60 days following the SEC's approval of the
      Public Company Accounting Oversight Board amendments to
      AU Section 411, "The Meaning of Present Fairly in Conformity With
      Generally Accepted Accounting Principles."  We do not expect the
      adoption of SFAS No. 162 will have a material effect on our financial
      position, results of operations or cash flows.





In
      May
      2008, the FASB issued FSP Accounting Principles Board ("APB") 14-1 "Accounting
      for Convertible Debt Instruments That May Be Settled in Cash upon Conversion
      (Including Partial Cash Settlement) " ("FSP APB 14-1").  FSP
      APB 14-1 requires the issuer of certain convertible debt instruments that
      may be settled in cash (or other assets) on conversion to separately account
      for
      the liability (debt) and equity (conversion option) components of the instrument
      in a manner that reflects the issuer's non-convertible debt borrowing
      rate.  FSP APB 14-1 is effective for fiscal years beginning after
      December 15, 2008 on a retroactive basis.  We are currently
      evaluating the potential impact, if any, of the adoption of FSP APB 14-1 on
      our financial position, results of operations or cash flows.





Other
      recent accounting pronouncements issued by the FASB (including its Emerging
      Issues Task Force), the AICPA, and the SEC did not, or are not believed by
      management to, have a material impact on the Company’s present or future
      financial statements.


34


**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**APRIL
      30, 2008 AND 2007**








**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:





**2008**
            
            **2007**Motorcycles
                and other vehicles
            
            $
            1,612,962
            
            $
            1,336,545Less:
                accumulated depreciation
            
            
            (336,100
            )
            
            (221,800
            )Motorcycles
                and other vehicles, net of accumulated depreciation
            
            
            1,276,862
            
            
            1,114,745Less:
                estimated reserve for residual values
            
            
            (25,231
            )
            
            (26,059
            )Motorcycles
                and other vehicles under operating leases, net
            
            $
            1,251,630
            
            $
            1,088,686





At
      April
      30, 2008, 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, 2008 and 2007 was $241,834
      and $279,348, respectively. All 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, 2008:





Year
                ending April
                30,2009
            
            $
            214,9892010
            
            
            115,8512011
            
            
            59,1352012
            
            
            27,6482013
            
            
            11245Total
            
            $
            428,867







35


**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**APRIL
      30, 2008 AND 2007**





**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, 2008, the
      Company had repossessed vehicles of value $79,069, which will be
      resold.





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





RISC
      loan
      receivables, which are carried at cost, were $4, 346, 314, and $2,552,157 at
      April 30, 2008 and 2007, respectively and include deficiency receivables of
      $30,697 and $79,717 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
                30,2009
            
            $
            862,2462010
            
            
            984,6962011
            
            
            1,129,4462012
            
            
            976,8082013
            
            
            393,118Total
                Due
            
            $
            4,346,315





**NOTE
      E - PROPERTY AND EQUIPMENT**





Major
      classes of property and equipment at April 30, 2008 and 2007 consist of the
      followings:





**2008**
            
            **2007**Computer
                equipment , software and furniture
            
            $
            191,247
            
            $
            191,247Less:
                accumulated depreciation and amortization
            
            
            (129,986
            )
            
            (97,047
            )Net
                property and equipment
            
            $
            61,261
            
            $
            94,200





Depreciation
      and amortization expense was $274,773 and $323,146 for the years ended April
      30,
      2008 and 2007, respectively.




36


**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**APRIL
      30, 2008 AND 2007**





**NOTE
      F - NOTES PAYABLE-Senior Lender**





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, 2008 is
      10.33%.





At
      April
      30, 2008, the notes payable mature as follows:




Year
              ended April 30
            
            
            Amount2009
            
            $
            1,140,6712010
            
            
            1,429,3292011
            
            
            1,096,6182012
            
            
            976,5012013
            
            
            386,744Total
                Due
            
            $
            5,029,864








**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. 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. One note
      for
      $100,000 has been extended to August 15, 2008, the remaining notes were extended
      to May 1, 2008 and were due as of August 13, 2008. The Company is in negotiation
      with noteholders for further extensions. The Company has accrued interest and
      penalties as per the terms of the note agreement





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. The notes have
      been
      extended to August 15, 2008.




37


**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**APRIL
      30, 2008 AND 2007**





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





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 note due to matured October 19, 2007 was extended to
      August 15, 2008.





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 due to mature on
      November 5, 2007 was extended to August 15, 2008.





e.  During
      the year ended April 30, 2008, the Company sold to forty-seven accredited
      investors six months unsecured notes in the aggregate amount of $1,890,100.
      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. At the Company’s option, the notes are convertible into shares of common
      stock raging from, $0.03 to $0.08 per share. All notes will mature in six months
      on various dates through October 30, 2008. An aggregate of $28,000 are notes
      are
      due as of August 13, 2008 and the Company is in negotiation with noteholders
      for
      further extensions. The Company has accrued interest and penalties as per the
      terms of the note agreement. Subsequent to April 30, 2008, $700,000 of these
      notes were repaid (see Subsequent Events).





f.  During
      the year ended April 30, 2008, the Company sold one accredited investor
      unsecured demand notes in the aggregate amount of $480,000 of which $55,000
      was
      repaid during the year. The notes bear 8% simple interest and interest may
      be
      paid in cash or shares of the Company. As of April 30, 2008 and August 13,
      2008
      the noteholder has not made a demand for payment.





g..  On
      September 19, 2007, the Company sold to one accredited investor for the purchase
      price of $150,000 securities consisting of a $150,000 convertible debenture
      due
      December 19, 2007, 100,000 shares of unregistered common stock, and 400,000
      common stock purchase warrants. The debentures bear interest at the rate of
      12%
      per year compounded monthly and are convertible into shares of the Company's
      common stock at $0.0504 per share. The warrants may be exercised on a cashless
      basis and are exercisable until September 19, 2007 at $0.05 per share. In the
      event the debentures are not timely repaid, the Company is to issue 100,000
      shares of unregistered common stock for each thirty day period the debentures
      remain outstanding. The note was subsequently extended to April 15, 2008 with
      the penalty feature in force. An aggregate of $145,000 notes are due as of
      August 13, 2008 and the Company is in negotiation with note holders for further
      extension. The Company has accrued interest and penalties as per the terms
      of
      the note agreement. Subsequent to April 30, 2008, $5,000 of these notes were
      repaid (see Subsequent Events).





h.  On
      November 19, 2007, the Company sold to an accredited investor, a short term
      note
      in the amount of $20,000 due December 3, 2007. The note bears interest at the
      rate of 10% per year. The Company issued 10,000 shares of unregistered common
      stock as an inducement for the loan. The note was subsequently extended to
      May
      1, 2008. Subsequent to April 30, 2008, this note was repaid (see Subsequent
      Events).




38


**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**APRIL
      30, 2008 AND 2007**








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





i.  On
      November 26, 2007, the Company sold to an accredited investor, a short term
      note
      in the amount of $25,000 due December 10, 2007. The note bore interest at the
      rate of 10% per year. The Company is to issue 12,500 shares of unregistered
      common stock as an inducement for the loan. The note was subsequently extended
      to August 16, 2008. $5,000 was repaid in January 2008 and $3,000 was repaid
      in
      February 2008(see Subsequent Events).




j.  On
      December 12, 2007, the Company sold to an accredited investor, a short term
      note
      in the amount of $200,000 due January 31, 2008. The note was subsequently
      extended to August 15, 2008. The note bears interest at the rate of 10% per
      year. Interest is payable in cash or shares, at the lender’s option, with
      principal and accrued interest payable at maturity. The Company issued 100,000
      shares of unregistered common stock to the lender as an inducement for the
      loan.
      On a pro rata basis, the Company is to issue the lender 100,000 shares of the
      Company’s unregistered common stock for every 30 day period that the principal
      balance and any accrued interest of note remains outstanding after the original
      maturity date.





k.  On
      February 4, 2008, the Company issued 75,000 shares of its restricted common
      stock to an individual in consideration of a $25,000 loan to the Company. In
      February 2008, this loan was converted into a six month, 6% convertible note
      due
      August 4, 2008. Notes are due as of August 13, 2008 and the Company is in
      negotiation with note holders for extension and the Company is in negotiation
      with note holders for further extension. At the Company’s option, the notes are
      convertible into shares of common stock at $0.0336 per share.





l.  On
      February 5, 2008, the Company issued 75,000 shares of its restricted common
      stock to another individual in consideration of a $25,000 loan to the Company.
      In February 2008, this loan was converted into a six month, 6% convertible
      note
      due August 5, 2008. Notes are due as of August 13, 2008 and the Company is
      in
      negotiation with note holders for extension. and the Company is in negotiation
      with note holders for further extension.. At the Company’s option, the notes are
      convertible into shares of common stock at $0.0336 per share.





**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, 2008 and 2007,
      aggregated loans payable to officers were $244,760 and $202,260 respectively.
      During the year ended April 30, 2008, the Company borrowed from a Director
      and
      officer $40,000 and $2,500, respectively on a demand basis without interest.
      $2,500 was prepaid subsequent to year end (see Subsequent Events).





At
      April
      30, 2008, included in accounts receivable, is $2,354 due from American
      motorcycle Leasing Corp., a company controlled by the Company's Chief Executive
      Officer and a director, for the purchase of motorcycles.




39


**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**APRIL
      30, 2008 AND 2007**





**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, 2008 and 2007, the Company
      charged to operations $0 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, 2008 and 2007, the Company had payable to American Motorcycle Leasing
      Corp. in the amounts of $0and $20,224, respectively, related to such purchases.





**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, 2008 and 2007,
      the Company has issued and outstanding 825and 19,795 shares of preferred stock
      issued and outstanding, respectively. The Company has 130,798,657 and
      123,216,157 shares of common stock issued and outstanding as of April 30, 2008
      and 2007, respectively.





**Common
      Stock**





In
      July
      2007, the Company entered into a three month consulting agreement with a
      consulting firm pursuant to which the Company issued five year warrants to
      purchase 1,000,000 shares of unregistered common stock at $0.05 per share.
      The
      agreement had called for the issuance of additional warrants on a performance
      basis; however the agreement was cancelled with no further issuance of warrants
      required. The unvested warrants have been valued at $48,122 using the
      Black-Sholes option pricing model with the following assumptions: (1) dividend
      yield of 0%; (2) expected volatility of 181%; (3) risk-free interest rate of
      4.94%. The warrants are fully vested and expire if unexercised in five years.





In
      August
      2007, the Company amended an April, 2007 agreement with a consultant and entered
      into a new three month consulting agreement with the consultant which agreement
      calls for cash payments by the Company of $3,000, which has been paid, and
      1,100,000 shares of unregistered common stock valued at $77,000 (which were
      issued in May 2007 in conjunction with the April 2007 agreement) based upon
      the
      consultants performance under the agreement.





In
      September 2007, the Company, pursuant to a consulting agreement, issued to
      the
      consultant 100,000 shares of its restricted common stock valued at $7,000.00.
      The Company, also, issued five year warrants to purchase 400,000 shares of
      unregistered common stock at $0.05 per share. The warrants which are fully
      vested have been valued at $27,107 using the Black-Scholes option pricing model
      with the following assumptions: (1) dividend yield of 0%; (2) expected
      volatility of 181%; (3) risk-free interest rate of 4.52%, and expire if
      unexercised in five years.




40


**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**APRIL
      30, 2008 AND 2007**





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





In
      October 2007, the Company entered into a consulting agreement for financial
      advisory services with an individual pursuant to which the Company issued five
      year warrants to purchase 375,000 shares of unregistered common stock at $0.05
      per share. The warrants which are fully vested have been valued at $18,038
      using
      the Black-Scholes option pricing model with the following assumptions: (1)
      dividend yield of 0%; (2) expected volatility of 181%; (3) risk-free interest
      rate of 4.53%, and expire if unexercised in five years.





In
      October 2007, pursuant to the terms and provisions of their loans, the company
      issued to four individuals 2,690,000 shares of its restricted common stock
      valued at $209,350.





In
      November 2007, the Company issued to an individual 10,000 shares of its
      restricted common stock valued at $600.00 as an inducement for a
      loan.





In
      January 2008, pursuant to the terms and provisions of their loans, the company
      issued to four individuals 440,000 shares of its restricted common stock valued
      at $33,800.





In
      January 2008, the Company, pursuant to a consulting agreement, issued to the
      consultant 500,000 shares of its restricted common stock valued at
      $20,000.





On
      January 31, 2008, the Company issued five year warrants to purchase 1,632,833
      shares of its restricted common stock at a price of $0.0438 per share to a
      corporation pursuant to a placement agency agreement. The warrants which are
      fully vested have been valued at $93,420 using the Black-Scholes option pricing
      model with the following assumptions: (1) dividend yield of 0%; (2) expected
      volatility of 178%; (3) risk-free interest rate of 2.8%, and expire if
      unexercised in five years.





On
      February 14, 2008, the Company, pursuant to a consulting agreement, issued
      to
      the consultant 1,000,000 shares of restricted common stock valued at $80,000.
      The consulting agreement, unless cancelled, required the Company to issue up
      to
      4,000,000 additional shares of restricted common stock to the consultant, in
      tranches of 1,000,000 shares each, on the three, six, nine and twelve month
      anniversary dates of the agreement. The agreement was cancelled as of March
      31,
      2008 with no further issuance of shares required.





In
      February 2008, pursuant to the terms and provisions of their loans, the company
      issued to five individuals 540,000 shares of its restricted common stock valued
      at $46,800.





In
      February 2008, the company issued to four individuals 262,500 shares of its
      restricted common stock valued at $13,250.00 as an inducement for
      loans





In
      March
      2008, pursuant to the terms and provisions of their loans, the company issued
      to
      six individuals 520,000 shares of its restricted common stock valued at
      $59,600.





In
      April
      2008, pursuant to the terms and provisions of their loans, the company issued
      to
      six individuals 420,000 shares of its restricted common stock valued at
      $38,400.





During
      the years ended April 30, 2008 and 2007, the Company expensed $733,120 and
      $807,338, respectively, in non-cash charges related to stock and option
      compensation expense.


41


**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**APRIL
      30, 2008 AND 2007**





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





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.





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-Scholes 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.





**Preferred
      Stock Series A**





On
      July
      20, 2007, one shareholder holding 16,745 shares of preferred stock converted
      those shares into 10,733,974 shares of common stock and forgave $215,253 in
      accumulated but unpaid dividends on the preferred shares. On January 31, 2008,
      three shareholders holding 2,225 shares of preferred stock converted those
      shares into 1,426,230 shares of common stock. The 12,160,210, shares of common
      stock issuable upon conversion of the preferred shares had not been physically
      issued as of April 30, 2008. These unissued shares are not included in the
      outstanding shares. The forgiven dividends were recognized as additional paid-in
      capital.





42


**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**APRIL
      30, 2008 AND 2007**





**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, 2008 and 2007, the Company has available for federal income tax purposes
      a
      net operating loss carry forward of approximately $16,880,000 and $13,280,000
      expiring in the year 2028 and 2027, 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.





Components
      of deferred tax assets as of April 30, 2008 and 2007 are as
      follows:




April
                30,2008
            
            2007Non
                current:Net
                operating loss carry forward
            
            $
            5,739,200
            
            $
            4,515,000Valuation
                allowance
            
            
            (5,739,200
            )
            
            (4,515,000
            )Net
                deferred tax asset
            
            $
            -
            
            $
            -





The
      valuation allowance increased by $1,224,000 and $1,234,000 during the year
      ended
      April 30, 2008 and 2007, respectively.





**NOTE
      L - LOSSES PER COMMON SHARE**





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





**2008**
            
            **2007**Net
                loss available for common shareholders
            
            $
            (3,992,354
            )
            $
            (3,934,467
            )Basic
                and diluted loss per share
            
            $
            (0.03
            )
            $
            (0.03
            )Weighted
                average common shares outstanding-basic diluted
            
            
            127,304,396
            
            
            122,061,446  43


**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**APRIL
      30, 2008 AND 2007**





**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-Scholes 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 year ended April 30, 2008, the Company granted options to purchase an
      aggregate of 1,170,000 shares of common stock to thirteen employees. However,
      four employees left during the three months ended July 31, 2007 and two
      employees left during the three months ended January 31, 2008. As a result
      of
      these resignations, 530,000 unexercised options were cancelled. The remaining
      vested and unvested options have been valued at $51,795 using the Black-Scholes
      option pricing model with the following assumptions: (1) dividend yield of
      0%;
      (2) expected volatility of 143%; (3) risk-free interest rate of 4.76%, vest
      over
      a 48 month period and expire if unexercised in ten 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.





The
      following table summarizes common stock options issued to officers, directors
      and employees 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
              Price6,175,000
            
            3.9
            
            $0.24
            
            2,885,000
            
            $0.29


44


**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**APRIL
      30, 2008 AND 2007**





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





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
            
            $
            0.26Granted
            
            
            1,170,000
            
            
            0.10Exercised
            
            
            -
            
            
            -Canceled
                or expired
            
            
            (530,000
            )
            
            0.10Outstanding
                at April 30, 2008
            
            
            6,175,000
            
            $
            0.24





The
      weighted-average fair value of stock options granted during the years ended
      April 30, 2008 and 2007 was $0.09 and $0.262, 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):
            
            2008
            
            2007Risk
                free interest rate at grant date:
            
            
            2.49
            %
            
            5.1
            %Expected
                stock price volatility
            
            
            164
            %
            
            131
            %Expected
                dividend payout
            
            
            0
            
            
            0Expected
                options life in years(a)
            
            
            3
            
            
            5





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




The
      options granted in the year ended April 30, 2008 had an intrinsic value of
      $21,346. There was no intrinsic value for the options granted during the year
      ended April 30, 2007.





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.




45


**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**APRIL
      30, 2008 AND 2007**





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





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
            
            
            4,687,503
            
            
            .25
            
            $
            0.195
            
            
            4,687,503
            
            $
            0.195$0.215
            
            
            1,755,537
            
            
            2.80
            
            $
            0.215
            
            
            1,755,537
            
            $
            0.215$0.05
            
            
            1,775,000
            
            
            3.89
            
            $
            0.05
            
            
            1,775,000
            
            $$
            0.05$0.0438
            
            
            1,632,833
            
            
            4.30
            
            $
            0.0438
            
            
            1,632,833
            
            $
            0.0438$0.088
            
            
            100,000
            
            
            1.63
            
            $
            0.088
            
            
            100,000
            
            $
            0.0889,950,873
            
            
            1.34
            
            $
            0.147
            
            
            9,950,873
            
            $
            0.147








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
            
            $
            0.197Granted
            
            
            3,407,833
            
            $
            0.050Exercised
            
            
            -
            
            
            -Canceled
                or expired
            
            
            (6,261,414
            )
            $
            0.195Outstanding
                at April 30, 2008
            
            
            9,950,873
            
            $
            0.147







46


**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**APRIL
      30, 2008 AND 2007**





**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, 2008 and 2007 was $0.05 and $0.06 respectively, and
      the weighted-average significant assumptions used to determine those fair
      values, using a Black-Scholes option pricing model are as follows:





**2008**
            
            **2007**Significant
                assumptions (weighted-average):Risk-free
                interest rate at grant date
            
            
            2.82
            %
            
            4.62
            %Expected
                stock price volatility
            
            
            178
            %
            
            158
            %Expected
                dividend payout
            
            
            -
            
            
            -Expected
                option life-years
            
            
            4
                yrs
            
            
            3
                yrs






The
      amount of the expense charged to operations for compensatory warrants granted
      in
      exchange for services was $247,160 and $6,600 for the years ended April 30,
      2008
      and 2007, 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. This lease was renewed on October 24, 2007 or an additional 5 years.
      Total
      lease rental expense for the years ended April 30, 2008 and 2007, was
      $225,953and $213,570, respectively.





Commitment
      for minimum rentals under non-cancelable leases are:





April
                30, 2009
            
            $
            290,375April
                30, 2010
            
            $
            297,590April
                30, 2011
            
            $
            304,985April
                30, 3012
            
            $
            312,565April
                30, 2013
            
            $
            321,092





**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.




47


**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**APRIL
      30, 2008 AND 2007**





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





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, on November 1, 2007, 25,000
      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: 12,500 shares on November 1,
      2008; and 12,500 on November 1, 2009. During the years ended April 30, 2008
      and
      2007, the Company has recorded $20,000 as expense for each year as per this
      employment agreement.





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 vested 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, 2008, the Company:





·
            Issued
                2,700,000 shares of restricted common stock, valued at $184,000,
                to two
                individuals and two corporations for consulting
                services.





·
            Issued
                272,500 shares of restricted common stock, valued at $13,850, to
                five
                individuals as inducements to make loans to the
                Company.





·
            Issued
                4,610,000 shares of restricted common stock, valued at $378,350,
                to six
                individuals as penalty shares pursuant to note agreements.





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




48


**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**APRIL
      30, 2008 AND 2007**





**NOTE
      P - SUBSEQUENT EVENTS**





From
      May
      1, 2008 through August 1, 2008, the Company: borrowed from three accredited
      investors $400,000 in 10% short term unsecured notes with due dates from July
      19, 2008 to September 30, 2008 of which $50,000 has been repaid in this period.
      The Company issued 300,000 shares of unregistered common stock, valued at
      $29,000, to the lenders as an inducement for the loans.





The
      Company sold to six accredited investors, six month unsecured notes in the
      aggregate amount of $360,000. All notes bear 6.5 % 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. At the Company’s option, the notes are convertible
      into shares of common stock raging from, $0.05 to $0.06 per share. All notes
      will mature in six months on various dates through January 18,
      2009.





The
      Company sold to seven accredited investors, six month unsecured notes in the
      aggregate amount of $82,500. All notes bear 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. At the Company’s option, the notes are convertible into
      shares of common stock raging from, $0.05 to $0.06 per share. All notes will
      mature in six months on various dates through December 25, 2008.





The
      Company sold to one accredited investor an unsecured demand note in the amount
      of $40,000. The note bears 8% simple interest and the 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
      Company borrowed from a Director $10,000, on a demand basis without
      interest.





During
      this period, The Company: repaid $129,000 of 10% bridge notes and issued
      1,634,662 shares, valued at $54,924.64, for the accrued interest thereon; repaid
      $5,000 of 12% convertible notes, and repaid $2,500 to an officer.





During
      this period, $700,000 principal amount of 6% convertible debentures were
      converted to 16,941,070 shares of restricted common stock and the Company issued
      723,684 shares of restricted common stock in lieu of $29,205.07 accrued interest
      thereon.





During
      this period, pursuant to an agreement with an investor relations consultant,
      he
      Company issued 6,000,000 shares of restricted common stock valued at
      $520,000.





Pursuant
      to various note agreements, during this period the Company issued 1,510,000
      shares of restricted common stock valued at $148,000 as penalties.


49


**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**APRIL
      30, 2008 AND 2007**





**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, 2008, the Company incurred loss of $22,224,442. 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
      pursuing 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.




50


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





None.





**ITEM
      8A. CONTROLS AND PROCEDURES**





**Evaluation
      of Disclosure Controls and Procedures**





Our
      management, with the participation of our Chief Executive Officer and Principal
      Financial Officer, has evaluated the effectiveness of our disclosure controls
      and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under
      the Exchange Act) as of the end of the period ended April 30, 2008. Based upon
      such evaluation, our Chief Executive Officer and Principal Financial Officer
      have concluded that, as of such date, our disclosure controls and procedures
      are
      effective in providing reasonable assurance that the information required to
      be
      disclosed in this report has been recorded, processed, summarized and reported,
      on a timely basis, as of the end of the period covered by this report, and
      that
      our disclosure controls and procedures are also effective to ensure that
      information required to be disclosed in the reports we file under the Exchange
      Act is accumulated and communicated to our management, including our principal
      executive officer and principal financial officer, to allow timely decisions
      regarding required disclosure.





**Management’s
      Report on Internal Control over Financial Reporting**





Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting, as defined in Rule 13a-15(f) of the Exchange
      Act. Our management has conducted an evaluation of the effectiveness of our
      internal control over financial reporting based on criteria established in
      Internal Control—Integrated Framework issued by the Committee of Sponsoring
      Organizations of the Treadway Commission. Based on this evaluation, management
      has concluded that our internal control over financial reporting was effective
      as of April 30, 2008. This annual report does not include an attestation report
      of our independent registered public accounting firm regarding internal control
      over financial reporting. We were not required to have, nor have we engaged
      our
      independent registered public accounting firm to perform, an audit on our
      internal control over financial reporting pursuant to the rules of the
      Securities and Exchange Commission that permit us to provide only management’s
      report in this annual report.




**Changes
      in Internal Control Over Financial Reporting**





There
      were no changes in our internal control over financial reporting during the
      quarter ended April 30, 2008 to which this report relates that have materially
      affected, or are reasonably likely to materially affect, our internal control
      over financial reporting.





**Limitations
      on Controls**





Management
      does not expect that our disclosure controls and procedures or our internal
      control over financial reporting will prevent or detect all error and fraud.
      Any
      control system, no matter how well designed and operated, is based upon certain
      assumptions and can provide only reasonable, not absolute, assurance that its
      objectives will be met. Further, no evaluation of controls can provide absolute
      assurance that misstatements due to error or fraud will not occur or that all
      control issues and instances of fraud, if any, within the Company have been
      detected.





**ITEM
      8B. OTHER INFORMATION**





Not
      applicable.




51


**PART
      III**





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





**Our
      Management**





The
      following sets forth our executive officers and directors and their respective
      ages and positions as of May 12, 2007 are as follows:





Name
            Age
            PositionAnthony
                L. Havens
            54
            Chief
                Executive Officer, President, and ChairmanKristian
                Srb
            53
            DirectorJeffrey
                Bean
            54
            DirectorAnthony
                W. Adler
            68
            Executive
                Vice President and Principal Financial OfficerRichard
                P. Trotter
            65
            Chief
                Operating OfficerSandra
                L. Ahman
            44
            Vice
                President, Secretary and Director





**Management
      Profiles**





**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 served as acting Chief Financial Officer
      from
      July 2005 to September 2006. Mr. Havens served as the Managing Member and Chief
      Executive Officer of our predecessor entity, Sparta Commercial Services, LLC,
      since its inception in 2001 until its dissolution in February 2006. 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 founder and
      President of Bean Foods, LLC. Formed in July 2006 the company develops, owns
      and
      operates quick serve restaurants in Georgia. Prior to founding Bean Foods,
      Mr.
      Bean was the founding partner for GoMotorcycle.com, a business that engaged
      in
      the sale of motorcycle parts and accessories over the Internet. Mr. Bean was
      an
      institutional broker and trader at a major commodities trading firm from 1985
      to
      1997. From 1977 to 1985, Mr. Bean was President of Thomaston Press, Ltd., a
      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.





**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




52


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 served as a Vice President of our
      predecessor entity, Sparta Commercial Services, LLC since its inception in
      2001
      until its dissolution in February 2006. 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 15 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 or her 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, 2008, 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 separately-designated standing audit, nominating or
      compensation committee or similar committee of the Board of Directors. 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 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.





**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




53


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, and have not previously adopted a code
      of ethics as our operations have been limited and we have had a small number
      of
      employees since inception.





**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, 2008, 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 Chief
      Executive Officer and our next two most highly compensated executive officers
      who served during our fiscal years ended April 30, 2008 and 2007 (“Named
      Executive Officers”).






Name
              and
                Principal Position
            
            Year
            
            Salary
              ($)
            
            Bonus
              ($)
            
            Stock
              Awards
              ($)(a)(b)
            
            Option
              Awards
              ($)(a)(c)
            
            All
              Other
              Compensation
              ($)(d)
            
            Total
              ($)Anthony
                L. Havens
            
            
            2008
            
            
            310,440
            
            
            0
            
            
            0
            
            
            0
            
            
            11,580
            
            
            322,020Chief
                Executive Officer
            
            
            2007
            
            
            280,000
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            280,000Anthony
                W. Adler (e)
            
            
            2008
            
            
            185,000
            
            
            0
            
            
            0
            
            
            156,928
            
            
            0
            
            
            341,928Executive
                Vice
              President
                and Principal
              Financial
                Officer
            
            
            2007
            
            
            138,500
            
            
            0
            
            
            0
            
            
            212,347
            
            
            21,000
            
            
            371,847Richard
                P. Trotter
            
            
            2008
            
            
            200,000
            
            
            0
            
            
            20,000
            
            
            49,420
            
            
            0
            
            
            269,420Chief
                Operating Officer
            
            
            2007
            
            
            200,000
            
            
            0
            
            
            20,000
            
            
            49,420
            
            
            0
            
            
            269,420





(a)
            See
                note M to financial statements for assumptions made in the valuation.


(b)
            For
                Mr. Trotter, refers to the values of 25,000 shares of restricted
                stock
                that vested in each of fiscal years 2008 and 2007. 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 100,000
                shares
                have vested, and 25,000 shares remains subject to future vesting
                as
                follows: 12,500 shares on November 1, 2008; and 12,500 on November
                1,
                2009.


(c)
            For
                Mr. Adler, refers to the values of 800,000 stock options that vested
                in
                each of fiscal years 2008 and 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 each of September
                22, 2006
                and 2007, stock options to purchase 800,000 shares vested, and the
                remaining 2,400,000 options are to vest in equal installments on
                September
                22, 2008 and 2009.




54


For
      Mr.
      Trotter, refers to the values of 175,000 stock options that vested in each
      of
      fiscal years 2008 and 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, and additional options to purchase 175,000 shares vested on each of April
      29, 2006, 2007 and 2008, and the remaining options are to vest on April 29,
      2009.


(d)
            This
                column reports the total amount of perquisites and other benefits
                provided, if such total amount exceed $10,000. In fiscal 2008, for
                Mr.
                Havens, this includes expenses of $11,580. In fiscal 2007, for Mr.
                Adler,
                this includes 1099 compensation of
                $21,000.


(e)
            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, 2008.





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)
            
            
            1,600,000
            
            
            -
            
            
            2,400,000
            
            
            0.1914
            
            
            9/21/2011
            
            
            -
            
            
            -
            
            
            -
            
            
            -Richard
                P. Trotter (2)
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            25,,000
            
            
            5,000Richard
                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 and September 22, 2007 stock options to purchase
                a
                total of 1,600,000 shares vested, with 1,200,000 options to vest
                on each
                of September 22, 2009 and September 22,
                2010.


(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
                100,000
                shares have vested, and 25,000 shares remains subject to future vesting
                as
                follows: 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 each of April 29, 2005,
                2006,
                2007 and 2008, and the remaining options are to vest on April 29,
                2009.





**Compensation
      of Directors**





No
      compensation was paid to non-employee directors in fiscal year 2008.


55


**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.





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 and September 27, 2007, options
      for
      a total of 1,600,000 shares vested, and the remaining options to purchase
      2,400,000 shares vest in equal installments on September 22, 2008 and 2009,
      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







56


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
      each of November 1, 2004, 2005, 2006, 2007 25,000 shares vested. An additional
      25,000 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: 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.





**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, 2008.





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(a)
            
            Number
                of securities remaining available for
              future
                issuance under
              equity
                compensation planEquity
                compensation plans approved by securities holders
            
            
            800,000
            
            $
            0.18
            
            
            7,700,000Equity
                compensation plans not approved by security holders (b)
            
            
            10,738,370
            
            $
            0.14
            
            
            0Total
            
            
            11,538,370
            
            $
            0.15
            
            
            7,700,000





(a)
            Calculation
                excludes shares subject to restricted stock
                grants.


(b)
            Includes
                100,000 shares pursuant to a restricted stock grant, subject to vesting.
                There is no exercise price associated with a restricted stock
                grant.





**Plans
      in the Shareholder Approved Category**





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, 2008, the Company granted to employees options to purchase
      an
      aggregate of 1,170,000 shares of common stock, and 530,000




57


unexercised
      options were cancelled. As of April 30, 2008, options to purchase 800,000 shares
      of common stock were outstanding under the plan.





**Plans
      Not in the Shareholder Approved Category**





On
      November 1, 2004, we agreed to grant Richard P. Trotter, our Chief Operating
      Officer, pursuant to an employment agreement, 125,000 shares of our common
      stock, subject to vesting and subject to continued employment. Mr. Trotter
      was
      previously issued 25,000 shares. Mr. Trotter is entitled to an additional
      100,000 shares of common stock, of which 75,000 shares have vested but have
      not
      yet been issued, and 25,000 shares remains subject to future vesting as follows:
      12,500 shares on November 1, 2008; and 12,500 on November 1, 2009.





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, April 29, 2007, and April 30, 2008, and the
      remaining options are to vest on April 30, 2009.





In
      connection with the private placement during the year ended April 30, 2006,
      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.





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, and on September 22,
      2007
      an additional 800,000 shares vested. The remaining stock options are to vest
      in
      equal installments 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 on October 23, 2007 an additional 100,000
      stock options vested. The remaining options are to vest in equal installments
      over the next two anniversary dates of the agreement.





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.





In
      July
      2007, the Company entered into a three month consulting agreement with a
      consulting firm pursuant to which the Company issued five year warrants to
      purchase 1,000,000 shares of unregistered common stock at $0.05 per share.
      The
      agreement had called for the issuance of additional warrants on a performance
      basis; however the agreement was cancelled with no further issuance of warrants
      required.





In
      September 2007, the Company, pursuant to a consulting agreement, issued five
      year warrants to purchase 400,000 shares of unregistered common stock at $0.05
      per share.





In
      October 2007, the Company entered into a consulting agreement for financial
      advisory services with an individual pursuant to which the Company issued five
      year warrants to purchase 375,000 shares of unregistered common stock at $0.05
      per share.





On
      January 31, 2008, the Company issued five year warrants to purchase 1,632,833
      shares of its restricted common stock at a price of $0.0438 per share to a
      corporation pursuant to a placement agency agreement.


58


**Common
      Stock Ownership**





The
      table
      below sets forth information regarding the beneficial ownership of our common
      stock as of April 30, 2008 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
              OwnedAnthony
                L. Havens (1)
            31,433,250
            
            
            24.0Kristian
                Srb (2)
            33,066,562
            
            
            25.3Jeffrey
                Bean (3)
            316,000
            
            
            *Anthony
                W. Adler (4)
            2,695,000
            
            
            2.1Richard
                P. Trotter (5)
            800,000
            
            
            *Sandra
                L. Ahman
            580,865
            
            
            *Leo
                Long
            10,902,730
            
            
            8.39109
                Loriet Blvd.
              Lenexa,
                KS 66219All
                current directors and named
              officers
                as a group (6 in all)
            68,891,677
            
            
            51.6





*  Represents
      less than 1%


(1)
            Mr.
                Havens' minor son owns 700,000 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
                300,000 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 and options to purchase
                100,000
                shares vested on October 23, 2007. Options to purchase an additional
                200,000 shares are to vest in equal installments on each of October
                23,
                2008 and 2009.


(4)
            Includes
                1,600,000 vested stock options. Pursuant to an option agreement,
                Mr. Adler
                is entitled to up to 4,000,000 options subject to vesting. Options
                to
                purchase 800,000 shares vested on September 22, 2006. and additional
                options to purchase 800,000 shares vested on September 22, 2007.
                Options
                to purchase an additional 2,400,000 shares are to vest in equal
                installments on each of September 22, 2008 and September 22,
                2009.


(5)
            Includes
                100,000 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 100,000
                shares
                have vested, and 25,000 shares remains subject to future vesting
                as
                follows: 12,500 shares on November 1, 2008; and 12,500 on November
                1,
                2009. Also includes 700,000 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 April 29, 2005, 2006, 2007, and 2008, stock options to
                purchase
                175,000 shares vested, and the remaining options are to vest on April
                29,
                2009.


59


**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**





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. As of April 30,
      2008, $18,000 remains to be repaid.





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 ended April 30, 2007. As of April 30, 2008,
      $13,760 remains to be repaid.





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. As of April 30, 2008,
      $8,500 remains to be repaid.





During
      the fiscal year ended April 30, 2007, we received two, $20,000 non-interest
      bearing demand loans from Kristian Srb, one of our directors. As of April 30,
      2008, $20,000 remains to be repaid.





During
      the fiscal year ended April 30, 2007, we received a $2,500 non-interest bearing
      demand loan from Anthony Adler, one of our officers which was outstanding as
      of
      April 30, 2008, $2,500 was repaid subsequent to April 30, 2008.





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.


60


**ITEM
      13. EXHIBITS**





The
      following exhibits are filed with this report:


Exhibit
                  Number
              Description
                  of ExhibitExhibit
                  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)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)
  61
  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
                  10.20
              Form
                  of Convertible Debenture (Incorporated by reference to Exhibit
                  10.1 of
                  Form 10-QSB filed on December 21, 2007)Exhibit
                  11
              Statement
                  re: computation of per share earnings is hereby incorporated by
                  reference
                  to “Financial Statements” of Part II - Item 7, contained in this Form
                  10-KSBExhibit
                  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 Principal Financial Officer pursuant to 18 U.S.C. Section
                  1350


___


*
      Filed
      herewith.







62


**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 fiscal
      years
      ended April 30, 2008 and 2007 were $162,046 and $150,390, respectively. Audit
      fees consist of the aggregate fees billed for the audits of our annual financial
      statements, the reviews of our quarterly financial statements, and services
      that
      are normally provided in connection with statutory and regulatory filings or
      engagements for those fiscal years.





**Audit-Related
      Fees**





Fees
      for
      audit-related services provided by our principal independent registered public
      accounting firm during the fiscal years ended April 30, 2008 and 2007 were
      $0.
      Audit-related fees consist of fees billed for assurance and related services
      that are reasonably related to the performance of the audit or review of our
      financial statements outside of those fees disclosed above under the caption
      Audit Fees.





**Tax
      Fees**





Fees
      for
      tax services provided by our principal independent registered public accounting
      firm during the fiscal years ended April 30, 2008 and 2007 were $0. Tax fees
      consist of fees billed for tax compliance, tax advice, and tax planning.





**All
      Other Fees**





There
      were no other fees billed for services for the fiscal years ended April 30,
      2008
      and 2007.





**Pre-Approval
      Policies and Procedures**





Our
      Board
      of Directors has a policy that requires pre-approval of all audit,
      audit-related, tax services, and other services, including non-audit services,
      performed by our independent registered public accounting firm. All services
      performed by our principal independent registered public accounting firm, and
      all fees paid, in our fiscal years ended April 30, 2008 and 2007 were
      pre-approved. 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.




63


**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. Havens
              Anthony
                L. Havens
              Chief
                Executive Officer
              
              Date:
                August 13, 2008





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. Havens
              Anthony
                L. Havens
              Chief
                Executive Officer, President
              and
                Chairman of the Board
              
              Date:
                August 13, 2008
              
              By:/s/
                Anthony W. Adler
              Anthony
                W. Adler
              Executive
                Vice President, and
              Interim
                Principal Financial Officer
              
              Date:
                August 13, 2008
              
              By:/s/
                Sandra L. Ahman
              Sandra
                L. Ahman
              Vice
                President and Director
              
              Date:
                August 13, 2008
              
              By:/s/
                Kristian Srb
              Kristian
                Srb
              Director
              
              Date:
                August 13, 2008
              
              By:/s/
                Jeffrey Bean
              Jeffrey
                Bean
              Director
              
              Date:
                August 13, 2008




64