Sparta Commercial Services, Inc. – ‘424B3’ on 6/1/06

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Prospectus   —   Rule 424(b)(3)
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Document/Exhibit                   Description                      Pages   Size 

 1: 424B3       Prospectus                                            78    422K 

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                                                Filed Pursuant to Rule 424(b)(3)
              under the Securities Act of 1933, as amended (File No. 333-133644)

PROSPECTUS                                                                      

SPARTA COMMERCIAL SERVICES, INC.

62,934,506 SHARES OF

COMMON STOCK

      This prospectus relates to the resale by the selling stockholders of up to
62,934,506 shares of our common stock, including up to 22,980,782 shares of     
common stock issuable upon conversion of preferred stock and up to 13,548,411   
issuable upon the exercise of common stock purchase warrants. The selling       
stockholders may sell common stock from time to time in the principal market on 
which the stock is traded at the prevailing market price or in negotiated       
transactions. The selling stockholders may be deemed underwriters of the shares 
of common stock, which they are offering. We will pay the expenses of           
registering these shares.                                                       

We are not selling any shares of common stock in this offering and  
therefore will not receive any proceeds from the sale of common stock hereunder.
We may receive proceeds from any exercise of outstanding warrants.              

    Our common stock listed on the Over-The-Counter Bulletin Board under the
symbol "SRCO." The last reported sales price per share of our common stock as   
reported by the Over-The-Counter Bulletin Board on May 23, 2006, was $0.42.     

Investing in these securities involves significant risks. See "Risk 
Factors" beginning on page 6.                                                   

   Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
Prospectus is truthful or complete. Any representation to the contrary is a     
criminal offense.                                                               

The date of this prospectus is May 31, 2006.

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PROSPECTUS SUMMARY

   The following summary highlights selected information contained in this
prospectus. This summary does not contain all the information you should        
consider before investing in the securities. Before making an investment        
decision, you should read the entire prospectus carefully, including the "risk  
factors" section, the financial statements and the notes to the financial       
statements.                                                                     

SPARTA COMMERCIAL SERVICES, INC.

      We were incorporated under the laws of the State of Nevada on May 13, 1980
under the name Tomahawk Oil and Minerals, Inc. and we changed our name to       
Tomahawk Industries, Inc. on November 6, 1983. On February 27, 2004, pursuant to
an Agreement and Plan of Reorganization, Tomahawk Industries, Inc. acquired     
Sparta Commercial Services, LLC, a Delaware limited liability company. Effective
August 25, 2004, we changed our name to Sparta Commercial Services, Inc., by    
filing a Certificate of Amendment to our Articles of Incorporation with the     
Secretary of State of the State of Nevada.                                      

     For the nine month period ended January 31, 2006, we generated $90,629 in
revenue and a net loss of $6,734,000. In addition, for the year ended April 30, 
2005, we generated $65,833 in revenue and a net loss of $2,579,821. As a result 
of recurring losses from operations our auditors, in their report dated July 15,
2005, have expressed substantial doubt about out ability to continue as a going 
concern.                                                                        

 Our executive offices are located at 462 Seventh Ave, 20th Floor, New
York, NY 10018, and our telephone number is (212) 239-2666. We are a Nevada     
corporation.                                                                    

The Offering                                                                    

Common stock offered by selling                                                 
stockholders....................  Up to 62,934,506 shares, including the        
following:  

                              o  up to 22,980,782 shares of common stock
                                   issuable upon the conversion of preferred
    stock, and

                              o  up to 13,548,411 shares of common stock
                                    issuable upon the exercise of common stock
            purchase warrants.

                               This number represents 55.2% of our current
      outstanding stock.

Common stock to be outstanding                                                  
after the offering..............  Up to 159,713,903 shares.                     

Use of proceeds.................  We will not receive any proceeds from the sale
                                 of the common stock. However, we will receive
                                 the sale price of any common stock we sell to
                                the selling stockholder upon the exercise of
                               the warrants. We expect to use the proceeds
                                  received from the exercise of the warrants, if
                              any, for general working capital purposes.

Over-The-Counter Bulletin Board                                                 
Symbol..........................  SRCO                                          

    The above information regarding common stock to be outstanding after the
offering is based on 114,100,173 shares of common stock outstanding as of May   
12, 2006 and assumes the subsequent conversion of our Series A Preferred Stock  
and exercise of warrants by our selling stockholders.                           

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RISK FACTORS

   This investment has a high degree of risk. Before you invest you should
carefully consider the risks and uncertainties described below and the other    
information in this prospectus. If any of the following risks actually occur,   
our business, operating results and financial condition could be harmed and the 
value of our stock could go down. This means you could lose all or a part of    
your investment.                                                                

Risks Related to Our Financial Results

Our lack of operating data makes predicting our future performance difficult.   

    We are in the "developmental" stage of business and have yet to commence
any substantive commercial operations. We have no operating history upon which  
an evaluation of our prospects can be based. We do not have any substantial     
historical financial data on which to base planned operating expenses or        
forecast revenues. Our proposed business is unproven. As a result of these      
factors, it is difficult to evaluate our prospects, and our future success is   
more uncertain than if we had a longer or more proven history of operations. Our
prospects must be considered in light of the risks, expenses and difficulties   
frequently encountered by companies in the early stages of a business           
enterprise, particularly companies in highly competitive markets.               

We have a limited operating history with no history of significant revenues.    

  The year ended April 30, 2005 was a developmental stage period for us,
setting up credit procedures, setting our arrangements with vehicle             
distributors, obtaining personnel, seeking financing to support our             
developmental efforts, and seeking additional credit facilities. We will        
continue to obtain regulatory approval in additional states, where required,    
prior to commencing active operations in those states. While we are actively    
signing up dealers to participate in our financing programs, including our      
private label financing programs, we have no significant operating history.     
Through April 30, 2005, we have generated nominal sales revenues, have incurred 
significant expenses, and have sustained significant losses. Our net loss       
attributed to common stockholders for the year ended April 30, 2005 and nine    
months ended January 31, 2006 was $4,418,727 (after giving effect to a          
$1,810,000 charge for the beneficial conversion discount on our Convertible     
Preferred shares and a $28,906 charge for Preferred dividends payable) and      
$8,620,683 (after giving effect to a charge of $1,886,683 for Preferred         
dividends), respectively. As of April 30, 2005 and as of January 31, 2006, we   
had a working capital deficit of $728,207 and $3,023,127, respectively. We may  
continue to incur losses for the near future. There can be no assurance that we 
will achieve or sustain profitability on a quarterly or annual basis.           

We have entered into a credit line with an institutional lender, who has        
required preferences and rights senior to those of our preferred stock and      
placed restrictions on the payment of dividends.                                

     We entered into a secured senior credit facility with a major third party
lender, for a revolving line of credit. The lender has received a security      
interest in substantially all of our assets with seniority over the rights of   
our preferred stock and our common stock. Unless the security interests are     
released, assets will not be available to us to secure future indebtedness,     
which may adversely affect our ability to borrow in the future. If we are unable
to repay our outstanding indebtedness under the credit line, the lender could   
foreclose on all of our assets. If we do not have sufficient cash flow to repay 
the credit line indebtedness or if we cannot refinance the obligation, we will  
not be able to implement our business plan, which would have a material adverse 
affect on our future viability. The lender, in granting the credit line, has    
also required that we meet certain financial criteria in order to pay dividends 
on any of our preferred shares and common shares. We may not be able to repay   
our outstanding indebtedness under the credit line.                             

Our business requires capital and we will need to obtain additional financing in
the near future.                                                                

 Our business requires extensive amounts of capital for credit reserve
purposes. Presently, we have sufficient operating capital to fund reserve       
requirements and to fulfill our business plans over the next 12 months. We      
believe that we have sufficient capital resources to obtain additional credit   
facilities and fund any initial reserve requirement pursuant to obligations with
a lending institution. As our business grows, we will be required to maintain   
higher levels of credit reserves. To the extent that our revenues do not provide
sufficient cash flow to cover such credit reserve levels, we may have to obtain 
additional financing to fund the credit reserve requirement existing at the     
time. There can be no assurance that we will be able to secure a line of credit 
or have the requisite capital reserve, or that we will be able to obtain        
additional financing for such purposes. The failure to obtain additional funds, 
when required, on satisfactory terms and conditions, would have a material and  
adverse effect on our business, operating results and financial condition.      

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Auditor's opinion expresses doubt about our ability to continue as a "going     
concern"                                                                        

      The independent auditors report on our April 30, 2005 financial statements
state that our historical losses and the lack of revenues raise substantial     
doubts about our ability to continue as a going concern, due to our status as a 
development stage company and our lack of significant operations. We cannot     
assure you that we will be able to generate revenues or maintain any line of    
business that might prove to be profitable. Accordingly, a purchase of our      
common stock should be considered a high-risk investment because investors will 
be placing their funds at risk in a development stage company with the attendant
unforeseen costs, expenses and problems that a company in this phase of business
may encounter. Our ability to continue as a going concern is subject to our     
ability to generate a profit or obtain necessary funding from outside sources,  
including obtaining additional funding from the sale of our securities,         
increasing sales or obtaining credit lines or loans from various financial      
institutions where possible. If we are unable to develop our business, we may   
have to discontinue operations or cease to exist, which would be detrimental to 
the value of our common stock. We can make no assurances that our business      
operations will develop and provide us with significant cash to continue        
operations.                                                                     

We will be required to raise additional capital to fund our operations.         

   To the extent we raise additional capital by issuing equity securities,
our stockholders may experience substantial dilution. Also, any new equity      
securities may have greater rights, preferences or privileges than our existing 
common stock. A material shortage of capital will require us to take drastic    
steps such as reducing our level of operations, disposing of selected assets or 
seeking an acquisition partner. If cash is insufficient, we will not be able to 
continue operations.                                                            

 Risks Related To Our Business

A significant number of customers may fail to perform under their loans.        

   As a lender, one of the largest risks we face is the possibility that a
significant number of borrowers will fail to pay their loans when due. If       
borrowers' defaults cause losses in excess of our allowance for loan losses, it 
could have an adverse effect on our business, profitability and financial       
condition. If a borrower enters into bankruptcy, we may have no means of        
recourse. We have established an evaluation process designed to determine the   
adequacy of the allowance for loan losses. While this evaluation process uses   
historical and other objective information, the establishment of loan losses is 
dependent to a great extent on management's experience and judgment. We cannot  
assure you that our loan reserves will be sufficient to absorb future loan      
losses or prevent a material adverse effect on our business, profitability or   
financial condition.                                                            

A variety of factors and economic forces may affect our operating results.      

   Our operating results may differ from current forecasts and projections
significantly in the future as a result of a variety of factors, many of which  
are outside our control. These factors include, without limitation, the receipt 
of revenues, which is difficult to forecast accurately, the rate of default on  
our loans, the amount and timing of capital expenditures and other costs        
relating to the expansion of our operations, the introduction of new products or
services by us or our competitors, borrowing costs, pricing changes in the      
industry, technical difficulties, general economic conditions and economic      
conditions specific to the motorcycle industry. The success of an investment in 
a retail loan based venture is dependent, at least in part, on extrinsic        
economic forces, including the supply of and demand for such services and the   
rate of default on the retail installment loans. No assurance can be given that 
we will be able to generate sufficient revenue to cover our cost of doing       
business. Furthermore, our revenues and results of operations will be subject to
fluctuations based upon general economic conditions. Economic factors like      
unemployment, interest rates, the rate of inflation and consumer perceptions of 
the economy may affect the rate of prepayment and defaults on customer leases   
and loans and the ability to sell or dispose of the related specified vehicles  
for an amount at least equal to their residual values which will have a material
adverse effect on our business.                                                 

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A material reduction in the interest rate spread could have a negative impact on
our business and profitability.                                                 

 A portion of our net income is expected to come from an interest rate
spread, which is the difference between the interest rates paid by us on        
interest-bearing liabilities, and the interest rate we receive on               
interest-earning assets, such as loans and leases extended to customers.        
Interest rates are highly sensitive to many factors that are beyond our control,
such as inflation, recession, global economic disruptions and unemployment.     
There is no assurance that our current level of interest rate spread will not   
decline in the future. Any material decline would have a material adverse effect
on our business and profitability.                                              

Failure to perfect a security interest could harm our business.                 

    An ownership interest or security interest in a motor vehicle registered
in most states may be perfected against creditors and subsequent purchasers     
without notice for valuable consideration only by one or more of the following: 
depositing with the state's department of motor vehicles a properly endorsed    
certificate of title for the vehicle showing the transferee or secured party as 
legal owner or lien holder thereon, filing a sworn notation of lien with the    
state's department of motor vehicles and noticing such lien on the certificate  
of title, or if the vehicle has not been previously registered, filing an       
application for an original registration together with an application for       
registration of the secured party as legal owner or lien holder, as the case may
be, with the state's department of motor vehicles. We may not have a validly    
perfected ownership interest and security interest, respectively, in some       
vehicles during the period of the loan. As a result, our ownership or security  
interest in these vehicles will not be perfected and our interest could be      
inferior to interests of other creditors or purchasers who have taken the steps 
described above. If such creditors or purchasers successfully did so, the       
affected vehicles would not be available to generate their expected cash flow,  
which would have a material adverse effect on our business.                     

Risks associated with leasing.                                                  

Our business is subject to the risks generally associated with the  
ownership and leasing of equipment. A lessee may default in performance of its  
lease obligations and we may be unable to enforce our remedies under a lease. As
a result, certain of these customers may pose credit risks to us. Our inability 
to collect receivables due under a lease and its inability to sell or re-lease  
off-lease motorcycles could have a material adverse effect on our business,     
financial condition or results of operations.                                   

Adverse changes in used vehicle prices may harm our business.                   

     Significant increases in the inventory of vehicles may depress the prices
at which we can sell or lease our inventory of repossessed or off-lease vehicles
or may delay sales or leases. Factors that may affect the level of used vehicles
inventory include consumer preferences, leasing programs offered by our         
competitors and seasonality. In addition, average used powersports vehicle      
prices have fluctuated in the past, and any softening in the used powersports   
vehicle market could cause our recovery rates on repossessed or off-lease       
vehicles to decline below current levels. Lower recovery rates increase our     
credit losses and reduce the amount of cash flows we receive.                   

Our business is dependent on intellectual property rights and we may not be able
to protect such rights successfully.                                            

 Our intellectual property, including our license agreements and other
agreements, which establish our rights to proprietary intellectual property, are
of great value to our business operations. Infringement or misappropriation of  
our intellectual property or by us could materially harm our business. We rely  
on a combination of trade secret, copyright, trademark, patent and other        
proprietary rights laws to protect our rights to this valuable intellectual     
property. Third parties may try to challenge our intellectual property rights.  
In addition, our business is subject to the risk of third parties infringing or 
circumventing our intellectual property rights. We may need to resort to        
litigation in the future to protect our intellectual property rights, which     
could result in substantial costs and diversion of resources. Our failure to    
protect our intellectual property rights could have a material adverse effect on
our business and competitive position.                                          

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We may not be able to compete in the industry.                                  

We will compete with commercial banks, savings and loans, industrial
thrifts, credit unions and consumer finance companies, including large consumer 
finance companies such as HSBC/Household, General Electric and Transamerica.    
Many of these competitors have well developed infrastructure systems in place as
well as greater financial and marketing resources than we have. Additionally,   
competitors may be able to provide financing on terms significantly more        
favorable to motorcycle purchasers than we can offer. Providers of motorcycle   
financing have traditionally competed on the basis of interest rates charged,   
the quality of credit accepted, the flexibility of contract terms offered and   
the quality of service provided to dealers and customers. We seek to compete    
predominantly on the basis of our high level of dealer service, strong dealer   
relationships and by offering flexible terms. Many of our competitors focus     
their efforts on different segments of the credit quality spectrum. Our business
may be adversely affected if any of such competitors in any of our markets      
choose to intensify their competition in the segment of the prime or sub-prime  
credit spectrum on which we focus or if dealers become unwilling to forward to  
us applications of prospective customers. To the extent that we are not able to 
compete effectively within our credit spectrum and to the extent that the       
intensity of competition causes the interest rates we charge to be lower, our   
results of operations can be adversely affected.                                

Our business is subject to various government regulations.                      

     We are subject to numerous federal and state consumer protection laws and
regulations and licensing requirements, which, among other things, may affect:  
(i) the interest rates, fees and other charges we impose; (ii) the terms and    
conditions of the contracts; (iii) the disclosures we must make to obligors; and
(iv) the collection, repossession and foreclosure rights with respect to        
delinquent obligors. The extent and nature of such laws and regulations vary    
from state to state. Federal bankruptcy laws limit our ability to collect       
defaulted receivables from obligors who seek bankruptcy protection. Prospective 
changes in any such laws or the enactment of new laws may have an adverse effect
on our business or the results of operations. Compliance with existing laws and 
regulations has not had a material adverse affect on our operations to date. We 
will need to periodically review our office practices in an effort to ensure    
such compliance, the failure of which may have a material adverse effect on our 
operations and our ability to conduct business activities.                      

We are controlled by current officers, directors and principal stockholders.    

     Our directors, executive officers and principal stockholders beneficially
own approximately 64.4% of voting stock outstanding on a fully diluted basis.   
Accordingly, these persons and their respective affiliates have the ability to  
exert substantial control over the election of our Board of Directors and the   
outcome of issues submitted to our stockholders, including approval of mergers, 
sales of assets or other corporate transactions. In addition, such control could
preclude any unsolicited acquisition of us and could affect the price of our    
Common Stock.                                                                   

We are dependent on our management and the loss of any officer could hinder the 
implementation of our business plan.                                            

   We are heavily dependent upon management, the loss of any of whom could
have a material adverse affect on our ability to implement our business plan.   
While we have entered into employment agreements with certain executive         
officers, including our Chief Executive Officer and Chief Operating Officer,    
employment agreements could be terminated for a variety of reasons. If, for some
reason, the services of management, or of any member of management, were no     
longer available to us, our operations and proposed businesses and endeavors may
be materially adversely affected. In our start-up stages, Mr. Havens, our Chief 
Executive Officer, has been primarily responsible for setting up our business   
plan and our infrastructure. As we entered into our development stages, other   
officers may been instrumental in setting up our financial and operational      
controls and procedures, and we have not yet hired additional personnel to      
perform such functions. Any failure of management to implement and manage our   
business strategy and growth may have a material adverse affect on us. There can
be no assurance that our operating and financial control systems will be        
adequate to support its future operations and anticipated growth. Failure to    
manage our growth properly could have a material adverse affect on our business,
financial condition or result of operations. Furthermore, the inability to      
continue to upgrade the operating and financial control systems, the inability  
to recruit and hire necessary personnel or the emergence of unexpected expansion
difficulties could have a material adverse affect on our business, financial    
condition or results of operations.                                             

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Risks Related To This Offering

There is no assurance of an established public trading market, which would      
adversely affect the ability of investors in our company to sell their          
securities in the public markets.                                               

   Although our common stock trades on the Over-the-Counter Bulletin Board
(the "OTCBB"), a regular trading market for the securities may not be sustained 
in the future. The NASD has enacted recent changes that limit quotations on the 
OTCBB to securities of issuers that are current in their reports filed with the 
Securities and Exchange Commission. The effect on the OTCBB of these rule       
changes and other proposed changes cannot be determined at this time. The OTCBB 
is an inter-dealer, Over-The-Counter market that provides significantly less    
liquidity than the NASD's automated quotation system (the "NASDAQ Stock         
Market"). Quotes for stocks included on the OTCBB are not listed in the         
financial sections of newspapers as are those for The Nasdaq Stock Market.      
Therefore, prices for securities traded solely on the OTCBB may be difficult to 
obtain and holders of common stock may be unable to resell their securities at  
or near their original offering price or at any price. Market prices for our    
common stock will be influenced by a number of factors, including:              

o     the issuance of new equity securities;                        
o     changes in interest rates;                                    
     o     competitive developments, including announcements by competitors of
        new products or services or significant contracts, acquisitions,
      strategic partnerships, joint ventures or capital commitments;
o     variations in quarterly operating results;                    
o     change in financial estimates by securities analysts;         
o     the depth and liquidity of the market for our common stock;   
     o     investor perceptions of our company and the technologies industries
generally; and                                          
o     general economic and other national conditions.               

The limited prior public market and trading market may cause volatility in the  
market price of our common stock.                                               

      Our common stock is currently traded on a limited basis on the OTCBB under
the symbol "SRCO." The quotation of our common stock on the OTCBB does not      
assure that a meaningful, consistent and liquid trading market currently exists,
and in recent years such market has experienced extreme price and volume        
fluctuations that have particularly affected the market prices of many smaller  
companies like us. Our common stock is thus subject to volatility. In the       
absence of an active trading market:                                            

      o     investors may have difficulty buying and selling or obtaining market
quotations;                                             
o     market visibility for our common stock may be limited; and    
 o     a lack of visibility for our common stock may have a depressive
effect on the market for our common stock.              

Our common stock could be considered a "penny stock."                           

      Our common stock could be considered to be a "penny stock" if it meets one
or more of the definitions in Rules 15g-2 through 15g-6 promulgated under       
Section 15(g) of the Securities Exchange Act of 1934, as amended. These include 
but are not limited to the following: (i) the stock trades at a price less than 
$5.00 per share; (ii) it is NOT traded on a "recognized" national exchange;     
(iii) it is NOT quoted on The Nasdaq Stock Market, or even if so, has a price   
less than $5.00 per share; or (iv) is issued by a company with net tangible     
assets less than $2.0 million, if in business more than a continuous three      
years, or with average revenues of less than $6.0 million for the past three    
years. The principal result or effect of being designated a "penny stock" is    
that securities broker-dealers cannot recommend the stock but must trade in it  
on an unsolicited basis.                                                        

Broker-dealer requirements may affect trading and liquidity.                    

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      Section 15(g) of the Securities Exchange Act of 1934, as amended, and Rule
15g-2 promulgated thereunder by the SEC require broker-dealers dealing in penny 
stocks to provide potential investors with a document disclosing the risks of   
penny stocks and to obtain a manually signed and dated written receipt of the   
document before effecting any transaction in a penny stock for the investor's   
account.                                                                        

     Potential investors in our common stock are urged to obtain and read such
disclosure carefully before purchasing any shares that are deemed to be "penny  
stock." Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve 
the account of any investor for transactions in such stocks before selling any  
penny stock to that investor. This procedure requires the broker-dealer to (i)  
obtain from the investor information concerning his or her financial situation, 
investment experience and investment objectives; (ii) reasonably determine,     
based on that information, that transactions in penny stocks are suitable for   
the investor and that the investor has sufficient knowledge and experience as to
be reasonably capable of evaluating the risks of penny stock transactions; (iii)
provide the investor with a written statement setting forth the basis on which  
the broker-dealer made the determination in (ii) above; and (iv) receive a      
signed and dated copy of such statement from the investor, confirming that it   
accurately reflects the investor's financial situation, investment experience   
and investment objectives. Compliance with these requirements may make it more  
difficult for holders of our common stock to resell their shares to third       
parties or to otherwise dispose of them in the market or otherwise.             

Shares eligible for future sale may adversely affect the market price of our    
common stock, as the future sale of a substantial amount of our restricted stock
in the public marketplace could reduce the price of our common stock.           

      From time to time, certain of our stockholders may be eligible to sell all
or some of their shares of common stock by means of ordinary brokerage          
transactions in the open market pursuant to Rule 144, promulgated under the     
Securities Act ("Rule 144"), subject to certain limitations. In general,        
pursuant to Rule 144, a stockholder (or stockholders whose shares are           
aggregated) who has satisfied a one-year holding period may, under certain      
circumstances, sell within any three-month period a number of securities which  
does not exceed the greater of 1% of the then outstanding shares of common stock
or the average weekly trading volume of the class during the four calendar weeks
prior to such sale. Rule 144 also permits, under certain circumstances, the sale
of securities, without any limitations, by a non-affiliate of our company that  
has satisfied a two-year holding period. Any substantial sale of common stock   
pursuant to Rule 144 or pursuant to any resale prospectus may have an adverse   
effect on the market price of our securities.                                   

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 USE OF PROCEEDS

     This prospectus relates to shares of our common stock that may be offered
and sold from time to time by the selling stockholders. We will not receive any 
proceeds from the sale of shares of common stock in this offering. However, we  
will receive the sale price of any common stock we sell to the selling          
stockholder upon exercise of the warrants. We expect to use the proceeds        
received from the exercise of the warrants, if any, for general working capital 
purposes.                                                                       

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

    Our common stock is traded on the OTC Bulletin Board, referred to herein
as the OTCBB, under the symbol "SRCO.ob." 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        Low

Fiscal Year 2004 (May 1, 2003 - April 30, 2004) *                               
First quarter (May 1, 2003 - July 31, 2003)                   $  0.01    $ 0.01 
Second quarter (August 1, 2003 - October 31, 2003)            $  0.05    $ 0.01 
Third quarter (November 1, 2003 - January 31, 2004)           $  0.03    $ 0.017
Fourth quarter (February 1, 2004 - April 30, 2004)            $  0.20    $ 0.03 

Fiscal Year 2005 (May 1, 2004 - April 30, 2005)                                 
First quarter (May 1, 2004 - July 31, 2004)                   $  1.60    $ 0.80 
Second quarter (August 1, 2004 - October 31, 2004)            $  0.96    $ 0.48 
Third quarter (November 1, 2004 - January 31, 2005)           $  0.96    $ 0.48 
Fourth quarter (February 1, 2005 - April 30, 2005)            $  1.05    $ 0.45 

Fiscal Year 2006 (May 1, 2005 - April 30, 2006)                                 
First quarter (May 1, 2005 - July 31, 2005)                   $  1.01    $ 0.25 
Second quarter (August 1, 2005 - October 31, 2005)            $  0.96    $ 0.59 
Third quarter (November 1, 2005 - January 31, 2006)           $  0.81    $ 0.41 
Fourth quarter (February 1, 2006 - April 30, 2006)            $  0.73    $ 0.42 

*     On December 27, 2004, we effected a net effective 25:200 common stock     
      split. Fiscal year 2004 stock prices have not been adjusted to give effect
for such 25:200 stock split effected.                               

    As of April 25, 2006, there were approximately 3003 holders of record of
our common stock.                                                               

  We have appointed Executive Registrar & Transfer Inc. 3615 South Huron
Street, Suite 104, Englewood, CO 80110, as transfer agent for our shares of     
common stock.                                                                   

Equity Compensation Plan Information                                            

  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, 2005, no securities were granted under this plan.      

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    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. On April  
29, 2005, stock options to purchase 175,000 shares vested, and the remaining    
options are to vest in equal installments over the next four anniversary date of
the agreement.                                                                  

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

      The following table summarizes our equity compensation plan information as
of April 30, 2005.                                                              

                                                        [Enlarge/Download Table]


                                                                                        Number of Shares 
                                                                                      Remaining Available
                                           Number of Shares to                        for Future Issuance
                                              Be Issued upon                              Under Equity   
                                               Exercise of        Weighted-Average     Compensation Plans
                                               Outstanding       Exercise Price of     (Excluding Shares 
                                            Options, Warrants   Outstanding Options,      Reflected in   
                                                and Rights      Warrants and Rights       Column (a))    
                Plan Category(1)                   (a)                  (b)                   (c)        
-----------------------------------------  -------------------  --------------------  -------------------
                                                                                                         
Equity Compensation plans approved by                                                                    
  stockholders...........................               0                N/A                8,500,000    
Equity Compensation plans not approved by                                                                
  stockholders...........................       1,075,000             $0.529                      N/A    
    Total................................       1,075,000             $0.529                8,500,000    

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

FORWARD-LOOKING INFORMATION                                                     

   The information in this report contains forward-looking statements. All
statements other than statements of historical fact made in this report are     
forward looking. In particular, the statements herein regarding industry        
prospects and future results of operations or financial position are            
forward-looking statements. These forward-looking statements can be identified  
by the use of words such as "believes," "estimates," "could," "possibly,"       
"probably," anticipates," "projects," "expects," "may," "will," or "should" or  
other variations or similar words. No assurances can be given that the future   
results anticipated by the forward-looking statements will be achieved.         
Forward-looking statements reflect management's current expectations and are    
inherently uncertain. Our actual results may differ significantly from          
management's expectations.                                                      

    The following discussion and analysis should be read in conjunction with
our financial statements, included herewith. This discussion should not be      
construed to imply that the results discussed herein will necessarily continue  
into the future, or that any conclusion reached herein will necessarily be      
indicative of actual operating results in the future. Such discussion represents
only the best present assessment of our management.                             

MERGER AND CORPORATE RESTRUCTURE                                                

      Prior to February 27, 2004, we did not conduct any substantive operations.
On February 27, 2004, pursuant to an Agreement and Plan of Reorganization, we   
acquired Sparta Commercial Services, LLC, in a transaction viewed as a reverse  
acquisition. The purpose of the transaction was to try to create some value for 
our shareholders. As an inactive publicly registered shell corporation with no  
significant assets or operations, our business plan was to seek an acquisition  
candidate. Sparta sought access to financing, as a publicly-held company. As a  
result of the reverse acquisition, there was a change in control of our company.
In accordance with SFAS No. 141, Sparta Commercial Services LLC was the         
acquiring entity. While the transaction is accounted for using the purchase     
method of accounting, in substance the Agreement is a recapitalization of the   
Company's capital structure and is recorded as a capital transaction rather than
a business combination under SFAS 141.                                          

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     For accounting purposes, the Company has accounted for the transaction as
a reverse acquisition and Sparta Commercial Services LLC shall be the surviving 
entity. The Company did not recognize goodwill or any intangible assets in      
connection with the transaction and there were no adjustments to the Company's  
historic carrying values of the assets and liabilities.                         

   Until January 31, 2005, Sparta was a development stage company. Efforts
had been principally devoted to developing 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 600cc and higher) and        
utility-oriented 4-stroke all terrain vehicles (ATVs).                          

     To date, we have generated limited sales revenues, have incurred expenses
and have sustained losses. Consequently, our operations are subject to all the  
risks inherent in the establishment of a new business enterprise. For the period
from October 1, 2001 (date of Sparta's inception) through April 30, 2005, we    
have accumulated losses of $6,277,658.                                          

RESULTS OF OPERATIONS                                                           

COMPARISON OF THE NINE MONTHS ENDED JANUARY 31, 2006 TO THE NINE MONTHS ENDED   
JANUARY 31, 2005                                                                

  For the nine months ended January 31, 2006 and 2005, we have generated
limited, but increasing sales revenues, have incurred significant expenses, and 
have sustained significant losses. We believe we will begin to earn increasing  
revenues from operations during the remainder of fiscal 2006 and in the upcoming
fiscal year.                                                                    

Revenues                                                                        

     Revenues totaled $90,629 during the nine months ended January 31, 2006 as
compared to $47,879 during the nine months ended January 31, 2005. Current      
period revenue was comprised primarily of $62,806 in lease revenue, $6,747 in   
dealer fees, and $9,900 in private label fees. Prior period revenue was         
comprised primarily of $16,607 in lease revenue, $20,300 in dealer fees and     
$9,517 in private label fees.                                                   

Costs and Expenses                                                              

      General and administrative expenses were $3,819,526 during the nine months
ended January 31, 2006, compared to $1,523,941 during the nine months ended     
January 31, 2005, an increase of $2,295,585, or 151%. Expenses incurred during  
the current nine month period consisted primarily of the following expenses:    

Compensation and related costs, $947,440; Accounting, audit and     
professional fees, $219,785; Consulting fees, $2,142,477; Rent, $114,404; and   
Travel and entertainment, $58,457. Expenses incurred during the comparative nine
month period consisted primarily of the following expenses: Compensation and    
related costs, $623,400; Accounting, audit and professional fees, $143,038;     
Consulting fees, $164,068; Rent, $50,364; Travel and entertainment, $58,480     
License fees, $150,633, and the value of warrants issued to the private         
placement agent of $105,303. Of the current nine months consulting expense,     
$1,590,000 will be paid through the issuance of 2,650,000 shares of common      
stock.                                                                          

  In connection with its private placement transactions, the Company has
expensed non-cash costs of $406,665 during the nine months ended January 31,    
2006 related to warrants granted to the private placement agent, with no related
expense during the comparative period. The Company also incurred a non-cash     
charge of $605,442 during the nine months ended January 31, 2006 related to     
shares of common stock issued or to be issued in connection with debt financing 
and has recorded an expense of $2,040,000 related to the failure to file a      
registration statement or have an effective registration statement covering the 
underlying shares of common stock issuable upon conversion of it preferred stock
and the related warrants. This expense will be settled through the issuance of  
shares and warrants. There were no comparable expenses during the nine months   
ended January 31, 2005. We have also recorded non-cash income of $126,177       
related to the decrease in value of warrants issued with registration rights.   
The fair value of these warrants is classified as a liability on the balance    
sheet.                                                                          

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Net Loss                                                                        

   We incurred a net loss before preferred dividends of $6,734,000 for our
nine months ended January 31, 2006 as compared to $1,493,850 for the            
corresponding interim period in 2005. The $5,240,150 or 351% increase in our net
loss before preferred dividends for our nine month interim period ended January 
31, 2006 was attributable primarily to a $2,295,585 increase in general and     
administrative expense and a net increase of $2,924,771 in non-cash financing   
costs.                                                                          

  We also incurred preferred dividend expense of $1,886,683 for our nine
month period ended January 31, 2006 with an expense of $810,000 in the          
corresponding interim period of 2005. The increase in preferred dividend expense
was attributable to the sale of convertible preferred stock that commenced in   
December, 2004 and concluded in July 2005. In addition to dividends payable on  
the outstanding preferred stock, preferred dividend expense for 2006 and 2005   
includes an aggregate charge of $1,775,000 and $810,000, respectively, related  
to warrants issued with the convertible preferred stock and a beneficial        
conversion feature associated with the preferred stock.                         

    Our net loss attributable to common stockholders increased to $8,620,683
for our nine month period ended January 31, 2006 as compared to $2,303,850 for  
the corresponding period in 2005. The $6,316,833 increase in net loss           
attributable to common stockholders for our nine month period ended January 31, 
2006 was due to the $5,240,150 increase in our net loss before preferred        
dividends, increased by the aforesaid $1,076,683 increase in preferred dividend 
expense.                                                                        

COMPARISON OF THE YEAR ENDED APRIL 30, 2005 TO THE YEAR ENDED APRIL 30, 2004    

For the year ended April 30, 2005, we have generated limited sales  
revenues, have incurred significant expenses, and have sustained significant    
losses. We believe we will begin to earn increasing revenues from operations in 
fiscal 2006 as we complete our transition to an operating company.              

Revenues                                                                        

     Revenues totaled $65,833 in fiscal 2005 compared to $0 revenues in fiscal
2004. Fiscal 2005 revenue was comprised of $22,800 in dealer fees, $9,900 in    
private label fees, $17,575 in lease payments and $15,558 in other fees and     
income.                                                                         

Costs and Expenses                                                              

    The Company incurred licensing fees of $150,633 for the year ended April
30, 2005, and $730,433 for the year ended April 30, 2004, respectively. The     
costs incurred were for the licensing of certain proprietary software, operating
systems and processes for use in connection with the extension of credit and    
underwriting techniques for the purchase of contracts and of leased motor       
vehicles. The decrease from fiscal 2004 to fiscal 2005 reflects the fact that   
this process is nearing completion.                                             

  The Company incurred organization costs of $294,408 for the year ended
April 30, 2005, and $670,486 for the year ended April 30, 2004, respectively.   
Organizational costs consist of establishing business procedures, filing to do  
business web site development and related activities. The year to year decrease 
in organization costs is primarily attributed to the wind down of initial       
organizational activity.                                                        

  The Company incurred compensation costs of $828,298 for the year ended
April 30, 2005 compared with $223,968 in fiscal 2004. The increase is related to
the costs of the Company increasing its employment base during 2005 including   
the addition of a Chief Operating Officer and a Chief Financial Officer as well 
as several administrative personnel. At April 30, 2005, the headcount was eight.
As the Company continues to expand, the Company will incur additional costs for 
personnel. In order for the Company to attract and retain quality personnel,    
management anticipates it will continue to offer competitive salaries and issue 
common stock to consultants and employees.                                      

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 The Company paid $233,333 and $135,140 to its managing member, who is
Chairman and Chief Executive Officer, in fiscal 2005 and 2004, respectively.    
These payments were charged to operations, and are included in the compensation 
costs shown above.                                                              

 In connection with the private placement transaction, the Company has
expensed non cash costs of $383,284 to issue warrants to the private placement  
agent for the year ended April 30, 2005 and $0 in fiscal 2004. The Company has  
expensed non cash costs $1,810,000 which equals the intrinsic value of the      
imbedded beneficial conversion feature for the Preferred Stock holders for the  
year ended April 30, 2005 and $0 in fiscal 2004. At April 30, 2005, accrued     
preferred dividends of $28,906 were charged to operations. There was no accrual 
made in fiscal 2004.                                                            

   The Company incurred legal and accounting fees of $197,384 for the year
ended April 30, 2005, as compared to $85,962 for the year ended April 30, 2004, 
respectively. The increase in costs is related to legal and accounting expenses 
associated with finalizing the private placement and complying with various     
federal and state securities statutes, rules and regulations.                   

  The Company incurred other operating expenses of $791,647 for the year
ended April 30, 2005. Notable expenses in this category are the cost of a       
purchase option for a portfolio of equipment leases of $250,000, rent of        
$125,214, consulting expenses of $84,365, travel of $79,547, advertising of     
$28,107, telecommunications of $21,476 and depreciation of $22,626. The         
remainder is comprised of expenses for postage, shipping, storage, repairs and  
other normal operating costs. In fiscal 2004, other operating costs totaled     
$70,119, comprised of rent of $19,772, travel of $18,430, advertising of $4,057 
and all other expenses of $27,860.                                              

Net Loss                                                                        

     Our net loss for the year ended April 30, 2005 was $4,418,727 in contrast
to a loss of $1,772,257 for the year ended April 30, 2004, respectively. The    
increase in net loss was due primarily to the fact that the Company incurred    
expenses related to the private placement transaction, consisting of non cash   
expense of a beneficial conversion discount of $1,810,000, and a non cash       
expense of $383,284 for warrants issued to the placement agent in 2005 and to   
the fact that the Company has increased its resources and spending in 2005 as it
transitioned from a development stage to an operating entity. The payment of    
$250,000 for a purchase option for equipment leases from American Motorcycle    
Leasing Corp. ("AML") also contributed to the loss. While AML is not a          
shareholder of the Company, our President and Chief Executive Officer is an     
officer and a minority shareholder of AML.                                      

 As a result of significant restrictions on transfers of the equipment
leases owned by AML including, but not limited to, obtaining approvals from     
AML's secured lender, and the agreement's non-exclusivity, the Company has      
accounted for the fee as an expense and has charged the $250,000 to operations  
in the current year.                                                            

  While the Company has charged the fee to operations during the current
year, the Company believes that the purchase option, subject to the terms and   
conditions described, may provide us with the opportunity to expand its         
equipment leasing portfolio, which would benefit the Company. However, there is 
no guaranty that we will acquire any of the assets held by AML at terms and     
conditions acceptable to us.                                                    

    Our net loss per common share (basic and diluted) was $0.05 for the year
ended April 30, 2005 and $0.25 for the year ended April 30, 2004.               

LIQUIDITY AND CAPITAL RESOURCES                                                 

As of January 31, 2006, the Company had a working capital deficit of
$3,023,127. The Company generated a deficit in cash flow from operations of     
$2,172,063 for the nine months ended January 31, 2006. This deficit is primarily
attributable to the Company's net loss from operations of $6,734,000, partially 
offset by depreciation and amortization of $58,045 and the fair value attributed
to stock and warrants issued of $1,172,910, and to changes in the balances of   
current assets and liabilities. Accounts payable and accrued expenses increased 
by $3,458,030, deferred revenue increased by 91,860 and prepaid expenses and    
deposits increased by $184,675. Included in accounts payable and accrued        
expenses at January 31, 2006 are accrued penalties of $2,040,000 related to the 
failure to file a registration statement or have an effective registration      
statement covering the underlying shares of common stock issuable upon          
conversion of it preferred stock and the related warrants. This expense will be 
settled through the issuance of shares and warrants or the cancellation of the  
obligation through negotiation with shareholders. Also included in accounts     
payable and accrued expenses at January 31, 2006 are accrued consulting and     
advisory fees of $1,590,000, which will be paid through the issuance of         
2,650,000 shares of common stock.                                               

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   The Company, pursuant to the terms of the private placement of Series A
Convertible Preferred Stock with Warrants (the "Units"), which placement had its
final closing on July 27, 2005, is required to issue to the holders of such     
Units and the Placement Agent penalty shares such that the number of shares of  
Common Stock issuable upon conversion of the Series A Preferred Stock and the   
exercise of the Warrants and the Placement Agent Warrants shall be increased    
each month until the Company files with the Securities and Exchange Commission  
(the "SEC"),a registration statement registering the common shares underlying   
the Units. As of January 31, 2006, the aggregate number of penalty shares       
accrued for the shares issuable upon conversion of the Series A Convertible     
Preferred Stock is 1,953,290 and the fair value expensed for these shares at    
January 31, 2006 is $1,332,000. The aggregate number of penalty shares accrued  
upon exercise of the Warrants and Placement Agent Warrants is 1,140,146 and the 
fair value expense for these shares at January 31, 2006 is $708,000.            
Additionally, for each month, or fraction thereof, subsequent to January 2006   
and until such registration statement is filed, the Company will be required to 
issue an additional 574,498 penalty shares for the shares issuable upon         
conversion of the Series A Convertible Preferred Stock and 335,537 penalty      
shares upon exercise of the Warrants and Placement Agent Warrants. Pursuant to  
the terms of the $3 million private placement of the Company's common stock     
which commenced in December 2005 and terminated in March 2006 (the "PPM"), the  
Company is required to file with the SEC a registration statement registering   
the common shares sold pursuant to the PPM. If such registration statement is   
not filed by April 28, 2006, and for each month or fraction thereof until such  
registration is filed, the Company will be required to issue up to 179,487      
additional penalty shares to the purchasers of the PPM and the Placement Agent. 
As of March 16, 2006, the Company has obtained, from Unit holders, conditional  
waivers which cancel the Companies obligation to issue a total of approximately 
775,000 penalty shares representing valuation expense of approximately $524,000 
at January 31, 2006. Assuming the condition is met the $524,000 will be         
recognized as a reduction of non-cash financing cost with a like reduction in   
accrued accounts payable. Such waivers are conditioned upon the Company filing  
with the SEC a registration statement registering the common shares underlying  
the Units within 30 days of the final closing of the Company's current private  
placement offering. The Company is seeking to obtain penalty waivers from the   
remaining Unit holders and Placement Agent. There is no assurance that such     
additional waivers can or will be obtained.                                     

     Cash flows used in investing activities for the nine months ended January
31, 2006 was $592,976, primarily due to the purchase of property and equipment  
of $32,390, payments for motorcycles and vehicles of $200,524 and investments in
leases of $353,562.                                                             

      The Company met its cash requirements during the nine month period through
net proceeds from the issuance of equity of $3,319,497, debt financing of       
$372,675 and subscriptions for units of our securities, consisting of one share 
of common stock and a warrant to purchase one share of common stock exercisable 
for three years at $0.80 per share, of $330,000, all partially offset by        
payments on bridge loans and other financing of $357,244. Additionally, the     
Company has received limited revenues from leasing and financing motorcycles and
other vehicles, its recently launched private label programs and from dealer    
sign-up fees.                                                                   

  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, which may take the form of debt, convertible debt or equity, in order
to provide the necessary working capital. There is no guarantee that we will be 
successful in raising the funds required.                                       

      We estimate that we will need approximately $1,750,000 in additional funds
to fully implement our business plan during the next twelve months for a credit 
line reserve and for our general operating expenses. As of the date of this     
filing, we have more than sufficient operating capital to continue our planned  
business operations for the next twelve months and for our general operating    
expenses. Although the Company obtained a senior credit facility in July 2005,  
which allowed us to commence our initial active operations, this facility       
finances only three of our five credit tiers, thus we will need to obtain       
additional credit facilities to fully implement our business plan. We are       
presently seeking those additional credit facilities and long term debt. This   
additional, 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. If we are not successful in generating sufficient   
liquidity from operations or in raising sufficient capital resources to finance 
our growth, 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.                                                                          

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

    The independent auditors report on our April 30, 2005 and 2004 financial
statements included in the Company's Annual Report states that the Company's    
historical losses and the lack of revenues raise substantial doubts about the   
Company's ability to continue as a going concern, due to the losses incurred and
its lack of significant operations. If we are unable to develop our business, we
have to discontinue operations or cease to exist, which would be detrimental to 
the value of the Company's common stock. We can make no assurances that our     
business operations will develop and provide us with significant cash to        
continue operations.                                                            

PLAN OF OPERATIONS                                                              

ADDRESSING THE GOING CONCERN ISSUES                                             

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

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

  The primary issues management will focus on in the immediate future to
address this matter include:                                                    

o     seeking additional credit lines from institutional lenders;   

   o     seeking institutional investors for debt or equity investments in
our company; and                                        

o     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                                                             

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 From our inception through the period ended January 31, 2006, we have
relied on the services of outside consultants for services and currently have   
nine 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 50% during the next twelve months. As we continue to  
expand, we will incur additional cost for personnel. This projected increase in 
personnel is dependent upon our generating revenues and obtaining sources of    
financing. There is no guarantee that we will be successful in raising the funds
required or generating revenues sufficient to fund the projected increase in the
number of employees.                                                            

INFLATION                                                                       

   The impact of inflation on the costs of the Company, and the ability to
pass on cost increases to its customers over time is dependent upon market      
conditions. The Company is not aware of any inflationary pressures that have had
any significant impact on the Company's operations over the past quarter, and   
the Company does not anticipate that inflationary factors will have a           
significant impact on future operations.                                        

CRITICAL ACCOUNTING POLICIES                                                    

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

REVENUE RECOGNITION                                                             

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

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

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

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

STOCK-BASED COMPENSATION                                                        

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 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.       

RECENT ACCOUNTING PRONOUNCEMENTS                                                

In February 2006, the FASB issued SFAS 155, which applies to certain
"hybrid financial instruments," which are instruments that contain embedded     
derivatives. The new standard establishes a requirement to evaluate beneficial  
interests in securitized financial assets to determine if the interests         
represent freestanding derivatives or are hybrid financial instruments          
containing embedded derivatives requiring bifurcation. This new standard also   
permits an election for fair value remeasurement of any hybrid financial        
instrument containing an embedded derivative that otherwise would require       
bifurcation under SFAS 133. The fair value election can be applied on an        
instrument-by-instrument basis to existing instruments at the date of adoption  
and can be applied to new instruments on a prospective basis. Management is     
assessing the implications of this standard, which may materially impact the    
Company's results of operations in the fourth quarter of fiscal year 2006 and   
thereafter.                                                                     

 In February 2006, the FASB issued FASB Staff Position ("FSP") No. FAS
123(R)-4, "Classification of Options and Similar Instruments Issued as Employee 
Compensation That Allow for Cash Settlement upon the Occurrence of a Contingent 
Event," which amends SFAS No. 123(R) to require that options issued with a cash 
settlement feature that can be exercised upon the occurrence of a contingent    
event that is outside the employee's control should not be classified as        
liabilities until it becomes probable that the event will occur. For companies  
that adopted SFAS No. 123(R) prior to the issuance of the FSP, application is   
required in the first reporting period beginning after February 3, 2006.        
Currently, the Company has no stock options outstanding with contingent cash    
settlement features, and as a result, the FSP will not impact the Company's     
consolidated financial statements.                                              

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. The 
Company has 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.                

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.        

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BUSINESS

OUR ORGANIZATION HISTORY                                                        

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

      On November 6, 1983, we changed our corporate name to Tomahawk Industries,
Inc.                                                                            

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

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

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

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

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

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

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

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

OUR BUSINESS                                                                    

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

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

BUSINESS OVERVIEW                                                               

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

o     Retail installment sales contracts and leases;                
o     Private label programs for manufacturers and distributors;    
     o     Ancillary products and services, such as private label gap coverage
and private label service contracts; and                
o     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 the      
financing alternative because depreciation generated by Sparta's leasing        
activities will reduce income tax due on income resulting from Sparta's retail  
installment sales contracts.                                                    

RETAIL INSTALLMENT SALES CONTRACTS AND LEASES                                   

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

To insure that Sparta's Credit Evaluation Process and Collateral    
Guidelines are consistently applied and that the credit/underwriting decision   
process provides rapid decisioning to Sparta Authorized Dealers and the Private 
Label Dealers, Sparta has developed a point of sale credit application and      
contract decisioning system. This system is named "iPLUS" and is structured as  
an Application Service Provider ("ASP") and has the capability of providing the 
dealer with conditional approvals without human involvement seven days a week,  
twenty-four hours a day. This technology provides quick, consistent credit      
decisions for our dealer network and reduces the number of credit analysts      
required, thereby, reducing Sparta's personnel expense. Depending on Sparta's   
arrangement with its lending sources, in the case of consumer finance contracts,
Sparta may finance its purchase of the contracts by borrowing from a lending    
source and pledging the retail finance contracts as collateral for the loan.    

      All of the installment sale contracts will be secured by qualified, titled
motorcycles with 600+cc and higher engines, 4-stroke all-terrain vehicles       
(ATVs), or select scooters. Customer financing needs are projected to range from
approximately $2,000 to $35,000. Contract terms of 24 to 60 months will be      
offered.                                                                        

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

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PRIVATE LABEL PROGRAMS FOR MANUFACTURERS AND DISTRIBUTORS                       

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

 (1)   MALAGUTI USA - the North American Distributor for Malaguti SPA.

     (2)   KYMCO Motorsports - the exclusive importer and distributor of KYMCO
brand scooters for the USA.                             

 (3)   CMSI (Classic Motorcycle and Sidecars, Inc.) - manufacturer and
     distributor of the Flying Tiger Motorcycle and TN'G Scooters.

(4)   ETON America, LLC. - the U.S. subsidiary of ETON Worldwide.   

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

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 our dealers that are costly to obtain on an individual dealer   
basis. Also, we offer a private label GAP (Guaranteed Auto Protection) plan for 
our dealers:                                                                    

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

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

REVENUE FROM REMARKETING OFF-LEASE AND REPOSSESSED VEHICLES                     

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

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

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

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

CREDIT AND COLLECTIONS                                                          

POLICIES AND PROCEDURES                                                         

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

CREDIT EVALUATION PROCESS AND COLLATERAL GUIDELINES                             

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

IPLUS (INTERNETPURCHASING 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 and is structured as an Application Service  
Provider ("ASP") and has the capability of providing the dealer with conditional
approvals without human involvement 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 will provide   
the Sparta Authorized Dealers and Private Label Dealers with a competitive      
advantage and will increase Sparta's ability to garner a larger share of the    
dealer's business.                                                              

Major features of iPLUS include:                              

o     100% WEB Browser Based ( www.spartacommercial.com)            
o     User friendly system                                          
o     No costly software required by the users                      
o     Operates on any dial-up connection as slow as 28.8            
      o     Requires Internet Explorer 5.5 or above, Adobe Acrobat Reader 5.0 or
above, both available at no charge on the Internet      

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o     Integrated scorecard and decision engine                      
      o     Integrated credit bureau retrieval and review (can access any of the
3 major bureaus)                                        
    o     Once application is submitted; decisions in seconds/7 Days a Week/
24 Hours a Day                                          
o     Easy to complete customer application                         
o     Dealer application management                                 
     o     Dealer Desking Tool - Profit Manager (Assists dealer in structuring
any approved application.)                              
o     Prints approved customer contract and contract package        
o     Captures information in electronic format                     
o     Complete underwriting documentation and control system        
o     Dealer communication                                          
      o     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 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 tier system by using an empirical score card
and then assigning its own credit tiers based on Sparta's experience. This      
credit tier is used as the basis to determine the terms and conditions under    
which an applicant is approved or declined.                                     

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

COLLECTION PROCEDURES                                                           

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

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

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

USING DIVERSIFICATION TO REDUCE PORTFOLIO RISK                                  

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

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

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

SPARTA APPROVED VEHICLE MODELS - Advance rates and other credit restrictions    
will be in effect for certain models and years based on the relevant facts and  
circumstances.                                                                  

MARKET INFORMATION                                                              

As reported in the 2005 Annual Statistical Report of the Motorcycle 
Industry Council, retail sales of new motorcycles have grown steadily from 1991 
through 2005. North American registrations of new 651cc and higher motorcycles  
reached 517,600 in 2005. This represents a 5% increase over 2004. Registrations 
have increased for 14 consecutive years. Retail sales of new and used           
motorcycles reached $10.7 billion in 2004.                                      

    U.S. sales of new ATVs were estimated to be 780,435 units in 2005 with a
market value of $1.6 billion and scooter sales approached 57,000 in 2005 and are
growing at a 17% annual rate, as reported in Powersports Business Magazine in   
the April 3, 2006 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 an in-house 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 in-house direct sales force is comprised of a
Marketing Group and a Dealer Support Group.                                     

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

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

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     While we do not market or sell directly to consumers, 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 our nearest Authorized dealer or     
Private Label Dealer in their area. Consumers will be able to view the          
Classified Section of the website and any consumer inquiring about the program  
will be directed to their nearest authorized dealer.                            

COMPETITION                                                                     

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

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

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

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

   The more significant competitors of Sparta include: GE Retail Services,
Capital One, HSBC/Household Bank, Sheffield Financial/BB&T, Lending Tree, CIT   
Bank, AIG, and Transamerica. To management's knowledge, none of these firms     
offer leases for powersports vehicles.                                          

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

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

      While some of Sparta's larger competitors have vast sources of capital and
may be able to offer lower interest rates due to lower borrowing costs, Sparta  
believes that the combination of management's experience, expedient service,    
availability of the lease option and iPLUS give Sparta an advantage over its    
competitors.                                                                    

REGULATION                                                                      

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

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

o     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.                      

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

     o     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.                                                 

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

o     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.          

      o     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.                            

   o     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.                                                

     o     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.             

  o     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.                                 

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      o     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. 

     o     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 May 12, 2006, we had 15 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.                                           

FACILITIES

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

      We believe that our existing facilities will be adequate to meet our needs
for the foreseeable future. Should we need additional space, management believes
it will be able to secure additional space at commercially reasonable rates.    

 LEGAL PROCEEDINGS

   From time to time, we may become involved in various lawsuits and legal
proceedings, which arise in the ordinary course of business. We are not         
currently aware of any such legal proceedings or claims.                        

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS                                                

Our executive officers and directors and their respective ages and  
positions as of May 12, 2006 are as follows:                                    

Name                   Age  Position                                            
----                   ---  --------                                            
Anthony L. Havens      52   Chief Executive Officer, President, Acting Chief    
      Financial Officer and Chairman
Kristian Srb           51   Director                                            
Jeffrey Bean           52   Director                                            
Richard P. Trotter     63   Chief Operating Officer                             
Sandra L. Ahman        42   Vice President, Secretary and Director              

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

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

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

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

SANDRA L. AHMAN, VICE PRESIDENT, SECRETARY AND DIRECTOR. On March 1, 2004,      
Sandra Ahman became Vice President of Operations and Secretary of Sparta, and a 
Director on June 1, 2004. She has been a Vice President of Sparta Commercial    
Services, LLC since formation. From 1994 to 2004, she was Vice President of     
Operations of American Motorcycle Leasing Corp. Prior to joining American       
Motorcycle Leasing Corp., Ms. Ahman was with Chatham Capital Partners, Ltd.     
Before joining Chatham in 1993, she was Manager, Human Resources for Comart and 
Aniforms, a sales promotion and marketing agency in New York, where she worked  
from 1986 to 1993. For the past 10 years, Ms. Ahman has been an active volunteer
with The Children's Aid Society in New York City. She is the Chairperson of its 
Associates Council, a membership of 500 committed volunteers.                   

There are no family relationships between any of our directors or   
executive officers.                                                             

Board Committees                                                                

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

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

Code of Ethics                                                                  

   We have not yet adopted a "code of ethics", as defined by the SEC, that
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.                   

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Director Compensation                                                           

      Directors are reimbursed for reasonable out-of-pocket expenses incurred in
connection with attendance at Board meetings.                                   

EXECUTIVE COMPENSATION

     The following table sets forth the annual and long-term compensation paid
to our Chief Executive Officer and the other executive officers. We refer to all
of these officers collectively as our "named executive officers."               

Summary Compensation Table

 Prior to February 27, 2004, management spent less than five hours per
month on company matters. Accordingly, no officer or director received any      
compensation other than reimbursement for out-of-pocket expenses incurred on our
behalf, and no cash compensation, deferred compensation, employee stock options,
or long-term incentive plan awards were issued or granted to our management     
through February 27, 2004.                                                      

                                                        [Enlarge/Download Table]

                                  Annual Compensation                        Long Term                        
                                                                           Compensation                       
                                                                              Awards                          
Name and                                               Other     Restricted          Securities               
Principal                                             Annual        Stock            Underlying     All Other 
Position        Year      Salary       Bonus       Compensation    Awards           Options/SARS  Compensation

                                                                                                              
Anthony L.      2005  $  233,333      $   0            $   0             0                  0         $   0   
Havens (1)      2004  $   46,667      $   0            $   0             0                  0         $   0   
Chief                                                                                                         
Executive                                                                                                     
Officer,                                                                                                      
President, and                                                                                                
Director                                                                                                      

Richard P.      2005  $   80,000      $   0            $   0       125,000(3)         875,000(4)      $   0   
Trotter (2)                                                                                                   
Chief                                                                                                         
Operating                                                                                                     
Officer                                                                                                       

Michael J.      2005  $    3,125      $   0            $   0             0                  0         $   0   
Mele (5)                                                                                                      
Chief                                                                                                         
Financial                                                                                                     
Officer                                                                                                       

Daniel J.       2005  $  105,001      $   0            $   0       227,272(7)               0         $   0   
Lanjewar (6)                                                                                                  
Former Chief                                                                                                  
Financial                                                                                                     
Officer                                                                                                       

Sandra L.       2005  $   75,000      $   0            $   0             0                  0         $   0   
Ahman (8)       2004  $   12,500      $   0            $   0             0                  0         $   0   
Vice President                                                                                                
and Secretary                                                                                                 

(1)   Became an officer on February 27, 2004. His reported fiscal year 2004     
    compensation covers the period February 27, 2004 through April 30, 2004.
(2)   Became an officer on November 1, 2004. His reported fiscal year 2005      
   compensation covers the period November 1, 2004 through April 30, 2005.
(3)   Refers to restricted stock, subject to vesting, granted. Pursuant to an   
    employment agreement, Mr. Trotter is entitled to up to 125,000 shares of
  common stock. The grant of shares is subject to vesting and subject to
continued employment. On November 1, 2004, 25,000 shares vested. An 
      additional 100,000 shares are subject to vesting at a future date, subject
      to proportionate adjustment in the event of employment termination for any
     incomplete vesting period, as follows: 25,000 shares on November 1, 2005;
 25,000 shares on November 1, 2006; 25,000 shares on November 1, 2007;
12,500 shares on November 1, 2008; and 12,500 on November 1, 2009.  

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(4)   Refers to stock options, subject to vesting, granted. Pursuant to 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. On April 29, 2005,
      stock options to purchase 175,000 shares vested, and the remaining options
    are to vest in equal installments over the next four anniversary date of
the agreement.                                                      
(5)   Became an officer on April 29, 2005. His reported fiscal year 2005        
compensation covers the period from April 29, 2005.                 
(6)   Became an officer on August 2, 2004, and resigned on April 29, 2005. His  
   reported fiscal year 2005 compensation covers the period August 2, 2004
through April 29, 2005.                                             
(7)   Refers to shares vested. Pursuant to an employment agreement, Mr. Lanjewar
     was entitled to up to 568,175 shares of common stock. The grant of shares
     was subject to vesting and subject to continued employment. On January 1,
    2005, 113,635 shares vested, and the reminder of the shares were to vest
      in equal portions on July 1, 2005, July 1, 2006, July 1, 2007, and July 1,
2008, subject to proportionate adjustment in the event of employment
      termination for any incomplete vesting period. In April 2005, Mr. Lanjewar
      resigned as our Chief Financial Officer, and was vested with an additional
113,637 shares of common stock.                                     
(8)   Became an officer on March 1, 2004. Her reported fiscal year 2004         
compensation covers the period March 1, 2004 through April 30, 2004.

                                                        [Enlarge/Download Table]

                              OPTION/SAR GRANTS IN LAST FISCAL YEAR                   
                                        INDIVIDUAL GRANTS                             

                 Number of                                                            
           Securities Underlying    % of Total Options/SARs    Exercise or            
                Options/SARs        Granted to Employees in    base price   Expiration
Name             Granted(#)               Fiscal Year            ($/Sh)        Date   

                                                                                      
Richard P.      875,000 (a)                  100 %               $0.605     4-29-10(b)
Trotter                                                                               

(a)   Refers to stock options, subject to vesting, granted. Pursuant to 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. On April 29, 2005,
      stock options to purchase 175,000 shares vested, and the remaining options
    are to vest in equal installments over the next four anniversary date of
the agreement.                                                      
(b)   Refers to expiration date of vested options.                              

                                                        [Enlarge/Download Table]

                           AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR                                   
                                      AND FY-END OPTION/SAR VALUES                                               

             Shares                       Number of securities                                                   
           Acquired on                    underlying unexercised                    Value of unexercised         
            Exercise     Value                 Options/SARs                       in-the-money options/SARs      
                        Realized               at FY-end (#)                           at FY-end ($)(a)          
Name           (#)        ($)        Exercisable        Unexercisable          Exercisable          Unexercisable

                                                                                                                 
Richard P.      --        --          175,000             700,000                  $0                   $0       
Trotter                                                                                                          

(a)   The dollar values were calculated by determining the difference between   
   the fair market value at fiscal year-end of the common stock underlying
     the options and the exercise price of the options. The last sale price of
     a share of Sparta's common stock on April 29, 2005 as reported by the OTC
Bulletin Board was $0.605.                                          

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Employment Agreements with Executive Officers                                   

 We have an employment agreement with Anthony L. Havens and Richard P.
Trotter. The remaining officers serve at the discretion of our board of         
directors and hold office until their successor is elected and qualified or     
until their earlier resignation or removal.                                     

Employment Agreement with CEO                                                   

   We entered into an employment agreement, dated as of February 27, 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:            

   o     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;                                    
    o     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;                              
    o     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                                                      
    o     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 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 is at an annual rate of $160,000. On   
May 1, 2005, his base salary increases 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 1,000,000 shares of our common 
stock. The grant of shares is subject to vesting and subject to continued       
employment. On November 1, 2004, 25,000 shares vested and on November 1, 2005,  
an additional 25,000 shares vested. An additional 75,000 shares are subject to  
vesting at a future date, subject to proportionate adjustment in the event of   
employment termination for any incomplete vesting period, as follows: 25,000    
shares on November 1, 2006; 25,000 shares on November 1, 2007; 12,500 shares on 
November 1, 2008; and 12,500 on November 1, 2009. He is entitled to three weeks 
of paid vacation during the first year of employment, and four weeks per year   
thereafter. He is entitled to health insurance, short term and long term        
disability insurance, retirement benefits, fringe benefits, and other employee  
benefits on the same basis as is made generally available to other employees. He
is entitled to reimbursement of reasonable business expenses incurred by him in 
accordance with company policies. The employment agreement provides for         
termination for cause. If terminated without cause, he is entitled to severance.
As severance, he shall be entitled to one week's base salary as of the date of  
termination for the first full year of service, and thereafter, two weeks' base 
salary for each succeeding year of service, up to an aggregate of four months of
such base salary.                                                               

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     On February 27, 2004, pursuant to an Agreement and Plan of Reorganization
with Sparta Commercial Services, LLC and its members, we acquired all of the    
membership interests of Sparta in exchange for the agreement for the issuance of
such number of shares of our common stock as would represent approximately      
91.75% of our outstanding shares. At February 26, 2004, we had an authorized    
capital of 200,000,000 shares and 56,637,228 shares issued and outstanding, and 
we issued the remaining balance of authorized capital of 143,362,772 shares     
(pre-split) to Sparta members. The remaining unissued balance of 486,511,854    
shares (pre-split) due to the Sparta members were subsequently issued upon      
completion of an increase in our authorized capital. Pursuant to the            
acquisition, all of our former directors and officers resigned, and nominated   
Anthony Havens, the designee of Sparta, as the officer and director. Present    
officers of the company, Anthony Havens and Sandra Ahman, acquired their        
respective ownership interest in our common stock pursuant to their exchange of 
membership interests of Sparta. Glenn A. Little, the former principal           
stockholder of the company, prior to the completion of acquisition owned        
40,000,000 shares, or 71%, of our then issued and outstanding shares of common  
stock. Sparta also entered into a consulting agreement for business and         
financial services with Glenn A. Little. The agreement was for a term of one    
year. Mr. Little received a fee of $100,000 pursuant to the consulting          
agreement.                                                                      

 We entered into a license agreement, dated as of June 1, 2002, and as
amended on December 3, 2003, with American Motorcycle Leasing Corp., an entity  
controlled by our president and a significant shareholder. Under the agreement, 
we have a non-exclusive, perpetual right to use American Motorcycle Leasing     
Corp.'s proprietary operating systems related to consumer credit underwriting   
procedures, vehicle and vehicle lease value evaluation methods, rental stream   
collection and insurance tracking policies and procedures. The license fee      
consisted of $300,000 and 330,433 membership interests of Sparta Commercial     
Services, LLC, which will be exchanged for 34,256,941 shares of Tomahawk upon an
increase in our authorized capital.                                             

 We entered into a services agreement, dated as of March 1, 2004, with
American Motorcycle Leasing Corp. For a period of three years, American         
Motorcycle Leasing Corp. is to provide personnel, computer equipment and        
software, and facilities, in connection with our credit and underwriting        
activities and our use of the operating systems that we had licensed from       
American Motorcycle Leasing Corp. In return for such services, we agreed to pay 
$100,000 by March 1, 2005, and for the time of the personnel utilized at their  
salary rate at American Motorcycle Leasing Corp.                                

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

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

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

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

  In June 2005, Kristian Srb, one of our directors, purchased on various
dates, an aggregate of 10,800 shares of our common stock at prices of $0.45 to  
$0.55 per share in the open market, as follows: on 6/13/2005, purchased 3,062   
shares at $0.51 per share; on 6/13/2005, purchased 1,938 shares at $0.55 per    
share; on 6/14/2005, purchased 800 shares at $0.55 per share; and on 6/20/2005, 
purchased 5,000 shares at $0.45 per share.                                      

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.                   

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information regarding the beneficial 
ownership of our common stock as of May 12, 2006 by:                            

    o     each person known by us to be the beneficial owner of more than 5%
of our Common Stock;                                    
o     each of our directors;                                        
o     each of our executive officers; and                           
o     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.                                                                          

                                                        [Enlarge/Download Table]

                                   Number of      Percentage                                   Percentage of 
                                     Shares        of Class                                        Class     
                                  Beneficially   Beneficially  Number of   Number of Shares     Beneficially 
                                 Owned Prior to   Owned Prior    Shares   Beneficially Owned  Owned After the
Name                                Offering      to Offering   Offered   After the Offering      Offering   
-------------------------------  --------------  ------------  ---------  ------------------  ---------------
                                                                                                             
Anthony L. Havens (1)              32,833,250        28.8%         0          32,833,250 (1)       20.6%     
Kristian Srb (2)                   33,045,750        29.0%         0          33,045,750           20.7%     
Jeffrey Bean                           0               *           0               0                 *       
Richard P. Trotter (3)              200,000            *           0            200,000              *       
Sandra L. Ahman                     580,865            *           0            580,865              *       
Glenn A. Little (4)                                                                                          
211 West Wall                                                                                                
Midland, texas 79701               6,792,758         6.0%      1,664,552       5,128,206            3.2%     
All current directors and named                                                                              
officers as a group (5 in all)    66,659,865        58.4%                     66,659,865           41.7%     

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*     Represents less than 1%                                                   

(1)   Mr. Havens' minor son owns 150,000 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 50,000 vested shares, pursuant to an employment agreement, Mr.   
     Trotter is entitled to up to 125,000 shares of common stock. The grant of
shares is subject to vesting and subject to continued employment. On
      November 1, 2004, 25,000 shares vested. An additional 25,000 shares vested
      on November 1, 2005. An additional 75,000 shares are subject to vesting at
a future date, subject to proportionate adjustment in the event of  
 employment termination for any incomplete vesting period, as follows:
 25,000 shares on November 1, 2006; 25,000 shares on November 1, 2007;
   12,500 shares on November 1, 2008; and 12,500 on November 1, 2009. Also
   includes 175,000 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 April 29,
    2005, stock options to purchase 175,000 shares vested, and the remaining
    options are to vest in equal installments over the next four anniversary
dates of the agreement.                                             
(4)   Includes (i) 641,026 shares issuable upon conversion of the Series A      
Convertible Preferred Stock, and (ii) 368,590 shares issuable upon  
exercise of warrants.                                               

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DESCRIPTION OF SECURITIES TO BE REGISTERED

COMMON STOCK                                                                    

    We are authorized to issue up to 340,000,000 shares of common stock, par
value $0.001. As of May 12, 2006, there were 114,100,173 shares of common       
stock outstanding. Holders of the common stock are entitled to one vote per     
share on all matters to be voted upon by the stockholders. Holders of common    
stock are entitled to receive ratably such dividends, if any, as may be declared
by the Board of Directors out of funds legally available therefor. Upon the     
liquidation, dissolution, or winding up of our company, the holders of common   
stock are entitled to share ratably in all of our assets which are legally      
available for distribution after payment of all debts and other liabilities and 
liquidation preference of any outstanding common stock. Holders of common stock 
have no preemptive, subscription, redemption or conversion rights. The          
outstanding shares of common stock are validly issued, fully paid and           
nonassessable.                                                                  

INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

  Section 78.7502 of the Nevada Revised Statutes allows a corporation to
indemnify any officer, director, employee or agent who is a party or is         
threatened to be made a party to a litigation by reason of the fact that he or  
she is or was an officer, director, employee or agent of the corporation, or is 
or was serving at the request of the corporation as an officer, director,       
employee or agent of another corporation, partnership, joint venture, trust or  
other enterprise, against expenses, including attorneys' fees, judgments, fines 
and amounts paid in settlement actually and reasonably incurred by such director
or officer if:                                                                  

    o     there was no breach by the officer, director, employee or agent of
            his or her fiduciary duties to the corporation involving intentional
misconduct, fraud or knowing violation of law; or       

     o     the officer, director, employee or agent acted in good faith and in
            a manner which he or she reasonably believed to be in or not opposed
          to the best interests of the corporation, and, with respect to any
         criminal action or proceeding, had no reasonable cause to believe
his or her conduct was unlawful.                        

      Our bylaws further provide that our Board of Directors has sole discretion
to indemnify our officers and other employees. We may limit the extent of such  
indemnification by individual contracts with our directors and executive        
officers, but have not done so. We are required to advance, prior to the final  
disposition of any proceeding, promptly on request, all expenses incurred by any
director or executive officer in connection with that proceeding on receipt of  
an undertaking by or on behalf of that director or executive officer to repay   
those amounts if it should be determined ultimately that he or she is not       
entitled to be indemnified under our bylaws or otherwise. We are not, however,  
required to advance any expenses in connection with any proceeding if a         
determination is reasonably and promptly made by our Board of Directors by a    
majority vote of a quorum of disinterested Board members that (a) the party     
seeking an advance acted in bad faith or deliberately breached his or her duty  
to us or our stockholders and (b) as a result of such actions by the party      
seeking an advance, it is more likely than not that it will ultimately be       
determined that such party is not entitled to indemnification pursuant to the   
applicable sections of our bylaws.                                              

   Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act" or "Securities Act") may be permitted to directors,      
officers or persons controlling us pursuant to the foregoing provisions, or     
otherwise, we have been advised that in the opinion of the Securities and       
Exchange Commission, such indemnification is against public policy as expressed 
in the Act and is, therefore, unenforceable.                                    

PLAN OF DISTRIBUTION

  The selling stockholders and any of their respective pledgees, donees,
assignees and other successors-in-interest may, from time to time, sell any or  
all of their shares of common stock on any stock exchange, market or trading    
facility on which the shares are traded or in private transactions. These sales 
may be at fixed or negotiated prices. The selling stockholders may use any one  
or more of the following methods when selling shares:                           

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o     ordinary brokerage transactions and transactions in which the 
broker-dealer solicits the purchaser;                   
  o     block trades in which the broker-dealer will attempt to sell the
          shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction;             
o     purchases by a broker-dealer as principal and resale by the   
broker-dealer for its account;                          
o     an exchange distribution in accordance with the rules of the  
applicable exchange;                                    
o     privately-negotiated transactions;                            
    o     short sales that are not violations of the laws and regulations of
any state or the United States;                         
  o     broker-dealers may agree with the selling stockholders to sell a
        specified number of such shares at a stipulated price per share;
o     through the writing of options on the shares;                 
o     a combination of any such methods of sale; and                
o     any other method permitted pursuant to applicable law.        

  The selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus. The selling    
stockholders shall have the sole and absolute discretion not to accept any      
purchase offer or make any sale of shares if they deem the purchase price to be 
unsatisfactory at any particular time.                                          

    The selling stockholders may also engage in short sales against the box,
puts and calls and other transactions in our securities or derivatives of our   
securities and may sell or deliver shares in connection with these trades.      

      The selling stockholders or their respective pledgees, donees, transferees
or other successors in interest, may also sell the shares directly to market    
makers acting as principals and/or broker-dealers acting as agents for          
themselves or their customers. Such broker-dealers may receive compensation in  
the form of discounts, concessions or commissions from the selling stockholders 
and/or the purchasers of shares for whom such broker-dealers may act as agents  
or to whom they sell as principal or both, which compensation as to a particular
broker-dealer might be in excess of customary commissions. Market makers and    
block purchasers purchasing the shares will do so for their own account and at  
their own risk. It is possible that a selling stockholder will attempt to sell  
shares of common stock in block transactions to market makers or other          
purchasers at a price per share which may be below the then market price. The   
selling stockholders cannot assure that all or any of the shares offered in this
prospectus will be issued to, or sold by, the selling stockholders. The selling 
stockholders and any brokers, dealers or agents, upon effecting the sale of any 
of the shares offered in this prospectus, may be deemed to be "underwriters" as 
that term is defined under the Securities Act of 1933, as amended, or the       
Securities Exchange Act of 1934, as amended, or the rules and regulations under 
such acts. In such event, any commissions received by such broker-dealers or    
agents and any profit on the resale of the shares purchased by them may be      
deemed to be underwriting commissions or discounts under the Securities Act.    

     We are required to pay all fees and expenses incident to the registration
of the shares, including fees and disbursements of counsel to the selling       
stockholders, but excluding brokerage commissions or underwriter discounts.     

    The selling stockholders, alternatively, may sell all or any part of the
shares offered in this prospectus through an underwriter. No selling stockholder
has entered into any agreement with a prospective underwriter and there is no   
assurance that any such agreement will be entered into.                         

   The selling stockholders may pledge their shares to their brokers under
the margin provisions of customer agreements. If a selling stockholder defaults 
on a margin loan, the broker may, from time to time, offer and sell the pledged 
shares. The selling stockholders and any other persons participating in the sale
or distribution of the shares will be subject to applicable provisions of the   
Securities Exchange Act of 1934, as amended, and the rules and regulations under
such act, including, without limitation, Regulation M. These provisions may     
restrict certain activities of, and limit the timing of purchases and sales of  
any of the shares by, the selling stockholders or any other such person. In the 
event that the selling stockholders are deemed affiliated purchasers or         
distribution participants within the meaning of Regulation M, then the selling  
stockholders will not be permitted to engage in short sales of common stock.    
Furthermore, under Regulation M, persons engaged in a distribution of securities
are prohibited from simultaneously engaging in market making and certain other  
activities with respect to such securities for a specified period of time prior 
to the commencement of such distributions, subject to specified exceptions or   
exemptions. In regards to short sells, the selling stockholder can only cover   
its short position with the securities they receive from us upon conversion. In 
addition, if such short sale is deemed to be a stabilizing activity, then the   
selling stockholder will not be permitted to engage in a short sale of our      
common stock. All of these limitations may affect the marketability of the      
shares.                                                                         

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      We have agreed to indemnify the selling stockholders, or their transferees
or assignees, against certain liabilities, including liabilities under the      
Securities Act of 1933, as amended, or to contribute to payments the selling    
stockholders or their respective pledgees, donees, transferees or other         
successors in interest, may be required to make in respect of such liabilities. 

Pursuant to a requirement by the National Association of Securities 
Dealers, Inc., or NASD, the maximum commission or discount to be received by any
NASD member or independent broker/dealer may not be greater than 8.0% of the    
gross proceeds received by us for the sale of any securities being registered   
pursuant to SEC Rule 415.                                                       

     Until March 2008, we have granted Maxim the right of first refusal to act
as lead underwriter or minimally as a co-manager, for certain types of equity   
and debt offerings.                                                             

If the selling stockholders notify us that they have a material     
arrangement with a broker-dealer for the resale of the common stock, then we    
would be required to amend the registration statement of which this prospectus  
is a part, and file a prospectus supplement to describe the agreements between  
the selling stockholders and the broker-dealer.                                 

 PENNY STOCK

The Securities and Exchange Commission has adopted Rule 15g-9 which 
establishes the definition of a "penny stock," for the purposes relevant to us, 
as any equity security that has a market price of less than $5.00 per share or  
with an exercise price of less than $5.00 per share, subject to certain         
exceptions. For any transaction involving a penny stock, unless exempt, the     
rules require:                                                                  

     o     that a broker or dealer approve a person's account for transactions
in penny stocks; and                                    
    o     the broker or dealer receive from the investor a written agreement
          to the transaction, setting forth the identity and quantity of the
penny stock to be purchased.                            

    In order to approve a person's account for transactions in penny stocks,
the broker or dealer must                                                       

      o     obtain financial information and investment experience objectives of
the person; and                                         
o     make a reasonable determination that the transactions in penny
         stocks are suitable for that person and the person has sufficient
      knowledge and experience in financial matters to be capable of
evaluating the risks of transactions in penny stocks.   

 The broker or dealer must also deliver, prior to any transaction in a
penny stock, a disclosure schedule prescribed by the Commission relating to the 
penny stock market, which, in highlight form:                                   

o     sets forth the basis on which the broker or dealer made the   
suitability determination; and                          
     o     that the broker or dealer received a signed, written agreement from
the investor prior to the transaction.                  

Disclosure also has to be made about the risks of investing in penny
stocks in both public offerings and in secondary trading and about the          
commissions payable to both the broker-dealer and the registered representative,
current quotations for the securities and the rights and remedies available to  
an investor in cases of fraud in penny stock transactions. Finally, monthly     
statements have to be sent disclosing recent price information for the penny    
stock held in the account and information on the limited market in penny stocks.

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SELLING STOCKHOLDERS

    The following table sets forth the common stock ownership of the selling
stockholders as of May 12, 2006. The selling stockholders acquired their        
securities through a loan financing which closed in November 2004 and December  
2004, a private placement of Series A Convertible Preferred Stock with warrants 
which placement had its final closing on July 27, 2005, a loan financing which  
closed in November 2005 and December 2005, and a private placement of common    
stock which had its final closing on March 29, 2006.                            

   We will not receive any proceeds from the resale of the common stock by
the selling stockholders. Assuming all the shares registered below are sold by  
the selling stockholders, none of the selling stockholders will continue to own 
any shares of our common stock. Other than as set forth in the following table, 
the selling stockholders have not held any position or office or had any other  
material relationship with us or any of our predecessors or affiliates within   
the past three years. In addition, except as set forth below, the selling       
stockholders are not registered broker-dealers.                                 

                                                        [Enlarge/Download Table]


                                       Total                                              Percentage
                                    Shares Owned                               Number of   of Common
                                    and Issuable    Percentage                  Shares       Stock  
                                   Upon Exercise     of Common                   Owned       Owned  
                                    of Warrants       Stock,                     After       After  
                                   and Conversion    Assuming     Number of   Completion  Completion
                                    of Preferred       Full         Shares        of          of    
                                    Stock Before    Conversion   Offered for   Offering    Offering 
               Name                   Offering     and Exercise      Sale         (1)         (2)   
------------------------------     --------------  ------------  -----------  ----------  ----------
                                                                                                    
Robert G. Dello-Russo (3)             3,511,540        3.1%        3,511,540       0           *    

Arthur O. Silver Trust (4)            2,021,411        1.8%        2,021,411       0           *    

Ronald K. Marks (5)                     500,385           *          500,385       0           *    

Lee A. Pearlmutter Trust (6)            740,770           *          740,770       0           *    

SA Properties Co LP (7)               1,986,154        1.7%        1,986,154       0           *    

Neil Ellman                           1,027,821           *        1,027,821       0           *    

Raymond J. Brown (8)                     98,077           *           98,077       0           *    

Morrco Properties Co LP (9)             461,538           *          461,538       0           *    

Richard E. Kent IRA                     260,000           *          260,000       0           *    
The Russell Family Investments LP                                                                   
(10)                                  1,002,564           *        1,002,564       0           *    

Thomas Blatner (11)                     368,590           *          368,590       0           *    

Michael Friedman                        130,000           *          130,000       0           *    

Family Trust under Natalie L.                             *                                    *    
Kuhr  Revocable Trust (12)              260,000                      260,000       0                

Allen Coburn                             62,000           *           62,000       0           *    

John O'Neal Johnston Trust (13)         320,385           *          320,385       0           *    

Emeric Holderith                         90,000           *           90,000       0           *    

Roy G. Shaw, Jr. (14)                   585,770           *          585,770       0           *    

Andrew Morris Roth IRA                  130,000           *          130,000       0           *    

Robert A. & Susan DeLuca                317,000           *          317,000       0           *    

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                                        Total                                              Percentage
                                     Shares Owned                               Number of   of Common
                                     and Issuable    Percentage                  Shares       Stock  
                                    Upon Exercise     of Common                   Owned       Owned  
                                     of Warrants       Stock,                     After       After  
                                    and Conversion    Assuming     Number of   Completion  Completion
                                     of Preferred       Full         Shares        of          of    
                                     Stock Before    Conversion   Offered for   Offering    Offering 
               Name                    Offering     and Exercise      Sale         (1)         (2)   
------------------------------      --------------  ------------  -----------  ----------  ----------
                                                                                                     

Lee Westerheide                          260,000           *          260,000       0           *    

John C. Moss                              78,477           *           78,477       0           *    

Leo Long (15)                         16,880,971       14.8%       16,880,971       0           *    

Neil Prete                               550,000           *          550,000       0           *    

Albert Carocci                           260,000           *          260,000       0           *    

Bill McCurtain                           105,000           *          105,000       0           *    

Rodolfo Beeck (16)                       192,308           *          192,308       0           *    

Elizabeth K. Millan (17)                 151,154           *          151,154       0           *    

JoAnn Stock                              154,000           *          154,000       0           *    

Reed Kean                                390,000           *          390,000       0           *    

Edward Wilson                            120,000           *          120,000       0           *    

WNSJ Properties LLC (18)                 130,000           *          130,000       0           *    

Nite Capital LP (19)                     512,821           *          512,821       0           *    

Larry Warner                             515,000           *          515,000       0           *    

Larry & Rebecca Warner                   153,846           *          153,846       0           *    

Crestview Capital Master, LLC (20)     2,564,200        2.2%        2,564,200       0           *    

RTK Partners (21)                        130,000           *          130,000       0           *    

Saul Kaminsky                            260,000           *          260,000       0           *    
United Empire Capital Mgt. Inc.                                                                      
(22)                                     200,000           *          200,000       0           *    

Joseph Bianco                            130,000           *          130,000       0           *    

Emilile J. Corsiglia IRA                 130,000           *          130,000       0           *    

Leon Bialik                              179,487           *          179,487       0           *    

Paul Lodi (23)                           567,308           *          567,308       0           *    

Jacobs Pond LLC (24)                     391,026           *          391,026       0           *    

Robert J. Corsiglia Trust (25)         2,115,386        1.9%        2,115,386       0           *    

Robert J. Corsiglia IRAR (26)          1,490,385        1.3%        1,490,385       0           *    

Robert J. Corsiglia ROL IRA (27)         480,770           *          480,770       0           *    

Emilie J. Corsiglia (28)                 240,385           *          240,385       0           *    

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                                        Total                                              Percentage
                                     Shares Owned                               Number of   of Common
                                     and Issuable    Percentage                  Shares       Stock  
                                    Upon Exercise     of Common                   Owned       Owned  
                                     of Warrants       Stock,                     After       After  
                                    and Conversion    Assuming     Number of   Completion  Completion
                                     of Preferred       Full         Shares        of          of    
                                     Stock Before    Conversion   Offered for   Offering    Offering 
               Name                    Offering     and Exercise      Sale         (1)         (2)   
------------------------------      --------------  ------------  -----------  ----------  ----------
                                                                                                     

Juliet Lodi (29)                         144,231           *          144,231       0           *    

Paul & Edith Lodi (30)                   192,308           *          192,308       0           *    

Christopher J. Kennan (31)             1,099,907           *        1,099,907       0           *    

Alfonse M. D'Amato (32)                  961,539           *          961,539       0           *    
Steven E. Erickson and Dean                                                                          
Erickson Trust (33)                      240,385           *          240,385       0           *    
B. Jerry L. Huff and Judith T.                                                                       
Huff Revocable Living Trust (34)         120,192           *          120,192       0           *    

William N. & Deborah L. Hicks (35)       182,192           *          182,192       0           *    
Bankhaus B Metzler seel Sohn &                                                                       
Co. (36)                               1,028,526           *          961,539    66,987         *    

Helmut Janssen (37)                      348,077           *          348,077       0           *    

RF JM Partners LLC (38)                  552,886           *          552,886       0           *    

Richard E. and Laura T. Kent (39)        480,770           *          480,770       0           *    

Marcos Aszelowicz (40)                   138,221           *          138,221       0           *    

Corinne Lozach (41)                      961,539           *          961,539       0           *    

Leonard Herzfeld (42)                    192,308           *          192,308       0           *    

W.R. Sauey (43)                          961,539           *          961,539       0           *    

Glenn A. Little (44)                   1,520,321        1.3%        1,520,321       0           *    

The Sherman Family Partners (45)         961,539           *          961,539       0           *    

John Barlow                               33,334           *           33,334       0           *    

Ludwig von Hanstein                      444,167           *          216,667   227,500         *    

Maxim Group LLC (46)                   5,255,155        4.5%        5,255,155       0           *    

Suan Investments, Inc. (47)              128,205           *          128,205       0           *    

Joshua Lifshitz                           84,103           *           84,103       0           *    

Steve Schnipper (48)                     244,359           *          224,359       0           *    

Robert Stranczek (49)                    480,770           *          480,770       0           *    
American Capital Ventures, Inc.                                                                      
(50)                                   3,050,000        2.8%        3,050,000       0           *    

* Less than 1%.                                                                 

(1)   Assumes that all securities registered will be sold.                      

(2)   Applicable percentage ownership is based on 114,100,173 shares of common  
stock outstanding as of April 25, 2006, together with securities    
    exercisable or convertible into shares of common stock within 60 days of
      April 25, 2006 for each stockholder. Beneficial ownership is determined in
   accordance with the rules of the Securities and Exchange Commission and
     generally includes voting or investment power with respect to securities.
Shares of common stock that are currently exercisable or exercisable
   within 60 days of April 25, 2006 are deemed to be beneficially owned by
the person holding such securities for the purpose of computing the 
      percentage of ownership of such person, but are not treated as outstanding
      for the purpose of computing the percentage ownership of any other person.

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(3)   Includes (i) 1,282,052 shares issuable upon conversion of the Series A    
      Convertible Preferred Stock, (ii) 737,180 shares issuable upon exercise of
warrants, and (iii) 1,492,308 shares of common stock.               

(4)   Includes (i) 320,513 shares issuable upon conversion of the Series A      
      Convertible Preferred Stock, (ii) 160,257 shares issuable upon exercise of
     warrants and (iii) 1,540,641 shares of common stock. Arthur O. Silver has
      the voting and dispositive rights over the shares held by Arthur O. Silver
Trust.                                                              

(5)   Includes (i) 160,257 shares issuable upon conversion of the Series A      
     Convertible Preferred Stock, (ii) 80,128 shares issuable upon exercise of
warrants, and (iii) 260,000 shares of common stock.                 

(6)   Includes (i) 320,514 shares issuable upon conversion of the Series A      
      Convertible Preferred Stock, (ii) 160,256 shares issuable upon exercise of
     warrants and (iii) 260,000 shares of common stock. Lee A. Pearlmutter has
the voting and dispositive rights over the shares held by Lee A.    
Pearlmutter Trust.                                                  

(7)   John W. Russell has the voting and dispositive rights over the shares held
by SA Properties Co LP. (8) Includes (i) 32,051 shares issuable upon
      conversion of the Series A Convertible Preferred Stock, (ii) 16,026 shares
 issuable upon exercise of warrants, and (iii) 50,000 shares of common
stock.                                                              

(9)   John W. Russell has the voting and dispositive rights over the shares held
by Morrco Properties Co LP.                                         

(10)  John W. Russell has the voting and dispositive rights over the shares held
by The Russell Family Investments LP.                               

(11)  Includes (i) 160,257 shares issuable upon conversion of the Series A      
     Convertible Preferred Stock, (ii) 80,128 shares issuable upon exercise of
warrants, and (iii) 128,205 shares of common stock.                 

(12)  Adam Kuhr has the voting and dispositive rights over the shares held by   
Family Trust under Natalie L. Kuhr Revocable Trust.                 

(13)  Includes (i) 160,256 shares issuable upon conversion of the Series A      
     Convertible Preferred Stock, (ii) 80,128 shares issuable upon exercise of
   warrants, and (iii) 80,000 shares of common stock. John O'Neal Johnston
     has the voting and dispositive rights over the shares held by John O'Neal
Johnston Trust.                                                     

(14)  Includes (i) 320,513 shares issuable upon conversion of the Series A      
      Convertible Preferred Stock, (ii) 160,257 shares issuable upon exercise of
warrants, and (iii) 105,000 shares of common stock.                 

(15)  Includes (i) 10,733,980 shares issuable upon conversion of the Series A   
     Convertible Preferred Stock, (ii) 5,366,991 shares issuable upon exercise
    of warrants, and (iii) 780,000 shares of common stock. The actual number
     of shares of common stock offered in this prospectus, and included in the
   registration statement of which this prospectus is a part, includes (i)
  10,733,974 shares issuable upon conversion of the Series A Convertible
      Preferred Stock, (ii) 5,366,991 shares issuable upon exercise of warrants,
and (iii) 780,000 shares of common stock. However Mr. Long has      
contractually agreed to restrict his ability to convert the Series A
      Convertible Preferred Stock or exercise his warrants and receive shares of
our common stock such that the number of shares of common stock     
  beneficially held by him in the aggregate after such exercise does not
    exceed 4.9% of the then issued and outstanding shares of common stock as
determined in accordance with Section 13(d) of the Exchange Act.    
    Accordingly, the number of shares of common stock set forth in the table
    for the selling stockholder exceeds the number of shares of common stock
  that the selling stockholders could own beneficially at any given time
   through their ownership of the warrants. In that regard, the beneficial
     ownership of the common stock by the selling stockholder set forth in the
      table is not determined in accordance with Rule 13d-3 under the Securities
Exchange Act of 1934, as amended                                    

(16)  Includes (i) 96,154 shares issuable upon exercise of warrants, and (iii)  
96,154 shares of common stock.                                      

(17)  Includes (i) 64,103 shares issuable upon conversion of the Series A       
     Convertible Preferred Stock, (ii) 32,051 shares issuable upon exercise of
warrants, and (iii) 55,000 shares of common.                        

(18)  Walter N. Rothschild III has the voting and dispositive rights over the   
shares held by WNSJ Properties LLC.                                 

(19)  Keith A. Goodman has the voting and dispositive rights over the shares    
held by Nite Capital LP.                                            

(20)  Stewart R. Flink has the voting and dispositive rights over the shares    
held by Crestview Capital Master, LLC.                              

(21)  John W. Russell has the voting and dispositive rights over the shares held
by RTK Partners.                                                    

(22)  Shay Kostner has the voting and dispositive rights over the shares held by
United Empire Capital Mgt. Inc.                                     

(23)  Includes (i) 224,359 shares issuable upon conversion of the Series A      
      Convertible Preferred Stock, (ii) 112,180 shares issuable upon exercise of
warrants, and (iii) 230,769 shares of common.                       

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(24)  Includes (i) 243,590 shares issuable upon conversion of the Series A      
      Convertible Preferred Stock, (ii) 121,795 shares issuable upon exercise of
warrants, and (iii) 25,641 shares of common stock. Paul Lodi has the
  voting and dispositive rights over the shares held by Jacobs Pond LLC.

(25)  Includes (i) 1,410,257 shares issuable upon conversion of the Series A    
Convertible Preferred Stock, and (ii) 705,129 shares issuable upon  
exercise of warrants.                                               

(26)  Includes (i) 993,590 shares issuable upon conversion of the Series A      
Convertible Preferred Stock, and (ii) 496,795 shares issuable upon  
exercise of warrants.                                               

(27)  Includes (i) 320,513 shares issuable upon conversion of the Series A      
Convertible Preferred Stock, and (ii) 160,257 shares issuable upon  
exercise of warrants.                                               

(28)  Includes (i) 160,256 shares issuable upon conversion of the Series A      
      Convertible Preferred Stock, and (ii) 80,128 shares issuable upon exercise
of warrants.                                                        

(29)  Includes (i) 96,154 shares issuable upon conversion of the Series A       
      Convertible Preferred Stock, and (ii) 48,077 shares issuable upon exercise
of warrants.                                                        

(30)  Includes (i) 128,205 shares issuable upon conversion of the Series A      
      Convertible Preferred Stock, and (ii) 64,103 shares issuable upon exercise
of warrants.                                                        

(31)  Includes (i) 480,769 shares issuable upon conversion of the Series A      
      Convertible Preferred Stock, (ii) 272,436 shares issuable upon exercise of
warrants and (iii) 346,702 shares of common stock.                  

(32)  Includes (i) 641,026 shares issuable upon conversion of the Series A      
Convertible Preferred Stock, and (ii) 320,513 shares issuable upon  
exercise of warrants.                                               

(33)  Includes (i) 160,257 shares issuable upon conversion of the Series A      
      Convertible Preferred Stock, and (ii) 80,128 shares issuable upon exercise
of warrants.                                                        

(34)  Includes (i) 80,128 shares issuable upon conversion of the Series A       
      Convertible Preferred Stock, and (ii) 40,064 shares issuable upon exercise
of warrants.                                                        

(35)  Includes (i) 80,128 shares issuable upon conversion of the Series A       
     Convertible Preferred Stock, (ii) 40,064 shares issuable upon exercise of
warrants and (iii) 62,000 shares of common stock.                   

(36)  Includes (i) 641,026 shares issuable upon conversion of the Series A      
Convertible Preferred Stock, and (ii) 320,513 shares issuable upon  
exercise of warrants.                                               

(37)  Includes (i) 32,051 shares issuable upon conversion of the Series A       
     Convertible Preferred Stock, (ii) 16,026 shares issuable upon exercise of
warrants, and (iii) 300,000 shares of common stock                  

(38)  Includes (i) 368,590 shares issuable upon conversion of the Series A      
Convertible Preferred Stock, and (ii) 184,295 shares issuable upon  
exercise of warrants.                                               

(39)  Includes (i) 320,513 shares issuable upon conversion of the Series A      
Convertible Preferred Stock, and (ii) 160,257 shares issuable upon  
exercise of warrants.                                               

(40)  Includes (i) 92,147 shares issuable upon conversion of the Series A       
      Convertible Preferred Stock, and (ii) 46,074 shares issuable upon exercise
of warrants.                                                        

(41)  Includes (i) 641,026 shares issuable upon conversion of the Series A      
Convertible Preferred Stock, and (ii) 320,513 shares issuable upon  
exercise of warrants.                                               

(42)  Includes (i) 128,205 shares issuable upon conversion of the Series A      
      Convertible Preferred Stock, and (ii) 64,103 shares issuable upon exercise
of warrants.                                                        

(43)  Includes (i) 641,026 shares issuable upon conversion of the Series A      
Convertible Preferred Stock, and (ii) 320,513 shares issuable upon  
exercise of warrants.                                               

(44)  Includes (i) 641,026 shares issuable upon conversion of the Series A      
      Convertible Preferred Stock, (ii) 320,513 shares issuable upon exercise of
warrants and (iii) 558,782 shares of common stock.                  

(45)  Includes (i) 641,026 shares issuable upon conversion of the Series A      
Convertible Preferred Stock, and (ii) 320,513 shares issuable upon  
exercise of warrants.                                               

(46)  Maxim Partners LLC owns 94% of Maxim Group LLC, a registered broker       
      dealer. MJR Holdings LLC owns 73.5% of Maxim Partners LLC. Mike Rabinowitz
 is the principal manager of MJR Holdings and has principal voting and
    dispositive power with respect to the securities owned by Maxim Partners
     LLC. The number of share beneficially owned include: (i) 3,500,018 shares
   of common stock and (ii) warrants to acquire 1,755,537 shares of common
      stock, which were issued to Maxim Partners, as nominee of Maxim Group, for
     services provided to the company in its recent private placement offering
that began in December 2005.                                        

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(47)  Ernest Gottdiener has the voting and dispositive rights over the shares   
   held by Suan Investments, Inc. Includes (i) 32,051 shares issuable upon
exercise of warrants, and (ii) 96,154 shares of common stock.       

(48)  Includes (i) 16,025 shares issuable upon exercise of warrants, and (ii)   
     228,334 shares of common stock. (49) Includes (i) 320,513 shares issuable
 upon conversion of the Series A Convertible Preferred Stock, and (ii)
160,257 shares issuable upon exercise of warrants.                  

(50)  Shares to be granted pursuant to an Investor Relations Agreement, dated as
of April 11, 2006, pursuant to which 550,000 shares were issued upon
execution and the remaining shares are to be issued in monthly      
installments over a 36 month period.                                

 LEGAL MATTERS

 Sichenzia Ross Friedman Ference LLP, New York, New York will issue an
opinion with respect to the validity of the shares of common stock being offered
hereby.                                                                         

 EXPERTS

    Our financial statements as of April 30, 2005, and for each of the years
in the two year period then ended, have been included herein in reliance upon   
the report of Russell Bedford Stefanou Mirchandani LLP, independent registered  
public accounting firm, appearing elsewhere herein, and upon authority of said  
firm as experts in accounting and auditing.                                     

 AVAILABLE INFORMATION

We have filed with the SEC a registration statement on Form SB-2 to 
register the securities offered by this prospectus. For future information about
us and the securities offered under this prospectus, you may refer to the       
registration statement and to the exhibits filed as a part of the registration  
statement.                                                                      

In addition, after the effective date of this prospectus, we will be
required to file annual, quarterly, and current reports, or other information   
with the SEC as provided by the Securities Exchange Act. You may read and copy  
any reports, statements or other information we file at the SEC's public        
reference facility maintained by the SEC at 100 F Street, N.E., Washington, D.C.
20549. You can request copies of these documents, upon payment of a duplicating 
fee, by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further   
information on the operation of the public reference room. Our SEC filings are  
also available to the public through the SEC Internet site at http\\www.sec.gov.

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SPARTA COMMERCIAL SERVICES, INC.
FINANCIAL STATEMENTS

 TABLE OF CONTENTS

                                                                            Page

Condensed Consolidated Balance Sheets as of January 31, 2006 (unaudited)        
and April 30, 2005                                                           F-1

Unaudited Condensed Consolidated Statements of Operations                       
for the Three and Nine Months Ended January 31, 2006 and 2005                F-2

Unaudited Condensed Consolidated Statements of Cash Flows                       
for the Nine Months Ended January 31, 2006 and 2005                          F-3

Notes to Unaudited Condensed Consolidated Financial Statements               F-4

Report of Registered Independent Certified Public Accounting Firm           F-12

Consolidated Balance Sheets as of April 30, 2005 and 2004                   F-13

Consolidated Statements of Losses for the years ended                           
   April 30, 2005 and 2004                                                  F-14

Consolidated Statements of Deficiency in Stockholder's Equity                   
   for the years ended April 30, 2005 and 2004                              F-15

Consolidated Statements of Cash Flows for the years ended                       
   April 30, 2005 and 2004                                           F-16 - F-17

Notes to Consolidated Financial Statements                                  F-18

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                      SPARTA COMMERCIAL SERVICES, INC.
                     CONDENSED CONSOLIDATED BALANCE SHEETS

                                                        [Enlarge/Download Table]

                                                                         January 31,       April 30,  
                                                                             2006            2005     
                                                                         ------------    ------------ 
                                                                          (Unaudited)                 
                                                                                                      
ASSETS                                                                                                

Current assets:                                                                                       
     Cash and cash equivalents                                           $    983,238    $    108,365 
     Lease payments receivable, current portion                               114,425          14,764 
     Prepaid expenses                                                          74,090              -- 
     Other current assets                                                       6,034           6,700 
                                                                         ------------    ------------ 
Total current assets                                                        1,177,787         129,829 

Motorcycles and other vehicles under operating leases, net of                                         
     accumulated depreciation of $38,742 and $13,392, respectively            270,203          99,886 

Property and equipment, net of accumulated depreciation and                                           
     amortization of $43,215 and $15,378, respectively                        111,361         106,809 

Finance receivables, net of current portion                                   306,921          21,521 

Deposits                                                                      159,552          48,967 
                                                                         ------------    ------------ 
Total assets                                                             $  2,025,824    $    407,012 
                                                                         ============    ============ 

LIABILITIES AND STOCKHOLDERS' DEFICIT                                                                 

Current liabilities:                                                                                  
     Accounts payable and accrued expenses                               $  2,026,869    $    509,936 
     Accrued equity penalties (Note C)                                      2,040,000              -- 
     Notes payable                                                             28,985         300,000 
     Deferred revenue                                                         105,060          23,100 
     Due to related party                                                          --          25,000 
                                                                         ------------    ------------ 
Total current liabilities                                                   4,200,914         858,036 

Notes payable, long term portion                                              136,446              -- 
Warrant liability                                                             451,752              -- 
                                                                         ------------    ------------ 
Total liabilities                                                           4,789,112         858,036 
                                                                         ------------    ------------ 

Stockholders' deficit:                                                                                
     Preferred stock,  $0.001 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, 21,875 and 18,100 shares issued and outstanding,                                    
       respectively                                                         2,187,500       1,810,000 
     Common stock, $0.001 par value; 340,000,000 shares                                               
       authorized, 106,944,654 and 86,005,415 shares issued                                           
       and outstanding, respectively                                          106,945          86,005 

     Common stock subscribed                                                  330,000              -- 

     Additional paid-in capital                                             9,820,151       3,930,629 

     Deferred compensation                                                   (309,543)             -- 

     Accumulated deficit                                                  (14,898,341)     (6,277,658)
                                                                         ------------    ------------ 
Total stockholders' deficit                                                (2,763,288)       (451,024)
                                                                         ------------    ------------ 
Total liabilities and stockholders' deficit                              $  2,025,824    $    407,012 
                                                                         ============    ============ 

The  accompanying  notes are an integral part of these  unaudited  condensed  consolidated  financial 
statements.                                                                                           

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                                       SPARTA COMMERCIAL SERVICES, INC.                                       
                               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                                
                        FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2006 AND 2005                         
                                                 (UNAUDITED)                                                  

                                                      For The Three Months           For The Nine Months      
                                                        ended January 31,             ended January 31,       
                                                 ----------------------------    ---------------------------- 
                                                      2006           2005            2006            2005     
                                                 ------------    ------------    ------------    ------------ 
                                                                                                              
Revenue                                          $     43,008    $     26,416    $     90,629    $     47,879 
                                                 ------------    ------------    ------------    ------------ 
Operating expenses:                                                                                           
     General and administrative                     2,322,057         739,320       3,819,526       1,523,941 
     Depreciation and amortization                     22,157          10,131          58,044          17,788 
                                                 ------------    ------------    ------------    ------------ 
Total operating expenses                            2,344,214         749,451       3,877,570       1,541,729 

Loss from operations                               (2,301,206)       (723,035)     (3,786,941)     (1,493,850)

Other expense:                                                                                                
     Interest expense and financing cost, net      (1,483,522)             --      (3,066,736)             -- 
     Change in value of warrant liability             126,177              --         126,177              -- 
     Loss on sale of asset                                 --              --          (6,500)             -- 
                                                 ------------    ------------    ------------    ------------ 
Net loss                                           (3,658,551)       (723,035)     (6,734,000)     (1,493,850)

Preferred dividend                                     29,191         810,000       1,886,683         810,000 
                                                 ------------    ------------    ------------    ------------ 
Net loss attributed to common stockholders       $ (3,687,742)   $ (1,533,035)   $ (8,620,683)   $ (2,303,850)
                                                 ============    ============    ============    ============ 
Basic and diluted loss per share                 $      (0.04)   $      (0.01)   $      (0.08)   $      (0.02)
                                                 ============    ============    ============    ============ 
Basic and diluted loss per share attributed to                                                                
     common stockholders                         $      (0.04)   $      (0.02)   $      (0.10)   $      (0.03)
                                                 ============    ============    ============    ============ 

Weighted average shares outstanding                95,648,989      85,934,261      89,586,901      85,934,261 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.   

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SPARTA COMMERCIAL SERVICES, INC.
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 FOR THE NINE MONTHS ENDED JANUARY 31, 2006 AND 2005
 (UNAUDITED)

                                          2006          2005
                                          -----------    -----------

CASH FLOWS FROM OPERATING ACTIVITIES:                                           
Net loss                                        $(6,734,000)   $(1,493,850)     
Adjustments to reconcile net loss to net cash                                   
used in operating activities:                                               
Depreciation and amortization                    58,045         17,788  
Valuation allowance on deposit                       --         61,000  
Amortization of deferred revenue                 (9,900)            --  
Amortization of deferred compensation           240,252             --  
Stock issued for services                        85,228         82,500  
Stock based finance cost                        973,607        105,303  
Change in warrant liability                    (126,177)            --  
Loss on sale of assets                            6,500             --  
Changes in operating assets and liabilities:                                    
(Increase) decrease in:                                                     
Lease payments receivable                       (31,499)            --  
Prepaid expenses                                (74,090)      (101,800) 
Other current assets                                666        (13,187) 
Deposits                                       (110,585)            --  
Increase (decrease) in:                                                     
Accounts payable and accrued expenses         1,418,030        337,880  
Accrued equity penalties                      2,040,000                 
Deferred revenue                                 91,860         33,971  
                                          -----------    -----------
Net cash used in operating activities            (2,172,063)      (970,395)     
                                          -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:                                           
Proceeds from sale of asset                          25,000             --      
Cost of asset sold                                  (31,500)            --      
Payments for motorcycles and other vehicles        (200,524)       (81,634)     
Investment in leases                               (353,562)            --      
Purchases of property and equipment                 (32,390)      (137,063)     
Net proceeds from marketable securities                  --         13,379      
                                          -----------    -----------
Net cash provided by investing activities          (592,976)      (205,318)     
                                          -----------    -----------
CASH FLOWS FROM FINANCING ACTIVITIES:                                           
Proceeds from sale of preferred stock, net        1,592,517        810,000      
Proceeds from sale of common stock, net           1,726,980             --      
Repayment of affiliate advances                     (25,000)       (23,885)     
Proceeds from notes                                 372,675        400,000      
Payments on notes                                  (357,244)            --      
Common stock subscription                           330,000             --      
Payments for fractional shares                          (16)            --      
                                          -----------    -----------
Net cash provided by financing activities         3,639,912      1,186,115      
                                          -----------    -----------

Net increase in cash                                874,873         10,402      
Cash and cash equivalents, beginning of year        108,365         11,973      
                                          -----------    -----------
Cash and cash equivalents, end of year          $   983,238    $    22,375      
                                          ===========    ===========
Cash paid for:                                                                  
Interest                                      $    15,788    $        --    
Income taxes                                           --             --    

The  accompanying  notes  are an  integral  part of  these  unaudited  condensed
consolidated financial statements.                                              

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SPARTA COMMERCIAL SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2006
 (UNAUDITED)

NOTE A - SUMMARY OF ACCOUNTING POLICIES                                         

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

Basis of Presentation                                                           

The accompanying  unaudited  consolidated financial statements as of January 31,
2006 and for the nine month  periods  ended  January 31, 2006 and 2005 have been
prepared by the Company  pursuant to the rules and regulations of the Securities
and  Exchange  Commission,   including  Form  10-QSB  and  Regulation  S-B.  The
information  furnished  herein  reflects all  adjustments  (consisting of normal
recurring  accruals and  adjustments),  which are, in the opinion of management,
necessary to fairly present the operating  results for the  respective  periods.
Certain  information  and  footnote   disclosures  normally  present  in  annual
financial statements prepared in accordance with accounting principles generally
accepted  in the United  States of America  have been  omitted  pursuant to such
rules and regulations.  The company  believes that the disclosures  provided are
adequate to make the  information  presented  not  misleading.  These  financial
statements should be read in conjunction with the audited  financial  statements
and  explanatory  notes for the year ended  April 30, 2005 as  disclosed  in the
company's 10-KSB for that year as filed with the SEC, as it may be amended.     

The  results of the nine  months  ended  January  31,  2006 are not  necessarily
indicative  of the  results to be expected  for the full year  ending  April 30,
2006.                                                                           

The unaudited condensed  consolidated  financial statements include the accounts
of the Company and its wholly owned subsidiary, Sparta Commercial Services, LLC.
All significant  intercompany  transactions and balances have been eliminated in
the consolidated financial statements.                                          

Estimates                                                                       

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

Revenue Recognition                                                             

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

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SPARTA COMMERCIAL SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2006
 (UNAUDITED)

NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)                             

Revenue Recognition (continued)                                                 

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

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

The  Company  charges  fees to  manufacturers  and other  customers  related  to
creating a private label version of the Company's  financing  program  including
web access, processing credit applications, consumer contracts and other related
documents and  processes.  Fees received are amortized and booked as income over
the length of the  contract.  At January 31,  2006,  the  Company  had  recorded
deferred revenue related to these contracts of $13,200.                         

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 $0.04 and $0.02 for the three  months  ended  January  31, 2006 and
2005,  respectively,  and $0.10 and $0.03 for the nine months ended  January 31,
2006 and 2005,  respectively.  For the nine  months  ended  January 31, 2006 and
2005,  29,685,131 and 7,932,486  potential shares,  respectively,  were excluded
from the shares used to calculate  diluted earnings per share as their inclusion
would reduce net loss per share.                                                

Reclassifications                                                               

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

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SPARTA COMMERCIAL SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2006
 (UNAUDITED)

NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)                             

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.       

Recent Accounting Pronouncement                                                 

In February  2006,  the FASB issued SFAS 155,  which applies to certain  "hybrid
financial instruments," which are instruments that contain embedded derivatives.
The new standard  establishes a requirement to evaluate beneficial  interests in
securitized   financial   assets  to  determine  if  the   interests   represent
freestanding derivatives or are hybrid financial instruments containing embedded
derivatives  requiring  bifurcation.  This new standard also permits an election
for fair value  remeasurement of any hybrid financial  instrument  containing an
embedded derivative that otherwise would require bifurcation under SFAS 133. The
fair  value  election  can be applied  on an  instrument-by-instrument  basis to
existing  instruments  at  the  date  of  adoption  and  can be  applied  to new
instruments on a prospective basis.  Management is assessing the implications of
this standard,  which may materially  impact the Company's results of operations
in the fourth quarter of fiscal year 2006 and thereafter.                       

In February 2006, the FASB issued FASB Staff Position  ("FSP") No. FAS 123(R)-4,
"Classification   of  Options  and  Similar   Instruments   Issued  as  Employee
Compensation  That Allow for Cash Settlement upon the Occurrence of a Contingent
Event," which amends SFAS No. 123(R) to require that options  issued with a cash
settlement  feature that can be exercised  upon the  occurrence  of a contingent
event  that is outside  the  employee's  control  should  not be  classified  as
liabilities  until it becomes  probable that the event will occur. For companies
that adopted SFAS No.  123(R) prior to the issuance of the FSP,  application  is
required  in the first  reporting  period  beginning  after  February  3,  2006.
Currently,  the Company has no stock options  outstanding  with  contingent cash
settlement  features,  and as a result,  the FSP will not impact  the  Company's
consolidated financial statements.                                              

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SPARTA COMMERCIAL SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2006
 (UNAUDITED)

NOTE B - RELATED PARTY TRANSACTIONS                                             

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 January 31,
2006 this amount has been paid in full.                                         

In January 2005,  the Company  received a loan of $25,000 from an officer.  This
loan is non-interest bearing and is payable on demand. The loan was repaid as of
January 31, 2006.                                                               

NOTE C - STOCKHOLDERS' EQUITY                                                   

On December 27, 2004, the Company  effected a one-for-two  hundred reverse stock
split followed by a forward split of twenty  five-for-one  of its authorized and
outstanding  shares of common  stock,  $.001 par value.  All  references  in the
financial  statements and notes to financial  statements,  numbers of shares and
share amounts have been retroactively restated to reflect the reverse split.    

Common Stock                                                                    

During the nine months ended January 31, 2006, the Company issued 464,745 shares
of common  stock,  valued at  $243,270,  as  additional  costs  related to loans
received  by the  Company.  This  amount  has been  charged to  financing  cost.
Additionally,  as  consideration  for loans received during the third quarter of
fiscal 2006, the Company will issue 70,000 shares of common stock.  The value of
these shares has been recorded at $38,500 and this amount is included in accrued
expenses at January 31, 2006 and has been charged to financing cost.            

During August 2005, the Company issued 651,124 shares of common stock in payment
of $150,000 of principal  amount of notes payable and $12,781 of related accrued
interest.  The shares were issued at a value below  market price and the Company
has recorded a financing cost of $323,672 related to this discount.             

During  September and October 2005,  the Company  issued an aggregate of 600,000
shares of common stock, pursuant to a consulting agreement. The shares have been
valued at $474,000 and this amount is being  amortized over the one year term of
the agreement, commencing August 1, 2005.                                       

During October 2005,  the Company issued 113,637 shares of common stock,  valued
at $85,228, for services.                                                       

During  October and November  2005, the Company  received  $330,000  pursuant to
subscription  agreements  for  units,  at  $0.60  per  unit,  of  the  Company's
securities,  with each  unit  consisting  of one  share of common  stock and one
warrant.                                                                        

The Company will issue  250,000  shares of common stock as payment of consulting
fees.  These fees have been accrued in the  financial  statements  at a value of
$85,000 as of January 31, 2006.                                                 

During December 2005, the Company entered into an agreement pursuant to which it
agreed to issue  2,650,000  shares of common stock for  consulting  and advisory
services rendered and to be rendered. The shares have been valued at $1,590,000,
based  on the  fair  value  of the  Company's  common  stock  on the date of the
agreement.  This amount has been  charged to expense in the third  quarter  and,
since the shares  have not been issued as of January  31,  2006,  this amount is
included in accrued expenses in the financial statements.                       

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SPARTA COMMERCIAL SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2006
 (UNAUDITED)

NOTE C - STOCKHOLDERS' EQUITY (continued)                                       

Common Stock (continued)                                                        

During  December 2005 and January 2006,  the Company sold  10,151,400  shares of
common stock through a private  placement.  The Company received net proceeds of
$1,726,980  from the  sale.  Costs of  $212,952  were  deducted  from the  gross
proceeds and additional costs of $39,590 were paid by the Company.              

In connection with the private  placement  described  above, the Company granted
1,015,140  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  $577,929  using  the
Black-Sholes  pricing model. The assumptions used in the Black-Scholes model are
as follows:  (1) dividend  yield of 0%; (2)  expected  volatility  of 177%,  (3)
risk-free interest rate of 3.65%, 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  ($577,929)  and included the change in
fair  value  from the date of  issuance  to  January  31,  2006 in other  income
(expense),  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 $451,752 at January 31, 2006.                    

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 January 2006, the Company  issued  8,958,333  shares of common stock upon
conversion of 13,975 shares of preferred stock.                                 

Preferred Stock Series A                                                        

In December  2004,  the Company  commenced  a private  placement  to raise up to
$3,000,000  through the sale of up to 30 units of our securities at $100,000 per
unit. Each unit consists of (i) 1,000 shares of series A convertible, redeemable
preferred  stock and (ii) warrants to purchase  320,513  shares of common stock,
exercisable  for three  years at $0.195 per  share.  The  preferred  stock has a
stated value of $100 per share, carries a 6% annual cumulative dividend, payable
semi-annually in arrears,  and is convertible into shares of common stock at the
rate of one preferred share into 641 shares of common stock.                    

During the three months ended July 31, 2005, 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.  Costs of
$182,484  were  deducted  from the  proceeds.  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 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.                                                                

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SPARTA COMMERCIAL SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2006
 (UNAUDITED)

NOTE C - STOCKHOLDERS' EQUITY (continued)                                       

Preferred Stock Series A (continued)                                            

In accordance  with EITF 00-27,  a portion of the proceeds were allocated to the
class 'C' 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 the  Company's  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
are included in the accompanying financial statements.                          

In the event that a registration statement covering all of the securities issued
pursuant to the private placement of preferred shares is not declared  effective
by the Securities and Exchange Commission by July 31, 2005, the number of shares
issuable upon conversion of the preferred stock and the exercise of the warrants
will be  increased  by 0.75%  for each 30 day  period  during a six  month  term
following  July 31, 2005 that a  registration  statement  has not been  declared
effective.  Following this initial six month term, the number of shares issuable
upon  conversion of the preferred stock and the exercise of the warrants will be
increased  by 1.50% for each 30 day  period  during a six month  term  following
January 31, 2006 that a registration  statement has not been declared effective.
There was not an effective  registration  statement as of July 31, 2005,  nor is
there one as of January 31, 2006. Additionally,  if a registration statement has
not been filed as of  October  27,  2005,  the  number of shares  issuable  upon
conversion  of the  preferred  stock and the  exercise of the  warrants  will be
increased by 1% for each 30 day period until a registration  statement is filed.
A  registration  statement was not filed as of October 27, 2005, and one has not
been filed as of January  31,  2006.  As a result,  the  Company  has accrued an
expense of  $1,440,000  and  $2,040,000  during the three and nine months  ended
January 31, 2006, respectively, related to these penalty provisions. This amount
will be settled  through the  issuance of equity  securities.  As of January 31,
2006, an aggregate of 1,953,290  penalty shares and 1,140,146  penalty  warrants
has accrued.  As of March 16, 2006,  the Company has obtained  waivers  covering
approximately 775,000 penalty shares and 388,000 penalty warrants. These waivers
aggregate  approximately  $761,000  of the  accrued  expense.  The  waivers  are
contingent  upon  the  company  filing a  registration  statement  covering  the
original  shares  and  warrants  within  30 days  of the  final  closing  of the
Company's current private placement offering.                                   

During the three  months  ended  January  31,  2005,  the Company  issued  2,250
preferred  shares at a stated  value of $100 per share and  warrants to purchase
721,154 shares of common stock, exercisable for three years at $0.195 per share,
for aggregate gross proceeds of $225,000 received from investors.  In connection
with the private  placement,  during the nine months ended January 31, 2005, the
Company issued as compensation to the placement agent warrants to 144,231 shares
of common stock,  exercisable for five years at $0.172 per share.  The warrants,
which were  valued at  approximately  $105,303  using the  Black-Scholes  option
pricing model,  were  recognized as a cost of issuance of the Series A Preferred
shares.                                                                         

In accordance  with EITF 98-5,  the Company  recognized  an imbedded  beneficial
conversion  feature present in the Preferred Stock.  The Company  recognized and
measured an aggregate of $810,000,  which equals to the  intrinsic  value of the
imbedded  beneficial  conversion  feature,  to additional  paid-in capital and a
return  to  the  Preferred  Stock  holders.  Since  the  preferred  shares  were
convertible  at the date of issuance,  the return to the preferred  shareholders
attributed to the beneficial  conversion  feature has been recognized in full at
the date the Preferred Stock was issued.                                        

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SPARTA COMMERCIAL SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2006
 (UNAUDITED)

NOTE C - STOCKHOLDERS' EQUITY (continued)                                       

Preferred Stock Series A (continued)                                            

During the nine months  ended  January  31,  2005,  the  Company  sold rights to
acquire  securities of the Company to investors for aggregate  gross proceeds of
$585,000.  Pursuant  to the terms of the  rights,  as the  Company  conducted  a
closing  to a private  placement  transaction  in 2004  utilizing  a  designated
registered  broker-dealer  as a placement  agent, on January 1, 2005, the rights
have  automatically  converted into 5,850 preferred  shares at a stated value of
$100 per  share and  warrants  to  purchase  1,875,001  shares of common  stock,
exercisable for three years at $0.195 per share.                                

NOTE D - GOING CONCERN MATTERS                                                  

The accompanying consolidated 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
consolidated  financial statements the Company has realized minimal revenue from
operations and has incurred significant operating losses since inception.  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.  However,  the planned principal
operations  have not commenced  and no assurance can be given that  management's
actions will result in profitable  operations or the resolution of its liquidity
problems. The accompanying  statements do not include any adjustments that might
result should the Company be unable to continue as a going concern.             

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

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SPARTA COMMERCIAL SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2006
 (UNAUDITED)

NOTE E - NON-CASH FINANCIAL INFORMATION                                         

During the nine months ended January 31, 2006 the Company:                      

      o     Recorded a dividend on preferred stock of $1,775,000  related to the
            fair value of the class 'C' warrants issued with preferred stock and
the related beneficial conversion feature.              

      o     Incurred costs of $182,483  related to the sale of preferred  stock.
These costs were deducted from the proceeds.            

      o     Issued  464,745  shares of common  stock,  valued  at  $243,270,  as
  additional costs related to loans received by the Company.

      o     Issued  651,124  shares of common  stock in payment of  $150,000  of
            principal  amount of notes  payable and  $12,781 of related  accrued
            interest.  The shares were issued at a value below  market price and
            the Company has  recorded a  financing  cost of $323,672  related to
this discount.                                          

      o     Issued an aggregate of 600,000 shares of common stock, pursuant to a
            consulting  agreement.  The shares have been valued at $474,000  and
            this amount is being amortized over twelve months, commencing August
1, 2005.                                                

      o     Issued  113,637  shares of common  stock,  valued  at  $85,228,  for
services.                                               

      o     Issued  8,958,333  shares of common stock upon  conversion of 13,975
shares of preferred stock.                              

      o     Incurred  costs of  $212,952  related  to the sale of common  stock.
These costs were deducted from the proceeds.            

      o     Granted an aggregate of 160,000 stock  options to  employees.  These
options have been valued at $75,795.                    

During the nine months ended January 31, 2005 the Company:                      

      o     Recorded a dividend on  preferred  stock of $810,000  related to the
            fair value of the class 'C' warrants issued with preferred stock and
the related beneficial conversion feature.              

NOTE F - NOTES PAYABLE                                                          

The company  finances certain of its leases through a third party. The repayment
terms  are  generally  three to five  years and the  notes  are  secured  by the
underlying  vehicles.  The weighted average interest rate at January 31, 2006 is
9.2%.                                                                           

NOTE G - SUBSEQUENT EVENT                                                       

In  February  2006,  the  Company  completed  a private  placement  offering  of
1,565,667  shares of common  stock,  par value $0.001 per share,  to  accredited
investors for net proceeds of $258,768.                                         

In March 2006, the Company completed a private  placement  offering of 4,039,200
shares common stock, par value $0.001 per share, to accredited investors for net
proceeds of $691,127.                                                           

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RUSSELL BEDFORD STEFANOU MIRCHANDANI LLP
CERTIFIED PUBLIC ACCOUNTANTS

--------------------------------------------------------------------------------

 REPORT OF REGISTERED INDEPENDENT CERTIFIED PUBLIC ACCOUNTING FIRM

Board of Directors                                                              
Sparta Commercial Services, Inc.                                                
New York, New York                                                              

 We have audited the accompanying consolidated balance sheet of Sparta
Commercial Services, Inc., as of April 30, 2005 and 2004, and the related       
consolidated statements of losses, deficiency in stockholders' equity and cash  
flows for each of the two years in the period ended April 30, 2005. These       
financial statements are the responsibility of the company's management. Our    
responsibility is to express an opinion on the financial statements based upon  
our audits.                                                                     

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

      In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Sparta         
Commercial Services, Inc. at April 30, 2005 and 2004, and the consolidated      
results of its operations and its cash flows for each of the two years in the   
period ended April 30, 2005, 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 O 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 O. The financial statements do not include any           
adjustments that might result from the outcome of this uncertainty.             

                                  /s/ RUSSELL BEDFORD STEFANOU MIRCHANDANI LLP
                                   ---------------------------------------------
                              Russell Bedford Stefanou Mirchandani LLP
                  Certified Public Accountants

New York, New York                                                              
July 15, 2005                                                                   

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SPARTA COMMERCIAL SERVICES, INC.
 CONSOLIDATED BALANCE SHEETS
 APRIL 30, 2005 and 2004

                                                        [Enlarge/Download Table]

                                                                                            2005          2004     
                                                                                         -----------   ----------- 
                                                                                                                   
ASSETS                                                                                                             
Current assets:                                                                                                    
Cash and cash equivalents                                                                $   108,365   $    11,973 
Retail installment sale contract receivables-current (Note E)                                 14,764            -- 
Marketable securities                                                                             --        13,379 
Other current assets, net                                                                      6,700            -- 
                                                                                         -----------   ----------- 
Total current assets                                                                         129,829        25,352 

Motorcycles and other vehicles under operating leases, net of accumulated                                          
  depreciation of $13,392 and $0, at April 30, 2005 and April 30, 2004,                                            
  respectively (Note D)                                                                       99,886            -- 
Property and equipment, net of accumulated depreciation and amortization of $15,378 and                            
  $30, at April 30, 2005 and 2004, respectively (Note F)                                     106,809         1,193 

  Other assets:                                                                                                    
  Prepaid expenses and deposits (see Note C)                                                  48,967            -- 
  Retail installment sale contract receivables (Note E)                                       21,521            -- 
                                                                                         -----------   ----------- 
  Total other assets                                                                          70,488            -- 

Total assets                                                                             $   407,012   $    26,545 
                                                                                         ===========   =========== 

LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY                                                                 
Current Liabilities:                                                                                               
Accounts payable and accrued expenses                                                    $   509,936   $    81,721 
Note payable (Note G)                                                                        300,000            -- 
Deferred revenue (Note A)                                                                     23,100            -- 
Due to related party (Note H)                                                                 25,000        23,885 
                                                                                         -----------   ----------- 
       Total current liabilities                                                             858,036       105,606 

Commitments and contingencies (Note M)                                                                             

Deficiency in Stockholders' Equity: (Note I)                                                                       
Preferred Stock, $0.001 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. 18,100 and 0 shares of convertible preferred stock are                                     
  issued and outstanding                                                                                           
  at April 30, 2005 and 2004, respectively                                                 1,810,000            -- 
Common Stock, $0.001 par value; 340,000,000 and 200,000,000 shares authorized at                                   
  April 30, 2005 and 2004, respectively; 86,005,415 and 7,079,654 shares                                           
  issued and outstanding at April 30, 2005 and 2004, respectively                             86,005         7,080 
Common stock - subscription payable                                                               --        17,920 
Additional paid-in-capital                                                                 3,930,629     1,754,870 
Accumulated deficit                                                                       (6,277,658)   (1,858,931)
                                                                                         -----------   ----------- 
       Total deficiency in stockholders' equity                                             (451,024)      (79,061)
                                                                                         -----------   ----------- 

Liabilities and deficiency in stockholders' equity                                       $   407,012   $    26,545 
                                                                                         ===========   =========== 

           See accompanying notes to consolidated financial statements                                             

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SPARTA COMMERCIAL SERVICES, INC.
CONSOLIDATED STATEMENT OF LOSSES

                                                        [Enlarge/Download Table]

                                                                    For the Year Ended April 30, 
                                                                    ---------------------------- 
                                                                       2005              2004    
                                                                    ------------    ------------ 
                                                                                                 
Revenue                                                             $     65,833    $         -- 
                                                                    ------------    ------------ 

Operating Expenses:                                                                              
General and administrative                                             2,366,914       1,780,968 
Payment for option to purchase portfolio from a related party            250,000              -- 
Depreciation and amortization (Note F)                                    28,740              -- 
                                                                    ------------    ------------ 
   Total Operating Expenses                                            2,645,654       1,780,968 

Loss from Operations                                                  (2,579,821)     (1,780,968)

Other Income (Expenses)                                                       --           8,711 
Income Taxes (Note J)                                                         --              -- 

Net Loss                                                              (2,579,821)     (1,772,257)
                                                                    ------------    ------------ 
Preferred dividend payable                                                28,906              -- 
Preferred dividend-beneficial conversion discount on                                             
  convertible  preferred                                               1,810,000              -- 
                                                                    ------------    ------------ 
Net Loss Available to Common Stockholders                           $ (4,418,727)   $ (1,772,257)
                                                                    ============    ============ 

Loss per common share (basic and assuming dilution) (Note K)        $      (0.05)   $      (0.25)
                                                                    ============    ============ 

Weighted average common shares outstanding (basic and diluted), as    85,812,006       7,079,654 
  restated for splits                                                                            

 See accompanying notes to consolidated financial statements

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SPARTA COMMERCIAL SERVICES, INC.
CONSOLIDATED STATEMENT OF DEFICIENCY IN STOCKHOLDERS' EQUITY
 FOR THE YEARS ENDED April 30, 2005 and 2004

                                                        [Enlarge/Download Table]

                                    Sparta                                                                             
                                  Commercial                                 Subscription                              
                                 Services LLC                    Common        Payable-                                
                                  Membership       Common        Shares         Common      Subscription     Preferred 
                                   Interest        Shares        Amount         Shares         Payable        Shares   
                                 ------------   ------------  ------------   ------------   ------------   ------------
                                                                                                                       
Balance at April 30, 2003        $  5,265,000             --  $    165,250   $         --   $         --             --

Proceeds from capital                                                                                                  
contributions                         775,000             --       775,000             --             --             --

Membership interests issued                                                                                            
to consultants in exchange for                                                                                         
services in June 2003 at $1 per                                                                                        
unit                                  448,000             --       448,000             --             --             --

Membership interests  issued                                                                                           
in exchange for                                                                                                        
licensing fees in December                                                                                             
2003 at $1 per unit                   330,433             --       330,433             --             --             --

Tomahawk Shares retained by                                                                                            
Tomahawk stockholders in                                                                                               
connection with merger with                                                                                            
Sparta Commercial Services                                                                                             
LLC in February 2004, as                                                                                               
restated                                   --      7,079,654         7,080             --             --             --

Shares deemed to be issued to                                                                                          
Sparta members in relation to                                                                                          
merger with Sparta                                                                                                     
Commercial Services LLC in                                                                                             
February 2004                      (6,818,433)            --    (1,718,683)    17,920,346         17,920             --

Net Loss                                   --             --            --             --             --             --
                                 ------------   ------------  ------------   ------------   ------------   ------------

Balance at April 30, 2004        $         --      7,079,654  $      7,080     17,920,346   $     17,920             --

Shares issued to Sparta                                                                                                
members in relation to merger                                                                                          
with Sparta Commercial                                                                                                 
Services LLC in February                                                                                               
2004 (Note B)                              --     17,920,346        17,920    (17,920,346)       (17,920)            --

Balance of shares issued to                                                                                            
members                                    --     60,795,625        60,796             --        (60,796)              

Preferred shares issued to                                                                                             
subscription holders                       --             --            --             --             --         18,100

Warrants issued to placement                                                                                           
agent in January 2005                      --             --            --             --             --             --

Warrants on convertible                                                                                                
preferred shares                           --             --            --             --             --             --

Beneficial conversion discount                                                                                         
on convertible preferred                                                                                               
shares                                     --             --            --             --             --             --

Warrants Issued for services                                                                                           
Issuance Cost of Preferred                                                                                             
shares                                     --             --            --             --             --             --

Shares Issued For Notes                                                                                                
Payable                                    --         96,155            96             --             --             --

Shares issued to employees                                                                                             
(vested portion)                           --        113,635           113             --             --             --

Net Loss                                   --             --            --             --             --             --
                                 ------------   ------------  ------------   ------------   ------------   ------------

Balance at April 30, 2005        $         --     86,005,415  $     86,005             --   $         --         18,100
                                 ============   ============  ============   ============   ============   ============


                                                                                 Total                                 
                                  Preferred    Additional                    Stockholders'                             
                                    Shares      Paid-in       Accumulated       Equity                                 
                                    Amount      Capital         Deficit      (Deficiency)                              
                                 ------------  ------------   ------------   ------------                              
                                                                                                                       
Balance at April 30, 2003        $         --  $         --   $    (86,674)  $     78,576                              

Proceeds from capital                                                                                                  
contributions                              --            --             --        775,000                              

Membership interests issued                                                                                            
to consultants in exchange for                                                                                         
services in June 2003 at $1 per                                                                                        
unit                                       --            --             --        448,000                              

Membership interests  issued                                                                                           
in exchange for                                                                                                        
licensing fees in December                                                                                             
2003 at $1 per unit                        --            --             --        330,433                              

Tomahawk Shares retained by                                                                                            
Tomahawk stockholders in                                                                                               
connection with merger with                                                                                            
Sparta Commercial Services                                                                                             
LLC in February 2004, as                                                                                               
restated                                   --        54,107             --         61,187                              

Shares deemed to be issued to                                                                                          
Sparta members in relation to                                                                                          
merger with Sparta                                                                                                     
Commercial Services LLC in                                                                                             
February 2004                              --     1,700,763             --             --                              

Net Loss                                   --            --     (1,772,257)    (1,772,257)                             
                                 ------------  ------------   ------------   ------------                              

Balance at April 30, 2004                  --  $  1,754,870   $ (1,858,931)  $    (79,061)                             

Shares issued to Sparta                                                                                                
members in relation to merger                                                                                          
with Sparta Commercial                                                                                                 
Services LLC in February                                                                                               
2004 (Note B)                              --            --             --                                             

Balance of shares issued to                                                                                            
members                                                                                                                

Preferred shares issued to                                                                                             
subscription holders                1,810,000            --             --      1,810,000                              

Warrants issued to placement                                                                                           
agent in January 2005                      --       383,284             --        383,284                              

Warrants on convertible                                                                                                
preferred shares                           --       487,660             --        487,660                              

Beneficial conversion discount                                                                                         
on convertible preferred                                                                                               
shares                                     --     1,322,340             --      1,322,340                              

Warrants Issued for services                                                                                           
Issuance Cost of Preferred                                                                                             
shares                                     --        89,980             --         89,980                              

Shares Issued For Notes                                                                                                
Payable                                    --      (129,000)            --       (128,904)                             

Shares issued to employees                                                                                             
(vested portion)                           --        82,291             --         82,404                              

Net Loss                                   --            --     (4,418,727)    (4,418,727)                             
                                 ------------  ------------   ------------   ------------                              

Balance at April 30, 2005           1,810,000  $  3,930,629   $ (6,277,658)  $   (451,024)                             
                                 ============  ============   ============   ============                              

 See accompanying notes to consolidated financial statements

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SPARTA COMMERCIAL SERVICES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS

                                                        [Enlarge/Download Table]

                                                                             For the Year Ended April 30,
                                                                             ----------------------------
                                                                                  2005           2004    
                                                                              -----------    ----------- 
                                                                                                         
Cash flows from Operating Activities:                                                                    
Net loss                                                                      $(4,418,727)   $(1,772,257)

Adjustments to reconcile net loss to net cash used in operating activities:                              
Warrants issued with convertible preferred shares (Note I)                        487,660             -- 
Beneficial conversion discount on convertible preferred stock (Note I)          1,322,340             -- 
Depreciation and amortization (Note F)                                             28,740             30 
                                                                              -----------    ----------- 
Cost of warrants issued                                                           473,264             -- 
Shares issued to employees (vested portion)                                        82,500             -- 
Shares issued in exchange for licensing fees                                           --        330,433 
Shares issued to consultants for services (Note I)                                     --        448,000 
Acquisition costs(Note B)                                                              --         61,187 
Gain on sale of investments                                                            --         (8,711)

(Increase)decrease in:                                                                                   
Retail installment sale contract receivable                                       (36,285)            -- 
                                                                              -----------    ----------- 
Other current assets                                                               (6,700)            -- 
Prepaid expenses and deposits                                                     (48,967)            -- 
Increase(decrease) in:                                                                                   
Accounts payable                                                                  428,215         79,221 
Increase in deferred revenue                                                       23,100             -- 
Due to related party                                                              (23,885)        80,999 
                                                                              -----------    ----------- 
Net Cash used in Operating Activities                                          (1,688,745)      (781,098)

Cash Flows From Investing Activities:                                                                    
Net payments for property and equipment                                          (120,964)        (1,223)
Payments for motorcycles                                                         (113,278)            -- 
(Payments for) proceeds from sale (purchase) of marketable securities              13,379         (4,668)
                                                                              -----------    ----------- 
Net Cash used in Investing Activities                                            (220,863)        (5,891)

Cash Flows From Financing Activities:                                                                    
Proceeds from note payable(Note G)                                                300,000             -- 
Proceeds from note payable -related party(Note G)                                  25,000             -- 
Proceeds form  sale of equity interests, net                                    1,681,000        775,000 
                                                                              -----------    ----------- 
Net Cash Provided by Financing Activities                                       2,006,000        775,000 

 See accompanying notes to consolidated financial statements

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SPARTA COMMERCIAL SERVICES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
 (Continued)

                                                        [Enlarge/Download Table]

                                                              For the Years Ended April 30,
                                                              -----------------------------
                                                                   2005         2004       
                                                                ----------   ----------    
                                                                                           
Net increase (decrease) in cash and equivalents                     96,392      (11,989)   
Cash and equivalents at beginning of period                         11,973       23,962    
                                                                ----------   ----------    
Cash and equivalents at end of period                           $  108,365   $   11,973    
                                                                ==========   ==========    

Supplemental disclosures of cash flow information:                                         
Cash paid during the period for interest                        $       --   $       --    
                                                                ----------   ----------    
Cash paid during the period for taxes                           $       --   $       --    
                                                                ----------   ----------    

Non Cash Investing and Financing Transactions:                                             
Shares issued in exchange for services (Note I)                 $       --   $  448,000    
Shares issued to employees (vested portion)                         82,500           --    
Cost of warrants issued                                            473,264           --    
Warrants issued with convertible preferred shares                  487,660                 
                                                                             ----------    
Shares issued in exchange for licensing fees                            --      330,433    
Beneficial conversion discount on convertible preferred stock    1,322,340           --    
Merger with Sparta: (Note B)                                                               
Common stock retained                                                   --           --    
Liabilities assumed in excess of assets acquired                        --           --    
Shares issued in exchange  for services(Note B)                         --       61,187    

 See accompanying notes to consolidated financial statements

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SPARTA COMMERCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 APRIL 30, 2005 and 2004

NOTE A - SUMMARY OF ACCOUNTING POLICICIES                                       

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., formerly known as Tomahawk Industries, Inc.   
(the "Company" or "Tomahawk") was formed on May 13, 1980 under the laws of the  
State of Nevada. On February 27, 2004, the Company entered into an Agreement of 
Plan and Reorganization ("Agreement") with Sparta Commercial Services, LLC      
("Sparta"), a limited liability company formed on October 1, 2001 under the laws
of the State of Delaware under the name of Sparta Financial Services, LLC. .In  
accordance with SFAS No. 141, Sparta was the acquiring entity. While the        
transaction is accounted for using the purchase method of accounting, in        
substance the Agreement is a recapitalization of the Company's capital          
structure. As a result of the Agreement, there was a change in control of the   
Company. Also, subsequently, the Company's name was changed from Tomahawk       
Industries, Inc. to Sparta Commercial Services, Inc. From April 1988 until the  
date of the Agreement, the Company was an inactive publicly registered shell    
corporation with no significant assets or operations (see Note B).              

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 500cc and higher) and utility-oriented 4-stroke all   
terrain vehicles (ATVs). The Company was in the development stage till January  
31, 2005, as defined by Statement of Financial Accounting Standards No. 7 ("SFAS
No. 7").                                                                        

The consolidated financial statements include the accounts of the Company and   
its wholly owned subsidiary, Sparta Commercial Services, LLC. All significant   
intercompany transactions and balances have been eliminated in the consolidated 
financial statements.                                                           

Estimates                                                                       
---------                                                                       

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

Revenue Recognition                                                             
-------------------                                                             

The Company originates leases on new and used motorcycles and other powersports 
vehicles from motorcycle dealers throughout the United States. All of the       
Company's leases, which the Company enters into, are accounted for as operating 
leases. At the inception of the lease, 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. An acquisition fee classified as fee income on the financial statements 
is received and recognized in income at the inception of the lease.             

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.                                                                 

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SPARTA COMMERCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 APRIL 30, 2005 and 2004

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 also provides financing for motorcycles and other powersports       
vehicles through the origination of retail installment sale contracts, where    
revenue is recognized over the term of the loan contract. Provision is made for 
delinquent accounts.                                                            

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 is amortized and booked as income over   
the length of the contract. At April 30, 2005 and 2004, the Company had recorded
deferred revenue of $23,100 and $0, respectively.                               

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.                                                                    

Marketable Securities                                                           
---------------------                                                           

The Company classifies its marketable securities as "available for sale"        
securities which may be sold in response to changes in interest rates, liquidity
needs and for other purposes. Securities classified as "available for sale" are 
carried in the financial statement at fair value. Realized gains and losses are 
included in other income. Unrealized gains and losses are reported as a separate
component of stockholders' equity.                                              

At April 30, 2005, the marketable securities balance was $0. At April 30, 2004, 
marketable securities consist of:                                               

                                                Unrealized      Fair
                                           Cost         Gain      Market Value
Equity securities                         $    --       $   --       $    --    
Mutual funds                               13,379           --        13,379    
Total                                     $13,379       $   --       $13,379    
                                      =======       ======       =======

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SPARTA COMMERCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 APRIL 30, 2005 and 2004

NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)                             

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.                                          

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.                                                             

Intangible Assets                                                               
-----------------                                                               

Organization costs have been expensed as incurred.                              

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, 2005 and 2004, the Company has $0, as        
accumulated unrealized gain (loss) on marketable securities classified as held  
for sale.                                                                       

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.                                          

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SPARTA COMMERCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 APRIL 30, 2005 and 2004

NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)                             

Stock Based Compensation                                                        
------------------------                                                        

In December 2003, the FASB issued SFAS No. 148, "Accounting for Stock-Based     
Compensation-Transition and Disclosure-an amendment of SFAS 123." This statement
amends SFAS No. 123, "Accounting for Stock-Based Compensation," to provide      
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation.                     

In addition, this statement amends the disclosure requirements of SFAS No. 123  
to require prominent disclosures in both annual and interim financial statements
about the method of accounting for stock-based employee compensation and the    
effect of the method used on reported results. The Company has chosen to        
continue to account for stock-based compensation using the intrinsic value      
method prescribed in APB Opinion No. 25 and related interpretations.            
Accordingly, compensation expense for stock Warrants is measured as the excess, 
if any, of the fair market value of the Company's stock at the date of the grant
over the exercise price of the related option. The Company has adopted the      
annual disclosure provisions of SFAS No. 148 in its financial reports from      
January 1, 2003.                                                                

Had compensation costs for the Company's stock options been determined based on 
the fair value at the grant dates for the awards, the Company's net loss and    
losses per share would have been as follows (transactions involving stock       
options issued to employees and Black-Scholes model assumptions are presented in
Note G):                                                                        

                                                        [Enlarge/Download Table]

                                                                2005          2004    
                                                            -----------   ----------- 
                                                                                      
Net loss - as reported                                      $(4,418,727)  $(1,772,257)
Add: Total stock based employee                                                       
compensation  expense as reported under                                               
intrinsic value method (APB. No. 25)                             82,500            -- 
Deduct: Total stock based employee                                                    
compensation expense as reported under fair value based                               
method (SFAS No. 123)                                          (247,100)           -- 
                                                            -----------   ----------- 
Net loss - Pro Forma                                        $(4,583,327)  $(1,772,257)
                                                            ===========   =========== 

Net loss attributable to common stockholders - Pro forma    $(4,583,327)  $(1,772,257)
                                                            ===========   =========== 
Basic (and assuming dilution) loss per share - as reported  $     (0.05)  $     (0.25)
                                                            ===========   =========== 
Basic (and assuming dilution) loss per share - Pro forma    $     (0.05)  $     (0.25)
                                                            ===========   =========== 

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 third quarter of 2006. Management is     
assessing the implications of this revised standard, which may materially impact
the Company's results of operations in the third quarter of fiscal year 2006 and
thereafter.                                                                     

Liquidity                                                                       
---------                                                                       

As shown in the accompanying financial statements, the Company incurred a net   
loss of $(6,277,658) during the period October 1, 2001 (date of inception)      
through April 30, 2005. The Company's current liabilities exceeded its current  
assets by $ 728,207 as of April 30, 2005.                                       

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SPARTA COMMERCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 APRIL 30, 2005 and 2004

NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)                             

Concentrations of Credit Risk                                                   
-----------------------------                                                   

Financial instruments and related items, which potentially subject the Company  
to concentrations of credit risk, consist primarily of cash, cash equivalents   
and trade receivables. The Company places its cash and temporary cash           
investments with high credit quality institutions. At times, such investments   
may be in excess of the FDIC insurance limit. The Company periodically reviews  
its trade receivables in determining its allowance for doubtful accounts. At    
April 30, 2005 and 2004, allowance for doubtful accounts receivables was $0.    

Research and Development                                                        
------------------------                                                        

Company-sponsored research and development costs related to both present and    
future products will be expended in the period incurred.                        

Property and Equipments                                                         
-----------------------                                                         

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        5 years                                           
Automobiles                   5 years                                           
Furniture and equipment       5 years                                           
Computer Equipment            3 years                                           

The Company follows a policy of charging the costs of advertising to expenses   
incurred. During the years ended April 30, 2005 and 2004, the Company incurred  
advertising costs of $28,107 and $4,057, respectively.                          

Net Earnings (Losses) Per Common Share                                          
--------------------------------------                                          

The Company computes earnings per share under Statement of Financial Accounting 
Standards No. 128, "Earnings Per Share" ("SFAS 128"). Net earnings (losses) per 
common share is computed by dividing net income (loss) by the weighted average  
number of shares of common stock and dilutive common stock equivalents          
outstanding during the year. Dilutive common stock equivalents consist of shares
issuable upon conversion of convertible preferred shares and the exercise of the
Company's stock options and warrants (calculated using the treasury stock       
method).                                                                        

Reclassifications                                                               
-----------------                                                               

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

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SPARTA COMMERCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 APRIL 30, 2005 and 2004

NOTE A - SUMMARY OF ACCOUNTING POLICIES (Continued)                             

New Accounting Pronouncements                                                   
-----------------------------                                                   

In November 2004, the Financial Accounting Standards Board (FASB) issued SFAS   
151, Inventory Costs-- an amendment of ARB No. 43, Chapter 4. This Statement    
amends the guidance in ARB No. 43, Chapter 4, "Inventory Pricing," to clarify   
the accounting for abnormal amounts of idle facility expense, freight, handling 
costs, and wasted material (spoilage). Paragraph 5 of ARB 43, Chapter 4,        
previously stated that ". . . under some circumstances, items such as idle      
facility expense, excessive spoilage, double freight, and rehandling costs may  
be so abnormal as to require treatment as current period charges. . . ." This   
Statement requires that those items be recognized as current-period charges     
regardless of whether they meet the criterion of "so abnormal." In addition,    
this Statement requires that allocation of fixed production overheads to the    
costs of conversion be based on the normal capacity of the production           
facilities. This Statement is effective for inventory costs incurred during     
fiscal years beginning after June 15, 2005. Management does not believe the     
adoption of this Statement will have any immediate material impact on the       
Company.                                                                        

In December 2004, the FASB issued SFAS No.152, "Accounting for Real Estate      
Time-Sharing Transactions--an amendment of FASB Statements No. 66 and 67" ("SFAS
152) The amendments made by Statement 152 This Statement amends FASB Statement  
No. 66, Accounting for Sales of Real Estate, to reference the financial         
accounting and reporting guidance for real estate time-sharing transactions that
is provided in AICPA Statement of Position (SOP) 04-2, Accounting for Real      
Estate Time-Sharing Transactions. This Statement also amends FASB Statement No. 
67, Accounting for Costs and Initial Rental Operations of Real Estate Projects, 
to state that the guidance for (a) incidental operations and (b) costs incurred 
to sell real estate projects does not apply to real estate time-sharing         
transactions. The accounting for those operations and costs is subject to the   
guidance in SOP 04-2. This Statement is effective for financial statements for  
fiscal years beginning after June 15, 2005 with earlier application encouraged. 
The Company does not anticipate that the implementation of this standard will   
have a material impact on its financial position, results of operations or cash 
flows.                                                                          

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SPARTA COMMERCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 APRIL 30, 2005 and 2004

NOTE A - SUMMARY OF ACCOUNTING POLICIES (Continued)                             

New Accounting Pronouncements (Continued)                                       
-----------------------------------------                                       

On December 16, 2004, the Financial Accounting Standards Board ("FASB")         
published Statement of Financial Accounting Standards No. 123 (Revised 2004),   
Share-Based Payment ("SFAS 123R"). SFAS 123R requires that compensation cost    
related to share-based payment transactions be recognized in the financial      
statements. Share-based payment transactions within the scope of SFAS 123R      
include stock Warrants, restricted stock plans, performance-based awards, stock 
appreciation rights, and employee share purchase plans. On April 14, 2005, the  
SEC amended the effective date of the provisions of this statement. Accordingly,
the Company will implement the revised standard in the forth quarter of fiscal  
year 2006. Currently, the Company accounts for its share-based payment          
transactions under the provisions of APB 25, which does not necessarily require 
the recognition of compensation cost in the financial statements. Management is 
assessing the implications of this revised standard, which may materially impact
the Company's results of operations in the third quarter of fiscal year 2006 and
thereafter.                                                                     

On December 16, 2004, FASB issued Statement of Financial Accounting Standards   
No. 153, Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29,   
Accounting for Nonmonetary Transactions (" SFAS 153"). This statement amends APB
Opinion 29 to eliminate the exception for nonmonetary exchanges of similar      
productive assets and replaces it with a general exception for exchanges of     
nonmonetary assets that do not have commercial substance. Under SFAS 153, if a  
nonmonetary exchange of similar productive assets meets a commercial-substance  
criterion and fair value is determinable, the transaction must be accounted for 
at fair value resulting in recognition of any gain or loss. SFAS 153 is         
effective for nonmonetary transactions in fiscal periods that begin after June  
15, 2005. The Company does not anticipate that the implementation of this       
standard will have a material impact on its financial position, results of      
operations or cash flows.                                                       

In March 2005, the FASB issued FASB Interpretation (FIN) No. 47, "Accounting for
Conditional Asset Retirement Obligations, an interpretation of FASB Statement   
No. 143," which requires an entity to recognize a liability for the fair value  
of a conditional asset retirement obligation when incurred if the liability's   
fair value can be reasonably estimated. The Company is required to adopt the    
provisions of FIN 47 no later than the end of its fiscal 2006. The Company does 
not expect the adoption of this Interpretation to have a material impact on its 
consolidated financial position, results of operations or cash flows.           

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

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SPARTA COMMERCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 APRIL 30, 2005 and 2004

NOTE B - MERGER  AND CORPORATE RESTRUCTURE                                      

On February 27, 2004, the Company entered into an Agreement of Plan and         
Reorganization ("Agreement" or "Merger") with Sparta Commercial Services LLC    
("Sparta"). As a result of the Merger, there was a change in control of the     
public entity. In accordance with SFAS No. 141, Sparta was the acquiring entity.
While the transaction is accounted for using the purchase method of accounting, 
in substance the Agreement is a recapitalization of Sparta's capital structure. 

For accounting purposes, the Company accounted for the transaction as a reverse 
acquisition and Sparta is the surviving entity. The total purchase price and    
carrying value of net assets acquired was $61,187. The Company did not recognize
goodwill or any intangible assets in connection with the transaction. From April
1988 until the date of the Agreement, the Company was an inactive corporation   
with no significant assets and liabilities.                                     

Effective with the Agreement, all previously outstanding membership interests   
owned by the Sparta's members were exchanged for an aggregate of 17,920,346     
shares of the Company's common stock. The value of the stock that was issued was
the historical cost of the Company's net tangible assets, which did not differ  
materially from their fair value.                                               

The total consideration paid was $61,187 and the significant components of the  
transaction are as follows:                                                     

Common stock retained                        $ 56,637         
Assets acquired                                  (594)        
Liabilities assumed                             5,144         
Cash paid                                          --         
                                    --------
Total consideration paid/organization cost   $ 61,187         
                                    ========

In accordance with SOP 98-5, the Company expensed $61,187 as organization costs.

NOTE C - PREPAID EXPENSE AND DEPOSITS                                           

Prepaid expenses and deposits at April 30, 2005 and 2004 consist of the         
following:                                                                      

                                                2005      2004
                                                 ---------    ------

   Security deposit to landlord                  $  40,800    $   --

   Advance lease system deposit                      5,000        --
   Consolidated electric deposit                     3,167        --
   Purchase option deposit                         250,000        --
   Less: valuation allowance                      (250,000)       --
                                                 ---------    ------

   Total prepaid expenses and deposits           $  48,967    $   --
                                                 =========    ======

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SPARTA COMMERCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 APRIL 30, 2005 and 2004

NOTE D - MOTORCYCLES AND OTHER VEHICLES UNDER OPERATING LEASES                  

Motorcycles and other vehicles under operating leases at April 30, 2005 and 2004
consist of the following:                                                       

                                                                [Download Table]

                                                                   2005       2004 
                                                                 ---------   ------
                                                                                   
Motorcycles and other vehicles                                   $ 113,278   $   --
Less: accumulated depreciation                                     (13,392)      --
                                                                 ---------   ------
Motorcycles and other vehicles, net of accumulated depreciation     99,886       --
                                                                 ---------   ------
Less: estimated reserve for residual values                             --       --
                                                                 ---------   ------
Motorcycles and other vehicles under operating leases, net                         
                                                                 $  99,886   $   --
                                                                 =========   ======

At April 30, 2005, motorcycles and other vehicles are depreciated to the        
estimated residual values of $42,964 over the lives of their lease contracts.   

The following is a schedule by years of minimum future rentals on non cancelable
operating leases as of April 30, 2005:                                          

Year ending April 30,                                           
   2006                                                        $25,818
   2007                                                         30,700
   2008                                                         18,858
   2009                                                          2,530
                                                               -------

   Total                                                       $77,906
                                                               =======

NOTE E - RETAIL INSTALLMENT RECEIVABLES                                         

Retail installment sale receivables, which are carried at cost, were $36,285 and
$0 at April 30, 2005 and 2004, respectively. The following is a schedule by     
years of future payments related to these receivables. Future payments include  
amortization of cost as well as a profit margin.                                

Year ending April 30,                                           
    2006                                                        $ 17,426
    2007                                                          17,300
    2008                                                           7,109
    2009                                                             991
                                                                --------
                                                                  42,826
     Less: interest portion                                        (6,541)
                                                                ========
                                                                  36,285
    Less: allowance for doubtful receivables                          --
                                                                --------
                                                                  36,285
     Less: current receivables                                    (14,764)
                                                                --------
                                                                $ 21,521
                                                                ========

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SPARTA COMMERCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 APRIL 30, 2005 and 2004

NOTE F - PROPERTY AND EQUIPMENT                                                 

Major classes of property and equipment at April 30, 2005 and 2004 consist of   
the followings:                                                                 

                                                           2005         2004
                                                           --------     --------
Computer equipment , web site and furniture                $122,187     $  1,223
Less: accumulated depreciation and amortization              15,378           30
                                                           --------     --------

Net property and equipment                                 $106,809     $  1,193
                                                           ========     --------

Depreciation and amortization expense was $15,348 and $30 for the years ended   
April 30, 2005 and 2004, respectively.                                          

NOTE G - NOTES PAYABLE                                                          

Notes payable at April 30, 2005 and 2004 are as follows:                        

                                                        [Enlarge/Download Table]

                                                                                                 2005       2004 
                                                                                               ---------   ------
                                                                                                                 
Notes payables; 10% interest, unsecured, originally scheduled to expire on April                                 
30, 2005, the note holders are entitled to an "Equity Kicker" equal to 128,206                                   
restricted shares of common stock for each $100,000 loaned, in the event of                                      
default, as penalty, the repayment after default of promissory note shall be                                     
collateralized by certain security interest as per the terms of the agreement                                    
Notes were subsequently extended until August 31, 2005 and beyond, with interest                                 
increased to 20% in certain instances, and the Equity Kicker equal to                                            
192,308 restricted shares of common stock for each $100,000 loaned in certain instances        $ 300,000   $   --

Note payable to officer of the Company,  unsecured,  non-interest bearing,  payable on demand                    
(Note H)                                                                                          25,000       --
                                                                                               ---------   ------
                                                                                                 325,000       --
Less: current portion                                                                           (325,000)      --
                                                                                               ---------   ------
Notes payable - long term                                                                      $      --   $   --
                                                                                               =========   ======

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SPARTA COMMERCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 APRIL 30, 2005 and 2004

NOTE H - 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, 2005 and
2004, the Company charged to operations $150,633 and $730,433, respectively, in 
connection with the licensing agreement. At April 30, 2005 and 2004, the balance
outstanding on account of licensing agreement payable to related party was $0.  
During the years ended April 30, 2005 and 2004, the Company paid $81,000 and $0,
for a purchase option agreement whereby the Company has the option to purchase  
from a related party, portions of a certain portfolio of equipment leases for   
motorcycles.                                                                    

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. In June, 2005, an        
additional $20,000 was paid.                                                    

Up to November 30, 2004, the Company leased office space from an entity         
controlled by the Company's President and Chief Executive Officer. From December
1, 2004, the Company has entered into a lease agreement for office premises with
an unrelated party. (Note M)                                                    

In January 2005, the Company received a loan of $25,000 from an officer. This   
loan is non-interest bearing and is payable on demand. (Note G)                 

NOTE I - 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, 2005 and 2004, the Company has issued and outstanding 18,100 and 0 shares of
preferred stock issued and outstanding, respectively. The Company has 86,005,415
and 7,079,654 shares of common stock issued and outstanding as of April 30, 2005
and 2004, respectively.                                                         

On December 27, 2004, the Company effected a one-for-two hundred reverse stock  
split followed by a forward split of twenty five-for-one of its authorized and  
outstanding shares of common stock, $.001 par value. All references in the      
financial statements and notes to financial statements, numbers of shares and   
share amounts have been retroactively restated to reflect the reverse split.    

Common Stock                                                                    
------------                                                                    

In June 2003, Sparta issued 448,000 shares of membership interest to various    
consultants in exchange for services valued at $1 per share. The units of       
membership interest issued was valued at approximately $1 per share, which      
represents the fair value of the units issued, which did not differ materially  
from the value of the services rendered.                                        

During the year ended April 30, 2004, Sparta issued for cash 775,000 shares of  
membership interest for $775,000.                                               

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SPARTA COMMERCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 APRIL 30, 2005 and 2004

NOTE I - EQUITY INSTRUMENTS (continued)                                         

In December 2003, Sparta issued 330,433 shares of membership interest for       
licensing fees payable to a company controlled by principal members of Sparta.  
The units of membership interest issued was valued at approximately $1 per      
share, which represents the fair value of the units issued, which did not differ
materially from the value of the services rendered.                             

In February 2004, as per agreement of Plan and Reorganization ("Agreement") with
Sparta, all previously outstanding membership interests owned by the Sparta's   
members were exchanged for an aggregate of 17,920,346 shares of the Company's   
common stock. In September 2004, the Company issued 17,920,346 shares of common 
stock. The value of the stock that was issued was the historical cost of the    
Company's net tangible assets, which did not differ materially from their fair  
value. After the authorized capital of the company was increased, the Company   
issued an additional 60,813,982 shares of its common stock that was due to      
Sparta's former members under the merger agreement. Also, as per the Agreement, 
7,079,654 shares of common stock were retained by the stockholders of the       
Company.                                                                        

 In January, 2005, 113,635 shares of restricted stock issued to the former Chief
Financial Officer, Daniel Lanjewar, were vested and issued.                     

In April, 2005, 96,155 shares were issued pursuant to an agreement with two     
individuals who provided short term note payable financing to the Company.      

Preferred Stock Series A                                                        
------------------------                                                        

In December 2004, the Company commenced a private placement to raise up to      
$3,000,000 through the sale of up to 30 units of our securities at $100,000 per 
unit. Each unit consists of (i) 1,000 shares of series A convertible, redeemable
preferred stock and (ii) warrants to purchase 320,513 shares of common stock,   
exercisable for three years at $0.195 per share. The preferred stock has a      
stated value of $100 per share, carries a 6% annual cumulative dividend, payable
semi-annually in arrears, and is convertible into shares of common stock at the 
rate of one preferred share into 641 shares of common stock.                    

In December 2004, the Company began a private placement transaction utilizing a 
designated registered broker-dealer as a placement agent. During the year ended 
April 30, 2005, the Company issued 12,250 preferred shares at a stated value of 
$100 per share and warrants to purchase 3,926,286 shares of common stock,       
exercisable for three years at $0.195 per share, for aggregate gross proceeds of
$1,225,000 received from investors. In connection with the private placement,   
during the year ended April 30, 2005, the Company issued as compensation to the 
placement agent warrants to 785,257 shares of common stock, exercisable for five
years at $0.172 per share. The warrants, which were valued at approximately     
$383,284 using the Black-Scholes option pricing model, were recognized as a cost
of issuance of the Series A Preferred shares.                                   

During the year ended April 30, 2005, the Company sold rights to acquire        
securities of the Company to investors for aggregate gross proceeds of $585,000.
Pursuant to the terms of the rights, as the Company conducted a closing to a    
private placement transaction in 2004 utilizing a designated registered         
broker-dealer as a placement agent, on January 1, 2005, the rights have         
automatically converted into 5,850 preferred shares at a stated value of $100   
per share and warrants to purchase 1,875,001 shares of common stock, exercisable
for three years at $0.195 per share.                                            

In accordance with Emerging Issues Task Force Issue 98-5, Accounting for        
Convertible Securities with a beneficial Conversion Features or Contingently    
Adjustable Conversion Ratios ("EITF 98-5"), the Company recognized an imbedded  
beneficial conversion feature present in the Preferred Stock. The Company       
recognized and measured an aggregate of $1,810,000, which equals to the         
intrinsic value of the imbedded beneficial conversion feature, to additional    
paid-in capital and a return to the Preferred Stock holders. Since the preferred
shares were convertible at the date of issuance, the return to the preferred    
shareholders attributed to the beneficial conversion feature has been recognized
in full at the date the Preferred Stock was issued.                             

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SPARTA COMMERCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 APRIL 30, 2005 and 2004

NOTE J - 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, 2005, the Company has available for federal income tax purposes a  
net operating loss carry forward of approximately $4,500,000, expiring in the   
year 2024, 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, 2005 are as follows:          

Non current:                                                    
Net operating loss carry forward                   $ 1,530,000  
Valuation allowance                                 (1,530,000) 
                                                 -----------
Net deferred tax asset                             $        --  
                                                 ===========

NOTE K - LOSSES PER COMMON SHARE                                                

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

                                                                [Download Table]

                                                       2005           2004     
                                                   ------------    ----------- 
                                                                               
Net loss available for common shareholders         $ (4,418,727)   $(1.772,257)
                                                   ============    =========== 
Basic and diluted loss per share                   $      (0.05)   $     (0.25)
                                                   ============    =========== 
Weighted average common shares outstanding-basic                               
Diluted                                              85,812,006      7,079,654 

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SPARTA COMMERCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 APRIL 30, 2005 and 2004

NOTE L - 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.    

a) The following table summarizes the stock options issued to officers and      
employees outstanding and the related price. These are the first options issued 
under the plan.                                                                 

                                                        [Enlarge/Download Table]

             Stock Options Outstanding                          Stock Options Exercisable        
             -------------------------                          -------------------------        
                           Weighted Average                                                      
                               Remaining     Weighted Average                    Weighted Average
Exercise     Number        Contractual Life      Exercise         Number             Exercise    
 Prices   Outstanding           (Years)           Price        Exercisable             Price     
 ------   -----------           -------           -----        -----------             -----     
                                                                                                 
 $ 0.605    875,000              5.00             $0.605         175,000              $0.605     

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

                                                            Weighted Average
                                         Number of Shares  Price Per Share
                                         ----------------  ---------------
Outstanding at April 30, 2003                         --         $   --         
                                        -------         ------
Granted                                            --             --      
Exercised                                          --             --      
Outstanding at April 30, 2004                         --             --         
                                        -------         ------
Granted                                       875,000         $0.605      
Exercised                                          --             --      
Canceled or expired                                --             --      
                                        -------         ------
Outstanding at April 30, 2005                    875,000         $0.605         
                                        -------         ------

The weighted fair value of the stock options granted during the years ended     
April 30, 2005 and 2004 and the weighted average significant assumptions used to
determine fair values, using the Black Scholes option pricing model are as      
follows:                                                                        

Significant Assumptions (weighted average):                     2005        2004
    Risk free interest rate at grant date:                       3%          n/a
    Expected stock price volatility                              60%         n/a
    Expected dividend payout                                      0          n/a
    Expected option life in years                                 5          n/a

If the Company recognized compensation cost for the non qualified stock option  
plan in accordance with SFAS No. 123, the company would have incurred an        
additional $247,100 in expense resulting in a pro forma net loss of             
$(4,665,827), or $(0.05) per share.                                             

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SPARTA COMMERCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 APRIL 30, 2005 and 2004

NOTE L - 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.                                                   

                                                        [Enlarge/Download Table]

             Warrants Outstanding                                Warrants Exercisable            
             --------------------                                --------------------            
                           Weighted Average                                                      
                               Remaining     Weighted Average                    Weighted Average
Exercise     Number        Contractual Life      Exercise         Number             Exercise    
 Prices   Outstanding           (Years)           Price        Exercisable             Price     
 ------   -----------           -------           -----        -----------             -----     
                                                                                                 
$0.195       200,000             3.00            $0.195           100,000            $0.195      
$0.172       785,257             5.00            $0.172           785,257            $0.172      
$0.195     3,926,286             3.00            $0.195         3,926,286            $0.195      
$0.195     1,875,001             3.00            $0.195         1,875,001            $0.195      
------     ---------             ----            ------         ---------            ------      
$0.195     6,786,544             3.11            $0.194         6,686,544            $0.194      
======     =========             ====            ======         =========            ======      

Non- Employee Stock Warrants (Continued)                                        
----------------------------------------                                        

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

                                                                        Weighted
                                                                         Average
                                                                         Price
                                                           Number        Per
                                                           of Shares     Share
                                                            ---------     ------
Outstanding at April 30, 2003                                      --     $   --
                                                            ---------     ------
   Granted                                                         --         --
   Exercised                                                       --         --
Outstanding at April 30, 2004                                      --         --
                                                            ---------     ------
   Granted                                                  6,786,544     $0.194
   Exercised                                                       --         --
   Canceled or expired                                             --         --
                                                            ---------     ------
Outstanding at April 30, 2005                               6,786,544     $0.194
                                                            ---------     ------

The weighted-average fair value of stock warrants granted to non-employees      
during the years ended April 30, 2005 and 2004 and the weighted-average         
significant assumptions used to determine those fair values, using a            
Black-Scholes option pricing model are as follows:                              

                                                             2005       2004
                                                              --------  --------

Significant assumptions (weighted-average):                                     
  Risk-free interest rate at  grant date                          3%     n/a
  Expected stock price volatility                                60%     n/a
  Expected dividend payout                                       --       --
  Expected option life-years (a)                            3.11 yrs     n/a
(a) The expected option life is based on contractual expiration dates.          

The amount of the expense charged to operations for compensatory warrants       
granted in exchange for services was $473,264 and $0 for the years ended April  
30, 2005 and 2004, respectively.                                                

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SPARTA COMMERCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 APRIL 30, 2005 and 2004

NOTE M - COMMITMENTS AND CONTINGENCIES                                          

Operating Lease Commitments                                                     
---------------------------                                                     

In October 2004, the Company entered into a lease agreement with an unrelated   
party for office space in New York City from December 1, 2004 through November  
30, 2007. Total lease rental expense for the years ended April 30, 2005 and     
2004, was $125,214 and $19,772, respectively.                                   

Commitments for minimum rentals under non-cancelable leases at April 30, 2005   
are as follows:                                                                 

     Year ended April 30,                                         Amount
     2006                                                      $ 116,224
     2007                                                        177,061
     2008                                                        104,973
                                                               ---------
                                                               $ 449,258

Employment and Consulting Agreements                                            
------------------------------------                                            
The Company has employment agreements with all of its employees. In addition to 
salary and benefit provisions, the agreements include non-disclosure and        
confidentiality provisions for the protection of the Company's proprietary      
information.                                                                    

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.                                                                         

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. On November 1, 2004,    
25,000 shares vested and are yet to be issued, and the reminder of the shares   
are to vest, subject to proportionate adjustment in the event of employment     
termination for any incomplete vesting period, as follows: 25,000 shares on     
November 1, 2005; 25,000 shares on November 1, 2006; 25,000 shares on November  
1, 2007; 12,500 shares on November 1, 2008; and 12,500 on November 1, 2009.     
During the year ended April 30, 2005, the Company has recorded $20,000 as       
expenses as per this employment agreement.                                      

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.                                             

F-33

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SPARTA COMMERCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 APRIL 30, 2005 and 2004

NOTE N - SUBSEQUENT EVENTS                                                      

In the period since April 30, 2005, the Company has received an additional      
$1,775,000 related to the private placement transaction. In connection with     
these proceeds, the Company has issued 17,775 preferred shares at a stated value
of $100 per share and warrants to purchase 6,312,505 shares of common stock,    
exercisable for three years at $0.195 per share, and as compensation to the     
placement agent warrants to 1,137,822 shares of common stock, exercisable for   
five years at $0.172 per share. A subscription received prior to April 30,2005  
for 0.05 units was subsequently rescinded.                                      

In the period since April 30, 2005, the Company also received an additional     
$5,000 from a private investor with terms consistent with the private placement.

NOTE O - 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, 2005, the Company incurred a loss of $6,277,658. 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. However, the planned principal   
operations have not commenced and no assurance can be given that management's   
actions will result in profitable operations or the resolution of its liquidity 
problems. The accompanying statements do not include any adjustments that might 
result should the Company be unable to continue as a going concern.             

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

F-34

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 62,934,506 SHARES

COMMON STOCK

------------------------

PROSPECTUS

MAY 31, 2006

------------------------

    YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT  
WHICH IS SET FORTH IN THIS PROSPECTUS. WE ARE OFFERING TO SELL SHARES OF OUR    
COMMON STOCK AND SEEKING OFFERS TO BUY SHARES OF OUR COMMON STOCK ONLY IN       
JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE INFORMATION CONTAINED IN
THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS  
OF THE TIME OF DELIVERY OF THIS PROSPECTUS OR ANY SALE OF THESE SECURITIES. OUR 
BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATION AND PROSPECTS MAY HAVE      
CHANGED AFTER THE DATE OF THIS PROSPECTUS.                                      

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘424B3’ Filing		Date		First		Last			Other Filings
		7/1/14		9
		11/1/09		28		76
		11/1/08		28		76
		7/1/08		29		31
		11/30/07		26		76
		11/1/07		28		76
		7/1/07		29		31
		11/1/06		28		76
		7/1/06		29		31
Filed on:		6/1/06
		5/31/06		1		78
		5/23/06		1
		5/12/06		2		37
		4/30/06		9		69			10KSB,  NT 10-K
		4/28/06		14					SB-2
		4/25/06		9		39
		4/11/06		42
		4/3/06		23
		3/29/06		37
		3/16/06		14		52
		2/3/06		17		49
		2/1/06		9
		1/31/06		2		54			10QSB,  NT 10-Q
		12/15/05		67
		11/1/05		9		76
		10/31/05		9					10QSB,  NT 10-Q
		10/27/05		52
		8/31/05		70
		8/1/05		9		54
		7/31/05		9		52			10QSB,  8-K,  NT 10-Q
		7/27/05		14		37
		7/15/05		2		55
		7/1/05		29		31
		6/15/05		66		67			4/A
		5/1/05		9		30
		4/30/05		2		77			10KSB,  10KSB/A
		4/29/05		10		74			3,  4,  8-K
		4/14/05		17		67
		3/1/05		31
		2/1/05		9
		1/31/05		9		61			10QSB,  NT 10-Q
		1/1/05		29		72			3/A
		12/28/04		18					8-K
		12/27/04		9		71
		12/16/04		17		67
		12/1/04		71		76
		11/30/04		71
		11/2/04		31		71
		11/1/04		9		76			3
		10/31/04		9					10QSB
		9/13/04		18					8-K
		8/25/04		2		18
		8/2/04		29		31			3
		8/1/04		9
		7/31/04		9					10QSB
		6/1/04		27
		5/1/04		9
		4/30/04		9		77			10KSB,  5,  NT 10-K
		3/1/04		27		31			3,  8-K
		2/27/04		2		68			3,  8-K,  8-K/A
		2/26/04		31
		2/1/04		9
		1/31/04		9					10QSB
		12/3/03		31
		11/1/03		9
		10/31/03		9					10QSB
		8/1/03		9
		7/31/03		9					10QSB
		5/1/03		9
		4/30/03		58		75			10KSB
		1/1/03		64
		6/1/02		31
		10/1/01		11		77
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