Overview

Sparta Commercial Services, Inc. is a national provider of financing solutions to the powersports industry. The company is currently the only nationwide full-service, independent, Web-based finance company offering a lease solution combined with the traditional retail purchase contract for the Powersports Industry. Headquartered in New York City, with its Dealer Support Group located in Houston, Texas, Sparta offers programs for manufacturers, distributors, and dealers. Sparta provides a full line of financing packages including indirect retail installment sales contracts and direct closed-end leases, as well as related services for individuals, fleets and municipal organizations.

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Investment Highlights

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Profile

Sparta Commercial Services, Inc. is currently the only nationwide full-service, independent; Web based finance company offering a lease solution combined with the traditional retail purchase contract for the Powersports Industry. Headquartered in New York City, with its Marketing & Sales Group located in Houston, Texas, Sparta’s position in the powersports marketplace is unique. Management’s fifty plus years of experience in the industry has created a company focused on growth, innovation and customer service.

Being powersports enthusiasts themselves, SPARTA’s management was quick to recognize that by the early 1990’s, the characteristics and demographics of the powersports community had changed dramatically from the mythological “bad boys” of earlier years, to an ever growing group of middle class men and women who were adventurous, but financially stable. Doctors and lawyers, accountants and architects, bankers and brokers, along with millions of others from virtually every segment of American culture, were becoming “bikers” and the powersports industry has since become a highly profitable and integral part of the American economic landscape.

As the profile of motorcyclists changed and the image of the industry improved, a group of business savvy enthusiasts recognized an opportunity and joined together to form a company that would serve the financial services needs and interests of powersports dealers and consumers throughout the country. SPARTA Commercial Services was born.

With a deeper understanding of the powersports community, a greater appreciation of dealer operations, and its positioning as a company serving only the powersports industry, SPARTA was able to develop a financial services program that offers a total spectrum of SPARTA branded financing programs and other industry related products. These include traditional retail installment sales contracts (The SPARTA Sport Loan), two leasing products (The SPARTA Flex Lease and The SPARTA Purchase Plus Lease), and the SPARTA Extended Service Contract and Gap Protection Programs. Additionally, and very importantly, SPARTA’s credit criteria are among the most liberal in the industry and the company’s commitment to dealer support is unparalleled.

SPARTA’s spectrum of financing programs cover all major brands of motorcycles, virtually all semi customs, most ATVs, and select scooters. So, whether it’s a powersports enthusiast looking for the best financing source for their next new or used motorcycle, ATV, or select scooter, or a dealer who wants the best “one stop” source for liberal credit criteria, a real selection of financing products, and outstanding dealer support, SPARTA can assist them all.

Over the last few years, Sparta announced year-over-year increased revenues of 365% from ‘06 to ’07. The first 9 months of 2008 saw a 38% increase in revenues over 2007's figures. With around $11M in originated consumer contracts since inception, the Company looks to have found a powerhouse industry to get into.

With the Company being the ONLY Financial services company in the U.S. solely dedicated to the Powersports industry and with other limited competition, the Company is looking to take a big piece of the $27.9 Billion motorcycle industry. With financing options available for motorcycle manufacturers such as BMW, Honda, Harley Davidson, Kawasaki, Suzuki, West Coast and Yamaha among many others and a 2,100+ dealer base in 37 States, representing 20% of the target market, Sparta Commercial Services Inc. is soon to be on investors radar screens around North America.

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Market Drivers

The ONLY financial services company in the U.S. solely dedicated to the Powersports industry;

• New U.S. motorcycle retail sales totaled $10.3 billion in 2008*;
• Special municipal leasing products are expanding beyond traditional police bikes (ex. Armored Vehicles, Asphalt graders, and Back hoes) with no residual risk to Sparta;
• Fluctuating fuel costs and lifestyle changes are leading to new purchases of motorcycles and scooters for everyday transportation. Scooters and dual sports bikes have seen 50% and 30% gains, respectively through 2008.

Scooter Sales

• 131,000 new scooters were sold in the United States in 2007.
• 70,000 new scooters were sold in the United States in 2002.
• 42,000 new scooters were sold in the United States in 2000.
• 2,250+ dealer base in 37 States, representing over 20% of the target market;
• Recently formed relationships, including: the largest online auto auction site; eLoan; and, N.A.D.A., resulting in substantial new loan applications.

*2008 Motorcycle Industry Council Statistical Annual

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Financing Options

• Retail installment sales contracts, leases, and private label programs;
• Substantial industry experience and residual studies;
• Focused underwriting - 600cc+ street legal motorcycles, 4-stroke ATVs and select scooters;
• Point-of-sale contract completion in as little as 20 minutes in most states;
• High quality customer service;
• Ability and knowledge to effectively resell units;
• Over 50 years of combined experience in motorcycle finance

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Competitive Edge

• Sparta is the only Nationwide Powersports Financial Services Company offering a LEASE;
• Consumer Leasing offers a lower monthly payment;
• Municipal Lease product used as advantageous financing option for budget constrained Government Agencies;
• Commercial Fleet Leasing program used for rental fleet acquisition in Harley-Davidson dealerships and for those Harley-Davidson dealerships that carry Municipal police bikes on their balance sheets
• Proprietary residual model;
• Proprietary iPLUS® credit decisioning and underwriting system;
• Dealer has the ability to sell & deliver bikes 24/7/365;
• Point-of-sale contract completed on site/on time;
• Substantial industry experience;
• Live, personalized customer service provided.

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Products Overview

Sparta Financing Products - SPARTA currently offers three outstanding financing products for new or used motorcycles and select scooters: The SPARTA Flex Lease, the SPARTA Purchase Plus Lease and the Sparta Sport Loan. With terms from 24 to 60 months, liberal credit criteria and a unique array of benefits and advantages – to both dealers and consumers – these 3 programs represent the most flexible and aggressive choices in powersports financing today.

SPARTA Flex Lease

The SPARTA Flex Lease is their preferred and recommended product because it offers customers more options and advantages than any retail installment contract – including the Company's. With the SPARTA Flex Lease, customers will almost always have a lower monthly payment than that of a retail installment contract on the same unit. Plus, they’ve got 4 options at lease end…which no retail installment contract offers: They can (1) buy the unit for the original residual amount; (2) The buyer can re-lease it either to own, or for an additional limited period; (3) The buyer can upgrade to a new unit, or (4) The buyer can simply walk away with no further obligation.

There’s also a very special feature to the SPARTA Flex Lease that’s unique in the marketplace– the “Early Upgrade.” The Early Upgrade opportunity applies when a customer has established a satisfactory payment history with the Company, and would like to get on a new vehicle before his/her lease contract expires. This means that an authorized SPARTA dealer will be able to move more units more often…and generate greater customer loyalty. The Early Upgrade can occur after 2 years on a 3 year lease; after 2 ½ years on a 4 year lease; and after 3 years on a 5 year lease – without penalty. The Company believes that with the Early Upgrade feature, the SPARTA Flex Lease is the best and most aggressive finance program available.

The SPARTA Flex Lease is available for virtually any motorcycle over 600cc’s. Residuals are almost always at least 40%, and as high as 65% of MSRP, depending on the unit. And the SPARTA Flex Lease can cover both new and used vehicles, with Harley Davidsons up to 7 years old and all other major brands up to 5 years old.

SPARTA Purchase Plus

SPARTA also offers a “Purchase Plus” program that is designed expressly for customers who definitely want to own the vehicle at lease end. This program normally carries an 11% residual and has an initial term of up to 60 months, making it function similar to a retail installment contract. At lease end, the customer also has the option to pay off the residual balance over several additional months.

SPARTA Sport Loan

The SPARTA Sport Loan is the Company's traditional retail installment finance product, but with the same liberal credit criteria that so many dealers want. The Company developed the Sport Loan specifically for those customers who are determined to “own” their vehicle immediately, and because The Company wants their dealer network to have the best choice of financing products from one source…SPARTA.

Manufacturers and Dealers (New and Used)

American Eagle	Honda	TN'G
Aprilia	Independence	Triumph
Arlen Ness	Iron Eagle	Ultra
Big Dog	Italjet	Ural
BMW	Kawasaki	Vespa
Bourget	Malaguti	Victory
Buell	Moto Guzzi	West Coast
California Custom	Mustang	Choppers
Confederate	MV Agusta	Yamaha
Death Row	Norton	DIAMO
Desperado	QLINK	Ducati
Eton	Paramount	Kymco
Orange County	Piaggio	Lambretta
Choppers	Precision	Thunder
Polaris	Saxon	Mountain
Fischer	Suzuki
Flying Tiger	Swift
Harley Davidson	Titan

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Financials & Milestone

SPARTA has revenue of $1.1 million for fiscal year 2008. Revenue increased 27% from 2007 to 2008. Operating income is negative for 2008; however, the trend of operating loss as a percent of sales decreased 45% from 2006 to 2008. Net loss declined 33% from $6 million in 2006 to $4 million in 2008. The company should have positive operating income by 2009 if the rate of operating loss decline continues.

Over the last few years, Sparta announced year-over-year increasing revenues of 365% from ‘06 to ’07. The first 9 months of 2008 saw a 38% increase in revenues over 2007's figures.

Milestones

• Announced that it has completed its first commercial fleet leasing transaction with a major Harley-Davidson dealer, providing a credit line of $460,000 under its new program.
• Sparta Funding LLC (Wholly owned subsidiary), has entered into a one year, extendable revolving credit agreement with Autobahn Funding Company LLC as lender, and DZ Bank AG Deutsche Zentral-Genossenchaftsbank New York Branch (“DZ Bank”) as Administrative Agent and Liquidity Agent.
• Sparta entered into a committed one year, $25 million expandable revolving credit facility, which requires Sparta to meet certain financial covenants prior to initial drawdown, and may be increased subject to portfolio performance, will enable Sparta to expand its dealer network, increase the variety of eligible asset classes in the powersports market, and enlarge its market share in the powersports sector.
• Developed proprietary iPLUS® software system to process credit decisions in under 60 seconds;
• Built full-service platform, including: Origination, Point-of-Sale Electronic Processing, Billing, Collection, Reporting, etc.
• Accessed Public Markets;
  - Fully reporting company on NASDAQ Bulletin Board;
• Established Nationwide Municipal and Governmental finance program in January 2007. Company financed Newark New Jersey’s motorcycle police force, and:
  - Added 76 Jurisdictions in 16 States in its first 14 months;
  - Initial Municipal customers have renewed and others have expressed interest in renewing.
• Executed the Dairyland Insurance Agreement (5/1/08);
  - $10.00 per click referral fee;
  - Estimated Implementation on-line March 2009
• Electronic Transaction Flow from: eLoan (5/23/08), a prominent online auto auction (5/23/08), and N.A.D.A. (5/23/08), resulting in 7,000+ consumer application referrals in May 2008;
• Manufacturer/Distributor Finance Program: Diamo;
• Manufacturer/Distributor Finance Program: Piaggio;
  - Piaggio manufactures Vespa, Moto Guzzi and Aprilia.
• Company has been approached by multiple powersport Manufacturers seeking consumer finance program;
• As of the 4th Quarter 2008 Sparta has signed in excess of 2,250 dealerships in 37 states, representing over 20% of its target market;
• Originated Consumer Contracts of $10,800,000 from inception to date;
  - Projected $32M origination in Fiscal ‘10.

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Competition

Only BMW and Harley-Davidson have finance divisions, however neither offer leases; GE and HSBC have historically provided purchase financing, however HSBC has significantly reduced its lending activities in this marketplace; GE’s large company mentality does not respond well to dealer needs or customer demands, however their underwriting criteria complement Sparta’s products in the marketplace.

Harley-Davidson Financial Services (HDFS) validated the Motorcycle financing model. In its first five years HDFS grew from a start-up unit to $27.68M (6.66%) of the total Harley-Davidson Corp. operating income. As of 2007, HDFS’s operating income has grown to $212.16M (14.65%) of the Harley-Davidson Corp. pre-tax income.

Harley Davidson represents roughly 50% of the +651cc Motorcycle Market. The Municipal leasing market is in need of alternative financing products. A shrinking property tax base creats a need for leasing, as budget constrained municipalities need to replace aging vehicle fleets and make new purchases despite economic woes. Sparta can finance ANY municipal equipment purchase, from motorcycle fleets, patrol cars to helicopters and tactical equipment. Sparta’s product will be offered to over 850 Harley-Davidson dealers nationwide that carry rental fleets and/or carry municipal bikes on their balance sheets.

Motorcycle dealers generated 2007 combined annual revenue of $15billion. Management sees a $2.2 Billion target retail market, Represents the 15% of retail sales not financed by captives, HDFS, GE, etc. Municipal and fleet leasing offers multi-million dollar revenue potential.

Recent News and Press Releases

•Sparta Commercial Announces New Revolving Credit Facility
Marketwire (Tue, Dec 30)

 

•Sparta Completes First Commercial Lease Transaction for Harley-Davidson Dealers
Marketwire (Mon, Dec 15)

•SPARTA COMMERCIAL SERVICES, INC. Financials
EDGAR Online Financials (Tue, Sep 30)

•SPARTA COMMERCIAL SERVICES, INC. Files SEC form 10-Q, Quarterly Report
EDGAR Online (Mon, Sep 22)

•Sparta Expands Its Presence in the Municipal Leasing Market
Marketwire (Mon, Aug 25)

•Sparta Commercial Services, Inc. Launches Its New iPlus(R) 2.0 Point of Sale Credit Decisioning and Contracting Platform
Marketwire (Wed, Aug 20)

•Sparta Commercial Services, Inc. Seeks an Increasing Share of the $8 Billion-Plus Motorcycle Market
Marketwire (Mon, Aug 18)

•SPARTA COMMERCIAL SERVICES, INC. Files SEC form 10KSB, Annual Report
EDGAR Online (Thu, Aug 14)

•Rising Fuel Prices and Recession Fears Spur Nationwide Interest in Motorcycles and Scooters
Marketwire (Mon, Aug 11)

•Sparta Announces Higher Than Expected Growth in Online Consumer Credit Applications
Marketwire (Tue, Aug 5)

•Sparta Commercial Services, Inc. Achieves 20% Penetration of Its Target Market
Marketwire (Wed, Jul 9)

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Management

Anthony L. Havens, CEO

Mr. Havens was previously with American Motorcycle Leasing Corp. as ther founder, CEO & Director (1995-2004). He has over 20 years of experience in finance and investment banking.

Richard P. Trotter, COO

Mr. Trotter was previously with American Finance Company, Inc. as its President & Chief Credit Officer (2001-2004). Prior to that he was SVP Originations and Marketing (1994-2001) for Consumer Portfolio Services (Nasdaq:CPSS). He has over 30 years experience in senior executive positions with financial institutions in the automobile lending, servicing, and collecting industry.

Anthony W. Adler, EVP & Acting CFO

Mr. Adler was previously with American Motorcycle Leasing Corp. as chief Financial Officer & Director (1995-2004). He has over 30 years experience in executive and senior management positions with investment banking, banking and consumer distribution businesses.
 

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Contact

Sparta Commercial Services, Inc.

Web: http://www.spartacommercial.com

462 Seventh Ave., 20th Floor
New York, NY 10018

Contact: A.L. Havens, CEO
212-239-2666 ext. 204

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FORWARD LOOKING STATEMENTS

This report includes forward-looking statements that reflect Sparta Commercial Services, Inc. current expectations about its future results, performance, prospects and opportunities. Sparta Commercial Services, Inc. has tried to identify these forward-looking statements by using words and phrases such as "may," "will," "expects," "anticipates," "believes," "intends," "estimates," "plan," "should," "typical," "preliminary," "we are confident" or similar expressions. These forward-looking statements are based on information currently available and are subject to a number of risks, uncertainties and other factors that could cause Sparta Commercial Services, Inc.'s actual results, performance, prospects or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. These risks, uncertainties and other factors include, without limitation, the Company's growth expectations and ongoing funding requirements, and specifically, the Company's growth prospects with scalable customers, and those outlined above. Other risks include the Company's limited operating history, the Company's history of operating losses, consumers' acceptance, the Company's use of licensed technologies, risk of increased competition, the potential need for additional financing, the terms and conditions of any financing that is consummated, the limited trading market for the Company's securities, the possible volatility of the Company's stock price, the concentration of ownership, and the potential fluctuation in the Company's operating results.

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