As a lender or lessor, one of the largest risks we face is the possibility that a significant number of customers will fail to pay their payments when due.  If customers’ defaults cause losses in excess of our allowance for 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 losses.  While this evaluation process uses historical and other objective information, the establishment of losses is dependent to a great extent on management’s experience and judgment.  We cannot assure you that our loss reserves will be sufficient to absorb future losses or prevent a material adverse effect on our business, profitability or financial condition.

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 and leases, 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 consumer financing 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 consumer retail installment contracts and consumer leases.  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 availability of credit generally, municipal government budget constraints affecting equipment purchases and leasing, 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 vehicles for an amount at least equal to their residual values which may have a material adverse effect on our business.

A significant 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.

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 complying with certain procedures specific to the particular state.  While we believe we have made all proper filings, we may not have a perfected lien or ownership interest in all of the vehicles we have financed.  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.

Our business is subject to the risks generally associated with the ownership and leasing of vehicles.  A lessee may default in performance of its consumer 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 our inability to profitably sell or re-lease off-lease vehicles could have a material adverse effect on our business, financial condition or results of operations.

Significant increases in the inventory of vehicles may depress the prices at which we can sell or lease our inventory of used vehicles composed of off-lease and repossessed 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 vehicles to decline below current levels.  ��Lower recovery rates increase our credit losses and reduce the amount of cash flows we receive.

We compete with commercial banks, savings and loans, industrial thrifts, credit unions and consumer finance companies, including large consumer finance companies such as GE Capital.  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 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 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 and strong dealer relationships, by offering flexible terms, and by offering both lease and loan options to customers with a broad range of credit profiles.  Many of our competitors focus their efforts on different segments of the credit quality spectrum.  While a number of our competitors have reduced their presence in the powersports financing industry because of industry specific factors and the current situation in the global credit markets, our business may be adversely affected if any of such competitors in any of our markets chooses to intensify its 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.

  

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 have never declared or paid any cash dividend on our common stock. We currently intend to retain any future earnings and do not expect to pay any dividends on our common stock in the foreseeable future. Future cash dividends on the common stock, if any, will be at the discretion of our board, and will depend on our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions imposed by lending or other agreements, including agreements with holders of senior or preferential rights, and other factors that the board may consider important.

Our board is empowered to issue, without stockholder approval, preferred stock, on one or more series, with dividend, liquidation, conversion, voting or other rights that could adversely affect the voting power or other rights of the holders of common stock.  From time to time, we have designated, and may in the future designate, series of preferred stock carrying various preferences and rights different from, and greater than, our common stock.  As of April 30, 2011,2012, we have two series of preferred stock outstanding. Preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of the company.

We may need to improve our reporting and internal controls and procedures.  We have in the past submitted reports with the SEC after the original due date of such reports.  If we fail to remain current on our reporting requirements, our common stock could be removed from quotation from the OTC Bulletin Board, which would limit the ability to sell our common stock.

Our directors and executive officers beneficially own approximately 18.2%14.6% of our common stock as of April 30, 2011.2012.  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 our company and could affect the price of our common stock.

 

We are heavily dependent upon management, the loss of any one of whom could have a material adverse effect on our ability to implement our business plan.  While we have entered into employment agreement with our Chief Executive Officer, this employment agreement could be terminated for a variety of reasons.  We do not presently carry key man insurance on the life of any employee.  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.  Any failure of management to implement and manage our business strategy 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 our future 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 effect on our business, financial condition or results of operations.

Cyclechex LLC was engaged in the business of selling, via the internet, information describing the title history of motorcycles. Since May 2011,2010, we have devoted a substantial amount of the Company’s resources to improving the amount and quality of the data offered the Cyclechex web site, launched new but similar products RV Checks, and CarVin Report and has attracted affiliates to the web sites all with the aim to be defacto go to sites for motorcycle and RV data. Additionally, we have commenced marketing, on an exclusive basis, mobile applications “apps” to vehicle dealers which will allow dealers to communicate with their customers and potential customers via cell phone applications. To date, Specialty Reports, Inc has operated at a loss. There can be no assurance that we can achieve this goal or that even if we do, that these products will be profitable.

Our executive offices are located at 462 Seventh Avenue, 20th Floor, New York, NY 10018. We have an agreement for use of office space at this location under a lease expiring on November 30, 2012. The office space contains approximately 7,000 square feet.  The rent for the year ended April 30, 2011 was $330,765.  For the year ended April 30, 2012, the rent is $312,565,was $283,867, and for the seven months ending November 30, 2012, the rent is $184,947. We believe that our existing facilities will be adequate to meet our needs for the foreseeable future. Should we need additionalare presently seeking new space, which management believes it will be able to secure additional space at commercially reasonable ratesrates.

As at April 30, 2011,2012, we were not a party to any material pending legal proceeding.  From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business.

 

Our common stock is currently quoted on the OTC Bulletin Board under the symbol "SRCO".  The following table sets forth, for the calendar periods indicated, the range of the high and low closing 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.

The approximate number of holders of record of our common stock as of April 30, 20112012 was 3,0143,018 excluding stockholders holding common stock under nominee security position listings.

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

As of April 30, 2011,2012, we had outstanding 125 shares of Series A Convertible Preferred Stock, $.001 par value. The Series A shares pay a 6% annual dividend which may be paid in cash or shares of common stock at our option.  We have not, as of April 30, 2011,2012, distributed any dividends on the Series A shares, in cash or in shares of common stock. Upon conversion of the Series A shares, all accrued and unpaid dividends are extinguished. As of April 30, 2011,2012, there was $4,527$5,287 of accrued Series A dividends payable.

As of April 30, 2011,2012, we had 157 shares of Series B preferred stock outstanding.  The Series B shares accrue dividends at an annual rate of 10%.  Accrued dividends are payable upon redemption of the Series B shares.  As of April 30, 2011,2012, no dividends were payable on Series B shares.

 

 

This report on Form 10-K contains certain "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, which represent our expectations and beliefs, including, but not limited to, statements concerning the Company's business and financial plans and prospects. The words "believe," "expect," "anticipate," "estimate," "project," and similar expressions identify forward-looking statements, which speak only as of the date such statement was made. These statements by their nature involve substantial risks and uncertainties, certain of which are beyond our control, and actual results may differ materially depending on a variety of important factors.

The following discussion and analysis should be read in conjunction with the information  set forth in the audited  financial statements for the years ended April 30, 20112012 and April 30, 20102011 and footnotes found in the Company's Annual Report on Form 10-K.

For the year ended April 30, 2011,2012, our revenues decreased.increased approximately 17%. We have continued to incur declining but significant expenses, and have sustained significant losses.

Revenues totaled $513,768$601,832 in fiscal 20112012 compared to revenues of $713,363$513,768 in fiscal 2010.2011. Fiscal 20112012 revenues were primarily comprised of $240,923$105,355 in interest income from Retail Installment Sales Contracts, $112,465$135,306 in income from Operating and Finance Leases, $47,620$289,628 in Commissions on municipal lease transactions, $55,455revenues from subsidiary revenues,our IT products and $31,920$71,543 in interest income on notes receivable.other income.

We incurred employee compensation and benefit costs of $1,232,747$1,007,866 for the year ended April 30, 20112012 compared with $1,061,074$1,232,747 in fiscal 2010.2011. The increasedecrease is primarily related to additional personnelreductions in connection with our new subsidiary, Specialty Reports, Inc and the acquisitionexecutive salaries.