UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





FORM
      10-QSB





(Mark
      One)





x
            QUARTERLY
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGEACT
                OF 1934





For
      the
      quarterly period ended October 31, 2006





o
            TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
                ACT





For
      the
      transition period from ________ to ___________.





Commission
      file number: 0-9483





SPARTA
      COMMERCIAL SERVICES, INC.


(Exact
      name of registrant as specified in its charter)


NEVADA
              30-0298178(State
                  or other jurisdiction of
              (IRS
                  Employerincorporation
                  or organization)
              Identification
                  No.)


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


(Address
      of principal executive offices)





(212)
      239-2666


(Issuer's
      telephone number)





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





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


Yes
o
      No x





As
      of
      December 13, 2006, we had 123,216,157 shares of common stock issued and
      outstanding.





Transitional
      Small Business Disclosure Format (check one): Yes o No x







SPARTA
      COMMERCIAL SERVICES, INC.





FORM
      10-QSB


FOR
      THE
      QUARTER ENDED OCTOBER 31, 2006





TABLE
      OF
      CONTENTS





PagePART
                I.
            FINANCIAL
                INFORMATIONItem
                1.
            Financial
                Statements (Unaudited)
            3Condensed
                Consolidated Balance Sheets as of October 31, 2006 and April 30,
                2006
            3Condensed
                Consolidated Statements of Operations for the Three and Six Months
                Ended
                October 31, 2006 and 2005
            4Condensed
                Consolidated Statements of Cash Flows for the Six Months Ended October
                31,
                2006 and 2005
            5Notes
                to Unaudited Condensed Consolidated Financial Statements
            6Item
                2.
            Management's
                Discussion and Analysis and Plan of Operation
            16Item
                3.
            Controls
                and Procedures
            27PART
                II.
            OTHER
                INFORMATIONItem
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            28Item
                6.
            Exhibits
            28Signatures
            29




2


PART
      I.
      FINANCIAL INFORMATION




ITEM
      1.
      FINANCIAL STATEMENTS




SPARTA
      COMMERCIAL SERVICES, INC.


CONDENSED
      CONSOLIDATED BALANCE SHEETS




October
                  31,2006
            
            
            April
                  30,
                2006(Unaudited)ASSETSCurrent
              assets:Cash
                and cash equivalents
            
            $
            11,518
            
            $
            856,382Lease
                payments receivable, current, net ofreserve
                of $31,731 and $5,090, respectively
            
            
            983,948
            
            
            206,986Other
                receivables
            
            
            23,250
            
            
            -Loan
                proceeds receivable
            
            
            21,061
            
            
            389,998Prepaid
                expenses
            
            
            19,724
            
            
            51,939Inventory
            
            
            48,173
            
            
            -Other
                current assets
            
            
            8,400
            
            
            4,250Total
                current assets
            
            
            1,116,074
            
            
            1,509,555Motorcycles
                and other vehicles under operating leases, net ofaccumulated
                depreciation of $210,894 and $75,873, respectively andloss
                reserve of $47,349 and $16,409, respectively.
            
            
            1,268,964
            
            
            667,286Property
                and equipment, net of accumulated depreciation andamortization
                of $74,838 and $53,249, respectively
            
            
            114,689
            
            
            121,544Lease
                and retail installment sale contract receivables, net of current
                portion
                andloss
                reserve of $55,415 and $14,654, respectively.
            
            
            1,738,072
            
            
            595,895Restricted
                cash
            
            
            233,828
            
            
            112,503Deferred
                financing cost
            
            
            17,300
            
            
            -Deposits
            
            
            50,817
            
            
            48,967Total
                assets
            
            $
            4,539,744
            
            $
            3,055,750LIABILITIES
                AND STOCKHOLDERS' EQUITYCurrent
                liabilities:Accounts
                payable and accrued expenses
            
            $
            957,402
            
            $
            424,692Accrued
                equity based compensation
            
            
            7,645
            
            
            333,600Accrued
                equity based penalties
            
            
            2,564
            
            
            47,468Notes
                payable Senior Lender
            
            
            858,944
            
            
            358,549Notes
                payable - other
            
            
            275,000
            
            
            -Loans
                payable - related parties
            
            
            83,260
            
            
            -Deferred
                revenue
            
            
            3,300
            
            
            -Total
                current liabilities
            
            
            2,188,115
            
            
            1,164,309Deferred
                revenue
            
            
            788,359
            
            
            186,245Notes
                payable Senior Lender
            
            
            1,403,811
            
            
            330,799Warrant
                liability
            
            
            -
            
            
            834,924Total
                liabilities
            
            
            4,380,285
            
            
            2,516,277Stockholders'
                equity: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, 19,795 and 19,795 shares issued
                and
                outstanding, as of October 31,2006 and April 30, 2006
            
            
            1,979,500
            
            
            1,979,500Common
                stock, $0.001 par value; 340,000,000 shares authorized, 123,146,657
                and
                114,180,301 shares issued and outstanding as of October 31,2006 and
                April
                30, 2006, respectively
            
            
            123,145
            
            
            114,180Common
                stock to be issued, 0 and 5,838,302 shares as of October 31,2006
                and April
                30, 2006, respectively.
            
            
            -
            
            
            5,838Common
                stock subscribed
            
            
            -
            
            
            330,000Additional
                paid-in capital
            
            
            14,450,661
            
            
            12,553,884Deferred
                compensation
            
            
            (126,000
            )
            
            (293,500
            )Accumulated
                deficit
            
            
            (16,267,847
            )
            
            (14,150,429
            )Total
                stockholders' equity
            
            
            159,459
            
            
            539,473Total
                liabilities and stockholders' equity
            
            $
            4,539,744
            
            $
            3,055,750





The
      accompanying notes are an integral part of these


unaudited
      condensed consolidated financial statements.




3


SPARTA
      COMMERCIAL SERVICES, INC.


CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS


FOR
      THE
      THREE AND SIX MONTHS ENDED OCTOBER 31, 2006 AND 2005


(UNAUDITED)


**Three
                  Months EndedOctober 31,**
              
              **Six
                  Months EndedOctober 31,****2006**
              
              **2005**
              
              **2006**
              
              **2005****Revenue**
              
              $
              219,555
              
              $
              30,295
              
              $
              411,197
              
              $
              47,621**Operating
                  expenses:**General
                  and administrative
              
              
              1,324,556
              
              
              910,737
              
              
              2,491,337
              
              
              1,497,469Depreciation
                  and amortization
              
              
              82,313
              
              
              23,654
              
              
              156,610
              
              
              35,887**Total
                  operating expenses**
              
              
              1,406,869
              
              
              934,391
              
              
              2,647,947
              
              
              1,533,356**Loss
                  from operations**
              
              
              (1,187,314
              )
              
              (904,096
              )
              
              (2,236,750
              )
              
              (1,485,735
              )**Other
                  expense:**Interest
                  expense and financing cost, net
              
              
              (102,381
              )
              
              (925,961
              )
              
              (120,268
              )
              
              (1,583,214
              )Change
                  in value of warrant liabilities
              
              
              (333,470
              )
              
              -
              
              
              299,474
              
              
              -Loss
                  on sale of asset
              
              
              -
              
              
              -
              
              
              -
              
              
              (6,500
              )**Net
                  loss**
              
              
              (1,623,165
              )
              
              (1,830,057
              )
              
              (2,057,544
              )
              
              (3,075,449
              )**Preferred
                  dividend**
              
              
              29,936
              
              
              54,217
              
              
              59,873
              
              
              1,857,492**Net
                  loss attributed to common stockholders**
              
              $
              (1,653,101
              )
              $
              (1,884,274
              )
              $
              (2,117,417
              )
              $
              (4,932,941
              )**Basic
                  and diluted loss per share**
              
              $
              (0.01
              )
              $
              (0.02
              )
              $
              (0.02
              )
              $
              (0.04
              )**Basic
                  and diluted loss per share attributed to****common
                  stockholders**
              
              $
              (0.01
              )
              $
              (0.02
              )
              $
              (0.02
              )
              $
              (0.06
              )**Weighted
                  average shares outstanding**
              
              
              121,947,292
              
              
              87,040,454
              
              
              121,350,018
              
              
              86,555,857




The
      accompanying notes are an integral part of these


unaudited
      condensed consolidated financial statements.


4


SPARTA
      COMMERCIAL SERVICES, INC.


CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS


FOR
      THE
      SIX MONTHS ENDED OCTOBER 31, 2006 AND 2005


(UNAUDITED)


**Six
                  Months Ended October 31,****2006**
              
              **2005****CASH
                  FLOWS FROM OPERATING ACTIVITIES:**Net
                  loss
              
              $
              (2,057,544
              )
              $
              (3,075,449
              )Adjustments
                  to reconcile net loss to net cashused
                  in operating activities:Depreciation
                  and amortization
              
              
              156,610
              
              
              35,887Allowance
                  for loss reserve
              
              
              98,342
              
              
              -Amortization
                  of deferred revenue
              
              
              (6,600
              )
              
              (6,600
              )Amortization
                  of deferred compensation
              
              
              223,500
              
              
              118,500Equity
                  based compensation
              
              
              302,950
              
              
              85,228Stock
                  based finance cost
              
              
              48,500
              
              
              973,607Change
                  in fair value of penalty warrant and warrant liability
              
              
              (267,855
              )
              
              -Loss
                  on sale of assets
              
              
              -
              
              
              6,500Changes
                  in operating assets and liabilities:(Increase)
                  decrease in:Lease
                  payments receivable
              
              
              (2,034,714
              )
              
              (41,167
              )Other
                  receivable
              
              
              (23,250
              )
              
              -Prepaid
                  expenses
              
              
              32,215
              
              
              (90,000
              )Loan
                  proceeds receivable
              
              
              368,937
              
              
              -Other
                  current assets
              
              
              (4,150
              )
              
              666Inventory
              
              
              -
              
              
              -Restricted
                  cash
              
              
              (121,325
              )
              
              -Deposits
              
              
              (1,850
              )
              
              (106,512
              )Increase
                  (decrease) in:Accounts
                  payable and accrued expenses
              
              
              599,967
              
              
              644,371Deferred
                  revenue
              
              
              612,014
              
              
              62,048Net
                  cash used in operating activities
              
              
              (2,119,157
              )
              
              (1,392,921
              )**CASH
                  FLOWS FROM INVESTING ACTIVITIES:**Proceeds
                  from sale of asset
              
              
              -
              
              
              25,000Cost
                  of asset sold
              
              
              -
              
              
              (31,500
              )Payments
                  for motorcycles and other vehicles
              
              
              (767,640
              )
              
              (384,887
              )Purchases
                  of property and equipment
              
              
              (14,734
              )
              
              (31,109
              )Net
                  cash used by investing activities
              
              
              (782,374
              )
              
              (422,496
              )**CASH
                  FLOWS FROM FINANCING ACTIVITIES:**Proceeds
                  from sale of preferred stock, net
              
              
              -
              
              
              1,592,517Proceeds
                  from notes from Senior Lender
              
              
              1,802,989
              
              
              104,340Payments
                  on notes from Senior Lender
              
              
              (229,582
              )
              
              (150,049
              )Proceeds
                  from other notes
              
              
              275,000
              
              
              -Loan
                  proceeds from other related parties
              
              
              83,260
              
              
              -Exercise
                  of warrants
              
              
              125,000
              
              
              180,000Payments
                  for fractional shares
              
              
              -
              
              
              (16
              )Net
                  cash provided by financing activities
              
              
              2,056,667
              
              
              1,726,792**Net
                  decrease in cash**
              
              
              (844,864
              )
              
              (88,625
              )**Cash
                  and cash equivalents, beginning of period**
              
              $
              856,382
              
              $
              108,365**Cash
                  and cash equivalents, end of period**
              
              $
              11,518
              
              $
              19,740**Cash
                  paid for:**Interest
              
              $
              72,513
              
              $
              10,424




The
      accompanying notes are an integral part of these


unaudited
      condensed consolidated financial statements.




5




SPARTA
      COMMERCIAL SERVICES, INC.


NOTES
      TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


OCTOBER
      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 condensed consolidated financial statements as of October
      31, 2006 and for the three and six month periods ended October 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, 2006 as disclosed in the
      Company's 10-KSB for that year as filed with the SEC.





The
      results of the six months ended October 31, 2006 are not necessarily indicative
      of the results to be expected for the full year ending April 30,
      2007.





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.





6





SPARTA
      COMMERCIAL SERVICES, INC.


NOTES
      TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


OCTOBER
      31, 2006


(UNAUDITED)





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 elated documents
      and processes. Fees received are amortized and booked as income over the length
      of the contract. At October 31, 2006, the Company had recorded deferred revenue
      related to these contracts of $3,300.





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




7





SPARTA
      COMMERCIAL SERVICES, INC.


NOTES
      TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


OCTOBER
      31, 2006


(UNAUDITED)





Stock
      Based Compensation





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





Three
              Months
                Ended
            
            Six
              Months
                EndedOctober
                31, 2005Net
                Loss - as reported
            
            $
            (1,830,057
            )
            $
            (3,075,449
            )*Add:*Total
                stock based employee compensationexpense
                as reported under intrinsic valuemethod
                (APB No. 25)
            
            
            —
            
            
            —*Deduct:*Total
                stock based employee compensationexpense
                as reported under fair valuebased
                method (SFAS No. 123)
            
            
            (12,355
            )
            
            (24,710
            )$
            (1,842,412
            )
            $
            (3,100,159
            )Net
                loss attributable to common stockholders- Pro forma
            
            $
            (1,896,629
            )
            $
            (4,957,651
            )Basic(and
                assuming dilution) loss per share-as reported
            
            $
            (0.02
            )
            $
            (0.06
            )Basic(and
                assuming dilution) loss per share - Pro forma
            
            $
            (0.02
            )
            $
            (0.06
            )





As
      of
      October 31, 2006 the number of options which have vested are 1,656,250 and
      the
      number of unvested options are 3,878,750. As of October 31, 2006 the number
      of
      shares which have vested are 200,000 and the number of unvested shares are
      625,000.





Net
      Loss
      Per Share





The
      Company uses Statement of Financial Accounting Standards (SFAS) No. 128,
      "Earnings Per Share" for calculating the basic and diluted loss per share.
      The
      Company computes 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
      $0.009 and $0.013 for the three months ended October 31, 2006 and 2005,
      respectively, and $0.02 and $0.06 for the six months ended October 31, 2006
      and
      2005, respectively. At October 31, 2006 and 2005, 30,928,051 and 37,468,324
      potential shares, respectively, were excluded from the shares used to calculate
      diluted earnings per share as their inclusion would reduce net loss per
      share.





8





SPARTA
      COMMERCIAL SERVICES, INC.


NOTES
      TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


OCTOBER
      31, 2006


(UNAUDITED)





New
      Accounting Pronouncements





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





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





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





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





9





SPARTA
      COMMERCIAL SERVICES, INC.


NOTES
      TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


OCTOBER
      31, 2006


(UNAUDITED)





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





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





NOTE
      B -
      MOTORCYCLES AND OTHER VEHICLES UNDER OPERATING LEASES





Motorcycles
      and other vehicles under operating leases at October 31, 2006 and April 30,
      2006
      consist of the following:


October
                  31,
                2006
              
              April
                  30,
                2006Motorcycles
                  and other vehicles
              
              $
              1,527,207
              
              $
              759,568*Less:*accumulated depreciation
              
              
              (210,894
              )
              
              (75,873
              )Motorcycles
                  and other vehicles, net of accumulated depreciation
              
              
              1,316,313
              
              
              683,695*Less:*estimated reserve for residual values
              
              
              (47,349
              )
              
              (16,409
              )Motorcycles
                  and other vehicles under operating leases, net
              
              $
              1,268,964
              
              $
              667,286




Depreciation
      expense for vehicles for the three and six months ended October 31, 2006 was
      $71,474 and $135,022, respectively, depreciation expense for property and
      equipment for the three and six months ended October 31, 2006 was $8,075 and
      $16,058, respectively. Depreciation expense for vehicles for the three and
      six
      months ended October 31, 2005 was $14,104 and $17,600, respectively,
      depreciation expense for property and equipment for the three and six months
      ended October 31, 2005 was $9,550 and $18,287, respectively.





10





SPARTA
      COMMERCIAL SERVICES, INC.


NOTES
      TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


OCTOBER
      31, 2006


(UNAUDITED)





NOTE
      C -
      INVENTORY





Inventory
      is comprised of repossessed vehicles and vehicles which have been returned
      at
      the end of their lease. Inventory is carried at the lower of depreciated cost
      or
      market, applied on a specific identification basis. During
      the period ended October 31, 2006, the Company repossessed Vehicles of value
      $48,173, which will be resold.





NOTE
      D -
      NOTES PAYABLE TO SENIOR LENDER





The
      Company finances certain of its leases through a third party. The repayment
      terms are generally one year to five years and the notes are secured by the
      underlying assets. The weighted average interest rate at October 31, 2006 is
      9.59% **.**





At
      October 31, 2006, the notes payable mature as follows:





12
                Months EndedOctober
                31,
            
            Amount2007
            
            $
            858,9442008
            
            
            538,4202009
            
            
            343,3612010
            
            
            353,0712011
            
            
            168,959$
            2,262,755





During
      the six month period ended October 31, 2006, the Company repaid $229,582 of
      the
      loans in cash.





NOTE
      E -
      NOTES PAYABLE OTHERS





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





The
      maturity dates of the notes were subsequently extended to various dates between
      December 5, 2006 to December 30, 2006, with simple interest rate of 10%, and
      Additional Equity in the aggregate amount of 105,000 restricted shares of common
      stock to be issued.





11





SPARTA
      COMMERCIAL SERVICES, INC.


NOTES
      TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


OCTOBER
      31, 2006


(UNAUDITED)





These
      notes payable for $275,000 are classified as current on the Company’s balance
      sheet. Furthermore, In connection with such notes payable, the Company has
      recorded $55,450 financing cost, $4,226 interest expense and $17,300 deferred
      financing cost.





NOTE
      F -
      LOANS PAYABLE TO RELATED PARTIES





In
      September and October 2006, the Company borrowed $60,000 and $8,500,
      respectively from a Director and officer on a demand basis without interest.
      On
      August 24, 2006, the Company borrowed $14,760 from another Director and Officer
      on a demand basis without interest. As of October 31, 2006, aggregated loans
      payable to officers were $83,260. These loans are classified as current on
      the
      Company’s balance sheet.





NOTE
      G -
      EQUITY TRANSACTIONS





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 35,850 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 October 31, 2006 and
      April 30, 2006, the Company has 19,795 shares of preferred stock issued and
      outstanding for each period. The Company has 123,146,657 and 114,180,301 shares
      of common stock issued and outstanding as of October 31, 2006 and April 30,
      2006, respectively.





Common
      Stock





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





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





During
      June and July 2006, the Company issued an aggregate of 208,500 shares of common
      stock, pursuant to a consulting agreement. The shares have been valued at
      $74,365.





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





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





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





During
      July 2006, the Company received $62,500 upon the exercise of 320,513 warrants.
      The shares were issued September, 2006.





12





SPARTA
      COMMERCIAL SERVICES, INC.


NOTES
      TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


OCTOBER
      31, 2006


(UNAUDITED)





During
      the six months ended October 31, 2006, the Company issued 250,000 shares of
      common stock, valued at $48,500, as additional costs related to loans received
      by the Company. This amount was charged to financing cost during the six months
      ended October 31, 2006.





During
      August 2006, the Company issued an aggregate of 139,000 shares of common stock,
      pursuant to a consulting agreement. The shares have been valued at
      $26,410.





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





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





During
      October 2006, the Company issued 320,963 shares of common stock for warrants
      exercised for $62,500.





During
      six months ended October 31, 2006, the Company granted options to purchase
      an
      aggregate of 4,500,000 shares of common stock to one employee and one Director.
      At grant date, 1,000,000 options vested immediately. The vested and unvested
      options have been valued at $636,433 using the Black-Sholes option pricing
      model
      with the following assumptions: (1) dividend yield of 0%; (2) expected
      volatility of 131%; (3) risk-free interest rate of 5.04% and 5.24%, vest over
      a
      36 month period and expire if unexercised in five years. During the three and
      six months periods ended October 31, 2006, the Company expensed $309,409 and
      $526,450 respectively in non-cash charges related to stock and option
      compensation expense.





Preferred
      Stock Series A





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. 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.





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





13





SPARTA
      COMMERCIAL SERVICES, INC.


NOTES
      TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


OCTOBER
      31, 2006


(UNAUDITED)





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





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





NOTE
      H -
      NON-CASH FINANCIAL INFORMATION





During
      the six months ended October 31, 2006, the Company:




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





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





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





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





·
            Issued
                697,500 shares of common stock, valued at $156,775, pursuant to consulting
                agreements.





·
            Issued
                250,000 shares of common stock, valued at $48,500, for additional
                costs
                related to loans received by the
                Company.




·
            Expensed
                $178,532 in non-cash charges related to option compensation
                expense.





14





SPARTA
      COMMERCIAL SERVICES, INC.


NOTES
      TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


OCTOBER
      31, 2006


(UNAUDITED)





NOTE
      I -
      SUBSEQUENT EVENTS.





During
      November 2006, the Company received subscription of $100,000 for $100,000 in
      notes of the Company bearing interest at the rate of 6% per year and maturing
      August 1, 2007.




NOTE
      J -
      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 October
      31, 2006, the Company incurred losses of $16,267,847. Of these losses,
      $2,057,544 was incurred during
      the six months ending
      October 31, 2006 and $3,075,449 in the six months ending October 31, 2005.
      As of
      October 31, 2006, the Company also had a working capital deficit of $1,072,041.
      These factors among others may indicate that the Company will be unable to
      continue as a going concern for a reasonable period of time.





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





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





15





ITEM
      2.
      MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION





GENERAL





The
      following discussion of our financial condition and results of operations should
      be read in conjunction with (1) our interim unaudited financial statements
      and
      their explanatory notes included as part of this quarterly report, and (2)
      our
      annual audited financial statements and explanatory notes for the year ended
      April 30, 2006 as disclosed in our annual report on Form 10-KSB for that year
      as
      filed with the SEC.





"FORWARD-LOOKING"
      INFORMATION





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





INTRODUCTORY
      STATEMENT





The
      period from inception through January 31, 2005 was a developmental period for
      us, setting up credit procedures, setting our arrangements with vehicle
      distributors, obtaining personnel, seeking financing to support our
      developmental efforts, and seeking credit facilities. Consequently, our
      operations are subject to all the risks inherent in the establishment of a
      new
      business enterprise. In fiscal year 2005, we began to obtain regulatory approval
      in several states, where required, prior to commencing active operations. In
      February 2006, we attended our first national motorcycle industry dealer only
      trade show "Dealer EXPO 2006" and over 200 dealers visited our booth during
      the
      show. We are actively signing up dealers to participate in our financing
      programs, including our private label financing programs. As of October 31,
      2006, 1,409 (compared to 777 at October 31, 2005) dealers have logged onto
      our
      web site and downloaded dealer applications and of that number, 511 have been
      approved as Sparta or private label authorized dealers. We believe this trend
      will continue over the foreseeable future. We have signed up four manufacturers
      to our private label programs, and are in negotiations with other manufacturers
      who have indicated an interest in a private label program. Additionally, we
      have
      signed three third party marketing arrangements with industry recognized
      consulting firms who will introduce our programs to their dealer clients and
      train them how to effectively use them. We have increased our marketing staff
      from 1 at January 2005 to 4 at the present time. The Company obtained a senior
      credit facility in July 2005 which was renewed for one year in August 2006,
      which allowed us to commence and continue our operations. This facility was
      further amended in November 2006 to allow us to extend credit to individuals
      with lower FICO scores than prior to the amendment. Additionally, the facility
      was amended to allow us to extend credit to municipalities. Despite these
      amendments, we will need to obtain additional credit facilities so that we
      have
      the funding sources which allow us to originate leases and finance contracts
      across all credit profiles of our business model. We are presently seeking
      additional credit facilities and long term debt and additional equity to support
      the additional debt.





16





In
      May
      2006, we entered into an agreement with netLoan Funding, LLC (“netLoan”), a
      provider of lender management services through its operation of a multi-asset
      finance portal linked to internet auction and sale websites. That agreement
      allows users who successfully bid on or purchase specified powersports vehicles,
      and who wish to lease or finance those vehicles, to apply for financing via
      a
      link between the auction web site and the netLoan site. Once the users “click”
on the netLoan link they land on the netLoan site where they then “click” on a
      button (which has a “picture” of the type of vehicle they wish to finance) and
      in the case of motorcycles, ATVs and scooters are routed by netLoan Funding
      to a
      dedicated portal on the Sparta web site where they will be able to complete
      online credit applications and, subject to credit approval, conclude the process
      within minutes. We will pay netLoan a fee for each funded transaction. To ensure
      a rapid and smooth implementation of this agreement, netLoan and Sparta
      commenced the program on a limited basis in October with Sparta providing
      secured financing options for ATVs, select motorcycles, and scooters only.
      This
      program was completely rolled out to fifty states by November 2006.





In
      July
      2006, we announced an agreement for routing of motorcycle, ATV, and scooter
      loan
      applications from a Fortune 500 global diversified financial provider. In
      October 2006, this agreement was extended for a minimum of one year. The
      agreement calls for that company to electronically transmit to Sparta loan
      applications submitted to them and which meet Sparta’s lending/leasing criteria. ***iPLUS*** **TM** will
      immediately approve or decline the application, and, if approved, notify the
      applicant through the internet within minutes. This agreement will allow
      consumers to be pre-approved before they even start shopping. We will pay that
      company a fee for each funded transaction. We have commenced receiving and
      decisioning applications on a manual test basis while final technical details
      needed to ensure a seamless automated process are implemented. This project
      is
      expected to be fully automated and operational by January 2007.





RESULTS
      OF OPERATIONS





COMPARISON
      OF THE THREE MONTHS ENDED OCTOBER 31, 2006 TO THE THREE MONTHS ENDED OCTOBER
      31,
      2005





For
      the
      three months ended October 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 continue to earn increasing
      revenues from operations during the remainder of fiscal 2007 and in the upcoming
      fiscal year.





REVENUES





Revenues
      totaled $219,555 during the three months ended October 31, 2006 as compared
      to
      $30,295 during the three months ended October 31, 2005. Current period revenue
      was comprised of $166,559 in lease revenue, $50,300 in Private Label and PPF
      Program fees and $2,696 in other income. Prior period revenue was comprised
      of
      $24,223 in lease revenue, $2,772 in dealer fees, and $3,300 in private label
      fees.





17




COSTS
      AND
      EXPENSES





General
      and administrative expenses were $1,324,556 during the three months ended
      October 31, 2006, compared to $910,737 during the three months ended October
      31,
      2005, an increase of $413,819, or 45%. Expenses incurred during the current
      three month period consisted primarily of the following expenses: Compensation
      and related costs, $414,505; Accounting, audit and professional fees, $195,785;
      Consulting fees, $55,027; Rent and utilities, $74,634, Travel and entertainment,
      $22,448 and stock based compensation $309,409. Expenses incurred during the
      comparative three month period in 2005 consisted primarily of the following
      expenses: Compensation and related costs, $400,925; Accounting, audit and
      professional fees, $114,008; Consulting fees, $215,529; Rent, $44,857; and
      Travel and entertainment, $17,905.





We
      incurred a non-cash charge of $309,409 during the three months ended October
      31,
      2006 related to options and shares of common stock and common stock options
      issued for consulting fees and services. The comparable non-cash charges for
      the
      three months ended October 31, 2005 were a non-cash expense of $323,672 related
      to shares of common stock issued in connection with debt financing.
      Additionally, during the three month period ended October 31, 2005, we recorded
      an expense of $600,000 related to the failure to have an effective registration
      statement covering the underlying shares of common stock issuable upon
      conversion of the preferred stock and the related warrants. During three months
      ending October 31, 2006, we have also recorded non-cash charge of $333,470
      related to the increase in value of warrants issued with registration rights.
      There was no comparable charge in the three months ended October 31,
      2005.





NET
      LOSS





We
      incurred a net loss before preferred dividends of $1,623,165 for our three
      months ended October 31, 2006 as compared to $1,830,057 for the corresponding
      interim period in 2005. The $206,892 or 11% decrease in our net loss before
      preferred dividends for our three month interim period ended October 31, 2006
      was attributable primarily to an increase in revenue and a decrease in non-cash
      financing costs which decrease was greater than an increase in operating
      expenses and the charge for change in the value of warranty liability.





We
      also
      incurred non-cash preferred dividend expense of $29,936 for our three month
      period ended October 31, 2006, with an expense of $54,217 in the corresponding
      interim period of 2005. The decrease in preferred dividend expense was
      attributable to the conversion of preferred stock to common stock.





Our
      net
      loss attributable to common stockholders decreased to $1,653,101 for our three
      month period ended October 31, 2006 as compared to $1,884,274 for the
      corresponding period in 2005. The $231,173 decrease in net loss attributable
      to
      common stockholders for our three month period ended October 31, 2006 was due
      to
      the decrease in net loss of $206,892 and the decrease in preferred dividends
      of
      $24,281.





COMPARISON
      OF THE SIX MONTHS ENDED OCTOBER 31, 2006 TO THE SIX MONTHS ENDED OCTOBER 31,
      2005





For
      the
      six months ended October 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 continue to earn increasing
      revenues from operations during the remainder of fiscal 2007 and in the upcoming
      fiscal year.





18





REVENUES





Revenues
      totaled $411,197 during the six months ended October 31, 2006 as compared to
      $47,621 during the six months ended October 31, 2005. Current period revenue
      was
      comprised of $332,574 in lease revenue, $60,500 in private label fees and
      Preferred Provider Program and $18,125 in other income. Prior period revenue
      was
      comprised of $34,974 in lease revenue, $6,047 in dealer fees, and $6,600 in
      private label fees.





COSTS
      AND
      EXPENSES





General
      and administrative expenses were $2,491,337 during the six months ended October
      31, 2006, compared to $1,497,469 during the six months ended October 31, 2005,
      an increase of $993,868, or 66%. Expenses incurred during the current six month
      period consisted primarily of the following expenses: Compensation and related
      costs, $853,899; Accounting, audit and professional fees,$330,425; Consulting
      fees, $160,442; Rent and utilities, $160,978, Travel and entertainment, $62,038
      and stock based compensation $526,450. Expenses incurred during the comparative
      six month period in 2005 consisted primarily of the following expenses:
      Compensation and related costs, $656,294; Accounting, audit and professional
      fees, $173,149; Consulting fees, $361,587; Rent, $72,814; and Travel and
      entertainment, $35,331.





During
      six months ending October 31, 2006, we recorded non-cash income of $299,474
      related to the decrease in value of warrants issued with registration rights.
      We
      incurred a non-cash charge of $526,450 during the six months ended October
      31,
      2006 related to options and shares of common stock issued for consulting fees,
      services and financing cost. For the six months ended October 31, 2005, we
      had
      expensed non-cash costs of $406,665 related to warrants granted to a private
      placement agent. Additionally, we incurred a non-cash charge of $599,642 during
      the six months ended October 31, 2005 related to shares of common stock issued
      in connection with debt financing and has recorded an expense of $600,000
      related to the failure to have an effective registration statement covering
      the
      underlying shares of common stock issuable upon conversion of it preferred
      stock
      and the related warrants.





NET
      LOSS





We
      incurred a net loss before preferred dividends of $2,057,544 for our six months
      ended October 31, 2006 as compared to $3,075,449 for the corresponding interim
      period in 2005. The $1,017,905 or 33% decrease in our net loss before preferred
      dividends for our six month interim period ended October 31, 2006 was
      attributable to an increase in revenue, a decrease in non-cash financing costs,
      and a partial recovery, in the amount of $299,474, of prior years charges for
      warrant liability.





We
      also
      incurred non-cash preferred dividend expense of $59,873 for our six month period
      ended October 31, 2006 as compared with a non-cash expense of $1,857,492 in
      the
      corresponding interim period of 2005. The decrease in preferred dividend expense
      was primarily attributable to the beneficial conversion feature expense of
      $1,775,000 in the corresponding interim period in 2005 (related to warrants
      issued with the convertible preferred stock and a beneficial conversion feature
      associated with the preferred stock) with no such comparable expense in the
      current period. Preferred dividends in the current period also decreased as
      a
      result of preferred stock conversions to common stock.





19







Our
      net
      loss attributable to common stockholders decreased to $2,117,417 for our six
      month period ended October 31, 2006 as compared to $4,932,941 for the
      corresponding period in 2005. The $2,815,524 decrease in net loss attributable
      to common stockholders for our six month period ended October 31, 2006 was
      due
      to the decrease in net loss and the decrease in preferred
      dividends.





LIQUIDITY
      AND CAPITAL RESOURCES





As
      of
      October 31, 2006, we had a working capital deficit of $1,072,041. We generated
      a
      deficit in cash flow from operations of $2,119,157 for the six months ended
      October 31, 2006. This deficit is primarily attributable to our net loss from
      operations of $2,057,544, an increase in lease receivables of $2,034,714 and
      a
      change in warrant liability of $267,855, partially offset by depreciation and
      amortization of $156,610 and to changes in the balances of current assets and
      liabilities. Accounts payable and accrued expenses increased by $599,967,
      deferred revenue increased by $612,014, prepaid expenses decreased by $32,215
      and loan proceeds receivable decreased by $368,937.





Cash
      flows used in investing activities for the six months ended October 31, 2006
      was
      $782,374, primarily due to the purchase of property and equipment of $14,734
      and
      payments for motorcycles and vehicles of $767,640.





We
      met
      our cash requirements during the six month period through net proceeds for
      equity of $125,000, proceeds of notes payable $275,000 and loans payable to
      officers $83,260 and debt financing of $1,802,989, offset with payments of
      $229,582. Additionally, we have received limited revenues from leasing and
      financing motorcycles and other vehicles, our 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 $1,800,000 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. Although we obtained a senior
      credit facility in July 2005, which allowed us to commence our initial active
      operations, this facility does not allow us to finance individuals with lower
      FICO scores nor does it provide financing for other markets we wish to enter.
      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 our operating flexibility. 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.




20





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





The
      independent auditors report on our April 30, 2006 and 2005 financial statements
      included in our Annual Report states that our historical losses and the lack
      of
      revenues raise substantial doubts about our 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 our 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 our liquidity, our management is actively pursing additional
      financing through discussions with investment bankers, financial institutions
      and private investors. There can be no assurance that we 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.





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




·
            seeking
                additional credit lines from institutional
                lenders;





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





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





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





PRODUCT
      RESEARCH AND DEVELOPMENT





We
      do not
      anticipate incurring significant research and development expenditures during
      the next twelve months.





ACQUISITION
      OR DISPOSITION OF PLANT AND EQUIPMENT





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





21





NUMBER
      OF
      EMPLOYEES





At
      October 31, 2006, we had 22 full time employees. If we fully implement our
      business plan, we anticipate our employment base may increase by approximately
      100% 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 our costs, and the ability to pass on cost increases
      to
      our customers over time is dependent upon market conditions. We are not aware
      of
      any inflationary pressures that have had any significant impact on our
      operations over the past quarter, and we do 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.




22





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





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





STOCK-BASED
      COMPENSATION





On
      December 16, 2004, the Financial Accounting Standards Board (FASB) issued FASB
      Statement No. 123R (revised 2004), "Share-Based Payment" which is a revision
      of
      FASB Statement No. 123, "Accounting for Stock-Based Compensation". Statement
      123R supersedes APB opinion No. 25, "Accounting for Stock Issued to Employees",
      and amends FASB Statement No. 95, "Statement of Cash Flows". Generally, the
      approach in Statement 123R is similar to the approach described in Statement
      123. However, Statement 123R requires all share-based payments to employees,
      including grants of employee stock options, to be recognized in the income
      statement based on their fair values. Pro-forma disclosure is no longer an
      alternative. Management has elected to apply Statement 123R in the third quarter
      of fiscal year 2006.





RECENT
      ACCOUNTING PRONOUNCEMENT





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





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




23





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





In
      May
      2005 the FASB issued 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 affected by a change in accounting principle. SFAS 154 is effective
      for
      accounting changes and corrections of errors made in fiscal years beginning
      after December 15, 2005. Early adoption is permitted for accounting changes
      and
      corrections of errors made in fiscal years beginning after the date this
      Statement is issued. The adoption of SFAS No. 154 did not have a material impact
      on the Company's financial position and results of operations.





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





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




24





OFF-BALANCE
      SHEET ARRANGEMENTS





The
      Company does not maintain off-balance sheet arrangements nor does it participate
      in non-exchange traded contracts requiring fair value accounting
      treatment.





TRENDS,
      RISKS AND UNCERTAINTIES





We
      have
      sought to identify what we believe to be the most significant risks to our
      business, but we cannot predict whether, or to what extent, any of such risks
      may be realized nor can we guarantee that we have identified all possible risks
      that might arise. Investors should carefully consider all of such risk factors
      before making an investment decision with respect to our common
      stock.





CAUTIONARY
      FACTORS THAT MAY AFFECT FUTURE RESULTS





We
      have
      sought to identify what we believe are significant risks to our business, but
      we
      cannot predict whether, or to what extent, any of such risks may be realized,
      nor can we guarantee that we have identified all possible risks that might
      arise.





POTENTIAL
      FLUCTUATIONS IN ANNUAL OPERATING RESULTS





Our
      annual operating results may fluctuate significantly in the future as a result
      of a variety of factors, most of which are outside our control, including:
      the
      demand for our products and services; seasonal trends in purchasing; the amount
      and timing of capital expenditures and other costs relating to the commercial
      and consumer financing; price competition or pricing changes in the market;
      technical difficulties or system downtime; general economic conditions; and
      economic conditions specific to the consumer financing sector.





Our
      annual results may also be significantly impacted by the impact of the
      accounting treatment of acquisitions, financing transactions or other matters.
      Particularly at our early stage of development, such accounting treatment can
      have a material impact on the results for any quarter. Due to the foregoing
      factors, among others, it is likely that our operating results may fall below
      our expectations or those of investors in some future quarter.





DEPENDENCE
      UPON MANAGEMENT





Our
      future performance and success is dependant upon the efforts and abilities
      of
      our management. To a very significant degree, we are dependent upon the
      continued services of Anthony L. Havens, our President and Chief Executive
      Officer and member of our Board of Directors, and Mr. Richard Trotter, our
      Chief
      Operating Officer. If we lost the services of Mr. Havens, Mr. Trotter, or other
      key employees before we could get qualified replacements that loss could
      materially adversely affect our business. We do not maintain key man life
      insurance on any of our Management.





Our
      officers and directors are required to exercise good faith and high integrity
      in
      our management affairs. Our bylaws provide, however, that our directors shall
      have no liability to us or to our shareholders for monetary damages for breach
      of fiduciary duty as a director except with respect to (1) a breach of the
      director's duty of loyalty to the corporation or its stockholders, (2) acts
      or
      omissions not in good faith or which involve intentional misconduct or a knowing
      violation of law, (3) liability which may be specifically defined by law or
      (4)
      a transaction from which the director derived an improper personal
      benefit.




25





CONTINUED
      CONTROL OF CURRENT OFFICERS AND DIRECTORS





The
      present officers and directors own approximately 54.44% of the outstanding
      shares of common stock, without giving effect to shares underlying convertible
      securities, and therefore are in a position to elect all of our Directors and
      otherwise control the Company, including, without limitation, authorizing the
      sale of equity or debt securities of Sparta, the appointment of officers, and
      the determination of officers' salaries. Shareholders have no cumulative voting
      rights.





MANAGEMENT
      OF GROWTH





We
      may
      experience growth, which will place a strain on our managerial, operational
      and
      financial systems resources. To accommodate our current size and manage growth
      if it occurs, we must devote management attention and resources to improve
      our
      financial strength and our operational systems. Further, we will need to expand,
      train and manage our sales and distribution base. There is no guarantee that
      we
      will be able to effectively manage our existing operations or the growth of
      our
      operations, or that our facilities, systems, procedures or controls will be
      adequate to support any future growth. Our ability to manage our operations
      and
      any future growth will have a material effect on our stockholders.





If
      we
      fail to remain current on our reporting requirements, we could be removed from
      the OTC Bulletin Board which would limit the ability of broker-dealers to sell
      our securities and the ability of stockholders to sell their securities in
      the
      secondary market.





Companies
      trading on the OTC Bulletin Board, such as us, must be reporting issuers under
      the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and must
      be current in their reports under the Exchange Act, in order to maintain price
      quotation privileges on the OTC Bulletin Board. If we fail to remain current
      on
      our reporting requirements, we could be removed from the OTC Bulletin Board.
      As
      a result, the market liquidity for our securities could be severely adversely
      affected by limiting the ability of broker-dealers to sell our securities and
      the ability of stockholders to sell their securities in the secondary
      market.




26


ITEM
      3.
      CONTROLS AND PROCEDURES





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





There
      was
      no change in our internal control over financial reporting (as defined in Rule
      13a-15(f) of the Exchange Act) that occurred during the fiscal quarter to which
      this report relates that has materially affected, or is reasonably likely to
      materially affect, our internal control over financial reporting.





27


PART
      II.
      OTHER INFORMATION





Item
      2.
      Unregistered Sales of Equity Securities and Use of Proceeds.





In
      September and October 2006, in transactions deemed to be exempt from
      registration under the Securities Act in reliance on Section 4(2) of the
      Securities Act, the Company sold to four accredited investors bridge notes
      in
      the aggregate amount of $275,000. Three 45-day bridge notes aggregating $175,000
      and one 90-day $100,000 note were originally scheduled to expire on various
      dates through November 30, 2006, together with simple interest at the rate
      of
      10%. The notes provide that 100,000 shares of the Company's restricted common
      stock are to be issued for each $100,000 of notes purchased, or any pro rated
      portion thereof. In the event of default on repayment, for each uncured month,
      as penalty, the equity kicker and the additional equity to be issued to the
      lenders are to be increased by 50%, on a pro rata basis, and during default
      period, interest is to be at the rate of 20%. The repayment, in the event of
      default, of the notes are to be collateralized by certain security interest
      as
      per the terms of the agreement. The Company had the right to extend the maturity
      date of notes for 30 to 45 days, and, in the event of extension, the lender
      would be entitled to an additional equity equal to 60% of the equity kicker
      shares. The maturity dates of the notes were subsequently extended to various
      dates between December 5, 2006 to December 30, 2006, with simple interest rate
      of 10%, and additional equity of in the aggregate amount of 165,000 restricted
      shares of common stock to be issued.





During
      November 2006, in transactions deemed to be exempt from registration under
      the
      Securities Act in reliance on Section 4(2) of the Securities Act, the Company
      received from an accredited investor a subscription of $100,000 for $100,000
      in
      notes of the Company bearing interest at the rate of 6% per year and maturing
      August 1, 2007.





Item
      6.
      Exhibits.





The
      following exhibits are filed with this report:





Exhibit
                Number
            
            Description
                of ExhibitExhibit
                10.1
            
            Employment
                Agreement with Anthony W. Adler (incorporated by reference to Exhibit
                10.1
                of Form 8-K, filed on October 2, 2006Exhibit
                10.2
            
            Stock
                Option Agreement with Jeffrey Bean, dated October 23, 2006 (incorporated
                by reference to Exhibit 10.1 of Form 8-K, filed on October 24,
                2006Exhibit
                10.3*
            
            Form
                of Promissory NoteExhibit
                10.4*
            
            Form
                of Promissory NoteExhibit
                11
            
            Statement
                re: computation of per share earnings is hereby incorporated by reference
                to "Financial Statements" of Part I- Financial Information, Item
                1 -
                Financial Statements, contained in this Form 10-QSB.Exhibit
                31.1*
            
            Certification
                of Chief Executive Officer Pursuant to Securities Exchange Act Rule
                13a-14(a)/15d-14(a)Exhibit
                31.2*
            
            Certification
                of Principal Financial Officer Pursuant to Securities Exchange Act
                Rule
                13a-14(a)/15d-14(a)Exhibit
                32.1*
            
            Certification
                of Chief Executive Officer Pursuant to Securities Exchange Act Rule
                13a-14(b) and 18 U.S.C. Section 1350Exhibit
                32.2*
            
            Certification
                of Principal Financial Officer Pursuant to Securities Exchange Act
                Rule
                13a-14(b) and 18 U.S.C. Section
                1350








*
      Filed
      herewith.


28


SIGNATURES





In
      accordance with the requirements of the Exchange Act, the registrant caused
      this
      report to be signed on its behalf by the undersigned, thereunto duly
      authorized.


SPARTA
                COMMERCIAL SERVICES, INC.Date: December 18, 2006
            By:
            /s/ Anthony L. HavensAnthony
                L. HavensChief
                Executive Officer  Date: December 18, 2006
              By:
              /s/ Anthony W. AdlerAnthony
                  W. AdlerPrincipal
                  Financial Officer
 29