**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 EXCHANGE** **ACT
        OF 1934**
 
 **For
        the quarterly period ended July 31, 2007**
 
 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 small business issuer as specified in its charter)
  **NEVADA**
              **30-0298178**(State
                  or other jurisdiction of incorporation or
                  organization)
              (IRS
                  Employer 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) 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
        August 31, 2007, we had 124,316,157 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 JULY 31, 2007**
 
 **TABLE
        OF CONTENTS**
 **Page****PART
                    I.**
                **FINANCIAL
                    INFORMATION**Item
                    1.
                Financial
                    Statements (Unaudited)
                3Condensed
                    Consolidated Balance Sheets as of July 31, 2007 and April 30,
                    2007
                3Condensed
                    Consolidated Statements of Operations for the Three Months Ended
                    July 31,
                    2007 and 2006
                4Condensed
                    Consolidated Statements of Cash Flows for the Three Months Ended
                    July 31,
                    2007 and 2006
                5Notes
                    to Unaudited Condensed Consolidated Financial Statements
                6Item
                    2.
                Management's
                    Discussion and Analysis and Plan of Operation
                14Item
                    3.
                Controls
                    and Procedures
                20**PART
                    II.**
                **OTHER
                    INFORMATION**Item
                    2.
                Unregistered
                    Sales of Equity Securities and Use of Proceeds
                21Item
                    6.
                Exhibits
                21Signatures
                
                22
 2
  **PART
        I. FINANCIAL INFORMATION**
 
 **ITEM
        1.**  **FINANCIAL
        STATEMENTS**
 
 **SPARTA
        COMMERCIAL SERVICES, INC.**
 **CONDENSED
        CONSOLIDATED BALANCE SHEETS**
 
 **July
                  31,**
              
              **April
                  30,****2007**
              
              **2007****ASSETS**
              
              
              UNAUDITED**Current
                  assets:**Cash
                  and cash equivalents
              
              $
              10,403
              
              $
              22,032RISC
                  loan receivable, current, net ofreserve
                  of $21,532 and $13,821, respectively (NOTE D)
              
              
              761,435
              
              
              569,052Interest
                  receivables
              
              
              36,852
              
              
              25,832Prepaid
                  expenses and other current assets
              
              
              82
              
              
              27,137Inventory
                  (NOTE C)
              
              
              17,400
              
              
              20,784**Total
                  current assets**
              
              
              826,172
              
              
              664,837Motorcycles
                  and other vehicles under operating leases, net ofaccumulated
                  depreciation of $248,414 and $221,800, respectively andloss
                  reserve of $36,115 and $26,059, respectively. (NOTE B)
              
              
              1,065,242
              
              
              1,088,686Property
                  and equipment, net of accumulated depreciation andamortization
                  of $108,107 and $97,047, respectively (NOTE E)
              
              
              83,140
              
              
              94,200RISC
                  loan receivables, net of current portion andloss
                  reserve of $74,282 and $45,517, respectively. (NOTE D)
              
              
              2,626,905
              
              
              1,923,767Other
                  assets
              
              
              29,559
              
              
              —Restricted
                  cash
              
              
              357,476
              
              
              284,943Deposits
              
              
              50,692
              
              
              50,692**Total
                  assets**
              
              $
              5,039,186
              
              $
              4,107,125**LIABILITIES
                  AND STOCKHOLDERS' DEFICIT****Current
                  liabilities:**Accounts
                  payable and accrued expenses
              
              $
              1,063,412
              
              $
              1,219,067Accrued
                  equity based compensation
              
              
              52,820
              
              
              40,310Accrued
                  equity based penalties
              
              
              2,380
              
              
              2,380Notes
                  payable - Senior Lender (NOTE F)
              
              
              902,534
              
              
              787,282Notes
                  payable - Other (NOTE I)
              
              
              1,692,759
              
              
              1,140,259Loans
                  payable - related parties
              
              
              222,260
              
              
              202,260Deferred
                  revenue
              
              
              42,915
              
              
              46,765**Total
                  current liabilities**
              
              
              3,979,080
              
              
              3,438,323Notes
                  payable - Senior Lender, long term portion (NOTE F)
              
              
              3,258,316
              
              
              2,197,925**Total
                  liabilities**
              
              
              7,237,396
              
              
              5,636,248**Stockholders'
                  deficit:**Preferred
                  stock, $0.001 par value; 10,000,000 shares authorized of which
                  35,850
                  shareshave
                  been designated as Series A convertible preferred stock, with a
                  stated
                  valueof
                  $100 per share, 3,050 and 19,795 shares issued and outstanding,
                  respectively
              
              
              305,000
              
              
              1,979,500Common
                  stock, $0.001 par value; 340,000,000 shares authorized, 124,316,157and
                  123,216,157 shares issued and outstanding, respectively
              
              
              124,316
              
              
              123,216Common
                  stock to be issued, 10,733,980 and 0 shares, respectively.
              
              
              10,734
              
              
              —Additional
                  paid-in capital
              
              
              16,632,518
              
              
              14,595,827Deferred
                  compensation
              
              
              —
              
              
              (24,000
              )Accumulated
                  deficit
              
              
              (19,270,778
              )
              
              (18,203,666
              )**Total
                  stockholders' deficit**
              
              
              (2,198,210
              )
              
              (1,529,123
              )**Total
                  liabilities and stockholders' deficit**
              
              $
              5,039,186
              
              $
              4,107,125
 
 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 MONTHS ENDED JULY 31, 2007 AND 2006**
 **(UNAUDITED)**
 
 **Three
                  Months Ended****July
                  31,****2007**
              
              **2006****Revenue**
              
              $
              283,997
              
              $
              191,642**Operating
                  expenses:**General
                  and administrative
              
              
              1,096,704
              
              
              1,166,781Depreciation
                  and amortization
              
              
              79,396
              
              
              74,297**Total
                  operating expenses**
              
              
              1,176,100
              
              
              1,241,078**Loss
                  from operations**
              
              
              (892,103
              )
              
              (1,049,436
              )**Other
                  expense:**Interest
                  expense and financing cost, net
              
              
              (170,396
              )
              
              13,323Change
                  in value of warrant liabilities
              
              
              -
              
              
              601,734**Net
                  loss**
              
              
              (1,062,499
              )
              
              (434,379
              )**Preferred
                  dividend payable**
              
              
              4,613
              
              
              29,937**Net
                  loss attributed to common stockholders**
              
              $
              (1,067,112
              )
              $
              (464,316
              )**Basic
                  and diluted loss per share**
              
              $
              (0.01
              )
              $
              (0.00
              )**Basic
                  and diluted loss per share attributed to****common
                  stockholders**
              
              $
              (0.01
              )
              $
              (0.00
              )**Weighted
                  average shares outstanding**
              
              
              123,969,418
              
              
              120,752,745
 
 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 THREE MONTHS ENDED JULY 31, 2007 AND 2006**
 **(UNAUDITED)**
 
 **Three
                  Months Ended****July
                  31,****2007**
              
              
              **2006****CASH
                  FLOWS FROM OPERATING ACTIVITIES:**Net
                  loss
              
              $
              (1,062,499
              )
              $
              (434,379
              )Adjustments
                  to reconcile net loss to net cashused
                  in operating activities:Depreciation
                  and amortization
              
              
              79,396
              
              
              74,297Allowance
                  for loss reserve
              
              
              55,004
              
              
              40,773Amortization
                  of deferred revenue
              
              
              (3,850
              )
              
              (3,300
              )Amortization
                  of deferred compensation
              
              
              24,000
              
              
              125,363Equity
                  based compensation
              
              
              149,806
              
              
              98,542Stock
                  based finance cost
              
              
              55
              
              
              —Forgiveness
                  of dividend payable
              
              
              224,164
              
              
              —Change
                  in fair value of penalty warrant and warrant liability
              
              
              —
              
              
              (601,734
              )Changes
                  in operating assets and liabilities:(Increase)
                  decrease in:Lease
                  payments receivable
              
              
              —
              
              
              (1,151,492
              )Interest
                  receivable
              
              
              (11,020
              )
              
              —Prepaid
                  expenses and other assets
              
              
              27,055
              
              
              17,708Loan
                  proceeds receivable
              
              
              —
              
              
              333,427Other
                  current assets
              
              
              —
              
              
              (2,900
              )Restricted
                  cash
              
              
              (72,533
              )
              
              (59,755
              )Deposits
              
              
              —
              
              
              (1,850
              )Increase
                  (decrease) in:Accounts
                  payable and accrued expenses
              
              
              (147,758
              )
              
              237,635Deferred
                  revenue
              
              
              —
              
              
              366,531Accrued
                  registration penalty
              
              
              —
              
              
              (44,495
              )Net
                  cash
                  used inoperating
                  activities
              
              
              (738,180
              )
              
              (1,005,629
              )**CASH
                  FLOWS FROM INVESTING ACTIVITIES:**Payments
                  for motorcycles and other vehicles
              
              
              (51,461
              )
              
              —Purchases
                  of RISC contracts
              
              
              (970,131
              )
              
              (471,528
              )Purchases
                  of property and equipment
              
              
              —
              
              
              (14,734
              )Net
                  cash
                  used in investing
                  activities
              
              
              (1,021,592
              )
              
              (486,262
              )**CASH
                  FLOWS FROM FINANCING ACTIVITIES:**Proceeds
                  from notes from senior lender
              
              
              1,616,278
              
              
              667,238Payments
                  on notes from senior lender
              
              
              (440,635
              )
              
              (81,860
              )Proceeds
                  from other notes
              
              
              552,500
              
              
              —Loan
                  proceeds from other related parties
              
              
              20,000
              
              
              —Exercise
                  of warrants
              
              
              0
              
              
              62,500Net
                  cashprovided
                  byfinancing
                  activities
              
              
              1,748,143
              
              
              647,878**Net****decrease****in
                  cash**
              
              
              (11,629
              )
              
              (844,013
              )**Cash
                  and cash equivalents, beginning of period**
              
              $
              22,032
              
              $
              856,382**Cash
                  and cash equivalents, end of period**
              
              $
              10,403
              
              $
              12,369**Cash
                  paid for:**Interest
              
              $
              102,503
              
              $
              24,093Income
                  taxes
              
              $
              1,100
              
              $
              —
  Non-cash
        items for the three months ended July 31, 2007 consisted of the conversion
        of
        16,745 preferred shares into 10,733,974 shares of common stock.
 
 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**
 **JULY
        31, 2007**
 **(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
        July
        31, 2007 and for the three month periods ended July 31, 2007 and 2006 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, 2007 as disclosed in the
        Company's 10-KSB for that year as filed with the SEC, as it may be
        amended.
 
 The
        results of the three months ended July 31, 2007 are not necessarily indicative
        of the results to be expected for the full year ending April 30,
        2008.
 
 The
        consolidated financial statements include the accounts of the Company and
        its
        wholly owned subsidiary, Sparta Commercial Services, LLC. Sparta Commercial
        Services, LLC was inactive during the periods presented and was dissolved
        in
        February 2007. 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 (principal amount of the contract plus the calculated earned income
        over the life of the contract), and the unearned income at lease inception
        is
        amortized over the lease term.
  6
 **SPARTA
        COMMERCIAL SERVICES, INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **JULY
        31, 2007**
 **(UNAUDITED)**
 
 **NOTE
        A - SUMMARY OF ACCOUNTING POLICIES (continued)**
 
 The
        Company purchases Retail Installment Sales Contracts (“RISC”) from motorcycle
        dealers. The RISCs are secured by liens on the titles to the vehicles. The
        RISCs
        are accounted for as loans. Upon purchase, the RISCs appear on the Company’s
        balance sheet as RISC loan receivable current and long term. Interest income
        on
        these loans is recognized when it is earned.
 
 The
        Company realizes gains and losses as the result of the termination of leases,
        both at and prior to their scheduled termination, and the disposition of
        the
        related motorcycle. The disposal of motorcycles, which reach scheduled
        termination of a lease, results in a gain or loss equal to the difference
        between proceeds received from the disposition of the motorcycle and its
        net
        book value. Net book value represents the residual value at scheduled lease
        termination. Lease terminations that occur prior to scheduled maturity as
        a
        result of the lessee’s voluntary request to purchase the vehicle have resulted
        in net gains, equal to the excess of the price received over the motorcycle’s
        net book value.
 
 Early
        lease terminations also occur because of (i) a default by the lessee, (ii)
        the
        physical loss of the motorcycle, or (iii) the exercise of the lessee’s early
        termination. In those instances, the Company receives the proceeds from either
        the resale or release of the repossessed motorcycle, or the payment by the
        lessee’s insurer. The Company records a gain or loss for the difference between
        the proceeds received and the net book value of the motorcycle.
 
 The
        Company charges fees to manufacturers and other customers related to creating
        a
        private label version of the Company’s financing program including web access,
        processing credit applications, consumer contracts and other related documents
        and processes. Fees received are amortized and booked as income over the
        length
        of the contract. 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.
  **Stock
        Based Compensation**
  The
        Company adopted SFAS No. 123(R) during third quarter of Fiscal year 2006,
        which
        no longer permits the use of the intrinsic value method under APB No. 25.
        The
        Company uses the modified prospective method to adopt SFAS No. 123(R), which
        requires compensation expense to be recorded for all stock-based compensation
        granted on or after January 1, 2006, as well the unvested portion of previously
        granted options. The Company is recording the compensation expense on a
        straight-line basis, generally over the explicit service period of three
        to five
        years. The Company made no stock-based compensation grants prior to the adoption
        of Statement 123(R) and therefore has no unrecognized stock compensation
        related
        liabilities or expense unvested or vested prior to 2006.
 
 We
        have
        selected the Black-Scholes method of valuation for share-based compensation
        and
        have adopted the modified prospective transition method under SFAS 123R,
        which
        requires that compensation cost be recorded, as earned, for all unvested
        stock
        options outstanding at the beginning of the third quarter of adoption of
        SFAS
        123R. As permitted by SFAS 123R, prior periods have not been restated. The
        charge is being recognized in non cash compensation, which is included in
        stock-based compensation expense, on a straight-line basis over the remaining
        service period after the adoption date based on the options’ original estimate
        of fair value. Prior to the adoption of SFAS 123R, the Company applied the
        intrinsic-value-based method of accounting prescribed by Accounting Principles
        Board Opinion No. 25 (“APB 25”), “Accounting for Stock Issued to Employees.”
Under this method, compensation cost was recorded only if the market price
        of
        the underlying stock on the grant date exceeded the exercise price. As permitted
        by SFAS 123, the Company elected the disclosure only requirements of SFAS
        123.
        The fair-value based method used to determine historical pro forma amounts
        under
        SFAS 123 was similar in most respects to the method used to determine
        stock-based compensation expense under SFAS 123R.
  7
 
 **SPARTA
        COMMERCIAL SERVICES, INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **JULY
        31, 2007**
 **(UNAUDITED)**
 
 **NOTE
        A - SUMMARY OF ACCOUNTING POLICIES (continued)**
 
 The
        following tables illustrates the effect that adoption of SFAS No. 123(R)
        had on
        the Company's year ended July 31, 2007 results and cash flows as well as
        the
        parameters used in the valuation of options granted in the first quarter
        ended July 31, 2007.
  Under
                Pre-SFAS
                No.123
                  (R)
                Accounting
              
              
              SFAS
                  No.
                123(R)
                  Impact
              
              
              Actual
                Quarter Ended
                July
                  31, 2007Earnings
                  before taxes
              
              $
              (999,305
              )
              $
              (67,807
              )
              $
              (1,067,112
              )Net
                  Earnings
              
              
              (999,305
              )
              $
              (67,807
              )
              $
              (1,067,112
              )**Net
                  Earnings**Basic
                  EPS
              
              $
              (0.01
              )
              $
              -
              
              $
              (0.01
              )Diluted
                  EPS
              
              
              (0.01
              )
              
              -
              
              
              (0.01
              )**Cash
                  Flows**Operating
                  Activities
              
              $
              (738,180
              )
              $
              -
              
              $
              (738,180
              )Financing
                  Activities
              
              $
              1,748,143
              
              
              -
              
              
              1,748,143
  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.
 
 8
  **SPARTA
        COMMERCIAL SERVICES, INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **JULY
        31, 2007**
 **(UNAUDITED)**
 
 **NOTE
        A - SUMMARY OF ACCOUNTING POLICIES (continued)**
 
 **Net
        Loss Per Share**
 
 The
        Company uses SFAS No. 128, “ *Earnings
        Per Share* ”
for
        calculating the basic and diluted loss per share. We compute basic loss per
        share by dividing net loss and net loss attributable to common shareholders
        by
        the weighted average number of common shares outstanding. Diluted loss per
        share
        is computed similar to basic loss per share except that the denominator is
        increased to include the number of additional common shares that would have
        been
        outstanding if the potential shares had been issued and if the additional
        shares
        were dilutive. Common equivalent shares are excluded from the computation
        of net
        loss per share if their effect is anti-dilutive.
 
 Per
        share
        basic and diluted net loss attributable to common stockholders amounted to
        $0.01
        and $0.00 for the quarters ended July
        31,
        200 7
        and 200 6,
        respectively. At July
        31,
        200 7
        and 200 6,
        20,934,071 and **** 27,069,527
        potential shares, respectively, were excluded from the shares used to calculate
        diluted earnings per share as their inclusion would reduce net loss per share.
 
 **NOTE
        B - MOTORCYCLES UNDER OPERATING LEASE**
 
 Motorcycles
        and other vehicles under operating leases at July
        31,
        200 7
        and
        April 30, 2007 consist of the followin g:
 
 July
                  31,
              
              April
                  30,2007
              
              2007Motorcycles
                  and other vehicles
              
              $
              1,349,771
              
              $
              1,336,545Less:
                  accumulated depreciation
              
              
              (248,414
              )
              
              (221,800
              )Motorcycles
                  and other vehicles, net of accumulated depreciation
              
              
              1,101,357
              
              
              1,114,745Less:
                  estimated reserve for residual values
              
              
              (36,115
              )
              
              (26,059
              )Motorcycles
                  and other vehicles under operating leases, net
              
              $
              1,065,242
              
              $
              1,088,686
 
 Depreciation expense
        was $68,336 and $279,348 for the quarter ended July 31, 2007 and the year
        ended April 30, 2007, respectively. Depreciation expense for
        the quarter ended July 31, 2006 was $63,548.
  **NOTE
        C - INVENTORY**
 
 Inventory
        is comprised of repossessed vehicles and vehicles which have been returned
        at
        the end of their lease. Inventory is carried at the lower of depreciated
        cost or
        market, applied on a specific identification basis. At July 31, 2007 the
        Company
        had repossessed vehicles valued at book value of $17,400. At April 30, 2007,
        the
        Company had repossessed vehicles of value $20,784.
  9
  **SPARTA
        COMMERCIAL SERVICES, INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **JULY
        31, 2007**
 **(UNAUDITED)**
 
 **NOTE
        D - RETAIL (RISC) LOAN RECEIVABLES**
 
 RISC
        loan
        receivables, which are carried at cost, were $3,484,154 and $2,552,157 at
        July
        31, 2007 and April 30, 2007, respectively. The following is a schedule by
        years
        of future principal payments related to these receivables. Certain of the
        assets
        are pledged as collateral for the note described in Note F.
 
 Year
                  ending July 31,2008
              
              $
              782,9672009
              
              
              803,0442010
              
              
              777,0582011
              
              
              727,0462012
              
              
              391,3392013
              
              
              2,700$
              3,484,154Less:
                  allowance for doubtful receivables
              
              
              (95,814
              )3,388,340Less:
                  current receivables, net of allowance
              
              
              (761,435
              )Long
                Term receivables
              
              $
              2,626,905
  As
        of
        April 30, 2007 current loan receivables net of allowance was $569,052 and
        long
        term loan receivable net of allowance was $1,923,767.
  **NOTE
        E - PROPERTY AND EQUIPMENT**
 
 Major
        classes of property and equipment at July 31, 2007 and April 30, 2007 consist
        of
        the followings:
  **July
                  31, 2007**
              
              
              **April
                  30, 2007**Computer
                  equipment, software and furniture
              
              $
              191,247
              
              $
              191,247Less:
                  accumulated depreciation and amortization
              
              
              (108,107
              )
              
              (97,047
              )Net
                  property and equipment
              
              $
              83,140
              
              $
              94,200
 
 Depreciation
        expense was $11,060 and $43,798 for the quarter ended July 31, 2007 and the
        year ended April 30, 2007, respectively. Depreciation and amortization
        expense for the quarter ended July 31, 2006 was $10,749.
  10
  **SPARTA
        COMMERCIAL SERVICES, INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **JULY
        31, 2007**
 **(UNAUDITED)**
 
 **NOTE
        F - NOTES PAYABLE-SENIOR LENDER**
 
 The
        Company finances certain of its leases through a third party. The repayment
        terms are generally one year to five years and the notes are secured by the
        underlying assets. The weighted average interest rate
        at July
        31, 200 7 is
        10.18%.
 
 At July 31,
        200 7 ,
        the
        notes payable mature as follows:
  12
                  months Ended
                July
                  31
              
              Amount2008
              
              $
              902,5342009
              
              
              1,020,2002010
              
              
              822,9072011
              
              
              877,0282012
              
              
              534,8392013
              
              
              3,342Total
              
              $
              4,160,850
  Notes
        payable to Senior Lender at April 30, 2007 were $2,985,207.
  **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 July 31, 200 7 and
        April 30, 200 7, the
        Company has
        issued and outstanding 3,050 and 19,795 shares of preferred stock issued
        and
        outstanding respectively. ****  The
        Company has
        124,316,157 and 123,216,157 shares of common stock issued and outstanding
        as of July
        31,
        200 7
        and
        April 30, 200 7,
        respectively.
 
 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
        class ‘C’ warrants based on their relative fair value, which totaled $931,800
        using the Black Scholes option pricing model. Further, we 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 are included in the accompanying financial
        statements.
  11
  **SPARTA
        COMMERCIAL SERVICES, INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **JULY
        31, 2007**
 **(UNAUDITED)**
 
 **NOTE
        G - EQUITY TRANSACTIONS (continued)**
 
 On
        July
        20, 2007, one shareholder holding 16,745 shares of preferred stock converted
        those shares into 10,733,974 shares of common stock and forgave $224,163
        in
        accumulated but unpaid dividends on the preferred shares. The 10,733,974
        shares
        of common stock issuable upon conversion of the preferred shares had not
        been
        physically issued as of July 31, 2007. The forgiven dividends were recognized
        as
        additional paid-in capital in the quarter ended July 31, 2007.
 
 Common
        Stock
 
 In
        August
        2007, the Company entered into a three month consulting agreement with a
        consultant which agreement calls for cash payments by the Company of $3,000,
        of
        which $1,000 has been paid, and issued 1,100,000 shares of restricted common
        stock based upon the consultants performance under the agreement.
 
 During
        the three months ended July 31, 2007, the Company granted options to purchase
        an
        aggregate of 1,020,000 shares of common stock to eleven employees. However,
        four
        employees left during the three months ended July 31, 2007. The vested and
        unvested options have been valued at $55,136 using the Black-Sholes option
        pricing model with the following assumptions: (1) dividend yield of 0%; (2)
        expected volatility of 143%; (3) risk-free interest rate of 4.76%, vest over
        a
        48 month period and expire if unexercised in ten years. During the quarter
        ended July 31, 2007 and the quarter ended July 31, 2006, the Company
        expensed $186,317 and $98,542,  respectively, in non-cash charges related
        to stock and option compensation expense.
 
 **NOTE
        H - SUBSEQUENT EVENTS**
 
 During
        the period from August 1, 2007 to September 7, 2007, the Company sold to
        thirteen accredited investors, six month unsecured notes in the aggregate
        amount
        of $490,500. All notes bear 6% simple interest, payable in cash or shares,
        at
        the Company’s option, with principal and accrued interest payable at maturity.
        Should the Company opt to convert these notes at maturity, these notes will
        be
        convertible into shares of common stock at prices ranging from $0.0288 to
        $0.0456 per share. All notes will mature in six months on various dates through
        March 7,2008.
 
 **NOTE
        I - NOTES PAYABLE-OTHER**
  **Notes
                  Payable
                  Other**
                
                
                **July
                    31, 2007**
                
                
                **April
                    30, 2007**6%
                    Bridge Loan, due October 19, 2007
                
                $
                50,000
                
                $
                50,000Non-interest
                    Demand Loan
                
                
                100,000
                
                
                40,00010%
                    Bridge Notes, due September 21, 2007
                
                
                275,000
                
                
                275,0006% Convertible
                    Notes, various due dates from August 24, 2007 (extended to October
                    1,
                    2007) to February 23, 2008
                
                
                1,267,759
                
                
                775,259Total
                
                $
                1,692,759
                
                $
                1,140,259
 12
  **SPARTA
        COMMERCIAL SERVICES, INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **JULY
        31, 2007**
 **(UNAUDITED)**
 
 **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 July 31,
        200 7 , the
        Company incurred
        loss of $19,270,778. Of these losses, $1,067,112 were incurred in the quarter
        ending July 31, 2007 and $464,316 in the quarter ending July 31, 2006. These
        factors among others may indicate that the
        Company will be
        unable to continue as a going concern for a reasonable period of
        time.
 
 The
        Company's existence is dependent upon management's ability to develop profitable
        operations. Management is devoting substantially all of its efforts to
        developing its business and raising capital and there can be no assurance
        that the
        Company 's
        efforts will be successful. However, there can be 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.
  13
  **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, 2007 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.
 
 RESULTS
        OF OPERATIONS
 
 COMPARISON
        OF THE THREE MONTHS ENDED JULY 31, 2007 TO THE THREE MONTHS ENDED JULY 31,
        2006
 
 For
        the
        three months ended July 31, 2007 and 2006, 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 our fiscal year ending April
        30, 2008 and in the upcoming fiscal year.
 
 REVENUES
 
 Revenues
        totaled $283,997 during the three months ended July 31, 2007 as compared
        to
        $191,642 during the three months ended July 31, 2006. Current period revenue
        was
        comprised primarily of $138,964 in interest income from RISC Loans, $105,129
        in
        lease revenue, $16,450 in private label fees and $23,454 in other fee income.
        For the three months ended July 31, 2006 revenues were comprised primarily
        of
        $153,092 in lease revenue, $10,200 in private label fees and $28,350 in other
        income.
 
 COSTS
        AND
        EXPENSES
 
 General
        and administrative expenses were $1,096,704 during the three months ended
        July
        31, 2007, compared to $1,166,781 during the three months ended July 31, 2006,
        a
        decrease of $70,077or 6%. Expenses incurred during the current three month
        period consisted primarily of the following expenses: Compensation and related
        costs of $501,313; Legal and accounting fees of $7,404; Consulting fees of
        $80,246. Rent and utilities of $74,414; General office expenses of $143,201;
        and
        loss reserve expense of $52,994. Expenses incurred during the comparative
        three
        month period in 2006 consisted primarily of the following expenses: Compensation
        and related costs, $326,852; Accounting, audit and professional fees, $132,184;
        Consulting fees, $222,863; Rent, $48,087, Travel and entertainment, $39,590;
        and
        stock based compensation, $98,542.
 
 During
        the three months ended July 31, 2007 we incurred, non-cash, stock based
        compensation charges of $186,317. During the three months ended July 31,
        2006,
        we incurred a non-cash charge of $223,905 related to shares of common stock
        issued for consulting fees and services. During three months ending July
        31,
        2006 we have also recorded non-cash income of $601,734 related to the decrease
        in value of warrants issued with registration rights.
  14
  NET
        LOSS
 
 We
        incurred a net loss before preferred dividends of $1,062,499 for our three
        months ended July 31, 2007 as compared to $434,379 for the corresponding
        interim
        period in 2006. The $628,120 or 145% increase in our net loss before preferred
        dividends for our three month interim period ended July 31, 2007 was
        attributable primarily to the $601,734 non-cash reduction in operating loss
        for
        the 2006 period resulting from the gain in warrant liabilities.
 
 We
        also
        incurred non-cash preferred dividend expense of $4,613 for our three month
        period ended July 31, 2007 as compared with an expense of $29,937 in the
        corresponding interim period of 2006. The decrease in preferred dividend
        expense
        was attributable to the conversion of 16,745 preferred shares to common stock
        during the current quarter.
 
 Our
        net
        loss attributable to common stockholders increased to $1,067,112 for our
        three
        month period ended July 31, 2007 as compared to $464,316 for the corresponding
        three month period in 2006.
 
 LIQUIDITY
        AND CAPITAL RESOURCES
 
 As
        of
        July 31, 2007, the Company had a working capital deficit of $3,152,908. The
        Company generated a deficit in cash flow from operations of $738,180 for
        the
        three months ended July 31, 2007. Cash flows used in investing activities
        for
        the three months ended July 31, 2007 was $1,021,592 primarily due to the
        purchase of RISC Loans for $970,131 and payments for motorcycles and vehicles
        of
        $51,461.
 
 Cash
        flows used in investing activities for the three months ended July 31, 2006
        was
        $486,262, primarily due to the purchase of property and equipment of $14,734
        and
        payments for motorcycles and vehicles of $471,528.
 
 The
        Company met its cash requirements for operating activities during the three
        month period ended July 31, 2007 through net proceeds from debt financing
        of
        $2,168,778 offset with payments of $440,635. Additionally, the Company had
        received limited revenues from leasing and financing motorcycles and other
        vehicles, its private label programs and from dealer sign-up fees and other
        fees.
 
 The
        Company met its cash requirements for operating and financing activities
        during
        the three month period ended July 31, 2006 through net proceeds from equity
        transactions of $62,500 and debt financing of $667,238 offset with payments
        of
        $81,860. Additionally, the Company had received limited revenues from leasing
        and financing motorcycles and other vehicles, its recently launched private
        label programs and from dealer sign-up fees.
 
 While
        we
        have raised capital to meet our working capital and financing needs in the
        past,
        additional financing is required in order to meet our current and projected
        cash
        flow deficits from operations and development. We are seeking financing,
        which
        may take the form of debt, convertible debt or equity, in order to provide
        the
        necessary working capital. There is no guarantee that we will be successful
        in
        raising the funds required.
 
 We
        estimate that we will need to raise approximately $1,800,000 in additional
        funds
        to fully implement our business plan during the next twelve months and for
        our
        general operating expenses. As of the date of this filing, we have do not
        have
        sufficient operating capital to continue our planned business operations
        for the
        next twelve months and for our general operating expenses. The Company obtained
        a senior credit facility in July 2005, which has been subsequently renewed,
        This
        facility allowed us to commence and continue our financing activities. However
        this facility finances only three of the five credit tiers of our business
        model, thus we need to obtain additional credit facilities to fully implement
        our business plan. We are presently seeking those additional credit facilities
        and long term debt. This additional, debt financing, if available, will require
        payment of interest and may involve restrictive covenants that could impose
        limitations on the operating flexibility of the Company. If we are not
        successful in generating sufficient liquidity from operations or in raising
        sufficient capital resources to finance our general operating expenses and
        our
        growth, on terms acceptable to us, this would 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 to a more limited
        scale.
  15
  AUDITOR'S
        OPINION EXPRESSES DOUBT ABOUT THE COMPANY'S ABILITY TO CONTINUE AS A "GOING
        CONCERN"
 
 The
        independent auditors report on our April 30, 2007 and 2006 financial statements
        included in the Company's Annual Report states that the Company's historical
        losses and the lack of revenues raise substantial doubts about the Company's
        ability to continue as a going concern, due to the losses incurred and its
        lack
        of significant operations. If we are unable to develop our business, we have
        to
        discontinue operations or cease to exist, which would be detrimental to the
        value of the Company's common stock. We can make no assurances that our business
        operations will develop and provide us with significant cash to continue
        operations.
 
 PLAN
        OF
        OPERATIONS
 
 ADDRESSING
        THE GOING CONCERN ISSUES
 
 In
        order
        to improve the Company's liquidity, the Company's management is actively
        pursing
        additional financing through discussions with investment bankers, financial
        institutions and private investors. There can be no assurance the Company
        will
        be successful in its effort to secure additional financing.
 
 We
        continue to experience net operating losses. Our ability to continue as a
        going
        concern is subject to our ability to develop profitable operations. We are
        devoting substantially all of our efforts to developing our business and
        raising
        capital. Our net operating losses increase the difficulty in meeting such
        goals
        and there can be no assurances that such methods will prove
        successful.
 
 The
        primary issues management will focus on in the immediate future to address
        this
        matter include:
 
 ·
            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.
 
 NUMBER
        OF
        EMPLOYEES
 
 At
        July
        31, 2007 we had 23 full time employees. If we fully implement our business
        plan,
        we anticipate our employment base may increase by approximately 25% during
        the
        next twelve months. As we continue to expand, we will incur additional cost
        for
        personnel. This projected increase in personnel is dependent upon our generating
        revenues and obtaining sources of financing. There is no guarantee that we
        will
        be successful in raising the funds required or generating revenues sufficient
        to
        fund the projected increase in the number of employees.
 
 INFLATION
 
 The
        impact of inflation on the costs of the Company, and the ability to pass
        on cost
        increases to its customers over time is dependent upon market conditions.
        The
        Company is not aware of any inflationary pressures that have had any significant
        impact on the Company's operations over the past quarter, and the Company
        does
        not anticipate that inflationary factors will have a significant impact on
        future operations.
  16
 
 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
 
 The
        Company originates leases on new and used motorcycles and other powersports
        vehicles from motorcycle dealers throughout the United States. The Company’s
        leases are accounted for as either operating leases or direct financing leases.
        At the inception of operating leases, no lease revenue is recognized and
        the
        leased motorcycles, together with the initial direct costs of originating
        the
        lease, which are capitalized, appear on the balance sheet as “motorcycles under
        operating leases-net”. The capitalized cost of each motorcycle is depreciated
        over the lease term, on a straight-line basis, down to the Company’s original
        estimate of the projected value of the motorcycle at the end of the scheduled
        lease term (the “Residual”). Monthly lease payments are recognized as rental
        income. Direct financing leases are recorded at the gross amount of the lease
        receivable (principal amount of the contract plus the calculated earned income
        over the life of the contract), and the unearned income at lease inception
        is
        amortized over the lease term.
 
 The
        Company purchases Retail Installment Sales Contracts (“RISC”) from motorcycle
        dealers. The RISCs are secured by liens on the titles to the vehicles. The
        RISCs
        are accounted for as loans. Upon purchase, the RISCs appear on the Company’s
        balance sheet as RISC loan receivable current and long term. Interest income
        on
        these loans is recognized when it is earned.
 
 The
        Company realizes gains and losses as the result of the termination of leases,
        both at and prior to their scheduled termination, and the disposition of
        the
        related motorcycle. The disposal of motorcycles, which reach scheduled
        termination of a lease, results in a gain or loss equal to the difference
        between proceeds received from the disposition of the motorcycle and its
        net
        book value. Net book value represents the residual value at scheduled lease
        termination. Lease terminations that occur prior to scheduled maturity as
        a
        result of the lessee’s voluntary request to purchase the vehicle have resulted
        in net gains, equal to the excess of the price received over the motorcycle’s
        net book value.
 
 Early
        lease terminations also occur because of (i) a default by the lessee, (ii)
        the
        physical loss of the motorcycle, or (iii) the exercise of the lessee’s early
        termination. In those instances, the Company receives the proceeds from either
        the resale or release of the repossessed motorcycle, or the payment by the
        lessee’s insurer. The Company records a gain or loss for the difference between
        the proceeds received and the net book value of the motorcycle.
 
 The
        Company charges fees to manufacturers and other customers related to creating
        a
        private label version of the Company’s financing program including web access,
        processing credit applications, consumer contracts and other related documents
        and processes. Fees received are amortized and booked as income over the
        length
        of the contract.
 
 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.
  17
  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
 
 There
        have been no significant new pronouncements since the issuance of the Company’s
        Annual Report on Form 10-KSB for the fiscal year ended April 30,
        2007.
 
 WEBSITE
        DEVELOPMENT COSTS
 
 We
        have
        incurred costs to develop a proprietary web-based private label financing
        program for processing including web access, processing credit applications,
        consumer contracts and other related documents and processes. The Company
        has
        elected to recognize the costs of developing its website and related
        intellectual property the website development costs in accordance with Emerging
        Issue Task Force ("EITF") No. 00-02, "Accounting for Website Development
        Costs."
        As such, the Company expenses all costs incurred that relate to the planning
        and
        post implementation phases of development of its website. Direct costs incurred
        in the development phase are capitalized and recognized over the estimated
        useful life. Costs associated with repair or maintenance for the website
        are
        included in cost of net revenues in the current period expenses.
 
 OFF-BALANCE
        SHEET ARRANGEMENTS
 
 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.
  18
 
 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. If we lost the services of
        either
        Mr. Havens, 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.
 
 CONTINUED
        CONTROL OF CURRENT OFFICERS AND DIRECTORS
 
 The
        present officers and directors own approximately 55% 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
        Section 12 of the Securities Exchange Act of 1934, as amended, and must be
        current in their reports under Section 13, 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.
  19
  **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.
  20
 
 **PART
        II. OTHER INFORMATION**
 
 **ITEM
        2.**  **UNREGISTERED
        SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.**
 
 From
        May
        1, 2007 to July 24, 2007, in transactions deemed to be exempt from registration
        under the Securities Act in reliance on Section 4(2) of the Securities Act,
        the
        Company sold to sixteen accredited investors six month unsecured notes in
        the
        aggregate amount of $457,000. The notes bear interest at the simple interest
        rate of 6% per year. At the Company’s option, the notes are convertible into
        shares of common stock at prices ranging from $0.03 to $0.055 per share.
        The
        notes mature in six months from the issuance on various dates through January
        24, 2008.
 
 During
        the three months ended July 31, 2007, in transactions deemed to be exempt
        from
        registration under the Securities Act in reliance on Section 4(2) of the
        Securities Act, the Company granted options to purchase an aggregate of
        1,020,000 shares of common stock to eleven employees. The options are
        exercisable for a period of ten years, subject to vesting condition, at $0.10
        per share.
 
 In
        August
        2007, in a transaction deemed to be exempt from registration under the
        Securities Act in reliance on Section 4(2) of the Securities Act, the Company
        entered into a three month consulting agreement with a consultant pursuant
        to
        which the Company issued 1,100,000 shares of restricted common stock.
 
 During
        the period from August 1, 2007 to September 7, 2007, 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 thirteen accredited investors,
        six
        month unsecured notes in the aggregate amount of $490,500. All notes bear
        6%
        simple interest, payable in cash or shares, at the Company’s option, with
        principal and accrued interest payable at maturity. Should the Company opt
        to
        convert these notes at maturity, these notes will be convertible into shares
        of
        common stock at prices ranging from $0.0288 to $0.0456 per share. All notes
        will
        mature in six months on various dates through March 7, 2008.
 
 **ITEM
        6.**  **EXHIBITS.**
 
 The
        following exhibits are filed with this report:
 Exhibit
                    Number
                
                Description
                    of ExhibitExhibit
                    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.
  21
 **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:
                September 19, 2007
              By:
              /s/
                Anthony L. HavensAnthony
                  L. Havens
                Chief
                  Executive Officer
 Date:
                  September 19, 2007
                By:
                /s/
                  Anthony W. AdlerAnthony
                      W. Adler
                    Principal
                      Financial Officer
  22