UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





(Mark
One)





x
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For
the quarterly period ended October 31, 2008





o           TRANSITION
REPORT PURSUANT TO 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 incorporation or organization)
            (IRS
      Employer Identification No.)





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


(Address
of principal executive offices)  (Zip Code)





(212)
239-2666


(Registrant’s
telephone number, including area code)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 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 large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.


Large
      accelerated filer o
            Accelerated
      filer oNon-accelerated
      filer o (Do
      not check if a smaller reporting company)
            Smaller
      reporting company x





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 18, 2008, we had 164,736,291 shares of common stock issued and
outstanding.





SPARTA
COMMERCIAL SERVICES, INC.





FORM
10-Q


FOR
THE QUARTER ENDED OCTOBER 31, 2008





TABLE
OF CONTENTS





PagePART
      I.
                      FINANCIAL
      INFORMATIONItem
      1.
                      Financial
      Statements (Unaudited)
                      3Condensed
      Consolidated Balance Sheets as of October 31, 2008 and April 30,
      2008
                      3Condensed
      Consolidated Statements of Operations for the
                        Three
      and Six Months Ended October 31, 2008 and 2007
                      4Condensed
      Consolidated Statements of Cash Flows for the
                        Six
      Months Ended October 31, 2008 and 2007
                      5Notes
      to Unaudited Condensed Consolidated Financial Statements
                      6Item
      2.
                      Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                      17Item
      3.
                      Quantitative
      and Qualitative Disclosures About Market Risk
                      24Item
      4.
                      Controls
      and Procedures
                      24PART
      II.
                      OTHER
      INFORMATIONItem
      1.
                      Legal
      Proceedings
                      25Item
      1A.
                      Risk
      Factors
                      25Item
      2.
                      Unregistered
      Sales of Equity Securities and Use of Proceeds
                      25Item
      3.
                      Defaults
      Upon Senior Securities
                      26Item
      4.
                      Submission
      of Matters to a Vote of Security Holders
                      26Item
      5.
                      Other
      Information
                      26Item
      6.
                      Exhibits
                      27Signatures
                      
                      28




2


PART
I. FINANCIAL INFORMATION





ITEM 1.   FINANCIAL
STATEMENTS





SPARTA
COMMERCIAL SERVICES, INC.


CONDENSED
CONSOLIDATED BALANCE SHEETS





October 31,
                                
                                
                                April 30,2008
                                
                                
                                2008(Unaudited)ASSETSCash
      and cash equivalents
                                
                                $
                                84,735
                                
                                
                                $
                                68,462RISC
      loan receivables, net of reserve of $84,711 and $86,312 respectively (NOTE
      D)
                                
                                
                                4,247,385
                                
                                
                                
                                4,260,002Motorcycles
      and other vehicles under operating leases net of accumulated depreciation
      of $267,058 and $ 336,100 respectively, and loss reserve of $19,283 and $
      25,231 respectively (NOTE B)
                                
                                
                                906,996
                                
                                
                                
                                1,251,631Purchased
      Portfolio (NOTE G)
                                
                                
                                100,000
                                
                                
                                
                                -Interest
      receivable
                                
                                
                                39,893
                                
                                
                                
                                58,382Accounts
      receivable
                                
                                
                                47,084
                                
                                
                                
                                37,024Inventory
      (NOTE C)
                                
                                
                                79,827
                                
                                
                                
                                79,069Property
      and equipment, net of accumulated depreciation and amortization of
      $138,945 and $129,986 respectively (NOTE E)
                                
                                
                                52,302
                                
                                
                                
                                61,261Restricted
      cash
                                
                                
                                445,592
                                
                                
                                
                                444,902Deposits
                                
                                
                                48,967
                                
                                
                                
                                48,967Total
      assets
                                
                                $
                                6,052,780
                                
                                
                                $
                                6,309,879LIABILITIES
      AND DEFICIENCY IN STOCKHOLDERS’ EQUITYLiabilities:Accounts
      payable and accrued expenses
                                
                                $
                                1,350,984
                                
                                
                                $
                                1,464,133Notes
      payable-Senior Lender (NOTE F)
                                
                                
                                4,691,583
                                
                                
                                
                                5,029,864Secured
      Senior note payable, net (NOTE G)
                                
                                
                                100,000
                                
                                
                                
                                -Convertible
      Notes payable (NOTE H)
                                
                                
                                2,817,859
                                
                                
                                
                                2,665,359Notes
      payable-other (NOTE I)
                                
                                
                                1,411,000
                                
                                
                                
                                1,147,500Loans
      payable-related parties (NOTE J)
                                
                                
                                342,260
                                
                                
                                
                                244,760Other
      liabilities
                                
                                
                                -
                                
                                
                                
                                6,741Deferred
      revenue
                                
                                
                                15,750
                                
                                
                                
                                22,617Total
      liabilities
                                
                                
                                10,729,435
                                
                                
                                
                                10,580,974Deficiency
      in Stockholders’ Equity:Preferred
      stock, $.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, 825 and 825 shares issued and
      outstanding respectively
                                
                                
                                82,500
                                
                                
                                
                                82,500Common
      stock, $.001 par value; 340,000,000 shares authorized, 160,200,075 and
      130,798,657 shares issued and outstanding respectively
                                
                                
                                160,200
                                
                                
                                
                                130,799Common
      stock to be issued, 15,875,733 and 12,160,210 shares
      respectively
                                
                                
                                15,876
                                
                                
                                
                                12,160Additional
      paid-in-capital
                                
                                
                                19,998,749
                                
                                
                                
                                17,727,889Accumulated
      deficit
                                
                                
                                (24,933,980
                                )
                                
                                
                                (22,224,442
                                )Total
      deficiency in stockholders’ equity
                                
                                
                                (4,676,655
                                )
                                
                                
                                (4,271,095
                                )Total
      liabilities and deficiency in stockholders’ equity
                                
                                $
                                6,052,780
                                
                                
                                $
                                6,309,879





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, 2008 AND 2007


(UNAUDITED)





Three Months Ended
                                      October 31,
                                    
                                    
                                    Six Months Ended
                                      October 31,2008
                                    
                                    
                                    2007
                                    
                                    
                                    2008
                                    
                                    
                                    2007Revenue
      :Rental
      Income, Leases
                                    
                                    $
                                    78,643
                                    
                                    
                                    $
                                    97,213
                                    
                                    
                                    $
                                    168,337
                                    
                                    
                                    $
                                    202,342Interest
      Income, Loans
                                    
                                    
                                    193,664
                                    
                                    
                                    
                                    158,076
                                    
                                    
                                    
                                    397,707
                                    
                                    
                                    
                                    297,028Other
                                    
                                    
                                    28,742
                                    
                                    
                                    
                                    42,015
                                    
                                    
                                    
                                    129,924
                                    
                                    
                                    
                                    81,931Total
      Revenues
                                    
                                    
                                    301,049
                                    
                                    
                                    
                                    297,303
                                    
                                    
                                    
                                    695,969
                                    
                                    
                                    
                                    581,300Operating
      expenses:General
      and administrative
                                    
                                    
                                    977,427
                                    
                                    
                                    
                                    1,206,382
                                    
                                    
                                    
                                    2,341,579
                                    
                                    
                                    
                                    2,303,086Depreciation
      and amortization
                                    
                                    
                                    48,088
                                    
                                    
                                    
                                    71,429
                                    
                                    
                                    
                                    109,171
                                    
                                    
                                    
                                    150,825Total operating
      expenses
                                    
                                    
                                    1,025,515
                                    
                                    
                                    
                                    1,277,811
                                    
                                    
                                    
                                    2,450,750
                                    
                                    
                                    
                                    2,453,911Loss
      from operations
                                    
                                    
                                    (724,466
                                    )
                                    
                                    
                                    (980,508
                                    )
                                    
                                    
                                    (1,754,782
                                    )
                                    
                                    
                                    (1,872,611
                                    )Other
      expenses:Interest
      expense and financing cost, net
                                    
                                    
                                    (273,507
                                    )
                                    
                                    
                                    (214,545
                                    )
                                    
                                    
                                    (952,234
                                    )
                                    
                                    
                                    (384,941
                                    )Net
      Loss
                                    
                                    
                                    (997,973
                                    )
                                    
                                    
                                    (1,195,053
                                    )
                                    
                                    
                                    (2,707,016
                                    )
                                    
                                    
                                    (2,257,552
                                    )Preferred
      dividend payable
                                    
                                    
                                    1,261
                                    
                                    
                                    
                                    18,100
                                    
                                    
                                    
                                    2,522
                                    
                                    
                                    
                                    22,713Net
      loss attributed to common stockholders
                                    
                                    $
                                    (999,234
                                    )
                                    
                                    $
                                    (1,213,153
                                    )
                                    
                                    $
                                    (2,709,538
                                    )
                                    
                                    $
                                    (2,280,265
                                    )Basic
      and diluted loss per share
                                    
                                    $
                                    (0.01
                                    )
                                    
                                    $
                                    (0.01
                                    )
                                    
                                    $
                                    (0.01
                                    )
                                    
                                    $
                                    (0.01
                                    )Basic
      and diluted loss per share attributed to common
    stockholders
                                    
                                    $
                                    (0.01
                                    )
                                    
                                    $
                                    (0.01
                                    )
                                    
                                    $
                                    (0.01
                                    )
                                    
                                    $
                                    (0.01
                                    )Weighted
      average shares outstanding
                                    
                                    
                                    158,640,140
                                    
                                    
                                    
                                    124,797,340
                                    
                                    
                                    
                                    152,754,485
                                    
                                    
                                    
                                    124,385,994





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


4


SPARTA
COMMERCIAL SERVICES, INC.


CONDENCED
CONSOLIDATED STATEMENTS OF CASH FLOWS


FOR
THE SIX MONTHS ENDED OCTOBER 31, 2008 AND 2007


(UNAUDITED)




Six
      Months Ended
                                              October
      31,2008
                                            
                                            
                                            2007CASH
      FLOWS FROM OPERATING ACTIVITIES :Net
      Loss
                                            
                                            $
                                            (2,707,016
                                            )
                                            
                                            $
                                            (2,280,265
                                            )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      and Amortization
                                            
                                            
                                            109,171
                                            
                                            
                                            
                                            150,826Allowance
      for loss reserves
                                            
                                            
                                            (8,548
                                            )
                                            
                                            
                                            52,507Amortization
      of deferred revenue
                                            
                                            
                                            (6,867
                                            )
                                            
                                            
                                            (7,700
                                            )Amortization
      of deferred compensation
                                            
                                            
                                            -
                                            
                                            
                                            
                                            24,000Beneficial
      conversion discount
                                            
                                            
                                            318,282
                                            
                                            
                                            
                                            -Equity
      based compensation
                                            
                                            
                                            134,281
                                            
                                            
                                            
                                            273,151Stock
      based finance cost
                                            
                                            
                                            855,119
                                            
                                            
                                            
                                            273,008Forgiveness
      of dividend payable
                                            
                                            
                                            -
                                            
                                            
                                            
                                            224,164Change
      in fair value of penalty warrant and warrant liability
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (174
                                            )Changes
      in operating assets and liabilities:(Increase)
      decrease in:
                                            
                                            
                                            
                                            
                                            
                                            
                                            -Interest
      Receivables
                                            
                                            
                                            18,489
                                            
                                            
                                            
                                            (78,667
                                            )Accounts
      Receivable
                                            
                                            
                                            (10,060
                                            )
                                            
                                            
                                            27,137Restricted
      cash
                                            
                                            
                                            (690
                                            )
                                            
                                            
                                            (98,417
                                            )Increase
      (decrease) in:Accounts
      payable and accrued expenses
                                            
                                            
                                            (46,117
                                            )
                                            
                                            
                                            (141,436
                                            )Deferred
      revenue
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (4,374
                                            )Net
      cash used in operating activities
                                            
                                            
                                            (1,343,956
                                            )
                                            
                                            
                                            (1,586,240
                                            )CASH
      FLOWS FROM INVESTING ACTIVITIES:Net
      Proceed from motorcycles and other vehicles
                                            
                                            
                                            251,370
                                            
                                            
                                            
                                            (387,865
                                            )Net
      Proceed from RISC
                                            
                                            
                                            13,460
                                            
                                            
                                            
                                            (1,121,527
                                            )Paid
      for Purchase of AML Portfolio
                                            
                                            
                                            (80,000
                                            )
                                            
                                            
                                            -Net
      cash provided by (used in) investing activities
                                            
                                            
                                            184,830
                                            
                                            
                                            
                                            (1,509,392
                                            )CASH
      FLOWS FROM FINANCING ACTIVITIESNet
      Repayment to senior lender
                                            
                                            
                                            (338,281
                                            )
                                            
                                            
                                            1,556,639Net
      Proceeds from convertible notes
                                            
                                            
                                            1,052,500
                                            
                                            
                                            
                                            1,175,500Net
      Proceeds from other notes
                                            
                                            
                                            263,500
                                            
                                            
                                            
                                            335,000Net
      Loan proceeds from other related parties
                                            
                                            
                                            97,500
                                            
                                            
                                            
                                            20,000Net
      Proceeds from secured note
                                            
                                            
                                            100,000
                                            
                                            
                                            
                                            -Net
      cash provided by financing activities
                                            
                                            
                                            1,175,219
                                            
                                            
                                            
                                            3,087,139Net
      Increase (decrease) in cash and cash equivalents
                                            
                                            $
                                            16,093
                                            
                                            
                                            $
                                            (8,493
                                            )Unrestricted
      cash and cash equivalents, beginning of period
                                            
                                            $
                                            68,642
                                            
                                            
                                            $
                                            22,032Unrestricted
      cash and cash equivalents , end of period
                                            
                                            $
                                            84,735
                                            
                                            
                                            $
                                            13,538Cash
      paid for:Interest
                                            
                                            $
                                            156,726
                                            
                                            
                                            $
                                            207,406Income
      taxes
                                            
                                            $
                                            993
                                            
                                            
                                            $
                                            6,415Non-Cash
      Transactions:Common
      stock issued in exchange for previously incurred debt
                                            
                                            $
                                            900,000
                                            
                                            
                                            
                                            -





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, 2008


(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, 2008 and for the three and six month periods ended October 31, 2008 and 2007
have been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission, including Form 10-Q and Regulation S-K and
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,
2008 as disclosed in the Company’s 10-KSB for that year as filed with the
SEC.





The
results of operations for the three and six months ended October 31, 2008 are
not necessarily indicative of the results to be expected for any other interim
period or the full year ending April 30, 2009.





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.





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.


6


SPARTA
COMMERCIAL SERVICES, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


OCTOBER
31, 2008


(UNAUDITED)




NOTE
A - SUMMARY OF ACCOUNTING POLICIES (continued)





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





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





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





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 SFAS No. 123(R) and therefore has no unrecognized stock compensation related
liabilities or expense unvested or vested prior to 2006.





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 $0.01 for the three months ended October 31, 2008 and 2007, respectively,
and $0.01 and $0.01 for the six months ended October 31, 2008 and 2007,
respectively. At October 31, 2008 and 2007, 35,116,084 and 64,704,486 potential
shares, respectively, were excluded from the shares used to calculate diluted
earnings per share as their inclusion would reduce net loss per
share.


7


SPARTA
COMMERCIAL SERVICES, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


OCTOBER
31, 2008


(UNAUDITED)




NOTE
A - SUMMARY OF ACCOUNTING POLICIES (continued)





New Accounting
Pronouncements





In
December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” (“SFAS
No. 141(R)”), which establishes principles and requirements for how an acquirer
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, and any noncontrolling interest in an
acquiree, including the recognition and measurement of goodwill acquired in a
business combination. SFAS No. 141R is effective as of the beginning of the
first fiscal year beginning on or after December 15, 2008. Earlier adoption is
prohibited and the Company is currently evaluating the effect, if any, that the
adoption will have on its financial position results of operations or cash
flows.





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interest in
Financial Statements, an amendment of ARB No. 51” (“SFAS No. 160”), which will
change the accounting and reporting for minority interests, which will be
recharacterized as noncontrolling interests and classified as a component of
equity within the balance sheets. SFAS No. 160 is effective as of the beginning
of the first fiscal year beginning on or after December 15, 2008. Earlier
adoption is prohibited and the Company is currently evaluating the effect, if
any, that the adoption will have on its financial position results of operations
or cash flows.





In June
2007, the Accounting Standards Executive Committee issued Statement of Position
07-1, “Clarification of the Scope of the Audit and Accounting Guide Investment
Companies and Accounting by Parent Companies and Equity Method Investors for
Investments in Investment Companies” (“SOP 07-1”). SOP 07-1 provides guidance
for determining whether an entity is within the scope of the AICPA Audit and
Accounting Guide Investment Companies (the “Audit Guide”). SOP 07-1 was
originally determined to be effective for fiscal years beginning on or after
December 15, 2007, however, on February 6, 2008, FASB issued a final Staff
Position indefinitely deferring the effective date and prohibiting early
adoption of SOP 07-1 while addressing implementation issues.




In
December 2007, the FASB ratified the consensus in EITF Issue No. 07-1,
“Accounting for Collaborative Arrangements” (“EITF 07-1”). EITF 07-1 defines
collaborative arrangements and requires collaborators to present the result of
activities for which they act as the principal on a gross basis and report any
payments received from (made to) the other collaborators based on other
applicable authoritative accounting literature, and in the absence of other
applicable authoritative literature, on a reasonable, rational and consistent
accounting policy is to be elected. EITF 07-1 also provides for disclosures
regarding the nature and purpose of the arrangement, the entity’s rights and
obligations, the accounting policy for the arrangement and the income statement
classification and amounts arising from the agreement. EITF 07-1 will be
effective for fiscal years beginning after December 15, 2008, which will be the
Company’s fiscal year 2009, and will be applied as a change in accounting
principle retrospectively for all collaborative arrangements existing as of the
effective date. The Company has not yet evaluated the potential impact of
adopting EITF 07-1 on its financial position, results of operations or cash
flows.





In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities – an amendment to FASB Statement No. 133” (“SFAS No.
161”).  SFAS No. 161 is intended to improve financial standards for
derivative instruments and hedging activities by requiring enhanced disclosures
to enable investors to better understand their effects on an entity’s financial
position, financial performance, and cash flows.  Entities are
required to provide enhanced disclosures about: (a) how and why an entity uses
derivative instruments; (b) how derivative instruments and related hedged items
are accounted for under SFAS No. 133 and its related interpretations; and (c)
how derivative instruments and related hedged items affect an entity’s financial
position, financial performance and cash flows.  It is effective for
financial statements issued for fiscal years beginning after November 15, 2008,
with early adoption encouraged.  The Company is currently evaluating
the impact of SFAS No. 161, if any, will have on its financial position, results
of operations or cash flows.


8


SPARTA
COMMERCIAL SERVICES, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


OCTOBER
31, 2008


(UNAUDITED)




NOTE
A - SUMMARY OF ACCOUNTING POLICIES (continued)




In April
2008, the FASB issued FSP No. FAS 142-3, “Determination of the Useful Life of
Intangible Assets”.  This FSP amends the factors that should be
considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and
Other Intangible Assets”.  The Company is required to adopt FSP 142-3
on September 1, 2009, and earlier adoption is prohibited.  The
guidance in FSP 142-3 for determining the useful life of a recognized intangible
asset shall be applied prospectively to intangible assets acquired after
adoption, and the disclosure requirements shall be applied prospectively to all
intangible assets recognized as of, and subsequent to, adoption.  The
Company is currently evaluating the impact of FSP 142-3 on its financial
position, results of operations or cash flows.





In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (“SFAS No. 162”).  SFAS No. 162 identifies the
sources of accounting principles and the framework for selecting the principles
used in the preparation of financial statements of nongovernmental entities that
are presented in conformity with generally accepted accounting principles (the
GAAP hierarchy).  SFAS No. 162 will become effective 60 days following
the SEC’s approval of the Public Company Accounting Oversight Board amendments
to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally
Accepted Accounting Principles.”  The Company does not expect the
adoption of SFAS No. 162 will have a material effect on its financial position,
results of operations or cash flows.





In May
2008, the FASB issued FSP Accounting Principles Board (“APB”) 14-1 “Accounting
for Convertible Debt Instruments That May Be Settled in Cash upon Conversion
(Including Partial Cash Settlement)” (“FSP APB 14-1”).  FSP APB 14-1
requires the issuer of certain convertible debt instruments that may be settled
in cash (or other assets) on conversion to separately account for the liability
(debt) and equity (conversion option) components of the instrument in a manner
that reflects the issuer’s non-convertible debt borrowing rate.  FSP
APB 14-1 is effective for fiscal years beginning after December 15, 2008 on a
retroactive basis.  The Company is currently evaluating the potential
impact, if any, of the adoption of FSP APB 14-1 on its financial position,
results of operations or cash flows.





Other
recent accounting pronouncements issued by the FASB (including its Emerging
Issues Task Force), the AICPA, and the SEC did not, or are not believed by
management to, have a material impact on the Company’s present or future
financial statements.





Reclassification





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


9


SPARTA
COMMERCIAL SERVICES, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


OCTOBER
31, 2008


(UNAUDITED)




NOTE
B - MOTORCYCLES AND OTHER VEHICLES UNDER OPERATING LEASES





Motorcycles
and other vehicles under operating leases at October 31, 2008 and April 30, 2008
consist of the following:





October 31,
                        
                        April 30,2008
                        
                        2008Motorcycles
      and other vehicles
                        
                        $
                        1,193,337
                        
                        
                        $
                        1,612,962Less: accumulated
      depreciation
                        
                        
                        (267,058
                        )
                        
                        
                        (336,100
                        )Motorcycles
      and other vehicles, net of accumulated depreciation
                        
                        
                        926,279
                        
                        
                        
                        1,276,862Less: estimated reserve
      for residual values
                        
                        
                        (19,283
                        )
                        
                        
                        (25,231
                        )Motorcycles
      and other vehicles under operating leases, net
                        
                        $
                        906,996
                        
                        
                        $
                        1,251,631




Depreciation
expense for vehicles for the three and six months ended October 31, 2008 was
$43,608 and $100,212, respectively. Depreciation expense for vehicles for the
three and six months ended October 31, 2007 was $62,464 and $130,800,
respectively.





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 October 31, 2008, the
Company’s inventory of repossessed or returned vehicles valued at market was
$79,827, which will be resold.





NOTE D – RETAIL (RISC) LOAN
RECEIVABLES





RISC loan
receivables, which are carried at cost, were $4,332,096 and $4,346,315 at
October 31, 2008 and April 30, 2008, respectively, including deficiency
receivables of $96,616 and $30,697, 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 October 31,2009
                          
                          $
                          1,004,1452010
                          
                          
                          1,099,3542011
                          
                          
                          1,134,8582012
                          
                          
                          822,7612013
                          
                          
                          270,978$
                          4,332,
      096




10


SPARTA
COMMERCIAL SERVICES, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


OCTOBER
31, 2008


(UNAUDITED)




NOTE E – PROPERTY AND
EQUIPMENT





Major
classes of property and equipment at October 31, 2008 and April 30, 2008 consist
of the followings:





October 31,
                        2008
                      
                      
                      April 30,
                        2008Computer equipment,
      software and furniture
                      
                      $
                      191,247
                      
                      
                      $
                      191,247Less:
      accumulated depreciation and amortization
                      
                      
                      (138,945
                      )
                      
                      
                      (129,986
                      )Net
      property and equipment
                      
                      $
                      52,302
                      
                      
                      $
                      61,261





Depreciation
and amortization expense for property and equipment was $4,479 and $8,959 for
the three months and six months ended October 31, 2008, respectively, and
$32,939 for the year ended April 30, 2008. Depreciation and amortization expense
for the three and six months ended October 31, 2007 were $8,966 and $20,026,
respectively.





NOTE
F - 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, 2008 is
10.37%.





At
October 31, 2008, the notes payable mature as follows:





12
      Months EndedOctober
      31,
                        
                        Amount2009
                        
                        $
                        1,278,4342011
                        
                        
                        1,212,7072012
                        
                        
                        1,145,4312013
                        
                        
                        799,1022014
                        
                        
                        255,908$
                        4,691,582





Notes
payable to Senior Lender at April 30, 2008 were $5,029,864.





NOTE
G - PURCHASED PORTFOLIO AND SECURED SENIOR NOTE





On
October 31, 2008, the Company purchased certain loans secured by a portfolio of
secured motorcycle leases (“Purchased Portfolio”) for a total purchase price of
$100,000.  The Company paid $80,000 at closing and agreed to pay the
remaining $20,000 upon receipt of additional Purchase Portfolio
documentation.  Proceeds from the Purchased Portfolio start accruing
to the Company beginning November 1, 2008.





To
finance the purchase, the Company issued a $150,000 Senior Secured Note dated
October 31, 2008 (“Senior Secured Note”) in exchange for $100,000 from the
Senior Secured Note holder.  Terms of the Senior Secured Note require
the Company to make semi-monthly payments in amounts equal to all net proceeds
from Purchased Portfolio lease payments and motorcycle asset sales received
until the Company has paid $150,000 to the Senior Secured Note
holder.  The Company is obligated to pay any remainder of the Senior
Secured Note by November 1, 2009 and has granted the Senior Secured Note holder
a security interest in the Purchased Portfolio.


11


SPARTA
COMMERCIAL SERVICES, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


OCTOBER
31, 2008


(UNAUDITED)




NOTE
G - PURCHASED PORTFOLIO AND SECURED SENIOR NOTE (continued)





Once the
Company has paid $150,000 to the Senior Secured Note holder from Purchased
Portfolio proceeds, the Company is obligated to pay fifty percent of all net
proceeds from Purchased Portfolio lease payments and motorcycle asset sales
until the Company and the Senior Secured Note holder mutually agree the Purchase
Portfolio has no remaining proceeds.





As of
October 31, 2008, the Company carries the Purchased Portfolio at its $100,000
cost, which is less than its estimated market value, and carries the liability
for the Senior Secured Note at $100,000, which is net of $50,000 in deferred
financing costs that will be amortized over the estimated term of the Senior
Secured Note along with the Senior Secured Note holder’s estimated share of
Purchased Portfolio proceeds.





NOTE
H – CONVERTIBLE NOTES PAYABLE





Convertible Notes Payable
                      
                      October 31,
                        2008
                      
                      
                      April 30,
                        20086%
      Convertible Notes, due various dates from April 22, 2008 to March 31,
      2009
                      
                      $
                      2,007,859
                      
                      
                      $
                      2,625,3596.5%
      Convertible Notes, due various dates from December 12, 2008 to April 17,
      2009
                      
                      
                      400,000
                      
                      
                      
                      -9%
      Convertible Note, due December 30, 2008
                      
                      
                      40,000
                      
                      
                      
                      40,00010%
      Convertible Note, due from July19, 2008 to March 2, 2009
                      
                      
                      370,000
                      
                      
                      
                      -Total
                      
                      $
                      2,817,859
                      
                      
                      $
                      2,665,359





As of
October 31, 2008, an aggregate of $655,500 of Convertible Notes Payable were
past due.





During
the six months ended October 31, 2008, the Company: borrowed from three
accredited investors $400,000 in 10% short term unsecured notes with due dates
from July 19, 2008 to September 30, 2008 of which $50,000 has been repaid in
this period.  At the option of the note holder, the notes are
convertible into a fixed conversion price based upon a price equal to a 40%
discount from the lowest closing price of the Company’s common stock for the
five trading days immediately preceding the receipt of funds by the Company from
the purchaser of note.





In
accordance with Emerging Issues Task Force Issue 98-5, Accounting for
Convertible Securities with a Beneficial Conversion Features or Contingently
Adjustable Conversion Ratios (“EITF 98-5”), the Company recognized an embedded
beneficial conversion feature present in the notes. The Company allocated a
portion of the proceeds equal to the intrinsic value of that feature to
additional paid-in capital. The Company recognized and measured an aggregate of
$318,182 of the proceeds, which is equal to the intrinsic value of the embedded
beneficial conversion feature, to additional paid-in capital and a discount
against the notes. The debt discount attributed to the beneficial conversion
feature was expensed during the three months ended July 31, 2008.





During
the six months ended October 31, 2008, the Company sold to nine accredited
investors, six month unsecured notes in the aggregate amount of $400,000. The
notes bear 6.5 % 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 $0.03 to $0.06 per share. The
notes will mature in six months on various dates through April 17,
2009.


12


SPARTA
COMMERCIAL SERVICES, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


OCTOBER
31, 2008


(UNAUDITED)




NOTE
H – CONVERTIBLE NOTES PAYABLE (continued)





During
the six months ended October 31, 2008, the Company sold to seven accredited
investors, six month unsecured notes in the aggregate amount of $82,500. The
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 $0.05 to $0.07 per share. The
notes will mature in six months on various dates through December 25,
2008.





During
the quarter ended July 31, 2008, the Company issued 723,684 shares of
unregistered common stock, valued at $29,205, in lieu of cash as interest for
convertible notes which were converted during the quarter. Additionally, the
Company issued 16,941,072 shares of unregistered common stock, valued at
$700,000, upon conversion of $700,000 in convertible notes.





During
the six months ended October 31, 2008, the Company sold to one accredited
investor a four month unsecured note in the aggregate amount of $20,000. The
note bears 10% 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 the note at maturity, the note will be convertible into
shares of common stock at price of $0.034 per share. The note will mature in
four months on February 28, 2009.





NOTE
I - NOTES PAYABLE - OTHER




Notes Payable - Other
                  
                  October 31,
                    2008
                  
                  
                  April 30,20086% Bridge
      Loan, due August 15, 2008 and January 1, 2009
                  
                  $
                  75,000
                  
                  
                  $
                  75,0008%
      Note, due August 15, 2008
                  
                  
                  40,000
                  
                  
                  
                  40,0008%
      Demand Notes
                  
                  
                  485,000
                  
                  
                  
                  375,00010%
      Bridge Loans, due various dates from May 15, 2008 March 31,
      2009
                  
                  
                  176,000
                  
                  
                  
                  275,00010%
      Notes, due various dated from August 15, 2008 to March 31,
      2009
                  
                  
                  107,500
                  
                  
                  
                  232,50012%
      Notes due March 31, 2009
                  
                  
                  145,000
                  
                  
                  
                  150,00012%
      Bridge Notes due October 26, 2008 to January 1, 2009
                  
                  
                  162,500
                  
                  
                  
                  012.46%
      Collateralized note due October 29, 2010
                  
                  
                  220,000
                  
                  
                  
                  0Total
                  
                  $
                  1,411,000
                  
                  
                  $
                  1,147,500





As of
October 31, 2008, an aggregate amount of $162,500 of Notes Payable Other was
past due.





During
the six months ended October 31, 2008, the Company sold to one accredited
investor an unsecured demand note in the amount of $110,000. The note bears 8%
simple interest and the interest may be paid in cash or shares of the Company.
The principal and interest owing thereon will become due and payable immediately
in the event of default on repayment by the Company.





During
the six months ended October 31, 2008, the Company repaid $99,000 of 10% Bridge
notes and issued 1,634,662 shares of its restricted common stock valued at
$.0336 per share in lieu of cash for the $54,925 accrued interest
thereon.





During
the six months ended October 31, 2008, the Company sold to four accredited
investors unsecured notes in the aggregate amount of $80,000. The notes bear 10%
simple interest and the interest may be paid in cash or shares of the Company.
The principal and interest owing thereon will become due and payable immediately
in the event of default on repayment by the Company. The notes mature in two
months on various dates through October 24, 2008.


13


SPARTA
COMMERCIAL SERVICES, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


OCTOBER
31, 2008


(UNAUDITED)





NOTE
I - NOTES PAYABLE – OTHER (continued)





During
the six months ended October 31, 2008, the Company sold to one accredited
investor an unsecured note in the aggregate amount of $20,000. The note bears
10% simple interest. The principal and interest owing thereon will become due
and payable immediately in the event of default on repayment by the Company. The
note matures on February 28, 2009.





Additionally,
during the six months ended October 31, 2008, one 10% note in the amount of
$200,000, plus accrued interest thereon in the amount of $16,931.51, were
converted into 3,615,523 shares of restricted common stock. As of December 15,
2008, these shares have not been issued.





During
the six months ended October 31, 2008, the Company sold to two accredited
investors’ unsecured notes in the amount of $170,000 of which $7,500 was repaid.
The notes bear 12% simple interest. The notes mature in two months on various
dates through November 2, 2008. During the six months ended October 31, 2008,
the Company repaid $5,000 of 12% bridge notes.





During
the six months ended October 31, 2008, the Company sold to one accredited
investors a secured note in the amount of $220,000. The notes bear 12.46% simple
interest. The note matures on October 29, 2010 and is secured by a second lien
on a pool of motorcycles.





NOTE
J - LOANS PAYABLE TO RELATED PARTIES





During
the six months ended October 31, 2008, the Company borrowed $100,000 from a
Director on a demand basis without interest and repaid $2,500 to one officer. As
of October 31, 2008, aggregated loans payable to officers and Directors were
$342,260.





NOTE K – 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, 2008 and
April 30, 2008, the Company has issued and outstanding 825 and 825 shares of
Series A preferred stock issued and outstanding respectively. The Company had
160,200,075 and 130,798,657 shares of common stock issued and outstanding as of
October 31, 2008 and April 30, 2008, respectively.





Preferred Stock Series
A





On July
20, 2007, one shareholder holding 16,745 shares of Series A preferred stock
converted those shares into 10,733,974 shares of common stock and forgave
$215,253 in accumulated but unpaid dividends on the preferred shares. On January
31, 2008, three shareholders holding 2,225 shares of preferred stock converted
those shares into 1,426,230 shares of common stock. The 12,160,204 shares of
common stock issuable upon conversion of the preferred shares had not been
physically issued as of October31, 2008.





Common
Stock





During
the six months ended October 31, 2008 and the six months ended October 31, 2007,
the Company expensed $134,281 and $273,151, respectively, for non-cash charges
related to stock and option compensation expense.


14


SPARTA
COMMERCIAL SERVICES, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


OCTOBER
31, 2008


(UNAUDITED)





NOTE K – EQUITY TRANSACTIONS
(continued)





During
the six months ended October 31, 2008, the Company issued 700,000 shares of
unregistered common stock valued at $54,218 as inducements for loans which
amount was expensed as financing cost. During the six months ended October 31,
2008, the Company issued 3,402,000 shares of unregistered common stock, valued
at $267,000, as penalties for loans.  During the six months ended
October 31, 2008, the Company issued 1,634,662 shares of unregistered common
stock, valued at $54,924, in lieu of cash as interest for bridge loans. During
the sixmonths
ended October 31, 2008; the Company issued 723,684 shares of unregistered common
stock, valued at $29,205, in lieu of cash as interest for convertible notes.
During the six months ended October 31, 2008, the Company issued 16,941,072
shares of unregistered common stock, valued at $700,000, upon conversion of
$700,000 in convertible notes resulting in an increase in additional-paid-in
capital of $683,059. During the six months ended October 31, 2008, pursuant to
an agreement with an investor relations consultant, the Company issued 6,000,000
shares of restricted common stock valued at $520,000. During the six months
ended October 31, 2008, the Company agreed to issued 3,333,333 shares of
unregistered common stock, valued at $200,000, upon conversion of $200,000 of
Bridge notes and the Company agreed to issue 282,190 shares of unregistered
common stock, valued at $16,932, in lieu of cash as interest for the Bridge
notes resulting in an increase in additional-paid-in capital of
$223,316.





NOTE L– SUBSEQUENT EVENTS





During
November 2008, the Company sold to two accredited investors, six month unsecured
notes in the aggregate amount of $10,000. The notes bear 6.5 % 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 $0.02 to $0.03 per share. The notes will mature in on various dates
through May 20, 2009.





During
November 2008, the Company sold to an accredited investor, a four month
unsecured note in the aggregate amount of $25,000. The note bears 8% 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 the note
at maturity; the notes will be convertible into shares of common stock at a
price of $0.02 per share. The note matures on March 25, 2009.





During
November 2008, the Company sold to three accredited investors, four month
unsecured notes in the aggregate amount of $35,000. The notes bear 10% 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 $0.02 to $0.03 per share. The notes will mature on
various dates through March 20, 2009.





In
December 2008, the Company cancelled 200,000 shares of its common stock which
had been issued as loan penalty shares in error in October 2008 and December
2008.




In
December 2008, the Company issued 240,000 shares in connection with a 10%
$25,000 bridge loan received in November 2007, of which $17,500 has been repaid,
and issued 20,000 shares as penalty for late payment.  In December
2008, pursuant to outstanding loan agreements, the Company issued 476,000
penalty shares valued at $0.03 per share. In
December 2008, a note holder converted $127,800 of convertible notes and $6,812
accrued interest thereon into 4,000,216 shares of common stock.




15


SPARTA
COMMERCIAL SERVICES, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


OCTOBER
31, 2008


(UNAUDITED)





NOTE M - GOING CONCERN
MATTERS





The
accompanying unaudited condensed 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, 2008, the Company incurred loss of $24,933,980.
Of these losses, $2,707,016 was incurred in the six months ending October 31,
2008 and $2,257,552 in the six months ending October 31, 2007. 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
pursuing additional equity financing through discussions with investment bankers
and private investors and the US Government. There can be no assurance the
Company will be successful in its effort to secure additional equity
financing.


16


ITEM
      2.
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS





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, 2008 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-Q 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 October 31, 2008 to the Three Months Ended October 31,
2007





For the
three months ended October 31, 2008 and 2007, 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 year ending April 30
2009 and in the upcoming fiscal year.





Revenues





Revenues
totaled $301,049 during the three months ended October 31, 2008 as compared to
$297,303 during the three months ended October 31, 2007. Current period revenue
was comprised of $78,643 in lease revenue, $193,664 in interest income from RISC
loans, and $28,742 in other income. Prior period revenue was comprised of
$97,213 in lease revenue, $158,076 in interest income from RISC loans, and
$42,015 in other income.





Costs
and Expenses





General
and administrative expenses were $977,427 during the three months ended October
31, 2008, compared to $1,206,382 during the three months ended October 31, 2007,
a decrease of $228,995 or 19%. Expenses incurred during the current three month
period consisted primarily of the following expenses: Compensation and related
costs, $360,678; Accounting, audit and professional fees, $178,158; Consulting
fees, $39,375; Rent, utilities and Telecomm expenses $104,236; Travel and
entertainment, $20,561;and stock based compensation, $67,736. Expenses incurred
during the comparative three month period in 2007consisted primarily of the
following expenses: Compensation and related costs, $432,173; Accounting, audit
and professional fees, $154,188; Consulting fees, $264,455; Rent and utilities,
$71,533; Travel and entertainment, $14,401; and stock based compensation,
$86,834.





We
incurred a non-cash charge of $67,736 during the three months ended October 31,
2008 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, 2007 was $86,834.


17


Net
Loss





We
incurred a net loss before preferred dividends of $997,973 for our three months
ended October 31, 2008 as compared to $1,195,054 for the corresponding interim
period in 2007. The $197,081 or 16.5% decrease. The decrease in our net loss
before preferred dividends for our three month interim period ended October 31,
2008 was attributable primarily to a $252,297 or 19.7% decrease in operating
expenses.





We also
incurred non-cash preferred dividend expense of $1,261for our three month period
ended October 31, 2008, with an expense of $18,100 in the corresponding interim
period of 2007. 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 $999,234 for our three
month period ended October 31, 2008 as compared to $1,213,154 for the
corresponding period in 2007. The $213,919 or 17.6% decrease in net loss
attributable to common stockholders for our three month period ended October 31,
2008 was due primarily to the $252,297 or 19.7% decrease in operating expenses,
and a $58,962 or 27.5% increase in interest expense and financing costs the
decrease in preferred dividends of $16,838.





Comparison
of the Six Months Ended October 31, 2008 to the Six Months Ended October 31,
2007





For the
six months ended October 31, 2008 and 2007, 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 year ending April 30
2009 and in the upcoming fiscal year.





Revenues





Revenues
totaled $695,969 during the six months ended October 31, 2008 as compared to
$581,300 during the six months ended October 31, 2007. Current period revenue
was comprised of $168,337 in lease revenue, $397,707 in interest income from
RISC loans, $25,495 in gain on disposition of vehicles, $3,867 in Preferred
Provider Program and $100,562 in other income. Prior period revenue was
comprised of $202,342 in lease revenue, $297,028 in interest income from RISC
loans, $19,700 in private label fees and Preferred Provider Program and $62,231
in other income.





Costs
and Expenses





General
and administrative expenses were $2,341,579 during the six months ended October
31, 2008, compared to $2,303,086 during the six months ended October 31, 2007,
an increase of $38,493, or 1.6%. Expenses incurred during the current six month
period consisted primarily of the following expenses: Compensation and related
costs, $787,722; Accounting, audit and professional fees, $224,345; Consulting
fees, $104,175; Rent, utilities and Telecomm expenses $198,129; Travel and
entertainment, $31,273; and stock based compensation, $654,730. Expenses
incurred during the comparative six month period in 2007 consisted primarily of
the following expenses: Compensation and related costs, $933,486; Accounting,
audit and professional fees, $161,592; Consulting fees, $344,701; Rent and
utilities, $145,947; Travel and entertainment, $38,598; and stock based
compensation, $273,151.





We
incurred a non-cash charge of $654,730 during the six months ended October 31,
2008 related to options and shares of common stock issued for consulting fees
and services. We did not incurred a non-cash charge during the six months ended
October 31, 2007 related to options and shares of common stock issued for
consulting fees and services. For the six months ended October 31, 2008, we
incurred a non-cash charge of $327,218 related to shares of common stock issued
for financing cost and a non-cash charge of $318,182 for beneficial conversion
discount for convertible securities issued during the period,. For the six
months ended October 31, 2007, we incurred a non-cash charge of $105,133 related
to shares of common stock issued for financing cost.


18


Net
Loss





We
incurred a net loss before preferred dividends of $2,707,016 for our six months
ended October 31, 2008 as compared to $2,257,552 for the corresponding interim
period in 2007. The $449,463 or 19.9% increase in our net loss before preferred
dividends for our six month interim period ended October 31, 2008 was
attributable to a $114,668, 19.7%, increase in revenue, and a $532,489, 500%
increase in non-cash financing costs and beneficial conversion discount, and a
$34,804, 12.5% increase in interest expense.





We also
incurred non-cash preferred dividend expense of $2,522 for our six month period
ended October 31, 2008 as compared with a non-cash expense of $22,713 in the
corresponding interim period of 2007. The decrease in preferred dividend expense
was attributable to the conversion of preferred shares to common
stock.





Our net
loss attributable to common stockholders increased to $2,709,538 for our six
month period ended October 31, 2008 as compared to $2,280,265 for the
corresponding period in 2007. The $429,273 increase in net loss attributable to
common stockholders for our six month period ended October 31, 2008 was due to
the increase in net loss and the decrease in preferred dividends.





LIQUIDITY
AND CAPITAL RESOURCES





As of
October 31, 2008, we had a deficit net worth of $4,676,655. We generated a
deficit in cash flow from operations of $1,343,956 for the six months ended
October 31, 2008. This deficit is primarily attributable to our net loss from
operations of $2,707,016, partially offset by depreciation and amortization of
$109,171, other non-cash charges totaling $1,307,682 and to changes in the
balances of current assets and liabilities. Accounts payable and accrued
expenses decreased by $46,117, other receivables decreases of $18,489 and
prepaid expenses increased by $10,060.





Cash
flows provided by investing activities for the six months ended October 31, 2008
was $184.830, primarily due to the net sale of RISC contracts of $13,460 and
payments from motorcycles and vehicles of $251,370, offset by the purchase of a
portfolio of loans secured by leases for $800,000.





We met
our cash requirements during the six month period through proceeds of
convertible notes of $1,072,500, proceeds of notes payable $343,500 and loans
payable to officers $97,500 and net payments on debt financing of $338,281.
Additionally, we have received limited revenues from leasing and financing
motorcycles and other vehicles, fees from our municipal lease program, and from
our Preferred Provider Program.





We do not
anticipate incurring significant research and development expenditures, and we
do not anticipate the sale or acquisition of any significant property, plant or
equipment, during the next twelve months.  At October 31, 2008 we had
15 full time employees. If we fully implement our business plan, we anticipate
our employment base may increase by approximately 50% during the next twelve
months. As we continue to expand, we will incur additional cost for personnel.
This projected increase in personnel is dependent upon our generating revenues
and obtaining sources of financing. There is no guarantee that we will be
successful in raising the funds required or generating revenues sufficient to
fund the projected increase in the number of employees.





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 $2,000,000 in additional funds
to fully implement our business plan during the next twelve months and for our
general operating expenses. As of October 31, 2008, 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.


19


The
Company obtained a senior credit facility in July 2005, which was subsequently
renewed.  In August 2008, reflective of the current restrictive credit
environment, this lender significantly tightened its lending criteria which, in
turn, has caused us to tighten our credit criteria, thereby significantly
limiting our ability to purchase RISC Contracts and purchase vehicles for lease.
In August 2008, we signed a commitment letter with a European based bank for a
one year $25 million renewable senior secured credit facility, which under
certain conditions can be extended for a second year. The closing of this
facility is subject to due diligence, documentation and certain other terms. If
we successfully complete the conditions of this bank, we anticipate the closing
of this facility will occur early in our third fiscal quarter.  We
have an agreement with a domestic bank for the leasing of vehicles and equipment
by state, political subdivisions thereof or other governmental or 501(c) (3),
not for profit entities. Under this agreement, we receive certain fees for
finding, negotiating and documenting lease transactions purchased by this bank.
This agreement is exclusive as to motorcycles and other powersports equipment
and non-exclusive for other equipment and vehicles. A number of these
transactions are solicited from our dealer base. In October 2008, we entered
into a Vendor Program Agreement with a private funding source which will provide
commercial, non-governmental, non-consumer leases, rentals and other customized
funding arrangements for the acquisition of powersports vehicles to customers
referred to this funding source by the Company. Under this agreement, we receive
certain fees for finding, negotiating and documenting lease transactions
purchased by this funding source. We are continuously seeking additional credit
facilities and long term debt financing. Any debt financing, if available, would
likely 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.





GOING
CONCERN ISSUES





The
independent auditors report on our April 30, 2008 and 2007 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.





In order
to improve the Company’s liquidity, the Company’s management is actively
pursuing 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 facilities from institutional lenders;
seeking institutional investors for debt or equity investments in our Company;
short term interim debt financing: and private placements of debt and equity
securities with accredited investors.





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.


20


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.





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.





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.





Our
future performance and success is dependent 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.





The
present officers and directors own approximately 50% 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.





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.


21


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.





CRITICAL
ACCOUNTING POLICIES





The
preparation of our 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 financial statements, we
believe the following critical accounting policies 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.


22


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





On
December 16, 2004, the Financial Accounting Standards Board (FASB) issued FASB
Statement No. 123(R) (revised 2004), “Share-Based Payment” which is a revision
of FASB Statement No. 123, “Accounting for Stock-Based Compensation”. SFAS
123(R) 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 SFAS 123(R) is similar to the approach described in
SFAS 123. However, SFAS 123(R) 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 SFAS 123(R) in the third quarter of
fiscal year 2006.





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. During the
quarter ended October 31, 2008 and July 31, 2008, the Company expensed $13,519
and $12,685 respectively as website development costs.





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,
2008.


23


ITEM
3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





Not
applicable.




ITEM
4.   CONTROLS AND PROCEDURES





Our
management, with the participation of our Chief Executive Officer and our
Principal Financial Officer, has evaluated the effectiveness of our disclosure
controls and procedures (as such term is defined in Rules 13a-15(e) and
15d-15(e) under 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.





Management
does not expect that our disclosure controls and procedures or our internal
control over financial reporting will prevent or detect all error and fraud. Any
control system, no matter how well designed and operated, is based upon certain
assumptions and can provide only reasonable, not absolute, assurance that its
objectives will be met. Further, no evaluation of controls can provide absolute
assurance that misstatements due to error or fraud will not occur or that all
control issues and instances of fraud, if any, within the Company have been
detected.




24


PART
II. OTHER INFORMATION





ITEM
1.   LEGAL PROCEEDINGS





Not
applicable.





ITEM
1A.   RISK FACTORS





Not
applicable.





ITEM 2.   UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS.





In August
2008, 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 seven
accredited investors an aggregate of $80,000 in short term, unsecured 10% notes
due October 2008. As inducements for these loans, the Company agreed to issue
one share of unregistered common stock for each dollar lent.  In the
event of default, the interest rate is to increase to 20%. In the event of
default, the holders of notes for $50,000 are entitled to an additional 0.2
share of unregistered common stock, for each month the default is not cured, for
each dollar lent, and the holders of notes for $30,000 are entitled to one
additional share of unregistered common stock, on a one-time basis, for each
dollar lent.





During
the three months ended October 31, 2008, 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 sold to one accredited investor a short term, sixty
day unsecured 12% note in the amount of $70,000.  As an inducement for
the loan, the Company issued 70,000 shares of its restricted common stock to the
lender. The principal and interest owing thereon will become due and payable
immediately in the event of default on repayment by the Company. In the event of
default, the interest rate shall be increased to 25%, and the Company shall
issue to the lender 56,000 shares of its common stock for each month the note
remains unpaid. Additionally, in the event of default, the note shall be
collateralized by a subordinated security interest in all of the Company’s
assets.





During
the three months ended October 31, 2008, 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 three accredited investors six month
unsecured notes in the aggregate amount of $40,000.  The notes bear
6.5% 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 a price equal to a 40% discount from the lowest closing price of
the Company’s common stock for the five trading days immediately preceding the
receipt of funds by the Company from the purchaser of notes. The notes will
mature on various dates through April 17, 2009.





During
the three month period ended October 31, 2008, in transactions deemed to be
exempt from registration under the Securities Act in reliance on Section 4(2) of
the Securities Act, the Company borrowed from one accredited investor a four
month unsecured note in the amount of $20,000. The note bears 10% 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 the note
at maturity, the note will be convertible into shares of common stock at a price
of $0.034 per share. The note will mature on March 2, 2009.





In August
2008, 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
sold to an accredited investor a $200,000 11% note, secured by equipment, due
August 2010.  In October 2008, the note was amended to a $220,000
12.462% note due October 29, 2010.  Beginning with November 29, 2008,
the Company is to make monthly principal and interest payments of $10,404. In
connection with the amendment, the Company agreed to issue the lender 250,000
shares of common stock.


25


During
November 2008, 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 two accredited investors, six month unsecured notes in the aggregate
amount of $10,000. The notes bear 6.5 % 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 $0.02 to
$0.03 per share. The notes will mature on various dates through May 20,
2009.




During
November 2008, 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
sold to an accredited investor, a four month unsecured note in the aggregate
amount of $25,000. The note bears 8% 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 the note at maturity; the note will
be convertible into shares of common stock at a price of $0.02 per share. The
note matures on March 25, 2009.





During
November 2008, 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 three accredited investors, four month unsecured notes in the aggregate
amount of $35,000. The notes bear 10% 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 $0.02 to
$0.03 per share. The notes will mature on various dates through March 20,
2009.





During
November 2008, 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
sold to one accredited investor, a 10% $25,000 bridge loan, of which $17,500 has
been repaid, and in December 2008, the Company issued 240,000 shares in
consideration of the loan and 20,000 shares as penalty for late
payment.





During
December 2008, 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 three accredited investors, four month unsecured notes in the aggregate
amount of $80,000. The notes bear 8% 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 the note at maturity; the notes will
be convertible into shares of common stock at a price of $0.02 per share. The
notes will mature on various dates through April 5, 2009.





ITEM
3.  DEFAULTS UPON SENIOR SECURITIES





Not
applicable.





ITEM
4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS





Not
applicable.





ITEM
5.  OTHER INFORMATION





In
October 2008, 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
sold to an accredited investor a $150,000 note, secured by equipment, due
November 1, 2009.  The Company is to make biweekly payments from
proceeds from collection of certain receivables, credited against the amount
due.  Additionally, after full repayment, the Company is to pay the
lender 50% of remaining proceeds from collection of such
receivables.


26


ITEM 6.   EXHIBITS.





The
following exhibits are filed with this report:





Exhibit
      No.
                      
                      Description11
                      
                      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-Q.31.1*
                      
                      Certification
      of Chief Executive Officer pursuant to Securities Exchange Act Rule
      13a-14(a)/15d-14(a)31.2*
                      
                      Certification
      of Principal Financial Officer pursuant to Securities Exchange Act Rule
      13a-14(a)/15d-14(a)32.1*
                      
                      Certification
      of Chief Executive Officer pursuant to 18 U.S.C. Section
    135032.2*
                      
                      Certification
      of Principal Financial Officer pursuant to 18 U.S.C. Section
      1350





*
      Filed herewith




27


SIGNATURES





Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.





SPARTA
      COMMERCIAL SERVICES, INC.Date:  December
      22, 2008
              By:
              /s/ Anthony L. HavensAnthony
      L. HavensChief
      Executive OfficerDate:  December
      22, 2008
              By:
              /s/ Anthony W. AdlerAnthony
      W. AdlerPrincipal
      Financial Officer




28