UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





**FORM
      10-QSB**





(Mark
      One)





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





For
      the
      quarterly period ended January 31, 2007





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





For
      the
      transition period from ________ to ___________.





Commission
      file number: 0-9483





**SPARTA
      COMMERCIAL SERVICES, INC.**


(Exact
      name of registrant as specified in its charter)





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




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


(Address
      of principal executive offices)





(212)
      239-2666


(Issuer's
      telephone number)





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





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act) Yes o No x





As
      of
      March 17, 2007, we had 123,216,157 shares of common stock issued and
      outstanding.





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





SPARTA
      COMMERCIAL SERVICES, INC.


FORM
      10-QSB


FOR
      THE
      QUARTER ENDED JANUARY 31, 2007





TABLE
      OF
      CONTENTS





PagePART
                I.
            FINANCIAL
                INFORMATIONItem
                1.
            Financial
                Statements (Unaudited)
            3Condensed
                Consolidated Balance Sheets as of January 31, 2007 and April 30,
                2006
            3Condensed
                Consolidated Statements of Operations for the Three and Nine Months
                Ended
                January 31, 2007 and 2006
            4Condensed
                Consolidated Statements of Cash Flows for the Nine Months Ended January
                31, 2007 and 2006
            5Notes
                to Unaudited Condensed Consolidated Financial Statements
            6Item
                2.
            Management's
                Discussion and Analysis and Plan of Operation
            16Item
                3.
            Controls
                and Procedures
            25PART
                II.
            OTHER
                INFORMATIONItem
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            26Item
                6.
            Exhibits
            27Signatures
            28




2


PART
        I.
        FINANCIAL INFORMATION
  ITEM
        1.
        FINANCIAL STATEMENTS
  SPARTA
        COMMERCIAL SERVICES, INC.
 CONDENSED
        CONSOLIDATED BALANCE SHEETS
  **January
                  31,**
              
              **April
                  30,****2007**
              
              **2006****ASSETS**
              
              (Unaudited)**Current
                  assets:**Cash
                  and cash equivalents
              
              $
              24,135
              
              $
              856,382Lease
                  payments receivable, current, net ofreserve
                  of $18,042 and $5,090, respectively. (Note D)
              
              
              588,231
              
              
              206,986Loan
                  proceeds receivable
              
              
              -
              
              
              389,998Prepaid
                  expenses and other current assets
              
              
              12,228
              
              
              56,189Inventory
                  (Note C)
              
              
              71,819
              
              
              -**Total
                  current assets**
              
              
              696,413
              
              
              1,509,555Motorcycles
                  and other vehicles under operating leases, net ofaccumulated
                  depreciation of $292,146 and $75,873, respectively andloss
                  reserve of $46,963 and $16,409, respectively. (Note B)
              
              
              1,266,221
              
              
              667,286Property
                  and equipment, net of accumulated depreciation andamortization
                  of $85,837 and $53,249, respectively
              
              
              103,690
              
              
              121,544Lease
                  and Retail installment sale contract receivables, net of current
                  portionand
                  loss reserve of $57,623 and 14,653, respectively. (Note D)
              
              
              1,879,852
              
              
              595,895Restricted
                  cash
              
              
              235,377
              
              
              112,503Deposits
              
              
              50,817
              
              
              48,967**Total
                  assets**
              
              $
              4,232,370
              
              $
              3,055,750**LIABILITIES
                  AND (DEFICIENCY IN) STOCKHOLDERS' EQUITY****Current
                  liabilities:**Accounts
                  payable and accrued expenses
              
              $
              1,037,343
              
              $
              424,692Accrued
                  equity based compensation
              
              
              25,020
              
              
              333,600Accrued
                  equity based penalties
              
              
              2,375
              
              
              47,468Notes
                  payable - Senior lender (Note E)
              
              
              661,280
              
              
              358,549Notes
                  payable - Other (Note F)
              
              
              800,259
              
              
              -Loans
                  payable - related parties (Note G)
              
              
              157,260
              
              
              -Deferred
                  revenue
              
              
              733
              
              
              -**Total
                  current liabilities**
              
              
              2,684,270
              
              
              1,164,309Deferred
                  revenue
              
              
              686,685
              
              
              186,245Notes
                  payable - Senior lender, long term portion (Note E)
              
              
              1,506,038
              
              
              330,799Warrant
                  liability
              
              
              -
              
              
              834,924**Total
                  liabilities**
              
              
              4,876,993
              
              
              2,516,277**(Deficiency
                  in) Stockholders' equity: (Note H)**Preferred
                  stock, $0.001 par value; 10,000,000 shares authorized of which
                  35,850
                  shareshave
                  been designated as Series A convertible preferred stock, with a
                  stated
                  valueof
                  $100 per share, 19,795 and 19,795 shares issued and outstanding,
                  as of
                  January 31, 2007 and April 30, 2006, respectively
              
              
              1,979,500
              
              
              1,979,500Common
                  stock, $0.001 par value; 340,000,000 shares authorized, 123,216,157
                  and114,180,301
                  shares issued and outstanding, as of January 31, 2007 and April
                  30, 2006,
                  respectively
              
              
              123,216
              
              
              114,180Common
                  stock to be issued, 0 and 5,838,302 shares, as of January 31, 2007
                  and
                  April 30, 2006, respectively.
              
              
              -
              
              
              5,838Common
                  stock subscribed
              
              
              -
              
              
              330,000Additional
                  paid-in capital
              
              
              14,530,832
              
              
              12,553,884Deferred
                  compensation
              
              
              (48,000
              )
              
              (293,500
              )Accumulated
                  deficit
              
              
              (17,230,171
              )
              
              (14,150,429
              )**Total
                  (Deficiency in) Stockholders' equity**
              
              
              (644,623
              )
              
              539,473**Total
                  liabilities and (deficiency in) stockholders'
                  equity**
              
              $
              4,232,370
              
              $
              3,055,750




The
        accompanying notes are an integral part of these
 unaudited
        condensed consolidated financial statements.
 3


SPARTA
        COMMERCIAL SERVICES, INC.
 CONDENSED
        CONSOLIDATED STATEMENTS OF OPERATIONS
 FOR
        THE
        THREE AND NINE MONTHS ENDED JANUARY 31, 2007 AND 2006
 (UNAUDITED)
  **For
                  The Three Months Ended**
              
              **For
                  The Nine Months Ended****January
                  31,**
              
              **January
                  31,****2007**
              
              **2006**
              
              **2007**
              
              **2006****Revenue**
              
              $
              214,642
              
              $
              43,008
              
              $
              625,839
              
              $
              90,629**Operating
                  expenses:**General
                  and administrative
              
              
              913,876
              
              
              2,322,057
              
              
              3,405,213
              
              
              3,819,526Depreciation
                  and amortization
              
              
              93,693
              
              
              22,157
              
              
              250,303
              
              
              58,044**Total
                  operating expenses**
              
              
              1,007,569
              
              
              2,344,214
              
              
              3,655,516
              
              
              3,877,570**Loss
                  from operations**
              
              
              (792,927
              )
              
              (2,301,206
              )
              
              (3,029,677
              )
              
              (3,786,941
              )**Other
                  expense:**Interest
                  expense and financing cost, net
              
              
              (139,649
              )
              
              (1,483,522
              )
              
              (259,917
              )
              
              (3,066,736
              )Change
                  in value of warrant liabilities
              
              
              189
              
              
              126,177
              
              
              299,663
              
              
              126,177Loss
                  on sale of asset
              
              
              -
              
              
              -
              
              
              -
              
              
              (6,500
              )**Net
                  loss**
              
              
              (932,387
              )
              
              (3,658,551
              )
              
              (2,989,931
              )
              
              (6,734,000
              )**Preferred
                  dividend**
              
              
              29,937
              
              
              29,191
              
              
              89,810
              
              
              1,886,683**Net
                  loss attributed to common stockholders**
              
              $
              (962,324
              )
              $
              (3,687,742
              )
              $
              (3,079,741
              )
              $
              (8,620,683
              )**Basic
                  and diluted loss per share**
              
              $
              (0.01
              )
              $
              (0.04
              )
              $
              (0.02
              )
              $
              (0.08
              )**Basic
                  and diluted loss per share attributed to****common
                  stockholders**
              
              $
              (0.01
              )
              $
              (0.04
              )
              $
              (0.03
              )
              $
              (0.10
              )**Weighted
                  average shares outstanding**
              
              
              123,213,646
              
              
              95,648,989
              
              
              121,971,228
              
              
              89,586,901
  The
          accompanying notes are an integral part of these
 unaudited
          condensed consolidated financial statements.
 4
  SPARTA
        COMMERCIAL SERVICES, INC.
 CONDENSED
        CONSOLIDATED STATEMENTS OF CASH FLOWS
 FOR
        THE
        NINE MONTHS ENDED JANUARY 31, 2007 AND 2006
 (UNAUDITED)
 **Nine
                  Months Ended****January
                  31,****2007**
              
              **2006****CASH
                  FLOWS FROM OPERATING ACTIVITIES:**Net
                  loss
              
              $
              (2,989,931
              )
              $
              (6,734,000
              )Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:Depreciation
                  and amortization
              
              
              250,303
              
              
              58,045Allowance
                  for loss reserve
              
              
              86,861
              
              
              -Amortization
                  of deferred revenue
              
              
              (9,167
              )
              
              (9,900
              )Amortization
                  of deferred compensation
              
              
              301,500
              
              
              240,252Equity
                  based compensation
              
              
              376,744
              
              
              85,228Stock
                  based finance cost
              
              
              54,948
              
              
              973,607Change
                  in fair value of penalty warrant and warrant liability
              
              
              (299,663
              )
              
              (126,177
              )Loss
                  on sale of assets
              
              
              -
              
              
              6,500Changes
                  in operating assets and liabilities:(Increase)
                  decrease in:Lease
                  payments receivable
              
              
              (1,792,942
              )
              
              (31,499
              )Prepaid
                  expenses and other assets
              
              
              43,961
              
              
              (73,424
              )Loan
                  proceeds receivable
              
              
              389,998
              
              
              -Restricted
                  cash
              
              
              (122,874
              )
              
              -Deposits
              
              
              (1,850
              )
              
              (110,585
              )Increase
                  (decrease) in:Accounts
                  payable and accrued expenses
              
              
              684,645
              
              
              1,418,030Accrued
                  equity penalties
              
              
              -
              
              
              2,040,000Deferred
                  revenue
              
              
              510,340
              
              
              91,860Accrued
                  registration penalty
              
              
              (13,285
              )
              
              —Net
                  cash used in operating activities
              
              
              (2,530,412
              )
              
              (2,172,063
              )**CASH
                  FLOWS FROM INVESTING ACTIVITIES:**Proceeds
                  from sale of asset
              
              
              -
              
              
              25,000Cost
                  of asset sold
              
              
              -
              
              
              (31,500
              )Payments
                  for motorcycles and other vehicles
              
              
              (847,590
              )
              
              (200,524
              )Investment
                  in leases
              
              
              -
              
              
              (353,562
              )Purchases
                  of property and equipment
              
              
              (14,734
              )
              
              (32,390
              )Net
                  cash used by investing activities
              
              
              (862,324
              )
              
              (592,976
              )**CASH
                  FLOWS FROM FINANCING ACTIVITIES:**Proceeds
                  from sale of preferred stock, net
              
              
              -
              
              
              1,592,517Proceeds
                  from sale of common stock, net
              
              
              -
              
              
              1,726,980Common
                  stock subscription
              
              
              -
              
              
              330,000Repayment
                  of affiliate advances
              
              
              -
              
              
              (25,000
              )Proceeds
                  from notes from banks
              
              
              1,918,605
              
              
              372,675Payments
                  on notes from banks
              
              
              (440,635
              )
              
              (357,244
              )Proceeds
                  from other notes
              
              
              800,259
              
              
              -Loan
                  proceeds from other related parties
              
              
              157,260
              
              
              -Exercise
                  of warrants
              
              
              125,000
              
              
              -Payments
                  for fractional shares
              
              
              -
              
              
              (16
              )Net
                  cash provided in financing activities
              
              
              2,560,489
              
              
              3,639,912**Net
                  (decrease) increase in cash**
              
              
              (832,247
              )
              
              874,873**Cash
                  and cash equivalents, beginning of period**
              
              $
              856,382
              
              $
              108,365**Cash
                  and cash equivalents, end of period**
              
              $
              24,135
              
              $
              983,238**Cash
                  paid for:**Interest
              
              $
              129,487
              
              $
              15,788


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
 JANUARY
        31, 2007
 (UNAUDITED)


NOTE
      A -
      SUMMARY OF ACCOUNTING POLICIES





A
      summary
      of the significant accounting policies applied in the preparation of the
      accompanying financial statements follows.





Basis
      of
      Presentation





The
      accompanying unaudited condensed consolidated financial statements as of January
      31, 2007 and for the three and nine month periods ended January 31, 2007 and
      2006 have been prepared by the Company pursuant to the rules and regulations
      of
      the Securities and Exchange Commission, including Form 10-QSB and Regulation
      S-B. The information furnished herein reflects all adjustments (consisting
      of
      normal recurring accruals and adjustments), which are, in the opinion of
      management, necessary to fairly present the operating results for the respective
      periods. Certain information and footnote disclosures normally present in annual
      financial statements prepared in accordance with accounting principles generally
      accepted in the United States of America have been omitted pursuant to such
      rules and regulations. The Company believes that the disclosures provided are
      adequate to make the information presented not misleading. These financial
      statements should be read in conjunction with the audited financial statements
      and explanatory notes for the year ended April 30, 2006 as disclosed in the
      Company's 10-KSB for that year as filed with the SEC.





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





Estimates





The
      preparation of the financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect certain reported amounts and disclosures. Accordingly, actual results
      could differ from those estimates.





Revenue
      Recognition





The
      Company originates leases on new and used motorcycles and other powersports
      vehicles from motorcycle dealers throughout the United States. The Company's
      leases are accounted for as either operating leases or direct financing leases.
      At the inception of operating leases, no lease revenue is recognized and the
      leased motorcycles, together with the initial direct costs of originating the
      lease, which are capitalized, appear on the balance sheet as "motorcycles under
      operating leases-net". The capitalized cost of each motorcycle is depreciated
      over the lease term, on a straight-line basis, down to the Company's original
      estimate of the projected value of the motorcycle at the end of the scheduled
      lease term (the "Residual"). Monthly lease payments are recognized as rental
      income. Direct financing leases are recorded at the gross amount of the lease
      receivable, and unearned income at lease inception is amortized over the lease
      term.





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





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





The
      Company charges fees to manufacturers and other customers related to creating
      a
      private label version of the Company's financing program including web access,
      processing credit applications, consumer contracts and other elated documents
      and processes. Fees received are amortized and booked as income over the length
      of the contract. At January 31, 2007, the Company had recorded deferred revenue
      related to these contracts of $733.





6
 
 SPARTA
          COMMERCIAL SERVICES, INC.
 NOTES
            TO
            CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 JANUARY
            31, 2007
 (UNAUDITED)


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





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





Three
              Months
                Ended
            
            Nine
              Months
                EndedJanuary
                31, 2006Net
                Loss - as reported
            
            $
            (3,658,551
            )
            $
            (6,734,000
            )*Add:*Total stock based employee compensation expense as reported
                under
                intrinsic value method (APB No. 25)
            
            
            —
            
            
            —*Deduct:*Total stock based employee compensation expense as reported
                under
                fair value based method (SFAS No. 123)
            
            
            --
            
            
            (24,710
            )$
            (3,658,551
            )
            $
            (6,758,710
            )Net
                loss attributable to common stockholders- Pro forma
            
            $
            (3,687,742
            )
            $
            (8,620,683
            )Basic(and
                assuming dilution) loss per share-as reported
            
            $
            (0.04
            )
            $
            (0.08
            )Basic(and
                assuming dilution) loss per share - Pro forma
            
            $
            (0.04
            )
            $
            (0.08
            )





The
      fair
      value for stock awards was estimated at the date of grant using the
      Black-Scholes option valuation model with the following weighted average
      assumptions for the nine months ended January 31, 2006:





2006Significant
                assumptions (weighted-average):Risk-free
                interest rate at grant date
            
            
            3
            %Expected
                stock price volatility
            
            
            60
            %Expected
                dividend payout
            
            
            -Expected
                option life (in years)
            
            
            5





The
      expected term of the options represents the estimated period of time until
      exercise and is based on historical experience of similar awards, giving
      consideration to the contractual terms, vesting schedules and expectations
      of
      future employee behavior. For 2006 and prior years, expected stock price
      volatility is based on the historical volatility of the Company’s stock for the
      related vesting periods. Prior to the adoption of SFAS 123R, expected stock
      price volatility was estimated using only historical volatility. The risk-free
      interest rate is based on the implied yield available on U.S. Treasury constant
      maturity securities with an equivalent remaining term. The Company has not
      paid
      dividends in the past and does not plan to pay any dividends in the near
      future.





The
      Black-Scholes option valuation model was developed for use in estimating the
      fair value of traded options, which have no vesting restrictions and are fully
      transferable. In addition, option valuation models require the input of highly
      subjective assumptions, particularly for the expected term and expected stock
      price volatility. The Company’s employee stock options have characteristics
      significantly different from those of traded options, and changes in the
      subjective input assumptions can materially affect the fair value estimate.
      Because Company stock options do not trade on a secondary exchange, employees
      do
      not derive a benefit from holding stock options unless there is an increase,
      above the grant price, in the market price of the Company’s stock. Such an
      increase in stock price would benefit all shareholders commensurately.





7
 
 SPARTA
          COMMERCIAL SERVICES, INC.
 NOTES
            TO
            CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 JANUARY
            31, 2007
 (UNAUDITED)


Net
      Loss
      Per Share





The
      Company uses Statement of Financial Accounting Standards (SFAS) No. 128,
      "Earnings Per Share" for calculating the basic and diluted loss per share.
      The
      Company computes basic loss per share by dividing net loss and net loss
      attributable to common shareholders by the weighted average number of common
      shares outstanding. Diluted loss per share is computed similar to basic loss
      per
      share except that the denominator is increased to include the number of
      additional common shares that would have been outstanding if the potential
      shares had been issued and if the additional shares were dilutive. Common
      equivalent shares are excluded from the computation of net loss per share if
      their effect is anti-dilutive.





Per
      share
      basic and diluted net loss attributable to common stockholders amounted to
      $0.01
      and $0.04 for the three months ended January 31, 2007 and 2006, respectively,
      and $0.03 and $0.10 for the nine months ended January 31, 2007 and 2006,
      respectively. At January 31, 2007 and 2006, 31,028,051 and 29,685,131 potential
      shares, respectively, were excluded from the shares used to calculate diluted
      earnings per share as their inclusion would reduce net loss per
      share.





New
      Accounting Pronouncements





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities - Including an amendment of FASB
      Statement No. 115,” which permits entities to measure many financial instruments
      and certain other items at fair value. The objective is to improve financial
      reporting by providing entities with the opportunity to mitigate volatility
      in
      reporting earnings caused by measuring related assets and liabilities
      differently without having to apply complex hedge accounting provisions. This
      Statement is expected to expand the use of fair value measurement, which is
      consistent with the Board’s long-term measurement objectives for accounting for
      financial instruments. This Statement is effective as of the beginning of the
      Company’s first fiscal year that begins after November 15, 2007.





In
      September 2006, the FAS issued SFAS No. 158, Employers’ Accounting for Defined
      Benefit Pension and Other Postretirement Plans, which requires employers to
      recognize the over-funded or under-funded status of a defined benefit
      postretirement plan (other than a multiemployer plan) as an asset or liability
      in its statement of financial position and to recognize changes in that funded
      status in the year in which the changes occur through comprehensive income
      of a
      business entity. The Company does not believe that the pronouncement will have
      a
      material affect on its financial statements as it does not participate in
      defined benefit pension plans.





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





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





8
 
 SPARTA
          COMMERCIAL SERVICES, INC.
 NOTES
            TO
            CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 JANUARY
            31, 2007
 (UNAUDITED)


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





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





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





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





On
      December 21, 2006, the Financial Accounting Standards Board ("FASB") issued
      FASB
      Staff Position (FSP) Emerging Issues Task Force ("EITF") 00-19-2, "Accounting
      for Registration Payment Arrangements," which requires an issuer to account
      for
      a contingent obligation to transfer consideration under a registration payment
      arrangement in accordance with FASB Statement No. 5, Accounting for
      Contingencies and FASB Interpretation 14, Reasonable Estimation of the Amount
      of
      Loss. Registration payment arrangements are frequently entered into in
      connection with issuance of unregistered financial instruments, such as equity
      shares or warrants. A registration payment arrangement contingently obligates
      the issuer to make future payments or otherwise transfer consideration to
      another party if the issuer fails to file a registration statement with the
      SEC
      for the resale of specified financial instruments or fails to have the
      registration statement declared effective within a specific period. The FSP
      requires issuers to make certain disclosures for each registration payment
      arrangement or group of similar arrangements. The FSP is effective immediately
      for registration payment arrangements and financial instruments entered into
      or
      modified after the FSP's issuance date. For previously issued registration
      payment arrangements and financial instruments subject to those arrangements,
      the FSP is effective for financial statements issued for fiscal years beginning
      after December 15, 2006. We do not expect the adoption of this FSP to have
      a
      significant impact on our financial condition or results of
      operations.





9
 
 SPARTA
          COMMERCIAL SERVICES, INC.
 NOTES
            TO
            CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 JANUARY
            31, 2007
 (UNAUDITED)


NOTE
      B -
      MOTORCYCLES AND OTHER VEHICLES UNDER OPERATING LEASES





Motorcycles
      and other vehicles under operating leases at January 31, 2007 and April 30,
      2006
      consist of the following:




January
                31,
              2007
            
            April
                30,
              2006Motorcycles
                and other vehicles
            
            $
            1,605,330
            
            $
            759,568*Less:*accumulated depreciation
            
            
            (292,146
            )
            
            (75,873
            )Motorcycles
                and other vehicles, net of accumulated depreciation
            
            
            1,313,184
            
            
            683,695*Less:*estimated reserve for residual values
            
            
            (46,963
            )
            
            (16,409
            )Motorcycles
                and other vehicles under operating leases, net
            
            $
            1,266,221
            
            $
            667,286




Depreciation
      expense for vehicles for the three and nine months ended January 31, 2007 was
      $82,693 and $217,715, respectively, depreciation expense for property and
      equipment for the three and nine months ended January 31, 2007 was $10,999
      and
      32,588, respectively. Depreciation expense for vehicles for the three and nine
      months ended January 31, 2006 was $14,836 and $32,436, respectively,
      depreciation expense for property and equipment for the three and nine months
      ended January 31, 2006 was $9,550 and $25,608, 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 January 31, 2007, the
      Company had repossessed Vehicles of value $71,819, which will be
      resold.





NOTE
      D -
      RETAIL INSTALLMENT RECEIVABLES





Retail
      installment sale receivables, which are carried at cost, were $2,468,083 and
      $802,881 at January 31, 2007 and April 30,
      2006 ,
      respectively. The following is a schedule by years of future payments related
      to
      these receivables. Future payments include amortization of cost as well as
      a
      profit margin. Certain of the assets are pledged as collateral for the note
      described in Note E.





12
                Months Ended
              January
                31,
            
            Amount2008
            
            $
            771,1422009
            
            
            761,4672010
            
            
            722,0372011
            
            
            670,0822012
            
            
            305,7053,230,433Less:
                interest portion
            
            
            (686,685
            )2,543,748Less:
                allowance for doubtful receivables
            
            
            (75,665
            )2,468,083Less:
                current receivables
            
            
            (588,231
            )$
            1,879,852





10


SPARTA
        COMMERCIAL SERVICES, INC.
 NOTES
          TO
          CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 JANUARY
          31, 2007
 (UNAUDITED)





NOTE
      E -
      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 January 31, 2007 is
      10.293%.





At
      January 31, 2007, the notes payable mature as follows:




12
                Months EndedJanuary
                31,
            
            Amount2008
            
            $
            661,2802009
            
            
            564,0272010
            
            
            335,5432011
            
            
            354,2282012
            
            
            252,2402,167,318Less:
                current payable
            
            
            (661,280
            )$
            1,506,038





NOTE
      F -
      NOTES PAYABLE OTHERS





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





The
      maturity dates of the notes were subsequently extended to various dates between
      December 5, 2006 to December 30, 2006, with simple interest rate of 10%, and
      Additional Equity in the aggregate amount of 165,000 restricted shares of common
      stock to be issued. Thereafter, the Company is in default on repayment of these
      notes and is now subject to 20% interest rate and the “Additional Equity” equal
      to 50% increased shares for each month or portion thereof, as penalty, until
      such default has not been cured. As of January 31, 2007, the Company is obliged
      to issue 517,742 kicker, additional kicker and default shares valued at $73,446
      to such creditors.





*b.*
            During
                three months ended January 31, 2007, the Company sold to eight accredited
                investors six months unsecured notes in the aggregate amount of $525,259.
                All notes bears 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 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. All notes will mature in six
                months on
                various dates through July 30,
                2007.





11
 
 SPARTA
          COMMERCIAL SERVICES, INC.
 NOTES
            TO
            CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 JANUARY
            31, 2007
 (UNAUDITED)


NOTE
      G -
      LOANS PAYABLE TO RELATED PARTIES





During
      nine months ended January 31, 2007, the Company borrowed from a Director and
      officer $135,000 and $8,500, respectively on a demand basis without interest.
      The Company also owes $13,760 to another Director and Officer an interest free
      demand loan received on August 24, 2006. As of January 31, 2007, aggregated
      loans payable to officers were $157,260. These loans are classified as current
      on the Company’s balance sheet.





At
      January 31, 2007, included in accounts payable, is $9,460 due to American
      motorcycle Leasing Corp., a company controlled by the Company's Chief Executive
      Officer and a director, for the purchase of motorcycles.





NOTE
      H -
      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 January 31, 2007 and
      April 30, 2006, the Company has 19,795 shares of preferred stock issued and
      outstanding for each period. The Company has 123,216,157 and 114,180,301 shares
      of common stock issued and outstanding as of January 31, 2007 and April 30,
      2006, respectively.





Common
      Stock





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





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





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





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





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





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





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





During
      the nine months ended January 31, 2007, the Company issued 250,000 shares of
      common stock, valued at $48,500, as additional costs related to loans received
      by the Company. This amount was charged to financing cost during the nine months
      ended January 31, 2007.





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





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





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





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





12
 
 SPARTA
          COMMERCIAL SERVICES, INC.
 NOTES
            TO
            CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 JANUARY
            31, 2007
 (UNAUDITED)


During
      November 2006, the Company issued 69,500 shares of common stock, pursuant to
      a
      consulting agreement. The shares have been valued at $6,745.





During
      December 2006, the Company granted 100,000 common stock purchase warrants to
      a
      placement agent for future investments services. The warrants were exercisable
      immediately, have an exercise price per share equal to 110% per share of the
      closing bid price of the closing bid price of a share of the Company’s common
      stock on the date of this warrant and expire in three years. The warrants were
      valued at $6,448 using the Black-Sholes pricing model and expensed. The
      assumption ranges used in the Black-Scholes model are as
      follows:  (1) dividend yield of 0%; (2) expected volatility
      of 149%, (3) risk-free interest rate of 4.62%, and
      (4) expected life of 3 years.





During
      nine months ended January 31, 2007, the Company granted options to purchase
      an
      aggregate of 4,500,000 shares of common stock to one employee and one Director.
      At grant date, 1,000,000 options vested immediately. The vested and unvested
      options have been valued at $636,433 using the Black-Sholes option pricing
      model
      with the following assumptions: (1) dividend yield of 0%; (2) expected
      volatility of 131%; (3) risk-free interest rate of 5.04% and 5.24%, vest over
      a
      36 month period and expire if unexercised in five years.





During
      the three and nine months periods ended January 31, 2007, the Company expensed
      $176,814 and $703,264, respectively, in non-cash charges related to stock and
      option compensation expense.





Preferred
      Stock Series A





During
      the three months ended July 31, 2005, the Company issued 17,750 preferred shares
      at a stated value of $100 per share and warrants to purchase 5,689,108 shares
      of
      common stock, exercisable for three years at $0.195 per share, for aggregate
      gross proceeds of $1,775,000 received from investors. In connection with the
      private placement, during the three months ended July 31, 2005, the Company
      issued as compensation to the placement agent warrants to purchase 1,137,822
      shares of common stock, exercisable for five years at $0.172 per share. The
      warrants, which were valued at $406,665 using the Black-Scholes option pricing
      model, were recognized as an expense during the quarter.





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





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





Since
      the
      warrants contain registration rights for the underlying shares and since the
      delivery of such registered shares was not deemed controllable by the Company,
      we recorded the net value of the warrants at the date of issuance as a warrant
      liability on the balance sheet at April 30, 2006 of $834,924. A Registration
      Statement under Form SB-2, including the shares underlying the warrants, was
      declared effective by the Securities and Exchange Commission on May 31, 2006.
      Therefore, the change in the fair value from April 30, 2006 to May 31, 2006
      was
      included in other income (expense) for three months ended January 31, 2007,
      in
      accordance with EITF 00-19, *“Accounting
      for Derivative Financial Instruments Indexed to, and Potentially Settled in,
      a
      Company’s Own Stock”* .
      The
      fair value of the warrants was $567,069 and $834,924 at May 31, 2006 and
      April 30, 2006, respectively. Additionally, as the Registration Statement
      covering the underlying shares was declared effective, the accrued warrant
      liability at May 31, 2006 was credited to additional-paid in capital. The amount
      credited to additional-paid-in capital was $567,069.





13
 
 SPARTA
          COMMERCIAL SERVICES, INC.
 NOTES
            TO
            CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 JANUARY
            31, 2007
 (UNAUDITED)


NOTE
      I -
      NON-CASH FINANCIAL INFORMATION





During
      the nine months ended January 31, 2007, the Company:




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





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





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





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





NOTE
      J -
      STOCK OPTIONS AND WARRANTS





Share-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 years.
      The Company made no stock-based compensation grants prior to the adoption of
      Statement 123(R) and therefore has no unrecognized stock compensation related
      liabilities or expense unvested or vested prior to 2006.





The
      following tables illustrates the effect that adoption of SFAS No. 123(R) had
      on
      the Company's nine months ending January 31, 2007 results and cash flows as
      well
      as the parameters used in the valuation of options granted in the first nine
      months of 2007.




Under
                Pre-SFAS
              No.123
                (R)
              Accounting
            
            SFAS
                No.
              123(
                R) Impact
            
            Actual
              Nine
                Months Ended January 31, 2007Loss
                before taxes
            
            $
            (2,758,331
            )
            $
            (231,600
            )
            $
            (2,989,931
            )Net
                Loss
            
            
            (2,758,331
            )
            $
            (231,600
            )
            $
            (2,989,931
            )Net
                EarningsBasic
                EPS
            
            $
            (0.02
            )
            $
            -
            
            $
            (0.02
            )Diluted
                EPS
            
            
            (0.02
            )
            
            -
            
            
            (0.02
            )Cash
                FlowsOperating
                Activities
            
            $
            (2,530,412
            )
            $
            -
            
            $
            (2,530,412
            )Financing
                Activities
            
            $
            2,560,489
            
            
            -
            
            
            2,560,489





NOTE
      K -
      SUBSEQUENT EVENTS.





In
      February 2007, the Company received from two accredited investors’ subscriptions
      totaling $40,000 for six month convertible notes of the Company bearing interest
      at the rate of 6% per year and maturing on August 22 and August 27,
      2007.





14
 
 SPARTA
          COMMERCIAL SERVICES, INC.
 NOTES
            TO
            CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 JANUARY
            31, 2007
 (UNAUDITED)


NOTE
      L -
      GOING CONCERN MATTERS





The
      accompanying financial statements have been prepared on a going concern basis,
      which contemplates the realization of assets and the satisfaction of liabilities
      in the normal course of business. As shown in the accompanying financial
      statements during the period October 1, 2001 (date of inception) through January
      31, 2007, the Company incurred losses of $17,230,171. Of these losses,
      $2,989,931 was incurred during the nine months ending January 31, 2007 and
      $6,734,000 in the nine months ending January 31, 2006. As of January 31, 2007,
      the Company also had a working capital deficit of $1,987,857. These factors
      among others may indicate that the Company will be unable to continue as a
      going
      concern for a reasonable period of time.





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





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





15


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





GENERAL





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





"FORWARD-LOOKING"
      INFORMATION





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





INTRODUCTORY
      STATEMENT





The
      period from inception through January 31, 2005 was a developmental period for
      us, setting up credit procedures, setting our arrangements with vehicle
      distributors, obtaining personnel, seeking financing to support our
      developmental efforts, and seeking credit facilities. Consequently, our
      operations are subject to all the risks inherent in the establishment of a
      new
      business enterprise. In fiscal year 2005, we began to obtain regulatory approval
      in several states, where required, prior to commencing active operations. In
      February 2006, we attended our first national motorcycle industry dealer only
      trade show "Dealer EXPO 2006" and over 200 dealers visited our booth during
      the
      show. During the 2007 Dealer EXPO, over 400 dealers visited our booth. We are
      continuously signing up dealers to participate in our financing programs,
      including our private label financing programs. As of January 31, 2007, 1,498
      (compared to 898 at January 31, 2006) dealers have logged onto our web site
      and
      downloaded dealer applications and of that number, 605 (compared to 245 at
      January 31, 2006) have been approved as Sparta or private label authorized
      dealers. We believe this trend will continue over the foreseeable future. We
      have signed up four manufacturers to our private label programs, and are in
      negotiations with other manufacturers who have indicated an interest in a
      private label program. Additionally, we have signed three third party marketing
      arrangements with industry recognized consulting firms who will introduce our
      programs to their dealer clients and train them how to effectively use them.
      We
      have increased our marketing staff from 2 at January 2006 to 7 at the present
      time. The Company obtained a senior credit facility in July 2005 which was
      renewed for one year in August 2006, which allowed us to commence and continue
      our operations. This facility was further amended in November 2006 to allow
      us
      to extend credit to individuals with lower FICO scores than prior to the
      amendment. Additionally, the facility was amended to allow us to extend credit
      to municipalities. Despite these amendments, we will need to obtain additional
      credit facilities so that we have the funding sources which allow us to
      originate leases and finance contracts across all credit profiles and asset
      classes of our business model. We are presently seeking additional credit
      facilities and long term debt and additional equity to support the additional
      debt.




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





16


In
      July
      2006, we announced an agreement for routing of motorcycle loan applications
      from
      a Fortune 500 global diversified financial provider. In October 2006, this
      agreement was extended for a minimum of one year. The agreement calls for that
      company to electronically transmit to Sparta loan applications submitted to
      them
      and which meet Sparta’s lending/leasing criteria. ***iPLUS*** **TM** will
      immediately approve or decline the application, and, if approved, notify the
      applicant through the internet within minutes. This agreement will allow
      consumers to be pre-approved before they even start shopping. We will pay that
      company a fee for each funded transaction. In January 2007, this application
      went “live” in 12 states with plans to roll out to 38 additional states over a
      mutually agreed schedule.





RESULTS
      OF OPERATIONS





COMPARISON
      OF THE THREE MONTHS ENDED JANUARY 31, 2007 TO THE THREE MONTHS ENDED JANUARY
      31,
      2006





For
      the
      three months ended January 31, 2007 and 2006, we have generated limited, but
      increasing, sales revenues, have incurred significant expenses, and have
      sustained significant losses. We believe we will continue to earn increasing
      revenues from operations during the remainder of fiscal 2007 and in the upcoming
      fiscal year.





REVENUES





Revenues
      totaled $214,642 during the three months ended January 31, 2007 as compared
      to
      $43,008 during the three months ended January 31, 2006. Current period revenue
      was comprised of $197,826 in lease revenue, $817 in Private Label and Preferred
      Provider Program fees and $10,001 in other income. Prior period revenue was
      comprised primarily of $38,460 in lease revenue and $3,300 in private label
      fees.




COSTS
      AND
      EXPENSES





General
      and administrative expenses were $913,876 during the three months ended January
      31, 2007, compared to $2,322,057 during the three months ended January 31,
      2006,
      a decrease of $1,408,181, or 61%. Expenses incurred during the current three
      month period consisted primarily of the following expenses: Compensation and
      related costs, $453,095; Accounting, audit and professional fees, $49,982;
      Consulting fees, $70,979; Rent and utilities, $66,849, Travel and entertainment,
      $46,146 and stock based compensation $169,169. Expenses incurred during the
      comparative three month period in 2006 consisted primarily of the following
      expenses: Compensation and related costs, $291,147; Accounting, audit and
      professional fees, $46,636; Consulting fees, $1,780,890; Rent, $41,590; and
      Travel and entertainment, $23,126.





We
      incurred non-cash charges of $224,813 during the three months ended January
      31,
      2007, of which $169,169 is related to options and shares of common stock issued
      for consulting fees and services and $55,644 is related to shares and warrants
      for financing cost. The comparable non-cash charges for the three months ended
      January 31, 2006 were a non-cash expense of $38,500 related to shares of common
      stock issued in connection with debt financing. Additionally, during the three
      month period ended January 31, 2006, we recorded an expense of $1,440,000
      related to the failure to have an effective registration statement covering
      the
      underlying shares of common stock issuable upon conversion of the preferred
      stock and the related warrants.





NET
      LOSS





We
      incurred a net loss before preferred dividends of $932,387 for our three months
      ended January 31, 2007 as compared to $3,658,551 for the corresponding interim
      period in 2006. The $2,726,164 or 75% decrease in our net loss before preferred
      dividends for our three month interim period ended January 31, 2007 was
      attributable primarily to an increase in revenue and a decrease in non-cash
      financing costs and operating expenses.


We
      also
      incurred non-cash preferred dividend expense of $29,937 for our three month
      period ended January 31, 2007, with an expense of $29,191 in the corresponding
      interim period of 2006.





Our
      net
      loss attributable to common stockholders decreased to $962,324 for our three
      month period ended January 31, 2007 as compared to $3,687,742 for the
      corresponding period in 2006. The $2,725,418 decrease in net loss attributable
      to common stockholders for our three month period ended January 31, 2007 was
      due
      to the decrease in net loss of $2,726,164 and the increase in preferred
      dividends of $746.





17


COMPARISON
      OF THE NINE MONTHS ENDED JANUARY 31, 2007 TO THE NINE MONTHS ENDED JANUARY
      31,
      2006





For
      the
      nine months ended January 31, 2007 and 2006, we have generated limited, but
      increasing, sales revenues, have incurred significant expenses, and have
      sustained significant losses. We believe we will continue to earn increasing
      revenues from operations during the remainder of fiscal 2007 and in the upcoming
      fiscal year.





REVENUES





Revenues
      totaled $625,839 during the nine months ended January 31, 2007 as compared
      to
      $90,629 during the nine months ended January 31, 2006. Current period revenue
      was comprised primarily of $530,400 in lease revenue, $61,317 in private label
      fees and Preferred Provider Program and $28,126 in other income. Prior period
      revenue was comprised primarily of $62,806 in lease revenue, $6,747 in dealer
      fees and $9,900 in private label fees.





COSTS
      AND
      EXPENSES





General
      and administrative expenses were $3,405,213 during the nine months ended January
      31, 2007, compared to $3,819,526 during the nine months ended January 31, 2006,
      a decrease of $414,313, or 11%. Expenses incurred during the current nine month
      period consisted primarily of the following expenses: Compensation and related
      costs, $1,306,994; Accounting, audit and professional fees,$380,407; Consulting
      fees, $231,421; Rent and utilities, $227,827, Travel and entertainment, $108,184
      and stock based compensation $703,264. Expenses incurred during the comparative
      nine month period in 2006 consisted primarily of the following expenses:
      Compensation and related costs, $947,440; Accounting, audit and professional
      fees, $219,785; Consulting fees, $2,142,477; Rent, $114,404; and Travel and
      entertainment, $58,457.





During
      nine months ending January 31, 2007, we recorded non-cash income of $299,663
      related to the decrease in value of warrants issued with registration rights
      and
      other expenses. We incurred a non-cash charge of $831,658 during the nine months
      ended January 31, 2007 related to options and shares of common stock issued
      for
      consulting fees, services and financing cost. For the nine months ended January
      31, 2006, we had expensed non-cash costs of $406,665 related to warrants granted
      to a private placement agent. Additionally, we incurred a non-cash charge of
      $605,442 during the nine months ended January 31, 2006 related to shares of
      common stock issued in connection with debt financing and has recorded an
      expense of $2,040,000 related to the failure to have an effective registration
      statement covering the underlying shares of common stock issuable upon
      conversion of it preferred stock and the related warrants.





NET
      LOSS





We
      incurred a net loss before preferred dividends of $2,989,931 for our nine months
      ended January 31, 2007 as compared to $6,734,000 for the corresponding interim
      period in 2005. The $3,744,069 or 56% decrease in our net loss before preferred
      dividends for our nine month interim period ended January 31, 2007 was
      attributable to an increase in revenue, a decrease in operating expenses and
      non-cash financing costs, and a partial recovery, in the amount of $299,663,
      of
      prior years charges for warrant liability and other expense.





We
      also
      incurred non-cash preferred dividend expense of $89,810 for our nine month
      period ended January 31, 2007 as compared with a non-cash expense of $1,886,683
      in the corresponding interim period of 2006. The decrease in preferred dividend
      expense was primarily attributable to the beneficial conversion feature expense
      of $1,775,000 in the corresponding interim period in 2006 (related to warrants
      issued with the convertible preferred stock and a beneficial conversion feature
      associated with the preferred stock) with no such comparable expense in the
      current period. Preferred dividends in the current period also decreased as
      a
      result of preferred stock conversions to common stock.





Our
      net
      loss attributable to common stockholders decreased to $3,079,741 for our nine
      month period ended January 31, 2007 as compared to $8,620,683 for the
      corresponding period in 2006. The $5,540,942 decrease in net loss attributable
      to common stockholders for our nine month period ended January 31, 2007 was
      due
      to the decrease in net loss and the decrease in preferred
      dividends.





18


LIQUIDITY
      AND CAPITAL RESOURCES





As
      of
      January 31, 2007, we had a working capital deficit of $1,987,857. We generated
      a
      deficit in cash flow from operations of $2,530,412 for the nine months ended
      January 31, 2007. This deficit is primarily attributable to our net loss from
      operations of $2,989,931, an increase in lease receivables of $1,792,942 and
      a
      change in warrant liability of $299,663, partially offset by depreciation and
      amortization of $250,303 and to changes in the balances of current assets and
      liabilities. Accounts payable and accrued expenses increased by $684,645,
      deferred revenue increased by $510,340, prepaid expenses decreased by $43,961
      and loan proceeds receivable decreased by $389,998.





Cash
      flows used in investing activities for the nine months ended January 31, 2007
      was $862,324, primarily due to the purchase of property and equipment of $14,734
      and payments for motorcycles and vehicles of $847,590.





We
      met
      our cash requirements during the nine month period through net proceeds for
      equity of $125,000, proceeds of notes payable $800,259 and loans payable to
      officers $157,260 and debt financing of $1,918,605, offset with payments of
      $440,635. Additionally, we have received limited revenues from leasing and
      financing motorcycles and other vehicles, our recently launched private label
      programs and from dealer sign-up fees.





While
      we
      have raised capital to meet our working capital and financing needs in the
      past,
      additional financing is required in order to meet our current and projected
      cash
      flow deficits from operations and development. We are seeking financing, which
      may take the form of debt, convertible debt or equity, in order to provide
      the
      necessary working capital. There is no guarantee that we will be successful
      in
      raising the funds required.





We
      estimate that we will need approximately $1,800,000 in additional funds to
      fully
      implement our business plan during the next twelve months for a credit line
      reserve and for our general operating expenses. Although we obtained a senior
      credit facility in July 2005, which allowed us to commence our initial active
      operations, this facility does not allow us to finance individuals with lower
      FICO scores nor does it provide financing for other markets we wish to enter.
      Thus, we will need to obtain additional credit facilities to fully implement
      our
      business plan. We are presently seeking those additional credit facilities
      and
      long term debt. This additional, debt financing, if available, will require
      payment of interest and may involve restrictive covenants that could impose
      limitations on our operating flexibility. If we are not successful in generating
      sufficient liquidity from operations or in raising sufficient capital resources
      to finance our growth, on terms acceptable to us, this could have a material
      adverse effect on our business, results of operations, liquidity and financial
      condition, and we will have to adjust our planned operations and development
      on
      a more limited scale.




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





The
      independent auditors report on our April 30, 2006 and 2005 financial statements
      included in our Annual Report states that our historical losses and the lack
      of
      revenues raise substantial doubts about our ability to continue as a going
      concern, due to the losses incurred and its lack of significant operations.
      If
      we are unable to develop our business, we have to discontinue operations or
      cease to exist, which would be detrimental to the value of our common stock.
      We
      can make no assurances that our business operations will develop and provide
      us
      with significant cash to continue operations.





PLAN
      OF
      OPERATIONS





ADDRESSING
      THE GOING CONCERN ISSUES





In
      order
      to improve our liquidity, our management is actively pursing additional
      financing through discussions with investment bankers, financial institutions
      and private investors. There can be no assurance that we will be successful
      in
      its effort to secure additional financing.





19


We
      continue to experience net operating losses. Our ability to continue as a going
      concern is subject to our ability to develop profitable operations. We are
      devoting substantially all of our efforts to developing our business and raising
      capital.





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




§
            seeking
                additional credit lines from institutional
                lenders;





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





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





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





PRODUCT
      RESEARCH AND DEVELOPMENT





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





ACQUISITION
      OR DISPOSITION OF PLANT AND EQUIPMENT





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





NUMBER
      OF
      EMPLOYEES





At
      January 31, 2007, we had 21 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.





INFLATION





The
      impact of inflation on our costs, and the ability to pass on cost increases
      to
      our customers over time is dependent upon market conditions. We are not aware
      of
      any inflationary pressures that have had any significant impact on our
      operations over the past quarter, and we do not anticipate that inflationary
      factors will have a significant impact on future operations.





CRITICAL
      ACCOUNTING POLICIES





The
      preparation of our consolidated financial statements in conformity with
      accounting principles generally accepted in the United States requires us to
      make estimates and judgments that affect our reported assets, liabilities,
      revenues, and expenses, and the disclosure of contingent assets and liabilities.
      We base our estimates and judgments on historical experience and on various
      other assumptions we believe to be reasonable under the circumstances. Future
      events, however, may differ markedly from our current expectations and
      assumptions. While there are a number of significant accounting policies
      affecting our consolidated financial statements; we believe the following
      critical accounting policy involves the most complex, difficult and subjective
      estimates and judgments.





REVENUE
      RECOGNITION





We
      originate leases on new and used motorcycles and other powersports vehicles
      from
      motorcycle dealers throughout the United States. Our leases are accounted for
      as
      either operating leases or direct financing leases. At the inception of
      operating leases, no lease revenue is recognized and the leased motorcycles,
      together with the initial direct costs of originating the lease, which are
      capitalized, appear on the balance sheet as "motorcycles under operating
      leases-net". The capitalized cost of each motorcycle is depreciated over the
      lease term, on a straight-line basis, down to the original estimate of the
      projected value of the motorcycle at the end of the scheduled lease term (the
      "Residual"). Monthly lease payments are recognized as rental income. An
      acquisition fee classified as fee income on the financial statements is received
      and recognized in income at the inception of the lease. Direct financing leases
      are recorded at the gross amount of the lease receivable, and unearned income
      at
      lease inception is amortized over the lease term.





20


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





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





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





SHARE-BASED
      COMPENSATION





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





RECENT
      ACCOUNTING PRONOUNCEMENT





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities - Including an amendment of FASB
      Statement No. 115,” which permits entities to measure many financial instruments
      and certain other items at fair value. The objective is to improve financial
      reporting by providing entities with the opportunity to mitigate volatility
      in
      reporting earnings caused by measuring related assets and liabilities
      differently without having to apply complex hedge accounting provisions. This
      Statement is expected to expand the use of fair value measurement, which is
      consistent with the Board’s long-term measurement objectives for accounting for
      financial instruments. This Statement is effective as of the beginning of the
      Company’s first fiscal year that begins after November 15, 2007.





In
      September 2006, the FAS issued SFAS No. 158, Employers’ Accounting for Defined
      Benefit Pension and Other Postretirement Plans, which requires employers to
      recognize the over-funded or under-funded status of a defined benefit
      postretirement plan (other than a multiemployer plan) as an asset or liability
      in its statement of financial position and to recognize changes in that funded
      status in the year in which the changes occur through comprehensive income
      of a
      business entity. The Company does not believe that the pronouncement will have
      a
      material affect on its financial statements as it does not participate in
      defined benefit pension plans.





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





21


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





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





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





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





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





22





OFF-BALANCE
      SHEET ARRANGEMENTS





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





TRENDS,
      RISKS AND UNCERTAINTIES





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





CAUTIONARY
      FACTORS THAT MAY AFFECT FUTURE RESULTS





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





POTENTIAL
      FLUCTUATIONS IN ANNUAL OPERATING RESULTS





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





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





DEPENDENCE
      UPON MANAGEMENT





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





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





CONTINUED
      CONTROL OF CURRENT OFFICERS AND DIRECTORS





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





23





MANAGEMENT
      OF GROWTH





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





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





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




24


ITEM
      3.
      CONTROLS AND PROCEDURES





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





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





25


PART
      II.
      OTHER INFORMATION





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





In
      September and October 2006, in transactions deemed to be exempt from
      registration under the Securities Act in reliance on Section 4(2) of the
      Securities Act, the Company sold to four accredited investors bridge notes
      in
      the aggregate amount of $275,000. Three 45-day bridge notes aggregating $175,000
      and one 90-day $100,000 note were originally scheduled to expire on various
      dates through November 30, 2006, together with simple interest at the rate
      of
      10%. The notes provide that 100,000 shares of the Company's restricted common
      stock are to be issued for each $100,000 of notes purchased, or any pro rated
      portion thereof. The Company had the right to extend the maturity date of notes
      for 30 to 45 days, and, in the event of extension, the lender would be entitled
      to an additional equity equal to 60% of the equity kicker shares. The maturity
      dates of the notes were subsequently extended to various dates between December
      5, 2006 to December 30, 2006, with simple interest rate of 10%, and additional
      equity of in the aggregate amount of 165,000 restricted shares of common stock
      to be issued. In the event of default on repayment, for each uncured month,
      as
      penalty, the equity kicker and the additional equity to be issued to the lenders
      are to be increased by 50%, on a pro rata basis, and during default period,
      interest is to be at the rate of 20%. The repayment, in the event of default,
      of
      the notes are to be collateralized by certain security interest as per the
      terms
      of the agreement. As of January 31, 2007, the notes remain unpaid, and the
      shares of common stock to be issued as equity kicker on the original note,
      as
      additional equity kicker shares for the extension, and as additional shares
      during the unpaid period, remain to be issued.





From
      November 2006 through January 2007, in transactions deemed to be exempt from
      registration under the Securities Act in reliance on Section 4(2) of the
      Securities Act, the Company received from eight accredited investors
      subscriptions for six month convertible notes of the Company in the aggregate
      principal amount of $525,259. The notes bear interest at the rate of 6% per
      year
      and mature from June 1, 2007 to August 1, 2007. At the Company’s option, the
      notes are convertible into shares of common stock at the rate of ranging from
      $.048 to $.054 per share.




In
      December 2006, 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
      granted 100,000 common stock purchase warrants to a placement agent for future
      investments services. The warrants are exercisable at $.088 per share until
      December 15, 2009.





In
      February 2007, in transactions deemed to be exempt from registration under
      the
      Securities Act in reliance on Section 4(2) of the Securities Act, the Company
      received from two accredited investors subscriptions for six month convertible
      notes of the Company in the aggregate principal amount of $40,000. The notes
      bear interest at the rate of 6% per year and mature in August 2007.




26


ITEM
      6.
      EXHIBITS.





The
      following exhibits are filed with this report:





Exhibit
                Number
            
            Description
                of ExhibitExhibit
                10.1
            
            Form
                of Promissory Note issued September and October 2006 (Incorporated
                by
                reference to Exhibit 10.3 of Form 10-QSB filed on December 18,
                2006)Exhibit
                10.2
            
            Form
                of Promissory Note issued November 2006 through January 2007 (Incorporated
                by reference to Exhibit 10.4 of Form 10-QSB filed on December 18,
                2006)Exhibit
                11
            
            Statement
                re: computation of per share earnings is hereby incorporated by reference
                to "Financial Statements" of Part I- Financial Information, Item
                1 -
                Financial Statements, contained in this Form 10-QSB.Exhibit
                31.1*
            
            Certification
                of Chief Executive Officer Pursuant to Securities Exchange Act Rule
                13a-14(a)/15d-14(a)Exhibit
                31.2*
            
            Certification
                of Principal Financial Officer Pursuant to Securities Exchange Act
                Rule
                13a-14(a)/15d-14(a)Exhibit
                32.1*
            
            Certification
                of Chief Executive Officer Pursuant to Securities Exchange Act Rule
                13a-14(b) and 18 U.S.C. Section 1350Exhibit
                32.2*
            
            Certification
                of Principal Financial Officer Pursuant to Securities Exchange Act
                Rule
                13a-14(b) and 18 U.S.C. Section
                1350





*
      Filed
      herewith.


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SIGNATURES





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


SPARTA
                COMMERCIAL SERVICES, INC.Date:
                March 19, 2007
            By:
            /s/
                Anthony L. HavensAnthony
                L. HavensChief
                Executive Officer


Date:
                March 19, 2007
            By:
            /s/
                Anthony W. AdlerAnthony
                W. AdlerPrincipal
                Financial Officer






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