**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-Q**





(Mark
      One)





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





**For
      the quarterly period ended July 31, 2008**





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 incorporation or organization)
            (IRS
                Employer Identification No.)





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


(Address
      of principal executive offices)





**(212)
      239-2666**


(Registrant’s
      telephone number, including area code)





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days. Yes x No o





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company.
      See
      the definitions of “large accelerated filer,” “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filero
            Accelerated fileroNon-accelerated filero(Do not check if a smaller reporting company)
            Smaller reporting companyx





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
      September 4, 2008, we had 158,358,075 shares of common stock issued and
      outstanding.





**SPARTA
      COMMERCIAL SERVICES, INC.**





**FORM
      10-Q**


**FOR
      THE QUARTER ENDED JULY 31, 2008**





**TABLE
      OF CONTENTS**





**Page****PART
                I.**
            **FINANCIAL
                INFORMATION**Item
                1.
            Financial
                Statements
            3Unaudited
                Condensed Balance Sheets as of July 31, 2008 and April 30,
                2008
            3Unaudited
                Condensed Statements of Operations for the Three Months Ended July
                31,
                2008 and 2007
            4Unaudited
                Condensed Statements of Cash Flows for the Three Months Ended July
                31,
                2008 and 2007
            5Notes
                to Unaudited Condensed Financial Statements
            6Item
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            15Item
                4.
            Controls
                and Procedures
            21**PART
                II.**
            **OTHER
                INFORMATION**Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            22Item
                6.
            Exhibits
            23Signatures
            24


2


**PART
      I.**  **FINANCIAL
      INFORMATION**




**ITEM
      1.**  **FINANCIAL
      STATEMENTS**





**SPARTA
      COMMERCIAL SERVICES, INC.**


**CONDENSED
      BALANCE SHEETS**




**July 31,**
                **2008**
              
              **April 30,**
                **2008****(Unaudited)****ASSETS**Cash
                  and cash equivalents
              
              $
              64,488
              
              $
              68,642RISC
                  loan receivable, current, net of reserve of $93,556 and $86,312,
                  as of
                  July 31, 2008 and April 30, 2008, respectively (NOTE D)
              
              
              4,683,310
              
              
              4,260,002Motorcycles
                  and other vehicles under operating leases, net of accumulated accumulated
                  depreciation of $301,516 and $336,100, as of July 31,2008 and April
                  30,
                  2008, respectively and loss reserve of $19,318 and $25,231, as
                  of July 31,
                  2008 and April 30, 2008, respectively (NOTE B)
              
              
              946,603
              
              
              1,251,631Interest
                  receivables
              
              
              64,638
              
              
              58,382Accounts
                  receivable
              
              
              63,951
              
              
              37,024Inventory
                  (NOTE C)
              
              
              56,358
              
              
              79,069Property
                  and equipment, net of accumulated depreciation and amortization
                  of
                  $134,466 and $129,986, respectively (NOTE E)
              
              
              56,781
              
              
              61,261Restricted
                  cash
              
              
              454,499
              
              
              444,902Deposits
              
              
              48,967
              
              
              48,967**Total
                  assets**
              
              $
              6,439,595
              
              $
              6,309,879**LIABILITIES
                  AND STOCKHOLDERS’ DEFICIT**Accounts
                  payable and accrued expenses
              
              $
              1,249,740
              
              $
              1,461,955Accrued
                  equity based penalties
              
              
              -
              
              
              2,178Notes
                  payable - Senior Lender (NOTE F)
              
              
              5,137,011
              
              
              5,029,864Convertible
                  Notes payable (NOTE G)
              
              
              2,807,859
              
              
              2,665,359Notes
                  payable - Other (NOTE H)
              
              
              1,063,500
              
              
              1,147,500Loans
                  payable - related parties
              
              
              252,260
              
              
              244,760Other
                  liabilities
              
              
              8,992
              
              
              6,741Deferred
                  revenue
              
              
              18,767
              
              
              22,617**Total
                  liabilities**
              
              
              10,538,129
              
              
              10,580,974**Stockholders’
                  deficit:**Preferred
                  stock, $0.001 par value; 10,000,000 shares authorized of which
                  35,850
                  shares have been designated as Series A convertible preferred stock,
                  with
                  a stated value of $100 per share, 825 and 825 shares issued and
                  outstanding, as of July 31, 2008 and April 30, 2008,
                  respectively
              
              
              82,500
              
              
              82,500Common
                  stock, $0.001 par value; 340,000,000 shares authorized, 157,908,075
                  and
                  130,798,657 shares issued and outstanding, as of July 31, 2008
                  and April
                  30, 2008, respectively
              
              
              157,908
              
              
              130,799Common
                  stock to be issued, 12,260,210 and 12,160,210 shares, as of July
                  31, 2008
                  and April 30, 2008, respectively
              
              
              12,260
              
              
              12,160Additional
                  paid-in capital
              
              
              19,583,544
              
              
              17,727,889Accumulated
                  deficit
              
              
              (23,934,746
              )
              
              (22,224,442
              )**Total
                  stockholders’ deficit**
              
              
              (4,098,534
              )
              
              (4,271,094
              )**Total
                  liabilities and stockholders’ deficit**
              
              $
              6,439,595
              
              $
              6,309,879





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


3


**SPARTA
      COMMERCIAL SERVICES, INC.**


**CONDENSED
      STATEMENTS OF LOSSES**


**FOR
      THE THREE MONTHS ENDED JULY 31, 2008 AND 2007**


**(UNAUDITED)**


**Three Months Ended****July 31,****2008**
              
              **2007****Revenue:**Rental
                  Income, Leases
              
              **$**
              89,694
              
              $
              105,129Interest
                  Income, Loans
              
              
              204,044
              
              
              138,964Other
              
              
              101,182
              
              
              39,904**Total
                  Revenues**
              
              
              394,919
              
              
              283,997**Operating
                  expenses:**General
                  and administrative
              
              
              1,364,152
              
              
              1,096,704Depreciation
                  and amortization
              
              
              61,083
              
              
              79,396**Total
                  operating expenses**
              
              
              1,425,235
              
              
              1,176,100**Loss
                  from operations**
              
              
              (1,030,316
              )
              
              (892,103
              )**Other
                  expense:**Interest
                  expense and financing cost, net
              
              
              (678,727
              )
              
              (170,396)
              )**Net
                  loss**
              
              
              (1,709,042
              )
              
              (1,062,499
              )**Preferred
                  dividend payable**
              
              
              1,261
              
              
              4,613**Net
                  loss attributed to common stockholders**
              
              $
              (1,710,304
              )
              $
              (1,067,112
              )**Basic
                  and diluted loss per share**
              
              $
              (0.01
              )
              $
              (0.01
              )**Basic
                    and diluted loss per share attributed tocommon
                    stockholders**
              
              $
              (0.01
              )
              $
              (0.01
              )**Weighted
                  average shares outstanding**
              
              
              146,924,245
              
              
              123,969,418





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


4


**SPARTA
      COMMERCIAL SERVICES, INC.**


**STATEMENTS
      OF CASH FLOWS**


**FOR
      THE THREE MONTHS ENDED JULY 31, 2008 AND 2007**


**(UNAUDITED)**


**Three Months Ended****July 31,****2008**
              
              **2007****CASH
                  FLOWS FROM OPERATING ACTIVITIES:**Net
                  loss
              
              $
              (1,709,042
              )
              $
              (1,062,499
              )Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:Depreciation
                  and amortization
              
              
              61,083
              
              
              79,396Allowance
                  for loss reserve
              
              
              (1,330
              )
              
              55,004Amortization
                  of deferred revenue
              
              
              (3,850
              )
              
              (3,850
              )Amortization
                  of deferred compensation
              
              
              -
              
              
              24,000Amortization
                  of beneficial conversion features
              
              
              318,182
              
              
              -Equity
                  based compensation
              
              
              770,364
              
              
              149,861Forgiveness
                  of dividend payable
              
              
              -
              
              
              224,164Changes
                  in operating assets and liabilities:(Increase)
                  decrease in:Interest
                  receivable
              
              
              (6,256
              )
              
              (11,020)
              )Prepaid
                  expenses and other assets
              
              
              (26,927
              )
              
              27,055Restricted
                  cash
              
              
              (9,598
              )
              
              (72,533
              )Increase
                  (decrease) in:Accounts
                  payable and accrued expenses
              
              
              (119,086
              )
              
              (147,758)
              )Net
                  cash used in operating activities
              
              
              (726,458
              )
              
              (738,170
              )**CASH
                  FLOWS FROM INVESTING ACTIVITIES:**Net
                  Proceeds (Payments) for motorcycles and other vehicles
              
              
              242,511
              
              
              (51,461
              )Net
                  Purchases of RISC contracts
              
              
              (393,354
              )
              
              (970,131
              )Net
                  cash used in investing activities
              
              
              (150,843
              )
              
              (1,021,592
              )**CASH
                  FLOWS FROM FINANCING ACTIVITIES:**Proceeds
                  from notes from senior lender
              
              
              1,043,847
              
              
              1,616,278Payments
                  on notes from senior lender
              
              
              (936,700
              )
              
              (440,635
              )Net
                  Proceeds from convertible notes
              
              
              842,500
              
              
              -Net
                  Payments to other notes
              
              
              (84,000
              )
              
              552,500Net
                  Loan proceeds from other related parties
              
              
              7,500
              
              
              20,000Net
                  cash provided by financing activities
              
              
              873,147
              
              
              1,748,143**Net****decrease****in
                  cash**
              
              
              (4,154
              )
              
              (11,629
              )**Cash
                  and cash equivalents, beginning of period**
              
              $
              68,642
              
              $
              22,032**Cash
                  and cash equivalents, end of period**
              
              $
              64,488
              
              $
              10,403**Cash
                  paid for:**Interest
              
              $
              103,142
              
              $
              102,503Income
                  taxes
              
              $
              993
              
              $
              1,100Non-Cash
                  Transactions:Common
                  stock issued in exchange for previously incurred debt
              
              $
              700,000
              
              
              -





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


5


**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO CONDENSED FINANCIAL STATEMENTS**


**JULY
      31, 2008**


**(UNAUDITED)**





**NOTE
      A - SUMMARY OF ACCOUNTING POLICIES**





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





**Basis
      of Presentation**





The
      accompanying unaudited condensed financial statements as of July 31, 2008 and
      for the three month periods ended July 31, 2008 and 2007 have been prepared
      by
      the Company pursuant to the rules and regulations of the Securities and Exchange
      Commission, including Form 10-Q and Regulation S-K and Form 10-QSB and
      Regulation S-B. The information furnished herein reflects all adjustments
      (consisting of normal recurring accruals and adjustments), which are, in the
      opinion of management, necessary to fairly present the operating results for
      the
      respective periods. Certain information and footnote disclosures normally
      present in annual financial statements prepared in accordance with accounting
      principles generally accepted in the United States of America have been omitted
      pursuant to such rules and regulations. The Company believes that the
      disclosures provided are adequate to make the information presented not
      misleading. These financial statements should be read in conjunction with the
      audited financial statements and explanatory notes for the year ended April
      30,
      2008 as disclosed in the Company’s 10-KSB for that year as filed with the SEC,
      as it may be amended.





The
      results of the three months ended July 31, 2008 are not necessarily indicative
      of the results to be expected for the full year ending April 30,
      2009.





**Estimates**





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





**Revenue
      Recognition**





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




The
      Company purchases Retail Installment Sales Contracts (“RISC”) from motorcycle
      dealers. The RISCs are secured by liens on the titles to the vehicles. The
      RISCs
      are accounted for as loans. Upon purchase, the RISCs appear on the Company’s
      balance sheet as RISC loan receivable current and long term. Interest income
      on
      these loans is recognized when it is earned.


6


**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO CONDENSED FINANCIAL STATEMENTS**


**JULY
      31, 2008**


**(UNAUDITED)**





**NOTE
      A - SUMMARY OF ACCOUNTING POLICIES (continued)**





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





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





The
      Company charges fees to manufacturers and other customers related to creating
      a
      private label version of the Company’s financing program including web access,
      processing credit applications, consumer contracts and other related documents
      and processes.





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





**Stock
      Based Compensation**





The
      Company adopted SFAS No. 123(R) during third quarter of fiscal year 2006, which
      no longer permits the use of the intrinsic value method under APB No. 25. The
      Company uses the modified prospective method to adopt SFAS No. 123(R), which
      requires compensation expense to be recorded for all stock-based compensation
      granted on or after January 1, 2006, as well the unvested portion of previously
      granted options. The Company is recording the compensation expense on a
      straight-line basis, generally over the explicit service period of three to
      five
      years. The Company made no stock-based compensation grants prior to the adoption
      of SFAS No. 123(R) and therefore has no unrecognized stock compensation related
      liabilities or expense unvested or vested prior to 2006.





**Net
      Loss Per Share**





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





Per
      share
      basic and diluted net loss attributable to common stockholders amounted to
      $0.01
      and $0.01 for the quarters ended July 31, 2008 and 2007, respectively. At July
      31, 2008 and 2007, 30,302,766 and 20,934,071 potential shares, respectively,
      were excluded from the shares used to calculate diluted earnings per share
      as
      their inclusion would reduce net loss per share.


7


**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO CONDENSED FINANCIAL STATEMENTS**


**JULY
      31, 2008**


**(UNAUDITED)**





**NOTE
      A - SUMMARY OF ACCOUNTING POLICIES (continued)**




**New
      Accounting Pronouncements**





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





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





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





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





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


8


**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO CONDENSED FINANCIAL STATEMENTS**


**JULY
      31, 2008**


**(UNAUDITED)**





**NOTE
      A - SUMMARY OF ACCOUNTING POLICIES (continued)**





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





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





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





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





**Reclassification**





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


9


**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO CONDENSED FINANCIAL STATEMENTS**


**JULY
      31, 2008**


**(UNAUDITED)**





**NOTE
      B - MOTORCYCLES UNDER OPERATING LEASE**





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


July 31,
              
              April 30,2008
              
              2008Motorcycles
                  and other vehicles
              
              $
              1,267,434
              
              $
              1,612,962Less:
                  accumulated depreciation
              
              
              (301,515
              )
              
              (336,100
              )Motorcycles
                  and other vehicles, net of accumulated depreciation
              
              
              965,919
              
              
              1,276,862Less:
                  estimated reserve for residual values
              
              
              (19,317
              )
              
              (25,231
              )Motorcycles
                  and other vehicles under operating leases, net
              
              $
              946,603
              
              $
              1,251,630





Depreciation
      expense was $56,603 and $241,834 for the quarter ended July 31, 2008 and the
      year ended April 30, 2008, respectively. Depreciation expense for the quarter
      ended July 31, 2007 was $68,336.





**NOTE
      C - INVENTORY**





Inventory
      is comprised of repossessed vehicles and vehicles which have been returned
      at
      the end of their lease. Inventory is carried at the lower of depreciated cost
      or
      market, applied on a specific identification basis. At July 31, 2008 the Company
      had repossessed vehicles valued at book value of $56,358. At April 30, 2008,
      the
      Company had repossessed vehicles of value $79,069.




**NOTE
      D - RETAIL (RISC) LOAN RECEIVABLES**





RISC
      loan
      receivables, which are carried at cost, were $4,776,865 and $4,346,315 at July
      31, 2008 and April 30, 2008, respectively, including deficiency receivables
      of
      $98,981 and $30,697, respectively. The following is a schedule by years of
      future principal payments related to these receivables. Certain of the assets
      are pledged as collateral for the note described in Note F.





Year
                ending July 31,2009
            
            $
            1,009,5922010
            
            
            1,099,9642011
            
            
            1,256,3762012
            
            
            994,6242013
            
            
            416,309$
            4,776,865


10




**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO CONDENSED FINANCIAL STATEMENTS**


**JULY
      31, 2008**


**(UNAUDITED)**





**NOTE
      E - PROPERTY AND EQUIPMENT**





Property
      and equipment at July 31, 2008 and April 30, 2008 consist of the followings:


July 31,
                2008
              
              April 30,
                2008Computer
                  equipment, software and furniture
              
              $
              191,247
              
              $
              191,247Less:
                  accumulated depreciation and amortization
              
              
              (134,466
              )
              
              (129,986
              )Net
                  property and equipment
              
              $
              56,781
              
              $
              61,261





Depreciation
      expense was $61,083 and $274,733 for the quarter ended July 31, 2008 and
      the year ended April 30, 2008, respectively. Depreciation and amortization
      expense for the quarter ended July 31, 2007 was $79,396.




**NOTE
      F - NOTES PAYABLE - SENIOR LENDER**





The
      Company finances certain of its leases through a third party senior lender.
      The
      repayment terms are generally one year to five years and the notes are secured
      by the underlying assets. The weighted average interest rate at July 31, 2008
      is
      10.38%.





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




12
                months ended July 31,
            
            Amount2009
            
            $
            1,252,7142010
            
            
            1,302,1732011
            
            
            1,227,2082012
            
            
            966,6442013
            
            
            388,272Total
            
            $
            5,137,011




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




**NOTE
      G – CONVERTIBLE NOTES PAYABLE**





**Convertible Notes Payable**
            
            **July 31,**
              **2008**
            
            **April 30,**
              **2008**6% Convertible Notes,
                due various dates from April 22, 2008 to January 18, 2009
            
            $
            2,007,859
            
            $
            2,625,3596.5%
                Convertible Notes, due various dates from December 12, 2008 toJanuary
                18, 2009
            
            
            360,000
            
            
            -9%
                Convertible Note, due December 30, 2008
            
            
            40,000
            
            
            40,00010%
                Convertible Note, due from July 19, 2008 to September 30,
                2008
            
            
            400,000
            
            
            -Total
            
            $
            2,807,859
            
            $
            2,665,359




As
      of
      July 31, 2008, an aggregate of $345,000 of Convertible Notes Payable were past
      due of which $50,000 were repaid on August 1, 2008.




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




11




**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO CONDENSED FINANCIAL STATEMENTS**


**JULY
      31, 2008**


**(UNAUDITED)**





**NOTE
      G – CONVERTIBLE NOTES PAYABLE (continued)**





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




The
      Company sold to six accredited investors, six month unsecured notes in the
      aggregate amount of $360,000. All notes bear 6.5 % simple interest, payable
      in
      cash or shares, at the Company’s option, with principal and accrued interest
      payable at maturity. Should the Company opt to convert these notes at maturity,
      these notes will be convertible into shares of common stock at a price equal
      to
      a 40% discount from the lowest closing price of the Company’s common stock for
      the five trading days immediately preceding the receipt of funds by the Company
      from the purchaser of note. At the Company’s option, the notes are convertible
      into shares of common stock raging from, $0.05 to $0.06 per share. All notes
      will mature in six months on various dates through January 18,
      2009.





The
      Company sold to seven accredited investors, six month unsecured notes in the
      aggregate amount of $82,500. All notes bear 6% simple interest, payable in
      cash
      or shares, at the Company’s option, with principal and accrued interest payable
      at maturity. Should the Company opt to convert these notes at maturity, these
      notes will be convertible into shares of common stock at 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. At the Company’s option, the notes are convertible into
      shares of common stock raging from, $0.05 to $0.06 per share. All notes will
      mature in six months on various dates through December 25, 2008.




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





As
      of
      April 30, 2008, the notes are convertible at fixed conversion prices ranging
      from $.0288 to $.0816 per share into a total of 54,402,581 shares of the
      Company’s common stock




12


**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO CONDENSED FINANCIAL STATEMENTS**


**JULY
      31, 2008**


**(UNAUDITED)**





**NOTE
      H - NOTES PAYABLE - OTHER**




**Notes Payable - Other**
            
            **July 31,**
              **2008**
            
            **April 30,**
              **2008**6%
                Bridge Loan, due August 15, 2008
            
            $
            75,000
            
            $
            75,0008%
                Note, due August 15, 2008
            
            
            40,000
            
            
            40,0008%
                Demand Notes
            
            
            415,000
            
            
            375,00010%
                Bridge Loans, due various dates from May 1 to August 15,
                2008
            
            
            176,000
            
            
            275,00010%
                Notes, due August 15 to August 16, 2008
            
            
            212,500
            
            
            232,50012%
                Notes due August 13, 2008
            
            
            145,000
            
            
            150,000Total
            
            $
            1,063,500
            
            $
            1,147,500




As
      of
      July 31, 2008, an aggregate amount of $32,000 of Notes Payable Other were past
      due.




During
      the three months ended July 31, 2008, the Company sold to one accredited
      investor an unsecured demand note in the amount of $40,000. The note bears
      8%
      simple interest and the interest may be paid in cash or shares of the Company.
      The note and interest owing thereon will become due and payable immediately
      in
      the event of default on repayment by the Company.





**NOTE
      I - 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. The Company had 825 and 825
      shares of Series A preferred stock issued and outstanding as of July 31, 2008
      and April 30, 2008, respectively. The Company had 157,908,075 and 130,798,657
      shares of common stock issued and outstanding as of July 31, 2008 and April
      30,
      2008, respectively.





Preferred
      Stock Series A




On
      July
      20, 2007, one shareholder holding 16,745 shares of preferred stock converted
      those shares into 10,733,974 shares of common stock and forgave $215,253 in
      accumulated but unpaid dividends on the preferred shares. On January 31, 2008,
      three shareholders holding 2,225 shares of preferred stock converted those
      shares into 1,426,230 shares of common stock. The 12,160,210 shares of common
      stock issuable upon conversion of the preferred shares had not been physically
      issued as of July 31, 2008.





Common
      Stock





During
      the quarter ended July 31, 2008 and the quarter ended July 31, 2007, the Company
      expensed $67,249 and $186,317, respectively, for non-cash charges related to
      stock and option compensation expense.





During
      the quarter ended July 31, 2008, the Company issued 300,000 shares of
      unregistered common stock and agreed to issue an additional 100,000 shares,
      valued at $35,818, as inducements for loans which amount was expensed as
      financing cost. During the quarter ended July 31, 2008, the Company issued
      1,510,000 shares of unregistered common stock, valued at $144,800, as penalties
      for loans. During the quarter ended July 31, 2008, the Company issued 1,634,662
      shares of unregistered common stock, valued at $54,924, in lieu of cash as
      interest for





13





**SPARTA
      COMMERCIAL SERVICES, INC.**


**NOTES
      TO CONDENSED FINANCIAL STATEMENTS**


**JULY
      31, 2008**


**(UNAUDITED)**





**NOTE
      I - EQUITY TRANSACTIONS (continued)**





bridge
      loans. During the quarter ended July 31, 2008, the Company issued 723,684 shares
      of unregistered common stock, valued at $29,205, in lieu of cash as interest
      for
      convertible notes. During the quarter ended July 31, 2008, the Company issued
      16,941,072 shares of unregistered common stock, valued at $700,000, upon
      conversion of $700,000 in convertible notes resulting in an increase in
      additional-paid-in capital of $683,059. During quarter ended July 31, 2008,
      pursuant to an agreement with an investor relations consultant, he Company
      issued 6,000,000 shares of restricted common stock valued at
      $520,000.




**NOTE
      J - SUBSEQUENT EVENTS**





On
      August
      1, 2008, the Company repaid $50,000 of a $250,000 10% bridge loans that matured
      in July 2008.





In
      August
      2008, the Company sold to one accredited investor an unsecured demand note
      in
      the amount of $70,000. The note bears 8% simple interest.





In
      August
      2008, the Company sold to four accredited investors $80,000 in short term,
      unsecured 10% notes due October 2008. As inducements for these loans, the
      Company agreed to issue one share of unregistered common stock for each dollar
      lent.





On
      August
      26, 2008 and September 2, 2008, the Company sold to two accredited investors
      $170,000 in short term, sixty day unsecured 12% notes. As inducements for these
      loans, the Company agreed to issue 220,000 shares of unregistered common stock.





In
      August
      2008, the Company sold to an accredited investor a $200,000 11% note, secured
      by
      equipment, due August 2010.





In
      August
      2008, the Company issued a total of 420,000 shares of its restricted common
      stock, valued at $35,800 to six accredited investors as penalty shares pursuant
      to loan agreements.




**NOTE
      K****-****GOING
      CONCERN MATTERS**





The
      accompanying unaudited condensed financial statements have been prepared on
      a
      going concern basis, which contemplates the realization of assets and the
      satisfaction of liabilities in the normal course of business. As shown in the
      accompanying financial statements during the period October 1, 2001 (date of
      inception) through July 31, 2008, the Company incurred loss of $23,934,746.
      Of
      these losses, $1,710,304 was incurred in the quarter ending July 31, 2008 and
      $1,067,112 in the quarter ending July 31, 2007. These factors among others
      may
      indicate that the Company will be unable to continue as a going concern for
      a
      reasonable period of time.





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





In
      order
      to improve the Company’s liquidity, the Company’s management is actively 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.


14


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





**General**





The
      following discussion of our financial condition and results of operations should
      be read in conjunction with (1) our interim unaudited financial statements
      and
      their explanatory notes included as part of this quarterly report, and (2)
      our
      annual audited financial statements and explanatory notes for the year ended
      April 30, 2008 as disclosed in our annual report on Form 10-KSB for that year
      as
      filed with the SEC.





**“Forward-Looking”
      Information**





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





**RESULTS
      OF OPERATIONS**





**Comparison
      of the Three Months Ended July 31, 2008 to the Three Months Ended July 31,
      2007**





For
      the
      three months ended July 31, 2008 and 2007, we have generated limited, but
      increasing, sales revenues, have incurred significant expenses, and have
      sustained significant losses. We believe we will continue to earn increasing
      revenues from operations during the remainder of our fiscal year ending April
      30, 2008 and in the upcoming fiscal year.





**Revenues**





Revenues
      totaled $394,919 during the three months ended July 31, 2008 as compared to
      $283,997 during the three months ended July 31, 2007. Current period revenue
      was
      comprised primarily of $204,044 in interest income from RISC Loans, $89,694
      in
      lease revenue, $85,690 in recovery of prior year’s expenses, $5,415 in other
      income, and $10,077 in gain on sale of vehicles. For the three months ended
      July
      31, 2007 revenues were comprised primarily of $105,129 in lease revenue,
      $138,964 in interest income from RISC loans, and $39,904 in other
      income.





**Costs
      and Expenses**





General
      and administrative expenses were $1,364,152 during the three months ended July
      31, 2008, compared to $1,096,704 during the three months ended July 31, 2007,
      an
      increase of $267,448 or 24.4%. Expenses incurred during the current three month
      period consisted primarily of the following expenses: compensation and related
      costs of $403,037; legal and accounting fees of $46,187; consulting fees of
      $64,800; rent and utilities of $93,893; general office expenses of $124,475;
      and
      loss reserve expense of $22,919. Expenses incurred during the comparative three
      month period in 2007 consisted primarily of the following expenses: compensation
      and related costs, $501,313; accounting, audit and professional fees, $7,404;
      consulting fees, $80,246; rent and utilities, $74,414; general office expenses,
      $143,201; and loss reserve, $52,994.





During
      the three months ended July 31, 2008, we incurred the following non-cash, equity
      based compensation charges: consulting, $520,000; employee stock and option
      compensation, $67,249; beneficial conversion cost of $318,182 and financing
      costs, $183,115. During the three months ended July 31, 2007, we incurred the
      following non-cash, equity based compensation charges: consulting, $118,510;
      employee stock and option compensation, $67,807; and financing costs,
      $39,600.


15


**Net
      Loss**





We
      incurred a net loss before preferred dividends of $1,709,042 for our three
      months ended July 31, 2008 as compared to $1,062,499 for the corresponding
      three
      month period in 2007. The $646,543 or 60.85% increase in our net loss before
      preferred dividends for our three month interim period ended July 31, 2008
      was
      attributable primarily to a $508,331 or 298.32% increase in interest expense
      and
      financing costs and a $249,135 or 21.2% increase in operating expenses, all
      partially off-set by a $110,922 or 39% increase in revenues.





Our
      net
      loss attributable to common stockholders increased to $1,710,304 for our three
      month period ended July 31, 2008 as compared to $1,067,112 for the corresponding
      three month period in 2007.





**LIQUIDITY
      AND CAPITAL RESOURCES**





As
      of
      July 31, 2008, the Company had negative net worth of $4,098,534. The Company
      generated a deficit in cash flow from operations of $726,458 for the three
      months ended July 31, 2008. Cash flows used in investing activities for the
      three months ended July 31, 2008 was $150,843, primarily due to the purchase
      of
      RISC Loans for $393,354 and net pay-offs of leases of $242,511.





Cash
      flows used in investing activities for the three months ended July 31, 2007
      was
      $1,021,592, primarily due to payments for motorcycles and vehicles of $51,461
      and purchases of RISC Loans in the amount of $970,131.





The
      Company met its cash requirements for operating activities during the three
      month period ended July 31, 2008 primarily through net proceeds from debt
      financing of $1,893,847 offset with payments of $1,020,700 and conversion of
      debt, plus accrued interest of $784,140, to common stock. Additionally, the
      Company had received limited revenues from leasing and financing motorcycles
      and
      other vehicles, municipal leasing program fees and other fees.





The
      Company met its cash requirements for operating and financing activities during
      the three month period ended July 31, 2007 through net proceeds from debt
      financing of $2,188,778 offset with payments of $440,635. Additionally, the
      Company had received limited revenues from leasing and financing motorcycles
      and
      other vehicles, its recently launched private label programs and from dealer
      sign-up fees.





We
      do not
      anticipate incurring significant research and development expenditures, and
      we
      do not anticipate the sale or acquisition of any significant property, plant
      or
      equipment, during the next twelve months. At July 31, 2008 we had 17 full time
      employees. If we fully implement our business plan, we anticipate our employment
      base may increase by approximately 50% during the next twelve months. As we
      continue to expand, we will incur additional cost for personnel. This projected
      increase in personnel is dependent upon our generating revenues and obtaining
      sources of financing. There is no guarantee that we will be successful in
      raising the funds required or generating revenues sufficient to fund the
      projected increase in the number of employees.





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





We
      estimate that we will need to raise approximately $2,000,000 in additional
      funds
      to fully implement our business plan during the next twelve months and for
      our
      general operating expenses. As of July 31, 2008, we have do not have sufficient
      operating capital to continue our planned business operations for the next
      twelve months and for our general operating expenses. The Company obtained
      a
      senior credit facility in July 2005, which was subsequently renewed. Subsequent
      to July 31, 2008, reflective of the current restrictive credit environment,
      this
      lender significantly tightened its lending criteria which, in turn, has caused
      us to tighten our credit criteria thereby, limiting our ability to purchase
      RISC
      Contracts and purchase vehicles for lease. In August 2008, we signed a
      commitment letter with a European based bank for a one year $25 million senior
      secured credit facility, which under certain conditions can be extended for
      a
      second year. The closing of this facility is subject to due diligence,
      documentation and
      certain other terms. If we successfully complete the conditions of this bank,
      we
      anticipate the closing of this facility will occur late in our second fiscal
      quarter or early in our third fiscal quarter. We have an agreement with a
      domestic bank for the leasing of vehicles and equipment by state, political
      subdivisions thereof or other governmental or 501(c)3, not for profit entities.
      Under this agreement, we receive certain fees for finding, negotiating and
      documenting lease transactions purchased by this bank. This agreement is
      exclusive as to motorcycles and other powersports equipment and non-exclusive
      for other equipment and vehicles. A number of these transactions are solicited
      from our dealer base. We are continuously seeking additional credit facilities
      and long term debt financing. Any debt financing, if available, would likely
      require payment of interest and may involve restrictive covenants that could
      impose limitations on the operating flexibility of the Company. If we are not
      successful in generating sufficient liquidity from operations or in raising
      sufficient capital resources to finance our general operating expenses and
      our
      growth, on terms acceptable to us, this would have a material adverse effect
      on
      our business, results of operations, liquidity and financial condition, and
      we
      will have to adjust our planned operations and development to a more limited
      scale.




16




**GOING
      CONCERN ISSUES**





The
      independent auditors report on our April 30, 2008 and 2007 financial statements
      included in the Company’s Annual Report states that the Company’s historical
      losses and the lack of revenues raise substantial doubts about the Company’s
      ability to continue as a going concern, due to the losses incurred and its
      lack
      of significant operations. If we are unable to develop our business, we have
      to
      discontinue operations or cease to exist, which would be detrimental to the
      value of the Company’s common stock. We can make no assurances that our business
      operations will develop and provide us with significant cash to continue
      operations.





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





We
      continue to experience net operating losses. Our ability to continue as a going
      concern is subject to our ability to develop profitable operations. We are
      devoting substantially all of our efforts to developing our business and raising
      capital. Our net operating losses increase the difficulty in meeting such goals
      and there can be no assurances that such methods will prove
      successful.





The
      primary issues management will focus on in the immediate future to address
      this
      matter include: seeking additional credit facilities from institutional lenders;
      seeking institutional investors for debt or equity investments in our Company;
      short term interim debt financing: and private placements of debt and equity
      securities with accredited investors.




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





**INFLATION**





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




**OFF-BALANCE
      SHEET ARRANGEMENTS**





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


17


**TRENDS,
      RISKS AND UNCERTAINTIES**





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





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





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





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





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





The
      present officers and directors own approximately 50% of the outstanding shares
      of common stock, without giving effect to shares underlying convertible
      securities, and therefore are in a position to elect all of our Directors and
      otherwise control the Company, including, without limitation, authorizing the
      sale of equity or debt securities of Sparta, the appointment of officers, and
      the determination of officers’ salaries. Shareholders have no cumulative voting
      rights.





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





If
      we
      fail to remain current on our reporting requirements, we could be removed from
      the OTC Bulletin Board which would limit the ability of broker-dealers to sell
      our securities and the ability of stockholders to sell their securities in
      the
      secondary market. Companies trading on the OTC Bulletin Board, such as us,
      must
      be reporting issuers under Section 12 of the Securities Exchange Act of 1934,
      as
      amended, and must be current in their reports under Section 13, in order to
      maintain price quotation privileges on the OTC Bulletin Board. If we fail to
      remain current on our reporting requirements, we could be removed from the
      OTC
      Bulletin Board. As a result, the market liquidity for our securities could
      be
      severely adversely affected by limiting the ability of broker-dealers to sell
      our securities and the ability of stockholders to sell their securities in
      the
      secondary market.


18


**CRITICAL
      ACCOUNTING POLICIES**





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





**Revenue
      Recognition**





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





The
      Company purchases Retail Installment Sales Contracts (“RISC”) from motorcycle
      dealers. The RISCs are secured by liens on the titles to the vehicles. The
      RISCs
      are accounted for as loans. Upon purchase, the RISCs appear on the Company’s
      balance sheet as RISC loan receivable current and long term. Interest income
      on
      these loans is recognized when it is earned.





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





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





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





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.


19


**Stock-Based
      Compensation**





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





**Website
      Development Costs**





We
      have
      incurred costs to develop a proprietary web-based private label financing
      program for processing including web access, processing credit applications,
      consumer contracts and other related documents and processes. The Company has
      elected to recognize the costs of developing its website and related
      intellectual property the website development costs in accordance with Emerging
      Issue Task Force (“EITF”) No. 00-02, “Accounting for Website Development Costs.”
As such, the Company expenses all costs incurred that relate to the planning
      and
      post implementation phases of development of its website. Direct costs incurred
      in the development phase are capitalized and recognized over the estimated
      useful life. Costs associated with repair or maintenance for the website are
      included in cost of net revenues in the current period expenses. During the
      quarter ended July 31, 2008, the Company expensed $12,685 as website development
      costs.





**RECENT
      ACCOUNTING PRONOUNCEMENT**





There
      have been no significant new pronouncements since the issuance of the Company’s
      Annual Report on Form 10-KSB for the fiscal year ended April 30, 2008.


20


**ITEM
      4.  CONTROLS AND PROCEDURES**





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





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




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


21


**PART
      II. OTHER INFORMATION**




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





In
      May
      and June 2008, in transactions deemed to be exempt from registration under
      the
      Securities Act in reliance on Section 4(2) of the Securities Act, the
      Company **** sold
      to
      seven accredited investors six month unsecured notes in the aggregate amount
      of
      $82,500. All notes bear 6% simple interest, payable in cash or shares, at the
      Company’s option, with principal and accrued interest payable at maturity.
      Should the Company opt to convert these notes at maturity, these notes will
      be
      convertible into shares of common stock at a price equal to a 40% discount
      from
      the lowest closing price of the Company’s common stock for the five trading days
      immediately preceding the receipt of funds by the Company from the purchaser
      of
      notes.





In
      May
      2008, in a transaction deemed to be exempt from registration under the
      Securities Act in reliance on Section 4(2) of the Securities Act, the Company
      sold to one accredited investor an unsecured demand note in the amount of
      $40,000. The note bears 8% simple interest ****





In
      June
      2008, in a transaction deemed to be exempt from registration under the
      Securities Act in reliance on Section 4(2) of the Securities Act, the Company
      entered into a six month consulting agreement with a consultant pursuant to
      which the Company issued 6,000,000 shares of unregistered common stock.





In
      June
      and July 2008, in transactions deemed to be exempt from registration under
      the
      Securities Act in reliance on Section 4(2) of the Securities Act, the Company
      sold to six accredited investors six month unsecured notes in the aggregate
      amount of $360,000. All notes bear 6.5% simple interest, payable in cash or
      shares, at the Company’s option, with principal and accrued interest payable at
      maturity. Should the Company opt to convert these notes at maturity, these
      notes
      will be convertible into shares of common stock at a price equal to a 40%
      discount from the lowest closing price of the Company’s common stock for the
      five trading days immediately preceding the receipt of funds by the Company
      from
      the purchaser of notes.





During
      the three month period ended July 31, 2008, in transactions deemed to be exempt
      from registration under the Securities Act in reliance on Section 4(2) of the
      Securities Act, the Company borrowed from three accredited investors $400,000
      in
      10% short term unsecured notes with due dates from July 19, 2008 to September
      30, 2008. As an inducement for the loans, the Company agreed to issue one share
      of unregistered common stock for each dollar lent. In the event of default,
      the
      interest rate is to increase to 20%, and, for each month the default is not
      cured, the holders are entitled to an additional 0.2 share of unregistered
      common stock for each dollar lent.





In
      August
      2008, in a transaction deemed to be exempt from registration under the
      Securities Act in reliance on Section 4(2) of the Securities Act, the Company
      sold to one accredited investor an unsecured demand note in the amount of
      $70,000. The note bears 8% simple interest ****





In
      August
      2008, in transactions deemed to be exempt from registration under the Securities
      Act in reliance on Section 4(2) of the Securities Act, the Company sold to
      four
      accredited investors $80,000 in short term, unsecured 10% notes due October
      2008. As inducements for these loans, the Company agreed to issue one share
      of
      unregistered common stock for each dollar lent. In the event of default, the
      interest rate is to increase to 20%, and, for each month the default is not
      cured, the holders are entitled to an additional 0.2 share of unregistered
      common stock for each dollar lent.





On
      August
      26, 2008, in a transaction deemed to be exempt from registration under the
      Securities Act in reliance on Section 4(2) of the Securities Act, the Company
      sold to an accredited investor $100,000 in short term, sixty day unsecured
      12%
      note. As an inducement for the loan, the Company agreed to issue 150,000 shares
      of unregistered common stock. In the event of default, the interest rate is
      to
      increase to 20% and, for each month the default is not cured, the holder is
      entitled to 30,000 shares of unregistered common stock.


22


On
      September 2, 2008, in a transaction deemed to be exempt from registration under
      the Securities Act in reliance on Section 4(2) of the Securities Act, the
      Company sold to an accredited investor $70,000 in short term, sixty day
      unsecured 12% note. As an inducement for the loan, the Company agreed to issue
      70,000 shares of unregistered common stock. In the event of default, the
      interest rate is to increase to 25%, subject to usury law, and, for each month
      the default is not cured, the holder is entitled to 56,000 shares of
      unregistered common stock.





In
      August
      2008, in a transaction deemed to be exempt from registration under the
      Securities Act in reliance on Section 4(2) of the Securities Act, the Company
      sold to an accredited investor a $200,000 11% note, secured by equipment, due
      August 2010.




**ITEM
      6.  EXHIBITS.**





The
      following exhibits are filed with this report:




**Exhibit
                Number**
            
            **Description
                of Exhibit**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-Q.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 18 U.S.C. Section
                1350Exhibit
                32.2*
            
            Certification
                of Principal Financial Officer pursuant to 18 U.S.C. Section
                1350*
                Filed herewith


23




**SIGNATURES**





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





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




24