================================================================================
                                  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, 2006

|_|   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 Employer
 incorporation 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
|_|

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

As of February 16, 2006,  we had  106,944,653  shares of common stock issued and
outstanding.

Transitional Small Business Disclosure Format (check one): Yes |_| No |X|

================================================================================
<PAGE>

                        SPARTA COMMERCIAL SERVICES, INC.

                                   FORM 10-QSB
                     FOR THE QUARTER ENDED JANUARY 31, 2006

                                TABLE OF CONTENTS

                                                                            Page
PART I.     FINANCIAL INFORMATION

Item 1.     Financial Statements (Unaudited)                                   3

            Condensed Consolidated Balance Sheets as of January 31, 2006
            and April 30, 2005                                                 3

            Condensed Consolidated Statements of Operations
            for the Three and Nine Months Ended January 31, 2006 and 2005      4

            Condensed Consolidated Statements of Cash Flows
            for the Nine Months Ended January 31, 2006 and 2005                5

            Notes to Unaudited Condensed Consolidated Financial Statements     6

Item 2.     Management's Discussion and Analysis of Financial Condition,      14
            Results of Operations and Plan of Operation

Item 3.     Controls and Procedures                                           23

PART II.    OTHER INFORMATION

Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds       24

Item 6.     Exhibits                                                          25

Signatures                                                                    26


                                       2
<PAGE>

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                                   SPARTA COMMERCIAL SERVICES, INC.
                                CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                         January 31,       April 30,
                                                                             2006            2005
                                                                         ------------    ------------
                                                                          (Unaudited)
<S>                                                                      <C>             <C>
ASSETS

Current assets:
     Cash and cash equivalents                                           $    983,238    $    108,365
     Lease payments receivable, current portion                               114,425          14,764
     Prepaid expenses                                                          74,090              --
     Other current assets                                                       6,034           6,700
                                                                         ------------    ------------
Total current assets                                                        1,177,787         129,829

Motorcycles and other vehicles under operating leases, net of
     accumulated depreciation of $38,742 and $13,392, respectively            270,203          99,886

Property and equipment, net of accumulated depreciation and
     amortization of $43,215 and $15,378, respectively                        111,361         106,809

Finance receivables, net of current portion                                   306,921          21,521

Deposits                                                                      159,552          48,967
                                                                         ------------    ------------
Total assets                                                             $  2,025,824    $    407,012
                                                                         ============    ============

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
     Accounts payable and accrued expenses                               $  2,026,869    $    509,936
     Accrued equity penalties (Note C)                                      2,040,000              --
     Notes payable                                                             28,985         300,000
     Deferred revenue                                                         105,060          23,100
     Due to related party                                                          --          25,000
                                                                         ------------    ------------
Total current liabilities                                                   4,200,914         858,036

Notes payable, long term portion                                              136,446              --
Warrant liability                                                             451,752              --
                                                                         ------------    ------------
Total liabilities                                                           4,789,112         858,036
                                                                         ------------    ------------

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, 21,875 and 18,100 shares issued and outstanding,
       respectively                                                         2,187,500       1,810,000
     Common stock, $0.001 par value; 340,000,000 shares
       authorized, 106,944,654 and 86,005,415 shares issued
       and outstanding, respectively                                          106,945          86,005

     Common stock subscribed                                                  330,000              --

     Additional paid-in capital                                             9,820,151       3,930,629

     Deferred compensation                                                   (309,543)             --

     Accumulated deficit                                                  (14,898,341)     (6,277,658)
                                                                         ------------    ------------
Total stockholders' deficit                                                (2,763,288)       (451,024)
                                                                         ------------    ------------
Total liabilities and stockholders' deficit                              $  2,025,824    $    407,012
                                                                         ============    ============

The  accompanying  notes are an integral part of these  unaudited  condensed  consolidated  financial
statements.
</TABLE>


                                                  3
<PAGE>

<TABLE>
<CAPTION>
                                       SPARTA COMMERCIAL SERVICES, INC.
                               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                        FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2006 AND 2005
                                                 (UNAUDITED)


                                                      For The Three Months           For The Nine Months
                                                        ended January 31,             ended January 31,
                                                 ----------------------------    ----------------------------
                                                      2006           2005            2006            2005
                                                 ------------    ------------    ------------    ------------
<S>                                              <C>             <C>             <C>             <C>
Revenue                                          $     43,008    $     26,416    $     90,629    $     47,879
                                                 ------------    ------------    ------------    ------------
Operating expenses:
     General and administrative                     2,322,057         739,320       3,819,526       1,523,941
     Depreciation and amortization                     22,157          10,131          58,044          17,788
                                                 ------------    ------------    ------------    ------------
Total operating expenses                            2,344,214         749,451       3,877,570       1,541,729

Loss from operations                               (2,301,206)       (723,035)     (3,786,941)     (1,493,850)

Other expense:
     Interest expense and financing cost, net      (1,483,522)             --      (3,066,736)             --
     Change in value of warrant liability             126,177              --         126,177              --
     Loss on sale of asset                                 --              --          (6,500)             --
                                                 ------------    ------------    ------------    ------------
Net loss                                           (3,658,551)       (723,035)     (6,734,000)     (1,493,850)

Preferred dividend                                     29,191         810,000       1,886,683         810,000
                                                 ------------    ------------    ------------    ------------
Net loss attributed to common stockholders       $ (3,687,742)   $ (1,533,035)   $ (8,620,683)   $ (2,303,850)
                                                 ============    ============    ============    ============
Basic and diluted loss per share                 $      (0.04)   $      (0.01)   $      (0.08)   $      (0.02)
                                                 ============    ============    ============    ============
Basic and diluted loss per share attributed to
     common stockholders                         $      (0.04)   $      (0.02)   $      (0.10)   $      (0.03)
                                                 ============    ============    ============    ============

Weighted average shares outstanding                95,648,989      85,934,261      89,586,901      85,934,261


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
</TABLE>


                                                      4

<PAGE>

                        SPARTA COMMERCIAL SERVICES, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE NINE MONTHS ENDED JANUARY 31, 2006 AND 2005
                                   (UNAUDITED)


                                                    2006          2005
                                                -----------    -----------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                        $(6,734,000)   $(1,493,850)
Adjustments to reconcile net loss to net cash
  used in operating activities:
    Depreciation and amortization                    58,045         17,788
    Valuation allowance on deposit                       --         61,000
    Amortization of deferred revenue                 (9,900)            --
    Amortization of deferred compensation           240,252             --
    Stock issued for services                        85,228         82,500
    Stock based finance cost                        973,607        105,303
    Change in warrant liability                    (126,177)            --
    Loss on sale of assets                            6,500             --
Changes in operating assets and liabilities:
  (Increase) decrease in:
    Lease payments receivable                       (31,499)            --
    Prepaid expenses                                (74,090)      (101,800)
    Other current assets                                666        (13,187)
    Deposits                                       (110,585)            --
  Increase (decrease) in:
    Accounts payable and accrued expenses         1,418,030        337,880
    Accrued equity penalties                      2,040,000
    Deferred revenue                                 91,860         33,971
                                                -----------    -----------
Net cash used in operating activities            (2,172,063)      (970,395)
                                                -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of asset                          25,000             --
Cost of asset sold                                  (31,500)            --
Payments for motorcycles and other vehicles        (200,524)       (81,634)
Investment in leases                               (353,562)            --
Purchases of property and equipment                 (32,390)      (137,063)
Net proceeds from marketable securities                  --         13,379
                                                -----------    -----------
Net cash provided by investing activities          (592,976)      (205,318)
                                                -----------    -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of preferred stock, net        1,592,517        810,000
Proceeds from sale of common stock, net           1,726,980             --
Repayment of affiliate advances                     (25,000)       (23,885)
Proceeds from notes                                 372,675        400,000
Payments on notes                                  (357,244)            --
Common stock subscription                           330,000             --
Payments for fractional shares                          (16)            --
                                                -----------    -----------
Net cash provided by financing activities         3,639,912      1,186,115
                                                -----------    -----------

Net increase in cash                                874,873         10,402
Cash and cash equivalents, beginning of year        108,365         11,973
                                                -----------    -----------
Cash and cash equivalents, end of year          $   983,238    $    22,375
                                                ===========    ===========
Cash paid for:
  Interest                                      $    15,788    $        --
  Income taxes                                           --             --

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


                                       5
<PAGE>

                        SPARTA COMMERCIAL SERVICES, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                JANUARY 31, 2006
                                   (UNAUDITED)


NOTE A - SUMMARY OF ACCOUNTING POLICIES

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

Basis of Presentation

The accompanying  unaudited  consolidated financial statements as of January 31,
2006 and for the nine month  periods  ended  January 31, 2006 and 2005 have been
prepared by the Company  pursuant to the rules and regulations of the Securities
and  Exchange  Commission,   including  Form  10-QSB  and  Regulation  S-B.  The
information  furnished  herein  reflects all  adjustments  (consisting of normal
recurring  accruals and  adjustments),  which are, in the opinion of management,
necessary to fairly present the operating  results for the  respective  periods.
Certain  information  and  footnote   disclosures  normally  present  in  annual
financial statements prepared in accordance with accounting principles generally
accepted  in the United  States of America  have been  omitted  pursuant to such
rules and regulations.  The company  believes that the disclosures  provided are
adequate to make the  information  presented  not  misleading.  These  financial
statements should be read in conjunction with the audited  financial  statements
and  explanatory  notes for the year ended  April 30, 2005 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 nine  months  ended  January  31,  2006 are not  necessarily
indicative  of the  results to be expected  for the full year  ending  April 30,
2006.

The unaudited condensed  consolidated  financial statements include the accounts
of the Company and its wholly owned subsidiary, Sparta Commercial Services, LLC.
All significant  intercompany  transactions and balances have been eliminated in
the consolidated financial statements.

Estimates

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

Revenue Recognition

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


                                       6
<PAGE>

                        SPARTA COMMERCIAL SERVICES, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                JANUARY 31, 2006
                                   (UNAUDITED)


NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

Revenue Recognition (continued)

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

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

The  Company  charges  fees to  manufacturers  and other  customers  related  to
creating a private label version of the Company's  financing  program  including
web access, processing credit applications, consumer contracts and other related
documents and  processes.  Fees received are amortized and booked as income over
the length of the  contract.  At January 31,  2006,  the  Company  had  recorded
deferred revenue related to these contracts of $13,200.

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 $0.04 and $0.02 for the three  months  ended  January  31, 2006 and
2005,  respectively,  and $0.10 and $0.03 for the nine months ended  January 31,
2006 and 2005,  respectively.  For the nine  months  ended  January 31, 2006 and
2005,  29,685,131 and 7,932,486  potential shares,  respectively,  were excluded
from the shares used to calculate  diluted earnings per share as their inclusion
would reduce net loss per share.

Reclassifications

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


                                       7
<PAGE>

                        SPARTA COMMERCIAL SERVICES, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                JANUARY 31, 2006
                                   (UNAUDITED)


NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

Stock Based Compensation

On December 16, 2004,  the Financial  Accounting  Standards  Board (FASB) issued
FASB  Statement  No.  123R  (revised  2004),  "Share-Based  Payment"  which is a
revision of FASB Statement No. 123,  "Accounting for Stock-Based  Compensation".
Statement 123R  supersedes APB opinion No. 25,  "Accounting  for Stock Issued to
Employees",  and amends  FASB  Statement  No.  95,  "Statement  of Cash  Flows".
Generally,  the approach in Statement 123R is similar to the approach  described
in Statement 123. However,  Statement 123R requires all share-based  payments to
employees,  including grants of employee stock options,  to be recognized in the
income statement based on their fair values.  Pro-forma  disclosure is no longer
an  alternative.  On April 14, 2005,  the SEC amended the effective  date of the
provisions of this  statement.  The effect of this  amendment by the SEC is that
the Company will have to comply with Statement 123R and use the Fair Value based
method of accounting no later than the fourth  quarter of 2006.  Management  has
elected to apply Statement 123R in the third quarter of fiscal year 2006.

Recent Accounting Pronouncement

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.  Management is assessing the implications of
this standard,  which may materially  impact the Company's results of operations
in the fourth quarter of fiscal year 2006 and thereafter.

In February 2006, the FASB issued FASB Staff Position  ("FSP") No. FAS 123(R)-4,
"Classification   of  Options  and  Similar   Instruments   Issued  as  Employee
Compensation  That Allow for Cash Settlement upon the Occurrence of a Contingent
Event," which amends SFAS No. 123(R) to require that options  issued with a cash
settlement  feature that can be exercised  upon the  occurrence  of a contingent
event  that is outside  the  employee's  control  should  not be  classified  as
liabilities  until it becomes  probable that the event will occur. For companies
that adopted SFAS No.  123(R) prior to the issuance of the FSP,  application  is
required  in the first  reporting  period  beginning  after  February  3,  2006.
Currently,  the Company has no stock options  outstanding  with  contingent cash
settlement  features,  and as a result,  the FSP will not impact  the  Company's
consolidated financial statements.


                                       8
<PAGE>

                        SPARTA COMMERCIAL SERVICES, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                JANUARY 31, 2006
                                   (UNAUDITED)


NOTE B - RELATED PARTY TRANSACTIONS

The Company  entered into a purchase option  agreement with American  Motorcycle
Leasing Corp., an entity controlled by the Company's President and a significant
shareholder,  on  November  2, 2004 at a cost to Sparta  Commercial  Services of
$250,000. This agreement granted Sparta Commercial Services the right, for a two
year period,  to purchase  portions of a certain  portfolio of equipment  leases
that American Motorcycle Leasing Corp. owns. The portfolio is secured by a first
priority security interest in favor of Citibank,  N.A. or its assigns.  The cost
of $250,000 has been  charged to  operations  in fiscal 2005.  As of January 31,
2006 this amount has been paid in full.

In January 2005,  the Company  received a loan of $25,000 from an officer.  This
loan is non-interest bearing and is payable on demand. The loan was repaid as of
January 31, 2006.

NOTE C - STOCKHOLDERS' EQUITY

On December 27, 2004, the Company  effected a one-for-two  hundred reverse stock
split followed by a forward split of twenty  five-for-one  of its authorized and
outstanding  shares of common  stock,  $.001 par value.  All  references  in the
financial  statements and notes to financial  statements,  numbers of shares and
share amounts have been retroactively restated to reflect the reverse split.

Common Stock

During the nine months ended January 31, 2006, the Company issued 464,745 shares
of common  stock,  valued at  $243,270,  as  additional  costs  related to loans
received  by the  Company.  This  amount  has been  charged to  financing  cost.
Additionally,  as  consideration  for loans received during the third quarter of
fiscal 2006, the Company will issue 70,000 shares of common stock.  The value of
these shares has been recorded at $38,500 and this amount is included in accrued
expenses at January 31, 2006 and has been charged to financing cost.

During August 2005, the Company issued 651,124 shares of common stock in payment
of $150,000 of principal  amount of notes payable and $12,781 of related accrued
interest.  The shares were issued at a value below  market price and the Company
has recorded a financing cost of $323,672 related to this discount.

During  September and October 2005,  the Company  issued an aggregate of 600,000
shares of common stock, pursuant to a consulting agreement. The shares have been
valued at $474,000 and this amount is being  amortized over the one year term of
the agreement, commencing August 1, 2005.

During October 2005,  the Company issued 113,637 shares of common stock,  valued
at $85,228, for services.

During  October and November  2005, the Company  received  $330,000  pursuant to
subscription  agreements  for  units,  at  $0.60  per  unit,  of  the  Company's
securities,  with each  unit  consisting  of one  share of common  stock and one
warrant.

The Company will issue  250,000  shares of common stock as payment of consulting
fees.  These fees have been accrued in the  financial  statements  at a value of
$85,000 as of January 31, 2006.

During December 2005, the Company entered into an agreement pursuant to which it
agreed to issue  2,650,000  shares of common stock for  consulting  and advisory
services rendered and to be rendered. The shares have been valued at $1,590,000,
based  on the  fair  value  of the  Company's  common  stock  on the date of the
agreement.  This amount has been  charged to expense in the third  quarter  and,
since the shares  have not been issued as of January  31,  2006,  this amount is
included in accrued expenses in the financial statements.


                                       9
<PAGE>

                        SPARTA COMMERCIAL SERVICES, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                JANUARY 31, 2006
                                   (UNAUDITED)


NOTE C - STOCKHOLDERS' EQUITY (continued)

Common Stock (continued)

During  December 2005 and January 2006,  the Company sold  10,151,400  shares of
common stock through a private  placement.  The Company received net proceeds of
$1,726,980  from the  sale.  Costs of  $212,952  were  deducted  from the  gross
proceeds and additional costs of $39,590 were paid by the Company.

In connection with the private  placement  described  above, the Company granted
1,015,140  common stock purchase  warrants to the placement  agent. The warrants
are  exercisable  immediately,  have an  exercise  price of $0.215 per share and
expire  in  five  years.   The  warrants  were  valued  at  $577,929  using  the
Black-Sholes  pricing model. The assumptions used in the Black-Scholes model are
as follows:  (1) dividend  yield of 0%; (2)  expected  volatility  of 177%,  (3)
risk-free interest rate of 3.65%, 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  ($577,929)  and included the change in
fair  value  from the date of  issuance  to  January  31,  2006 in other  income
(expense),  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 $451,752 at January 31, 2006.

During  December 2005, the Company  granted  options to purchase an aggregate of
160,000 shares of common stock to two employees. The options have been valued at
$75,795  using  the  Black-Sholes   option  pricing  model  with  the  following
assumptions:  (1) dividend  yield of 0%; (2) expected  volatility  of 177%,  (3)
risk-free  interest rate of 4.38%, and (4) expected life of 3 years. The options
have an  exercise  price of $0.59,  vest over a 38 month  period  and  expire if
unexercised in ten years.

During January 2006, the Company  issued  8,958,333  shares of common stock upon
conversion of 13,975 shares of preferred stock.

Preferred Stock Series A

In December  2004,  the Company  commenced  a private  placement  to raise up to
$3,000,000  through the sale of up to 30 units of our securities at $100,000 per
unit. Each unit consists of (i) 1,000 shares of series A convertible, redeemable
preferred  stock and (ii) warrants to purchase  320,513  shares of common stock,
exercisable  for three  years at $0.195 per  share.  The  preferred  stock has a
stated value of $100 per share, carries a 6% annual cumulative dividend, payable
semi-annually in arrears,  and is convertible into shares of common stock at the
rate of one preferred share into 641 shares of common stock.

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.  Costs of
$182,484  were  deducted  from the  proceeds.  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.  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.


                                       10
<PAGE>

                        SPARTA COMMERCIAL SERVICES, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                JANUARY 31, 2006
                                   (UNAUDITED)


NOTE C - STOCKHOLDERS' EQUITY (continued)

Preferred Stock Series A (continued)

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

In the event that a registration statement covering all of the securities issued
pursuant to the private placement of preferred shares is not declared  effective
by the Securities and Exchange Commission by July 31, 2005, the number of shares
issuable upon conversion of the preferred stock and the exercise of the warrants
will be  increased  by 0.75%  for each 30 day  period  during a six  month  term
following  July 31, 2005 that a  registration  statement  has not been  declared
effective.  Following this initial six month term, the number of shares issuable
upon  conversion of the preferred stock and the exercise of the warrants will be
increased  by 1.50% for each 30 day  period  during a six month  term  following
January 31, 2006 that a registration  statement has not been declared effective.
There was not an effective  registration  statement as of July 31, 2005,  nor is
there one as of January 31, 2006. Additionally,  if a registration statement has
not been filed as of  October  27,  2005,  the  number of shares  issuable  upon
conversion  of the  preferred  stock and the  exercise of the  warrants  will be
increased by 1% for each 30 day period until a registration  statement is filed.
A  registration  statement was not filed as of October 27, 2005, and one has not
been filed as of January  31,  2006.  As a result,  the  Company  has accrued an
expense of  $1,440,000  and  $2,040,000  during the three and nine months  ended
January 31, 2006, respectively, related to these penalty provisions. This amount
will be settled  through the  issuance of equity  securities.  As of January 31,
2006, an aggregate of 1,953,290  penalty shares and 1,140,146  penalty  warrants
has accrued.  As of March 16, 2006,  the Company has obtained  waivers  covering
approximately 775,000 penalty shares and 388,000 penalty warrants. These waivers
aggregate  approximately  $761,000  of the  accrued  expense.  The  waivers  are
contingent  upon  the  company  filing a  registration  statement  covering  the
original  shares  and  warrants  within  30 days  of the  final  closing  of the
Company's current private placement offering.

During the three  months  ended  January  31,  2005,  the Company  issued  2,250
preferred  shares at a stated  value of $100 per share and  warrants to purchase
721,154 shares of common stock, exercisable for three years at $0.195 per share,
for aggregate gross proceeds of $225,000 received from investors.  In connection
with the private  placement,  during the nine months ended January 31, 2005, the
Company issued as compensation to the placement agent warrants to 144,231 shares
of common stock,  exercisable for five years at $0.172 per share.  The warrants,
which were  valued at  approximately  $105,303  using the  Black-Scholes  option
pricing model,  were  recognized as a cost of issuance of the Series A Preferred
shares.

In accordance  with EITF 98-5,  the Company  recognized  an imbedded  beneficial
conversion  feature present in the Preferred Stock.  The Company  recognized and
measured an aggregate of $810,000,  which equals to the  intrinsic  value of the
imbedded  beneficial  conversion  feature,  to additional  paid-in capital and a
return  to  the  Preferred  Stock  holders.  Since  the  preferred  shares  were
convertible  at the date of issuance,  the return to the preferred  shareholders
attributed to the beneficial  conversion  feature has been recognized in full at
the date the Preferred Stock was issued.


                                       11
<PAGE>

                        SPARTA COMMERCIAL SERVICES, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                JANUARY 31, 2006
                                   (UNAUDITED)


NOTE C - STOCKHOLDERS' EQUITY (continued)

Preferred Stock Series A (continued)

During the nine months  ended  January  31,  2005,  the  Company  sold rights to
acquire  securities of the Company to investors for aggregate  gross proceeds of
$585,000.  Pursuant  to the terms of the  rights,  as the  Company  conducted  a
closing  to a private  placement  transaction  in 2004  utilizing  a  designated
registered  broker-dealer  as a placement  agent, on January 1, 2005, the rights
have  automatically  converted into 5,850 preferred  shares at a stated value of
$100 per  share and  warrants  to  purchase  1,875,001  shares of common  stock,
exercisable for three years at $0.195 per share.

NOTE D - GOING CONCERN MATTERS

The accompanying consolidated 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
consolidated  financial statements the Company has realized minimal revenue from
operations and has incurred significant operating losses since inception.  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,  the planned principal
operations  have not commenced  and 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.


                                       12
<PAGE>

                        SPARTA COMMERCIAL SERVICES, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                JANUARY 31, 2006
                                   (UNAUDITED)


NOTE E - NON-CASH FINANCIAL INFORMATION

During the nine months ended January 31, 2006 the Company:

      o     Recorded a dividend on preferred stock of $1,775,000  related to the
            fair value of the class 'C' warrants issued with preferred stock and
            the related beneficial conversion feature.

      o     Incurred costs of $182,483  related to the sale of preferred  stock.
            These costs were deducted from the proceeds.

      o     Issued  464,745  shares of common  stock,  valued  at  $243,270,  as
            additional costs related to loans received by the Company.

      o     Issued  651,124  shares of common  stock in payment of  $150,000  of
            principal  amount of notes  payable and  $12,781 of related  accrued
            interest.  The shares were issued at a value below  market price and
            the Company has  recorded a  financing  cost of $323,672  related to
            this discount.

      o     Issued an aggregate of 600,000 shares of common stock, pursuant to a
            consulting  agreement.  The shares have been valued at $474,000  and
            this amount is being amortized over twelve months, commencing August
            1, 2005.

      o     Issued  113,637  shares of common  stock,  valued  at  $85,228,  for
            services.

      o     Issued  8,958,333  shares of common stock upon  conversion of 13,975
            shares of preferred stock.

      o     Incurred  costs of  $212,952  related  to the sale of common  stock.
            These costs were deducted from the proceeds.

      o     Granted an aggregate of 160,000 stock  options to  employees.  These
            options have been valued at $75,795.


During the nine months ended January 31, 2005 the Company:

      o     Recorded a dividend on  preferred  stock of $810,000  related to the
            fair value of the class 'C' warrants issued with preferred stock and
            the related beneficial conversion feature.

NOTE F - NOTES PAYABLE

The company  finances certain of its leases through a third party. The repayment
terms  are  generally  three to five  years and the  notes  are  secured  by the
underlying  vehicles.  The weighted average interest rate at January 31, 2006 is
9.2%.

NOTE G - SUBSEQUENT EVENT

In  February  2006,  the  Company  completed  a private  placement  offering  of
1,565,667  shares of common  stock,  par value $0.001 per share,  to  accredited
investors for net proceeds of $258,768.

In March 2006, the Company completed a private  placement  offering of 4,039,200
shares common stock, par value $0.001 per share, to accredited investors for net
proceeds of $691,127.


                                       13
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION,  RESULTS OF
        OPERATIONS 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,  2005 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

Unless otherwise  stated,  the discussion and analysis refers to the business of
Sparta  Commercial  Services,  Inc. and does not refer to the operations for our
former business which was essentially a non-operating shell company.

The period from inception through April 30, 2005 was a developmental  period for
us,  setting  up  credit  procedures,  setting  our  arrangements  with  vehicle
distributors,   obtaining   personnel,   seeking   financing   to  support   our
developmental  efforts,  and  seeking  credit  facilities.   Consequently,   our
operations are subject to all the risks inherent in the  establishment  of a new
business enterprise. In fiscal year 2005, we began to obtain regulatory approval
in several states,  where required,  prior to commencing active  operations.  In
February 2006, we attended our first national  motorcycle  industry  dealer only
trade show "Dealer EXPO 2006" and over 200 dealers  visited our booth during the
show.  We are  actively  signing  up  dealers to  participate  in our  financing
programs,  including our private label financing programs. As of March 15, 2006,
1,016  (compared to 478 at March 15, 2005) dealers have logged onto our web site
and downloaded dealer applications and of that number, 254 have been approved as
Sparta or private label authorized  dealers. We believe this trend will continue
over the foreseeable future. We have signed up four manufacturers to our private
label  programs,  and are in  negotiations  with  other  manufacturers  who have
indicated an interest in a private label program.  Additionally,  we have signed
three third party marketing  arrangements  with industry  recognized  consulting
firms who will introduce our programs to their dealer clients and train them how
to effectively use them. We have increased our marketing staff from 1 at January
31, 2005 to 2 at January 31, 2006 and to 4 at March 15, 2006.  As of the date of
this  filing,  we have more than  sufficient  operating  capital to fulfill  our
planned business operations for the next twelve months for a credit line reserve
and for our general operating  expenses.  Although the Company obtained a senior
credit  facility in July 2005,  which allowed us to commence our initial  active
operations,  we will  need to  obtain  additional  credit  facilities  to  fully
implement  our business  plan as this current  credit  facility  only allows for
origination  across three out of five credit  profiles.  We need the  additional
credit  facilities so that we have the funding  sources to originate  leases and
finance  contracts  across all credit  profiles of our  business  model.  We are
presently seeking additional credit facilities and long term debt.


                                       14
<PAGE>

RESULTS OF OPERATIONS

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

For the three months ended January 31, 2006 and 2005, we have generated limited,
but increasing,  sales revenues,  have incurred significant  expenses,  and have
sustained  significant  losses.  We believe we will continue to earn  increasing
revenues from operations during the remainder of fiscal 2006 and in the upcoming
fiscal year.

REVENUES

Revenues  totaled  $43,008  during the three  months  ended  January 31, 2006 as
compared to $26,416  during the three  months ended  January 31,  2005.  Current
period revenue was comprised primarily of $38,460 in lease revenue and $3,300 in
private label fees.  Prior period revenue was comprised  primarily of $21,865 in
lease revenue and $4,550 in private label fees.

COSTS AND EXPENSES

General and  administrative  expenses  were  $2,322,057  during the three months
ended  January 31,  2006,  compared to $739,320  during the three  months  ended
January 31, 2005, an increase of $1,582,737,  or 214%.  Expenses incurred during
the current three month period  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.  Expenses  incurred during the comparative  three month
period in 2005 consisted primarily of the following  expenses:  Compensation and
related costs,  $301,038;  Accounting,  audit and  professional  fees,  $78,861;
Consulting  fees,  $71,030;  and the value of  warrants  issued  to the  private
placement  agent  of  $105,303.  Of  the  current  quarter  consulting  expense,
$1,590,000  will be paid  through  the  issuance of  2,650,000  shares of common
stock.

We incurred a non-cash  charge of $38,500  during the three months ended January
31, 2006 related to shares of common stock to be issued in connection  with debt
financing.  Additionally,  we recorded an expense of  $1,440,000  related to the
failure  to file a  registration  statement  or have an  effective  registration
statement   covering  the  underlying  shares  of  common  stock  issuable  upon
conversion of our preferred stock and the related warrants. This expense will be
settled  through the issuance of shares and warrants or the  cancellation of the
obligation  through  negotiation  with  shareholders.  There were no  comparable
expenses  during the nine months ended  January 31, 2005.  We have also recorded
non-cash income of $126,177  related to the decrease in value of warrants issued
with  registration  rights.  The fair value of these warrants is classified as a
liability on the balance sheet.

NET LOSS

We incurred a net loss before  preferred  dividends of $3,658,551  for our three
months  ended  January 31, 2006 as  compared to $723,035  for the  corresponding
interim  period in 2005.  The $2,935,516 or 406% increase in our net loss before
preferred  dividends for our three month  interim  period ended January 31, 2006
was  attributable  primarily to a $1,351,981 net increase in non-cash  financing
costs, and an increase of $1,582,737 in general and administrative expense.

We also incurred  non-cash  preferred  dividend expense of $29,191 for our three
month  period  ended  January  31,  2006  with an  expense  of  $810,000  in the
corresponding interim period of 2005. The decrease in preferred dividend expense
was  attributable  to the sale of convertible  preferred stock that commenced in
December,  2004 for which we incurred a non cash charge of $810,000 which equals
the  intrinsic  value of the  imbedded  beneficial  conversion  feature  for the
Preferred Stock holders for the three months ended January 31, 2005.

Our net loss attributable to common stockholders increased to $3,687,742 for our
three month  period  ended  January 31, 2006 as compared to  $1,533,035  for the
corresponding  period in 2005. The $2,154,707  increase in net loss attributable
to common stockholders for our three month period ended January 31, 2006 was due
to the $2,935,516 increase in our net loss before preferred dividends, offset by
the aforesaid $780,809 decrease in preferred dividend expense.


                                       15
<PAGE>

COMPARISON  OF THE NINE MONTHS  ENDED  JANUARY 31, 2006 TO THE NINE MONTHS ENDED
JANUARY 31, 2005

For the nine months ended January 31, 2006 and 2005, we have generated  limited,
but increasing  sales revenues,  have incurred  significant  expenses,  and have
sustained  significant  losses.  We  believe  we will  begin to earn  increasing
revenues from operations during the remainder of fiscal 2006 and in the upcoming
fiscal year.

REVENUES

Revenues  totaled  $90,629  during the nine  months  ended  January  31, 2006 as
compared to $47,879  during the nine months  ended  January  31,  2005.  Current
period revenue was comprised  primarily of $62,806 in lease  revenue,  $6,747 in
dealer  fees,  and  $9,900 in private  label  fees.  Prior  period  revenue  was
comprised  primarily  of $16,607 in lease  revenue,  $20,300 in dealer  fees and
$9,517 in private label fees.

COSTS AND EXPENSES

General and administrative expenses were $3,819,526 during the nine months ended
January 31, 2006,  compared to  $1,523,941  during the nine months ended January
31, 2005,  an increase of  $2,295,585,  or 151%.  Expenses  incurred  during the
current  nine  month  period  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.  Expenses  incurred during the  comparative  nine month
period consisted primarily of the following  expenses:  Compensation and related
costs, $623,400;  Accounting, audit and professional fees, $143,038;  Consulting
fees, $164,068;  Rent, $50,364; Travel and entertainment,  $58,480 License fees,
$150,633,  and the value of warrants  issued to the private  placement  agent of
$105,303. Of the current nine months consulting expense, $1,590,000 will be paid
through the issuance of 2,650,000 shares of common stock.

In connection with its private placement transactions,  the Company has expensed
non-cash costs of $406,665 during the nine months ended January 31, 2006 related
to warrants  granted to the private  placement  agent,  with no related  expense
during the  comparative  period.  The Company also incurred a non-cash charge of
$605,442  during the nine months  ended  January  31, 2006  related to shares of
common stock issued or to be issued in  connection  with debt  financing and has
recorded an expense of $2,040,000  related to the failure to file a registration
statement or have an effective  registration  statement  covering the underlying
shares of common stock  issuable upon  conversion of it preferred  stock and the
related  warrants.  This expense will be settled  through the issuance of shares
and  warrants.  There were no comparable  expenses  during the nine months ended
January 31, 2005. We have also recorded  non-cash income of $126,177  related to
the  decrease in value of warrants  issued with  registration  rights.  The fair
value of these warrants is classified as a liability on the balance sheet.

NET LOSS

We incurred a net loss before  preferred  dividends of  $6,734,000  for our nine
months ended  January 31, 2006 as compared to $1,493,850  for the  corresponding
interim  period in 2005.  The $5,240,150 or 351% increase in our net loss before
preferred dividends for our nine month interim period ended January 31, 2006 was
attributable  primarily to a $2,295,585  increase in general and  administrative
expense and a net increase of $2,924,771 in non-cash financing costs.

We also incurred  preferred  dividend  expense of $1,886,683  for our nine month
period ended  January 31, 2006 with an expense of $810,000 in the  corresponding
interim  period  of  2005.  The  increase  in  preferred  dividend  expense  was
attributable  to the sale of  convertible  preferred  stock  that  commenced  in
December,  2004 and concluded in July 2005. In addition to dividends  payable on
the outstanding  preferred stock,  preferred  dividend expense for 2006 and 2005
includes an aggregate charge of $1,775,000 and $810,000,  respectively,  related
to  warrants  issued  with the  convertible  preferred  stock  and a  beneficial
conversion feature associated with the preferred stock.

Our net loss attributable to common stockholders increased to $8,620,683 for our
nine month  period  ended  January 31, 2006 as  compared to  $2,303,850  for the
corresponding  period in 2005. The $6,316,833  increase in net loss attributable
to common  stockholders for our nine month period ended January 31, 2006 was due
to the $5,240,150 increase in our net loss before preferred dividends, increased
by the aforesaid $1,076,683 increase in preferred dividend expense.


                                       16
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

As of January 31, 2006, the Company had a working capital deficit of $3,023,127.
The Company  generated a deficit in cash flow from  operations of $2,172,063 for
the nine months ended January 31, 2006.  This deficit is primarily  attributable
to the Company's net loss from  operations of  $6,734,000,  partially  offset by
depreciation  and amortization of $58,045 and the fair value attributed to stock
and  warrants  issued of  $1,172,910,  and to changes in the balances of current
assets and  liabilities.  Accounts  payable and accrued  expenses  increased  by
$3,458,030,  deferred  revenue  increased  by 91,860 and  prepaid  expenses  and
deposits  increased  by  $184,675.  Included  in  accounts  payable  and accrued
expenses at January 31, 2006 are accrued penalties of $2,040,000  related to the
failure  to file a  registration  statement  or have an  effective  registration
statement   covering  the  underlying  shares  of  common  stock  issuable  upon
conversion of it preferred stock and the related warrants.  This expense will be
settled  through the issuance of shares and warrants or the  cancellation of the
obligation  through  negotiation  with  shareholders.  Also included in accounts
payable and accrued  expenses  at January  31, 2006 are accrued  consulting  and
advisory  fees of  $1,590,000,  which  will  be paid  through  the  issuance  of
2,650,000 shares of common stock.

The  Company,  pursuant  to the  terms  of the  private  placement  of  Series A
Convertible Preferred Stock with Warrants (the "Units"), which placement had its
final  closing on July 27,  2005,  is  required  to issue to the holders of such
Units and the Placement  Agent penalty  shares such that the number of shares of
Common Stock  issuable upon  conversion of the Series A Preferred  Stock and the
exercise of the Warrants and the  Placement  Agent  Warrants  shall be increased
each month until the Company files with the Securities  and Exchange  Commission
(the "SEC"),a  registration  statement  registering the common shares underlying
the Units.  As of January  31,  2006,  the  aggregate  number of penalty  shares
accrued for the shares  issuable  upon  conversion  of the Series A  Convertible
Preferred  Stock is  1,953,290  and the fair value  expensed for these shares at
January 31, 2006 is $1,332,000.  The aggregate  number of penalty shares accrued
upon exercise of the Warrants and Placement  Agent Warrants is 1,140,146 and the
fair  value   expense  for  these  shares  at  January  31,  2006  is  $708,000.
Additionally,  for each month, or fraction  thereof,  subsequent to January 2006
and until such registration  statement is filed, the Company will be required to
issue  an  additional  574,498  penalty  shares  for the  shares  issuable  upon
conversion  of the Series A  Convertible  Preferred  Stock and  335,537  penalty
shares upon exercise of the Warrants and Placement Agent  Warrants.  Pursuant to
the terms of the $3 million  private  placement  of the  Company's  common stock
which  commenced in December  2005 (the "PPM"),  the Company is required to file
with  the SEC a  registration  statement  registering  the  common  shares  sold
pursuant to the PPM. If such  registration  statement is not filed within thirty
days of the final  closing of the PPM,  and for each month or  fraction  thereof
until such  registration  is filed,  the Company will be required to issue up to
179,487 additional penalty shares to the purchasers of the PPM and the Placement
Agent.  The Company intends to file,  within 30 days of the final closing of the
PPM, a  registration  statement  with the SEC  registering  all required  shares
pursuant to the Unit and PPM  offerings.  As of March 16, 2006,  the Company has
obtained,  from Unit  holders,  conditional  waivers  which cancel the Companies
obligation to issue a total of approximately 775,000 penalty shares representing
valuation  expense of approximately  $524,000 at January 31, 2006.  Assuming the
condition  is met the  $524,000  will be  recognized  as a reduction of non-cash
financing cost with a like reduction in accrued accounts  payable.  Such waivers
are  conditioned  upon the Company filing with the SEC a registration  statement
registering  the common shares  underlying the Units within 30 days of the final
closing of the Company's  current  private  placement  offering.  The Company is
seeking to obtain penalty  waivers from the remaining Unit holders and Placement
Agent.  There  is no  assurance  that  such  additional  waivers  can or will be
obtained.

Cash flows used in investing  activities  for the nine months ended  January 31,
2006 was  $592,976,  primarily  due to the purchase of property and equipment of
$32,390,  payments for  motorcycles  and vehicles of $200,524 and investments in
leases of $353,562.

The Company met its cash  requirements  during the nine month period through net
proceeds from the issuance of equity of  $3,319,497,  debt financing of $372,675
and subscriptions for units of our securities, consisting of one share of common
stock and a warrant to purchase one share of common stock  exercisable for three
years at $0.80 per share,  of  $330,000,  all  partially  offset by  payments on
bridge  loans and other  financing of  $357,244.  Additionally,  the Company has
received  limited  revenues  from leasing and  financing  motorcycles  and other
vehicles,  its recently  launched private label programs and from dealer sign-up
fees.


                                       17
<PAGE>

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  $1,750,000 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.  As of the date of this
filing,  we have more than sufficient  operating capital to continue our planned
business  operations  for the next twelve  months and for our general  operating
expenses.  Although the Company  obtained a senior credit facility in July 2005,
which  allowed us to  commence  our initial  active  operations,  this  facility
finances  only  three of our five  credit  tiers,  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 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 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,  2005 and 2004  financial
statements  included in the  Company's  Annual  Report states that the Company's
historical  losses and the lack of revenues raise  substantial  doubts about the
Company's ability to continue as a going concern, due to the losses incurred and
its lack of significant operations. If we are unable to develop our business, we
have to discontinue  operations or cease to exist, which would be detrimental to
the value of the  Company's  common stock.  We can make no  assurances  that our
business  operations  will  develop  and  provide  us with  significant  cash to
continue operations.

PLAN OF OPERATIONS

ADDRESSING THE GOING CONCERN ISSUES

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

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

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

o     seeking additional credit lines from institutional lenders;

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

o     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.


                                       18
<PAGE>

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

From our inception  through the period ended January 31, 2006, we have relied on
the  services  of outside  consultants  for  services  and  currently  have nine
employees.  In  order  for  us to  attract  and  retain  quality  personnel,  we
anticipate we will have to offer competitive salaries to future 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 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.

CRITICAL ACCOUNTING POLICIES

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

REVENUE RECOGNITION

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

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

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.


                                       19
<PAGE>

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

STOCK-BASED COMPENSATION

On December 16, 2004,  the Financial  Accounting  Standards  Board (FASB) issued
FASB  Statement  No.  123R  (revised  2004),  "Share-Based  Payment"  which is a
revision of FASB Statement No. 123,  "Accounting for Stock-Based  Compensation".
Statement 123R  supersedes APB opinion No. 25,  "Accounting  for Stock Issued to
Employees",  and amends  FASB  Statement  No.  95,  "Statement  of Cash  Flows".
Generally,  the approach in Statement 123R is similar to the approach  described
in Statement 123. However,  Statement 123R requires all share-based  payments to
employees,  including grants of employee stock options,  to be recognized in the
income statement based on their fair values.  Pro-forma  disclosure is no longer
an  alternative.  On April 14, 2005,  the SEC amended the effective  date of the
provisions of this  statement.  The effect of this  amendment by the SEC is that
the Company will have to comply with Statement 123R and use the Fair Value based
method of accounting no later than the fourth  quarter of 2006.  Management  has
elected to apply Statement 123R in the third quarter of fiscal year 2006.

RECENT ACCOUNTING PRONOUNCEMENT

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.  Management is assessing the implications of
this standard,  which may materially  impact the Company's results of operations
in the fourth quarter of fiscal year 2006 and thereafter.

In February 2006, the FASB issued FASB Staff Position  ("FSP") No. FAS 123(R)-4,
"Classification   of  Options  and  Similar   Instruments   Issued  as  Employee
Compensation  That Allow for Cash Settlement upon the Occurrence of a Contingent
Event," which amends SFAS No. 123(R) to require that options  issued with a cash
settlement  feature that can be exercised  upon the  occurrence  of a contingent
event  that is outside  the  employee's  control  should  not be  classified  as
liabilities  until it becomes  probable that the event will occur. For companies
that adopted SFAS No.  123(R) prior to the issuance of the FSP,  application  is
required  in the first  reporting  period  beginning  after  February  3,  2006.
Currently,  the Company has no stock options  outstanding  with  contingent cash
settlement  features,  and as a result,  the FSP will not impact  the  Company's
consolidated financial statements.


                                       20
<PAGE>

WEBSITE DEVELOPMENT COSTS

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

OFF-BALANCE SHEET ARRANGEMENTS

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

TRENDS, RISKS AND UNCERTAINTIES

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

CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS

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

POTENTIAL FLUCTUATIONS IN ANNUAL OPERATING RESULTS

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

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

DEPENDENCE UPON MANAGEMENT

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

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


                                       21
<PAGE>

CONTINUED CONTROL OF CURRENT OFFICERS AND DIRECTORS

The present  officers and directors  own  approximately  62% of the  outstanding
shares of common stock,  without giving effect to shares underlying  convertible
securities,  and  therefore  are in a position to elect all of our Directors and
otherwise control the Company,  including,  without limitation,  authorizing the
sale of equity or debt securities of Sparta,  the  appointment of officers,  and
the determination of officers' salaries.  Shareholders have no cumulative voting
rights.

MANAGEMENT OF GROWTH

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

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

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


                                       22
<PAGE>

ITEM 3. CONTROLS AND PROCEDURES

Our management,  with the participation of our Chief Executive  Officer,  who is
also  presently  serving  as 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.


                                       23
<PAGE>

                           PART II. OTHER INFORMATION

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

In July 2005, in a transaction  deemed to be exempt from registration  under the
Securities  Act in reliance on Section  4(2) of the  Securities  Act, we entered
into an agreement with an individual for business consulting services for a term
of one year pursuant to which we agreed to issue 250,000  shares of common stock
as compensation. These shares have not yet been issued as of January 31, 2006.

In July 2005, in a transaction  deemed to be exempt from registration  under the
Securities  Act in reliance on Section  4(2) of the  Securities  Act, we entered
into an agreement with an individual for investor relations  consulting services
for a term of two years,  with  services  beginning in August 2005,  pursuant to
which  we  agreed  to  issue  600,000   shares  of  common  stock  per  year  as
compensation.  We issued  300,000 shares in September 2005 and 300,000 shares in
October 2005 to the consultant as  compensation  for the first year of services.
We issued  250,000  shares in March 2006,  in advance for the second year of the
agreement.

In October 2005, in a transaction  deemed to be exempt from  registration  under
the Securities Act in reliance on Section 4(2) of the Securities Act, we sold to
an accredited  investor  300,000 units of our  securities at $0.60 per unit, for
gross proceeds of $180,000.  Each unit consists of (i) one share of common stock
and (ii) a warrant to purchase one share of common stock,  exercisable for three
years at $0.80 per share.  These  shares  have not yet been issued as of January
31, 2006. We used the proceeds for working capital purposes.

In November 2005, in transactions  deemed to be exempt from  registration  under
the Securities Act in reliance on Section 4(2) of the Securities Act, we sold to
two  accredited  investors an aggregate of 250,001  units for gross  proceeds of
$150,000. Each unit consists of (i) one share of common stock and (ii) a warrant
to purchase one share of common stock,  exercisable for three years at $0.80 per
share. These shares have not yet been issued as of January 31, 2006. We used the
proceeds for working capital purposes.

In December 2005, in transactions  deemed to be exempt from  registration  under
the Securities Act in reliance on Section 4(2) of the Securities Act, we entered
into  agreements  with  three  accredited  investors  for  bridge  loans  in the
aggregate amount of $175,000. The bridge loans were to mature on March 31, 2006,
together with simple interest at the rate of 10% per annum. As part of the loan,
we agreed to issue the lenders as an equity kicker an aggregate of 70,000 shares
of our common  stock.  These  shares  have not yet been issued as of January 31,
2006. In the event of default on repayment, as penalty, the simple interest rate
on the unpaid principal shall be increased to a rate of 20% per annum commencing
from the date of default,  and the number of shares issuable as an equity kicker
shall be  increased  by 50% for each month that such default has not been cured.
The loans were repaid in January 2006.

On December 21, 2005,  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 stock options to purchase an aggregate of 160,000 shares of the
Company's  common  stock,  exercisable  for a period of up to ten years from the
date of grant at $0.59 per  share,  subject to vesting  criteria  through  March
2009, to two employees.

On December 22, 2005,  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 an agreement with Maxim Group, a placement agent,  pursuant
to which Maxim was granted  2,650,000  shares of the  Company's  common stock as
payment for  services  rendered and to be  rendered..  These shares have not yet
been issued as of January 31, 2006.

In December 2005 and January 2006, we sold 10,151,399 shares of our common stock
in a private placement to accredited  investors for an aggregate  purchase price
of  $1,979,523.  The  aforementioned  securities  were sold in reliance upon the
exemption  afforded by the  provisions of Regulation  D, as  promulgated  by the
Securities and Exchange Commission under the Securities Act of 1933, as amended.
We granted  the  investors  registration  rights  with  respect to the shares of
common stock purchased.  In connection with the private  placement,  the Company
granted 1,015,140 common stock purchase warrants,  exercisable for five years at
$0.2145 per price, to the placement agent.


                                       24
<PAGE>

In February  2006,  we sold  1,565,667  shares of our common  stock in a private
placement to accredited  investors for an aggregate  purchase price of $305,305.
The aforementioned  securities were sold in reliance upon the exemption afforded
by the provisions of Regulation D, as promulgated by the Securities and Exchange
Commission  under  the  Securities  Act of 1933,  as  amended.  We  granted  the
investors  registration  rights  with  respect  to the  shares of  common  stock
purchased. In connection with the private placement, the Company granted 156,567
common stock purchase warrants, exercisable for five years at $0.2145 per price,
to the placement agent.

In March  2006,  we sold  4,039,200  shares  of our  common  stock in a  private
placement to accredited  investors for an aggregate  purchase price of $787,644.
The aforementioned  securities were sold in reliance upon the exemption afforded
by the provisions of Regulation D, as promulgated by the Securities and Exchange
Commission  under  the  Securities  Act of 1933,  as  amended.  We  granted  the
investors  registration  rights  with  respect  to the  shares of  common  stock
purchased. In connection with the private placement, the Company granted 156,567
common stock purchase warrants, exercisable for five years at $0.2145 per price,
to the placement agent.


ITEM 6. EXHIBITS

The following exhibits are filed with this report:

Exhibit Number  Description of Exhibit
--------------  ----------------------------------------------------------------
Exhibit 10.1*   Form of Warrant included in Units
Exhibit 10.2*   Form of Loan Agreement, December 2005
Exhibit 10.3    Form  of  Subscription  Agreement  (Incorporated by reference to
                Exhibit 10.1 of Form 8-K filed on January 4, 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 and Principal Financial
                Officer Pursuant to Securities Exchange
                Act Rule 13a-14(a)/15d-14(a)
Exhibit 32.1*   Certification of Chief Executive Officer and Principal Financial
                Officer  Pursuant  to Securities Exchange Act Rule 13a-14(b) and
                18 U.S.C. Section 1350


----------
*     Filed herewith.


                                       25
<PAGE>

                                   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 22, 2006                            By: /s/ Anthony L. Havens
                                                    ----------------------------
                                                    Anthony L. Havens
                                                    Chief Executive Officer and
                                                    Principal Financial Officer


                                       26