Summary of SPARTA COMMERCIAL SERVICES, INC.

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-K 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 JANUARY 31, 2009 TO THE THREE MONTHS ENDED
JANUARY 31, 2008

For the three months ended January 31, 2009 and 2008, 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 2009 and in the upcoming fiscal year.

REVENUES

Revenues totaled $278,268 during the three months ended January 31, 2009 as compared to $288,605 during the three months ended January 31, 2008. Current period revenue was comprised of $70,235 in lease revenue, $184,405 in loan revenue, $1,350 in Private Label and Preferred Provider Program fees and $22,278 in other income. Prior period revenue was comprised primarily of $100,612 in lease revenue, $153,685 in loan revenue, $3,850 in Private Label and Preferred Provider Program fees and $30,459 in other income.

COSTS AND EXPENSES

General and administrative expenses were $886,927 during the three months ended January 31, 2009, compared to $683,698 during the three months ended January 31, 2008, an increase of $203,230 or 29.7%. Expenses incurred during the current three month period consisted primarily of the following expenses: Rent, utilities and Telecom $371,445; Accounting, audit and professional fees, $48,597; Consulting fees, $48,475; Rent, utilities and telecom, $89,371, Travel and meals and entertainment, $7,070 and Advertising, Marketing and Website expenses of $6,608. Expenses incurred during the comparative three month period in 2008 consisted primarily of the following expenses: Compensation and related costs, $385,540; Accounting, audit and professional fees, $44,410; Consulting fees, $34,348; Rent and utilities, $66,670, Travel and entertainment, $14,600 and Marketing expenses of $4,134.

We incurred non-cash charges of $186,043 during the three months ended January 31, 2009, of which $125,636 is related to options and shares of common stock issued for consulting fees and services, $55,407 is related to shares and warrants for financing cost and $5,000 for stock based employee compensation. We incurred non-cash charges of $236,598 during the three months ended January 31, 2008, of which $69,703 is related to options and shares of common stock issued to employees and $166,895 is related to shares and warrants for financing cost.

NET LOSS

We incurred a net loss before preferred dividends of $968,617 for our three months ended January 31, 2009 as compared to $798,028 for the corresponding interim period in 2008. The $170,589 or 21.4% increase in our net loss before preferred dividends for our three month interim period ended January 31, 2009 was attributable primarily to a 3.6% decrease in revenue and a 27.9% increase in operating expenses and a 14.9% decrease in interest expense and financing costs. We also incurred non-cash preferred dividend expense of $1,261 for our three month period ended January 31, 2009, compared with an expense of $16,797 in the corresponding interim period of 2008.

Our net loss after dividends attributable to common stockholders increased to $969,878 for our three month period ended January 31, 2009 as compared to $814,825 for the corresponding period in 2008. The $155,053 increase in net loss attributable to common stockholders for our three month period ended January 31, 2009 was due to the $10,337 decrease in revenuers and the $209,977 in crease in operating expenses, the $49,926 decrease in interest expenses and financing costs and the $15,536 decrease in preferred dividend.

COMPARISON OF THE NINE MONTHS ENDED JANUARY 31, 2009
TO THE NINE MONTHS ENDED JANUARY 31, 2008

For the nine months ended January 31, 2009 and 2008, 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 2009 and in the upcoming fiscal year.

REVENUES

Revenues totaled $974,237 during the nine months ended January 31, 2009 as compared to $865,532 during the nine months ended January 31, 2008. Current period revenue was comprised primarily of $238,573 in lease revenue, $582,113 in loan revenue, $5,217 in Preferred Provider Program fees, and $148,334 in other income. Prior period revenue was comprised primarily of $302,953 in lease revenue, $446,338 in loan revenue, $23,550 in Preferred Provider Program fees, and $92,690 in other income.

COSTS AND EXPENSES

General and administrative expenses were $3,228,507 during the nine months ended January 31, 2009, compared to $2,950,249 during the nine months ended January 31, 2008, an increase of $278,258 or 9.4%. Expenses incurred during the current nine month period consisted primarily of the following expenses: Compensation and related costs, $1,124,479; Accounting, audit, legal and other professional fees, $272,942; Consulting fees, $152,650; Rent and utilities, $287,500; Travel and entertainment, $38,343 and Advertising and Marketing of $16,337. Expenses incurred during the comparative nine month period in 2008 consisted primarily of the following expenses: Compensation and related costs, $1,319,027; Accounting, audit, legal and other professional fees, $206,003; Consulting fees, $300,897; Rent and utilities, $212,617 Travel and entertainment, $53,198 and Advertising and Marketing of $18,729.

For the nine months ended January 31, 2009, we had expensed non-cash costs of $396,804 related to shares and warrants granted in connection with debt financing, $318,182 for beneficial discount on debt conversion privileges, $194,688 in stock and options issued to employees and $645,449 in stock and warrants issued to consultants. During nine months ending January 31, 2008, we recorded non-cash income of $299,663 related to the decrease in value of warrants issued with registration rights and other expenses. For the nine months ended January 31, 2008, we had expensed non-cash costs of $297,401 related to shares and warrants granted in connection with debt financing, $217,311 in stock and options issued to employees and $167,160 in stock and warrants issued to consultants.

NET LOSS

We incurred a net loss before preferred dividends of $3,675,633 for our nine months ended January 31, 2009 as compared to $3,052,791 for the corresponding interim period in 2008. The $622,843 or 20.4% increase in our net loss before preferred dividends for our nine month interim period ended January 31, 2009 was attributable to a $108,705 or 12.6% increase in revenue, a $278,258 or 9.4% increase in operating expenses and non-cash financing costs (of which there was an $455,666 (118.5%) increase in non-cash equity based compensation), and a $488,197 or 65.2% increase in interest expense and non-cash financing costs of which $418,306 was an 139.6% increase in non-cash financing costs.

We also incurred non-cash preferred dividend expense of $3,784 for our nine month period ended January 31, 2009 as compared with a non-cash expense of $26,022 in the corresponding interim period of 2008. The decrease in preferred dividend expense primarily attributable to the conversion of preferred shares to common stock during the nine month period ended January 31, 2009.

Our net loss attributable to common stockholders of $3,679,417 for our nine month period ended January 31, 2009 was $600,604 or 19.5% greater than the nine month period ending January 31, 2008 due to the $108,705 (12.6%) increase in revenues, the $278,258 (9.4%) increase in operating expenses (of which there was an $455,666 (118.5%) increase in non-cash equity based compensation),and the $488,197 (65.2%) increase in interest expense and financing cost of which $418,306 was an 139.6% increase in non-cash financing costs.

LIQUIDITY AND CAPITAL RESOURCES

As of January 31, 2009, we had a deficit net worth of $5,249,976. We generated a deficit in cash flow from operations of $1,329,702 for the nine months ended January 31, 2009. This deficit is primarily attributable to our net loss of $3,679,417, partially offset by depreciation and amortization of $153,533, $1,040,324 in equity based compensation, $416,469 in stock based finance costs, $325,000 in beneficial conversion discount, and to changes in the balances of current assets and liabilities. Accounts payable and accrued expenses increased $499,716, and pre-paid expenses increased $147,702.

Cash provided by investing activities for the nine months ended January 31, 2009 was $739,421, primarily due to the net pay offs of RISC contracts of $438,309, of leased motorcycles and vehicles of $383,666, and the net cost of purchased portfolio of $82,554.

We met our cash requirements during the nine month period through net proceeds from convertible notes payable of $1,348,000, net proceeds from notes payable of $408,500, loans payable to officers of $133,500, and net proceeds of secured notes payable of $107,195. Additionally, we have received limited revenues from leasing and financing motorcycles and other vehicles, private label programs and from dealer sign-up fees and municipal lease origination 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 January 31, 2009, we had 15 full time employees. If we fully implement our business plan, we anticipate our employment base may increase by approximately 50% during the next twelve months. As we continue to expand, we will incur additional cost for personnel. This projected increase in personnel is dependent upon our generating revenues and obtaining sources of financing. There is no guarantee that we will be successful in raising the funds required or generating revenues sufficient to fund the projected increase in the number of employees.

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

We estimate that we will need to raise approximately $2,000,000 in additional funds to fully implement our business plan during the next twelve months and for our general operating expenses. As of January 31, 2009, 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. In August 2008, reflective of the current restrictive credit environment, this lender severely tightened its lending criteria which, in turn, has caused us to tighten our credit criteria, thereby severely limiting our ability to purchase RISC Contracts and purchase vehicles for lease. On December 19, 2008, our wholly owned subsidiary, Sparta Funding LLC, entered into a one year, extendable revolving credit agreement with Autobahn Funding Company LLC as Lender and DZ Bank AG Deutsche Zentral-Genossenschaftsbank New York Branch ("DZ Bank") as Administrative Agent and Liquidity Agent in the amount of $25,000,000 for the purpose of financing retail installment sales contracts and leases secured by new and used Powersports Vehicles (motorcycles over 600cc, select scooters and ATVs). Additionally, a portion of this facility can be used to finance municipal and commercial fleet leases. Prior to the initial drawdown from the facility the registrant is required to meet certain financial covenants. As of January 31, 2009, we have not met those covenants. We have an agreement with a domestic bank for the leasing of vehicles and equipment by state, political subdivisions thereof or other governmental or 501(c) (3), not for profit entities. Under this agreement, we receive certain fees for finding, negotiating and documenting lease transactions purchased by this bank. This agreement is exclusive as to motorcycles and other powersports equipment and non-exclusive for other equipment and vehicles. A number of these transactions are solicited from our dealer base. In October 2008, we entered into a Vendor Program Agreement with a private funding source which will provide commercial, non-governmental, non-consumer leases, rentals and other customized funding arrangements for the acquisition of powersports vehicles to customers referred to this funding source by the Company. Under this agreement, we receive certain fees for finding, negotiating and documenting lease transactions purchased by this funding source. We are continuously seeking additional credit facilities and long term debt financing. Any debt financing, if available, would likely require payment of interest and may involve restrictive covenants that could impose limitations on the operating flexibility of the Company. If we are not successful in generating sufficient liquidity from operations or in raising sufficient capital resources to finance our general operating expenses and our growth, on terms acceptable to us, this would have a material adverse effect on our business, results of operations, liquidity and financial condition, and we will have to adjust our planned operations and development to a more limited scale.

GOING CONCERN ISSUES

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

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

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

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

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

INFLATION

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

OFF-BALANCE SHEET ARRANGEMENTS

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

TRENDS, RISKS AND UNCERTAINTIES

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

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

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

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

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

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

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

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

CRITICAL ACCOUNTING POLICIES

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

Revenue Recognition

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

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

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

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

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

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

Stock-Based Compensation

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

Impairment of Long-Lived Assets

The Company has adopted Statment of Financial Accounting Standards No. 121 (SFAS 12). The Statement requires that live-long assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. SFAS No. 121 also requires assets to be disposed of be reported at the lower of the carrying amount or the fair value less costs to sell.

RECENT ACCOUNTING PRONOUNCEMENT

Refer to Note A - Interim Financial Data of the Notes to Condensed Consolidated Financial Statements.