<PAGE>   1
                                  FORM 10-Q/A

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549


[X]         QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended      September 30, 1998
                                ------------------------------

                                       OR

[ ]         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

For the transition period from                to
                               --------------    -------------

Commission file number              0-21682
                       ---------------------------------------

                                  SPARTA, Inc.
       -------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

           Delaware                                          63-0775889
  -------------------------------                         -----------------
  (State or other jurisdiction of                         (I.R.S. Employer)
  incorporation or organization)

       23041 Avenida de la Carlota, Suite 325, Laguna Hills, CA 92653-1595
       -------------------------------------------------------------------
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (949) 768-8161
       -------------------------------------------------------------------
              (Registrant's telephone number, including area code)

                                 Not Applicable
       -------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act or 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.

Yes    x         No
     -----            -----

As of October 4, 1998, the registrant had 5,683,537 shares of common stock, $.01
par value per share, issued and outstanding.




<PAGE>   2


                                  SPARTA, Inc.

            QUARTERLY REPORT FOR THE PERIOD ENDED SEPTEMBER 30, 1998

                                      INDEX


PART I  FINANCIAL STATEMENTS

ITEM 1  Quarterly Financial Statements

        Statements of Income for the Nine Months Ended September 30, 1998
        and September 30, 1997 (Unaudited)

        Balance Sheets as of September 30, 1998 and December 31, 1997
        (Unaudited)

        Statement of Cash Flows for the Nine Months Ended September 30, 1998 and
        September 30, 1997 (Unaudited)

        Notes to Consolidated Financial Statements (Unaudited)

ITEM 2  Management's Discussion and Analysis of Financial Condition and Results
        of Operations

PART II OTHER INFORMATION

SIGNATURE

EXHIBIT 11  Computations of Earnings per Share



<PAGE>   3

                                     PART I
                              FINANCIAL STATEMENTS



CONSOLIDATED STATEMENT OF INCOME
         (UNAUDITED)

<TABLE>
<CAPTION>

                                   THREE MONTHS ENDED SEPTEMBER 30    NINE MONTHS ENDED SEPTEMBER 30
                                   --------------------------------  --------------------------------
                                        1998             1997             1998             1997
                                   ---------------  ---------------  ---------------  ---------------
<S>                                <C>              <C>              <C>              <C>
SALES                                 $24,169,000      $23,408,000      $70,763,000      $63,519,000
                                   ---------------  ---------------  ---------------  ---------------
COSTS AND EXPENSES:

  Labor costs and related
     benefits                          14,100,000       12,316,000       38,637,000       33,342,000

  Subcontractor & other costs           5,824,000        7,121,000       18,406,000       17,271,000

  Facility costs                        1,798,000        1,620,000        5,434,000        5,157,000

  Travel and other                        515,000          328,000        2,199,000        2,068,000

  Interest expense, net                    58,000           26,000          256,000          134,000
                                   ---------------  ---------------  ---------------  ---------------

                                       22,295,000       21,411,000       64,932,000       57,972,000
                                   ---------------  ---------------  ---------------  ---------------

INCOME BEFORE PROVISION FOR
  TAXES ON INCOME                       1,874,000        1,997,000        5,831,000        5,547,000

PROVISION FOR TAXES ON INCOME             787,000          839,000        2,449,000        2,330,000
                                   ---------------  ---------------  ---------------  ---------------

NET INCOME                            $ 1,087,000      $ 1,158,000      $ 3,382,000      $ 3,217,000
                                   ===============  ===============  ===============  ===============

BASIC EARNINGS PER SHARE              $      0.20      $      0.15      $      0.48      $      0.42
                                   ===============  ===============  ===============  ===============

DILUTED EARNINGS PER SHARE            $      0.16      $      0.14      $      0.45      $      0.39
                                   ===============  ===============  ===============  ===============
</TABLE>





* EARNINGS PER SHARE AMOUNTS PRESENTED FOR PRIOR YEARS HAVE BEEN RESTATED IN
  ACCORDANCE WITH STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 128, "EARNINGS
  PER SHARE".



    The accompanying notes are an integral part of the financial statements


<PAGE>   4

CONSOLIDATED BALANCE STATEMENT
         (UNAUDITED)

<TABLE>
<CAPTION>
                                                   SEPTEMBER 30        DECEMBER 31,
                                                       1998                1997
                                                  ----------------    ----------------
                                                    (Unaudited)          (Audited)
<S>                                              <C>                  <C>
ASSETS

CURRENT ASSETS
  Cash                                                $   178,000         $   198,000
  Accounts receivable                                  18,941,000          23,557,000
  Prepaid expenses                                        503,000             448,000
                                                  ----------------    ----------------
    TOTAL CURRENT ASSETS                               19,622,000          24,203,000

  Equipment and improvements, net                       9,049,000           7,321,000
  Other assets                                          2,000,000           1,685,000
                                                  ----------------    ----------------
    TOTAL ASSETS                                      $30,671,000         $33,209,000
                                                  ================    ================


LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
  Accrued compensation                                $ 4,726,000         $ 5,723,000
  Accounts payable and other accrued expenses           1,043,000           3,005,000
  Current portion of notes payable                        433,000             477,000
  Income tax payable                                           --             199,000
  Deferred income taxes                                 2,708,000           2,446,000
                                                  ----------------    ----------------
    TOTAL CURRENT LIABILITIES                           8,910,000          11,850,000

NOTES PAYABLE                                                  --           2,658,000
SUBORDINATED NOTES PAYABLE                                328,000             646,000
DEFERRED INCOME TAXES                                     828,000           1,677,000

Commitments and contingencies

REDEEMABLE PREFERRED STOCK
  Preferred stock, $.01 par value; 2,000,000
  shares authorized; 569,039 and 569,039 
  shares issued and outstanding                         4,604,000           3,926,000

STOCKHOLDERS' EQUITY
  Common stock, $.01 par value, 25,000,000
  shares authorized; 13,692,211 and 13,070,700 
  shares issued                                           137,000             131,000
  Additional paid-in capital                           30,909,000          26,340,000
  Retained earnings                                    27,857,000          25,152,000
  Treasury stock                                     (42,902,000)        (39,171,000)
                                                  ----------------    ----------------
    TOTAL STOCKHOLDERS' EQUITY                         16,001,000          12,452,000
                                                  ----------------    ----------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY           $ 30,671,000        $ 33,209,000
                                                  ================    ================
</TABLE>





    The accompanying notes are an integral part of the financial statements


<PAGE>   5

CONSOLIDATED STATEMENT OF CASH FLOWS
           (UNAUDITED)

<TABLE>
<CAPTION>
                                                            NINE MONTHS ENDED SEPTEMBER 30
                                                         -------------------------------------
                                                               1998                1997
                                                         -----------------    ----------------
<S>                                                         <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net Income                                                   $3,382,000          $3,217,000
  Adjustments to reconcile net income to net 
    cash provided by operating activities:
      Depreciation and amortization                               960,000           1,134,000
      Loss on sale of equipment                                    19,000             105,000
      Employee compensation paid in stock                       2,382,000           1,690,000
      Changes in assets and liabilities:
        Accounts receivable                                     4,132,000           (245,000)
        Prepaid expenses                                         (55,000)              11,000
        Other assets                                              168,000           (137,000)
        Accrued compensation                                    (998,000)           1,227,000
        Accounts payable and other accrued expense            (1,961,000)         (1,388,000)
        Income taxes payable/receivable                            63,000           (393,000)
        Deferred income taxes                                   (847,000)           (849,000)
      Tax benefit relating to stock plan                          404,000              84,000
                                                         -----------------    ----------------
          NET CASH PROVIDED BY OPERATING ACTIVITIES             7,649,000           4,456,000
                                                         -----------------    ----------------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Capital expenditures                                      (2,707,000)         (2,178,000)
                                                         -----------------    ----------------
          NET CASH USED IN INVESTING ACTIVITIES               (2,707,000)         (2,178,000)
                                                         -----------------    ----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of stock                               1,789,000           1,622,000
  Cash purchases of treasury stock                            (3,731,000)         (3,785,000)
  Net (repayments) proceeds line-of-credit agreement          (2,658,000)             802,000
  Principal payments on debt                                    (362,000)           (886,000)
                                                         -----------------    ----------------
          NET CASH USED IN FINANCING ACTIVITIES               (4,962,000)         (2,247,000)
                                                         -----------------    ----------------

NET DECREASE IN CASH                                             (20,000)              31,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                  198,000             151,000
                                                         -----------------    ----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                        178,000             182,000
                                                         =================    ================

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: 
  Cash paid during the period for:
    Interest                                                  $   266,000         $   134,000
                                                         =================    ================
    Income taxes                                              $ 3,235,000         $ 3,494,000
                                                         =================    ================

</TABLE>



    The accompanying notes are an integral part of the financial statements



<PAGE>   6

                                  SPARTA, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                                   (Unaudited)


NOTE A - BASIS OF PRESENTATION
------------------------------

The accompanying financial information has been prepared in accordance with the
instructions to Form 10-Q and therefore does not necessarily include all
information and footnotes necessary for a fair presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles.

The Company's fiscal year is the 52 or 53 week period ending on the Friday
closest to December 31. The Company's last fiscal year ended on January 2, 1998;
and, its third quarter ended October 4, 1998 and corresponding third quarter
last year on October 3, 1997. To aid the reader of the financial statements, the
year end has been presented as December 31, 1997 and the quarters and nine
months ended September 30, 1997 and September 30, 1998.

In the opinion of management, the unaudited financial information for the
nine-month periods ended September 30, 1998 and September 30, 1997 reflects all
adjustments (which include only normal, recurring adjustments) necessary for a
fair presentation thereof.

NOTE B - RECEIVABLES
--------------------

Unbilled accounts receivable include $1,778,000 of costs incurred on projects
for which the Company has been requested by the customer to begin work under a
new contract or extend work under a present contract, but for which final
contract negotiations or formal contracts or contract modifications have not
been executed at September 30, 1998.

NOTE C - INCOME TAXES
---------------------

Income taxes for interim periods are computed using the estimated annual
effective rate method.







<PAGE>   7

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

The Management Discussion and Analysis of Financial Condition and Results of
Operation contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ significantly from
projections contained in forward-looking statements. For a more complete
discussion of the factors which could cause such a difference, the Company's
Form 10-K for the year ended December 31, 1997, should be consulted.

The following table sets forth, for the periods indicated, selected financial
results from the Company's continuing operations and audited Financial
Statements.

RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
                                 Three months ended September 30,  Nine months ended September 30,
                                 -------------------------------- --------------------------------
                                     1998             1997             1998            1997
                                 --------------  ---------------  ---------------  --------------
<S>                                <C>            <C>               <C>              <C>
  Sales                             24,169,000       23,408,000       70,763,000      63,519,000
  Gross profit (1)                   2,231,000        1,967,000        6,543,000       5,919,000
  Gross profit as a % of costs          10.17%            9.17%           10.19%          10.28%
  Net income (2)                     1,087,000        1,158,000        3,382,000       3,217,000
  Number of staff                          699              610              699             610
</TABLE>

<TABLE>
<CAPTION>
                                                                    Balance at
                                                 ------------------------------------------------
                                                 September 30,    December 31,     September 30,
                                                      1998             1997            1998
                                                 ---------------  ---------------  --------------
<S>                                               <C>               <C>              <C>
  Funded 12 month backlog                            33,000,000       29,900,000      37,500,000
  Total 12 month contract
    backlog                                         105,200,000       93,200,000      92,200,000
  Stockholders equity                                16,001,000       12,452,000      12,032,000
  Equity per share (3)                                     2.58             1.89            1.92
  Stock repurchase notes                                761,000        1,123,000       1,255,000
  Line of credit                                             --        2,658,000       1,263,000
  Number in days sales in
    receivables                                              75               93              83
  Current ratio                                             2.4              2.1             2.0
</TABLE>



(1) The Company defines gross profits as sales less costs and expenses excluding
    interest costs and certain expenses which cannot be billed to its 
    government customers.
(2) Prior to adjustments for interest and accretion on stock - See Exhibit 11.
(3) Equity per share based on weighted shares of common stock outstanding for
    period ending, including weighted shares of preferred stock outstanding.


REVENUES

The Company's contract revenues for the third quarter were up 3.3% from the
corresponding three month period in 1997. Third quarter sales of $24,619,000
were the highest quarterly total in the Company's history. Profitability for the
three month period ended September 30, 1998 was up 13.4% when compared to the
corresponding period of 1997. Profitability as a percent of costs increased from
9.17% to 10.17% for the corresponding period in 1998. Borrowings against the
Company's line of credit were zero as of the end of the 3rd quarter compared to
a borrowing level of $1,262,000 at the end of the corresponding period in 1997.
The Company has been successful in reducing its days sales from 80 days at June
30, 1998 to 75 days at September 30, 1998. Reduced spending for capital and IR&D
projects as well as improvement in days sales outstanding in the second half of
the year has contributed to this reduction in borrowing requirements.




<PAGE>   8

NEW CONTRACTS AND ANNUALIZED BACKLOG

During the third quarter, the Company reversed roles with the small business
prime contractor on the Range Facilities and Information Support Services
(RF&ISS) contract at NASA Dryden. As the new prime contractor on this program,
the Company's Technical Services Operation (TSO) will gain a small increase in
sales this fiscal year, but a large increase in sales over the next three years
(about $9,000,000 increase per year). The International Systems Operation (INSO)
won a competitive bid with the Army's Missile Systems Intelligence Command
(MSIC) for the Laboratory Operation Support (LOS) contract. This is a
$43,000,000 contract over five years. Backlog increases were experienced on
several existing contracts by the Company's Command, Control, Communications,
Computer Intelligence Operation (C4IO), the Advanced Systems and Technology
Operation (ASTO), and the Defense Programs Operation (DPO). The Company had one
major competitive loss during the quarter by its Technical Services Operation
(TSO). It was a bid to the Air Force Research Laboratory at Edwards Air force
Base for the Rocket Propulsion Services Program. It was a $30,000,000 program
over five years.

In summary, the Company's funded backlog at the end of the third quarter was
$33,000,000 as compared to $37,500,000 for the same period last year. Annualized
contract backlog increased 12.9% in the first three quarters from the backlog
starting the year. Backlog went from $93,200,000 at the start of the year to
$105,000,000 at the end of the third quarter. The Company plans to submit many
proposals in the next two quarters as the opportunity backlog is still very
strong.

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary sources of liquidity are funds provided by operations and
the bank line of credit. The Company's line of credit limit is $12,000,000.
Borrowings under the line of credit at September 30, 1998 were zero. Days sales
outstanding decreased to 75 days at September 30, 1998, from 80 days at June 30,
1998, and from 83 days at September 30, 1997. The Company continues to actively
monitor receivables with emphasis placed on collection activities. The Company's
debt-to-equity ratio, as defined by the bank, was 0.4 at September 30, 1998
versus 0.8 at December 31, 1997 and 0.7 at September 30, 1997. All capital
expenditures were financed through operating funds and the revolving line of
credit. The Company's cash flow from operations plus borrowing under its line of
credit are expected to provide sufficient funds for the Company's operations,
common stock repurchases, capital expenditures, and future long-term debt
requirements.

STOCKHOLDER EQUITY

The Company increased stockholder's equity from $12,452,000 at the end of 1997
to $16,001,000 at September 30, 1998. The Company's strong earnings and net
proceeds from the sale and repurchase of stock have accounted for this increase.
The Company is now repurchasing all the stock from terminating employees and
intends to continue to do so for the foreseeable future.

STOCK PURCHASE AGREEMENT

In November, 1994, the Company entered into a Stock Purchase Agreement (the
"Agreement") with Science Applications International Corporation ("SAIC"), under
which SAIC was obligated to buy, during the first year of the Agreement, shares
of the Company's Preferred Stock with an aggregate price of $1,200,000. Under
the Agreement, SAIC also has the option, but not the obligation, to buy
additional shares of Preferred Stock, provided that SAIC's total purchases
during any quarter may not exceed $600,000 and provided further, that the total
number of shares of Preferred Stock purchases during any quarter may not exceed
the total number of shares of Common Stock offered to the Company for repurchase
by the Company's existing stockholders. The purchase price for all shares
purchased under the Agreement by SAIC is equal to the then current Formula Price
applicable to the Company's Common Stock. The Agreement grants SAIC the option
to require the Company to repurchase all of the Preferred Stock held by SAIC at
the Formula Price at time of option exercise. In the event the option is
exercised, the Company may issue SAIC a subordinated note bearing an interest
rate equal to the lesser of prime or 10%. SAIC suspended its purchase of Company
preferred stock in the last quarter of 1996 and has not purchased any stock
since. The total purchase as of September 30, 1998 of $2,400,000 (569,039
shares) of Company Preferred Stock represents 9.10% of the Company's total
outstanding stock. Through September 30, 1998 accretion of Preferred Stock was
$2,204,000.


<PAGE>   9
EFFECTS OF FEDERAL FUNDING FOR DEFENSE PROGRAMS

The Company continues to have over 90% of its contracts with the Department of
Defense. The Company anticipates little or no effect on its anticipated sales
for 1998 as a result of the outcome of the November, 1998 federal elections for
the Senate and House of Representatives. However, sales in its government
business areas for 1999 and subsequent years could be impacted by this election
and the yet to be resolved federal budget for Government Fiscal Year 1999.

YEAR2000

THE STATEMENTS IN THE FOLLOWING SECTION CONSTITUTE "YEAR2000 READINESS
DISCLOSURE" WITHIN THE MEANING OF THE YEAR2000 INFORMATION AND READINESS
DISCLOSURE ACT.

        YEAR2000 PLAN - In 1997, the Company informally initiated a program on
its internal web site to prepare computing infrastructure for Year2000
[YEAR2000] readiness. In 1998, the Company initiated a more formal program to
complete the preparation and to perform testing of the Company's computing
systems and microchip dependent infrastructure. In addition to computing and
microchip technology, the evaluation of potential business disruptions relating
to vendors, suppliers, facilities, customers, and utilities are also a part of
this program. The Company has appointed a senior information systems engineer as
Corporate Information Systems Director [CISD]. Included in the CISD's assignment
is the responsibility for corporate YEAR2000 readiness. The Company's Network
Steering Group (NSG), an on-going organization of the Company's top information
system personnel tasked with maintenance and upgrade of all Company information
system resources, will support the CISD in Year2000 issues. The CISD reports
directly to the Executive Committee and will periodically brief the Board of
Directors on YEAR2000 progress.

        IT SYSTEMS - The Company is heavily dependent on its internal computing
systems to perform its primary business activity. Systems software includes both
internally developed software/databases and commercial third-party supplied
software/databases. The hardware systems are dominated by desktop PCs, graphics
workstations, servers, and networking hardware. The Company has no mainframe
computers at the present time. A portion of the Company's business is also the
development of software for customers and commercial sales.

        IT REMEDIATION PLAN - The CISD has established a four-phase program, as
shown in the accompanying chart, to ensure that its IT systems will be ready for
YEAR2000.

<TABLE>
<CAPTION>
                         7/1/98 to   10/1/98 to   1/1/1999 to   4/1/99 to    7/1/99 to    10/1/99 to
IT REMEDIATION           9/30/98     12/31/98      3/31/99       6/30/99      9/30/99      12/31/99
<S>                      <C>       <C>            <C>            <C>       <C>            <C>
=======================================================================================================
P I - Increasing
  Awareness                ----------------------------------------------------------------------

P II - Developing
  and Assessing                         -----------------

P III - Remediation                         -------------------------

P IV - Testing                                          --------------------------


NON-IT REMEDIATION

Evaluation of
  Embedded Chip Systems                    ------------------

Remediation and Test                                  ----------------------
  of Embedded Systems

Contingency Planning                                      ---------------------------------------

=======================================================================================================
</TABLE>







<PAGE>   10

Phase one, increasing internal awareness, was begun several years ago and is an
on-going activity assuring that YEAR2000 issues are an integral part of all IT
decisions. Phase two, developing and assessing an inventory of IT systems for
the purpose of identifying YEAR2000 issues has begun and is expected to be
completed by March, 1999. Remediation, phase three, will consist of upgrade or
replacement of hardware and software identified with YEAR2000 issues. This
process has been on going for the Company's desk-top PCs, servers, and
networking equipment and is estimated to be 80% complete. Remediation of all
identified issues is planned for by July, 1999. The fourth phase, testing, has
also been on-going for stand-alone systems once corrected (e.g., upgrading of PC
bios) and will be completed by August, 1999 for all stand-alone and integrated,
networked components. In 1997, the Company determined that its core internal
financial accounting system needed to be replaced. The legacy system had been
internally developed with some use of commercial modules, but was not capable of
supporting the Company's planned future growth, nor was the system YEAR2000
compliant. The legacy system has been replaced by a commercial system with
vendor assurances of YEAR2000 compliance. During the test phase, the Company
will perform tests on the system to confirm vendor representations.

The Company also delivers internally developed software to customers under
contract, sometimes with commercially supplied hardware. In general, contracts
entered into to date for Company developed software have not included
requirements for YEAR2000 compliance. However, the Company is evaluating
software delivered from 1997 to the present to identify the Company's potential
risk from this software. The Company is actively marketing software products
developed for the commercial marketplace. All such software is internally
YEAR2000 compliant, but risk from customer's use on non-compliant computers and
interfaces with non-compliant software cannot be readily assessed. The Company
is making every effort to minimize this risk through licensing and use
agreements.

As of this date, it is management's opinion that the Company will meet its plan
to be YEAR2000 ready for all of its Information Technology systems.

        NON-IT SYSTEMS - The Company is in the process of inventorying and
assessing all non-IT systems. Embedded processors are found in computer
controlled machinery, elevators, telephone systems and security and access
systems. The Company has some embedded chip technology associated with computer
controlled manufacturing equipment in its LaJolla facility, and is in the
process of assessing its YEAR2000 readiness. All of the Company's facilities are
leased. Lessors have been asked to identify all facility equipment using
embedded chip technology and its YEAR2000 readiness. As of this date,
approximately 10% have answered the Company's request for information. The risks
to the Company include temporary disruption of business in facilities barred
from access. The Company expects such disruptions to be temporary and short in
duration, if they occur at all, but recognizes it cannot control YEAR2000
compliance in leased facilities and must depend on the cooperation of lessors
and management companies in this regard.

        BUSINESS PARTNER AND CUSTOMER YEAR2000 IMPACTS - To maintain its revenue
stream, the Company is dependent on it's customers, the U.S. Government, and the
banking industry to implement YEAR2000 compliance programs. The Company will be
initiating communications with its business partners to determine their YEAR2000
readiness and the extent to which the Company may be vulnerable for their
failure to comply. All of the Company customers, suppliers, and subcontractors
have similar proprietary interests to the Company in meeting YEAR2000
Compliance, and the Company does not anticipate significant disruption of
business from this source. The Company is dependent on the U.S. Government
paying offices for approximately 85% of its contract reimbursements. The Company
will be contacting it's U. S. Government paying offices to determine their
position on expectations for YEAR2000 compliance. Disruption in the payment
process could have a significant impact on the cash flow of the Company and lead
to higher than historical borrowings on its line of credit. The Company's credit
line expires in December 1999, but management anticipates no issues in renewing
the credit line several months prior to expiration. It is the Company's
understanding that the nation's banking industry is under heavy pressure and
scrutiny by government oversight authorities to assure YEAR2000 compliance. The
Company's primary bank has assured management that all testing for YEAR2000
compliance with be done by June, 1999, and that they expect to be fully
compliant. The Company's business operations are also dependent to varying
degrees on other business partners including, utility companies, payroll
processing vendor, insurance and benefit providers, investment fund managers and
trustee's for retirement plans, communication's vendors, and delivery vendors to
name the more significant. The Company plans on initiating contact with its
business partners to determine their YEAR2000 readiness and the risk to the
Company of any failure to do so. The ability of the Company's business partners
to be YEAR2000 compliant is not in the Company's control. Failure of such third
party systems to be compliant or compatible could have a material adverse effect
on the Company's results of operations and ability to do business. Such
failures, where significant, will be addressed by contingency planning. The





<PAGE>   11

Company receives less than 1% of its revenues from contracts with companies or
government entities in other countries, and does not anticipate significant risk
from those countries lack of readiness for YEAR2000.


        YEAR2000 REMEDIATION COSTS - Cost of remediation includes cost to
upgrade or replace systems, hardware, software, internal labor, consulting, and
YEAR2000 readiness assessment software. Cost associated with replacement of
hardware, software, and embedded chip affected machines is not included in the
cost if that replacement was planned and has been merely accelerated for
YEAR2000 readiness. For example, the Company's legacy internal financial
accounting system was a planned upgrade and was accelerated to begin in 1997 to
assure YEAR2000 readiness, and will not be included in remediation costs. To
date, the Company estimates it has spent approximately $25K on this remediation
and expects to spend an additional $215K to complete this effort. All costs,
except long-lived assets, will be expensed as incurred.

        CONTINGENCY PLANS - Upon an assessment of the YEAR2000 issues,
particularly with respect to non-IT issues, the Company will identify reasonable
worst case scenario(s). For each scenario so identified, contingency plans will
be developed and communicated with employees. A reasonable worst case scenario
does not include, for example, the complete disruption of all local utility
services for an extended period of time at all Company business locations.
Although such an event is not impossible, in the veiw of management it is highly
unlikely. A reasonable worst case scenario may include, however, the inability
of the U. S. Government paying offices to meet historical invoice turn around
times exacerbated by one or more of the Company's key customers also late in
paying open accounts. Other reasonable worst case scenarios may include
potential litigation with customers, suppliers or vendors with respect to
YEAR2000 compliance of the Company's products and services; service problems
with payroll, benefits and insurance vendors; and/or interruption of
subcontracted services and products from vendors required to meet contract
obligations on contracts with performance incentives. The impact of any of these
scenarios varies but includes increased costs for general and administrative
support, higher interest expense to finance operations, and potential reduction
or delays in the purchase of Company products. Due to the speculative nature of
the schedule and degree of compliance of third parties, it is uncertain whether
or not the contingency plans selected will adequately address the impacts on the
Company's financial condition once all issues are known after January 1, 2000.

        YEAR2000 FORWARD LOOKING STATEMENTS - The foregoing statements as to
costs, dates, intent, belief and current expectations of the Company or its
officers with respect to YEAR2000 issues are forward looking and are made in
reliance on the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Such statements are based on the Company's best estimates
and expectations given the information available at the date hereof and may be
updated as additional information becomes available. In addition, such
statements are not guarantees of future results or outcomes and involve risks
and uncertainties, and actual results may differ materially from those in the
forward-looking statements as a result of various factors. The Company cautions
that it is impossible to predict the impact of certain factors that are not
within the control of the Company and there can be no assurances that these
estimates will be achieved and actual results could differ materially from those
anticipated.



<PAGE>   12



PART II   OTHER INFORMATION

ITEM 1    LEGAL PROCEEDINGS

The Company has no investigations, claims, and lawsuits arising out of its
business, nor any known to be pending.

ITEM 2    CHANGES IN SECURITIES

Not Applicable

ITEM 3    DEFAULTS UPON SENIOR SECURITIES

Not Applicable

ITEM 4    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company's Annual Meeting will be held on May 1, 1998 at which time proxies
and shareholders present voted on and approved the 1997 Stock Plan, the Amended
and Restated Certificate of Incorporation, the Directors and the continuation of
Price Waterhouse as auditor.

ITEM 5    OTHER MATERIALLY IMPORTANT EVENTS

Not Applicable

ITEM 6    EXHIBITS AND REPORTS ON FORM 8-K

No report(s) on Form 8-K were filed by the Company during the fiscal quarter for
which this report is filed.

          (a) Exhibits

          Exhibit No.         Exhibit
          -----------         -------

             11               Statement re: Computation of Per Share Earnings

             27               Financial Data Schedule

             Filed previously on original 10-Q.

<PAGE>   13

                                    SIGNATURE


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



                                                   SPARTA, INC.


                                                   /s/ B. Warren Knudson
                                                   -----------------------------
Date:   February 9, 1999                           B. Warren Knudson
                                                   Vice President and Chief
                                                   Financial Officer
                                                   (Principal Finance and
                                                   Accounting Officer)