##### Table of Contents



FORM 10-Q

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 March 31, 2002

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.

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(Exact name of registrant as specified in its charter)


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

23041 Avenida de la Carlota, Suite 325, Laguna Hills, CA 92653-1595

---

(Address of principal executive offices)(Zip Code)


(949) 768-8161

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(Registrants telephone number, including area code)


Not Applicable

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(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 March 31, 2002, the registrant had 5,353,721 shares of common stock, $.01
par value per share, issued and outstanding.





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TABLE OF CONTENTS



|                          |                                                                                               |                                            |  |  |  |  |  | 
|------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  | 
|PART I                   
|                          |                                                                                               | CONSOLIDATED BALANCE SHEET                
|                          |                                                                                               | CONSOLIDATED STATEMENT OF INCOME          
|                          |                                                                                               | CONSOLIDATED STATEMENT OF CASH FLOWS      
|                          |                                                                                               | Notes to Consolidated Financial Statements
|                          | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                          | Item 3. Quantitative and Qualitative Disclosures about Market Risk                           
|Part II Other Information
|                          | Item 1 Legal Proceedings                                                                     
|                          | Item 2 Changes in Securities                                                                 
|                          | Item 3 Defaults Upon Senior Securities                                                       
|                          | Item 4 Submission of Matters to a Vote of Security Holders                                   
|                          | Item 5 Other Materially Important Events                                                     
|                          | Item 6 Exhibits and Reports on Form 8-K                                                      
|Signature                



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##### Table of Contents



SPARTA, Inc.

QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2002

INDEX

|          |  |                                                                                       |  |  |  |  |  | 
|--------- |  | ------------------------------------------------------------------------------------- |  |  |  |  |  | 
|PART I    |  | Financial Information                                                                 |  |  |  | 
|Item 1    |  | Quarterly Financial Statements                                                        |  |  |  | 
|Item 2    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  |  |  | 
|Item 3    |  | Qualitative and Quantitative Disclosures About Market Risk                            |  |  |  | 
|PART II   |  | Other Information                                                                     |  |  |  | 
|Item 1    |  | Legal Proceedings                                                                     |  |  |  | 
|Item 2    |  | Changes in Securities                                                                 |  |  |  | 
|Item 3    |  | Defaults Upon Senior Securities                                                       |  |  |  | 
|Item 4    |  | Submission of Matters to a Vote of Security Holders                                   |  |  |  | 
|Item 5    |  | Other Materially Important Events                                                     |  |  |  | 
|Item 6    |  | Exhibits and Reports on Form 8-K                                                      |  |  |  | 
|Signature |  |                                                                                       |  |  |  | 





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##### Table of Contents






PART I




SPARTA, Inc.CONSOLIDATED BALANCE SHEET

|                                           |                                                                                                                   |                            |            |             |            |              |            |            |            | 
|------------------------------------------ | ----------------------------------------------------------------------------------------------------------------- | -------------------------- | ---------- | ----------- | ---------- | ------------ | ---------- | ---------- | ---------- | 
|                                           |                                                                                                                   |                            |            | March 31,   |            | December 31,
|                                           |                                                                                                                   |                            |            | 2002        |            | 2001        
|                                           |                                                                                                                   |                            |            |             |            |             
|                                           |                                                                                                                   |                            |            | (Unaudited) |            | (Audited)   
|ASSETS                                     |                                                                                                                   |                            |            |             |            |              |            |           
|Current Assets                             |                                                                                                                   |                            |            |             |            |              |            |           
|                                           | Cash and cash equivalents                                                                                         |                            | $          | 9,967,000   |            |              | $          | 10,303,000 |           
|                                           | Short-term investments                                                                                            |                            |            | 2,271,000   |            |              | $          | 8,727,000  |           
|                                           | Accounts receivable, net                                                                                          |                            |            | 29,225,000  |            |              |            | 27,150,000 |           
|                                           | Prepaid expenses                                                                                                  |                            |            | 734,000     |            |              |            | 395,000    |           
|                                           |                                                                                                                   |                            |            |             |            |              |            |           
|                                           |                                                                                                                   | Total current assets       |            |             | 42,197,000 |              |            |            | 46,575,000 | 
|                                           | Equipment and improvements, net                                                                                   |                            |            | 8,359,000   |            |              |            | 8,606,000  |           
|                                           | Other assets                                                                                                      |                            |            | 1,949,000   |            |              |            | 1,971,000  |           
|                                           |                                                                                                                   |                            |            |             |            |              |            |           
|                                           |                                                                                                                   | Total Assets               |            | $           | 52,505,000 |              |            | $          | 57,152,000 | 
|                                           |                                                                                                                   |                            |            |             |            |              |            |           
|LIABILITIES AND STOCKHOLDERS EQUITY       |                                                                                                                   |                            |            |             |            |              |            |           
|Current Liabilities                        |                                                                                                                   |                            |            |             |            |              |            |           
|                                           | Accrued compensation                                                                                              |                            | $          | 5,540,000   |            |              | $          | 10,596,000 |           
|                                           | Accounts payable and other accrued expenses                                                                       |                            |            | 6,057,000   |            |              |            | 5,977,000  |           
|                                           | Current portion of subordinated notes payable                                                                     |                            |            | 2,188,000   |            |              |            | 1,609,000  |           
|                                           | Income taxes payable                                                                                              |                            |            | 2,066,000   |            |              |            | 2,049,000  |           
|                                           | Deferred income taxes                                                                                             |                            |            | 1,013,000   |            |              |            | 1,013,000  |           
|                                           |                                                                                                                   |                            |            |             |            |              |            |           
|                                           |                                                                                                                   | Total current liabilities  |            |             | 16,864,000 |              |            |            | 21,244,000 | 
|Subordinated notes payable                 |                                                                                                                   |                            | 9,805,000  |             |            |              | 7,365,000  |           
|Deferred income taxes                      |                                                                                                                   |                            | 812,000    |             |            |              | 812,000    |           
|Redeemable Preferred Stock                 |                                                                                                                   |                            |            |             |            |              |            |           
|                                           | Preferred stock, $.01 par value; 2,000,000 shares authorized;
168,494 and 223,682 shares issued and outstanding   |                            |            | 3,235,000   |            |              |            | 4,053,000  |           
|Stockholders equity                       |                                                                                                                   |                            |            |             |            |              |            |           
|                                           | Common stock, $.01 par value, 25,000,000 shares authorized;
5,353,721 and 5,071,564 shares issued and outstanding |                            |            | 54,000      |            |              |            | 50,000     |           
|                                           | Additional paid-in capital                                                                                        |                            |            | 28,867,000  |            |              |            | 24,655,000 |           
|                                           | Retained earnings                                                                                                 |                            |            | 838,000     |            |              |            | (1,027,000 | )         
|                                           | Treasury stock                                                                                                    |                            |            | (7,970,000  | )          |              |            |           |           
|                                           |                                                                                                                   |                            |            |             |            |              |            |           
|                                           |                                                                                                                   | Total stockholders equity |            |             | 21,789,000 |              |            |            | 23,678,000 | 
|                                           |                                                                                                                   |                            |            |             |            |              |            |           
|Total Liabilities and Stockholders Equity |                                                                                                                   | $                          | 52,505,000 |             |            | $            | 57,152,000 |           
|                                           |                                                                                                                   |                            |            |             |            |              |            |           

The accompanying notes are an integral part of the financial statements





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SPARTA, Inc.CONSOLIDATED STATEMENT OF INCOME
(Unaudited)

|                                            |                                  |   |                              |            |      |   |            |            |  
|------------------------------------------- | -------------------------------- | - | ---------------------------- | ---------- | ---- | - | ---------- | ---------- | -
|                                            |                                  |   | Three Months ended March 31,
|                                            |                                  |   |                             
|                                            |                                  |   | 2002                         |            | 2001
|                                            |                                  |   |                              |            |     
|Sales                                       |                                  | $ | 35,928,000                   |            |      | $ | 31,394,000 |           
|                                            |                                  |   |                              |            |      |   |            |           
|Costs and expenses:                         |                                  |   |                              |            |      |   |            |           
|                                            | Labor costs and related benefits |   |                              | 20,592,000 |      |   |            | 17,875,000 |  
|                                            | Subcontractor & other costs      |   |                              | 8,321,000  |      |   |            | 7,560,000  |  
|                                            | Facility costs                   |   |                              | 2,569,000  |      |   |            | 2,153,000  |  
|                                            | Travel and other                 |   |                              | 1,057,000  |      |   |            | 585,000    |  
|                                            | Interest expense (income), net   |   |                              | (24,000    | )    |   |            | (54,000    | )
|                                            |                                  |   |                              |            |      |   |            |           
|                                            |                                  |   | 32,515,000                   |            |      |   | 28,119,000 |           
|                                            |                                  |   |                              |            |      |   |            |           
|Income before provision for
taxes on income |                                  |   | 3,413,000                    |            |      |   | 3,275,000  |           
|Provision for taxes on income               |                                  |   | 1,365,000                    |            |      |   | 1,310,000  |           
|                                            |                                  |   |                              |            |      |   |            |           
|Net income                                  |                                  | $ | 2,048,000                    |            |      | $ | 1,965,000  |           
|                                            |                                  |   |                              |            |      |   |            |           
|Basic earnings per share                    |                                  | $ | 0.38                         |            |      | $ | 0.37       |           
|                                            |                                  |   |                              |            |      |   |            |           
|Diluted earnings per share                  |                                  | $ | 0.35                         |            |      | $ | 0.34       |           
|                                            |                                  |   |                              |            |      |   |            |           

The accompanying notes are an integral part of the financial statements





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SPARTA, Inc.CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)

|                                                   |                                                                                   |              |                                    |                                                      |         |                              |            |            |         |           |            |  
|-------------------------------------------------- | --------------------------------------------------------------------------------- | ------------ | ---------------------------------- | ---------------------------------------------------- | ------- | ---------------------------- | ---------- | ---------- | ------- | --------- | ---------- | -
|                                                   |                                                                                   |              |                                    |                                                      |         | Three Months ended March 31,
|                                                   |                                                                                   |              |                                    |                                                      |         |                             
|                                                   |                                                                                   |              |                                    |                                                      |         | 2002                         |            | 2001      
|                                                   |                                                                                   |              |                                    |                                                      |         |                              |            |           
|Cash flows from operating activities:              |                                                                                   |              |                                    |                                                      |         |                              |            |           
|                                                   | Net income                                                                        |              | $                                  | 2,048,000                                            |         |                              | $          | 1,965,000  |        
|                                                   | Adjustments to reconcile net income to net
cash provided by operating activities: |              |                                    |                                                      |         |                              |            |            |        
|                                                   |                                                                                   |              | Depreciation and amortization      |                                                      |         | 538,000                      |            |            |         | 512,000   |           
|                                                   |                                                                                   |              | Loss on sale of equipment          |                                                      |         | 4,000                        |            |            |         |           |           
|                                                   |                                                                                   |              | Stock-based compensation           |                                                      |         | 2,091,000                    |            |            |         | 1,962,000 |           
|                                                   |                                                                                   |              | Changes in assets and liabilities: |                                                      |         |                              |            |            |         |           |           
|                                                   |                                                                                   |              |                                    | Accounts receivable                                  |         |                              | (2,075,000 | )          |         |           | 6,945,000  |  
|                                                   |                                                                                   |              |                                    | Prepaid expenses                                     |         |                              | (339,000   | )          |         |           | (218,000   | )
|                                                   |                                                                                   |              |                                    | Other assets                                         |         |                              | 22,000     |            |         |           | (3,000     | )
|                                                   |                                                                                   |              |                                    | Accrued compensation                                 |         |                              | (5,056,000 | )          |         |           | (2,668,000 | )
|                                                   |                                                                                   |              |                                    | Accounts payable and other accrued expenses          |         |                              | 80,000     |            |         |           | (3,833,000 | )
|                                                   |                                                                                   |              |                                    | Income taxes payable                                 |         |                              | 18,000     |            |         |           | 567,000    |  
|                                                   |                                                                                   |              | Tax benefit relating to stock plan |                                                      |         | 787,000                      |            |            |         | 608,000   |           
|                                                   |                                                                                   |              |                                    |                                                      |         |                              |            |           
|                                                   |                                                                                   |              |                                    | Net cash provided by (used for) operating activities |         |                              | (1,882,000 | )          |         |           | 5,837,000  |  
|                                                   |                                                                                   |              |                                    |                                                      |         |                              |            |           
|Cash flows from investing activities:              |                                                                                   |              |                                    |                                                      |         |                              |            |           
|                                                   | Capital expenditures                                                              |              |                                    | (295,000                                             | )       |                              |            | (425,000   | )      
|                                                   | Proceeds from sale of short-term investments                                      |              |                                    | 6,456,000                                            |         |                              |            |            |        
|                                                   |                                                                                   |              |                                    |                                                      |         |                              |            |           
|                                                   |                                                                                   |              |                                    | Net cash provided by (used for) investing activities |         |                              | 6,161,000  |            |         |           | (425,000   | )
|                                                   |                                                                                   |              |                                    |                                                      |         |                              |            |           
|Cash flows from financing activities:              |                                                                                   |              |                                    |                                                      |         |                              |            |           
|                                                   | Proceeds from issuance of stock                                                   |              |                                    | 1,336,000                                            |         |                              |            | 724,000    |        
|                                                   | Redemption of preferred stock                                                     |              |                                    | (1,000,000                                           | )       |                              |            | (257,000   | )      
|                                                   | Cash purchases of treasury stock                                                  |              |                                    | (4,520,000                                           | )       |                              |            | (2,762,000 | )      
|                                                   | Principal payments on subordinated notes payable                                  |              |                                    | (431,000                                             | )       |                              |            | (236,000   | )      
|                                                   |                                                                                   |              |                                    |                                                      |         |                              |            |           
|                                                   |                                                                                   |              |                                    | Net cash provided by (used for) financing activities |         |                              | (4,615,000 | )          |         |           | (2,531,000 | )
|                                                   |                                                                                   |              |                                    |                                                      |         |                              |            |           
|Net increase (decrease) in cash                    |                                                                                   |              | (336,000                           | )                                                    |         |                              | 2,881,000  |           
|Cash and cash equivalents at beginning of period   |                                                                                   |              | 10,303,000                         |                                                      |         |                              | 7,082,000  |           
|                                                   |                                                                                   |              |                                    |                                                      |         |                              |            |           
|Cash and cash equivalents at end of period         |                                                                                   | $            | 9,967,000                          |                                                      |         | $                            | 9,963,000  |           
|                                                   |                                                                                   |              |                                    |                                                      |         |                              |            |           
|Supplemental disclosures of cash flow information: |                                                                                   |              |                                    |                                                      |         |                              |            |           
|                                                   | Cash paid during the period for:                                                  |              |                                    |                                                      |         |                              |            |            |        
|                                                   |                                                                                   | Interest     |                                    | $                                                    | 55,000  |                              |            | $          | 88,000  |          
|                                                   |                                                                                   |              |                                    |                                                      |         |                              |            |           
|                                                   |                                                                                   | Income taxes |                                    | $                                                    | 577,000 |                              |            | $          | 155,000 |          
|                                                   |                                                                                   |              |                                    |                                                      |         |                              |            |           

The accompanying notes are an integral part of the financial statements





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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 Sunday
closest to December 31. The Companys last fiscal year ended on December 30,
2001 and its first quarter ended March 31, 2002 and its corresponding first
quarter last year ended on April 1, 2001. To aid the reader of the financial
statements, the year-end has been presented as December 31, 2001 and the
three-month period ends have been presented as March 31, 2002 and March 31,
2001.

In the opinion of management, the unaudited financial information for the
three-month periods ended March 31, 2002 and March 31, 2001 reflects all
adjustments (which include only normal, recurring adjustments) necessary for a
fair presentation thereof.

Note B  Income Taxes

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

Note C  Computation of Per Share Earnings

|                   |                      |                   |           |                              |      |      |           |           |      | 
|------------------ | -------------------- | ----------------- | --------- | ---------------------------- | ---- | ---- | --------- | --------- | ---- | 
|                   |                      |                   |           | Three months ended March 31,
|                   |                      |                   |           |                             
|                   |                      |                   |           | 2002                         |      | 2001
|                   |                      |                   |           |                              |      |     
|Basic EPS          |                      |                   |           |                              |      |      |           |          
|                   | Net income           |                   | $         | 2,048,000                    |      |      | $         | 1,965,000 |     
|                   | Accretion adjustment |                   |           | (182,000                     | )    |      |           |          |     
|                   |                      |                   |           |                              |      |      |           |          
|                   |                      | $                 | 1,866,000 |                              |      | $    | 1,965,000 |          
|                   |                      |                   |           |                              |      |      |           |          
|Shares outstanding |                      |                   | 4,958,553 |                              |      |      | 5,251,505 |          
|Per share amounts  |                      | $                 | 0.38      |                              |      | $    | 0.37      |          
|                   |                      |                   |           |                              |      |      |           |          
|Dilutive Effect    |                      |                   |           |                              |      |      |           |          
|                   | Net income           |                   | $         | 2,048,000                    |      |      | $         | 1,965,000 |     
|                   | Accretion adjustment |                   |           | (182,000                     | )    |      |           |          |     
|                   |                      |                   |           |                              |      |      |           |          
|                   |                      | $                 | 1,866,000 |                              |      | $    | 1,965,000 |          
|                   |                      |                   |           |                              |      |      |           |          
|Shares outstanding |                      |                   | 4,958,553 |                              |      |      | 5,251,505 |          
|Stock options      |                      |                   | 333,512   |                              |      |      | 348,923   |          
|Deferred stock     |                      |                   | 90,327    |                              |      |      | 116,442   |          
|                   |                      |                   |           |                              |      |      |           |          
|                   |                      |                   | 5,382,392 |                              |      |      | 5,716,870 |          
|                   |                      | Per share amounts |           | $                            | 0.35 |      |           | $         | 0.34 | 
|                   |                      |                   |           |                              |      |      |           |          



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##### Table of Contents






Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

The following table sets forth, for the periods indicated, selected financial
results:

|                                                       |                                   |   |                              |    |      |   |            |    |  
|------------------------------------------------------ | --------------------------------- | - | ---------------------------- | -- | ---- | - | ---------- | -- | -
|                                                       |                                   |   | Three months ended March 31,
|                                                       |                                   |   |                             
|                                                       |                                   |   | 2002                         |    | 2001
|                                                       |                                   |   |                              |    |     
|Sales                                                  |                                   | $ | 35,928,000                   |    |      | $ | 31,394,000 |   
|Sales by business area, as a
percentage of total sales |                                   |   |                              |    |      |   |            |   
|                                                       | Ballistic Missile Defense (BMD) |   |                              | 41 | %    |   |            | 38 | %
|                                                       | Non BMD Dept of Defense (DoD)   |   |                              | 49 | %    |   |            | 49 | %
|                                                       | Non-DoD                           |   |                              | 10 | %    |   |            | 13 | %
|Gross profit (1)                                       |                                   | $ | 3,513,000                    |    |      | $ | 3,281,000  |   
|Gross profit as a % of costs                           |                                   |   | 10.8                         | %  |      |   | 11.7       | % 
|Net income                                             |                                   | $ | 2,048,000                    |    |      | $ | 1,965,000  |   

|                                    |  |            |             |              |  |           |             |  |  |   |             | 
|----------------------------------- |  | ---------- | ----------- | ------------ |  | --------- | ----------- |  |  | - | ----------- | 
|                                    |  | Balance at
|                                    |  |           
|                                    |  | March 31,  |             | December 31, |  | March 31,
|                                    |  | 2002       |             | 2001         |  | 2001     
|                                    |  |            |             |              |  |          
|Funded 12 month backlog             |  | $          | 55,600,000  |              |  | $         | 31,700,000  |  |  | $ | 64,200,000  | 
|Unfunded 12 month backlog           |  |            | 95,700,000  |              |  |           | 111,600,000 |  |  |   | 62,500,000  | 
|                                    |  |            |             |              |  |           |             |  |  |   |             | 
|Total 12 month contract backlog     |  | $          | 151,300,000 |              |  | $         | 143,300,000 |  |  | $ | 126,700,000 | 
|                                    |  |            |             |              |  |           |             |  |  |   |             | 
|Stockholders equity                |  | $          | 21,789,000  |              |  | $         | 23,678,000  |  |  | $ | 22,851,000  | 
|Equity per share (2)                |  |            | 4.07        |              |  |           | 4.66        |  |  |   | 3.88        | 
|Stock repurchase notes              |  | $          | 11,993,000  |              |  | $         | 1,101,000   |  |  | $ | 6,244,000   | 
|Line of credit                      |  |            |            |              |  |           |            |  |  |   |            | 
|Number in days sales in receivables |  |            | 73          |              |  |           | 66          |  |  |   | 77          | 
|Current ratio                       |  |            | 2.5         |              |  |           | 2.2         |  |  |   | 2.7         | 



| | (1) |  | The Company defines gross profit as sales less all costs that are
allowable for and allocable to contracts under government procurement
regulations. As such, gross profit excludes certain unallowable
expenses, as well as interest income and interest expense. Management
considers gross profit, and gross profit as a percentage of costs, to be
key measures of the Companys contract performance.
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) |  | Equity per share is based on outstanding shares of common stock.                                                                                                                                                                                                                                                                                                                                          

New Contracts and Annualized Backlog

In the first quarter of 2002, the Company had three significant competitive
contract and/or task order wins, one sole-source add-on to an existing task
order, and four significant losses.

The Advanced Systems and Technology Operation (ASTO) won their second task
order under the GSA Blanket Purchase Agreement. This effort, on which the
Company is the prime contractor, will provide Systems Engineering and Technical
Analysis (SETA) support to the Missile Defense Agency (MDA) Targets and
Countermeasures Office. This task order is for $13.5 million over five years,
with the potential for 100% growth over this period; there is also a customer
option for an additional five years. Additionally, ASTO won a sole-source
add-on to the Test and Evaluation task order with MDA, also under the Blanket
Purchase Agreement. This award adds $19 million over 55 months to the original
task order. The Defense Program Operation (DPO) and the Integrated Data
Systems Operation (IDSO), as a subcontractor to Mevatech, won a Systems
Engineering and Technical Assistance Contract (SETAC) multiple award from the
Army Space and Missile Defense Command. The expected value of this program is
$9.5 million over five years. The Space and Missile Defense Operation
(SMDO), together with DPO, won a GSA task order for Technical and Analytic
Support of





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Ballistic Missile Defense for the Army Space Command in Colorado
Springs. This task order is for $6.1 million over four years (a one-year base
period plus three one-year options).

ST SPARTA, Inc., the Companys wholly-owned subsidiary (d/b/a Spiral
Technology, Inc.), was notified in the first quarter that it lost the
re-compete of its Research Facilities and Engineering Support Services
(RFESS) contract at NASAs Dryden Flight Research Center. This proposal was
valued at $147 million over 10 years. SMDO, with DPO, lost a GSA task order
for Ballistic and Cruise Missile Defense Technical Support for the Army Space
Command in Colorado Springs. This task order was for $5 million over four
years (a one-year base period plus three one-year options). IDSO, as a
subcontractor to Boeing, lost the Air Force Global Transportation System
contract, a $7.1 million five-year effort. IDSO, as part of the ALS Joint
Venture (a joint venture the Company has with two other partners), also lost a
task order for Automated Test Equipment Test Program Set Lifecycle Logistics
support with the Army Aviation and Missile Command under the Omnibus 2000
Logistics contract. This task order was for $11.8 million over five years.

During the first quarter, the Company received contract awards totaling $62.5
million. A portion of this funding had been delayed at the end of 2001 due to
the delay in Congressional approval of defense appropriations legislation. As
a result of this funding and the contract wins and losses discussed above, the
Companys funded contract backlog increased from $31.7 million at the end of
2001 to $55.6 million at the end of the first quarter. Firm/assured contract
backlog increased from $143.5 million at the end of 2001 to $151.3 million at
the end of the first quarter.

Results of Operations

The Companys contract revenues for the first quarter of 2002 increased 14%
from the corresponding period in 2001 due to increased project billings,
including the effect of new work as described above. BMD sales increased 24%
over the corresponding period in 2001, as the Company won several new contracts
(or extensions of previous contracts) during the latter part of 2001, in
addition to the first quarter contract wins discussed above. Non-BMD DoD
sales increased 14% over the corresponding period in 2001, as the Company has
continued to experience growth in its business for various intelligence
organizations. Non-DoD sales decreased 12% over the corresponding period in
2001 due to the completion of a commercial development contract early in the
first quarter of 2002.

The Company defines gross profit as sales less all costs that are allowable for
and allocable to contracts under government procurement regulations and cost
principles. As such, gross profit excludes certain unallowable expenses, as
well as interest income and interest expense. Management considers gross
profit, and the gross profit rate (gross profit as a percentage of costs), to
be key measures of the Companys contract performance. Gross profit for the
three-month period ended March 31, 2002 increased 7% compared to the
corresponding period of 2001, due primarily to the increase in sales over the
same period. The gross profit rate decreased to 10.8%, from 11.7% for the
corresponding period in 2001. The decrease in the gross profit rate is
primarily attributable to sales mix, as the gross profit rate on BMD programs,
which comprised a higher percentage of revenues during the first quarter of
2002, is somewhat lower than on other programs.

Liquidity and Capital Resources

The Companys principal sources of capital resources for funding its operations
are cash and short-term investments on hand, funds generated by ongoing
business activities, and proceeds from exercise of stock options and the
issuance of common stock. These sources are augmented, as necessary, by
borrowings under the Companys bank line of credit. The principal uses of
capital resources are for the repurchase of preferred and common stock,
repayments of amounts borrowed under the bank line of credit, principal
payments on subordinated promissory notes, and capital expenditures.

There were no borrowings against the Companys $6 million line of credit during
the first quarter of 2002 or the corresponding period in 2001. Sustaining the
low reliance on borrowings is largely due to the Companys cash and short-term
investment position, emphasis on rapid billing and collection of receivables, a
concerted effort to control capital expenditures and expenditures for
independent research and development, and a planned reduction of investment in
product initiatives. Days sales outstanding (DSO) increased to 73 days at
March 31, 2002 from 66 days at December 31, 2001. This increase was primarily
attributable to the delay in Congressional approval of defense appropriations
legislation referred to above. The Company expects that DSO will return to
lower levels as contract funding is received and the related receivables are
billed and collected. The Company continues to actively monitor receivables
with emphasis placed on collection activities.

Significant uses of cash during the first quarter of 2002 include (1) the
repurchase of $4.5 million of common stock in accordance with the Companys
voluntary stock repurchase policy, (2) the funding of $5.0 million of profit
sharing





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contributions, 401(k) matching contributions, and other accrued
compensation, and (3) the repurchase of $1.0 million of redeemable preferred
stock. The Company also issued $3.4 million of subordinated notes payable in
connection with common stock repurchases.

The Company anticipates that its existing capital resources and access to its
line of credit will be sufficient to fund planned operations for the
foreseeable future.

Stock Purchase Agreement

In November 1994, the Company entered into a Stock Purchase Agreement with
Science Applications International Corporation (SAIC), pursuant to which SAIC
purchased a total of 569,039 shares of redeemable preferred stock at a cost of
$2.4 million. Beginning in May 1999, by agreement with SAIC, the Company began
repurchasing shares of this preferred stock. During the first quarter of 2002,
the Company repurchased 55,188 shares at a cost of $1.0 million. As of March
31, 2002, SAIC held 168,494 shares of redeemable preferred stock, with an
aggregate accreted value of $3.2 million. It is the Companys intent to
continue to repurchase SAIC stock.

Effects of Federal Funding for Defense Programs

The Company continues to derive over 90% of its revenues from contracts with
U.S. Government agencies. The Companys government contracts may be
terminated, in whole or in part, at the convenience of the customer (as well as
in the event of default). In the event of a termination for convenience, the
customer is generally obligated to pay the costs incurred by the Company under
the contract plus a fee based upon work completed. There were no contracts
terminated in the first quarter of 2002. The Company does not anticipate any
termination of programs and contracts in 2002. However, no assurances can be
given that such events will not occur.

In addition to the right of the U.S. government to terminate contracts for
convenience, U.S. government contracts are conditioned upon the continuing
availability of Congressional appropriations. These appropriations are
therefore subject to changes as a result of increases or decreases in the
overall budget. New presidential administrations, change in the composition of
Congress, and disagreement or significant delay between Congress and the
Administration in reaching a defense budget accord can all significantly affect
the timing of funding on the Companys contract backlog. Delays in contract
funding resulting from these factors may have a significant adverse effect on
the Companys revenue recognition, liquidity, and DSO.

Forward-Looking Statements

All statements in this report that do not directly and exclusively relate to
historical facts constitute forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These statements
represent the Companys intentions, plans, expectations and beliefs, and are
subject to risks, uncertainties and other factors, many of which are outside
the Companys control. These factors could cause our actual results,
performance, achievements or industry results to differ materially from the
results, performance or achievements expressed or implied by such
forward-looking statements. These factors are described in more detail in the
Companys Annual Report on Form 10-K for the fiscal year ended December 30,
2001, and such other filings that the Company makes with the SEC from time to
time. Due to such uncertainties and risks, readers are cautioned not to place
undue reliance on such forward-looking statements, which speak only as of the
date hereof.




Item 3. Quantitative and Qualitative Disclosures about Market Risk

Refer to item 7A in the Companys Annual Report on Form 10-K for the year ended
December 31, 2001.





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Part II Other Information




Item 1 Legal Proceedings

The Company has no investigations, claims, or 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 31, 2002 at which time proxies
and shareholders present will vote on the election of Directors and on the
continuation of PricewaterhouseCoopers LLP as the Companys independent
accountants for the year ending December 31, 2002.




Item 5 Other Materially Important Events

Not Applicable




Item 6 Exhibits and Reports on Form 8-K

The Company did not file any Reports on Form 8-K during the fiscal quarter for
which this report is filed.





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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.                                                                                         
|                  
|Date: May 15, 2002 | /s/ David E. Schreiman                                                                               
|                   |                                                                                                      
|                   | David E. SchreimanVice President, Treasurer and ChiefFinancial Officer (Principal Accounting Officer)