##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period EndedSeptember 30, 2007
 OR
 o
    
    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.
  Delaware
    
    63-0775889(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 25531 Commercentre Drive, Suite 120, Lake Forest, CA 92630-8874
 (949) 768-8161
 Not Applicable
 þ o
 o o þ
 o þ




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##### 



SPARTA, Inc.
   PART
I FINANCIAL INFORMATIONItem 1.
    
    
    
    Financial Statements
    
    2Consolidated balance sheet  September 30, 2007 (unaudited) and December 31,
2006 (audited)
    
    3Consolidated statement of income  Three months ended September 30, 2007 and
2006 (unaudited); Nine months ended September 30, 2007 and 2006 (unaudited)
    
    4Consolidated statement of cash flows  Nine months ended September 30, 2007 and
2006 (unaudited)
    
    5Notes to consolidated financial statements  September 30, 2007 (unaudited)
    
    6Item 2.
    
    
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    16Item 3.
    
    
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    23Item 4.
    
    
    
    Controls and Procedures
    
    23PART
II OTHER INFORMATION
    
    24Item 1.
    
    
    
    Legal Proceedings
    
    24Item 1A.
    
    
    
    Risk Factors
    
    24Item 2.
    
    
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    24Item 3.
    
    
    
    Defaults Upon Senior Securities
    
    25Item 4.
    
    
    
    Submission of Matters to a Vote of Security Holders
    
    25Item 5.
    
    
    
    Other Information
    
    25Item 6.
    
    

    
    Exhibits
    
    25Signatures
    
    26EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  -1-




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PART I
 
 Item 1 Financial Statements
 -2-




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##### Table of Contents



SPARTA, Inc.
CONSOLIDATED BALANCE SHEET
 September 30,
    
    
    December 31,2007
    
    
    2006(Unaudited)
    
    
    (Audited)ASSETSCurrent AssetsCash and cash equivalents
    
    $
    38,437,000
    
    
    $
    23,379,000Short-term investments
    
    
    10,161,000
    
    
    
    14,861,000Receivables, net
    
    
    54,964,000
    
    
    
    63,193,000Income taxes receivable
    
    
    1,510,000
    
    
    
    Prepaid expenses
    
    
    1,482,000
    
    
    
    1,312,000Prepaid income taxes
    
    
    
    
    
    
    240,000Total current assets
    
    
    106,554,000
    
    
    
    102,985,000Equipment and improvements, net
    
    
    12,136,000
    
    
    
    12,096,000Intangible assets, net
    
    
    
    
    
    
    172,000Other assets
    
    
    3,259,000
    
    
    
    3,102,000Total Assets
    
    $
    121,949,000
    
    
    $
    118,355,000LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesAccrued compensation
    
    $
    21,263,000
    
    
    $
    19,783,000Accounts payable and other accrued expenses
    
    
    9,663,000
    
    
    
    16,593,000Billings in excess of costs plus earnings
    
    
    8,007,000
    
    
    
    6,702,000Current portion of notes payable
    
    
    3,726,000
    
    
    
    4,417,000Income taxes payable
    
    
    307,000
    
    
    
    Deferred income taxes
    
    
    1,251,000
    
    
    
    1,365,000Total current liabilities
    
    
    44,217,000
    
    
    
    48,860,000Notes payable
    
    
    8,992,000
    
    
    
    8,069,000Deferred income taxes
    
    
    14,000
    
    
    
    14,000Commitments and contingencies (Note 6)Stockholders EquityCommon stock, $.01 par value, 25,000,000
shares
authorized; 9,697,144 and 9,184,368 shares
issued;
4,733,828 and 4,858,193 shares outstanding
    
    
    97,000
    
    
    
    92,000Additional paid-in capital
    
    
    150,834,000
    
    
    
    130,940,000Retained earnings
    
    
    84,128,000
    
    
    
    69,025,000Treasury stock, at cost
    
    
    (166,333,000
    )
    
    
    (138,645,000
    )Total stockholders equity
    
    
    68,726,000
    
    
    
    61,412,000Total Liabilities and Stockholders Equity
    
    $
    121,949,000
    
    
    $
    118,355,000
  -3-




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SPARTA, Inc.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
 Three Months ended
    
    Nine Months endedSeptember 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006Sales
    
    $
    73,209,000
    
    
    $
    77,270,000
    
    
    $
    213,189,000
    
    
    $
    217,739,000Costs and expenses:Labor costs and related benefits
    
    
    37,172,000
    
    
    
    35,731,000
    
    
    
    110,489,000
    
    
    
    109,301,000Subcontractor costs
    
    
    23,186,000
    
    
    
    26,304,000
    
    
    
    60,678,000
    
    
    
    65,370,000Facility costs
    
    
    3,424,000
    
    
    
    4,471,000
    
    
    
    12,016,000
    
    
    
    12,634,000Travel and general administrative costs
    
    
    2,947,000
    
    
    
    3,020,000
    
    
    
    9,391,000
    
    
    
    8,762,000Total costs and expenses
    
    
    66,729,000
    
    
    
    69,526,000
    
    
    
    192,574,000
    
    
    
    196,067,000Operating income
    
    
    6,480,000
    
    
    
    7,744,000
    
    
    
    20,615,000
    
    
    
    21,672,000Interest income
    
    
    (513,000
    )
    
    
    (446,000
    )
    
    
    (1,453,000
    )
    
    
    (1,209,000
    )Interest expense
    
    
    187,000
    
    
    
    148,000
    
    
    
    503,000
    
    
    
    398,000Income from continuing operations
before provision for taxes on income
    
    
    6,806,000
    
    
    
    8,042,000
    
    
    
    21,565,000
    
    
    
    22,483,000Provision for taxes on income
    
    
    344,000
    
    
    
    3,319,000
    
    
    
    6,462,000
    
    
    
    9,357,000Income from continuing operations
    
    
    6,462,000
    
    
    
    4,723,000
    
    
    
    15,103,000
    
    
    
    13,126,000Discontinued operations (Note 4)Income (loss) from discontinued operations of
Sprial Technology, Inc. before income taxes
    
    
    
    
    
    
    (37,000
    )
    
    
    
    
    
    
    2,000Provision (benefit) for taxes on income (loss)
    
    
    
    
    
    
    (15,000
    )
    
    
    
    
    
    
    1,000Income (loss) from discontinued operations
    
    
    
    
    
    
    (22,000
    )
    
    
    
    
    
    
    1,000Net income
    
    $
    6,462,000
    
    
    $
    4,701,000
    
    
    $
    15,103,000
    
    
    $
    13,127,000Earnings per share:Basic:Income from continuing operations
    
    $
    1.35
    
    
    $
    0.92
    
    
    $
    3.14
    
    
    $
    2.52Income (loss) from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1.35
    
    
    $
    0.92
    
    
    $
    3.14
    
    
    $
    2.52Diluted:Income from continuing operations
    
    $
    1.30
    
    
    $
    0.87
    
    
    $
    3.02
    
    
    $
    2.37Income (loss) from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1.30
    
    
    $
    0.87
    
    
    $
    3.02
    
    
    $
    2.37Weighted average common equivalent shares:Basic
    
    
    4,771,426
    
    
    
    5,102,829
    
    
    
    4,810,475
    
    
    
    5,206,050Diluted
    
    
    4,961,034
    
    
    
    5,392,172
    
    
    
    5,009,225
    
    
    
    5,547,917
  -4-




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SPARTA, Inc.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
 Nine Months ended September 30,2007
    
    
    2006Cash flows from operating activities:Net income
    
    $
    15,103,000
    
    
    $
    13,127,000Adjustments to reconcile net income to net
cash provided by operating activities:Depreciation and amortization
    
    
    2,545,000
    
    
    
    2,799,000Loss on sale of equipment
    
    
    
    
    
    
    54,000Stock-based compensation
    
    
    8,093,000
    
    
    
    7,841,000Changes in assets and liabilities:Receivables, net
    
    
    8,229,000
    
    
    
    16,455,000Income taxes receivable
    
    
    (1,510,000
    )
    
    
    Prepaid expenses
    
    
    (170,000
    )
    
    
    (783,000
    )Prepaid income taxes
    
    
    
    
    
    
    548,000Other assets
    
    
    (157,000
    )
    
    
    287,000Accrued compensation
    
    
    1,480,000
    
    
    
    (97,000
    )Accounts payable and other accrued expenses
    
    
    (6,930,000
    )
    
    
    399,000Billings in excess of costs plus earnings
    
    
    1,305,000
    
    
    
    (152,000
    )Income taxes payable
    
    
    307,000
    
    
    
    Prepaid income taxes
    
    
    240,000Deferred income taxes
    
    
    (114,000
    )
    
    
    Net cash provided by operating activities
    
    
    28,421,000
    
    
    
    40,478,000Cash flows from investing activities:Purchases of equipment and improvements
    
    
    (2,413,000
    )
    
    
    (3,382,000
    )Redemptions (purchase) of short-term investments
    
    
    4,700,000
    
    
    
    (12,711,000
    )Net cash provided by (used for) investing
activities
    
    
    2,287,000
    
    
    
    (16,093,000
    )Cash flows from financing activities:Proceeds from issuance of common stock
    
    
    9,616,000
    
    
    
    9,271,000Excess tax benefit from stock-based compensation
    
    
    2,190,000
    
    
    
    2,956,000Purchases of treasury stock
    
    
    (23,256,000
    )
    
    
    (30,447,000
    )Principal payments on notes payable
    
    
    (4,200,000
    )
    
    
    (2,609,000
    )Net cash used for financing activities
    
    
    (15,650,000
    )
    
    
    (20,829,000
    )Net increase (decrease) in cash and cash equivalents
    
    
    15,058,000
    
    
    
    3,556,000Cash and cash equivalents at beginning of period
    
    
    23,379,000
    
    
    
    29,254,000Cash and cash equivalents at end of period
    
    $
    38,437,000
    
    
    $
    32,810,000Supplemental disclosures of cash flow information:Cash paid during the period for:Interest
    
    $
    503,000
    
    
    $
    398,000Income taxes
    
    $
    5,356,000
    
    
    $
    5,903,000Non-cash investing and financing activities:Issuance of notes payable in connection
with purchases of treasury stock
    
    $
    4,432,000
    
    
    $
    4,041,000Receipt of notes receivable in exchange for exercise of
stock options
    
    $
    468,000
    
    
    $
    563,000
 -5-




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SPARTA, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 Note 1  Basis of Presentation
    Note 2  Accounts Receivable
  September 30, 2007
    
    
    December 31, 2006Billed
    
    $
    28,862,000
    
    
    $
    32,486,000Unbilled
    
    
    26,757,000
    
    
    
    31,262,00055,619,000
    
    
    
    63,748,000Less allowances for unallowable contract costs
    
    
    (655,000
    )
    
    
    (555,000
    )$
    54,964,000
    
    
    $
    63,193,000
 Note 3  Income Taxes
  Accounting for
Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109
  -6-




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SPARTA, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
   Note 4  Discontinued Operations
  Accounting
for the Impairment or Disposal of Long-Lived Assets
  Three months ended
    
    
    Nine months endedSeptember 30, 2006
    
    
    September 30, 2006Sales
    
    $
    2,583,000
    
    
    $
    8,439,000Costs and expenses
    
    
    (2,620,000
    )
    
    
    (8,437,000
    )Income (loss) before income taxes
    
    
    (37,000
    )
    
    
    2,000Income tax (expense) benefit
    
    
    15,000
    
    
    
    (1,000
    )Income (loss) from discontinued operations
    
    $
    (22,000
    )
    
    $
    1,000
 -7-




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SPARTA, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 Note 5  Bank Line of Credit
  Note 6  Commitments and Contingencies
    Note 7  Stockholders Equity
   -8-




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SPARTA, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
    Note 8  Share-Based Compensation
  Share-Based Payment Accounting for Stock Issued to Employees Accounting for Stock-Based
Compensation
  -9-




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SPARTA, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
  Three Months Ended
    
    Nine Months EndedDecrease Due To Adopting SFAS 123(R)
    
    September 30, 2007
    
    September 30, 2007Income before income taxes
    
    $
    317,000
    
    
    $
    764,000Net income
    
    $
    190,000
    
    
    $
    458,000Basic EPS
    
    $
    0.04
    
    
    $
    0.09Diluted EPS
    
    $
    0.04
    
    
    $
    0.08
  2007 Stock Plan
   -10-




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SPARTA, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 Nine Months Ended
    
    Nine Months EndedKey Assumptions
    
    September 30, 2007
    
    September 30, 2006Expected volatility factor
    
    
    1.0%  8.9
    %
    
    
    5.4%  9.2
    %Expected option term (in years)Short-term options
    
    
    0.125
    
    
    
    0.125All other options
    
    
    3.0
    
    
    
    3.0Risk-free interest rate
    
    
    3.53%  5.23
    %
    
    
    4.25%  5.13
    %Expected annual dividend yield
    
    
    
    
    
    
    
   Weighted AverageStock options subject to SFAS123(R)
    
    Number of Shares
    
    
    Exercise PriceOutstanding at December 31, 2006
    
    
    260,120
    
    
    $
    42.42Granted
    
    
    621,525
    
    
    
    43.70Forfeited or Expired
    
    
    (50,108
    )
    
    
    42.71Exercised
    
    
    (9,727
    )
    
    
    42.53Outstanding at September 30, 2007
    
    
    821,810
    
    
    $
    43.37Exercisable at September 30, 2007
    
    
    48,202
    
    
    $
    42.68
  -11-




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SPARTA, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
   Weighted AverageNonvested stock options subject
    
    Number of
    
    
    Grant-Date Fairto SFAS 123(R)
    
    Shares
    
    
    ValueNonvested at December 31, 2006
    
    
    254,118
    
    
    $
    6.03Granted
    
    
    621,525
    
    
    
    5.88Vested
    
    
    (57,554
    )
    
    
    4.84Forfeited
    
    
    (44,481
    )
    
    
    6.03Nonvested at September 30, 2007
    
    
    773,608
    
    
    $
    6.00
    Stock options subject
    
    
    
    
    
    Weighted Averageto APB 25
    
    Number of Shares
    
    
    Exercise PriceOutstanding at December 31, 2006
    
    
    1,715,873
    
    
    $
    33.60Forfeited or Expired
    
    
    (66,865
    )
    
    
    35.72Exercised
    
    
    (358,129
    )
    
    
    27.27Outstanding at September 30, 2007
    
    
    1,290,879
    
    
    $
    35.24Exercisable at September 30, 2007
    
    
    744,516
    
    
    $
    32.44
  -12-




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SPARTA, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
   Nonvested stock options subject to
    
    Number of
    
    
    Weighted AverageAPB 25
    
    Shares
    
    
    Exercise PriceNonvested at December 31, 2006
    
    
    814,457
    
    
    $
    37.70Vested
    
    
    (212,681
    )
    
    
    34.10Forfeited
    
    
    (55,413
    )
    
    
    38.20Nonvested at September 30, 2007
    
    
    546,363
    
    
    $
    39.05
   Stock Compensation Plan
    Weighted AverageNumber of
    
    
    Grant-Date FairShares of Restricted Stock
    
    Shares
    
    
    ValueOutstanding at December 31, 2006
    
    
    52,080
    
    
    $
    13.89Granted
    
    
    7,012
    
    
    
    42.78Distributed
    
    
    (6,801
    )
    
    
    23.03Forfeited
    
    
    (1,428
    )
    
    
    28.02Outstanding at September 30, 2007
    
    
    50,863
    
    
    $
    16.25Vested, undistributed at September 30, 2007
    
    
    33,875
    
    
    $
    6.64
  -13-




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SPARTA, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
   Weighted AverageGrant-Date FairNonvested Shares of Restricted Stock
    
    Number of Shares
    
    
    ValueNonvested at December 31, 2006
    
    
    18,205
    
    
    $
    27.37Granted
    
    
    7,012
    
    
    
    42.78Vested
    
    
    (6,801
    )
    
    
    23.03Forfeited
    
    
    (1,428
    )
    
    
    28.02Nonvested at September 30, 2007
    
    
    16,988
    
    
    $
    35.41
  Note 9  Computation of Earnings Per Share (EPS)
 Three months ended September 30,
    
    
    Nine months ended September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Basic EPSNet income
    
    $
    6,462,000
    
    
    $
    4,701,000
    
    
    $
    15,103,000
    
    
    $
    13,127,000Weighted average
shares outstanding
    
    
    4,771,426
    
    
    
    5,102,829
    
    
    
    4,810,475
    
    
    
    5,206,050Per share amounts
    
    $
    1.35
    
    
    $
    0.92
    
    
    $
    3.14
    
    
    $
    2.52Diluted EPSNet income
    
    $
    6,462,000
    
    
    $
    4,701,000
    
    
    $
    15,103,000
    
    
    $
    13,127,000Weighted average
shares outstanding
    
    
    4,771,426
    
    
    
    5,102,829
    
    
    
    4,810,475
    
    
    
    5,206,050Stock options
    
    
    178,344
    
    
    
    272,341
    
    
    
    188,156
    
    
    
    322,498Restricted stock
    
    
    11,264
    
    
    
    17,002
    
    
    
    10,594
    
    
    
    19,3694,961,034
    
    
    
    5,392,172
    
    
    
    5,009,225
    
    
    
    5,547,917Per share amounts
    
    $
    1.30
    
    
    $
    0.87
    
    
    $
    3.02
    
    
    $
    2.37
 Note 10  Recent Accounting Pronouncements
 The Fair Value Option for Financial Assets and Financial
Liabilities  Including an amendment of FASB Statement No. 115
 -14-




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SPARTA, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 Fair
Value Measurements
 -15-




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Item 2 Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Results of Operations
  Accounting for the Impairment of Long-Lived Assets
  Operating Results(amounts in thousands, except percentages)Three months ended
    
    Nine months endedSeptember 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006Sales
    
    $
    73,209
    
    
    $
    77,270
    
    
    $
    213,189
    
    
    $
    217,739Sales by business area, as a
percentage of total sales:Ballistic Missile Defense (BMD)
    
    
    50
    %
    
    
    48
    %
    
    
    52
    %
    
    
    47
    %Other Dept of Defense (DoD)
    
    
    48
    %
    
    
    49
    %
    
    
    46
    %
    
    
    50
    %Non-DoD
    
    
    2
    %
    
    
    3
    %
    
    
    2
    %
    
    
    3
    %Operating Income
    
    $
    6,480
    
    
    $
    7,744
    
    
    $
    20,615
    
    
    $
    21,672Operating Margin
    
    
    8.9
    %
    
    
    10.0
    %
    
    
    9.7
    %
    
    
    10.0
    %Income from Continuing Operations
    
    $
    6,462
    
    
    $
    4,723
    
    
    $
    15,103
    
    
    $
    13,126Income (Loss) from Discontinued Operations
    
    $
    
    
    
    $
    (22
    )
    
    $
    
    
    
    $
    1Net income
    
    $
    6,462
    
    
    $
    4,701
    
    
    $
    15,103
    
    
    $
    13,127
    -16-




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Share-Based Payment,
   Backlog
   -17-




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September 30,
    
    December 31,
    
    September 30,2007
    
    2006
    
    2006(amount in thousands)Annualized funded contract backlog
    
    $
    119,200
    
    
    $
    87,600
    
    
    $
    98,200Annualized unfunded contract backlog
    
    
    120,700
    
    
    
    89,600
    
    
    
    70,500Total annualized contract backlog
    
    
    239,900
    
    
    
    177,200
    
    
    
    168,700Expected 12-month value of future
funding on
proposals with high probability
of winning
procurement
    
    
    54,600
    
    
    
    85,100
    
    
    
    96,500Total annualized Company-defined backlog
    
    $
    294,500
    
    
    $
    262,300
    
    
    $
    265,200Total multi-year contract backlog
    
    $
    596,200
    
    
    $
    434,600
    
    
    $
    426,500Expected value of future funding on
proposals with high probability of winning
procurement
    
    
    181,400
    
    
    
    312,300
    
    
    
    487,300Total multi-year Company-defined backlog
    
    $
    777,600
    
    
    $
    746,900
    
    
    $
    913,800Annualized Company-defined backlog
(by business area):BMD
    
    $
    148,400
    
    
    $
    136,900
    
    
    $
    134,300Other DoD
    
    
    140,400
    
    
    
    120,400
    
    
    
    124,700Non-DoD
    
    
    5,700
    
    
    
    5,000
    
    
    
    6,200Total annualized Company-defined backlog
    
    $
    294,500
    
    
    $
    262,300
    
    
    $
    265,200
   -18-




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##### Table of Contents




    
    Prime contract with the Missile and Space Intelligence Center (MSIC) for the Joint
Research Assessment and Analysis Center (JRAAC) Support Program, estimated value of $77.6
million over five years.
    
    Subcontract with the National Security Agency (NSA) Chief Technology Organization to
provide information technology support, estimated value of $30 million over five years.
    
    Four sole source add-ons to existing prime contracts with classified customers, total
estimated value of $14.9 million with individual performance periods of one year each.
    
    Prime contract with the U.S. Army Yuma Counterinsurgency Test and Evaluation program,
estimated value of $9.9 million over three years.
    
    Two prime contracts with the U.S. Air Force for the System Engineering and Technical
Support and Acquisition Support and System Engineering Programs, estimated value totaling
$11.2 million over one year.
    
    Subcontract in support of the U.S. Army Tube-launched, Optically-tracked, Wire-guided
(TOW) Wireless program, with a value of $5 million over two years.
    
    Subcontract for the U.S. Army Counter Narco-Terrorism Protection Program, estimated
value of $5.0 million over five years.
    
    Sole source prime contract with a classified customer, estimated value of $5.0 million
over nine months.
    
    Sole source add-on to an existing prime contract for the U.S. Army Intelligence and
Security Command (INSCOM) Engineering Support Program, estimated value of $3.8 million over
one year.
    
    Sole source add-on to an existing prime contract with the NSA Customer Solutions Office
for the Secure Mobile Environment/Portable Device Test and Evaluation Program, estimated
value of $3.2 million over two years.
    
    Exercise of a Missile Defense Agency (MDA) prime contract option for the Support to
Deputy International Affairs Program, estimated value of $2.2 million over one year.
    
    Sole source add-on to an existing prime contract with the Technical Support Working
Group, estimated value of $1.1 million over eighteen months.
    
    Sole source add-on to the existing prime contract with the Federal Bureau of
Investigation (FBI) for the Data Processing Support Program, estimated value of $1.0
million over six months.
  -19-




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Liquidity and Capital Resources
  Balance atSeptember 30, 2007
    
    December 31, 2006
    
    September 30, 2006Cash and cash equivalents
    
    $
    38,437,000
    
    
    $
    23,379,000
    
    
    $
    32,810,000Short-term investments
    
    $
    10,161,000
    
    
    $
    14,861,000
    
    
    $
    12,711,000Stockholders equity
    
    $
    68,726,000
    
    
    $
    61,412,000
    
    
    $
    66,749,000Notes payable
    
    $
    12,718,000
    
    
    $
    12,486,000
    
    
    $
    9,857,000Borrowings under line of
credit
    
    $
    
    
    
    $
    
    
    
    $
    Current ratio
    
    
    2.4
    
    
    
    2.1
    
    
    
    2.5
 Overview
      -20-




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Cash Flow Information
       -21-




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##### Table of Contents



Payments Due by Period(amounts in thousands)Contractual Obligations
    
    Total
    
    Less than 1 year
    
    1-3 years
    
    4-5 years
    
    More than 5 yearsPromissory Notes
    
    
    12,718
    
    
    $
    3,726
    
    
    $
    7,094
    
    
    $
    1,898
    
    
    $
    Operating Leases
    
    
    45,120
    
    
    
    9,659
    
    
    
    19,754
    
    
    
    6,284
    
    
    
    9,423Total Contractual Obligations
    
    $
    57,838
    
    
    $
    13,385
    
    
    $
    26,848
    
    
    $
    8,182
    
    
    $
    9,423
 Effects of Federal Funding for Defense Programs
   Recent Accounting Pronouncements
 The Fair Value Option for Financial Assets and Financial
Liabilities  Including an amendment of FASB Statement No. 115
 Fair
Value Measurements
 -22-




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##### Table of Contents



Forward-Looking Statements
  
 Item 3 Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4 Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Controls
  -23-




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##### Table of Contents



PART II OTHER INFORMATION
 
 Item 1 Legal Proceedings
  
 Item 1A Risk Factors
  
 Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
  Issuer Purchases of Equity Securities
 Maximum Number (orTotal Number of
    
    Approximate DollarShares Purchased as
    
    Value) of SharesPart of Publicly
    
    that May Yet BeTotal Number of
    
    Average Price Paid
    
    Announced Plans or
    
    Purchased Under thePeriod
    
    Shares Purchased
    
    per Share
    
    Programs
    
    Plans or ProgramsJuly
(7/2/07  7/29/07)
    
    
    55,880
    
    
    $
    43.87
    
    
    
    34,200
    
    
    
    August
(7/30/07  8/26/07)
    
    
    101,847
    
    
    
    44.92
    
    
    
    11,128
    
    
    $
    902,000September
(8/27/07  9/30/07)
    
    
    23,679
    
    
    
    43.93
    
    
    
    
    
    
    
    Total
    
    
    181,406
    
    
    $
    44.60
    
    
    
    45,328
    
    
    $
    902,000
   -24-




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##### Table of Contents



Item 3 Defaults Upon Senior Securities
  
 Item 4 Submission of Matters to a Vote of Security Holders
  
 Item 5 Other Information
  
 Item 6 Exhibits
 Exhibit 31.1
    
    Certification of Chief Executive Officer Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002Exhibit 31.2
    
    Certification of Chief Financial Officer Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002Exhibit 32.1
    
    Certification of Chief Executive Officer Pursuant to 18
U.S.C. Section 1350, As Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.Exhibit 32.2
    
    Certification of Chief Financial Officer Pursuant to 18
U.S.C. Section 1350, As Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
 -25-




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##### Table of Contents



Signature
  SPARTA, INC.
(Registrant)Date: November 9, 2007
    By:
    /s/  David E. SchreimanDavid E. SchreimanVice President and Chief Financial Officer
(Principal Accounting Officer) -26-




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##### Table of Contents



EXHIBIT INDEX
 Exhibit 31.1
    
    Certification of Chief Executive Officer Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002Exhibit 31.2
    
    Certification of Chief Financial Officer Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002Exhibit 32.1
    
    Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.Exhibit 32.2
    
    Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.