U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB


    X       Quarterly Report under Section 13 or 15 (d) of the Securities 
---------   Exchange Act of 1934.

For the quarterly period ended December 31, 1996.

---------  Transition  Report under  Section 13 or 15 (d) of the Exchange Act.


For the transition period from ________________ to __________________

                        Commission File Number 000-19318

                               SPARTA FOODS, INC.
        (exact name of small business issuer as specified in its charter)


       Minnesota                                        41-1618240
 (State or other jurisdiction of              (IRS Employer Identification No.)
   incorporation or organization)


                     2570 Kasota Avenue, St. Paul, MN 55108
                    (Address of principal executive offices)

                                 (612) 646-1888
                           (Issuer's telephone number)

     Check  whether  the Issuer (1) filed all  reports  required  to be filed by
Section 13 or 15 (d) of the  Exchange Act during the past 12 months (or for such
shorter period that the  Registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days.

                    Yes  ____X_____      No  __________

     State the number of shares  outstanding of each of the Issuer's  classes of
common equity, as of the latest practicable date:

              6,685,049 shares of Common Stock at January 21, 1997.

Transitional Small Business Disclosure Format:  Yes _______    No ____X____



<PAGE>



                               SPARTA FOODS, INC.

                                   FORM 10-QSB

                         QUARTER ENDED DECEMBER 31, 1996

                                TABLE OF CONTENTS

                                                                    PAGE



PART I. FINANCIAL INFORMATION

        Item 1. Financial Statements                                  3

          Condensed Consolidated Balance Sheets at December 31, 1996
          and September 30, 1996                                      3

          Condensed Consolidated Statements of Operations for the
          three-month periods ended December 31, 1996 and 1995        4

          Condensed Consolidated Statements of Cash Flows for the 
          three-month periods ended December 31, 1996 and 1995        5

          Notes to Condensed Consolidated Financial Statements -
          December 31, 1996                                           6

       Item 2.  Management's Discussion and Analysis of Financial
                Condition and Results of Operations                   7


PART II. OTHER INFORMATION

        Item 6.  Exhibits and Reports on Form 8-K                    10

SIGNATURES                                                           11

EXHIBIT INDEX                                                        12

                                      - 2 -

<PAGE>



                          PART I. FINANCIAL INFORMATION

ITEM 1.           FINANCIAL STATEMENTS

                               SPARTA FOODS, INC.
                      Condensed Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                                           December 31          September 30
                                                                                              1996                  1996
                                                                                   ---------------------------------------------
                                                                                          (unaudited)
ASSETS
<S>                                                                                        <C>                   <C>    

Current Assets
         Cash                                                                              $   9,223             $     600
         Accounts receivable, less allowances of $53,000 and $52,000,
          respectively                                                                       718,458               639,934
Inventories:
         Finished goods                                                                      338,847               241,959
         Raw materials and packaging                                                         547,089               506,513
Prepaid expenses                                                                              90,654                63,915
                                                                                           ---------             ---------
         Total current assets                                                              1,704,271             1,452,921
                                                                                           ---------             ---------
Property and Equipment                                                                     6,011,707             5,850,489
         Less accumulated depreciation                                                     2,229,363             2,115,810
                                                                                           ---------             ---------
                                                                                           3,782,344             3,734,679
                                                                                           ---------             ---------
Other Assets
         Goodwill, less accumulated amortization of $107,892 and
          $102,358, respectively                                                             451,998               457,533
         Covenants not-to-compete, less accumulated amortization of
          $247,653 and $235,366, respectively                                                 85,847                98,134
         Rental property held for resale, less accumulated depreciation of
          $21,978 and $15,984, respectively                                                  918,022               924,016
         Other                                                                               274,277               339,730
                                                                                           ---------              --------
                                                                                           1,730,144             1,819,413
                                                                                           ---------             ---------
                                                                                          $7,216,759            $7,007,013
                                                                                          ==========            ==========

LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
         Note payable, bank                                                              $  905,916            $  294,811
         Current maturities of long-term debt                                               520,464               567,905
         Accounts payable                                                                   393,427               658,575
         Accrued expenses                                                                   321,480               412,074
                                                                                          ---------             ----------
                  Total current liabilities                                               2,141,287             1,933,365
                                                                                          ---------             ----------
         Long-term Debt, less current maturities                                          1,951,853             2,063,613
                                                                                          ---------             ----------
         Stockholders Equity
                  Preferred Stock, authorized 1,000,000 shares, no
                   designated par value; none issued                                            --                    --

         Common Stock,  authorized 15,000,000 shares, $.01 par value; issued and
          outstanding 6,685,049 and 6,679,049 shares,
          respectively                                                                       66,850                66,790
         Additional paid-in capital                                                       4,913,459             4,911,070
         Accumulated deficit                                                             (1,856,690)           (1,967,825)
                                                                                         -----------            ----------
                                                                                          3,123,619             3,010,035
                                                                                         -----------            ----------
                                                                                         $7,216,759            $7,007,013
                                                                                         ==========            ===========
</TABLE>

See Notes to Condensed Consolidated Financial Statements.

                                      - 3 -

<PAGE>



                               SPARTA FOODS, INC.
                 Condensed Consolidated Statements of Operations
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                       For the three months
                                                                                        ended December 31
                                                                         ------------------------------------------------

                                                                                          1996                    1995
                                                                                          ----                    ----
<S>                                                                                 <C>                      <C>    

Net sales                                                                           $   3,111,222         $   2,920,625

Cost of sales                                                                           2,191,121             2,154,317
                                                                                        ---------             ---------
         Gross profit                                                                     920,101               766,308

Selling, general and administrative
 expenses                                                                                 757,285               701,314
                                                                                         --------             ---------
         Operating income                                                                 162,816                64,994

Other income (expense), net                                                                32,037                 4,112

Interest expense                                                                         (82,467)             (141,501)
                                                                                         --------             ---------
         Income (loss) before income tax                                                  112,386              (72,395)
                                                                                         
Provision for income tax                                                                    1,250                  ----
                                                                                         --------             ---------
         Net income (loss)                                                          $     111,136        $     (72,395)
                                                                                         ========             =========
Net Income (loss) per common share                                                  $         .02        $        (.02)
                                                                                         ========             =========

Weighted average number of common
 shares outstanding                                                                     6,679,766             4,062,799
                                                                                        =========            ==========

</TABLE>

See Notes to Condensed Consolidated Financial Statements.


                                      - 4 -

<PAGE>



                               SPARTA FOODS, INC.
                 Condensed Consolidated Statements of Cash Flows
                                   (unaudited)


<TABLE>
<CAPTION>
                                                                                                  For the three months
                                                                                                    ended December 31
                                                                                        -----------------------------------------
                                                                                               1996                1995
<S>                                                                                            <C>                 <C>    
Cash Flows from Operating Activities
     Net income (loss)                                                                          $   111,136        $   (72,395)
         Adjustments to reconcile net income (loss) to net cash
          used in operating activities:
              Depreciation and amortization                                                         145,658             129,471
              Changes in assets and liabilities:
                  Accounts receivable                                                              (78,524)           (101,790)
                  Inventories                                                                     (137,464)              28,097
                  Prepaid expenses                                                                 (26,739)            (28,691)
                  Other assets                                                                       63,755            (15,527)
                  Accounts payable and accrued expenses                                           (355,742)            (24,913)
                                                                                                 ----------           ---------
Net cash used in operating activities                                                             (277,920)            (85,748)
                                                                                                 ----------           ---------
Cash Flows from Investing Activities
     Purchases of property and equipment                                                          (167,811)            (23,444)
                                                                                                 ----------           ---------
     Net cash used in investing activities                                                        (167,811)            (23,444)
                                                                                                 ----------           ---------
Cash Flows From Financing Activities
     Net short term borrowings                                                                      611,105             255,399
     Payments on long-term borrowings                                                             (159,201)           (146,520)
     Issuance of Common Stock                                                                         2,450                 ---
                                                                                                -----------           ---------
     Net cash provided by financing activities                                                      454,354             108,879
                                                                                                -----------           ---------

     Net cash increase (decrease)                                                                     8,623               (313)

Cash Balance
     Beginning of period                                                                                600                 863
                                                                                                 ----------           ---------
     End of period                                                                             $      9,223       $         550
                                                                                                 ==========           =========
Supplemental Disclosures of Cash Flow Information
     Cash payments for:
         Interest                                                                               $    81,992         $   135,884
         Income taxes                                                                                 1,250                 ---
                                                                                                 ===========          =========
</TABLE>

See Notes to Condensed Consolidated Financial Statements.


                                      - 5 -

<PAGE>



                               Sparta Foods, Inc.
              Notes to Condensed Consolidated Financial Statements
                                December 31, 1996
                                   (unaudited)

NOTE 1.       GENERAL

     The unaudited  condensed  consolidated  balance sheet at December 31, 1996,
the condensed consolidated  statements of operations for the three-month periods
ended December 31, 1996 and 1995, and the condensed  consolidated  statements of
cash flows for the three-month periods ended December 31, 1996 and 1995, include
all  adjustments  which in the opinion of  management are necessary in order to
make the financial statements not misleading and are not necessarily  indicative
of results of  operations to be expected for the entire fiscal  year  ending
September 30, 1997.

     The unaudited  financial  statements should be read in conjunction with the
audited  financial  statements for the years ended  September 30, 1996 and 1995,
contained in Form 10-KSB and Form 10-KSB/A(No.1), and Management's  Discussion
and Analysis of Financial Condition and Results of Operations contained herein.

NOTE 2.       FINANCING AGREEMENT

     The Company has a financing  agreement with a bank which involves a line of
credit and term note.  Under this  agreement the Company is required to maintain
certain minimum net worth levels. In addition, a maximum debt to net worth ratio
is specified,  and dividends and capital  expenditures are restricted.  Advances
are secured by the Company's  accounts  receivable,  inventories  and equipment.
Maximum  borrowings  under  the line of credit  are  determined  by an  accounts
receivable and inventory borrowing base calculation or $1,200,000,  whichever is
less. At December 31, 1996 such borrowings bear interest at prime plus 1 percent
(9.25 percent),  and $905,916 was outstanding on the line of credit. On December
20, 1996 this  agreement  was amended to adjust  various  covenants,  extend the
maturity and make available an additional $200,000 under the term note.

NOTE 3.       INCOME TAX

     The  provision  for  income  tax is based  upon a minimum  state  tax.  The
availability of tax benefits from prior years offsets any regular taxes.

NOTE 4.       NET INCOME (LOSS) PER COMMON SHARE

     Net income  (loss) per common share is  calculated  based on the net income
and net loss for the respective period and the weighted average number of common
shares  outstanding  during the period.  Common Stock  equivalents  (options and
warrants)  are not dilutive and  anti-dilutive  for the  respective  three-month
periods ended December 31, 1996 and 1995.


                                      - 6 -

<PAGE>



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

Overview

     La Canasta of Minnesota,  Inc. ("La  Canasta"),  the  predecessor of Sparta
Foods, Inc. (the "Company"),  and now a wholly-owned  subsidiary of the Company,
began producing limited volumes of hand stretched tortillas,  corn tortillas and
corn tortilla chips shortly  following its  organization in 1981,  primarily for
sale to  restaurants.  The Company was organized  under the laws of the State of
Minnesota in 1988,  originally under the name of "Sparta Corp." for the purposes
of raising  capital for the  acquisition  of, or investment  in, a business.  In
January 1991, the Company  acquired all of the  outstanding  capital stock of La
Canasta. In 1991 and 1992, the Company completed acquisitions which expanded its
retail  brands to include Cruz and Chapala  trademark  products and its customer
bases  to  include  McDonald's  restaurants.   In  1993,  the  Company  acquired
substantially all of the assets of International Food Products,  Inc. ("IFP") of
Lakeville, Minnesota, which was engaged in the manufacture and sale of tortillas
and tortilla  chips.  This  acquisition  provided  the Company  with  additional
manufacturing  capabilities,  the  established  La Campana  Paradiso and Mexitos
brand names,  and the retail and food service  distribution  services of Bradley
Distributing,  Inc.  and Sysco  Corporation,  respectively.  In 1995 the Company
relocated  its  Lakeville,  Minnesota  production  operations  to its  St.  Paul
manufacturing  facility. The Company leased the Lakeville facility in 1996 for a
period of 10 years with a purchase option.

Results of Operations

     The  Company's net sales of $3,111,222  increased  $190,597  (6.5%) for the
three  months ended  December  31,  1996,  as compared to the three months ended
December  31, 1995.  This  increase  primarily  resulted  from  expansion of the
Company's  existing  customer  base in the retail  industry as well as expansion
into new  territories  through its primary  retail  distributor,  Crystal  Farms
Refrigerated Distribution Company.

     Gross  profit,  as a  percentage  of net sales,  for the three months ended
December  31,  1996,  was 29.6%  compared to 26.2 % for the three  months  ended
December 31,  1995.  The higher  percentage  reflects  significant  cost savings
achieved by certain  purchases  of raw  materials  and  packaging as well as the
effect of periodic price increases of the Company's products.

     Selling, general and administrative expenses increased $55,971 or 8% in the
three  months ended  December 31, 1996,  as compared to the same period in 1995.
This  increase  is the  result of the sales  increase  for the period as well as
reflecting  some  additional  expense  incurred in introducing and promoting the
Company's new line of La Canasta tortilla chips into the retail market. Selling,
general and administrative  expenses,  as a percentage of net sales, remained at
24 % for the three  months  ended  December  31,  1996,  as compared to the same
period in 1995.  Interest expense decreased  $59,034 for the three-month  period
ended  December 31, 1996  compared to the three months ended  December 31, 1995.
This is due  primarily  to interest  rate  reductions  and lower  levels of bank
borrowings.


                                      - 7 -

<PAGE>



Liquidity and Capital Resources

     The Company financed its current  activities  primarily through  short-term
borrowings and cash generated from its operations.

     Cash used in operating  activities  during the three months ended  December
31, 1996 was $277,920  consisting  principally  of an increase in inventories of
$137,464,  an  increase  in  accounts  receivable  of $78,524  and a decrease in
accounts payable and accrued expenses of $355,742. This was offset by net income
of  $111,136  and  depreciation  and  amortization  of  $145,658.  Cash  used in
investing  activities  was  $167,811,  primarily  the result of the purchase and
installation  of a new  freezer.  Cash  provided  by  financing  activities  was
$454,354  due  mainly  to a net  increase  in  short-term  borrowings  under the
Company's Line of Credit.

     The Company  estimates that as of December 31, 1996, there is an additional
$117,000  which  could be  drawn  under  its bank  Line of  Credit.  The  amount
available  under this Line of Credit  fluctuates  daily based upon the Company's
eligible accounts  receivable and inventory.  The Line of Credit, Bank Term Note
and Bank Capital Note are subject to various financial covenants,  the violation
of which could result in termination of the loan agreements  which would require
the Company to repay the loans in full.  On December 20, 1996,  the Bank and the
Company  signed  an  amendment  to  their  Credit  Agreement  adjusting  various
financial  covenants  which  thereby  reduced  the  Company's  interest  rate on
borrowings effective October 1, 1996, extended the maturity of the facility from
December 7, 1997 to December 31, 1999 and made  available a Capital  Expenditure
Loan of up to  $200,000.  The  Company  had  been in  default  of the  financial
covenants in the past, and the bank had waived such defaults. It is management's
opinion  that  the  Company  will  be able to meet  the  requirements  of  these
covenants in the future;  however,  there is no assurance  that the Company will
not violate the  financial  covenants in the future or that the bank would waive
any such violations.

     At December 31, 1996,  the Company had cash of $9,223 and negative  working
capital of $437,016.

     The Company  believes  that its bank credit  facilities  and cash flow from
operations will be sufficient to meet its operating  requirements through fiscal
1997,  assuming  the  following:  (i) the  Company's  fiscal 1997 sales equal or
exceed fiscal 1996 sales; (ii) there are no significant increases in expenses in
fiscal  1997;  and (iii) the Company is able to keep its bank credit  facilities
operative.

Seasonality

     The  Company  has  historically  had  higher  sales in its third and fourth
fiscal quarters which end June 30, and September 30,  respectively,  than in its
first and second quarters. Management believes that this is a result of seasonal
consumption  patterns  with  respect to the  Company's  food  products,  such as
consumption  of higher  volumes of tortilla  chips,  salsa and barbecue  sauces,
during  the summer  months.  This  seasonality  may cause  quarterly  results of
operations to fluctuate.


                                      - 8 -

<PAGE>



Raw Material Cost Fluctuations

     The Company does not enter into futures contracts as defined by SFAS 80. It
does, however, enter into purchase orders for delayed delivery of raw materials,
generally  30 days for raw  materials  other  than flour and corn.  The  Company
enters into purchase orders for delayed  delivery of flour and corn for a period
of 2-18 months,  depending on current pricing, to ensure the availability of the
type of flour and corn best suited for the Company's  products.  These  purchase
orders are placed directly with the suppliers.

Outlook

     Its plan in fiscal 1997 is to increase  revenues and improve  profitability
by  focusing  on new markets and product  brand  positioning  of  tortillas  and
tortilla  chips in the retail and food  service  markets  to take  advantage  of
strong industry growth patterns.

     The foregoing  statements contained in this Outlook section of Management's
Discussion  and  Analysis of  Financial  Condition  and  Results of  Operations,
including  those  relating to the  Company's  (i)  ability to meet its  covenant
requirements under its Credit Agreement and (ii) operating  requirements through
fiscal 1997  contained  in  Management's  Discussion  and  Analysis of Financial
Condition   and   Results  of   Operations,   involve  a  number  of  risks  and
uncertainties.  Some of the factors  that could cause  actual  results to differ
materially  include  but are not  limited  to  seasonality  of its sales and raw
materials cost fluctuations, which are discussed above, and the following:

     Reliance on Principal Customers. The Company has several customers who each
accounted  for a significant  percentage of the Company's  sales in fiscal 1996.
During that period,  sales to Crystal Farms Refrigerated  Distribution  Company,
Ken  Davis  Products,   Inc.,   Catalina   Specialty  Foods,  Inc.  and  Bradley
Distributing,  Inc.  accounted  for  approximately  20%,  8%,  15% and 8% of the
Company's sales, respectively.  The loss of any of the foregoing customers could
have a material and adverse effect on the Company's sales and profitability.

     Competition. The Mexican-style food manufacturing and distribution industry
is  highly  competitive.  The  Company  is  in  competition  with  a  number  of
manufacturers and distributors of Mexican-style  food products and, to a limited
extent,  manufacturers  of "snack  foods," many of which are better  capitalized
than the Company.  The Company will also be subject to future  competition  from
other manufacturers, distributors and retailers who enter into the Mexican-style
food and distribution  industry. In the retail market, many of these competitors
engage in extensive local and national advertising and marketing,  and the brand
names for products  distributed  by those  competitors  are  significantly  more
recognizable  to the  consumer  than the  Company's  brand  names.  In addition,
competition  for shelf space in retail  grocery  stores is intense.  In the food
service market,  the Company is competing with a number of regional and national
producers or Mexican-style  food products.  Many of these competitors are better
capitalized  than the  Company  and have  established  sales  organizations.  No
assurance  can be given that the  Company  will be able to compete as it expands
its markets.

     Sufficiency of Working Capital.  As of December 31, 1996, the Company had a
cash balance of $9,223 and negative working capital of $437,016.  As of December
31, 1996, there was an additional $117,000 which could have been drawn under the
Company's Line of Credit.  The amount available  fluctuates daily based upon the
Company's eligible accounts receivable and inventory. In addition, the Company's
ability to obtain  additional  equity  capital is  severely  restricted,  and if
obtainable  at  all,  would  result  in  substantial  dilution.  Therefore,  the
Company's  ability to fund its working capital  requirements in fiscal 1997 will
be almost  entirely  dependent  on  generating  sales  which equal or exceed the
Company's fiscal 1996 sales. In addition,  any unforeseen  expense of a material
nature would  materially  and  adversely  affect the  Company's  ability to fund
ongoing operations.

     Government  Regulation.  The  Company's  business  is  subject  to  various
federal,  state and local environmental and health  regulations.  If the Company
were  found  not  to be in  compliance  with  such  regulations,  sanctions  and
penalties  could be imposed  which could  materially  and  adversely  affect the
Company's business.


                                      - 9 -

<PAGE>



                           PART II. OTHER INFORMATION


ITEM 6.       EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits

Exhibit
Number            Description

10.42     Fourth  Amendment to Credit and Security  Agreement dated December 20,
          1996  between the  Registrant  and Norwest  Bank  Minnesota,  National
          Association.

10.43     Manufacturing Agreement between the Registrant and Ken Davis Products,
          Inc.

10.44     Amendment to Consultant Agreement dated December 20, 1996 between the 
          Registrant and Catalina Specialty Foods, Inc.

11        Computation of Earnings Per Common Share.

27        Financial Data Schedule (filed only in electronic format).


(b)  Reports on Form 8-K

     A report on Form 8-K was not filed  during the quarter  ended  December 31,
1996.



                                     - 10 -

<PAGE>



                                   SIGNATURES

     In accordance  with the  requirements  of the Exchange Act, the  Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                             SPARTA FOODS, INC.
                                                (Registrant)

Dated:   February 6, 1997            By: /s/ Joel P. Bachul
                                          ------------------
                                          Joel P. Bachul,
                                          President and Chief Executive Officer


Dated:   February 6, 1997            By: /s/ A. Merrill Ayers
                                        --------------------
                                       A. Merrill Ayers
                                       Treasurer, Secretary and Chief Financial
                                        Officer






                                     - 11 -

<PAGE>



                               Sparta Foods, Inc.
                                  Exhibit Index




Exhibit
Number     Description

10.42     Fourth Amendment to Credit and Security Agreement dated December 20, 
          1996 between the Registrant and Norwest Bank Minnesota, National 
          Association.

10.43     Manufacturing Agreement between the Registrant and Ken Davis 
          Products, Inc.

10.44     Amendment to Consultant Agreement dated December 20, 1996 between the 
          Registrant and Catalina Specialty Foods, Inc.

11        Computation of Earnings Per Common Share.

27       Financial Data Schedule (filed only in electronic format).



                                     - 12 -