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, 1998.

         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)

                   1565First Avenue NW, New Brighton, MN 55112
                    (Address of principal executive offices)

                                 (651) 697-5500
                           (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:

                 7,851,416 of Common Stock at January 18, 1999.

Transitional Small Business Disclosure Format:  Yes  _____        No     X 





<PAGE>



                               SPARTA FOODS, INC.

                                   FORM 10-QSB

                         QUARTER ENDED DECEMBER 31, 1998

                                TABLE OF CONTENTS
                                                                            PAGE

PART I.  FINANCIAL INFORMATION

         Item 1. Financial Statements                                         3

                 Condensed Consolidated Balance Sheets at 
                 December 31, 1998 and September 30, 1998                     3

                 Condensed Consolidated Statements of Operations for
                 the three-month periods ended December 31, 1998 and 1997     4

                 Condensed Consolidated Statements of Cash Flows for the 
                 three-month periods ended December 31, 1998 and 1997         5

                 Notes to Condensed Consolidated Financial Statements 
                 - December 31, 1998                                          6

         Item 2. Management's Discussion and Analysis or Plan of Operation    8



PART II. OTHER INFORMATION

         Item 2. Changes in Securities                                       12

         Item 6. Exhibits and Reports on Form 8-K                            12


SIGNATURES                                                                   13

EXHIBIT INDEX                                                                14


<PAGE>


                          PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                               SPARTA FOODS, INC.
                      Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
                                                                              December 31    September 30
                                                                                  1998            1998
                                                                             ------------    ------------
                                                                              (unaudited)
<S>                                                                          <C>             <C>         
ASSETS
Current Assets
   Cash and cash equivalents                                                 $  1,383,174    $  1,131,255
   Accounts receivable, less allowances of $30,000                                868,004         877,752
   Inventories:
      Finished goods                                                              504,303         436,784
      Raw materials and packaging                                                 423,645         396,396
  Prepaid expenses                                                                242,251         198,752
  Income tax receivable                                                             4,746           4,746
  Deferred tax asset                                                               43,000          43,000
                                                                             ------------    ------------
Total current assets                                                            3,469,123       3,088,685
                                                                             ------------    ------------
Property and Equipment                                                          9,208,646       9,045,342
   Less accumulated depreciation                                                2,982,287       2,788,399
                                                                             ------------    ------------
                                                                                6,226,359       6,256,943
                                                                             ------------    ------------
Other Assets
   Restricted cash                                                                201,613         242,059
  Covenants not-to-compete, less accumulated amortization of
     $ 41,089 and $39,424, respectively                                            58,911          60,576
   Goodwill, less accumulated amortization of $88,613 and 
     $85,404, respectively
                                                                                  424,759         427,968
   Deferred financing costs, less accumulated amortization of
      $ 69,181 and $64,778, respectively                                          128,853         133,256
   Deferred tax asset                                                             219,100         227,000
   Other                                                                          230,510         284,698
                                                                             ------------    ------------
                                                                                1,263,746       1,375,557
                                                                             ------------    ------------
                                                                             $ 10,959,228    $ 10,721,185
                                                                             ============    ============
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
   Current maturities of long-term debt                                      $    374,447    $    367,377
   Accounts payable                                                               548,104         506,874
   Accrued expenses                                                               344,144         469,448
                                                                             ------------    ------------
            Total current liabilities                                           1,266,695       1,343,699
                                                                             ------------    ------------
Long-term Debt, less current maturities                                         2,570,765       2,667,623
                                                                             ------------    ------------
Stockholders Equity
   Preferred Stock, authorized 1,000,000 shares, $1,000 par value;
      issued and outstanding 2,500 shares                                       2,500,000       2,500,000
   Common Stock, authorized 15,000,000 shares, $0.01 par value;
      issued and outstanding 7,842,295 and 7,037,172 shares, respectively          78,423          70,371
   Additional paid-in capital                                                   5,369,141       4,977,092
   Accumulated deficit                                                           (825,796)       (837,600)
                                                                             ------------    ------------
                                                                                7,121,768       6,709,863
                                                                             ------------    ------------
                                                                             $ 10,959,228    $ 10,721,185
                                                                             ============    ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements 


<PAGE>

                               SPARTA FOODS, INC.
                 Condensed Consolidated Statements of Operations
                                   (unaudited)
<TABLE>
<CAPTION>

                                                             For the three months
                                                                      ended
                                                                   December 31
                                                               1998           1997
                                                            -----------    ----------- 
<S>                                                         <C>            <C>        
Net sales                                                   $ 3,675,024    $ 3,812,157

Cost of sales                                                 2,593,863      2,763,502
                                                            -----------    ----------- 

   Gross profit                                               1,081,161      1,048,655

Selling, general, and administrative expenses                 1,043,111      1,004,075
                                                            -----------    ----------- 

    Operating income                                             38,050         44,580

Other income, net                                                32,252         38,232

Interest expense                                                (50,598)       (91,682)
                                                            -----------    ----------- 

    Income (Loss) before income tax                              19,704         (8,870)

Provision for income tax                                          7,900            950
                                                            -----------    ----------- 

   Net income (loss)                                        $    11,804    $    (9,820)
                                                            ===========    =========== 


Basic and Diluted Earnings per share                        $      --      $      --
                                                            ===========    =========== 

Weighted average number of common shares outstanding
                                                              7,650,090      6,784,390
                                                            ===========    =========== 

</TABLE>






See Notes to Condensed Consolidated Financial Statements.



<PAGE>



                               SPARTA FOODS, INC.
                 Condensed Consolidated Statements of Cash Flows
                                   (unaudited)
<TABLE>
<CAPTION>

                                                                            For the three months
                                                                             ended December 31
                                                                            1998             1997
Cash Flows from Operating Activities
<S>                                                                    <C>            <C>
   Net income (loss)                                                   $    11,804    $    (9,820)
   Adjustments to reconcile net income (loss) to net cash
      provided by (used in) operating activities:
         Depreciation and Amortization                                     203,165        160,273
       Deferred taxes                                                        7,900           --
         Changes in assets and liabilities:
            Accounts receivable                                              9,748        (67,700)
            Inventories                                                    (94,768)       133,263
            Prepaid expenses                                               (43,499)         3,471
            Accounts payable and accrued expenses                          (84,074)      (341,294)
                                                                       -----------    -----------
                 Net cash provided by (used in) operating activities        10,276       (121,807)
                                                                       -----------    -----------
Cash Flows from Investing Activities
   Decrease in restricted cash                                              40,446      1,456,755
   Purchases of equipment                                                 (163,304)    (1,660,560)
   Change in deposits and other assets                                      54,188        (10,484)
                                                                       -----------    -----------
                 Net cash used in investing activities                     (68,670)      (214,289)
                                                                       -----------    -----------

Cash Flows from Financing Activities
   Net borrowings on line of credit                                           --          379,187
   Repayment of Long-term Debt, net                                        (89,788)       (51,292)
   Issuance of Common Stock, net of costs                                  400,101         13,013
   Deferred financing costs                                                   --           (4,812)
                                                                       -----------    -----------
                 Net cash provided by financing activities                 310,313        336,096
                                                                       -----------    -----------
                 Net increase in cash                                      251,919           --
Cash and cash equivalents
   Beginning of period                                                   1,131,255            600
                                                                       -----------    -----------
   End of period                                                       $ 1,383,174    $       600
                                                                       ===========    ===========

Supplemental Disclosures of Cash Flow Information
   Cash payments for:
      Interest                                                         $    50,095    $    87,519
      Income taxes                                                            --            2,000
                                                                       ===========    ===========
</TABLE>


See Notes to Condensed Consolidated Financial Statements.



<PAGE>



                               Sparta Foods, Inc.
              Notes to Condensed Consolidated Financial Statements
                                December 31, 1998
                                   (unaudited)

NOTE 1.  GENERAL

         The unaudited condensed consolidated balance sheet at December 31,
         1998, the condensed consolidated statements of operations for the
         three-month periods ended December 31, 1998 and 1997, and the condensed
         consolidated statements of cash flows for the three-month periods ended
         December 31, 1998 and 1997, 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, 1999.

         The unaudited financial statements should be read in conjunction with
         the audited financial statements for the years ended September 30, 1998
         and 1997, contained in Form 10-KSB and Management's Discussion and
         Analysis or Plan of Operation contained herein.


NOTE 2.  FINANCING AGREEMENTS

         The Company has a line of credit (the "Line of Credit") and term loan
         (the "Term Loan") with a bank, secured by certain assets. Maximum
         borrowings under the Line of Credit are determined by a borrowing base
         calculation or $1,200,000, whichever is less. Borrowings bear interest
         at prime (7.75 percent at December 31, 1998). The Company is to
         maintain certain minimum net worth and debt service coverage levels.

         The Company has a loan acquired through the State of Minnesota related
         to a revenue bond issuance. The loan is due in monthly installments
         that vary in accordance with the maturity dates of the related revenue
         bonds, plus interest at rates varying from 4.5 to 6.0 percent. At
         December 31, 1998, $1,756,667 is outstanding. The Company is to
         maintain certain net worth and debt service coverage levels. In
         addition certain dividend restrictions are stipulated and a debt
         service reserve fund and a construction fund have been established. The
         debt service reserve fund will remain until all loan obligations have
         been satisfied. The construction fund represents undisbursed loan
         proceeds that are available for approved equipment expenditures. These
         fund amounts have been reflected on the consolidated balance sheet as
         restricted cash.


NOTE 3.  INCOME TAX

         Deferred taxes are provided on an asset and liability method whereby
         deferred tax assets are recognized for deductible temporary differences
         and operating loss and tax credit carryforwards, net of deferred tax
         liabilities for temporary differences. For the three-month period ended
         December 31, 1998, income taxes have been computed at the federal and
         state statutory rates. For the three-month period ended December 31,
         1997, income taxes are based upon a minimum state tax.


<PAGE>




NOTE 4.  PREFERRED STOCK

         On February 24, 1998, the Company issued 2,500 shares of Preferred
         Stock, Series 1998. The shares are convertible at any time at the rate
         of 606.06 shares of Common Stock for each share of Preferred Stock. The
         holders of the preferred stock have the right to require the Company to
         repurchase the stock in the event of a change in control authorized by
         the Board of Directors or if the Company is in default with certain
         covenants as defined in the agreement. The holders of the Preferred
         Stock are entitled to receive, when, as and if declared by the
         Company's Board of Directors, cash dividends at the rate of 5% annually
         or, at the option of the Company, dividends of shares of additional
         Preferred Stock at the rate of 7.5% annually. Dividends are fully
         cumulative, accumulate without interest from the date the Preferred
         Stock was originally issued, and, if declared by the Board of
         Directors, are payable, semi-annually on January 1st and July 1st. At
         December 31, 1998, cumulative and undeclared cash dividends totaled
         $106,250 or $42.50 per share of preferred stock.


NOTE 5.  NET INCOME PER COMMON SHARE

         The Company is complying with "Statement of Financial Accounting
         Standards No. 128, Earnings per Share" (FAS 128). FAS 128 requires the
         presentation of basic earnings per share (EPS) and diluted earnings per
         share amounts. Basic EPS is the net income related to the
         weighted-average number of common shares outstanding for the period.
         Diluted EPS reflects potential dilution assuming the issuance of common
         stock for stock options and warrants exercisable under the treasury
         stock method and also considers the potential conversion of convertible
         preferred stock.

         For the three-month periods ended December 31, 1998 and 1997, diluted
         EPS does not include the assumed conversion of option, warrants and
         preferred stock due to an antidilutive impact.






<PAGE>





ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR
                  PLAN OF OPERATION


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. Since 1991, the Company has completed acquisitions and
         secured new broker and distributor relationships which has expanded its
         trademark retail brands to include Cruz, Chapala, Mexitos and La
         Campana Paradiso, its retail distribution network to include Crystal
         Farms Refrigerated Distribution Company, Marigold Foods, Inc. and Royal
         Foods, Inc. and its food service customers to include McDonald's,
         Perkins, Friendly's and Carlos O'Kelly restaurants.


Results of Operations

         The Company's net sales of $3,675,024 decreased $137,133 (3.6%) for the
         three months ended December 31, 1998, as compared to the three months
         ended December 31, 1997. This decrease primarily resulted from the
         Company's loss of its largest private label barbecue sauce customer
         during the second quarter of fiscal 1998. Sales to this customer
         totaled approximately $243,000 (6.4%) for the three months ended
         December 31, 1997.

         Gross profit, as a percentage of net sales, for the three months ended
         December 31, 1998, was 29.4% compared to 27.5% for the three months
         ended December 31, 1997. This increase was primarily due to more
         favorable operating efficiencies during the quarter associated with the
         move to the new and improved manufacturing facility and utilization of
         new equipment as compared to operating in two manufacturing locations
         in the comparable quarter of the prior year.

         Selling, general and administrative expenses of $1,043,111 increased
         $39,036 or 3.9% in the three months ended December 31, 1998, as
         compared to the three months ended December 31, 1997. This increase is
         due mainly to the hiring of additional sales personnel to implement the
         Company's long-term sales growth objectives.

         Interest expense of $50,598 decreased $41,084 (44.8%) for the three
         months ended December 31, 1998 compared to the three months ended
         December 31, 1997. This decrease is due primarily to significant debt
         reductions during the second and third quarters of fiscal 1998 related
         to the use of proceeds from the issuance of preferred stock and the
         sale of rental property. The Company recorded a current federal and
         state income tax provision of $7,900 as compared to a minimum state tax
         provision of $950 during the previous year's quarter.


<PAGE>



Liquidity and Capital Resources

         The Company financed its current activities primarily through cash
         generated from its operations and the issuance of common stock
         resulting from the exercise of warrants.

         Cash provided by operating activities during the three months ended
         December 31, 1998 was $10,276 consisting principally of depreciation
         and amortization of $203,165 and net income of $11,804 offset by a
         decrease in accounts payable and accrued expenses of $84,074 and an
         increase in inventories and prepaid expenses of $138,267. Cash used in
         investing activities was $68,670 consisting principally of the purchase
         of equipment of $163,304 offset by the utilization of restricted cash
         of $40,446 and a decrease in deposits and other assets of $54,188. Cash
         provided by financing activities was $310,313 consisting of $400,101 in
         net proceeds from the issuance of common stock offset by a $89,788
         reduction in long-term debt.

         During October 1998, the Company received an aggregate of $401,937 and
         issued an aggregate of 803,873 shares of common stock related to
         warrants with expiration dates of October 20, 1998 and October 31,
         1998.

         At December 31, 1998, the Company had cash of $1,383,174 and working
         capital of $2,202,428. The Company believes that its bank credit
         facilities and cash flow from operations will be sufficient to meet its
         operating requirements through fiscal 1999.


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
         and salsa during the summer months. This seasonality may cause
         quarterly results of operations to fluctuate.


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.



<PAGE>


Outlook

         The Company's plan in fiscal 1999 is to continue to grow the business
         by increasing sales and expanding its presence in new geographic
         territories. The Company plans to grow the business internally as well
         as through joint ventures and/or acquisitions and through the
         development of new distribution relationships.

         The Company relies on computer software and hardware systems to manage
         its information and portions of its manufacturing. The Company is aware
         of the computer software and hardware issues associated with the
         programming code in existing computer software programs and
         non-information technology such as micro-controllers found in computer
         hardware. The issue is whether systems will properly recognize date
         sensitive information. Much of the computer software and hardware in
         use today are unable to recognize a year that begins with "20" instead
         of "19." Many computers will be unable to recognize the Year 2000 and,
         as a result, could generate erroneous data or cause a computer to fail.
         Some computer systems may begin to operate improperly sooner for
         failure to read other dates such as September 9, 1999.

         The Company has completed an assessment of its exposure to the Year
         2000 issue by evaluating its software and hardware systems. The
         Company's assessment revealed that its exposure to the Year 2000 issue
         is nominal, and it is currently upgrading its software and hardware
         systems to make such systems Year 2000 compliant. The cost of such
         upgrade is expected to be less than $10,000. In addition to evaluating
         its own systems, the Company has inquired of its major customers and
         suppliers as to their exposure to the Year 2000 issue to determine the
         extent to which the Company is indirectly vulnerable to the Year 2000
         issues from such customers and suppliers. Many of the Company's
         customers and suppliers have responded that they believe they are or
         will be Year 2000 compliant. The Company plans to continue to assess
         its exposure to the Year 2000 issue and develop plans to address any
         developments associated with the Year 2000 issue that could have an
         adverse effect on the Company and its operations.

         The foregoing statements contained in this Outlook section of
         Management's Discussion and Analysis or Plan of Operation and those
         relating to the Company's operating requirements through fiscal 1999
         contained in Management's Discussion and Analysis or Plan of Operation
         are forward looking statements that involve a number of risks and
         uncertainties. Some additional 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. During 1998, sales to Crystal Farms
         Refrigerated Distribution Company ("Crystal Farms") and Catalina
         Specialty Foods, Inc. accounted for approximately 25% and 12%,
         respectively, of the Company's sales, and management expects Crystal
         Farms to account for a greater percentage of the Company's sales in the
         future. Crystal Farms is the Company's largest single distributor of
         its retail products and has a significant impact on the Company's
         growth in the retail market. Although the Company and Crystal Farms

<PAGE>

         operate under a distribution agreement, the loss of Crystal Farms as a
         customer would have a material and adverse effect on the Company's
         sales and profitability and future growth.


         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 of 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.





<PAGE>


                           PART II. OTHER INFORMATION

ITEM 2.  CHANGES IN SECURITIES

During the quarter ended December 31, 1998, the Company sold shares of its
Common Stock without registration under the Securities Act of 1933, as follows:

<TABLE>
<CAPTION>
             Aggregate
              Number
            of Shares of                                                    Total           Exemption
 Date       Common Stock            Purchaser                           Purchase Price     Relied Upon

<S>           <C>             <C>                                          <C>             <C> 
10/15/98      130,674         Issued to existing security holders          $  65,337       Section 4(2)
                              upon exercise of warrants
10/20/98      405,000         Issued to existing security holders          $ 202,500       Section 4(2)
                              upon exercise of warrants
10/31/98      268,199         Issued to existing security holders          $ 134,100       Section 4(2)
                              upon exercise of warrants
</TABLE>



ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K


(a)  Exhibits


     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,
1998.





                                   SIGNATURES


         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 hereunto duly authorized.


                                          SPARTA FOODS, INC.
                                          (Registrant)

Dated:    January 19, 1999                By: /s/ Joel P. Bachul
                                          Joel P. Bachul,
                                          President and Chief Executive Officer


Dated:    January 19, 1999                By: /s/ A. Merrill Ayers
                                          A. Merrill Ayers
                                          Treasurer, Secretary and
                                          Chief Financial Officer