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 June 30, 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)

                  1565 First  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:

                         7,037,172 of Common Stock at July 28, 1998.

Transitional Small Business Disclosure Format:  Yes  _____        No     X
<PAGE>
                               SPARTA FOODS, INC.

                                   FORM 10-QSB

                           QUARTER ENDED JUNE 30, 1998

                                TABLE OF CONTENTS
                                                                            PAGE

PART I.  FINANCIAL INFORMATION

         Item 1.   Financial Statements                                        3

                   Condensed Consolidated Balance Sheets
                   at June 30, 1998 and September 30, 1997                     3

                   Condensed Consolidated Statements of
                   Operations for the three-month periods
                   and the nine-month periods ended
                   June 30, 1998 and 1997                                      4

                   Condensed Consolidated Statements of
                   Cash Flows for the nine-month periods
                   ended June 30, 1998 and 1997                                5

                   Notes to Condensed Consolidated Financial
                   Statements - June 30, 1998                                  6

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



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>
<S>                                                                                         <C>                  <C>
                                                                                           June 30               September 30
                                                                                             1998                    1997
                                                                                    ----------------------- -----------------
                                                                                          (unaudited)
ASSETS
Current Assets
   Cash                                                                               $      676,700         $           600
   Accounts receivable, less allowance of $29,500 and $49,500, respectively                  953,777                 833,467
   Inventories:
      Finished goods                                                                         476,114                 566,212
      Raw materials and packaging                                                            493,442                 531,358
   Prepaid expenses                                                                          230,215                 156,466
-----------------------------------------------------------------------------------------------------------------------------
            Total current assets                                                           2,830,248               2,088,103
-----------------------------------------------------------------------------------------------------------------------------
Property and Equipment                                                                     9,180,275               7,488,786
   Less accumulated depreciation                                                           2,700,746               2,371,131
-----------------------------------------------------------------------------------------------------------------------------
                                                                                           6,479,529               5,117,655
-----------------------------------------------------------------------------------------------------------------------------
Other Assets
   Restricted cash                                                                           291,262               1,893,967
   Goodwill, less accumulated amortization of $82,194 and $72,564, respectively
                                                                                             431,179                 440,808
   Covenants not-to-compete, less accumulated amortization of
      $47,261 and $40,772, respectively                                                       62,739                  69,228
   Rental property held for resale                                                                -                  906,422
   Other                                                                                     352,729                 381,162
-----------------------------------------------------------------------------------------------------------------------------
                                                                                           1,137,909               3,691,587
=============================================================================================================================
                                                                                      $   10,447,686         $    10,897,345
=============================================================================================================================
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
   Note payable, bank                                                                 $           -          $       834,209
   Current maturities of long-term debt                                                      356,387                 700,388
   Accounts payable:
       Trade                                                                                 581,520                 861,120
       Construction                                                                           29,925                 428,315
   Accrued expenses                                                                          403,488                 536,033
-----------------------------------------------------------------------------------------------------------------------------
            Total current liabilities                                                      1,371,320               3,360,065
-----------------------------------------------------------------------------------------------------------------------------
Long-term Debt, less current maturities                                                    2,801,821               4,051,212
-----------------------------------------------------------------------------------------------------------------------------
Stockholders Equity
   Convertible   Preferred   Stock,   5%  cumulative,   $1000  par  value;   non
      participating; authorized 1,000,000 shares; issued and
      outstanding 2,500 and 0 shares, respectively                                         2,500,000                       -
   Common Stock, $.01 par value; authorized 15,000,000 shares; issued and
     outstanding 7,035,922 and 6,765,758 shares, respectively                                 70,359                  67,657
   Additional paid-in capital                                                              4,978,730               4,950,507
   Accumulated deficit                                                                   (1,274,544)             (1,532,096)
-----------------------------------------------------------------------------------------------------------------------------
                                                                                           6,274,545               3,486,068
=============================================================================================================================
                                                                                  $       10,447,686         $    10,897,345
=============================================================================================================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
                               SPARTA FOODS, INC.
                 Condensed Consolidated Statements of Operations
                                   (unaudited)

<TABLE>
<CAPTION>
<S>                                                     <C>                   <C>              <C>                  <C>
                                                             For the three months                      For the nine months
                                                                     ended                                    ended
                                                                    June 30                                  June 30
                                                      ------------------------------------     ------------------------------------
                                                            1998               1997                 1998               1997
----------------------------------------------------- ------------------ -----------------     ---------------- -------------------

Net sales                                               $    3,969,986     $   3,810,107         $  11,047,646      $  10,114,728

Cost of sales                                                2,703,381         2,558,433             7,920,510          7,028,204
----------------------------------------------------- ------------------- ------------------ ------------------- ------------------

   Gross profit                                              1,266,605         1,251,674             3,127,136          3,086,524

Selling, general, and administrative expenses                  892,002           791,552             2,703,439          2,329,987
----------------------------------------------------- ------------------- ------------------ ------------------- ------------------

    Operating income                                           374,603           460,122               423,697            756,537

Other income  net                                               41,582            35,086               117,574             88,221

Interest expense                                               (77,957)         (74,502)             (280,219)          (240,130)
----------------------------------------------------- ------------------- ------------------ ------------------- ------------------

    Income before income tax                                   338,228           420,706               261,052            604,628

Provision for income tax                                         2,500            13,587                 3,500             16,087
----------------------------------------------------- ------------------- ------------------ ------------------- ------------------

   Net Income                                           $     335,728      $     407,119         $     257,552      $      588,541
===================================================== =================== ================== =================== ==================

Net Income per common share
   Basic Earnings per share                             $         .04      $         .06         $         .03      $          .09
===================================================== =================== ================== =================== ==================

   Weighted average number of common   shares
     outstanding                                            6,908,152          6,685,049             6,830,341           6,683,269
===================================================== =================== ================== =================== ==================

   Diluted earnings per share                           $         .03      $         .05         $         .02      $          .07
===================================================== =================== ================== =================== ==================

   Weighted average number of common
      and common equivalent shares                         10,650,892          8,253,102            9,215,017           8,289,050
===================================================== =================== ================== =================== ==================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.

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

<TABLE>
<CAPTION>
<S>                                                                                       <C>              <C>
                                                                                              For the nine months
                                                                                                ended June 30
                                                                                            1998             1997
Cash Flows from Operating Activities
   Net income                                                                             $    257,552     $   588,541
   Adjustments to reconcile net income to net cash
      provided by (used in) operating activities:
         Depreciation and Amortization                                                         527,080         421,152
         (Gain) Loss on sale of equipment and rental property                                  (6,625)          15,940
         Changes in assets and liabilities:
            Accounts receivable                                                              (120,310)       (209,944)
            Inventories                                                                        128,014       (231,607)
            Prepaid expenses                                                                  (73,749)       (147,282)
            Accounts payable and accrued expenses                                            (810,535)         124,318
------------------------------------------------------------------------------ ------- ---------------- ---------------
                 Net cash provided by (used in) operating activities                          (98,573)         561,118
------------------------------------------------------------------------------ ------- ---------------- ---------------
Cash Flows from Investing Activities
   Decrease in restricted cash                                                               1,602,705            -
   Purchases of equipment                                                                  (1,880,972)       (472,696)
   Net Proceeds from the sale of equipment and rental property                                 997,095         205,030
   Increase in deposits and other assets                                                      (42,667)       (302,107)
------------------------------------------------------------------------------ ------- ---------------- ---------------
                 Net cash provided by (used in) investing activities                           676,161       (569,773)
------------------------------------------------------------------------------ ------- ---------------- ---------------

Cash Flows from Financing Activities
   Net borrowings (payments) on line of credit                                               (834,209)         496,363
   Repayment of Long-Term Debt, net                                                        (1,593,392)       (460,191)
   Issuance of Common Stock, net of costs                                                      174,484           2,450
   Issuance of Preferred Stock, net of costs                                                 2,356,441              -
   Deferred financing costs                                                                    (4,812)              -
------------------------------------------------------------------------------ ------- ---------------- ---------------
                 Net cash provided by financing activities                                      98,512          38,622
------------------------------------------------------------------------------ ------- ---------------- ---------------
                 Net increase in cash                                                          676,100          29,967
Cash Balance
   Beginning of period                                                                             600             600
============================================================================== ======= ================ ===============
   End of period                                                                            $  676,700      $   30,567
============================================================================== ======= ================ ===============

Supplemental Disclosures of Cash Flow Information
   Cash payments for:
      Interest                                                                             $   306,395     $   242,569
      Income taxes                                                                               5,750           3,750
============================================================================== ======= ================ ===============
</TABLE>
See Notes to Condensed Consolidated Financial Statements.

<PAGE>
                               Sparta Foods, Inc.
              Notes to Condensed Consolidated Financial Statements
                                  June 30, 1998
                                   (unaudited)

NOTE 1.  GENERAL

     The unaudited  condensed  consolidated  balance sheet at June 30, 1998, the
     condensed  consolidated  statements of operations for the  three-month  and
     nine-month  periods  ended  June  30,  1998  and  1997,  and the  condensed
     consolidated statements of cash flows for the nine-month periods ended June
     30,  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, 1998.

     The unaudited  financial  statements should be read in conjunction with the
     audited  financial  statements  for the years ended  September 30, 1997 and
     1996, 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 (8.5
     percent at June 30, 1998).  The Company is to maintain  certain minimum net
     worth and debt service coverage levels. In addition,  a maximum debt to net
     worth ratio is specified.

     The Company has a loan acquired through the State of Minnesota related to a
     revenue bond issuance.  The loan is due in monthly  installments which 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 June 30,  1998,
     $1,826,250 is outstanding. The Company is to maintain certain net worth and
     debt service coverage levels. In addition 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

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

<PAGE>
NOTE 4.  CONVERTIBLE 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 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 June 30,  1998,
     cumulative and undeclared cash dividends totaled $43,750.


NOTE 5.  NET INCOME  PER COMMON SHARE

     The Company has adopted  "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, warrants,
     and  convertible  preferred  stock  exercisable  under the  treasury  stock
     method.  Presentation  of  EPS of  prior  periods  has  been  restated  for
     comparative purposes.

     Diluted  EPS for the  three-month  periods  ended  June  30,  1998 and 1997
     include  2,227,589  and  1,568,053,  respectively,  and for the  nine-month
     periods  ended June 30,  1998 and 1997  include  2,384,676  and  1,605,781,
     respectively,  weighted-average  shares  assumed  issued  for  options  and
     warrants.  In  addition,  for the  three-month  period ended June 30, 1998,
     diluted  EPS  includes  1,515,151  shares  assumed  issued for  convertible
     preferred  stock.  For the  nine-month  period  ended  June 30,  1998,  the
     conversion of preferred  stock has not been assumed 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. During the period 1991 through
     1993 the Company completed acquisitions which expanded its trademark retail
     brands to include Cruz, Chapala,  Mexitos and La Campana Paradiso, its food
     service  customers  to  include  McDonald's   restaurants  and  its  retail
     distribution network to include Bradley Distributing, Inc.

Results of Operations

     The Company's net sales of $11,047,646 increased $932,918 (9%) for the nine
     months ended June 30,  1998,  as compared to the nine months ended June 30,
     1997. Net sales of $3,969,986  increased $159,879 (4%) for the three months
     ended June 30,  1998,  as compared to the three months ended June 30, 1997.
     These increases  primarily resulted from sales to new customers in the food
     service  industry and sales to the Company's  primary retail  distributors,
     Crystal Farms Refrigerated Distribution Company and Marigold Foods, Inc.

     Gross profit,  as a percentage of net sales, for the nine months ended June
     30,  1998,  was 28.3%  compared to 30.5% for the nine months ended June 30,
     1997.  Gross  profit,  as a percentage  of net sales,  for the three months
     ended June 30, 1998, was 31.9% compared to 32.9% for the three months ended
     June 30, 1997. The lower percentages reflect additional manufacturing costs
     associated  with  maintaining  two  operating  locations  during  the first
     quarter  and lower  operating  efficiencies  during  the  second  and third
     quarters  resulting  from the  installation  and  operation of new tortilla
     manufacturing equipment.

     Selling,  general  and  administrative  expenses  of  $2,703,439  increased
     $373,452 or 16% in the nine months ended June 30, 1998,  as compared to the
     nine months ended June 30, 1997. These expenses  increased  $100,450 or 13%
     in the three months  ended June 30,  1998,  as compared to the three months
     ended  June 30,  1997.  These  increases  are the  result  of the net sales
     increase and reflect some  additional  expense  incurred in advertising and
     promoting the Company's line of Cruz products in the retail market.

<PAGE>
     Interest  expense of $280,219  increased  $40,089 for the nine months ended
     June 30, 1998  compared  to the nine months  ended June 30, 1997 and $3,455
     for the three months ended June 30, 1998 compared to the three months ended
     June 30, 1997. For the nine months ended June 30, 1998, the increase is due
     primarily to higher levels of bank  borrowings  during the first and second
     quarters to finance the costs of installing new manufacturing equipment and
     utilization of proceeds from debt financing  through the State of Minnesota
     to purchase new  manufacturing  equipment.  For the three months ended June
     30, 1998,  interest  expense returned to a level  experienced  prior to the
     installation of the new manufacturing  equipment.  This is primarily due to
     the  repayment of a portion of long-term  debt  (approximately  $1,600,000)
     using  proceeds  from the sale of rental  property and from the issuance of
     preferred stock,  offset by the continuing interest expense associated with
     the State of Minnesota debt financing.


Liquidity and Capital Resources

     The Company financed its current  activities  primarily through  short-term
     borrowings,  cash  generated  from  its  operations,  and the  issuance  of
     convertible preferred stock.

     Cash used in  operating  activities  during the nine months  ended June 30,
     1998 was $98,573  consisting  principally of a decrease in accounts payable
     and accrued  expenses of $810,535  offset by a decrease in  inventories  of
     $128,014,  depreciation  and  amortization  of $527,080,  and net income of
     $257,552.  Cash provided by investing  activities  was $676,161  consisting
     principally of the utilization of restricted cash associated with the State
     of Minnesota revenue bond loan agreement, and the proceeds from the sale of
     equipment  and rental  property  offset by the purchase of equipment in the
     Company's new manufacturing facility. Cash provided by financing activities
     was $98,512 due mainly to the issuance of preferred and common stock offset
     by the repayment of short-term and long-term borrowings.

     On February 24, 1998,  the Company  completed a private  placement of 2,500
     shares  of  preferred  stock to  Harvest  States  Cooperatives,  St.  Paul,
     Minnesota for $2,500,000. The preferred stock is convertible at the rate of
     606.06 shares of Common Stock for each share of preferred  stock.  Proceeds
     from the sale of  preferred  stock  were used to  reduce  bank debt and for
     working capital purposes.

     On May 12, 1998, the Company  completed the sale of its rental  property in
     Lakeville,  Minnesota. Proceeds were used to reduce long-term debt, and the
     sale resulted in a capital gain of approximately $7,000.

     On June 24, 1998, the Company entered into a new credit  agreement with its
     bank.  Proceeds from the new agreement  were used to satisfy an outstanding
     balance from a previous credit agreement with the same bank. The new credit
     agreement  consists of a Line of Credit up to a maximum limit of $1,200,000
     and a Term Loan. At June 30, 1998 $1,293,535 was outstanding  under the new
     Term Loan and the Line of Credit was not  utilized.  The Line of Credit and
     Term Loan 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. 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.

<PAGE>
     At June 30, 1998,  the Company had cash of $676,700 and working  capital of
     $1,458,928.  The Company believes that its bank credit  facilities and cash
     flow from operations will be sufficient to meet its operating  requirements
     through fiscal 1998.


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 tortillas,  tortilla chips,  salsa
     and barbecue sauces,  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.


Outlook

     The  Company's  plan in fiscal  1998 is to continue  to take  advantage  of
     strong  industry  growth  patterns.  The  Company  plans to utilize its new
     equipment, with improved production capacity, to increase sales and improve
     profitability  by focusing on new markets and product brand  positioning of
     tortillas  and  tortilla  chips in the  retail  and food  service  markets.
     Management believes that its major computer applications which are critical
     to the  Company's  operations  are either  Year 2000  compliant  or require
     nonmaterial resources to make them Year 2000 compliant.

     The foregoing  statements contained in this Outlook section of Management's
     Discussion and Analysis or Plan of Operation,  including  those relating to
     the Company's (i) ability to meet its covenant  requirements under its bank
     credit  facilities  and (ii)  operating  requirements  through  fiscal 1998
     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:


<PAGE>
     Reliance  on  Principal  Customers.  During  1997,  sales to Crystal  Farms
     Refrigerated  Distribution Company ("Crystal Farms") and Catalina Specialty
     Foods, Inc. accounted for approximately 23% 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 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 June 30,  1998,  the Company sold shares of its Common
Stock without registration under the Securities Act of 1933, as follows:

<TABLE>
<CAPTION>
<S>            <C>          <C>                                  <C>                  <C>
                                                                      Total
                Number                                           Purchase Price         Exemption
   Date        of Shares               Purchaser                                      Relied Upon

5/5/98           2,975      Issued upon exercise of warrant            $1,488         Section 4(2)
5/14/98        l50,000      Issued upon exercise of warrant          $112,500         Section 4(2)
5/18/98         47,508      Issued upon exercise of warrant           $23,754         Section 4(2)
6/8/98          10,000      Issued upon exercise of warrant            $5,000         Section 4(2)
6/22/98          9,552      Issued upon exercise of warrant            $4,776         Section 4(2)
</TABLE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K


(a)  Exhibits


     10.1 Term Loan and Credit Agreement,  Security  Agreement and Guaranty
          Agreement  dated June 24, 1998  between  the Company and Norwest  Bank
          Minnesota, National Association.

     11   Computation of Earnings Per Common Share.

          Financial Data Schedule (filed only in electronic format only):

     27.1 Nine  months ended June 30, 1998
     27.2 Fiscal  year ended  September 30, 1997 (restated)
     27.3 Six months ended March 31, 1997  (restated)
     27.4 Three months ended December 31, 1996 (restated)

 (b)  Reports on Form 8-K

     A report on Form 8-K was not filed during the quarter ended June 30, 1998.
<PAGE>
                                   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:            July 28,1998             By:  /s/ Joel P. Bachul
                                           Joel P. Bachul,
                                           President and Chief Executive Officer


Dated:            July 28,1998             By: /s/ A. Merrill Ayers
                                           A. Merrill Ayers
                                           Treasurer, Secretary and
                                           Chief Financial Officer