SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                   FORM 10-QSB

(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
    1934

                     For the quarter ended November 30, 1996

                                       OR

[ ] TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
    OF 1934 

                 For the transition period from         to

                         Commission File Number 1-11047

                           SPARTA SURGICAL CORPORATION
        (Exact name of small business issuer as specified in its charter)

               Delaware                                   22-2870438
    (State or other jurisdiction                       (I.R.S. Employer
   of incorporation or organization)                 Identification Number)


                              Bernal Corporate Park
                 7068 Koll Center Parkway, Pleasanton, CA 94566
                    (Address of principal executive offices)

                                 (510) 417-8812
                           (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

As of November 30, 1996,  4,575,000  shares of Common Stock,  162,178  shares of
Redeemable Convertible Preferred Stock and 28,068 shares of Series A Convertible
Redeemable Preferred Stock were outstanding.


<PAGE>


                           SPARTA SURGICAL CORPORATION

                                   Form 10-QSB


                                      INDEX

                                                                           Page
                                                                          Number
Part I.     Financial Information

            Item 1.      Financial Statements

                         Condensed Consolidated Balance
                         Sheet as of November 30, 1996 .................   1 - 2

                         Condensed Consolidated Statements
                         of Operations for the three months and
                         nine months ended November 30, 1996 and 1995 ..       3

                         Condensed Consolidated Statements
                         of Cash Flows for the nine months
                         ended November 30, 1996 and 1995 ..............   4 - 5

                         Notes to Financial Statements .................       6

            Item 2.      Management's Discussion and
                         Analysis of Financial Condition
                         and Results of Operations .....................  7 - 11

Part II.    Other Information and Signatures ........................... 12 - 16


<PAGE>

                           SPARTA SURGICAL CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                November 30, 1996
                                   (Unaudited)

                                     ASSETS


Current Assets:
 Cash and cash equivalents ..................................       $        --
 Accounts receivable - trade, net of allowance
   for doubtful accounts of $53,642 .........................           313,422
 Inventories ................................................         2,533,943
 Prepaid expenses ...........................................            65,853
                                                                    -----------
    Total Current Assets ....................................         2,913,218
                                                                    -----------
Property and Equipment, at cost:

 Machinery and equipment ....................................            56,400
 Other equipment ............................................           501,451
 Leasehold improvements .....................................            15,733
                                                                    -----------
                                                                        573,584

Less accumulated depreciation ...............................          (284,210)
                                                                    -----------

    Net Property and Equipment ..............................           289,374
                                                                    -----------
Other Assets:
 Intangible assets, net of
  accumulated amortization ..................................           796,774
 Deposits and other .........................................            56,560
 Notes receivable - related entities ........................           566,125
                                                                    -----------
     Total Other Assets .....................................         1,419,459
                                                                    -----------
     Total Assets ...........................................       $ 4,622,051
                                                                    ===========


                     The accompanying notes are an integral
            part of these condensed consolidated financial statements


                                     - 1 -


<PAGE>


                           SPARTA SURGICAL CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                November 30, 1996
                                   (Unaudited)
                                   (Continued)


                      LIABILITIES AND STOCKHOLDERS' EQUITY


Current Liabilities:
 Accounts payable - trade .......................................   $   624,573
 Accrued expenses:
  Payroll taxes and wages .......................................        47,623
  Interest and other ............................................        79,722
 Dividends payable ..............................................         3,509
 Notes payable ..................................................       950,000
 Royalties payable ..............................................        22,054
 Current portion of long-term debt ..............................        90,521
                                                                    -----------
     Total Current Liabilities ..................................     1,818,002
                                                                    -----------
Long-Term Debt, net of current portion above:
 Obligations under capital leases ...............................        80,084
 Financial institutions and other ...............................     1,030,889
                                                                    -----------
       Total Long-Term Debt .....................................     1,110,973
                                                                    -----------
Other liabilities ...............................................       364,913
                                                                    -----------
Commitments and contingencies ...................................            --

Stockholders' Equity:
 Preferred stock: $4.00 par value, 5,000,000 shares authorized;
   Non-cumulative Convertible Redeemable Preferred Stock:
    1,500,000 shares authorized,  162,178 shares issued
     and outstanding ............................................       648,712
   Series A Cumulative Convertible Preferred Stock:
    250,000 shares authorized, 28,068 shares issued
     and outstanding ............................................       112,272
 Common Stock: $.002 par value, 30,000,000 shares authorized,
   4,575,000 shares issued and outstanding ......................         9,150
 Additional paid in capital .....................................     7,909,331
 Accumulated deficit ............................................    (7,351,302)
                                                                    -----------
      Total Stockholders' Equity ................................     1,328,163
                                                                    -----------
      Total Liabilities and Stockholders'  Equity ...............   $ 4,622,051
                                                                    ===========


                     The accompanying notes are an integral
            part of these condensed consolidated financial statements


                                     - 2 -


<PAGE>
<TABLE>


                                                     SPARTA SURGICAL CORPORATION
                                           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                                             (Unaudited)
<CAPTION>
                                                                      Three Months Ended                    Nine Months Ended
                                                                         November 30,                          November 30,
                                                               ------------------------------        ------------------------------
                                                                   1996               1995               1996               1995
                                                                   ----               ----               ----               ----
<S>                                                            <C>                <C>                <C>                <C>        
Net Sales ..............................................       $   581,683        $ 1,549,326        $ 1,639,314        $ 5,250,269
Cost of sales ..........................................           245,084            779,242            685,821          2,495,461
                                                               -----------        -----------        -----------        -----------
     Gross Profit ......................................           336,599            770,084            953,493          2,754,808

Selling, general and administrative
 expenses ..............................................           418,890            575,303          1,483,182          1,748,450
Research and development expense .......................            13,352              5,337             39,852             52,415
Depreciation and amortization ..........................            59,599            123,291            177,826            452,321
Settlement of litigation ...............................           160,000                 --            855,712                 --
                                                               -----------        -----------        -----------        -----------
  Income (Loss) From Operations ........................          (315,242)            66,153         (1,603,079)           501,622
                                                               -----------        -----------        -----------        -----------
  Interest and other income ............................             3,248              1,639             10,597              9,827
  Interest expense .....................................           (42,497)           (68,900)          (170,635)          (469,090)
                                                               -----------        -----------        -----------        -----------
     Total Other Income (Expense) ......................           (39,249)           (67,261)          (160,038)          (459,263)
                                                               -----------        -----------        -----------        -----------
Income (Loss) Before Provision
 for Income Taxes ......................................          (354,491)            (1,108)        (1,763,117)            42,359
Provision for income taxes .............................             4,703                 --              4,703                 --
                                                               -----------        -----------        -----------        -----------
Net Income (Loss) ......................................          (359,194)            (1,108)        (1,767,820)            42,359
Preferred stock dividends ..............................            (3,509)            (5,839)           (96,594)           (44,184)
                                                               -----------        -----------        -----------        -----------
Net Income (Loss) Applicable to
 Common Stockholders ...................................       $  (362,703)       $    (6,947)       $(1,864,414)       $    (1,825)
                                                               ===========        ===========        ===========        ===========
Net Income (Loss) Per Share of
 Common Stock:
  Primary:
   Weighted average number of
    common shares outstanding ..........................         4,562,022          3,773,853          4,396,540          3,592,508
                                                               ===========        ===========        ===========        ===========
    Net income (loss) per common share .................       $      (.08)       $        --        $      (.42)       $        --
                                                               ===========        ===========        ===========        ===========
  Fully diluted:
   Weighted average number of
    common shares outstanding ..........................         4,562,022          3,773,853          4,396,540          3,934,631
                                                               ===========        ===========        ===========        ===========
    Net income (loss) per common share .................       $      (.08)       $        --        $      (.42)       $        --
                                                               ===========        ===========        ===========        ===========


                                               The accompanying notes are an integral
                                      part of these condensed consolidated financial statements


                                                                - 3 -
</TABLE>

<PAGE>


                           SPARTA SURGICAL CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)


                                                         Nine Months Ended
                                                            November 30,
                                                     --------------------------
                                                         1996           1995
                                                         ----           ----
Cash Flows From Operating Activities:
 Net income (loss) ...............................   $(1,767,820)   $    42,359
 Adjustments to reconcile net income (loss) to net
  cash provided (used) by operating activities:
    Depreciation and amortization ................       177,826        452,321
    Settlement of litigation .....................       433,212             --
    Reduction of expenses on settlement
     of Storz claim ..............................            --       (135,184)
    Changes in assets and liabilities:
     (Increase) in accounts receivable ...........       (25,005)       (42,836)
     Decrease in inventories .....................        75,444         79,596
     Decrease in prepaid expenses and other ......        15,942         39,008
     (Increase) in deposits and other ............        (4,351)       (66,253)
     (Decrease) in accounts payable and
      accrued expenses ...........................      (284,117)      (518,516)
                                                     -----------    -----------
     Net Cash (Used) By Operating Activities .....    (1,378,869)      (149,505)
                                                     -----------    -----------
Cash Flows From Investing Activities:
 Capital expenditures ............................       (11,131)       (18,048)
 Increase in intangible assets ...................       (31,951)        (1,042)
 Increase in receivables from related entities ...        (6,930)        (8,461)
                                                     -----------    -----------
     Net Cash (Used) By Investing Activities .....       (50,012)       (27,551)
                                                     -----------    -----------
Cash Flows From Financing Activities:
 Proceeds from  borrowing ........................     3,186,542      5,590,030
 Principal payments on notes payable .............    (1,834,958)    (5,331,230)
 Principal payments on accrued royalties .........       (40,203)       (87,270)
 Issuance of common stock upon exercise
  of Warrants ....................................       117,500             --
                                                     -----------    -----------
     Net Cash Provided By Financing Activities ...     1,428,881        171,530
                                                     -----------    -----------
     Net Increase (Decrease) in Cash and
      Cash Equivalents ...........................            --         (5,526)

     Cash and Cash Equivalents at Beginning
      of Period ..................................            --          5,526
                                                     -----------    -----------
     Cash and Cash Equivalents at End of Period ..   $        --    $        --
                                                     ===========    ===========


                     The accompanying notes are an integral
            part of these condensed consolidated financial statements


                                     - 4 -


<PAGE>


                          SPARTA SURGICAL CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                   (Continued)


                                                           Nine Months Ended
                                                              November 30,
                                                         ----------------------
                                                           1996          1995
                                                           ----          ----
Supplemental Disclosure of Cash Flow
 Information:
  Cash paid during the period for:
    Interest .....................................       $ 98,211       $469,090
    Income taxes .................................          4,703             --

Supplemental Disclosure of Noncash
 Investing and Financing Activities:
   Conversion of Preferred Stock into
    Common Stock .................................       $522,088       $670,516
   Dividends payable on Series A
    Convertible Preferred Stock ..................         21,677         31,381
   Stock dividends paid on Series A
    Convertible Preferred Stock ..................          3,509          6,694
   Stock dividends paid on Redeemable
    Preferred Stock ..............................         71,409             --
   Reduction of note payable due to
    settlement of Storz claim ....................             --        400,000
   Reduction of royalties payable due
    to settlement of Storz claim .................             --         62,495
   Reduction of intangibles due to
    settlement of Storz claim ....................             --        223,210


                     The accompanying notes are an integral
            part of these condensed consolidated financial statements


                                     - 5 -


<PAGE>


                           SPARTA SURGICAL CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


1.   The  accompanying  financial  information  of the  Company is  prepared  in
     accordance with the rules prescribed for filing condensed interim financial
     statements and,  accordingly,  does not include all disclosures that may be
     necessary for complete  financial  statements  prepared in accordance  with
     generally accepted  accounting  principles.  The disclosures  presented are
     sufficient,  in  management's  opinion,  to make  the  interim  information
     presented not misleading.  All adjustments,  consisting of normal recurring
     adjustments,  which are necessary so as to make the interim information not
     misleading, have been made. Results of operations for the nine months ended
     November 30, 1996 are not  necessarily  indicative of results of operations
     that  may be  expected  for  the  year  ending  February  28,  1997.  It is
     recommended  that this  financial  information  be read  with the  complete
     financial statements included in the Company's Annual Report on Form 10-KSB
     for the year ended February 29, 1996  previously  filed with the Securities
     and Exchange Commission.


                                     - 6 -


<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION

     On December 7, 1995,  the Company  sold its  medical  product  line,  which
consisted  primarily of wound care gauze dressings,  to Tecnol Medical Products,
Inc.  ("Tecnol"),  which  resulted in the Company's  elimination  of the medical
product line from its business operations  approximately three months before the
year ended February 29, 1996 ("Fiscal 1996"). Following this sale of assets, the
Company implemented a restructuring plan involving a reduction of personnel, the
reorganization  of the sales  department,  and the  consolidation  of  operating
facilities.  Therefore,  the results for the nine months ended November 30, 1996
("Nine Months Fiscal 1997") do not reflect the medical product line  operations,
whereas for the nine months ended  November 30, 1995 ("Nine Months Fiscal 1996")
the results of the medical product line operations are reflected. For the reason
stated  above,  the results for the Nine Months  Fiscal 1997 and the Nine Months
Fiscal 1996 are not strictly comparable.

RESULTS OF OPERATIONS

Three months ended November 30, 1996
as Compared to Three months ended November 30, 1995

     Net sales for the three  months ended  November  30, 1996  ("Third  Quarter
Fiscal 1997") were  $581,683,  a 62.5% decrease from net sales of $1,549,326 for
the three month period ended  November 30, 1995 ("Third  Quarter  Fiscal 1996").
The net sales  decrease  during the Third Quarter Fiscal 1997 as compared to the
Third Quarter Fiscal 1996 is the result of (i) a decrease of $939,182 in medical
product sales which resulted from the sale of the Company's medical product line
in December 1995;  (ii) a decrease of $17,105 or 5.1% in surgical  product sales
from  $333,072  to  $315,967;  and  (iii)  a  decrease  of  $11,356  or  4.1% in
electrotherapy  product  sales from  $277,072 to $265,716.  The net loss for the
Third Quarter Fiscal 1997 was $359,194 as compared to net loss of $1,108 for the
Third  Quarter  Fiscal 1996.  The  decrease in net income for the Third  Quarter
Fiscal 1997 as compared to the Third Quarter Fiscal 1996 is primarily due to the
decrease in net sales and the  corresponding  decrease in gross  profit  coupled
with a one time $160,000  expense  related to the  settlement of the  litigation
described below.

Nine months ended November 30, 1996
as Compared to Nine months ended November 30, 1995

     Net sales for the Nine Months Fiscal 1997 were $1,639,314, a 68.8% decrease
from net sales of  $5,250,269  for the Nine Months  Fiscal  1996.  The net sales
decrease  during the Nine  Months  Fiscal  1997 as  compared  to the Nine Months
Fiscal 1996 is the result of (i) a decrease  of  $3,151,932  in medical  product
sales which resulted from the disposition of the Company's  medical product line
in December 1995;  (ii) a decrease of $88,647 or 8.9% in surgical  product sales
from  $995,157  to  $906,510;  and  (iii) a  decrease  of  $370,376  or 33.6% in
electrotherapy  product sales from $1,103,180 to $732,804. The decrease in sales
for  the  electrotherapy  product  line  can  be  primarily  attributed  to  the
completion  in July 1995 of a one year,  non-cancelable  $500,000  contract with
Henley  Healthcare  ("Henley")  in which the  Company  provided  Henley with its
Spectrum  Max-SD TENS unit.  During the Nine Months  Fiscal 1996 the Company had
approximately  $282,000 in sales to Henley  which were not  repeated  during the
Nine Months  Fiscal  1997.  The Company  intends to  concentrate  its efforts on
increasing its level of sales to achieve profitable operations. In addition, the
Company intends to consider growth through selective  strategic  acquisitions in
complementary lines of business. In that regard, on November 1, 1996 the Company
entered into a non-binding letter of intent for the acquisition of substantially
all of the  operating  assets of Orion Life  Systems,  Inc. and its wholly owned
subsidiary, Orion Medical Products, Inc. ("Orion"). Based in Wheeling, Illinois,
Orion  specializes in contract  manufacturing,  packaging,  and sterilization of
medical  devices and single-use  procedure  trays as well as  manufacturing  and
marketing its own line of urological,  respiratory,  and I.V. therapy disposable
products. See "Part II. Other Information. Item 6. Reports on Form 8-K."

     Gross profit was $953,493 or 58.2% of net sales for the Nine Months  Fiscal
1997 as compared to  $2,754,808 or 52.5% of net sales for the Nine Months Fiscal
1996.  The increase in gross profit  percentage  is primarily due to the sale of


                                     - 7 -


<PAGE>


the medical product line in December 1995. In general,  the medical product line
generated  lower gross  profits  than the surgical  and  electrotherapy  product
lines.  The decrease in gross profit is primarily due to the overall decrease in
net sales resulting from the disposition of the medical product line.

     Selling,  general and administrative  ("SG&A") expenses for the Nine Months
Fiscal 1997 were  $1,483,182,  a 15.2% decrease from SG&A expenses of $1,748,450
for the Nine Months  Fiscal  1996.  The  decrease in SG&A  expenses for the Nine
Months  Fiscal 1997 as compared to the Nine Months  Fiscal 1996 is primarily due
to the overall  decrease in operating  expenses  resulting  from the sale of the
medical product line. This decrease is despite an increase in legal expenses for
the Nine  Months  Fiscal  1997 from  approximately  $93,000  for the Nine Months
Fiscal 1996 to approximately  $190,000 incurred in connection with the Company's
various litigation proceedings. In addition, the Company has increased its sales
and marketing  efforts to broaden its customer base and target  distributors for
each of our product lines.

     Research and development  ("R&D")  expenses for the Nine Months Fiscal 1997
were  $39,852,  a 24% decrease  from R&D expenses of $52,415 for the Nine Months
Fiscal 1996.  The  decrease in R&D  expenses for the Nine Months  Fiscal 1997 as
compared to the Nine Months Fiscal 1996 is primarily due to the  elimination  of
the R&D efforts  related to the  medical  product  line.  During the Nine Months
Fiscal 1997 the R&D  continues  to be focused on the  redesign of the  Company's
TENS  units in an effort to  increase  the  quality  and reduce the cost for the
electrotherapy product line.

     Depreciation and  amortization  ("D&A") expenses for the Nine Months Fiscal
1997 were $177,826,  a 60.7% decrease from D&A expenses of $452,321 for the Nine
Months Fiscal 1996.  During the Nine Months Fiscal 1997, D&A expenses  decreased
due to the elimination of the  depreciation  expense on the medical product line
manufacturing equipment sold to Tecnol in December 1995. As a result of the sale
of the medical  product line,  the Company's D&A expenses will be  substantially
reduced for the fiscal year ending February 28, 1997 ("Fiscal 1997").

     Settlement  of  litigation  expenses  for the Nine Months  Fiscal 1997 were
$855,712.  On August 6, 1996 the Company  settled  three  related  civil actions
involving  disputes  between  the  Company;  Thomas  F.  Reiner,  the  Company's
Chairman,  President and Chief Executive Officer; and Gerald S. Kramer, a former
officer and Chairman of the  Company's  Board of Directors  which  concerned Mr.
Kramer's  termination  as  an  officer  and  director,  disputes  regarding  his
employment  agreement and various monetary  obligations  between the parties. In
addition,  on November  26, 1996 the Company  settled a civil  action  involving
disputes  between the Company;  Reiner,  the Company's  Chairman,  President and
Chief Executive  Officer;  and Landino,  a former Vice President of Sales of the
Company and concerned Landino's  resignation as an employee of the Company.  The
Company  sued  Landino for monies owed to the Company  under a  promissory  note
executed  by Landino.  Landino  cross-complained  against  the Company  alleging
damages for wrongful  termination.  The  Company's  management  believes that it
would have ultimately  prevailed in these lawsuits,  but took the opportunity to
settle the litigation  before  substantial  additional legal fees and management
time were expended.

     Net interest expense for the Nine Months Fiscal 1997 was $160,038,  a 65.2%
decrease from net interest  expense of $459,263 for the Nine Months Fiscal 1996.
The  decrease in net  interest  expense is  primarily  due to the  repayment  of
certain of its  outstanding  debt in December 1995 from the cash proceeds of the
sale of the Company's  medical  product line.  The repayment of debt in December
1995 should result in substantially reduced interest expenses in Fiscal 1997.

     As a result of the foregoing,  the net loss for the Nine Months Fiscal 1997
was $1,767,820, a decrease of $1,810,179 from net income of $42,359 for the Nine
Months  Fiscal 1996.  The decrease in net income for the Nine Months Fiscal 1997
as compared to the Nine Months  Fiscal 1996 is primarily  due to the decrease in
net sales and the corresponding decrease in gross profit coupled with a one time
$855,712 expense related to the settlement of the litigation described above and
legal  expenses in the  approximate  amount of $190,000  which were  incurred in
connection with the Company's various litigation proceedings.

     Primary loss per share was $.42 for the Nine Months Fiscal 1997 as compared
to a  primary  loss per  share of $-- for the Nine  Months  Fiscal  1996.  Fully
diluted loss per share,  which assumes all dilutive  preferred share conversions
and the exercise of all dilutive  stock options and  warrants,  was $.42 for the
Nine Months  Fiscal 1997 as compared to fully  diluted loss of $-- per share for
the Nine Months  Fiscal  1996.  The primary and fully  diluted  income per share
computation  for the Nine Months  Fiscal 1997 reflect  dividends on the Series A


                                     - 8 -


<PAGE>


Convertible  Preferred  Stock and on the Redeemable  Preferred  Stock which were
paid in Common Stock during the Nine Months Fiscal 1997 and accrued dividends on
the Series A  Convertible  Preferred  Stock  which were paid in Common  Stock in
December 1996.

LIQUIDITY AND CAPITAL RESOURCES

     Since inception, the Company's primary sources of working capital have been
revenues  from  operations,  bank and private  party loans and proceeds from the
sale of securities.

     As of February 29, 1996,  the Company had net operating loss carry forwards
of  approximately  $5,000,000.  Availability of the Company's net operating loss
carry forwards,  if not utilized,  will expire at various dates through the year
2011.

     The  Company's  working  capital at  February  29, 1996 was  $1,246,470  as
compared to  $1,095,216  at November 30, 1996.  The  Company's  working  capital
position  decreased  by  $151,254  primarily  due to a decrease  in  inventories
coupled with an increase in notes payable.

     On December  7, 1995,  the Company  sold its  impregnated  wound care gauze
dressings  product  line to a subsidiary  of Tecnol  Medical  Products,  Inc., a
medical products  manufacturer  headquartered in Fort Worth,  Texas (the "Tecnol
Sale"). The purchase price was $5,675,000, of which approximately $5,010,000 was
paid in cash,  with the balance being paid primarily in the form of a promissory
note  bearing  interest  at prime rate and due in  September  1997 upon  certain
conditions  being met.  Since the Company could not determine if the  conditions
for  payment of the  $665,000  note  would be met prior to  September  1997,  it
established a reserve for the entire amount of the note receivable.  In addition
to wound care inventory, equipment and other assets, the Company's operations in
Hammonton, New Jersey were included in the sale.

     The Company has used the cash  proceeds of the Tecnol Sale to repay most of
its  outstanding  debt  including  (i)  $2,282,505  owed to  Congress  Financial
Corporation  under a  revolving  credit  facility;  (ii)  $111,602  owed for the
purchase of certain manufacturing  equipment which was subject to a lease; (iii)
$469,710  owed to Asset  Factoring,  Inc.,  consisting  of the  principal due on
certain  promissory  note plus accrued  interest;  (iv)  $600,000  owed to Storz
Instrument  Company relating to a $1,050,000 note payable in connection with the
Company's  acquisition  of certain assets of Storz' Oral  Maxillofacial  product
line; and (v)  $1,000,000 to Arbora,  A.G.  ("Arbora"),  which together with the
return of a $809,500  promissory  note issued to the Company by an  affiliate of
Arbora, served as principal  consideration to redeem and cancel 4,761,842 shares
of the  Company's  Common Stock.  The 4,761,842  shares were issued to Arbora on
December 4, 1995 in  consideration  of the conversion of a $1,000,000  note into
equity and the  issuance  to the Company of a  promissory  note in the amount of
$809,500 by an affiliate of Arbora  pursuant to an agreement  reached between it
and the Company. In connection with this transaction,  the Company also canceled
a warrant to purchase  1,000,000  shares of the Company's  Common Stock at $1.40
per share held by Arbora and issued Arbora and its affiliated  parties  warrants
to purchase up to 750,000 shares of the Company's common stock at $.47 per share
at any time until November 8, 1998. In addition, a voting trust was entered into
which provided the Company's  Chairman,  President and Chief Executive  Officer,
Thomas F.  Reiner,  with voting  rights as to such  shares.  On April 22,  1996,
250,000  shares of Common  Stock were  issued to Arbora in  connection  with the
exercise of 250,000 Common Stock purchase warrants.

     On March 11,  1996,  FINOVA  Capital  Corporation  ("FINOVA")  provided the
Company  with a  36-month  Revolving  Line of  Credit of up to  $1,500,000  (the
"Loan").  The Company agreed to pay FINOVA  interest on the average  outstanding
principal  amount of the Loan at a per annum  rate of prime plus 4%. The Loan is
advanced to the Company based on a percentage of eligible  assets and is secured
by a first lien on all of the assets of the Company.  Accordingly, the amount of
available funds under the Loan may be  substantially  less than  $1,500,000.  In
addition, $450,000 of the Loan is personally guaranteed by Thomas F. Reiner, the
Company's  Chairman,  President and Chief Executive Officer.  As of November 30,
1996, the outstanding balance on the Loan was $847,798 and $35,000 in credit was
available.  The  Loan is being  used to  provide  working  capital  for  current
operations and growth.

     In  July  1996,  the  Company   borrowed   $200,000  from  Asset  Factoring
International,  Inc.  ("Asset  Factoring"),  a company  controlled by Charles C.
Johnston, a principal stockholder of the Company, evidenced by a promissory note
bearing  12%  interest  per  annum  due in July  1997.  The  promissory  note is
subordinated to FINOVA and is personally guaranteed by Mr. Reiner. In connection


                                     - 9 -


<PAGE>


with the financing,  the Company issued Asset Factoring a warrant to purchase up
to 125,000 shares of its Common Stock  exercisable at $.50 per share at any time
until  July 18,  1999.  The  Company  also  entered  into a one year  consulting
agreement  with Asset  Factoring  in which the  Company is required to pay Asset
Factoring $25,000 for one year of consulting services. On November 11, 1996, the
Company borrowed $400,000 from Halstead LLC ("Halstead"),  a company  controlled
by Charles C. Johnston, a principal  stockholder of the Company,  evidenced by a
$600,000  promissory  note bearing 12% interest per annum due in December  1997.
The $600,000  promissory note was delivered to Halstead in consideration for the
cancellation of a promissory note in the principal amount of $200,000 owing from
the Company to Asset  Factoring  and the receipt by the Company of $400,000 from
Halstead.

     On  September  27, 1996,  the Company was served with a complaint  filed by
Storz Instrument  Company  ("Storz") seeking to collect the remaining balance of
$450,000  relating to a $1,050,000 note payable in connection with the Company's
acquisition  of certain  assets of Storz' Oral  Maxillofacial  product  line. On
November 27, 1996, the Company paid Storz $100,000 and entered into an agreement
pursuant  to which  Storz  would  take no  further  action on its  complaint  in
exchange for payment of $350,000, on or before April 15, 1997, together with all
accrued interest thereon through the date of payment, plus $5,000 as a fixed sum
for attorneys'  fees. If payment is not made by April 15, 1997, a judgement will
automatically be entered against the Company for the aforesaid amount.

     On November  19,  1996,  the  Company was served with a complaint  filed by
plaintiff,   Robert  M.  Rubin   ("Rubin")  in  connection  with  the  Company's
acquisition of Medical Designs, Inc. ("MDI") from Star Bank, N.A. of Cincinnati,
Ohio ("Star Bank") in December 1992 through a bankruptcy proceeding initiated by
MDI.  The  complaint  alleges  three causes of action  against the Company:  (i)
breach of an alleged  agreement  with Rubin , as the  assignee  of the claims of
MDI, to purchase the assets of MDI; (ii) conspiracy, or actions in concert, with
Star Bank to induce the Company to breach the foregoing alleged  agreement;  and
(iii)  breach of duty of good  faith and fair  dealing in  connection  with that
alleged agreement. Rubin seeks damages to be proved at trial, which appear to be
in excess of  $50,000,  and  possibly  as much as  $4,000,000,  based upon these
claims.  The Company  intends  vigorously  to oppose the claims  alleged in this
lawsuit which it considers to have been filed in bad faith and to be baseless in
law and fact.  Trial  counsel is also  evaluating,  and  intends to assert,  any
available  counterclaims  or other  sanctions,  against  Rubin in the matter for
damages,  or losses  the  Company  may incur as the result of the filing of this
suit.

     On or about  November 20,  1996,  Tecnol  initiated  against the Company an
arbitration action before the American Arbitration Association in San Francisco,
California  ("AAA").  Tecnol asserted claims  allegedly  arising out of Tecnol's
purchase  of the  Company's  medical  product  line by Tecnol in  December  1995
totaling  $117,000.  The Company believes that it is not liable for the majority
these claims. On or about December 17, 1996, Tecnol supplemented its arbitration
claim,  with  additional  claims  many of which  did not  specify  an  amount of
damages,  and others which  collectively  seek a dollar  amount of damages which
exceeds  $250,000,  bringing  the total amount of Tecnol's  specified  claims to
approximately $367,000. The Company believes these latter claims to be frivolous
and without basis or merit. The Company further believes that they were asserted
by  Tecnol  in bad  faith  primarily  to  excuse  non-payment  of  the  $665,000
promissory  note from  Tecnol  to the  Company  which  recently  became  due and
payable.  On January 6, 1997, the Company filed an answer and counterclaim  for,
among other  things,  damages to its New Jersey plant which it had  subleased to
Tecnol,  as well as other claims in tort,  contract and conversion.  The Company
believes  that,  except as otherwise  noted above,  Tecnol's  claims are without
merit, and intends vigorously to contest the same.

     In March 1995, the Financial Accounting Standards Board issued Statement of
Financial  Accounting Standard (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived  Assets  and for  Long-Lived  Assets to Be  Disposed  Of,"  which the
Company will adopt  prospectively  as required in Fiscal 1997.  Pursuant to this
Statement,  companies  are  required to  investigate  potential  impairments  of
long-lived assets, certain identifiable intangibles, and associated goodwill, on
an  exception  basis,   when  there  is  evidence  that  events  or  changes  in
circumstances  have made  recovery of an asset's  carrying  value  unlikely.  An
impairment loss would be recognized when the sum of the expected future net cash
flows is less than the carrying amount of the asset. The adoption of SFAS 121 is
not expected to have a significant impact on the Company's financial position or
result of operations.

     In October 1995, the Financial  Accounting Standards Board issued Statement
of Financial  Accounting  Standard  (SFAS) No. 123,  "Accounting for Stock-Based
Compensation,"  SFAS 123 will be adopted  by the  Company  as  required  for its


                                     - 10 -


<PAGE>


Fiscal 1997 financial  statements and is not expected to have a material  effect
on the Company's  financial position or results of operations.  Upon adoption of
SFAS 123,  the company  will  continue to measure  compensation  expense for its
stock-based  employee  compensation  plans  using  the  intrinsic  value  method
prescribed by APB Opinion No. 25,  "Accounting  for Stock Issued to  Employees,"
and will provide pro forma  disclosures  of net income and earnings per share as
if the fair  value-based  method  prescribed  by SFAS 123 had  been  applied  in
measuring compensation expense.

     The Company may make  additional  acquisitions  of companies,  divisions of
companies  or  products  in the  future.  Acquisitions  entail  numerous  risks,
including  difficulties  or an inability  to  successfully  assimilate  acquired
operations  and products,  diversion of  management's  attention and loss of key
employees of acquired businesses,  all of which the Company has encountered with
previous  acquisitions.  Future acquisitions by the Company may require dilutive
issuances of equity  securities and the  incurrence of additional  debt, and the
creation  of  goodwill  or  other   intangible   assets  that  could  result  in
amortization expense.  These factors could have a material adverse effect on the
Company's business, operating results and financial condition.

     The Company's current operations continue to be cash flow negative, further
straining the Company's working capital resources.  The Company's future capital
requirements will depend on numerous  factors,  including the acquisition of new
product lines and/or other business operations and the continued  development of
existing  product sales,  distribution and marketing  capabilities.  In order to
continue its current level of  operations,  it will be necessary for the Company
to obtain additional working capital, from either debt or equity sources. If the
Company is unable to obtain such additional working capital, it may be necessary
for  the  Company  to   restructure   its   operations  to  reduce  its  ongoing
expenditures.

     Except for the historical  information  contained  herein,  the matters set
forth in this report are  forward-looking  statements  within the meaning of the
"safe harbor"  provisions  of the Private  Securities  Litigation  Reform Act of
1995. These  forward-looking  statements are subject to risks and  uncertainties
that may cause  actual  results to differ  materially.  These risks are detailed
from time to time in the Company's  periodic  reports filed with the  Securities
and Exchange  Commission,  including the Company's  Annual Report on Form 10KSB,
Quarterly   Reports   on  Form   10QSB  and  other   periodic   filings.   These
forward-looking  statements  speak  only  as of the  date  hereof.  The  Company
disclaims any intent or obligation to update these forward-looking statements.


                                     - 11 -


<PAGE>


Part II. Other Information

Item 1. Legal Proceedings
          On September 27, 1996,  the Company was served with a complaint  filed
          by  Storz  Instrument  Company  ("Storz")  entitled  Storz  Instrument
          Company v. Sparta  Maxillofacial  Products,  Inc., et al.,  Docket No.
          4-96-CV-01920-CDP, U.S. District Court in St. Louis, Missouri, seeking
          to collect the remaining  balance of $450,000 relating to a $1,050,000
          note payable in connection  with the Company's  acquisition of certain
          assets of Storz' Oral  Maxillofacial  product  line.  On November  27,
          1996,  the Company  paid Storz  $100,000 and entered into an agreement
          pursuant to which Storz would take no further  action on its complaint
          in exchange  for payment of  $350,000,  on or before  April 15,  1997,
          together  with  all  accrued  interest  thereon  through  the  date of
          payment, plus $5,000 as a fixed sum for attorneys' fees. If payment is
          not made by April 15, 1997, a judgement will  automatically be entered
          against the Company for the aforesaid amount.

          On November 19, 1996, the Company was served with a complaint filed by
          plaintiff,  Robert M.  Rubin  ("Rubin")  entitled  Robert M.  Rubin v.
          Sparta  Surgical  Corporation,  Case  No.  C2  96-988,  United  States
          District  Court,  Southern  District of Ohio,  Eastern  Division.  The
          complaint is in connection  with the Company's  acquisition of Medical
          Designs, Inc. ("MDI") from Star Bank, N.A. of Cincinnati,  Ohio ("Star
          Bank") in December 1992 through a bankruptcy  proceeding  initiated by
          MDI. The complaint alleges three causes of action against the Company:
          (i) breach of an alleged agreement with Rubin , as the assignee of the
          claims of MDI,  to purchase  the assets of MDI;  (ii)  conspiracy,  or
          actions in concert, with Star Bank to induce the Company to breach the
          foregoing  alleged  agreement;  and (iii) breach of duty of good faith
          and fair  dealing in  connection  with that alleged  agreement.  Rubin
          seeks  damages to be proved at trial,  which appear to be in excess of
          $50,000, and possibly as much as $4,000,000,  based upon these claims.
          The Company  intends  vigorously to oppose the claims  alleged in this
          lawsuit  which it  considers to have been filed in bad faith and to be
          baseless  in law and  fact.  Trial  counsel  is also  evaluating,  and
          intends to assert,  any available  counterclaims  or other  sanctions,
          against  Rubin in the matter for  damages,  or losses the  Company may
          incur as the result of the filing of this suit.

          On or about November 20, 1996, Tecnol initiated against the Company an
          arbitration action before the American Arbitration  Association in San
          Francisco,  California  ("AAA"),  Case No. 74 Y 181  01129 96.  Tecnol
          asserted  claims  allegedly  arising out of  Tecnol's  purchase of the
          Company's  medical  product line by Tecnol in December  1995  totaling
          $117,000.  The Company believes that it is not liable for the majority
          these claims. On or about December 17, 1996,  Tecnol  supplemented its
          arbitration  claim,  with  additional  claims  many of  which  did not
          specify an amount of damages,  and others  which  collectively  seek a
          dollar amount of damages which  exceeds  $250,000,  bringing the total
          amount of Tecnol's  specified  claims to approximately  $367,000.  The
          Company believes these latter claims to be frivolous and without basis
          or merit.  The Company  further  believes  that they were  asserted by
          Tecnol in bad faith  primarily to excuse  non-payment  of the $665,000
          promissory  note from Tecnol to the Company which recently  became due
          and  payable.  On  January 6, 1997,  the  Company  filed an answer and
          counterclaim for, among other things,  damages to its New Jersey plant
          which it had  subleased  to Tecnol,  as well as other  claims in tort,
          contract  and  conversion.   The  Company  believes  that,  except  as
          otherwise noted above,  Tecnol's claims are without merit, and intends
          vigorously to contest the same.

          On November 26,  1996,  the Company  settled a civil  action  entitled
          Sparta  Surgical  Corporation  v.  John  P.  Landino  ("Landino")  and
          cross-complaint,  Docket No.  752611-8,  Superior Court of California,
          County of Alameda.  This action involved disputes between the Company;
          Reiner, the Company's Chairman, President and Chief Executive Officer;
          and  Landino,  a former  Vice  President  of Sales of the  Company and
          concerned  Landino's  resignation  as an employee of the Company.  The
          Company  sued  Landino for monies owed to the  Company  under  certain
          promissory note executed by Landino.  Landino cross-complained against
          the Company  alleging  damages  for  wrongful  termination.  Under the
          settlement,  the Company  paid to Landino  $35,000 and issued to him a
          promissory note in the amount of $125,000,  payable monthly over three
          years. In addition,  the parties  exchanged  general  releases and the
          Company  forgave  approximately  $12,000  in debts from  Landino.  The


                                     - 12 -


<PAGE>


          Company's  management believes that it would have ultimately prevailed
          in the  lawsuit,  but took the  opportunity  to settle the  litigation
          before  substantial  additional  legal fees and  management  time were
          expended.

Item 2. Changes in Securities
          None

Item 3. Defaults Upon Senior Securities
          None

Item 4. Submission of Matters to a Vote of Security Holders
          None

Item 5. Other Information
          None

Item 6. Exhibits and Reports on Form 8-K

     A.   Exhibits

          Computation of Primary Earnings Per Share (Page 14)
          Computation of Fully Diluted Earnings Per Share (Page 15)
          Exhibit 27 - Financial Data Schedule

     B.   Reports on Form 8-K

          The Company filed a Form 8-K dated  November 8, 1996 to report that on
          November 1, 1996,  the Company  entered into a  non-binding  letter of
          intent  for the  acquisition  of  substantially  all of the  operating
          assets of Orion Life  Systems,  Inc. and its wholly owned  subsidiary,
          Orion Medical Products,  Inc.  (collectively,  "Orion").  The purchase
          price to be paid  for the  assets  will be  approximately  $3  million
          consisting  of $450,000 in cash,  $100,000 in notes  payable over five
          years,  $550,000  in  royalties  payable  as  1.5% of net  sales,  the
          assumption of approximately $1,100,000 in bank debt, and assumption of
          approximately $800,000 in other liabilities. The letter of intent also
          calls for the  Company  to issue  earn-out  shares of common  stock to
          Orion's  president upon Orion's  meeting certain net sales and pre-tax
          profit goals during the fiscal years ending  February 28, 1998 through
          February  28,  2001.  The  closing  of the  acquisition  is subject to
          several  conditions,  including the  determination by the Company that
          the results of its due diligence investigation of Orion's business and
          assets are  satisfactory;  approval of the Board of  Directors of both
          companies;  the execution of a mutually acceptable definitive purchase
          agreement; and completing the Company's financing.  Based in Wheeling,
          Illinois, Orion specializes in contract manufacturing,  packaging, and
          sterilization  of medical  devices and single-use  procedure  trays as
          well  as  manufacturing  and  marketing  its own  line of  urological,
          respiratory, and I.V. therapy disposable products.


                                     - 13 -


<PAGE>
<TABLE>


                                                     SPARTA SURGICAL CORPORATION
                                              COMPUTATION OF PRIMARY EARNINGS PER SHARE

<CAPTION>

                                                                          Three Months Ended                 Nine Months Ended
                                                                             November 30,                        November 30,
                                                                     ----------------------------     ----------------------------
                                                                         1996             1995             1996             1995
                                                                         ----             ----             ----             ----
<S>                                                                  <C>              <C>              <C>              <C>         
Shares outstanding at beginning of period ......................       4,538,751        3,892,279        3,846,826        3,228,408

Shares issued during the period (weighted average) .............          23,271           69,074          549,714          551,600

Dilutive shares contingently issuable upon exercise of
options and warrants(weighted average) .........................              --               --               --               --

Less shares assumed to have been purchased for treasury
with assumed proceeds of stock warrants and options
(weighted average) .............................................              --               --               --               --

Less shares placed in escrow which are issuable only if
certain  income or stock price criteria are met
(weighted average) .............................................              --         (187,500)              --         (187,500)
                                                                     -----------      -----------      -----------      -----------
Total Primary Shares ...........................................       4,562,022        3,773,853        4,396,540        3,592,508
                                                                     ===========      ===========      ===========      ===========
Net Income (Loss) Applicable to Common Stockholders ............     $  (362,703)     $    (6,947)     $(1,864,414)     $    (1,825)
                                                                     ===========      ===========      ===========      ===========
Net Income (Loss) Per Primary Share ............................     $      (.08)     $        --      $      (.42)     $        --
                                                                     ===========      ===========      ===========      ===========


                                                               - 14 -


</TABLE>
<PAGE>


<TABLE>


                                                     SPARTA SURGICAL CORPORATION
                                           COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE

<CAPTION>
                                                                           Three Months Ended                Nine Months Ended
                                                                               November 30,                     November 30,
                                                                      ----------------------------      ---------------------------
                                                                          1996             1995             1996            1995
                                                                          ----             ----             ----            ----
<S>                                                                   <C>              <C>              <C>             <C>         
Shares outstanding at beginning of period .......................       4,538,751        3,892,279        3,846,826       3,228,408

Shares issued during the period (weighted average) ..............          23,271           69,074          549,714         706,223

Dilutive shares contingently issuable upon exercise of
options and warrants (weighted average) .........................              --               --               --              --

Less shares assumed to have been purchased for treasury
with assumed proceeds of stock warrants and options
(weighted average) ..............................................              --               --               --              --

Less shares placed in escrow which are issuable only if
certain income or stock prices are met, as they are
anti-dilutive (weighted average) ................................              --         (187,500)              --              --
                                                                      -----------      -----------      -----------      -----------
Total Fully Diluted Shares ......................................       4,562,022        3,773,853        4,396,540       3,934,631
                                                                      ===========      ===========      ===========      ===========
Net Income (Loss) Applicable To Common Stockholders .............     $  (362,703)     $    (6,947)     $(1,864,414)     $   (1,825)
                                                                      ===========      ===========      ===========      ===========
Net Income (Loss)per Fully Diluted Share ........................     $      (.27)     $        --      $      (.35)     $       --
                                                                      ===========      ===========      ===========      ===========


                                                               - 15 -


</TABLE>
<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 Surgical Corporation



     Thomas F. Reiner
---------------------------
Thomas F. Reiner
Chairman of the Board
President & CEO


     Wm. Samuel Veazey
---------------------------
Wm. Samuel Veazey
Vice President of Finance
and Administration


January 14, 1997


                                     - 16 -