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 August 31, 1999

                                       OR

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

          For the transition period from ____________ to ______________

                           Commission File No. 1-11047

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

            Delaware                                             22-2870438
            --------                                             ----------
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)


                                  Olsen Centre
                   2100 Meridian Park Blvd., Concord, CA 94520
                   -------------------------------------------
                    (Address of principal executive offices)


                                 (925) 825-8151
                                 --------------
                           (Issuer's telephone number)



     Check  whether  the issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the Securities 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 August 31, 1999,  3,660,860 shares of Common Stock,  89,983 shares of
Redeemable  Convertible  Preferred Stock,  28,068 shares of Series A Convertible
Redeemable  Preferred  Stock and 39,938 shares of Series AA Preferred Stock were
outstanding.

<PAGE>


                           SPARTA SURGICAL CORPORATION

                                   Form 10-QSB


                                      INDEX


                                                                         Page
                                                                        Number
                                                                        ------

Part I.   Financial Information

          Item 1. Financial Statements

                  Consolidated Balance                                    3
                  Sheet as of August 31, 1999

                  Consolidated Statements                                 4
                  of Operations for the three months and six
                  months ended August 31, 1999 and 1998

                  Consolidated Statements                                 5
                  of Cash Flows for the six months
                  ended August 31, 1999 and 1998

                  Notes to Consolidated Financial Statements            6 - 7

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

Part II.  Other Information and Signatures                             12 - 13



                                       2
<PAGE>
<TABLE>
<CAPTION>

                               SPARTA SURGICAL CORPORATION
                                CONSOLIDATED BALANCE SHEET
                                     August 31, 1999
                                       (Unaudited)

                                          ASSETS
                                                                                 August 31
                                                                                    1999
                                                                                    ----
Current Assets:
<S>                                                                                   <C>
       Cash and cash equivalents                                                      1,000
       Accounts receivable - net of allowance
              for doubtful accounts of $42,000                                      513,000
       Inventories                                                                2,303,000
       Other                                                                         52,000
                                                                                -----------

              Total current assets                                                2,869,000

Property and equipment, at cost:
       Equipment                                                                  1,118,000
       Other                                                                         20,000
                                                                                -----------
                                                                                  1,138,000
       Less accumulated depreciation                                               (280,000)
                                                                                -----------

              Net property and equipment                                            858,000

Other assets:
       Intangible assets                                                            890,000
       Other                                                                        114,000
                                                                                -----------
              Total other assets                                                  1,004,000
                                                                                -----------

              Total assets                                                        4,731,000
                                                                                ===========

                           LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

       Current portion of long term obligations                                     638,000
       Account payable - trade                                                      753,000
       Accrued expenses                                                             249,000
                                                                                -----------
              Total current liabilites                                            1,640,000

Revolving Credit Facility and Long-Term Obligations                               1,916,000

Stockholders' Equity:
       Preferred stock: $4.00 par value, 2,000,000 shares authorized;
              1992 Non-Cumulative Convertible Redeemable Preferred Stock:
              165,000 shares authorized, 89,983 shares issued and outstanding       360,000
              Series A Cumulative Convertible Preferred Stock:
              30,000 shares authorized, 28,068 shares issued and outstanding        112,000
              Series AA Cumulative Convertible Redeemable Preferred Stock:
              875,000 shares authorized, 39,938 shares issued and outstanding       160,000
              Common Stock:  $0.002 par value, 8,000,000 shares authorized,
              3,660,860 shares issued and outstanding                                 5,000
       Additional paid in capital                                                10,373,000
       Accumulated deficit                                                       (9,835,000)
                                                                                -----------
                    Total stockholder's equity                                    1,175,000
                                                                                -----------

                    Total liabilities and stockholder's equity                    4,731,000
                                                                                ===========



             The accompaning notes are an integral part of these statements.

                                            3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                                 SPARTA SURGICAL CORPORATION
                                            CONSOLIDATED STATEMENTS OF OPERATIONS
                                                         (Unaudited)

                                                                           Three Months Ended            Six Months Ended
                                                                                August 31,                   August 31,
                                                                      --------------------------    --------------------------
                                                                           1999          1998           1999           1998
                                                                           ----          ----           ----           ----

<S>                                                                   <C>            <C>            <C>            <C>
Net Sales                                                             $   965,000    $   583,000    $ 1,364,000    $ 1,302,000

Cost of Sales                                                             308,000        312,000        493,000        697,000
                                                                      -----------    -----------    -----------    -----------

        Gross Profit                                                      657,000        271,000        871,000        605,000

Selling, general and administrative expenses                              463,000        208,000        610,000        378,000
Depreciation and amortization expenses                                     55,000         44,000        114,000        133,000
                                                                      -----------    -----------    -----------    -----------

        Income from operations                                            139,000         19,000        147,000         94,000

Other income (expense):
  Interest and other income                                                12,000         98,000         12,000        304,000
  Interest expense                                                        (98,000)       (99,000)      (184,000)      (192,000)
                                                                      -----------    -----------    -----------    -----------

        Total other income (expense)                                      (86,000)        (1,000)      (172,000)       112,000
                                                                      -----------    -----------    -----------    -----------

Income (loss) before provision for income taxes                            53,000         18,000        (25,000)       206,000

Provision for income taxes                                                      0              0              0              0
                                                                      -----------    -----------    -----------    -----------

Net income (loss)                                                          53,000         18,000        (25,000)       206,000
                                                                      ===========    ===========    ===========    ===========


Preferred stock dividends                                                  (4,000)       (17,000)       (15,000)       (21,000)
                                                                      -----------    -----------    -----------    -----------

Net income/(loss) applicable to common stockholders                        49,000          1,000        (40,000)       185,000
                                                                      ===========    ===========    ===========    ===========


Shares used to calculate basic net income (loss) per common share       2,474,835      1,390,233      2,206,351      1,125,852
                                                                      ===========    ===========    ===========    ===========

Basic net income (loss) per common share                              $      0.02    $      0.00    ($     0.02)   $      0.16
                                                                      ===========    ===========    ===========    ===========

Shares used to calculate diluted net income (loss) per common share     4,040,409      1,844,533      2,206,351      1,598,266
                                                                      ===========    ===========    ===========    ===========

Diluted net income (loss) per common share                            $      0.02    $      0.01    ($     0.02)   $      0.14
                                                                      ===========    ===========    ===========    ===========



                               The accompanying notes are an integral part of these statements.

                                                             4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>


                                        SPARTA SURGICAL CORPORATION
                                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                  (Unaudited)


                                                                                    Six Months Ended
                                                                                        August 31,
                                                                                -------------------------
                                                                                   1999           1998
                                                                                   ----           ----

Cash flows from operating activities
<S>                                                                            <C>            <C>
     Net income (loss)                                                         ($   25,000)   $   206,000
     Adjustments to reconcile net income (loss) to net cash used in
        operating activities:
            Depreciation and amortization                                          114,000        133,000
            Reduction of accrued liabilites                                           --         (275,000)
            Gain on lease settlement                                               (12,000)          --
            Changes in operating assets and liabilities
                Accounts receivable                                               (204,000)       (49,000)
                Inventories                                                         12,000        125,000
                Other assets                                                        65,000        (59,000)
                Accounts payable and accrued expenses                             (310,000)      (379,000)
                                                                               -----------    -----------
                   Net cash used in operating activities                          (360,000)      (298,000)

Cash flows from investing activities:
     Capital expenditures                                                          (57,000)          --
     Increase in intangible assets                                                 (99,000)       (11,000)
                                                                               -----------    -----------
                   Net cash used in investing activities                          (156,000)       (11,000)

Cash flows from financing activities:
     Proceeds from borrowings                                                    1,451,000      1,523,000
     Principal payments on long-term obligations                                (1,060,000)    (1,214,000)
     Proceeds from issuance of common stock                                        125,000           --
                                                                               -----------    -----------
                   Net cash provided by financing activities                       516,000        309,000
                                                                               -----------    -----------

                   Net change in cash and cash equivalents                            --             --

                   Cash and cash equivalents at beginning of the period              1,000          1,000
                                                                               -----------    -----------

                   Cash and cash equivalents at end of the period                    1,000          1,000
                                                                               ===========    ===========

Supplemental disclosure of cash flow information:
-------------------------------------------------
     Cash paid during the year for:
        Interest                                                               $   214,000    $   166,000
        Income taxes                                                                  --             --

Supplemental disclosure of non-cash financing activities:
---------------------------------------------------------
     Conversion of debt into common stock                                      $      --      $   751,000
     Dividends payable on Series A convertible redeemable preferred stock           14,000         17,000
     Stock dividends paid on Series A convertible redeemable preferred stock        15,000         21,000
     Issuance of common stock in acquisition of subsidiary                         800,000           --


                     The accompanying notes are an integral part of these statements.

                                                    5
</TABLE>
<PAGE>

                           SPARTA SURGICAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1.   The  accompanying  consolidated  financial  statements of the Company as of
     August 31, 1999 and for the three and six months  ended August 31, 1999 and
     1998  have  been  prepared  on the  same  basis  as the  audited  financial
     statements.  In the  opinion  of  management,  such  unaudited  information
     includes all adjustments  (consisting  only of normal  recurring  accruals)
     necessary for a fair  presentation of this interim  information.  Operating
     results and cash flows for interim periods are not  necessarily  indicative
     of results for the entire  year.  The  information  included in this report
     should  be  read  in  conjunction  with  the  Company's  audited  financial
     statements  and notes thereto  included in the  Company's  Annual Report on
     Form 10-KSB for the year ended February 28, 1999, previously filed with the
     Securities and Exchange Commission.

2.   Effective  March 1, 1999,  the Company  adopted the provisions of Statement
     No. 130,  "Reporting  Comprehensive  Income" that  modifies  the  financial
     statement presentation of comprehensive income and its components. Adoption
     of this  Statement  had no effect on the  Company's  financial  position or
     operating results.

     Comprehensive  income  (loss) for the six months  ended August 31, 1999 and
     1998,  representing all changes in  stockholders'  equity during the period
     other than changes  resulting from transactions in the Company's stock, was
     $(40,000) and $185,000, respectively.

3.   Basic income (loss) per share is based upon weighted  average common shares
     outstanding. Diluted income (loss) per share is computed using the weighted
     average common shares outstanding plus any potentially dilutive securities.
     Dilutive securities include stock options, warrants,  convertible debt, and
     convertible preferred stock. The following table sets forth the computation
     of basic and diluted net income (loss) per common share:

<TABLE>
<CAPTION>

                                                  Three Months Ended August 31,  Six Months Ended August 31,
                                                  -----------------------------  ---------------------------
                                                      1999            1998           1999           1998
                                                      ----            ----           ----           ----
Numerator
<S>                                                <C>            <C>            <C>            <C>
  Net income (loss)                                $    53,000    $    18,000    ($   25,000)   $   206,000
  Preferred stock dividends                             (4,000)       (17,000)       (15,000)       (21,000)
                                                   -----------    -----------    -----------    -----------

  Net income (loss) used in computing income
  (loss) per common share                               49,000          1,000        (40,000)   $   185,000
                                                   -----------    -----------    -----------    -----------

  Preferred stock dividends                              4,000         17,000           --           21,000

  Interest expense on convertible debt                  15,000          9,000           --           14,000
                                                   -----------    -----------    -----------    -----------

  Net income (loss) used in computing diluted
  income (loss) per common share                   $    68,000    $    27,000    ($   40,000)   $   220,000
                                                   ===========    ===========    ===========    ===========

Denominator
  Weighted average common shares
  outstanding during the period                      2,474,835      1,390,233      2,206,351      1,125,852
                                                   -----------    -----------    -----------    -----------

Shares used in computing basic income
  (loss) per common share                            2,474,835      1,390,233      2,206,351      1,125,852

Dilutive effect of conversion of preferred stock       233,074         63,979           --           63,979
Dilutive effect of options and warrants using
  the treasury stock method                            602,812        157,821           --          175,935
Dilutive effect of convertible debt using the
  if-converted method                                  729,688        232,500           --          232,500
                                                   -----------    -----------    -----------    -----------
Shares used in computing diluted income
  (loss) per common share                            4,040,409      1,844,533      2,206,351      1,598,266
                                                   ===========    ===========    ===========    ===========

                                       6
</TABLE>
<PAGE>


4.   BUSINESS SEGMENTS

     The  Company's  products  are  divided  into two product  groups:  Surgical
     Devices  and  Durable  Medical   Equipment  and  Supplies.   The  Company's
     reportable  product group segments are strategic  business units that offer
     different  ranges of products.  Surgical  devices  include  electrosurgical
     instruments  and related  supplies,  ophthalmic and  ENT/Plastics  surgical
     instruments  and  specialty  disposables  used in a wide range of  surgical
     procedures  in  hospitals,  physicians'  offices,  outpatient  surgery  and
     emergency room settings.  Durable Medical  Equipment and supplies  includes
     pain  management  devices  and  accessories  used  in home  healthcare  for
     physical therapy and rehabilitation procedures.

     Information  by product group segment is set forth below for the six months
     ended August 31:

                                                    1999             1998
                                                    ----             ----
     Net Sales:
         Surgical Devices                        $1,035,000      $  515,000
         Durable Medical Equipment
           and Supplies                             329,000         787,000
                                                 ----------      ----------

                                                 $1,364,000      $1,302,000
                                                 ==========      ==========
     Gross Profit:
         Surgical Devices                        $  712,000      $  312,000
         Durable Medical Equipment
           and Supplies                             159,000         293,000
                                                 ----------      ----------

                                                 $  871,000      $  605,000
                                                 ==========      ==========

     Due to the shared and integrated  resources in personnel and facilities for
the two product group segments,  information on assets,  operating  expenses and
income  from  operations  is not  identifiable  for  each  of the  two  business
segments.


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

RESULTS OF OPERATIONS

Three months ended August 31, 1999
as Compared to three months ended August 31, 1998

     Net sales for the three  months  ended  August 31,  1999  ("Second  Quarter
Fiscal 2000") were $965,000, a 65.5% increase from net sales of $583,000 for the
three months ended August 31, 1998 ("Second Quarter Fiscal 1999"). The net sales
increase of $382,000 is primarily attributed to the Company's recent acquisition
of Olsen  Electrosurgical,  Inc.  and the  receipt  of  various  national  group
purchasing   organization   contracts  from  the  Company's  Strategic  Alliance
Marketing Agreement.

Six months ended August 31, 1999
as Compared to Six months ended August 31, 1998

     Net sales for the six months  ended  August 31,  1999 ("Six  Months  Fiscal
2000") were $1,364,000, a 4.8% increase from net sales of $1,302,000 for the six
months ended August 31, 1998 ("Six Months Fiscal 1999").  The net sales increase
of $62,000  during  the Six Months  Fiscal  2000 as  compared  to the Six Months
Fiscal 1999 is the result of an increase in Surgical Devices sales. The increase
in sales for the  surgical  device  can be  primarily  attributed  to the recent
acquisition of Olsen Electrosurgical, Inc. and receipt of various national group
purchasing   organization   contracts  from  the  Company's  Strategic  Alliance
Marketing Agreement.

                                       7
<PAGE>


     Gross  profit was  $871,000  or 64% of net sales for the Six Months  Fiscal
2000 as compared  to  $605,000  or 47.0% of net sales for the Six Months  Fiscal
1999.  The increase in gross profit  percentage  is primarily  due to the higher
margins generated from the increased sales volume in the Surgical Device product
lines and the reduced sales volume of the Durable Medical Equipment and supplies
product line which  generated  lower gross profit  margins during the Six Months
Fiscal 2000 as compared to the Six Months Fiscal 1999.

     Selling,  general and  administrative  ("SG&A") expenses for the Six Months
Fiscal 2000 were  $610,000,  a 61.4% increase from SG&A expenses of $378,000 for
the Six Months  Fiscal 1999.  The  increase in SG&A  expenses for the Six Months
Fiscal 2000 as compared to the Six Months  Fiscal 1999 is  primarily  due to the
additional   operating   expenses   resulting  from  the  acquisition  of  Olsen
Electrosurgical,   Inc.   ("Olsen"),   consulting   fees  to  the  former  Olsen
shareholders in connection with the  acquisition of Olsen,  expenses  related to
the Sparta's Pleasanton lease termination,  legal, accounting, and due diligence
fees related to the termination of the  non-binding  letter of intent to acquire
Western Medical Services, Inc., debt and equity financing costs and finder's fee
associated with the raising of $325,000 working capital.

     Net income for the Second Quarter  Fiscal 2000 was $53,000,  an increase of
$35,000 from net income of $18,000 for the Second  Quarter  Fiscal 1999. The net
income  increase  for the Second  Quarter  Fiscal 2000 is  primarily  due to the
increase in sales and gross profits from the acquisition of Olsen and receipt of
various  national  group  purchasing  organizations  ("GPO")  contracts from our
Strategic Alliance Marketing  Agreement.  During the Second Quarter Fiscal 2000,
the Company incurred certain non-recurring expenses in the approximate amount of
$135,000.  The  non-recurring  expenses  were  incurred in  connection  with the
termination of the acquisition of Western Medical Services, Inc. including legal
and accounting  fees, due diligence  costs,  consulting fees to the former Olsen
shareholder  in connection  with the Olsen  acquisition,  expenses in connection
with Sparta's lease termination and consolidating headquarters,  debt and equity
financing and finder's fees in connection  with the raising of $325,000  working
capital.


LIQUIDITY AND CAPITAL RESOURCES

     In recent years, the Company has experienced losses from operations and has
suffered from a deficiency in available  working  capital.  In Fiscal 1999,  the
Company  substantially  improved its  operating  performance,  principally  as a
result of significant reductions in operating expenses.  However,  revenues from
existing  product lines have not been  sufficient to generate  adequate  working
capital.  Management  intends  to  continue  the steps it has  taken to  improve
operations and aggressively  pursue capital for its acquisition  program through
debt and equity securities offerings. Management has retained the services of an
investment  advisor  to  pursue  capital  through  such  private  equity or debt
offering.   Management   intends  to  continue  to  pursue  viable   acquisition
candidates.   Management  believes  its  actions  will  be  sufficient  to  fund
operations,  however, there can be no assurance that the Company will be able to
complete planned debt or equity offerings or targeted acquisitions.

     At February 28, 1999, the Company had  approximately  $7,530,000 of federal
net operating loss  carryforwards for tax reporting purposes available to offset
future  taxable  income;  such  carryforwards  will  expire  from  2007 to 2019.
Additionally,  the Company has  approximately  $1,680,000 of state net operating
loss carryforwards for tax reporting purposes which will expire through 2004.

     The Company's working capital at August 31, 1999 was $1,229,000 as compared
to  $1,313,000  at February 28, 1999.  The Company's  working  capital  position
decreased  by $84,000  due to the short term debt  obtained in order to complete
the recent acquisition of Olsen.

     Mr.  Reiner  provided  the Company  with a Working  Capital  Line of Credit
Facility  ("WCLCF") of up to $500,000,  bearing 12% interest per annum.  On June
13, 1999, the Company  requested Mr. Reiner to increase the Working Capital Line
of Credit  Facility from $500,000 to $750,000 and to further extend the terms of

                                       8
<PAGE>


such  line  through  June  2000,   due  to  the  recent   acquisition  of  Olsen
Electrosurgical,  Inc.  The  advances  made  under the  Working  Capital  Credit
Facility and any accrued and unpaid  interest are due at the earlier of (i) July
2000; (ii) upon the closing of a minimum of $1,000,000  equity or debt financing
by the Company; or (iii) upon default at the option of Mr. Reiner, with five (5)
day notice to the Company. In addition, Mr. Reiner has the option to convert all
amounts under the Working  Capital  Credit  Facility  into the Company's  Common
Stock at 100% of the  average  closing  bid prices as reported on NASDAQ for the
five (5) trading days preceding the conversion  date. As of August 31, 1999, the
amount due, including accrued interest,  to Mr. Reiner under the Working Capital
Credit Facility was approximately  $467,000.  In June 1999, Mr. Reiner agreed to
increase  the  Company's  WCLCF from  $500,000  to  $750,000  due to the working
capital needs as a result of the Company's acquisition of Olsen Electrosurgical,
Inc.  on June 8, 1999.  For the  consideration,  Mr.  Reiner was issued  300,000
shares of the Company's Common Stock,  par value $0.002,  with such shares to be
held in escrow and released to the Company  upon full  payment of the  principal
and accrued  interest and in the event the  principal and interest is not repaid
at the end of the forth  year,  then,  at the option of Mr.  Reiner,  the shares
shall be released to him.

     On July 25,  1997,  Bank of America (B of A) provided  the  Company  with a
48-month Revolving Line of Credit of up to $2,500,000 (the "Loan").  The Company
agreed to pay B of A interest on the average outstanding principal amount of the
Loan at a per annum rate of prime plus 3%. The Loan is  advanced  to the Company
based on a  percentage  of  eligible  assets and is secured by a first  position
security interest on all of the assets of the Company. In addition,  $250,000 of
the Loan is personally  guaranteed by Thomas F. Reiner, the Company's  Chairman,
President and Chief  Executive  Officer.  As of October 7, 1999, the outstanding
balance on the Loan was  $1,190,000  and  approximately  $126,000  in credit was
available.  The  Loan is being  used to  provide  working  capital  for  current
operations.

     On August 11, 1999, a private  investor  purchased from the Company 100,000
shares of the Company's restricted Common Stock, par value $0.002, at a price of
$1.25 per share.  On September 2, 1999,  Spags  Investment  Group,  Inc. and its
affiliates  ("Spags")  agreed  to make a  bridge  loan in the  principal  sum of
$485,000,  due on March 2, 2002,  together with interest in the unpaid principal
balance  outstanding at the rate of 7% per annum;  interest is computed  monthly
and shall be payable  in  arrears  in full on March 2,  2000.  At the same time,
Sparta  repaid its  outstanding  Note  dated  July 9, 1999 due to Spags,  in the
amount of $200,000.  In consideration for the $485,000 bridge loan made by Spags
and its  affiliates,  the Company agreed to issue 342,000 shares of Common Stock
to Spags and a finder's fee of 28,500 shares of Common Stock to Spag's affiliate
Royce Walker & Co., LTD. In addition,  under the terms of the bridge loan, Spags
also has an irrevocable  option to purchase an additional  965,000 shares of the
Company's  common  shares  at a price of $1.00  per  share,  exercisable  on the
following  terms,  (i) 465,000 shares at $1.00 per shares ten (10) days from the
submission of the  Company's  10QSB filing for the period ended August 31, 1999,
and (ii) 500,000 shares at a price of $1.00 per share, within ten (10) days from
the  submission  of  any of the  Company's  QSB  filing  and  submission  of due
diligence material for any targeted acquisition by the Company.

     During the period from March 1999 through July 9, 1999,  the Company raised
$550,000 of debt financing  from various  individual  investors.  The individual
loans range from $25,000 to $200,000,  with interest ranging from 7% to 12%. The
net proceeds from these loans were  designated  primarily  for working  capital,
legal and accounting expenses related to various acquisition candidates that the
Company targeted which included the recent acquisition of Olsen Electrosurgical,
Inc. In accordance with the terms of the loans, the principal is to be repaid by
the Company at the earlier of ranging from two (2) months to six (6) months from
the  date  of  the  Notes  and  the  repayment  of  the  principal  amounts  was
subsequently  amended no earlier  than  March 1, 2000,  or the  closing of $25.0
million secondary public stock offering. In addition, as a consideration for the
loans made by the  individual  investors,  the Company will be required to issue
certain  number  of  shares of the  Company's  Common  Stock.  In  addition,  in
connection with this financing,  the Company retained a financial consultant and
the Company  paid  certain  finder's  fee and also  issued  warrants to purchase
300,000 shares of the Company's  Common Stock at $0.95 per share until September
16, 2002 and warrants to purchase  100,000 shares of the Company's  Common Stock
at $1.75 per share until September 16, 2002 with piggyback registration rights.

     The Company is registered  with the FDA as a medical device  establishment.
The Company's  office and  distribution  facilities in California are subject to
various state and local regulations such as zoning requirements, health and fire

                                       9
<PAGE>


codes and the like. All of the Company's  products must be approved,  registered
and/or   licensed  by  the  FDA  and  other  domestic  and  foreign   regulatory
authorities.  These  authorities also regulate  labeling,  advertising and other
forms  of  product   claims.   Subject  to   completion   of  internal   quality
documentation,  on  August  1999,  Sparta  Olsen,  the  Company's  wholly  owned
subsidiary,  was approved for ISO 9001 and EN 46001 Quality System Certification
(International).

     Under the Federal  Food,  Drug and Cosmetic Act, the Company is required to
file with the FDA a new device  description  and obtain FDA approval for any new
medical  device  which the Company  proposes  to  manufacture  and  market.  The
procedure for obtaining such approval  differs  depending upon the uniqueness of
the device,  with devices similar to those marketed prior to 1976 being eligible
for expedited approval and those devices which represent significant  departures
from devices on the market in 1976 requiring pre-marketing approval. The devices
are also subject to inspection by the FDA after approval,  with devices that are
potentially  life-threatening being subject to more stringent standards. The FDA
has established  manufacturing and  sterilization  standards for medical devices
known as "Good Manufacturing Practices" which require the Company's distribution
facility  and its  suppliers  to be  registered  annually and subject to regular
inspections  by the FDA.  The  Company  follows  Occupational  Safety and Health
Administration  (OSHA) guidelines as mandated by state and federal  regulations.
The Company  provides  training for all  employees to ensure that all aspects of
the manufacturing process are performed in an environmentally safe manner.

     On  June  8,  1999,  the  Company  acquired  Olsen  Electrosurgical,   Inc.
("Olsen"),  and  subsequently,  Mr.  Reiner  was asked to  personally  guarantee
certain obligations, including certain lease contracts for computers, telephones
and for an unsecured  working  capital line of credit with Wells Fargo Bank. Mr.
Reiner  agreed to  provide  his  guarantee  on behalf  of Olsen.  For  providing
guarantee for the Olsen's  obligations and as the guarantee is beneficial to the
Company's  shareholders  and overall  business and  operations,  on September 2,
1999, Mr. Reiner was issued 250,000  shares of the Company's  Common Stock,  par
value  $0.002,  which  shares  are  to be  held  in  escrow  until  the  Company
obligations are fully paid in one year, or unless extended, at the option of Mr.
Reiner, the shares shall be released to him after one year.

     On June 8, 1999, the Company  acquired all of the outstanding  common stock
of  Olsen  Electrosurgical,  Inc.  ("Olsen")  and  subsequently,  the  Company's
Chairman  of the  Board,  President  and CEO,  Thomas  F.  Reiner  was  asked to
personally guarantee certain obligations,  including certain lease contracts for
computers and telephone, and a $125,000 unsecured working capital line of credit
with Wells Fargo Bank.  Mr. Reiner  agreed to provide his personal  guarantee on
behalf of the Company,  even though he was not required to do so. For  providing
such guarantee,  as the guarantee is beneficial to the Company's shareholder and
overall  business and  operations,  on  September  1999,  Mr.  Reiner was issued
550,000  shares of the  Company's  Common Stock,  par value  $0.002,  which such
shares are to be held in escrow until the Company  obligations are fully paid in
one year, or unless  extended at the option of Mr.  Reiner,  the shares shall be
released to him after one year.

     In May  1999,  the  Company  entered  into  a  non-binding  asset  purchase
agreement  (subject to  completion  of financing  and due  diligence) to acquire
substantially  all of the  assets and  business  operations  of Western  Medical
Services, Inc., a provider of home health care staffing. On August 12, 1999, the
Company  terminated  its  non-binding  letter of  intent  with  Western  Medical
Services, Inc.

     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.  In  addition,  the  failure  to  finalize  and close the
acquisition  could result in additional  extending  expenses to the operation of
the  business.  These  factors  could  have a  material  adverse  effect  on the

                                       10
<PAGE>


Company's  business,   operating  results  and  financial  condition.   Although
applicable government  regulations vary in their provisions,  they are stringent
and continuing.  The cost of compliance  with these  regulations is difficult to
determine,  but such cost is and will continue to be a  significant  expense for
the Company. The Company believes that it has obtained all applicable government
and regulatory approvals for its existing products, facilities and processes and
expects  that all of its  current  license  will be renewed on a regular  basis.
There can be no  assurance  that the Company will  continue to be in  compliance
with all current  regulations  or that it will be able to comply with all future
regulations.

     The Company sells its products under a variety of trademarks, some of which
the Company has registered in the United States and various  foreign  countries.
The Company  currently  holds two patents  granted by the United  States  Patent
Office  relating to its Durable  Medical  Equipment  and  Accessories  which was
obtained  through the acquisition of Medical Design,  Inc.  Notwithstanding  the
trademarks  and patents  held by the  Company,  there can be no  assurance  that
competitors will not develop similar trademark  outside the Company's  trademark
protection  or  functionally  similar  products  outside  the  Company's  patent
protection.  There  also can be no  assurance  that  any  patents  issued  to or
licensed by others,  that others will not obtain  patents  that the Company will
need  to  license  or  design  around,  that  the  Company's  patents  will  not
inadvertently  infringe upon the patents of others,  or that others will not use
the Company's patents upon expiration of such patents. There can be no assurance
that existing or future patents will not be invalidated or that the Company will
have adequate funds to finance the high cost of prosecuting or defending  patent
validity or  infringement  issues.  Therefore,  the scope or  enforceability  of
claims allowed in the patents on which the Company will rely cannot be predicted
with any certainty.

The Company's  performance is substantially  dependent on the performance of its
executive officers and key employees.  In particular,  the services of Thomas F.
Reiner, the Company's Co-founder, Chairman of the Board, President and CEO would
be difficult to replace.  The Company has entered into an  Employment  Agreement
with Mr. Reiner.  The loss of the services of Mr.  Reiner,  any of its executive
officers  or other key  employees  could have a material  adverse  effect on the
business, results of operations or financial condition of the Company.

     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.  Our
principal  capital  requirements  have  been to fund  working  capital  needs to
support  internal  growth for  acquisitions  and for capital  expenditures.  Our
principal  working  capital  needs are for  inventory  and accounts  receivable.
Management  attempts to control  inventory levels in order to minimize  carrying
costs and maximize purchasing opportunities.  We sell inventory to our customers
on various payment terms. This requires  significant  working capital to finance
inventory purchases and entails accounts receivable expenses in the event any of
our major customers encounters financial  difficulties.  Although we monitor the
creditworthiness of our customers,  we cannot assume that we will not incur some
collection loss on customer accounts  receivable or loss in customer base in the
future. 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.

     The Company is currently  evaluating the potential  impact of the year 2000
on the processing of  date-sensitive  information by the Company's  computerized
information  system.  The year 2000  problem is the result of computer  programs
being written using two digits (rather than four) to define the applicable year.
Any of the Company's  computer  programs that have  time-sensitive  software may
recognize a date using "00" as the year 1900  rather  than the year 2000,  which
could  result  in  miscalculations  or  system  failures.  Based on  preliminary
information,  the costs of addressing  the potential  problems are not currently
expected to have a material adverse effect  (estimated not to exceed $25,000) on
the Company's financial  position,  liquidity or results of operations in future
periods.  However,  if the Company,  or its customers or vendors,  are unable to
resolve  such  processing  issues in a timely  manner,  it could pose a material
financial risk. Accordingly, the Company plans to devote the necessary resources
to resolve all significant year 2000 issues in a timely manner.

     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 10-KSB,
Quarterly   Reports  on  Form   10-QSB  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
-------------------------

          None.

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.   Exhibit No.

          27   Financial Data Schedule.

     B.   Reports on Form 8-K

     The Registrant filed a Form 8-K dated September 3, 1999 which reported that
     on September 2, 1999, the Company  borrowed  $485,000 from Spags Investment
     Group, N.V. and its affiliate,  Coridal,  N.V. Under the terms of the Note,
     the  principal  sum of  $485,000  is due on March  2,  2000  together  with
     interest on the unpaid principal balance  outstanding until paid in full at
     the rate of seven percent (7%) per annum.  At the same time, the Registrant
     paid in full its  $200,000  Note dated July 7, 1999.  In  consideration  of
     Spags making a $485,000 loan,  the Registrant  issued 342,000 shares of the
     Common Stock, par value $0.002. In connection with this transaction, 28,500
     shares of the Company's Common Stock, par value $0.002 and certain finder's
     fee was paid to Royce Walker, LLC, and to the Registrant's Consultant.

     The  Registrant  filed a Form 8-K  dated  July  19,  1999.  The  Registrant
     borrowed  $200,000  from Spags,  N.V. for working  capital.  The Note bears
     interest at a rate of seven  percent  (7%) per annum,  and shall become due
     and payable on  September  3, 1999.  In  consideration  of Spags making the
     $200,000  loan,  the Registrant  issued  260,000  restricted  shares of the
     Company's  common stock,  par value $0.002 to Spags and its  affiliate.  On
     September 2, 1999, the Registrant paid its Note in full.

     The Registrant filed a Form 8-K dated June 23, 1999, which reported that it
     has acquired in exchange for 400,000 shares of the Company's  Common Stock,
     par  value  $0.002,   all  of  the   outstanding   Common  Stock  of  Olsen
     Electrosurgical  Instruments,  Inc ("Olsen").  Olsen researches,  develops,
     manufactures   and  markets   reusable   and   disposable   electrosurgical
     instruments and  accessories  for use in cutting tissues and  cauterization
     during general surgical  procedures.  For its most recent fiscal year ended
     December 31, 1998, Olsen recorded net sales of  approximately  $2.4 million
     and employs 25 full-time employees.

                                       12
<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 hereto duly authorized.

Sparta Surgical Corporation



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




October 12, 1999

                                       13