================================================================================


                       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, 1998

                                       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)


                                 (925) 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, 1998,  2,868,898  shares of Common Stock,  119,783  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                            3
                   Sheet as of November 30, 1998

                   Condensed Consolidated Statements                         4
                   of Operations for the three months and nine
                   months ended November 30, 1998 and 1997

                   Condensed Consolidated Statements                         5
                   of Cash Flows for the nine months
                   ended November 30, 1998 and 1997

                   Notes to Condensed Consolidated Financial Statements      6

          Item 2.  Management's Discussion and                            7 - 10
                   Analysis of Financial Condition
                   and Results of Operations

Part II.  Other Information and Signatures                               11 - 12




                                       -2-

<PAGE>

                           SPARTA SURGICAL CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                November 30, 1998
                                   (Unaudited)

                                     ASSETS
Current assets:
   Cash and cash equivalents                                        $     1,000
   Accounts receivable - net of allowance
     for doubtful accounts of $ 34,000                                  243,000
   Inventories                                                        2,057,000
   Other                                                                 88,000
                                                                    -----------

      Total current assets                                            2,389,000
                                                                    -----------
Property and equipment, at cost:
   Equipment                                                            416,000
   Other                                                                 20,000
                                                                    -----------

                                                                        436,000
   Less accumulated depreciation                                       (286,000)
                                                                    -----------

      Net property and equipment                                        150,000

Other assets:
   Intangible assets                                                    506,000
   Other                                                                110,000
                                                                    -----------

      Total other assets                                                616,000
                                                                    -----------

   Total assets                                                     $ 3,155,000
                                                                    ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Current portion of long term obligations                        $   507,000
    Account payable - trade                                             415,000
    Accrued expenses                                                    107,000
                                                                    -----------
      Total current liabilities                                       1,029,000

Revolving credit facility and long term obligations                   1,837,000

Stockholders' Equity:
    Preferred stock: $4.00 par value,
      750,000 shares authorized:
    Non-cumulative convertible redeemable
      preferred stock: 165,000 shares authorized,
      119,783 shares issued and outstanding                             482,000
    Series A cumulative convertible preferred stock:
      30,000 shares authorized, 28,068 shares
      issued and outstanding                                            112,000
    Common stock:  $.002 par value, 8,000,000 shares
      authorized, 2,868,898 shares issued and outstanding                 6,000
    Additional paid in capital                                        9,051,000
    Accumulated deficit                                              (9,362,000)
                                                                    -----------

      Total stockholders' equity                                        289,000
                                                                    -----------

      Total liabilities and stockholders' equity                    $ 3,155,000
                                                                    ===========

                                      -3-


                       
<PAGE>
<TABLE>
<CAPTION>
                                                    SPARTA SURGICAL CORPORATION
                                          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                                          (Unaudited)

                                                              Three Months Ended                Nine Months Ended
                                                                 November 30,                      November 30,
                                                       -----------------------------       -----------------------------
                                                           1998               1997             1998             1997
                                                           ----               ----             ----             ----

<S>                                                    <C>               <C>               <C>               <C>        
Net sales                                              $   371,000       $   609,000       $ 1,673,000       $ 1,819,000

Cost of sales                                              181,000           299,000           878,000           884,000
                                                       -----------       -----------       -----------       -----------

      Gross profit                                         190,000           310,000           795,000           935,000


Selling, general and administrative expenses               261,000           450,000           772,000         1,419,000
Research and development expense                             3,000             8,000
                                                       -----------       -----------       -----------       -----------

      Income from operations                               (71,000)         (143,000)           23,000          (492,000)

Other income(expense):
   Interest and other income                                     0                 0           304,000            85,000
   Interest expense                                        (66,000)          (73,000)         (258,000)         (211,000)
                                                       -----------       -----------       -----------       -----------

      Total other income (expense)                         (66,000)          (73,000)           46,000          (126,000)
                                                       -----------       -----------       -----------       -----------

Income (loss) before provision for income taxes           (137,000)         (216,000)           69,000          (618,000)

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

Net income (loss)                                      ($  137,000)      ($  216,000)      $    69,000       ($  618,000)
                                                       ===========       ===========       ===========       ===========


Preferred stock dividends                                   (4,000)           (4,000)          (25,000)          (25,000)
                                                       -----------       -----------       -----------       -----------

Net income/(loss) applicable to
 common shareholders                                   ($  141,000)      ($  220,000)      $    44,000       ($  643,000)
                                                       ===========       ===========       ===========       ===========

Shares used to calculate basic net incom
 (loss) per common share                                 1,923,858           924,033         1,413,438           869,667
                                                       ===========       ===========       ===========       ===========

Basic net income (loss) per common share               ($     0.07)      ($     0.24)      $      0.03       ($     0.74)
                                                       ===========       ===========       ===========       ===========

Shares used to calculate diluted net income
 (loss) per common share                                 1,923,858           924,033         1,531,388           869,667
                                                       ===========       ===========       ===========       ===========

Diluted net income (loss) per common share             ($     0.07)      ($     0.24)      $      0.03       ($     0.74)
                                                       ===========       ===========       ===========       ===========

                                                               -4-
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                             SPARTA SURGICAL CORPORATION
                                     CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                     (Unaudited)
                                                                                      Nine months ended
                                                                                         November 30,
                                                                             ----------------------------------
                                                                                1998                    1997
                                                                                ----                    ----
<S>                                                                           <C>                     <C>    
Cash flows from operating activities
   Net income (loss)                                                         $    69,000            ($  618,000)
   Adjustments to reconcile net income
    (loss) to net cash used by
    operating activities:
      Depreciation and amortization                                              200,000                229,000
      Reduction of accrued liabilities                                          (304,000)               (85,000)
      Changes in operating assets and liabilities:
        Accounts receivable                                                      (28,000)               (52,000)
        Inventories                                                              108,000                 99,000
        Other assets                                                             (85,000)               (72,000)
        Accounts payable and accrued expenses                                   (345,000)              (357,000)
                                                                             -----------            -----------

      Net cash used by operating activities                                  ($  385,000)           ($  856,000)

Cash flows from investing activities:
   Capital expenditures                                                           (9,000)                (6,000)
   Increase in intangible assets                                                 (13,000)              (117,000)
   Increase in receivables from related entities                                                         17,000
   Principal payments received on notes receivable                                                      578,000
                                                                             -----------            -----------

      Net cash provided (used) by investing activities                           (22,000)               472,000
                                                                             -----------            -----------

Cash flows from financing activities
   Proceeds from borrowing                                                     1,918,000              4,118,000
   Principal payments on long term obligations                                (1,511,000)            (3,734,000)
                                                                             -----------            -----------

      Net cash provided by financing activities                                  407,000                384,000
                                                                             -----------            -----------

      Net change in cash and cash equivalents                                       --                     --

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

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

Supplemental disclosure of cash flow information:

   Cash paid during the period for:
     Interest                                                                $   190,000            $   140,030
     Income taxes                                                                   --                     --

Supplemental disclosure of noncash investing and financing activities:
   Conversion of debt into common stock                                       751,000.00                   --
   Conversion of preferred stock into common stock                              8,000.00                152,000
   Dividends payable on Series A convertible
    redeemable preferred stock                                                  4,000.00                  4,000
   Stock dividends paid on Series A
    convertible redeemable preferred stock                                     25,000.00                 25,000
   Issuance of common stock and warrants in payment of loan costs                   --                  236,000

                                                        -5-
</TABLE>

<PAGE>


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

1.   The accompanying condensed consolidated financial statements of the Company
     as of November  30, 1998 and for the three and nine months  ended  November
     30,  1998 and 1997  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, 1998 previously  filed with the
     Securities and Exchange Commission.

2.   Effective  "March 1, 1998, 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 nine months ended November 30, 1998 and
     1997,  representing all changes in Stockholders'  deficit during the period
     other than changes  resulting  from the  Company's  stock,  was $69,000 and
     $(618,000), 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 November 30,     Nine Months Ended November 30
                                              1998               1997             1998               1997
<S>                                        <C>               <C>               <C>                 <C> 
Numerator
  Net income (loss)                         $(137,000)        $(216,000)        $  69,000          $(618,000)
  Preferred stock dividends                  (  4,000)         (  4,000)          (25,000)          ( 25,000)
                                            ---------         ---------         ---------          ---------

  Net income (loss) available
  common shareholders                       $(141,000)        $(220,000)        $  44,000          $(643,000)
                                            =========         =========         =========          =========

Denominator
  Weighted average common shares
    outstanding during the period           1,923,858           924,333         1,413,438            869,667
                                            ---------         ---------         ---------          ---------

Shares used in computing basic income
  (loss) per common share                   1,923,858           924,333         1,413,438             869,667

Dilutive effect of conversion
  of preferred stock                               --                --               --                   --
Dilutive effect of options and
  warrants using
  the treasury stock method                        --                --           117,950                  --
Dilutive effect of convertible debt
  using the
  if-converted method                              --                --                --                   --
                                           ----------         ---------         ---------           ----------
Shares used in computing diluted income
  (loss) per common share                   1,923,858           924,033         1,531,388              869,667
                                           ==========         =========         =========           ==========


                                                      -6-
</TABLE>

<PAGE>



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

RESULTS OF OPERATIONS

Three months ended November 30, 1998
as Compared to Three months ended November 30, 1997


     Net sales for the three  months ended  November  30, 1998  ("Third  Quarter
Fiscal 1999") were  $371,000,  a 39% decrease from net sales of $609,000 for the
three months ended  November 30, 1997 ("Third  Quarter  Fiscal  1998").  The net
sales decrease is the result of a decrease of $211,000 or 61% in  electrotherapy
product sales from  $346,000 to $136,000  coupled with a decrease of $ 28,000 or
11% in surgical  product sales from $263,000 to $235,000.  The decrease in sales
for  the  electrotherapy  product  line  can  be  primarily  attributed  to  the
completion of purchase  orders from two of the  Company's  largest OEM accounts.
However,  the Company  expects to receive a new purchase order from one of these
OEM accounts  during the Fourth  Quarter Fiscal 1999. The further loss of any of
the Company's  electrotherapy  OEM accounts could have a material adverse effect
on the Company's business, operating results and financial condition.


Nine months ended November 30, 1998
as Compared to Nine months ended November 30, 1997

     Net sales for the nine months ended  November 30, 1998 ("Nine Months Fiscal
1999") were $1,673,000, an 8% decrease from net sales of $1,819,000 for the nine
months  ended  November  30, 1997 ("Nine  Months  Fiscal  1998").  The net sales
decrease  during the Nine  Months  Fiscal  1999 as  compared  to the Nine Months
Fiscal  1998 is the  result of a decrease  of  $91,000  or 9% in  electrotherapy
product  sales  from  $1,014,000  to  $923,000.  The  decrease  in sales for the
electrotherapy product line can be primarily attributed to the completion of two
purchase  orders from two of the Company's  largest OEM customers.  Net sales to
two OEM customers  accounted for approximately 30% of the Company's revenues for
the  Nine  Months  Fiscal  1999.  The  further  loss  of any  of  the  Company's
electrotherapy  OEM accounts could continue to have a material adverse effect on
the Company's business, operating results and financial condition. The net sales
decrease  during  the Nine  Months  Fiscal  1999 for the  surgical  products  of
$55,000,  or 7%  from  $805,000  to  $750,000  is  attributed  primarily  to the
reduction of the Company's surgical independent sales  representatives,  and the
elimination of various surgical trade show attendance.  In an effort to increase
surgical  sales,  the Company  recently  signed a Strategic  Alliance  Marketing
Agreement  with  Pilling  Weck  Surgical,  a division of  Teleflex,  (NYSE:TFX).
Pilling Weck is the nation's oldest and most respected manufacturer and marketer
of  hand-held  surgical   instruments  to  hospitals  and  physician's   offices
worldwide. Under the term of the agreement, Pilling Weck will identify Sparta as
an allied  single-source  provider  of the  Company's  ophthalmic  microsurgical
hand-held   instruments  whenever  negotiating  sales  contracts  with  national
hospital buying groups and international distributors.

     Gross profit was  $795,000 or 48 % of net sales for the Nine Months  Fiscal
1999 as compared  to  $935,000%  or 51% of net sales for the Nine Months  Fiscal
1998.  The decrease in gross profit  percentage  is primarily due to product mix
changes in the electrotherapy  products,  especially as to the completion of the
electrotherapy  purchase orders from two of the Company's largest OEM customers,
which yield slightly higher gross profit margins.

     Selling,  general and administrative  ("SG&A") expenses for the Nine Months
Fiscal 1999 were  $772,000,  a 46% decrease from SG&A expenses of $1,419,000 for
the Nine Months  Fiscal 1998.  The decrease in SG&A expenses for the Nine Months
Fiscal 1998 as compared to the Nine Months  Fiscal 1997 is primarily  due to the
Company's  implementation  of a  restructuring  plan  involving a  reduction  of
personnel, a Company wide reduction in salaries, and an overall cost containment
program in effect.

                                      -7-

<PAGE>


     The  increase in total net income is  primarily  due to the lower  selling,
general and  administrative  expenses,  as well as the  reduction of $304,000 in
accrued liabilities during the period as compared to the reduction of $85,000 in
accrued  liabilities during the Nine Months Fiscal 1998. The accrued liabilities
were originally  accrued in connection with the lease termination costs relating
to the  sale of the  wound  care  product  line in  December  1995.  Conversely,
interest expenses increased from $211,000 in Nine Months Fiscal 1998 to $258,000
in Nine Months  Fiscal  1999,  an increase  of $47,000 in net  interest  expense
resulting   primarily  from  higher  loan  balances  and  banking   expenses  to
NationsCredit,  the Company's primary lender. As a result of the foregoing,  the
net income for the Nine Months  Fiscal 1999 was $69,000,  an increase from a net
loss of $(618,000) for the Nine Months Fiscal 1998.

     As has been the Company's  strategy since the sale of the woundcare product
line in fiscal year 1996,  the Company  intends to continue 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.

     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 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.

LIQUIDITY AND CAPITAL RESOURCES

     The Company  develops,  manufactures  and markets surgical and non-invasive
electrotherapy  devices to the healthcare industry  worldwide.  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. The healthcare products industry is intensely competitive,  and many
of the Company's  competitors  have  financial,  marketing  and other  resources
substantially  greater than those of the Company.  Some of the Company's  larger
competitors enjoy an additional competitive advantage by reason of their ability
to offer product  discounts for volume purchases  across product lines.  Some of
the companies which the Company competes,  have significantly greater resources,
established sales  organizations  and greater  experience in marketing and sales
products through direct distribution and is dominated by general industry giants
such as  Johnson  and  Johnson,  Allegiance  Healthcare  Corporation,  Empi  and
Rehabilicare, Inc.

     On July 17, 1998,  J&C  Resources  ("J&C")  agreed to convert  indebtedness
owing to it from the  Company  in the  amount  of  $751,300  into  shares of the
Company's  common stock  $0.002 par value (the  "Common  Stock") at a conversion
price of $0.75  per  share.  The  conversion  resulted  in  J&C's  being  issued
1,001,733  shares  of the  Company's  Common  Stock.  In  conjunction  with  the
conversion of the J&C indebtedness  into equity,  the Company borrowed  $150,000
from  an  affiliate  of  J&C,  Asset   Factoring,   Inc.,  DBA  Asset  Factoring
International  ("Asset Factoring").  Under the terms of the loan, the note bears
interest at a rate of twelve  percent  (12%) per annum and shall  become due and
payable on or before the first to occur of the following events:  (1) receipt by
the  Company of proceeds of at least one  million  dollars  ($1,000,000)  upon a
private sale of its equity  securities;  or (2) the one year  anniversary of the
date of such note. In addition,  Asset Factoring was issued warrants to purchase
up to 150,000  shares of the Common  Stock at a price of $0.75 per share,  which
warrants  shall be  exercisable at any time within four years of the date of the
$150,000 note and which shall carry piggyback registration rights.

     On  July  25,   1997,   NationsCredit   Commercial   Funding   Division  of
NationsCredit  Commercial Corporation,  A NationsBank Company  ("NationsCredit")
provided  the  Company  with  a  48-month  Revolving  Line  of  Credit  of up to
$2,500,000 (the "Loan"). The Company agreed to pay NationsCredit interest on the
average  outstanding  principal  amount of the Loan at a per annum rate of prime
plus 3 1/2%.  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 Mr.  Thomas F.  Reiner.  As of January 8, 1998,  the  outstanding
balance  on the Loan was  $1,316,000  and  approximately  $4,000 in  credit  was
available.  The  Loan is being  used to  provide  working  capital  for  current
operations. In connection with the financing, the Company issued NationsCredit a
warrant to purchase up to 42,500 shares of its Common Stock exercisable at $1.11
per share at any time until July 25, 2002.

                                      -8-

<PAGE>


     On June 1998,  the Company  entered into a Working  Capital  Secured Credit
Facility  ("WCSCF")  agreement with Mr. Reiner,  the Company's Chairman and CEO,
pursuant to which Mr.  Reiner is providing the Company up to $500,000 in working
capital on an as needed basis. Providing the Company is not in default under the
WCSCF,  the working  capital  advances  made under the WCSCF and any accrued and
unpaid interest are due the earlier of (i) June 1999; (ii) upon the closing of a
minimum of $1,000,000 equity or debt financing by the Company. As of January 10,
1999, the amount due to Mr. Reiner under the WCSCF was  approximately  $462,000.
The WCSCF is secured by a second position security interest on all of the assets
of the Company.

     On July 27, 1998, Mr. Reiner agreed to accept a temporary  salary reduction
in the  approximate  amount of $50,000  during  the  fiscal  year 1999 under his
Employment  Agreement.  The temporary  salary  reduction may continue until cash
flow of the  Company  improves  and/or  Mr.  Reiner  elects  to  terminate  such
agreement. As a consideration for Mr. Reiner providing further assistance to the
Company's  cash flow  problems,  the  Company  agreed to issue to Mr.  Reiner an
option to purchase  100,000  shares of the Company's  Common  Stock,  $0.002 par
value,  at $1.47 per share at any time until July 26, 2005.  To further  improve
the Company's  cash flow and earnings  during the Third Quarter Fiscal 1999, Mr.
Reiner agreed to waive  approximately  $15,000 of his salary  payments under his
Employment  Agreement.  Mr.  Reiner  received no  consideration  for waiving his
salary.

     As of February 28, 1998,  the Company had net operating loss carry forwards
of  approximately  $9,450,000.  Availability of the Company's net operating loss
carry forwards,  if not utilized,  will expire at various dates through the year
2012.  The  Company's  working  capital at November  30, 1998 was  approximately
$1,360,000 as compared to $1,122,000 at February 28, 1998. The Company's working
capital position  increased by 238,000,  primarily due to the conversion of debt
to equity.

     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
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.

     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.

     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   Electrotherapy   TENS  units  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.

                                      -9-

<PAGE>


     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 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 that 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  failure.  Based  on  preliminary
information,  the costs of addressing  the potential  problems are not currently
expected to have a material adverse effect 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  issued 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 mannaer.

     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.

     The Company has experienced  difficulty from time to time in obtaining some
of its  products,  and there can be no  assurance  that its current or alternate
suppliers will be able to meet the Company's  needs on a timely basis.  Although
some products are currently  available  from  multiple  sources,  at present the
Company obtains  approximately 75% of the products it sells from single sources.
A lack of availability from current suppliers could cause  distribution  delays,
loss of  customers,  increased  cost to the  Company  and  decrease in levels of
sales.  In addition,  reliance on these  suppliers  could  adversely  affect the
Company's quality control efforts and its ability to control delivery schedules.

     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.


                                      -10-

<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
         -----------------

     The  Company  leases   corporate  and  warehouse   facilities   located  in
Pleasanton,  Califonria. On October 1, 1998 the Company entered into a three (3)
year term lease for its corporate  facility.  Under the terms of the lease,  the
Company  leased 4,344 square feet at a base monthly rent of $6,299.  On November
1, 1998 the  Company  entered  into a two (2) year term lease for its  warehouse
facility.  Under the terms of the lease, the Company leases 3,768 square feet at
a base monthly rent of $2,897.  The Company believes its facilities are adequate
for its needs in the foreseeable  future and that additional  space is available
at reasonable rates.

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

         A.     Exhibit No.

                27   Financial Data Schedule

         B.     Reports on Form 8-K

                None.





                                      -11-

<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



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


/s/ H. Dale Biggs
---------------------------------------
H.  Dale Biggs
Controller and Chief Financial Officer

January 15, 1999






                                      -12-