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, 1997

                                       OR

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

                 For the transition period from         to

                         Commission File Number 1-11047

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

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


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

                                 (510) 417-8812
                           (Issuer's telephone number)


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days. Yes X No

As of  August  31,  1996,  915,904  shares of Common  Stock,  135,483  shares of
Redeemable Convertible Preferred Stock and 28,068 shares of Series A Convertible
Redeemable Preferred Stock were outstanding.


<PAGE>


                           SPARTA SURGICAL CORPORATION

                                   Form 10-QSB


                                      INDEX


                                                                           Page
                                                                          Number

Part I.    Financial Information

           Item 1.    Financial Statements

                      Condensed Consolidated Balance
                      Sheet as of August 31, 1997                          1 - 2

                      Condensed Consolidated Statements
                      of Operations for the three months and
                      six months ended August 31, 1997 and 1996                3

                      Condensed Consolidated Statements
                      of Cash Flows for the six months
                      ended August 31, 1997 and 1996                           4

                      Notes to Financial Statements                            5

           Item 2.    Management's Discussion and
                      Analysis of Financial Condition
                      and Results of Operations                            6 - 9

Part II.   Other Information and Signatures                              10 - 13


<PAGE>


                           SPARTA SURGICAL CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                 August 31, 1997
                                   (Unaudited)

                                     ASSETS


Current Assets:
 Cash and cash equivalents ..................................       $        --
 Accounts receivable - trade, net of allowance
   for doubtful accounts of $30,381 .........................           335,160
 Inventories ................................................         2,260,668
 Prepaid expenses ...........................................            51,703
                                                                    -----------
    Total Current Assets ....................................         2,647,531
                                                                    -----------
Property and Equipment, at cost:
 Machinery and equipment ....................................           491,923
 Leasehold improvements .....................................            15,733
                                                                    -----------
                                                                        507,656
Less accumulated depreciation ...............................          (281,533)
                                                                    -----------
    Net Property and Equipment ..............................           226,123
                                                                    -----------
Other Assets:
 Intangible assets, net of
  accumulated amortization ..................................           987,809
 Deposits and other .........................................           134,240
 Notes receivable - related entities ........................           561,690
                                                                    -----------
     Total Other Assets .....................................         1,683,739
                                                                    -----------
     Total Assets ...........................................       $ 4,557,393
                                                                    ===========


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


                                       -1-


<PAGE>


                           SPARTA SURGICAL CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                 August 31, 1997
                                   (Unaudited)
                                   (Continued)

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
 Accounts payable - trade ......................................    $   482,171
 Accrued expenses:
  Payroll taxes and wages ......................................         64,077
  Interest and other ...........................................         20,053
  Other liabilities ............................................        147,380
 Dividends payable .............................................         17,542
 Notes payable .................................................        165,000
 Royalties payable .............................................         44,215
 Current portion of long-term debt .............................        428,937
                                                                    -----------
     Total Current Liabilities .................................      1,369,375
                                                                    -----------
Long-Term Debt, net of current portion above:
 Obligations under capital leases ..............................         93,033
 Financial institutions and other ..............................      2,334,670
 Less current portion above ....................................       (428,937)
                                                                    -----------
       Total Long-Term Debt ....................................      1,998,766
                                                                    -----------
Other liabilities ..............................................        178,466
                                                                    -----------
Commitments and contingencies ..................................             --

Stockholders' Equity:
 Preferred stock: $4.00 par value, 750,000 shares authorized;
   Non-cumulative Convertible Redeemable Preferred Stock:
    165,000 shares authorized, 135,483 shares issued
     and outstanding ...........................................        541,932
   Series A Cumulative Convertible Preferred Stock:
    30,000 shares authorized, 28,068 shares issued
     and outstanding ...........................................        112,272
 Common Stock: $.002 par value, 8,000,000 shares authorized,
   915,904 shares issued and outstanding .......................          1,833
 Additional paid in capital ....................................      8,283,939
 Accumulated deficit ...........................................     (7,929,190)
                                                                    -----------
      Total Stockholders' Equity ...............................      1,010,786
                                                                    -----------
      Total Liabilities and Stockholders' Equity ...............    $ 4,557,393
                                                                    ===========


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


                                      -2-


<PAGE>
<TABLE>


                                                     SPARTA SURGICAL CORPORATION
                                           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                                             (Unaudited)

<CAPTION>
                                                                      Three Months Ended                     Six Months Ended
                                                                           August 31,                            August 31,
                                                               ------------------------------        ------------------------------
                                                                    1997               1996               1997              1996
                                                                    ----               ----               ----              ----
<S>                                                            <C>                <C>                <C>                <C>
Net Sales ..............................................       $   560,027        $   472,678        $ 1,209,567        $ 1,057,631
Cost of sales ..........................................           262,937            198,086            584,836            440,737
                                                               -----------        -----------        -----------        -----------
     Gross Profit ......................................           297,090            274,592            624,731            616,894

Selling, general and administrative
 expenses ..............................................           400,110            552,051            824,277          1,064,292
Research and development expense .......................             3,192              8,525              5,105             26,500
Depreciation and amortization ..........................            78,345             60,638            145,249            118,227
Settlement of litigation ...............................                --            695,712                 --            695,712
                                                               -----------        -----------        -----------        -----------
  Income (Loss) From Operations ........................          (184,557)        (1,042,334)          (349,900)        (1,287,837)
                                                               -----------        -----------        -----------        -----------
Other Income (Expense):
  Interest and other income ............................                --              3,164             85,000              7,349
  Interest expense .....................................           (72,042)           (96,359)          (136,985)          (128,138)
                                                               -----------        -----------        -----------        -----------
     Total Other Income (Expense) ......................           (72,042)           (93,195)           (51,985)          (120,789)
                                                               -----------        -----------        -----------        -----------
Income (Loss) Before Provision
 for Income Taxes ......................................          (256,599)        (1,135,529)          (401,885)        (1,408,626)
Provision for income taxes .............................                --                 --                 --                 --
                                                               -----------        -----------        -----------        -----------
Net Income (Loss) ......................................          (256,599)        (1,135,529)          (401,885)        (1,408,626)
Preferred stock dividends ..............................           (17,542)           (88,951)           (21,051)           (93,085)
                                                               -----------        -----------        -----------        -----------
Net Income (Loss) Applicable to
 Common Stockholders ...................................       $  (274,141)       $(1,224,480)       $  (422,936)       $(1,501,711)
                                                               ===========        ===========        ===========        ===========
Net Income (Loss) Per Share of
 Common Stock:
  Primary:
   Weighted average number of
    common shares outstanding ..........................           868,032            748,173            842,568            719,098
                                                               ===========        ===========        ===========        ===========
    Net income (loss) per common share .................       $      (.32)       $     (1.64)       $      (.50)       $     (2.09)
                                                               ===========        ===========        ===========        ===========
  Fully diluted:
   Weighted average number of
    common shares outstanding ..........................           868,032            748,173            842,568            719,098
                                                               ===========        ===========        ===========        ===========
     Net income (loss) per common share ................       $      (.32)       $     (1.64)       $      (.50)       $     (2.09)
                                                               ===========        ===========        ===========        ===========


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


                                                                 -3-


</TABLE>

<PAGE>


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


                                                          Six Months Ended
                                                              August 31,
                                                     --------------------------
                                                          1997          1996
                                                          ----          ----
Cash Flows From Operating Activities:
 Net income (loss) ...............................   $  (401,885)   $(1,408,626)
 Adjustments to reconcile net income (loss) to net
  cash provided (used) by operating activities:
    Depreciation and amortization ................       145,249        118,227
    Settlement of litigation .....................            --        433,212
    Reduction of accrued liabilities .............       (85,000)            --
    Changes in assets and liabilities:
     (Increase) Decrease in accounts receivable ..       (13,483)        31,695
     (Increase) Decrease in inventories ..........          (209)        53,698
     (Increase) Decrease in prepaid expenses
      and other ..................................        (9,433)        (2,932)
     (Increase) in deposits and other ............       (35,310)        (3,298)
     (Decrease) in accounts payable and
      accrued expenses ...........................      (487,114)      (168,687)
                                                     -----------    ----------- 
     Net Cash (Used) By Operating Activities .....      (887,185)      (946,711)
                                                     -----------    ----------- 
Cash Flows From Investing Activities:
 Capital expenditures ............................        (5,967)        (1,705)
 Increase in intangible assets ...................      (109,581)       (36,438)
 Increase in receivables from related entities ...         7,672         (3,693)
 Principal payments received on notes receivable .       578,399             --
                                                     -----------    -----------
     Net Cash Provided (Used) By Investing
      Activities .................................       470,523        (41,836)
                                                     -----------    -----------
Cash Flows From Financing Activities:
 Proceeds from  borrowing ........................     3,525,558      2,092,969
 Principal payments on notes payable .............    (3,106,396)    (1,181,719)
 Principal payments on accrued royalties .........        (2,500)       (40,203)
 Issuance of common stock upon exercise
  of Warrants ....................................            --        117,500
                                                     -----------    -----------
     Net Cash Provided By Financing Activities ...       416,662        988,547
                                                     -----------    -----------
     Net Increase (Decrease) in Cash and
      Cash Equivalents ...........................            --             --
     Cash and Cash Equivalents at Beginning
      of Period ..................................            --             --
                                                     -----------    -----------
     Cash and Cash Equivalents at End of Period ..   $        --    $        --
                                                     ===========    ===========
Supplemental Disclosure of Cash Flow
 Information:
  Cash paid during the period for:
    Interest .....................................   $    80,619    $    52,522
    Income taxes .................................            --             --

Supplemental Disclosure of Noncash
 Investing and Financing Activities:
   Conversion of Preferred Stock
    into Common Stock ............................   $   100,780    $   511,908
   Dividends payable on Series A
    Convertible Preferred Stock ..................        17,542         17,543
   Stock dividends paid on Series A
    Convertible Preferred Stock ..................         3,509          4,134
   Stock dividends paid on Redeemable
    Preferred Stock ..............................            --         71,409
   Issuance of Common Stock and Warrants
    in payment of loan costs .....................       235,950             --


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


                                      -4-


<PAGE>


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


1.   The  accompanying  financial  information  of the  Company is  prepared  in
     accordance with the rules prescribed for filing condensed interim financial
     statements and,  accordingly,  does not include all disclosures that may be
     necessary for complete  financial  statements  prepared in accordance  with
     generally accepted  accounting  principles.  The disclosures  presented are
     sufficient,  in  management's  opinion,  to make  the  interim  information
     presented not misleading.  All adjustments,  consisting of normal recurring
     adjustments,  which are necessary so as to make the interim information not
     misleading,  have been made. Results of operations for the six months ended
     August 31, 1997 are not  necessarily  indicative  of results of  operations
     that  may be  expected  for  the  year  ending  February  28,  1998.  It is
     recommended  that this  financial  information  be read  with the  complete
     financial statements included in the Company's Annual Report on Form 10-KSB
     for the year ended February 28, 1997  previously  filed with the Securities
     and Exchange Commission.


                                      -5-


<PAGE>


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

Three months ended August 31, 1997
as Compared to Three months ended August 31, 1996

     Net sales for the three  months  ended  August 31,  1997  ("Second  Quarter
Fiscal 1998") were $560,027, a 18.5% increase from net sales of $472,678 for the
three month period ended August 31, 1996 ("Second Quarter Fiscal 1997"). The net
sales  increase  during the Second Quarter Fiscal 1998 as compared to the Second
Quarter  Fiscal  1997 is the result of a decrease of $15,420 or 5.6% in surgical
product  sales from  $275,404 to  $259,984  offset by an increase of $102,769 or
52.1% in  electrotherapy  product sales from $197,274 to $300,043.  The net loss
for the Second Quarter  Fiscal 1998 was $256,599,  a decrease of $878,930 from a
net loss of $1,135,529  for the Second  Quarter Fiscal 1997. The decrease in net
loss is  primarily  due to the  increase  in net  sales  and  the  corresponding
increase in gross profit coupled with a one time $695,712 expense related to the
settlement  of  litigation  and  legal  expenses  in the  approximate  amount of
$100,000 which were incurred in connection with the Company's various litigation
proceedings during the Second Quarter Fiscal 1997.

Six months ended August 31, 1997
as Compared to Six months ended August 31, 1996

     Net sales for the six months  ended  August 31,  1997 ("Six  Months  Fiscal
1998") were  $1,209,567,  a 14.4%  increase from net sales of $1,057,631 for the
six months  ended  August 31, 1996 ("Six  Months  Fiscal  1997").  The net sales
increase  during the Six Months Fiscal 1998 as compared to the Six Months Fiscal
1997 is the result of an increase of $200,095 or 42.8% in electrotherapy product
sales from  $467,088 to $667,183  coupled  with a decrease of $48,159 or 8.2% in
surgical product sales from $590,543 to $542,384.  The increase in sales for the
electrotherapy  product line can be primarily  attributed  to the receipt of two
non-cancelable   purchase  orders  from  Henley  Healthcare  ("Henley")  in  the
approximate aggregate amount of $600,000.  During the Six Months Fiscal 1997 the
Company  had  approximately  $265,000  in sales to Henley.  Consistent  with the
Company's  efforts to increase sales, in August 1997, the Company signed a three
year $1,200,000  exclusive  manufacturing  agreement with Henley  appointing the
Company  as  the  sole   developer  and   manufacturer   of  Henley's   patented
SYNAPS/T.E.A.M. Analgesia unit.

     Since  the sale of the  wound  care  product  line in  December  1995,  the
Company's  acquisition search efforts have increased  significantly as the focus
remains in the identification and review of a number of candidates. In addition,
to help us grow through acquisitions,  in July 1997, the Company obtained a $2.5
million line of credit from NationsCredit Commercial Corporation,  A NationsBank
Company.

     Gross profit was  $624,731 or 51.6% of net sales for the Six Months  Fiscal
1998 as compared  to  $616,894  or 58.3% of net sales for the Six Months  Fiscal
1997.  The decrease in gross profit  percentage is primarily due to the increase
in electrotherapy  product sales. In general,  the  electrotherapy  product line
generates lower gross profits than the surgical product line.

     Selling,  general and  administrative  ("SG&A") expenses for the Six Months
Fiscal 1998 were $824,277, a 22.6% decrease from SG&A expenses of $1,064,292 for
the Six Months  Fiscal 1997.  The  decrease in SG&A  expenses for the Six Months
Fiscal 1998 as compared to the Six Months  Fiscal 1997 is primarily due to legal
expenses  incurred  during the Six Months  Fiscal  1997 which were not  repeated
during the Six Months  Fiscal  1998.  In  addition,  lower  SG&A  expenses  were
experienced  for the Six Months Fiscal 1998 due to the Company's  implementation
in June 1997 of a  restructuring  plan  involving a reduction  of  personnel,  a
Company wide reduction in salaries, and an overall cost containment program.

     Research and  development  ("R&D")  expenses for the Six Months Fiscal 1998
were $5,105,  a 80.7%  decrease  from R&D expenses of $26,500 for the Six Months
Fiscal  1997.  In Fiscal  1997,  the  Company R&D  efforts  were  focused on its
redesign of the TENS units resulting in increased quality and lower product cost
for the electrotherapy product line.


                                      -6-


<PAGE>


     Depreciation  and  amortization  ("D&A") expenses for the Six Months Fiscal
1998 were  $145,249,  a 22.9% increase from D&A expenses of $118,227 for the Six
Months Fiscal 1997.  During the Six Months Fiscal 1998,  D&A expenses  increased
due to the amortization of $127,500,  over a two year period and $108,000 over a
four year  period,  resulting  from the issuance of common stock and warrants in
payment of loan costs. See " - Liquidity and Capital Resources".

     Total other expense for the Six Months Fiscal 1998 was $51,985,  a decrease
of $68,804 from total other  expense of $120,789 for the Six Months Fiscal 1997.
The decrease in total other expense is primarily due to the reduction of $85,000
in accrued  liabilities  offset by an increase of $8,847 in net interest expense
resulting  primarily  from higher  loan  balances  and  banking  expenses to the
Company's primary lender.

     As a result of the  foregoing,  the net loss for the Six Months Fiscal 1998
was $401,885, a decrease of $1,006,741 from a net loss of $1,408,626 for the Six
Months  Fiscal 1997.  The decrease in net loss for the Six Months Fiscal 1998 as
compared to the Six Months  Fiscal 1997 is primarily due to the decrease in SG&A
expenses, a settlement expense in the amount of $695,712 incurred during the Six
Months Fiscal 1997 which was not repeated  during the Six Months Fiscal 1998 and
a decrease in total other expense as discussed above.

     Primary loss per share was $.50 for the Six Months  Fiscal 1998 as compared
to a primary  loss per  share of $2.09 for the Six  Months  Fiscal  1997.  Fully
diluted loss per share,  which assumes all dilutive  preferred share conversions
and the exercise of all dilutive  stock options and  warrants,  was $.50 for the
Six Months  Fiscal 1998 as compared to fully diluted loss of $2.09 per share for
the Six Months  Fiscal  1997.  The  primary and fully  diluted  income per share
computation  for the Six Months  Fiscal 1998  reflect  accrued  dividends on the
Series A Convertible Preferred Stock which were paid in September 1997.

LIQUIDITY AND CAPITAL RESOURCES

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

     As of August 31, 1997, the Company had net operating loss carry forwards of
approximately $6,500,000. 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 August 31, 1997 was $1,278,156 as compared
to  $1,066,176  at February 28, 1997.  The Company's  working  capital  position
increased by $211,980.

     On or about  November 20, 1996,  Tecnol  initiated  an  arbitration  action
against the Company before the American Arbitration Association. Tecnol asserted
claims  allegedly  arising out of Tecnol's  purchase  of the  Company's  medical
product  line in December  1995.  On March 12,  1997,  the  Company  settled the
arbitration  action initiated by Tecnol.  Under the settlement  agreement Tecnol
paid the Company $575,000 in  consideration  for the cancellation by the Company
of a $665,000  note due from  Tecnol and the  dismissal  with  prejudice  of the
arbitration action by both parties.

     On March 19,  1997,  the  Company  repaid  $575,000  against  the amount of
$740,000 in principal  and accrued  interest  owing under a $600,000  promissory
note issued to Halstead LLC  ("Halstead"),  a company  controlled  by Charles C.
Johnston ("Mr.  Johnston"),  a principal stockholder of the Company. This amount
was required to be paid by the Company upon the Company's negotiated  settlement
with Tecnol which resulted in Tecnol paying the Company  $575,000.  On that same
date, the Company issued Halstead a promissory  note in the principal  amount of
$165,000  bearing  12%  interest  per  annum due  December  1997.  The  $165,000
promissory note represents the remaining  principal  amount owed of $25,000 plus
the $140,000 in accrued interest under the $600,000 note. The promissory note is
personally guaranteed by Mr. Reiner.

     On March 20, 1997, the Company borrowed  $375,000 from J&C Resources,  Inc.
("J&C  Resources"),  a  company  controlled  by  Mr.  Johnston  evidenced  by  a
promissory note bearing 15% interest per annum due in March 1999. The promissory
note is personally  guaranteed by Mr. Reiner.  In connection with the financing,


                                      -7-


<PAGE>


the Company issued J&C Resources  50,000 shares of Common Stock and a warrant to
purchase up to 16,667 shares of its Common Stock  exercisable  at $.60 per share
at any time until March 17,  2001.  The  Company  also  entered  into a two year
consulting  agreement with J&C Resources in which the Company is required to pay
J&C Resources $50,000 per year for consulting services.

     In April 1997, the Company entered into a debt repayment agreement with Mr.
Reiner. The amounts owed by Mr. Reiner will be repaid at varying amounts through
April 2004.  In addition,  all amounts owed by Mr.  Reiner are extended to April
2004 and no  interest  will be charged  on the notes owed by Mr.  Reiner and the
Company will reimburse Mr. Reiner for certain income tax related considerations.
In June 1997, the Company  amended its debt repayment  agreement with Mr. Reiner
increasing  the repayment  amount for the next twelve months from  approximately
$24,000 to  $50,000.  Due to the  increase in  payments  from Mr.  Reiner to the
Company,  the notes and accounts  receivable from Mr. Reiner are being presented
as a long term asset  rather than a  reduction  of  stockholders'  equity in the
financial  statements as presented on the Company's Annual Report on Form 10-KSB
for the year ended  February 28, 1997  previously  filed with the Securities and
Exchange Commission.

     In May 1997, the Company  entered into a working  capital  credit  facility
agreement with Mr. Reiner  pursuant to which Mr. Reiner is providing the Company
with up to $200,000 in working  capital on an as needed basis.  Working  capital
advances are evidenced by demand promissory notes bearing 12% interest per annum
due the  earlier of (i) thirty (30)  calendar  days from the  advance;  (ii) the
closing of a minimum of $1,000,000  equity or debt financing by the Company;  or
(iii) Mr. Reiner's demand with a five day notice to the Company.  The promissory
notes are  subordinated to the Company's senior lender with a junior lien on all
assets of the Company.  In connection  with the financing,  the Company gave Mr.
Reiner the right to convert any portion of the outstanding  amount owed into the
Company's  Common Stock at 75% of the average  closing bid price during the five
(5) business days prior to the  conversion  as reported by Nasdaq.  In addition,
the Company  issued Mr.  Reiner a warrant to purchase up to 97,000 shares of its
common stock  exercisable  at $1.28 per share at any time until May 21, 2002. As
of October 10, 1997,  the  outstanding  balance on the loans from Mr. Reiner was
$30,000.

     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%. 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 August 31, 1997,  the  outstanding  balance on the Loan was $1,598,974 and
approximately $10,000 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.  In  consideration  for Mr.  Reiner
providing his personal  guarantee for the NationsCredit  Loan, on July 25, 1997,
the Company  issued to Mr. Reiner 80,000 shares of Common Stock and an option to
purchase up to 150,000 of its Common Stock exercisable at $1.25 per share at any
time until July 25, 2004.

     On August 22,  1997,  the Nasdaq Stock Market  received  approval  from the
Securities  and  Exchange  Commission  for the  proposed  changes to its listing
requirements.  These changes materially enhance the threshold criteria necessary
to qualify for listing on the Nasdaq  National  and  SmallCap  Markets.  The new
listing requirements for continued listing will become effective on February 23,
1998.   Currently  the  Company  does  not  meet  the  new  net  tangible/market
capitalization/net  income  requirements  for  continued  listing  on the Nasdaq
SmallCap  Market and no assurance  can be given that the Company will be able to
meet  such  requirement.  If the  Company  is  unable  to meet  the new  listing
requirements,  its  securities  will be  subject  to  delisting  from the Nasdaq
SmallCap Market.  Trading, if any, in the Company's  securities would thereafter
be  conducted  in the OTC Bulletin  Board which could  substantially  reduce the
markets for the Company's securities.

     The Company may make  additional  acquisitions  of companies,  divisions of
companies  or  products  in the  future.  Acquisitions  entail  numerous  risks,


                                      -8-


<PAGE>


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

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

     Except for the historical  information  contained  herein,  the matters set
forth in this report are  forward-looking  statements  within the meaning of the
"safe harbor"  provisions  of the Private  Securities  Litigation  Reform Act of
1995. These  forward-looking  statements are subject to risks and  uncertainties
that may cause  actual  results to differ  materially.  These risks are detailed
from time to time in the Company's  periodic  reports filed with the  Securities
and Exchange  Commission,  including the Company's Annual Report on Form 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.


                                      -9-


<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.     Exhibits

                Computation of Primary Earnings Per Share (Page 11)
                Computation of Fully Diluted Earnings Per Share (Page 12)
                Exhibit 27 - Financial Data Schedule

         B.     Reports on Form 8-K

                The Company filed a Form 8-K dated July 25, 1997 which  reported
                the  receipt of a line of credit from  NationsCredit  Commercial
                Funding Division of NationsCredit Commercial Corporation.


                                      -10-


<PAGE>

<TABLE>


                                                     SPARTA SURGICAL CORPORATION
                                              COMPUTATION OF PRIMARY EARNINGS PER SHARE

<CAPTION>
                                                                       Three Months Ended                    Six Months Ended
                                                                            August 31,                           August 31,
                                                                  -----------------------------       -----------------------------
                                                                      1997              1996              1997               1996
                                                                      ----              ----              ----               ----
<S>                                                               <C>               <C>               <C>               <C>
Shares outstanding at beginning of period ..................          833,089           733,921           764,249           641,138

Shares issued during the period
(weighted average) .........................................           34,943            14,252            78,319            77,960

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

Less shares assumed to have been purchased for
treasury with assumed proceeds of stock warrants
and options (weighted average) .............................               --                --                --                --
                                                                  -----------       -----------       -----------       -----------
Total Primary Shares .......................................          868,032           748,173           842,568           719,098
                                                                  ===========       ===========       ===========       ===========
Net Income (Loss) Applicable to Common Stockholders ........      $  (274,141)      $(1,224,480)      $  (422,936)      $(1,501,711)
                                                                  ===========       ===========       ===========       ===========
Net Income (Loss) Per Primary Share ........................      $      (.32)      $     (1.64)      $      (.50)      $     (2.09)
                                                                  ===========       ===========       ===========       ===========


                                                                -11-


</TABLE>

<PAGE>
<TABLE>


                                                     SPARTA SURGICAL CORPORATION
                                           COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE

<CAPTION>
                                                                       Three Months Ended                    Six Months Ended
                                                                            August 31,                           August 31,
                                                                  -----------------------------       -----------------------------
                                                                      1997              1996              1997               1996
                                                                      ----              ----              ----               ----
<S>                                                               <C>               <C>               <C>               <C>
Shares outstanding at beginning of period ..................          833,089           733,921           764,249           641,138

Shares issued during the period
(weighted average) .........................................           34,943            14,252            78,319            77,960

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

Less shares assumed to have been purchased for
treasury with assumed proceeds of stock warrants
and options (weighted average) .............................               --                --                --                --
                                                                  -----------       -----------       -----------       -----------
Total Fully Diluted Shares .................................          868,032           748,173           842,568           719,098
                                                                  ===========       ===========       ===========       ===========
Net Income (Loss) Applicable to Common Stockholders ........      $  (274,141)      $(1,224,480)      $  (422,936)      $(1,501,711)
                                                                  ===========       ===========       ===========       ===========
Net Income (Loss) Per Fully Diluted Share ..................      $      (.32)      $     (1.64)      $      (.50)      $     (2.09)
                                                                  ===========       ===========       ===========       ===========


                                                                -12-


</TABLE>

<PAGE>


                                   SIGNATURES


     In accordance  with the  requirements  of the Exchange Act, the  registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


Sparta Surgical Corporation



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


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


October 15, 1997


                                      -13-