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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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                                   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 May 31, 2001

                                       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        No  X.
    ----     -----

     As of August 31,2001,  11,654,159 shares of Common Stock,  82,533 shares of
Redeemable  Convertible  Preferred Stock,  27,818 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

                            Consolidated Balance
                            Sheet as of May 31, 2001                        2

                            Consolidated Statements of
                            Operations for the Three Months
                            Ended May 31, 2001 and 2000                     3

                            Consolidated Statements of
                            Cash Flows for the Three Months
                            Ended May 31, 2001 and 2000                     4

                            Notes to Consolidated Financial
                            Statements                                      5

               Item 2.      Management's Discussion and
                            Analysis of Financial Condition
                            and Results of Operations                    6 - 16

Part II.       Other Information and Signatures                         16 - 18













                                       1

<PAGE>
<TABLE>
<CAPTION>


                                      SPARTA SURGICAL CORPORATION
                                       CONSOLIDATED BALANCE SHEET
                                             May 31, 2001
                                              (Unaudited)


                                                     ASSETS
<S>                                                                                       <C>
Current Assets:
        Cash                                                                              $      1,000
        Accounts receivable, net of allowance for doubtful accounts of $42,000                 262,000
        Other receivables                                                                        3,000
        Inventories                                                                          2,400,000
        Other                                                                                   61,000
                                                                                          ------------

Total Current Assets                                                                         2,727,000
                                                                                          ------------

Property and equipment, at cost-net                                                            693,000
                                                                                          ------------

Other Assets:
       Intangible assets, net                                                                  680,000
       Other                                                                                    20,000
                                                                                          ------------

Total Other Assets                                                                             700,000

                                                                                          ------------

Total Assets                                                                                 4,120,000
                                                                                          ============

                                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
       Current portion of long-term debt                                                  $  2,468,000
       Notes payable                                                                           150,000
       Accounts payable - trade                                                                992,000
       Accrued expenses                                                                        107,000
                                                                                          ------------

Total Current Liabilities                                                                    3,717,000
                                                                                          ------------

Long-term debt, net of current portion above                                                    42,000
                                                                                          ------------

Stockholders' equity:
       Preferred stock: $ 4.00 par value, 2,000,000 shares authorized;
            1992 non-cumulative convertible redeemable preferred stock: 165,000 shares
            authorized, 82,533 shares issued and outstanding                                   330,000
            Series A cumulative convertible redeemable preferred stock: 30,000 shares
            authorized, 27,818 shares issued and outstanding                                   111,000
            Series AA cumulative convertible redeemable preferred stock: 875,000 shares
            authorized, none issued and outstanding                                               --
       Common stock: $0.002 par value, 25,000,000 shares authorized, 9,644,225
       shares issued and outstanding                                                            15,000
       Additional paid in capital                                                           14,209,000
       Accumulated deficit                                                                 (14,304,000)
                                                                                          ------------

Total Stockholders' Equity                                                                     361,000
                                                                                          ------------

Total Liabilities and Stockholders' Equity                                                $  4,120,000
                                                                                          ============


See accompanying notes to consolidated financial statements.

</TABLE>


                                       2
<PAGE>
<TABLE>
<CAPTION>

                                             SPARTA SURGICAL CORPORATION
                                        CONSOLIDATED STATEMENTS OF OPERATIONS
                                                     (Unaudited)

                                                                                              Three Months Ended
                                                                                                 May 31, 2001
                                                                                         --------------------------
                                                                                             2001           2000
                                                                                         -----------    -----------
<S>                                                                                      <C>            <C>
Net sales                                                                                $   667,000    $   905,000
Cost of sales                                                                                259,000        486,000
                                                                                         -----------    -----------

Gross Profit                                                                                 408,000        419,000


Selling, general and administrative expenses                                                 466,000        424,000
Research, development and engineering                                                        101,000        117,000
Depreciation and amortization expenses                                                       119,000         56,000
                                                                                         -----------    -----------

Loss From Operations                                                                        (278,000)      (178,000)
                                                                                         -----------    -----------

Other Income (Expense):
Interest expense                                                                             (94,000)       (80,000)
                                                                                         -----------    -----------

Total Other Income (Expense)                                                                 (94,000)       (80,000)
                                                                                         -----------    -----------

Net Loss                                                                                    (372,000)      (258,000)

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

Net Loss Applicable to Common Stockholders                                               $  (376,000)   $  (262,000)
                                                                                         ===========    ===========

Weighted average shares used to calculate basic and diluted net loss per common share      7,735,943      6,309,309
                                                                                         ===========    ===========

Basic and diluted net loss per common share                                              $     (0.05)   $     (0.04)
                                                                                         ===========    ===========

See accompanying notes to consolidated financial statements

</TABLE>


                                                   3

<PAGE>
<TABLE>
<CAPTION>


                                       SPARTA SURGICAL CORPORATION
                                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                                               (Unaudited)
                                                                                    Three Months Ended
                                                                                      May 31, 2001
                                                                              --------------------------
                                                                                  2001          2000
                                                                              -----------    -----------
<S>                                                                           <C>            <C>
Cash Flows From Operating Activities:
          Net loss                                                            $  (372,000)   $  (258,000)
          Adjustment to reconcile net loss to net cash (used) by
          operating activities:
                Depreciation and amortization                                     119,000         56,000
                Changes in operating assets and liabilities:
                        Accounts receivable                                       154,000        (39,000)
                        Inventories                                               (23,000)       (42,000)
                        Other assets                                              (18,000)       270,000
                        Account payable and accrued expenses                      148,000       (469,000)
                                                                              -----------    -----------

                           Net Cash Provided (Used) By Operating Activities         8,000       (482,000)
                                                                              -----------    -----------

Cash Flows From Investing Activities:
          Capital expenditures                                                       --           (9,000)
          Increase in intangible assets                                           (20,000)          --
                                                                              -----------    -----------

                        Net Cash (Used) by Investing Activities                   (20,000)        (9,000)
                                                                              -----------    -----------

Cash Flows From Financing Activities:
          Proceeds from sale of common stock                                       10,000        381,000
          Borrowing (repayment) on lines of credit, net                            11,000      1,156,000
          Principal payments on long-term debt                                     (8,000)    (1,069,000)
                                                                              -----------    -----------

                        Net Cash Provided By Financing Activities                  13,000        468,000
                                                                              -----------    -----------

                        Net Change In Cash and Cash Equivalents                     1,000        (23,000)

Cash and Cash Equivalents at Beginning of Period                                     --           61,000
                                                                              -----------    -----------

Cash and Cash Equivalents at End of Period                                    $     1,000    $    38,000
                                                                              ===========    ===========

Supplemental Disclosure of Cash Flow Information:
-------------------------------------------------
          Cash paid during the period for:
                Interest                                                      $    94,000    $    69,000
                Income taxes                                                         --             --

Supplemental Disclosure of Non-Cash Investing and Financing Activities:
----------------------------------------------------------------------
          Dividends paid on Series A convertible redeemable preferred stock        24,000          4,000


</TABLE>


                                        4

<PAGE>


                           SPARTA SURGICAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1.   The accompanying condensed consolidated financial statements of the Company
     as of May 31,  2001 and for the three  months  ended May 31,  2001 and 2000
     have  been  prepared  on the same  basis as the  annual  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, 2001, previously filed with the
     Securities and Exchange Commission.

2.   Basic  income  (loss) per share is based upon  weighted  average  number of
     common  shares  outstanding  during the period.  Diluted  income (loss) per
     share is computed  using the weighted  average  number of common shares and
     potentially dilutive securities outstanding during the period.  Potentially
     dilutive   securities  include  incremental  common  shares  issuable  upon
     conversion of convertible  securities  (using the if-converted  method) and
     shares  issuable upon the exercise of stock options and warrants (using the
     treasury stock method).  Potentially  dilutive securities are excluded from
     the  computation if their effect is  anti-dilutive.  Contingently  issuable
     shares  are  included  in  diluted  earnings  per  share  when the  related
     conditions are satisfied. Potentially dilutive securities, excluded because
     of their anti-dilutive  effect, are 4,124,873 and 4,879,124 at May 31, 2001
     and  May 31,  2000,  respectively.  The  following  table  sets  forth  the
     computation of basic and diluted net income (loss) per common share:
<TABLE>
<CAPTION>

                                                                    Three Months Ended
                                                                      May 31, 2001
                                                             ----------------------------
                                                                2001              2000
                                                             -----------      -----------
     <S>                                                     <C>              <C>
     Numerator:
     Net income (loss) applicable to common stockholders     $  (376,000)     $  (262,000)

     Denominator:
     Weighted average common shares outstanding
        during the period                                      9,638,929        8,212,295
     Less shares subject to escrow agreement                  (1,902,986)      (1,902,986)
                                                             -----------      -----------
     Shares used in computing basic income (loss               7,735.943        6,309,309
          per common share
     Dilutive effect of conversion of preferred stock               --               --
     Dilutive effect of options and warrants                        --               --
     Dilutive effect of convertible debt                            --               --
                                                             -----------      -----------
     Shares used in computing diluted income
         (loss) per common share                               7,735,943        6,309,309
                                                             ===========      ===========
</TABLE>

                                       5

<PAGE>

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

     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 our periodic reports filed with the Securities and Exchange
Commission,  including  our 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. We disclaim any intent or obligation to update these
forward-looking statements.

     These statements  relate to future events in future  financial  performance
and involve known and unknown risks,  uncertainties  and other factor's that may
cause our or our industry's  actual  results,  performance or achievements to be
materially  different  form these  expressed  or implied by any  forward-looking
statements.  All of  these  matters  are  difficult  or  impossible  to  predict
accurately and many of which may be beyond our control. Although we believe that
the assumptions underlying our forward-looking statements are reasonable, any of
the assumptions could be inaccurate therefore there can be no assurance that the
forward-looking  statements  included  in this  form  10-QSB  will  prove  to be
accurate.  The  following  discussions  should be read in  conjunction  with the
Financial Statements and notes thereto, appearing elsewhere herein.

Risk Factors Affecting Future Operating Results

     The following important factors,  among others,  could cause actual results
to differ materially from those contained in forward-looking  statements made in
this Form 10-QSB,  or presented  elsewhere by  management  from time to time. We
wish to caution stockholders and investors that the following important factors,
among others, in some cases have affected,  and in the future could affect,  our
actual  results and could  cause our actual  results to differ  materially  from
those  expressed in any  forward-looking  statements  made by us. The statements
under this caption are  intended to serve as  cautionary  statements  within the
scope  of  the  Private  Securities  Litigation  Reformation  Act of  1995.  The
following  information is not intended to limit in any way the  characterization
of other statements or information under other caption as cautionary  statements
for such  purpose.  These factors  could have a material  adverse  effect on our
business, operating results and financial condition.

         We are engaged in the development and manufacturing of  electrosurgical
and microsurgical  instruments and accessories and electromedical  equipment and
supplies, utilizing proprietary technologies to satisfy unmet medical needs cost
effectively.  Our results of operations vary significantly from year to year and
from quarter to quarter,  and in the past have depended on, among other factors,
developing  new products,  demand for our products and  significantly  depend on
availability  of materials  from our suppliers  and  dependence on our customers
including hospital,  physicians,  medical distributors and OEM accounts. We have
incurred  net  losses  past  years and can't  assure  future  profitability.  At
February 28, 2001 our accumulated deficit was approximately $13,928,000.

                                       6
<PAGE>

     There can be no assurance that we (i) can predict the market  acceptance of
our  products,  (ii) will not face intense  competition  and if we are unable to
compete  effectively,  we may be  unable  to  maintain  or  expand  the  base of
purchasers for our devices and we may lose market share or be required to reduce
prices,  (iii) will be able to obtain  patent  protection  for our  products and
preserve  our trade  secrets  and  safeguard  the  security  and  privacy of our
confidential  technology,  (iv) will  continue  our  operations,  as we may need
additional  financing  and such  financing may not be available as we are highly
leveraged and may be unable to service our debt, (v) will be successful  because
we are subject to stringent and continuing  applicable federal  regulations that
there could be changes in the political,  economical,  or regulatory  healthcare
and may be subject to product liability  claims,  (vi) will be able to retain or
hire key personnel, and (vii) will not loose a key manufacturer,  distributor or
a customer  which  could  result in a  significant  reduction  in the revenue we
generate,  (viii) can anticipate unexpected events and if any of these events of
a significant magnitude were to occur, the extent of our losses could exceed the
amount of insurance we carry to compensate us for any losses.

     We 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  we  have   encountered   with  previous
acquisitions. Future acquisitions by us 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 our business,  operating results
and financial condition.

     In recent years we have experienced  losses from operations and continue to
suffer from a  deficiency  in  available  working  capital.  We had a deficit in
working capital of $990,000 as of May 31, 2001.  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.  We may
need to raise  additional  funds in order to continue our business plan, to fund
more  aggressive  marketing  programs  or to acquire  complementary  businesses,
technologies or services.  Any required additional funding may be unavailable on
terms  satisfactory  to us, or at all. If we raise  additional  funds by issuing
equity securities,  we may experience  significant  dilution and such securities
may have rights senior to those of the holders of common stock.

     Our  ability to meet our  planned  growth  will  require  substantial  cash
resources.  The  timing  and  amount of  future  capital  requirements  may vary
significantly  depending on numerous factors  including  regulatory,  technical,
competitive and other developments in the healthcare industry.  Any expansion of
our  operations  will  place  a  significant  strain  on  management,  financial
controls,  operating system,  personnel and other resources.  The success of our
products  depends  on  several  uncertain  events and  factors,  including:  the
effectiveness  of our  marketing  strategy and efforts,  our product and service
differentiation and quality, the extent of our network coverage,  our ability to
provide  timely,  effective  customer  support,  our  distribution  and  pricing
strategies,  as compared to our competitors,  our failure to adequately  protect
our proprietary rights may harm our competitive position.

                                       7
<PAGE>

Further risk particular to our Company are:


     We have incurred significant  operating losses and may not be profitable in
the future.

     We have reported net losses of  $2,308,000  and  $1,744,000  for the fiscal
years ended  February 29, 2000 and February 28, 2001  respectively  and $372,000
for the three months ended May 31,  2001.  We cannot  assure that we will report
profits in the future.


     Our operations  continue to be cash flow negative,  and we have an $990,000
deficit in working capital.

     Our 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  products,  as well as our  distribution  and
marketing efforts. In order to continue our current level of operations, it will
be necessary for us to obtain  additional  working capital,  from either debt or
equity  sources.  Our  principal  working  capital  needs are to fund  inventory
purchases and accounts receivable.  There can be no assurance we will be able to
obtain this financing on terms satisfactory to us.


     We face intense competition which could reduce our product prices.

     The medical products industry is intensely  competitive.  We compete in all
aspect  of  our  business  with  numerous  medical  products  manufacturers  and
distributors, many of whom have substantially greater market share and financial
and other resources than we do.  Competition with these companies could cause us
to reduce our product prices or the amount of products we sell.


     It is costly for us to comply with government regulations.

     Our  operations  are regulated by the Federal Food and Drug  Administrative
and other agencies in California.  Compliance with medical  product  regulations
are costly and time  consuming,  and if we do not remain in compliance we may be
unable to sell some or all of our products.


     We depend  upon  others to  manufacture  many of our  products  or  product
components on a timely and cost-effective basis.

     From time to time,  we have  experienced  difficulties  in  obtaining  some
products or components, and there can be no assurance that our suppliers will be
able to meet our product  needs on a timely  basis.  A lack of  availability  of
components  or products  could cause  production  delays,  increase  our product
costs,  affect our quality  control  efforts and  interfere  with our ability to
maintain production and delivery schedules.


                                       8
<PAGE>

     We depend upon our personnel.

     Our ability to manufacture and market our medical products depends upon our
ability to attract,  hire and retain qualified  personnel.  Competition for this
personnel  is  intense,  and there can be no  assurance  that we will be able to
attract and retain such  personnel.  We are also  dependent upon the services of
Thomas F. Reiner, our Chairman,  Chief Executive Officer and President. The loss
of Mr. Reiner's services would have a material adverse effect on our business.


     We face risks of reduced  revenue  and  increased  administrative  expenses
which might result from health care reform.

     Legislative proposals continue to be introduced or proposed in Congress and
in state  legislature  that would effect major changes in the health care system
nationally  and on the state level.  Among the  proposals  are cost  controls on
hospitals,  changes in health insurance  coverages,  reductions in reimbursement
for medical treatments and the creation of government health insurance plans. It
is not clear what  effect such  proposals  would have on our  business.  Certain
proposals,  such as cutback in medicare and Medicaid  programs,  containment  of
health  care  costs  and   permitting   states   greater   flexibility   in  the
administration of Medicaid,  could reduce our revenues or increase our costs. In
addition, concern about proposed reform measures and their potential effects has
contributed  to the  volatility  of stock prices of companies in health care and
related industries and may similarly affect the price of our common stock.


     Shares of our  Common  Stock  which are  eligible  for  future  sale by our
stockholders may decrease the price of our common stock.

     As of  August  31,  2001,  we had  11,654,159  shares of our  common  stock
outstanding. If holders of our securities sell substantial amounts of our common
stock,  the  market  price  of  our  common  stock  could  decrease.  We  have a
significant  number  of  stock  options,  warrants  and  convertible  securities
outstanding,  which could  significantly  depress our common stock price if they
were exercised and sold.

     As of February  28,  2001,  we have  outstanding  options  and  warrants to
purchase approximately 4,124,873 shares of our common stock and other securities
convertible into approximately  4,124,873 shares of common stock. The holders of
these  securities  may  exercise  or  convert  them at any time at  exercise  or
conversion  price  ranging  from $.22 per share to $13.50  per  share.  Although
restrictions  under federal  securities  laws limit the ability of the shares of
our common stock issuable upon exercise or conversion of these  securities to be
resold in the public market upon issuance,  these  restrictions may not apply or
may only apply for a period of one year from the date on which these  securities
are exercised or converted.  The sale of shares  underlying these stock options,
warrants and convertible securities could significantly depress the common stock
market price.

                                       9
<PAGE>

     There is no significant trading market for our common stock.

     Our common  stock is not  eligible  for trading on any national or regional
exchange.  Our common stock is traded on a limited basis on the non NASDAQ Other
OTC (Pink Sheet unqualified) pursuant to Rule 15c2-11 of the Securities Exchange
Act of 1934. This market tends to be highly  illiquid,  in part because there is
not a  national  quotation  system by which  potential  investors  can trace the
market price of shares  except  through  information  received or generated by a
limited number of  broker-dealers  that make a market in that particular  stock.
There is a greater chance of market  volatility for securities that trade on the
Pink  Sheets as  opposed to a  national  exchange  or  quotation  systems.  This
volatility may be caused by a variety of factors, including:

     o    the lack of readily available price quotations;
     o    the  absence of  consistent  administrative  supervision  of "bid" and
          "ask" quotations;
     o    lower trading volume;
     o    and market conditions.


     Because  our  common  stock is  classified  as "penny  stock",  trading  is
limited, and the common stock price could decline.

     Because our common stock falls under the  definition of "penny  stock," the
trading in our common stock is limited  because  broker-dealers  are required to
provide their  customers  with  disclosure  documents  prior to allowing them to
participate  in  transactions  involving  our  common  stock.  These  disclosure
requirements  are  burdensome to  broker-dealers  and may  discourage  them from
allowing their  customers to participate  in  transactions  involving our common
stock.

     "Penny  stocks' are equity  securities  with a market price below $5.00 per
share other than a security that is registered on a national exchange;  included
for quotation in the NASDAQ system;  or whose issuer has set tangible  assets of
more than $2,000,000 and has been in continuous operation for greater than three
years.  Issuers who have been in  operation  less than three years must have net
tangible assets of at least $5,000,000.

     Rules  promulgated by the Securities and Exchange  Commission under Section
15(g) of the Exchange Act require  broker-dealers  engaging in  transactions  in
"penny  stocks," to first provide to their customers a series of disclosures and
documents including:

     o    a standard risk disclosure document  identifying the risks inherent in
          investment in "penny stocks;
     o    all compensation  received by the broker-dealer in connection with the
          transaction;
     o    current quotation prices and other relevant market data; and,
     o    monthly  account  statements  reflection  the fair market value of the
          securities

     In addition,  these rules require that a broker-dealer obtain financial and
other information from a customer,  determine that transactions in "penny stock"
are suitable for such customer and deliver a written  statement to such customer
setting forth the basis for this determination.



                                       10
<PAGE>

     In addition,  under the Exchange Act, and the regulations  thereunder,  any
person engaged in a  distribution  of shares of our common stock offered by this
prospectus  may not  simultaneously  engage in  market  making  activities  with
respect to the common stock during the applicable "cooling off" periods prior to
the commencement of this distribution.

     Our preferred  stock and status as a Delaware  corporation may make a third
party acquisition of our company more difficult.

     Our certificate of incorporation authorizes our Board of Directors to issue
up to  2,000,000  shares  of  preferred  stock  having  such  rights  as  may be
designated  by our  Board  of  Directors,  without  stockholder  approval.  This
issuance of preferred  stock could inhibit a change in control by making it more
difficult to acquire the majority of our voting stock. In addition, the Delaware
General Corporation law restricts certain business  combinations with interested
stockholders.  This statute may have the effect of  inhibiting a  non-negotiated
merger or other business combination.


     We do not anticipate paying dividends

     We have not paid any cash dividends on our common stock since our inception
and we do not anticipate  paying cash dividends in the foreseeable  future.  Any
dividends  which we may pay in the future will be at the discretion of our Board
of Directors and will depend on our future earnings,  any applicable  regulatory
considerations,  our financial  requirements  and other similarly  unpredictable
factors.  For the  foreseeable  future,  we  anticipate  that we will retain any
earnings we may generate from our operations to finance and develop our growth.


RESULTS OF OPERATIONS

Three Months Ended May 31, 2001
As Compared to Three Months Ended May 31, 2000

     Net sales for the three months ended May 31, 2001  ("First  Quarter  Fiscal
2002") were $667,000, a decrease of $238,000, from net sales of $905,000 for the
three months ended May 31, 2000 ("First  Quarter Fiscal 2001").  The decrease in
net sales during the First Quarter  Fiscal 2002 as compared to the First Quarter
Fiscal 2001 is primarily  attributed to, (i) insufficient working capital as our
bank arbitrarily  stopped advancing under our credit facility as it alleged that
we were in default under our Amended  Security and Loan Agreement and (ii) since
we rely heavily on outside  suppliers for our components of our products and due
to our slow payments to suppliers, as a result of the bank's capricious actions,
we experienced  significant delays from some of our key suppliers and therefore,
we were unable to process some of the open orders for  production  and shipments
to our  customers.  We have been  aggressively  seeking out and  qualifying  new
suppliers in order to improve delivery of our components.

     Gross profit was $408,000 or 61% of net sales for the First Quarter  Fiscal
2002 as compared to  $419,000 or 46% of net sales for the First  Quarter  Fiscal
2001.  The increase in gross profit is primarily due to the improved  production
costs,  general price  increases and higher  margins  generated from some of our
international and OEM accounts as a result of our ISO/CE Certification.

                                       11
<PAGE>

     Selling, general and administrative ("SG&A") expenses for the First Quarter
Fiscal 2002 were $466,000, an increase of $42,000 from SG&A expenses of $424,000
for the First Quarter  Fiscal 2001.  The increase in SG&A expenses for the First
Quarter  Fiscal 2002 as compared to the First  Quarter  Fiscal 2001 is primarily
attributed to the additional legal expenses incurred in connection with our suit
against the bank,  quality  assurance audit  compliance and reissuance of ISO/CE
Certification, recruiting expenses and finance costs relating to our debt/equity
financing transactions.

     Research,  Development  and  Engineering  ("R&D")  expenses  for the  First
Quarter  Fiscal 2002 were  $101,000 as compared to $117,000 in the First Quarter
Fiscal 2001.  The  decrease of $16,000  from R&D expenses for the First  Quarter
Fiscal  2002,  as  compared  to the First  Quarter  Fiscal  2001,  is  primarily
attributed to the completion of the MEESA electrosurgical  project and reduction
of engineering expenses.

     Depreciation and Amortization ("D&A") expenses for the First Quarter Fiscal
2002 were $119,000 as compared to $56,000 in the First Quarter  Fiscal 2001. The
increase  of  $63,000  in D&A  expenses  for the First  Quarter  Fiscal  2002 as
compared  to the First  Quarter  Fiscal  2001 is in  connection  with  increased
amortization  expenses  of  certain  non-compete  fees  relating  to the  former
shareholder of Olsen.

     Net loss for the First  Quarter  Fiscal 2002 was  $372,000,  an increase of
$114,000 from a net loss of $258,000 for the First Quarter  Fiscal 2001. The net
loss for the First  Quarter  Fiscal  2002 as  compared  to net loss in the First
Quarter Fiscal 2001 is primarily  attributed to the above reasons, in particular
to the increased  amortization  expenses of $63,000  relating to the non-compete
agreement.

Liquidity and Capital Resources

     Since  inception,  we  have  been  undercapitalized  and  have  experienced
financial  difficulties.  Our  primary  sources  of  working  capital  have been
revenues  from  operations,  bank and private  party loans and proceeds from the
sale of securities.  Many of the bank and private party loans and certain of our
other obligations have required personal  guarantees from Mr. Reiner,  for which
he has been  compensated  by us. In addition,  from time to time, Mr. Reiner has
provided  us with the  working  capital  in order to  continue  to  operate  our
business. In recent years, we have experienced losses from operations and suffer
from a deficiency in available  working capital amounting to $990,000 at May 31,
2001. In addition our bank credit facility is the subject of pending litigation.
Revenues from existing  product lines have  historically  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 and debt offerings. Management also intends to continue to pursue
viable acquisition candidates. There can be no assurance that we will be able to
complete planned debt or equity offerings or targeted acquisitions. We will need
to generate cash flows from operations and/or raise additional funds in order to
maintain operation at current levels.

                                       12
<PAGE>

     Since inception,  our primary sources of working capital have been revenues
from  operations,  bank and private  party loans and  proceeds  from the sale of
securities.  At February  28,  2001,  we had federal  net  operating  loss carry
forwards of  approximately  $11,200,000  which will expire from 2007 to 2021. We
also had $2,300,000 of state net operating loss carry forwards for tax reporting
purposes  which will  expire  from 2002 to 2006.  Our net  operating  loss carry
forwards, if not utilized, will expire at various dates through the year 2019.

     Our working  capital at February  28,  2001 was  ($744,000)  as compared to
$1,633,000   at  February   29,  2000,   a  decrease  of   $2,3770,000   due  to
reclassification of (i) our long term debt to short term debt as a result of the
alleged default on our loan in connection with the suit instituted by our lender
against us, and (ii) Mr.  Reiner's  term debt which is due  December  2001.  Our
working capital at May 31, 2001 was ($990,000).

     Our current operations continue to be cash flow negative, further straining
our working capital  resources.  Our 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 market capabilities.  In order to continue our current level of
operations,  it will be necessary for us to obtain  additional  working capital,
from  either  debt or equity  sources.  If we are  unable  to obtain  additional
working  capital,  if may be necessary for us to  restructure  our operations to
reduce our ongoing expenditures. Our principal capital requirements have been to
fund working capital needs to support  officers'  salaries,  internal growth for
acquisition 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 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  management   monitors  the   creditworthiness  of  its
customers,  management cannot assume that we will not incur some collection loss
on customer accounts receivables or loss in customer base in the future.

     We rely on outside suppliers for many components of our products. From time
to time we have experienced  difficulties in obtaining some components and there
can be no  assurance  that our  manufacturing  sources  will be able to meet our
product needs on a timely basis. At present we obtain our  electromedical  units
and certain of our surgical disposable devices from single sources.  The lack of
availability  of these and other  products from its current  supplier due to our
current  operations being cash flow negative or for any other reasons would have
a material adverse effect on our operations.

     If we issue additional securities to raise funds, these securities may have
rights,  preferences  or  privileges  senior to that of the rights of our Common
Stock and our Stockholders  may experience  significant  dilution.  We cannot be
certain that  additional  financing  will be available to us on favorable  terms
when  required,  or at all. Our operating  results are volatile and difficult to
predict,  and if we fail to meet the  expectations  of investors  or  securities
analysts, the market price of our stock would likely decline significantly.


                                       13
<PAGE>

     We 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  we  have   encountered   with  previous
acquisitions.  Further  acquisitions  by us 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 an  acquisition  or  financing
activities could result in additional expenses to the operation of the business.
These factors could have a material  adverse  effect on our business,  operating
results and financial condition.

     On March 6, 2001, we completed our equity and debt  financing  from a group
of  investors.  The  equity  financing  consisted  of the  sale  of our  484,034
restricted  shares  of Common  Stock.  In  addition,  we also  completed  a debt
financing  in the amount of $150,000  ("Note").  The Note is at 8% interest  per
annum,  and is due and payable on August 20, 2001,  and at our option,  the Note
can be extended for an  additional  six months.  On August 20, 2001, we extended
the Note until December 20, 2001. On October 11, 2001, we paid the Note in full.

     On March 20, 2000, Bank of America  Commercial  provided us with an amended
24-month Revolving Line of Credit of up to $2,500,000 (the "Loan"). We agreed to
pay Bank of America  Commercial  interest on the average  outstanding  principal
amount of the Loan at a per annum rate of prime plus 3%. The Loan is advanced to
us based on a percentage of eligible  assets and is secured by a first  position
security  interest on all our assets.  As of February 28, 2001, the  outstanding
balance on the Loan was  $1,753,000.  The Loan is being used to provide  working
capital for current operations. In connection with the financing, we issued Bank
of America  Commercial  a warrant to purchase up to 10,000  shares of our Common
Stock  exercisable at $1.90 per share at any time until March 20, 2003. The bank
has called the loan (See Item #1 - Legal  Proceedings).  On  October  10,  2001,
Sparta Olsen Electrosurgical,  Inc.("Sparta Olsen") a wholly-owned subsidiary of
Sparta Surgical  Corporation  completed the sale of substantially all the assets
of Sparta Olsen  business  (the  "Sale"),  including  inventory,  machinery  and
equipment and all intangible assets (excluding cash and accounts receivable) for
the  amount of  $1,815,528  in cash to  Kentucky  Packaging  Service  LP, DBA Q2
Medical ("Q2 Medical") and at the same time entered into a Transition  Agreement
whereby Q2 Medical agreed to pay Sparta Olsen approximately $70,830 to assist in
the transfer of the business.

In connection with the Sale,  Sparta Olsen paid to Banc of America  ("BofA") all
amounts required pursuant to a Settlement Agreement between Sparta and BofA, and
BofA released all security interests in all of our assets, and also released the
personal  guarantee of Thomas F. Reiner,  our  Chairman,  President and CEO. The
Settlement  Agreement also contained  customary  releases and forever discharges
each  other from any and all claims  and  demands of every kind and  nature.  In
addition,  BofA and Sparta Olsen dismissed  lawsuits they have initiated against
one another.


     On May 23, 1997, we entered into a $200,000 Working Capital Credit Facility
("Reiner  Facility")  with Thomas F. Reiner and his assignee and we subsequently
amended  the Reiner  Facility  on August 2, 2001.  Under the terms of the Reiner
Facility,  we are able to draw on the credit  facility  upon the sole option and
approval of Mr. Reiner.  The Reiner Facility has a subordinated  senior security
interest to our lender. The Reiner Facility has a maximum credit facility amount
of  $700,000  and  interest  is at 14% per annum,  and is payable  monthly.  The
borrowings  under the Reiner  Facility  is used for  working  capital  including
payroll, inventory,  purchases and rent payments. The Reiner Facility expires on
December  21,  2001,  and shall be due and payable on demand upon the earlier of
(i) December 21, 2001, or (ii) upon demand by Mr. Reiner and his assignee with a
five day  notice to the  Company,  or (iii) if an order is  entered  for  relief
against  our  Company or  declaring  our  Company  insolvent,  or if the Company
voluntarily files for bankruptcy. The Reiner Facility is convertible at any time
at the option of Mr.  Reiner and his  assignee  into  shares of Common  Stock at
$0.16 per share  subject to  adjustments  as defined  under the  Amended  Reiner
Facility dated August 2, 2001. At May 31, 2001, the Reiner Facility loan balance
is $668,619.

                                       14
<PAGE>

     On August 17, 2001, we appointed D.H. Blair Investment  Banking Corp ("D.H.
Blair") to act as  non-exclusive  financial  advisor  and  investment  banker in
connection with (i) advising us in negotiating the  restructuring of our debt to
Bank of  America;  and/or (ii)  introducing  us and our  management  to analyst,
bankers,  and brokers in order to  communicate  our  business to the Wall Street
community;  and/or (iii) any  financing for us which may be arranged or provided
by a party introduced to us by D.H. Blair. As an inducement to Blair's providing
these services,  we issued to D.H. Blair a Warrant to purchase  3,000,000 shares
of our common  stock,  at an exercise  price of $0.15 per share,  which  Warrant
shall contain  antidulition  provisions,  exercisable for a five-year period and
shall  provide  for two  demand  registration  rights  and  limited  "piggyback"
registration  rights with respect to the shares  underlying the Warrant.  In the
event the financing with D.H. Blair does not close, then the number of shares of
the  Warrant to  purchase  common  stock  shall be  reduced  from  3,000,000  to
1,500,000.

     As a result,  we entered  into a Term Sheet with D.H.  Blair,  whereby D.H.
Blair will (a) loan $500,000 to us in the form of a senior  secured Note and (b)
purchase from us for $500,000,  (i) 5,000,000  shares of our common stock,  (ii)
warrant to purchase 5,000,000 shares of our common stock at $0.10 per share. The
Note is a five-year  term  interest at 10% per annum equal annual  principal and
interest payments and payable beginning the first anniversary of the date of the
Note and accrued interest thereon,  then the Note shall be repaid at the closing
of the financing without any prepayment penalties or fees to us.

     Under the Term Sheet, the closing of this transaction is conditioned  upon:
(i) our completing not less than $1,350,000 under the current private  placement
memorandum,  (ii) our entering into a Settlement  Agreement with Bank of America
acceptable  to D.H.  Blair,  (iii) our  becoming a reporting  company as defined
under the  Securities Act of 1933 and being current in our filings with the SEC,
(iv) other  conditions  relating to restriction of issuing  additional  options,
except  for  acquisition,  merger  and (v) our  executing  letters  of intent to
acquire certain businesses on terms acceptable to D.H. Blair.

     Pursuant to the June 17, 2001  Private  Placement  Memorandum,  East Garden
Realty,  LLC ("East Garden")  subscribed to purchase  1,666,667 shares of Common
Stock for $250,000.  Subject to the  completion  of the payment  schedule of the
shares purchased by East Garden, (i) the Subscription Agreement provides that in
the event our  shares of Common  Stock are not  trading at $0.35 per share in 12
months  from the date of  subscription,  than we agree to provide to East Garden
the difference from $0.15 per share to $0.35 per share, at our sole  discretion,
additional shares or cash will be provided to the subscriber, (ii) for providing
advisory  services  and other  conditions,  we also  greed to sell up to 125,000
shares of common stock at $0.02 per share to East  Garden,  (iii) we also agreed
to use best efforts to file a  registration  statement  covering  the  purchased
shares,  providing it is no later than 90 days after receipt of full payment for
the shares purchased.  Providing only if the full payment of $250,000 is made by
East Garden and if the  registration  statement  has not been filed by such 90th
day,  then we will be  required  to issue on the 91st day,  and  every  30th day
thereafter   through  the  271st  day,  an  additional   83,334  shares  of  the
registration  statement  has not been filed by such date (Penalty  Shares).  The
total number of Penalty Shares in the registration  statement will be no greater
than 500,000 shares. All additional  shares,  including Penalty Shares will only
be issued if East Garden has paid in full $250,000 for the purchase of 1,666,667
shares of Common  Stock.  The Penalty  Shares,  if any,  will be included in the
registration  statement filing. Mr. Reiner,  Chairman of the Board,  executed an
Irrevocable  Voting  Trust  Agreement  with  East  Garden  and as such he is the
Trustee over all such shares issued with full voting authority.

                                       15
<PAGE>

     Pursuant to the June 17, 2001, Private Placement Memorandum,  on August 21,
2001, a private  investor  subscribed to purchase 400,000 shares of Common Stock
for $60,000. The Subscription Agreement provides that in the event our shares of
Common  Stock are not  trading at $0.35 per share in 12 months  from the date of
subscription,  than we agree to provide the  difference  from $0.15 per share to
$0.35 per share, if any, at our sole discretion,  additional shares or cash will
be provided to the subscriber.

     On May 31, 2001 the Company entered into a non-binding letter of intent for
the sale of certain assets of the electrosurgical operations of the Company to a
medical  device company for  approximately  $1,811,000 in cash. The assets to be
sold  include  substantially  all the  assets  of the  electrosurgical  business
(excluding cash and accounts  receivable),  including  inventory,  machinery and
equipment and all intangible assets of the electrosurgical  business.  The final
terms of the sale are subject to a definitive Asset Purchase Agreement. The sale
is subject to a number of  conditions,  including  approval by the lender of our
bank  loan.  The  proceeds,  if any,  will be used to  repay  our  secured  bank
indebtedness and other indebtedness.  On October 10, 2001, all of the conditions
of the Asset  Purchase  Agreement  were met by and  between  Kentucky  Packaging
Service LP, DBA Q2 Medical  and we  completed  the sale of the Olsen  Assets for
approximately $1,815,528 in cash.

     On March 4, 1999, we entered into a two-year Consulting  Agreement that was
subsequently  amended on September 21, 1999. We appointed IGC of New York,  Inc.
("IGC")  as our  financial  advisor.  In its role as a  financial  advisor,  IGC
provides  us with  assistance  in  connection  with  securing  debt  and  equity
financing,  renders advice on mergers and acquisitions  and coordinates  various
meetings with our market makers and brokers.  For providing these services,  IGC
is  retained  for a  monthly  consulting  fee of  $8,000  for 24  months  plus a
percentage of the amount raised for any senior secured debt,  subordinated  debt
and private  equity in the event IGC has acted as the  introducing  party to the
transaction. Under the terms of the Consulting Agreement, the monthly consulting
fee of $8,000  terminates on September  23, 2001. In addition,  in its role as a
financial advisor,  we also issued to IGC warrants to purchase 400,000 shares of
our common  stock,  exercisable  at $0.95 per share at any time  until  March 3,
2002, and such warrants shall have piggyback  registration rights.  Furthermore,
upon the  closing  and  funding of a private  placement  financing  in the gross
amount of $7,000,000,  IGC shall receive additional warrants to purchase 500,000
shares of our common stock at an  exercisable  price ranging from $0.95 to $1.70
per share.  In the event we complete a secondary  public stock  offering and IGC
was the  introducing  party which results in our raising  gross  proceeds in the
amount of  $7,000,000,  IGC is (i) paid  $150,000  at the  closing,  (ii) issued
warrants to purchase  500,000 shares of our common stock at an exercise price of
$0.95 per share,  (iii) paid $192,000,  payable $8,000 over the twenty-four (24)
month period following the secondary public offering.


Part II. Other Information
         -----------------

Item 1.  Legal Proceedings

     On June 7,  2001,  we were  served  with a  complaint  from Bank of America
("B/A") in a civil action filed in the Superior Court of  California,  County of
Contra Costa,  alleging that we were in breach of our Loan Agreement dated March
20,  2000.  Under the suit,  B/A is  seeking  repayment  of all  amounts  owing,
approximately  $1.7 million  under the $2.5 million  Revolving  Credit  Facility
which is due March 20, 2001.


                                       16
<PAGE>

     On June 14,  2001,  we filed  suit  against  B/A in the  Superior  Court of
California, County of Contra Costa. In our suit, we are seeking $31.2 million in
alleged  damages  arising  from a breach of  contract  and  other  inappropriate
conduct,  covenant of good faith and fair dealing,  unlawful and unfair business
practices,  intentional affliction and emotional distress and conversion by B/A.
We allege  that our  damages  are based upon our lost  opportunities  to fulfill
orders and otherwise  implement our business plan and harm to our reputation and
stock  market  value.  On  October  10,  2001,  Sparta  Olsen   Electrosurgical,
Inc.("Sparta  Olsen") a wholly-owned  subsidiary of Sparta Surgical  Corporation
completed the sale of substantially all the assets of Sparta Olsen business (the
"Sale"), including inventory,  machinery and equipment and all intangible assets
(excluding cash and accounts receivable) for the amount of $1,815,528 in cash to
Kentucky  Packaging  Service LP, DBA Q2 Medical ("Q2  Medical")  and at the same
time entered into a Transition Agreement whereby Q2 Medical agreed to pay Sparta
Olsen approximately $70,830 to assist in the transfer of the business.

     In connection with the Sale,  Sparta Olsen paid to Banc of America ("BofA")
all amounts required pursuant to a Settlement Agreement between Sparta and BofA,
and BofA released all security interests in all of our assets, and also released
the personal guarantee of Thomas F. Reiner, our Chairman, President and CEO. The
Settlement  Agreement also contained  customary  releases and forever discharges
each  other from any and all claims  and  demands of every kind and  nature.  In
addition,  BofA and Sparta Olsen dismissed  lawsuits they have initiated against
one another.

     On September  25,  2001,  we were served with a complaint in a civil action
titled Nancy Perlman,  M.D. vs. Virtua Health,  Inc., Tyco  International  Ltd.,
Valleylab Inc., General Electric Medical Systems Information Technologies, Inc.,
et al filed in the U.S.  District  Court of New Jersey  (No.  01-00651SHO).  The
complaint  alleges product  liability and the relief sought exceeds $75,000.  We
believe the claim has no merit and  accordingly  we intend to vigorously  defend
it.

Item 2.  Changes in Securities
         ---------------------

     None


Item 3.  Defaults Upon Senior Securities
         -------------------------------

     Bank of America (See Item 1. Legal Proceedings)


Item 4.  Submission of Matters to a Vote of Security Holders
         ---------------------------------------------------

     None


Item 5.  Other Information
         -----------------

     None

                                       17
<PAGE>

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

     Reports on Forms 8-K

     We filed a Form 8-K dated March 13, 2001 in connection with our debt/equity
     financing and the issuance of 483,034 shares of restricted common stock. In
     addition,  J&C  Resources  exercised  its option to  convert  its Series AA
     Convertible  Preferred  Shares  into  179,722  shares of Common  Stock.  In
     addition,  we also  announced the  resignation  of our V.P.  Sales and also
     indicated  we  terminated  our  non-binding  letter of  intent  to  acquire
     substantially or all of the assets of Weck Surgical.

     We filed a Form 8-K  dated  May 21,  2001,  that our bank has  unilaterally
     increased  the reserve  required to be taken  against our  inventory.  This
     action  automatically  caused us to become overdrawn on our credit facility
     with Bank of America,  and which  resulted in us being in default under our
     credit facility.

     We filed a Form 8-K dated June 13, 2001 in connection with the civil action
     filed by Bank of  America  alleging  our breach of our loan  agreement  and
     seeking  repayment of all amounts owed by us under the credit facility.  In
     addition,  we  filed a $31.2  million  suit  against  Bank  of  America  in
     connection  with  damages  arising  from a breach  of  contract  and  other
     inappropriate conduct by B/A.


     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/ Joseph A. Salim
     ------------------------------
     Joseph A Salim
     Director of Finance
     (Principal Accounting Officer)


     October 11, 2001





                                       18