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, 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 X   No
   ---

     As of August 31, 2001,  11,737,598 shares of Common Stock, 82,533 shares of
Convertible  Redeemable  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                         3
                        as of August 31, 2001

                        Consolidated Statements                            4
                        of Operations for the three months and six
                        months ended August 31, 2001 and 2000

                        Consolidated Statements                            5
                        of Cash Flows for the six months
                        ended August 31, 2001 and 2000

                        Notes to Consolidated Financial Statements        6

          Item 2.       Management's Discussion and                     7 - 19
                        Analysis of Financial Condition
                        and Results of Operations

Part II.  Other Information and Signatures                              19 - 20









                                       2
<PAGE>
<TABLE>
<CAPTION>


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

                                                  ASSETS
<S>                                                                                         <C>
Current Assets:
         Cash                                                                               $       --
         Accounts receivable, net of allowance for doubtful accounts of $42,000                  293,000
         Inventories                                                                           2,334,000
         Other                                                                                    42,000
                                                                                            -------------
Total Current Assets                                                                           2,669,000
                                                                                            -------------
Property and equipment, at cost-net                                                              676,000
                                                                                            -------------
Other Assets:
        Intangible assets, net                                                                   621,000
        Other                                                                                     15,000
                                                                                            -------------
Total Other Assets                                                                               636,000
                                                                                            -------------
Total Assets                                                                                $  3,981,000
                                                                                            =============
                                   LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
        Current portion of long-term debt                                                   $  2,486,000
        Notes payable                                                                            150,000
        Accounts payable - trade                                                                 867,000
        Accrued expenses                                                                         197,000
                                                                                            -------------
Total Current Liabilities                                                                      3,700,000
                                                                                            -------------
Long-term debt, net of current portion above                                                      58,000
                                                                                            -------------
Stockholder's 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, 11,737,598
        shares issued and outstanding                                                             15,000
        Additional paid in capital                                                            14,374,000
        Accumulated deficit                                                                  (14,607,000)
                                                                                            -------------
Total Stockholders' Equity                                                                       223,000
                                                                                            -------------
Total Liabilities and Stockholders' Equity                                                  $  3,981,000
                                                                                            =============

See accompanying notes to consolidated financial statements.
</TABLE>


                                                    3

<PAGE>


<TABLE>
<CAPTION>


                                         SPARTA SURGICAL CORPORATION
                                    CONSOLIDATED STATEMENTS OF OPERATIONS
                                               August 31, 2001
                                                 (Unaudited)




                                                        Three Months Ended            Six Months Endedd
                                                            August 31,                    August 31,
                                                    --------------------------    ---------------------------
                                                        2001           2000           2001           2000
                                                    -----------    -----------    -----------    -----------
<S>                                                 <C>            <C>            <C>            <C>
 Net sales                                          $ 1,013,000    $   876,000    $ 1,680,000    $ 1,781,000
 Cost of sales                                          361,000        466,000        620,000        952,000
                                                    -----------    -----------    -----------    -----------

 Gross Profit                                           652,000        410,000      1,060,000        829,000


 Selling, general and administrative expenses           601,000        425,000      1,068,000        847,000
 Research, development and engineering                   82,000        105,000        183,000        224,000
 Depreciation and amortization expenses                 135,000        224,000        253,000        280,000
                                                    -----------    -----------    -----------    -----------

 Loss From Operations                                  (166,000)      (344,000)      (444,000)      (522,000)
                                                    -----------    -----------    -----------    -----------

 Other Income (Expense):
 Interest expense                                      (120,000)       (85,000)      (214,000)      (165,000)
                                                    -----------    -----------    -----------    -----------

 Total Other Income (Expense)                          (120,000)       (85,000)      (214,000)      (165,000)
                                                    -----------    -----------    -----------    -----------

 Net Loss                                              (286,000)      (429,000)      (658,000)      (687,000)

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

 Net Loss Applicable to Common Stockholders         $  (303,000)   $  (446,000)   $  (679,000)   $  (708,000)
                                                    ===========    ===========    ===========    ===========


 Weighted average shares used to calculate
 basic and diluted net loss per common share          8,140,531      6,891,808      7,938,237      6,478,788
                                                    ===========    ===========    ===========    ===========

 Basic and diluted net loss per common share        $     (0.04)   $     (0.06)   $     (0.09)   $     (0.11)
                                                    ===========    ===========    ===========    ===========






 See accompanying notes to consolidated financial statements.


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



                                        SPARTA SURGICAL CORPORATION
                                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                (Unaudited)
                                                                                   Six Months Ended
                                                                                      August 31,
                                                                              --------------------------
                                                                                  2001           2000
                                                                              -----------    -----------
<S>                                                                           <C>            <C>
Cash Flows From Operating Activities:
          Net loss                                                            $  (658,000)   $  (687,000)
          Adjustment to reconcile net loss to net cash (used) by
          operating activities:
                      Depreciation and amortization                               253,000        280,000
                      Changes in operating assets and liabilities:
                            Accounts receivable                                   126,000        (26,000)
                            Inventories                                            43,000        (92,000)
                            Other assets                                          (44,000)       226,000
                            Account payable and accrued expenses                   82,000       (278,000)
                                                                              -----------    -----------

                                 Net Cash (Used) By Operating Activities         (198,000)      (577,000)
                                                                              -----------    -----------

Cash Flows From Investing Activities:
          Capital expenditures                                                     (9,000)       (11,000)
          Increase in intangible assets                                              --          (65,000)
                                                                              -----------    -----------

                                 Net Cash (Used) By Investing Activities           (9,000)       (76,000)
                                                                              -----------    -----------

Cash Flows From Financing Activities:
          Proceeds from sale of common stock                                      170,000        381,000
          Borrowing (repayment) on lines of credit, net                            58,000      2,122,000
          Principal payments on long-term debt                                    (21,000)    (1,911,000)
                                                                              -----------    -----------

                                 Net Cash Provided By Financing Activities        207,000        592,000
                                                                              -----------    -----------

                                 Net Change In Cash and Cash Equivalents             --          (61,000)

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

Cash and Cash Equivalents at End of Period                                    $      --      $      --
                                                                              ===========    ===========

Supplemental Disclosure of Cash Flow Information:
-------------------------------------------------
          Cash paid during the period for:
                      Interest                                                $   214,000    $   171,000
                      Income taxes                                                   --             --

Supplemental Disclosure of Non-Cash Investing and Financing Activities:
-----------------------------------------------------------------------
          Dividends paid on Series A convertible redeemable preferred stock        41,000         38,000
          Conversion of debt into common stock                                       --          200,000

</TABLE>



                                       5
<PAGE>




                           SPARTA SURGICAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1.   The  accompanying  consolidated  financial  statements of the Company as of
     August 31, 2001 and for the three and six months  ended August 31, 2001 and
     2000,  have  been  prepared  on the  same  basis as the  audited  financial
     statements.  In the  opinion  of  management,  such  unaudited  information
     includes all adjustments  (consisting  only of normal  recurring  accruals)
     necessary for a fair  presentation of this interim  information.  Operating
     results and cash flows for interim periods are not  necessarily  indicative
     of results for the entire  year.  The  information  included in this report
     should  be  read  in  conjunction  with  the  Company's  audited  financial
     statements  and notes thereto  included in the  Company's  Annual Report on
     Form 10-KSB for the year ended February 28, 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
     if-converted 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 5,624,873  options and warrants,  and 4,487,540
     options  and  warrants  at  August  31,  2001 and 2000,  respectively.  The
     following  table sets forth the computation of basic and diluted net income
     (loss) per common share:


<TABLE>
<CAPTION>

                                                                       Three Months Ended                Six Months Ended
                                                                            August 31,                       August 31,
                                                                  ----------------------------    -----------------------------
                                                                      2001            2000             2001            2000
                                                                  ------------    ------------    --------------   ------------
<S>                                                               <C>             <C>             <C>              <C>
Numerator:
Net income (loss) applicable to common stockholders               $   (303,000)   $   (446,000)   $     (679,000)  $   (708,000)
                                                                  ============    ============    ==============   ============
Denominator:

Weighted average common shares outstanding during the period        10,043,517       8,794,794         9,841,223      8,381,774

Less shares in escrow                                                1,902,986       1,902,986         1,902,986      1,902,986
                                                                  ------------    ------------    --------------   ------------
Shares used in computing basic income (loss) per common share        8,140,531       6,891,808         7,938,237      6,478,788

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      8,140,531       6,891,808         7,938,237      6,478,788
                                                                  ============    ============    ==============   ============

</TABLE>


                                       6
<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  from 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  Reform 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 research, development, manufacturing and marketing of
microsurgical   hand  instruments  and   accessories,   critical  care  hospital
disposables and electromedical  equipment and supplies worldwide. 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.  At August  31,  2001 our
accumulated deficit was approximately $14,607,000.


                                       7
<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 an adverse material 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  $1,031,000  as of August 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.


                                       8
<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 $658,000
for the six months ended August 31, 2001.  We cannot  assure that we will report
profits in the future.

     Our operations continue to be cash flow negative,  and we have a $1,031,000
deficit in working capital as of August 31, 2001.

     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 product  industry is intensely  competitive.  We compete in all
aspects  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.


                                       9
<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 are faced with  significant  reduction of revenue and continued  ongoing
operating expenses from the sale of all of the assets of our subsidiary,  Sparta
Olsen  Electrosurgical,  Inc. business,  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, reduction 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 cutbacks in Medicare and Medicaid  programs,  containment of
health  case  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. Our
total annual  revenues will decline  significantly  from fiscal year ended 2001,
due to our sale of the Olsen  electrosurgical  business  on  October  10,  2001,
however,  we will at the same time continue to have ongoing  operating  expenses
and  obligations  for  our  subsidiary,   Sparta  Olsen  Electrosurgical,   Inc.
("Olsen")  business,  including  certain leases  equipment and facilities under
long-term leasing agreements.

     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  11,737,598  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 August 31, 2001, we have outstanding options and warrants to purchase
approximately  5,624,873  shares  of  our  common  stock  and  other  securities
convertible into approximately  5,624,873 shares of common stock. The holders of
these  securities  may  exercise  or  convert  them at any time at  exercise  or
conversion  price  ranging  from $0.15 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.


                                       10
<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 had no trading  activity 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.


                                       11
<PAGE>

     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.

     One  of  our  current  stockholders  has  significant  influence  over  our
management and operations.

     Thomas F. Reiner, our Co-Founder,  Chairman, CEO and President beneficially
owns  approximately 74% of our common stock as of February 28, 2001.  Therefore,
Mr. Reiner will be able among other things, to elect directors.

     Our quarterly results could fluctuate

     The Company's  quarterly  operating results could fluctuate due to a number
of factors.  These factors include the degree to which we encounter  competition
in our markets, as well as other general economic conditions.


                              RESULTS OF OPERATIONS

Three Months Ended August 31, 2001
as Compared to Three Months Ended August 31, 2000

     Net sales for the Three  Months  Ended  August 31,  2001  ("Second  Quarter
Fiscal 2002") were $1,013,000,  an increase of $137,000 or 16% from net sales of
$876,000  for the three months ended  August 31, 2000  ("Second  Quarter  Fiscal
2001").  The  increase  in net sales  during the Second  Quarter  Fiscal 2002 as
compared to the Second Quarter Fiscal 2001 is primarily due to the completion of
a large OEM private label contract.


                                       12
<PAGE>

     Gross profit for the Three  Months  Ended  August 31, 2001  ("Three  Months
Fiscal  2002") were  $652,000 or 64% of net sales as compared to $410,000 or 47%
of net sales for the Three Months Ended  August 31, 2000 ("Three  Months  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  accounts,  and also in  particular  we generated  extremely  high
margin on one of our OEM private label contracts.

     Selling,  general and administrative ("SG&A") expenses for the Three Months
Fiscal 2002 were  $601,000,  an increase of $176,000 as compared to $425,000 for
the Three Months Fiscal 2001. The increase in SG&A expenses for the Three Months
Fiscal  2002 is  partially  due to legal  expenses in  connection  with our suit
against our primary lender,  which we settled, and the costs associated with our
debt and equity financings.

     Research,  development  and  engineering  ("RD&E")  expenses  for the Three
Months Fiscal 2002 were  $82,000,  a decrease of $23,000 as compared to $105,000
for the Three Months Fiscal 2001. The decrease of $23,000 is due to reduction of
engineering expenses relating to completion of various OEM projects.

     Depreciation and  Amortization  ("D&A) expenses for the Three Months Fiscal
2002 were $135,000,  a decrease of $89,000 from D&A expenses of $224,000 for the
Three Months Fiscal 2001.

     Total Other  Expenses for the Three Months  Fiscal 2002 were  $120,000,  an
increase of $35,000  from Total Other  Expenses of $85,000 for the Three  Months
Fiscal  2001.  The increase in Total Other  Expenses is primarily  due to higher
level of debt during the period.

     As a result of the  foregoing,  the next loss for the Three  Months  Fiscal
2002 was  $286,000 a decrease of $143,000 as compared to $429,000  for the Three
Months Fiscal 2001. The decrease in net loss for the Three Months Fiscal 2002 as
compared to the Three Months  Fiscal 2001,  is primarily  due to the expenses as
discussed above.

Six Months Ended August 31, 2001
as Compared to Six Months Ended August 31, 2000

     Net sales for the Six Months  Ended  August 31,  2001 ("Six  Months  Fiscal
2002")  were  $1,680,000,  a  decrease  of  $101,000,  or 6% from  net  sales of
$1,781,000  for the Six Months Ended August 31, 2000 ("Six Months Fiscal 2001").
The decrease in net sales  during the Six Months  Fiscal 2002 as compared to the
Six Months  Fiscal  2001 can be  primarily  attributed  to the (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 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.

                                       13
<PAGE>

     Gross profit were $1,060,000, or 63% of net sales for the Six Months Fiscal
2002 as compared to $829,000 or 47% of net sales for the Six Months 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  accounts,  and also in  particular  we generated  extremely  high
margin on one of our large OEM private label contracts.

     Selling,  general and  administrative  ("SG&A") expenses for the Six Months
Fiscal 2002 were  $1,068,000,  an increase of $221,000,  as compared to $847,000
for the Six Months Fiscal 2001. The increase in SG&A expenses for the Six Months
Fiscal 2002 as compared to the Six Months Fiscal 2001 is primarily attributed to
the additional  legal expenses  incurred in connection with our suit against the
bank,  financing costs relating to our debt and equity  financing  transactions.
attendance at various medical trade shows in order to promote our products,  and
sales and marketing expenses in order to possibly generate new OEM accounts.

     Research,  development and engineering  ("R&D") expenses for the Six Months
Fiscal 2002 were  $183,000,  a decrease of $41,000,  as compared to $224,000 for
the Six Months  Fiscal  2001.  R&D expenses  decreased  for the Six Months Ended
Fiscal 2002  primarily  due to reduction  of  engineering  expenses  relating to
completion of various OEM projects.

     Depreciation  and  Amortization  ("D&A") expenses for the Six Months Fiscal
2002 were $253,000,  a decrease of $27,000 from D&A expenses of $280,000 for the
Six Months Fiscal 2001.

     Total  Other  Expenses  for the Six Months  Fiscal 2002 were  $214,000,  an
increase of $49,000, as compared to $165,000 for the Six Months Fiscal 2001. The
increase in Total Other  Expenses is primarily  due to higher  banking  expenses
with our primary lender as a result of the alleged default notice from our bank,
and a higher level of debt during the period.

     As a result of the  foregoing,  the net loss for the Six Months Fiscal 2002
was $658,000,  a decrease of $29,000, as compared to $687,000 for the Six Months
Fiscal  2001.  The decrease in the net loss for the Six Months  Fiscal 2002,  as
compared  to Six  Months  Fiscal  2001,  is  primarily  due to the  expenses  as
discussed above.

                         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 $1,031,000 at August
31, 2001.  In  addition,  we are subject to a pending  litigation  relating to a
product liability


                                       14
<PAGE>


claim.   Revenues  from  existing  product  lines  have  historically  not  been
sufficient  to  generate  adequate  working  capital.  On October 10,  2001,  we
divested  approximately  two-thirds  of our revenues  with the sale of our Olsen
electrosurgical business in order to pay-off at a negotiated discount our senior
bank debt and to settle our dispute with our senior lender.  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.

     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   $2,377,000   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) Reiner  Facility  term debt which is due December  2001. We
had a  deficiency  in our  working  capital at August 31,  2001 in the amount of
$1,031,000.

     Our current operations continue to be cash flow negative, further straining
our working  capital  resources,  even though we  eliminated  our debts with our
primary lender. 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, it 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 credit worthiness 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.


                                       15
<PAGE>

     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.

     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 an equity and debt financing from a group of
investors.   The  equity  financing   consisted  of  the  sale  of  our  484,034
unregistered  shares of Common  Stock.  In  addition,  we also  completed a debt
financing in the amount of $150,000 ("Note").  The subordinated  secured Note is
at 8%  interest  per annum,  and is due and payable on August 20,  2001.  At our
option,  the Note can be extended for an  additional  six months or December 20,
2001. On August 20, 2001, we extended the Note. On October 11, 2001, we paid the
Note in full. On October 12, 2001, we completed an additional  debt financing in
the amount of $60,000.  The unsecured  Note is at 8% interest per annum,  and is
due and payable on April 12,  2002.  At our option,  we may also extend the Note
for an additional six months, or until October 12, 2002.

     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 of our assets.  As of August 31, 2001, the outstanding
balance  on the Loan was  approximately  $1,721,000.  The Loan was being used to
provide working capital for our 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


                                       16
<PAGE>

time  until  March 20,  2003.  The bank has called the loan (See Item #1 - Legal
Proceedings). On October 10, 2001, our subsidiary, Sparta Olsen Electrosurgical,
Inc.  ("Olsen")  completed  the  sale of  substantially  all the  assets  of the
electrosurgical  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 Olsen on a monthly basis, approximately $70,830
to assist in the transfer of the business.

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

     On May 23, 1997, we entered into a $200,000 Working Capital Credit Facility
and  subsequently  increased it to $400,000  ("Reiner  Facility") with Thomas F.
Reiner and his  Assignee.  On August 2, 2001,  we amended  the Reiner  Facility.
Under  the  terms of the  amended  Reiner  Facility,  the  Reiner  Facility  was
increased  up to a maximum  of  $700,000,  and we are able to draw on the credit
facility  only upon the sole  option  and  approval  of Mr.  Reiner.  The Reiner
Facility is secured by a first position  security interest in all of our assets.
Reiner  Facility  has an  interest at 14% per annum,  and is payable  monthly in
arrears. However, due to our limited working capital, we have been unable to pay
some of the accrued  interest due under the Reiner  Facility.  As of October 22,
2001,  the Reiner  Facility  was over  advanced by  approximately  $76,000.  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 it is 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 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 October 22, 2001, the Reiner  Facility loan balance was
approximately $776,000.

     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.


                                       17
<PAGE>

     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. As of August 31,
2001,  we did not complete any of the  financing  under the Term Sheet with 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 agreed 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 by us if East  Garden has paid in full  $250,000  for the  purchase of
1,666,667  shares of Common Stock.  As of August 31, 2001,  East Garden has paid
$100,000 under the Subscription  Agreement.  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.

     Pursuant to the June 17,  2001,  Private  Placement  Memorandum,  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.


                                       18
<PAGE>

     On May 31, 2001 we entered into a non-binding letter of intent for the sale
of certain assets of the electrosurgical  business for approximately  $1,811,000
in cash and  subsequently  we executed an Asset  Purchase  Agreement  subject to
certain conditions.  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.  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 ("Q2 Medical") and our subsidiary  Sparta Olsen  Electrosurgical,
Inc.  ("Olsen)".  Under the terms of the Asset  Purchase  Agreement,  Olsen made
certain  customary  representation  and warranties and we also guaranteed  these
obligations,  and further we agreed to indemnify, defend and hold Q2 Medical and
its shareholders,  directors and officers,  harmless, from any and all judgments
as  the  result  of  or  arising  from  any  material  breaches,   misstatement,
inaccuracy,  error or omission of any of the  representation and warranties made
by Olsen  contained in the Asset  Purchase  Agreement  which either singly or in
aggregate  exceed  $25,000 in amount as the result of or arising from any suits,
claims,  damages of any kind or  nature,  known or  unknown  which are  asserted
against Q2 Medical,  including the failure of Olsen to assume,  pay,  perform or
discharge any or all of the excluded  liabilities,  and or employee  obligations
and to comply with bulk  transfers in connection  with the transfer of the Olsen
assets to Q2 Medical.

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  (No.  C01-01920),  alleging  that we were in  breach  of our Loan
Agreement dated March 20, 2000. Under the suit, B/A was seeking repayment of all
amounts  owing,  approximately  $1.7 million  under the $2.5  million  Revolving
Credit  Facility which is due March 20, 2001. On June 14, 2001, we filed a $31.2
suit against B/A in the  Superior  Court of  California,  County of Contra Costa
(No. C01-02203). On October 6, 2001, we entered into a Settlement Agreement, and
October 10,  2001,  we paid to B/A all amounts and both  parties  dismissed  its
suits against each other in its entirety.

     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.


                                       19
<PAGE>

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.   Reports on Forms 8-K

          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  alleged  damages  arising from a
          breach of contract and other inappropriate conduct by B/A.

          We filed a Form 8-K dated  October  11,  2001 and  October 16, 2001 in
          connection with the sale of our  electrosurgical  business and entered
          into a  Settlement  Agreement  with B/A and repaid all amounts owed to
          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 31, 2001






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