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 May 31, 1996
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to
Commission File Number 1-11047
SPARTA SURGICAL CORPORATION
(Exact name of small business issuer as specified in its charter)
Delaware 22-2870438
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
Bernal Corporate Park
7068 Koll Center Parkway, Pleasanton, CA 94566
(Address of principal executive offices)
(510) 417-8812
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
As of May 31, 1996, 4,403,526 shares of Common Stock, 178,523 shares of
Redeemable Convertible Preferred Stock and 33,068 shares of Series A Convertible
Redeemable Preferred Stock were outstanding.
<PAGE>
SPARTA SURGICAL CORPORATION
Form 10-QSB
INDEX
Page
Number
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance
Sheet as of May 31, 1996 1 - 2
Condensed Consolidated Statements
of Operations for the three months
ended May 31, 1996 and 1995 3
Condensed Consolidated Statements
of Cash Flows for the three months
ended May 31, 1996 and 1995 4
Notes to Financial Statements 5
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 6 - 8
Part II. Other Information and Signatures 9 - 12
<PAGE>
SPARTA SURGICAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
May 31, 1996
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents .................................. $ --
Accounts receivable - trade, net of allowance
for doubtful accounts of $108,664 ........................ 327,590
Inventories ................................................ 2,560,061
Notes receivable ........................................... 4,206
Prepaid expenses ........................................... 122,871
-----------
Total Current Assets .................................... 3,014,728
-----------
Property and Equipment, at cost:
Machinery and equipment .................................... 56,000
Other equipment ............................................ 491,625
Leasehold improvements ..................................... 15,733
-----------
563,358
Less accumulated depreciation ............................... (246,282)
-----------
Net Property and Equipment .............................. 317,076
-----------
Other Assets:
Intangible assets, net of
accumulated amortization .................................. 878,797
Deposits and other ......................................... 49,868
Notes receivable - officers ................................ 821,419
Accounts receivable - officers ............................. 127,232
-----------
Total Other Assets ..................................... 1,877,316
-----------
Total Assets ........................................... $ 5,209,120
===========
The accompanying notes are an integral
part of these condensed consolidated financial statements
-1-
<PAGE>
SPARTA SURGICAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
May 31, 1996
(Unaudited)
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable - trade ....................................... $ 689,652
Accrued expenses:
Payroll taxes and wages ....................................... 69,136
Interest and other ............................................ 24,418
Dividends payable .............................................. 4,134
Notes payable .................................................. 450,000
Accrued royalty payments ....................................... 31,151
Current portion of long-term debt .............................. 46,554
-----------
Total Current Liabilities .................................. 1,315,045
-----------
Long-Term Debt:
Obligations under capital leases ............................... 144,418
Financial institutions and other ............................... 596,355
Less current portion above ..................................... (46,554)
-----------
Total Long-Term Debt ..................................... 694,219
Other liabilities ............................................... 377,595
-----------
Commitments and contingencies ................................... --
Stockholders' Equity:
Preferred Stock: $4.00 par value, 5,000,000 shares authorized;
Non-cumulative Redeemable Convertible Preferred Stock:
1,500,000 shares authorized, 178,523 shares issued
and outstanding ............................................. 714,092
Series A Cumulative Convertible Redeemable Preferred Stock:
250,000 shares authorized, 33,068 shares issued
and outstanding ............................................. 132,272
Common Stock: $.002 par value, 30,000,000 shares authorized,
4,403,526 shares issued and outstanding ..................... 8,807
Additional paid in capital ..................................... 7,731,209
Accumulated deficit ............................................ (5,764,119)
-----------
Total Stockholders' Equity ................................ 2,822,261
-----------
Total Liabilities and Stockholders' Equity ................ $ 5,209,120
===========
The accompanying notes are an integral
part of these condensed consolidated financial statements
-2-
<PAGE>
SPARTA SURGICAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
May 31,
---------------------------
1996 1995
---- ----
Net sales ...................................... $ 584,953 $ 1,769,462
Cost of sales .................................. 242,651 862,048
----------- -----------
Gross Profit .............................. 342,302 907,414
Selling, general and administrative expenses ... 512,241 486,490
Research and development ....................... 17,975 36,764
Depreciation and amortization .................. 57,589 163,151
----------- -----------
Income (Loss) From Operations ............ (245,503) 221,009
----------- -----------
Other Income (Expense):
Interest and other income ..................... 4,185 4,607
Interest expense .............................. (31,779) (200,094)
----------- -----------
Total Other Income (Expense) .............. (27,594) (195,487)
----------- -----------
Income (Loss) Before Provision
For Income Taxes ......................... (273,097) 25,522
Provision for income taxes -- --
----------- -----------
Net Income (Loss) .............................. (273,097) 25,522
Preferred stock dividends ...................... (4,134) (6,964)
----------- -----------
Net Income (Loss) Applicable To Common
Shareholders .................................. $ (277,231) $ 18,558
=========== ===========
Net Income (Loss) Per Share of Common Stock:
Primary:
Weighted average number of common
shares outstanding .......................... 4,142,286 3,340,342
=========== ===========
Net Income (Loss) Per Common Share .......... $ (.07) $ .01
=========== ===========
Fully diluted:
Weighted average number of common
shares outstanding .......................... 4,142,286 3,807,304
=========== ===========
Net Income (Loss) Per Common Share .......... $ (.07) $ --
=========== ===========
The accompanying notes are an integral
part of these condensed consolidated financial statements
-3-
<PAGE>
SPARTA SURGICAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
May 31,
--------------------------
1996 1995
---- ----
Cash Flows From Operating Activities:
Net income (loss) ............................... $ (273,097) $ 25,522
Adjustments to reconcile net income (loss) to
net cash used by operating activities:
Depreciation and amortization ................. 57,589 163,151
Changes in assets and liabilities:
(Increase) in accounts receivable ............ (39,173) (92,509)
(Increase) Decrease in inventories ........... 49,326 (90,403)
(Increase) in prepaid expenses and other ..... (41,076) (84,346)
(Increase) Decrease in deposits and other .... 2,341 (2,095)
(Decrease) Increase in accounts payable
and accrued expenses ........................ (258,435) 37,209
----------- -----------
Net Cash (Used) By Operating Activities ..... (502,525) (43,471)
----------- -----------
Cash Flows From Investing Activities:
Capital expenditures ............................ (905) (9,586)
Increase in intangible assets ................... (31,665) (652)
Increase in receivables from related entities ... (4,662) (3,222)
----------- -----------
Net Cash (Used) By Investing Activities ..... (37,232) (13,460)
----------- -----------
Cash Flows From Financing Activities:
Proceeds from borrowing ........................ 1,055,898 1,956,572
Principal payments on notes payable ............. (602,535) (1,851,800)
Principal payments on accrued royalties ......... (31,106) (53,367)
Issuance of common stock upon exercise
of warrants .................................... 117,500 --
----------- -----------
Net Cash Provided By Financing Activities ... 539,757 51,405
----------- -----------
Net Increase (Decrease) in Cash and
Cash Equivalents ........................... -- (5,526)
Cash and Cash Equivalents at Beginning
of Period .................................. -- 5,526
----------- -----------
Cash and Cash Equivalents at End of Period .. $ -- $ --
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest ....................................... $ 19,004 $ 203,422
Income taxes ................................... -- --
Supplemental Disclosure of Noncash Investing
and Financing Activities:
Conversion of Preferred Stock into Common Stock. $ 436,708 $ 540,896
Dividends payable on Series A Convertible
Redeemable Preferred Stock .................... 4,134 6,964
The accompanying notes are an integral
part of these consolidated condensed financial statements
-4-
<PAGE>
SPARTA SURGICAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The accompanying financial information of the Company is prepared in
accordance with the rules prescribed for filing condensed interim financial
statements and, accordingly, does not include all disclosures that may be
necessary for complete financial statements prepared in accordance with
generally accepted accounting principles. The disclosures presented are
sufficient, in management's opinion, to make the interim information
presented not misleading. All adjustments, consisting of normal recurring
adjustments, which are necessary so as to make the interim information not
misleading, have been made. Results of operations for the three months
ended May 31, 1996 are not necessarily indicative of results of operations
that may be expected for the year ending February 28, 1997. It is
recommended that this financial information be read with the complete
financial statements included in the Company's Annual Report on Form 10-KSB
for the year ended February 29, 1996 previously filed with the Securities
and Exchange Commission.
-5-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
On December 7, 1995, the Company sold its medical product line, which
consisted primarily of wound care gauze dressings, to Tecnol Medical Products,
Inc. ("Tecnol"), which resulted in the Company's elimination of the medical
product line from its business operations approximately three months before the
year ended February 29, 1996 ("Fiscal 1996"). Following this disposition of
assets, the Company implemented a restructuring plan involving a reduction of
personnel, the reorganization of the sales department, and the consolidation of
operating facilities. Therefore, the results for the three months ended May 31,
1996 ("First Quarter Fiscal 1997") do not reflect the medical product line
operations, whereas for the three months ended May 31, 1995 ("First Quarter
Fiscal 1996") the results of the medical product line operations are reflected.
For the reason stated above, the results for the First Quarter Fiscal 1997 and
the First Quarter Fiscal 1996 are not strictly comparable.
RESULTS OF OPERATIONS
Three Months Ended May 31, 1996
as Compared to Three Months Ended May 31, 1995
Net sales for the First Quarter Fiscal 1997 were $584,953, a 66.9% decrease
from net sales of $1,769,462 for the First Quarter Fiscal 1996. The net sales
decrease during the First Quarter Fiscal 1997 as compared to the First Quarter
Fiscal 1996 is the result of (i) a decrease of $1,000,380 in medical product
sales which resulted from the disposition of the Company's medical product line
in December 1995; (ii) a decrease of $14,410 or 4.4% in surgical product sales
from $329,549 to $315,139; and (iii) a decrease of $169,719 or 38.6% in
electrotherapy product sales from $439,533 to $269,814. The decrease in sales
for the electrotherapy product line can be primarily attributed to the
completion in July 1995 of a one year, non-cancelable $500,000 contract with
Henley Healthcare ("Henley") in which the Company provided Henley with its
Spectrum Max-SD TENS unit. During the First Quarter Fiscal 1996 the Company had
approximately $150,000 in sales to Henley which were not repeated during the
First Quarter Fiscal 1997. However, the Company is currently negotiating a new
contract with Henley and expects negotiations to be finalized in the near
future. The Company intends to concentrate its efforts on increasing its level
of sales to achieve profitable operations. In addition, the Company intends to
consider growth through selective strategic acquisitions in complementary lines
of business.
Gross profit was $342,302 or 58.5% of net sales for the First Quarter
Fiscal 1997 as compared to $907,414 or 51.3% of net sales for the First Quarter
Fiscal 1996. The increase in gross profit percentage is primarily due to the
disposition of the medical product line in December 1995. In general, the
medical product line generated lower gross profits than the surgical and
electrotherapy product lines. The decrease in gross profit is primarily due to
the overall decrease in net sales resulting from the disposition of the medical
product line.
Selling, general and administrative ("SG&A") expenses for the First Quarter
Fiscal 1997 were $512,241, a 5.3% increase from SG&A expenses of $486,490 for
the First Quarter Fiscal 1996. The increase in SG&A expenses for the First
Quarter Fiscal 1997 as compared to the First Quarter Fiscal 1996 is primarily
due to legal expenses in the approximate amount of $105,000 incurred in
connection with the Company's various litigation proceedings. In addition, the
Company has increased its sales and marketing efforts to broaden its customer
base and target distributors for each of our product lines.
Research and development ("R&D") expenses for the First Quarter Fiscal 1997
were $17,975, a 51.1% decrease from R&D expenses of $36,764 for the First
Quarter Fiscal 1996. The decrease in R&D expenses for the First Quarter Fiscal
1996 as compared to the First Quarter Fiscal 1995 is primarily due to the
elimination of the R&D efforts related to the medical product line. During the
First Quarter Fiscal 1997 the R&D continues to be focused on the redesign of the
Company's TENS units in an effort to reduce the product cost for the
electrotherapy product line.
Depreciation and amortization ("D&A") expenses for the First Quarter Fiscal
1997 were $57,589, a 64.7% decrease from D&A expenses of $163,151 for the First
Quarter Fiscal 1996. During the First Quarter Fiscal 1997, D&A expenses
decreased due to the elimination of the depreciation expenses on the medical
product line manufacturing equipment sold to Tecnol in December 1995. As a
result of the sale of the medical product line, the Company's D&A expenses will
be substantially reduced for the fiscal year ending February 28, 1997 ("Fiscal
1997").
-6-
<PAGE>
Net interest expense for the First Quarter Fiscal 1997 was $27,594, a 85.9%
decrease from net interest expense of $195,487 for the First Quarter Fiscal
1996. The decrease in net interest expense is primarily due to the repayment of
most of its outstanding debt in December 1995 from the cash proceeds of the
medical product line sale. The repayment of debt in December 1995 should result
in substantially reduced interest expenses in Fiscal 1997.
As a result of the foregoing, the net loss for the First Quarter Fiscal
1997 was $273,097, a decrease of $298,619 from net income of $25,522 for the
First Quarter Fiscal 1996. The decrease in net income for the First Quarter
Fiscal 1997 as compared to the First Quarter Fiscal 1996 is primarily due to the
decrease in net sales and the corresponding decrease in gross profit coupled
with an increase in SG&A expenses.
Primary loss per share was $.07 for the First Quarter Fiscal 1997 as
compared to a primary income per share of $.01 for the First Quarter Fiscal
1996. Fully diluted loss per share, which assumes all dilutive preferred share
conversions and the exercise of all dilutive stock options and warrants, was
$.07 for the First Quarter Fiscal 1997 as compared to fully diluted income of
$.00 per share for the First Quarter Fiscal 1996. The primary and fully diluted
income per share computation for the First Quarter Fiscal 1997 reflect accrued
dividends on the Series A Convertible Preferred Stock which were which were paid
in June 1996.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company's primary sources of working capital have been
revenues from operations, bank and private party loans and proceeds from the
sale of securities.
As of February 29, 1996, the Company had net operating loss carry forwards
of approximately $5,000,000. Availability of the Company's net operating loss
carry forwards, if not utilized, will expire at various dates through the year
2011.
The Company's working capital at February 29, 1996 was $1,246,470 as
compared to $1,699,683 at May 31, 1996. The Company's working capital position
increased by $453,213 primarily due to the receipt of a Revolving Line of Credit
from FINOVA Capital Corporation and the subsequent elimination of certain
current liabilities.
On December 7, 1995, the Company sold its impregnated wound care gauze
dressings product line to Tecnol Medical Products, Inc., a medical products
manufacturer headquartered in Fort Worth, Texas (the "Tecnol Sale"). The
purchase price was $5,675,000, of which approximately $5,010,000 was paid in
cash, with the balance being paid primarily in the form of a promissory note
bearing interest at prime rate and due in September 1997 upon certain conditions
being met. In addition to wound care inventory, equipment and other assets, the
Company's operations in Hammonton, New Jersey were included in the sale.
The Company has used the cash proceeds of the Tecnol Sale to repay most of
its outstanding debt including (i) $2,282,505 owed to Congress Financial
Corporation under a revolving credit facility; (ii) $111,602 owed for the
purchase of certain manufacturing equipment which was subject to a lease; (iii)
$469,710 owed to Asset Factoring, Inc., consisting of the principal due on
certain promissory note plus accrued interest; (iv) $600,000 owed to Storz
Instrument Company relating to a $1,050,000 note payable in connection with the
Company's acquisition of certain assets of Storz' Oral Maxillofacial product
line; and (v) $1,000,000 to Arbora, A.G. ("Arbora"), which together with the
return of a $809,500 promissory note issued to the Company by an affiliate of
Arbora, served as principal consideration to redeem and cancel 4,761,842 shares
of the Company's Common Stock. The 4,761,842 shares were issued to Arbora on
December 4, 1995 in consideration of the conversion of a $1,000,000 note into
equity and the issuance to the Company of a promissory note in the amount of
$809,500 by an affiliate of Arbora pursuant to an agreement reached between it
and the Company. In connection with this transaction, the Company also canceled
a warrant to purchase 1,000,000 shares of the Company's Common Stock at $1.40
per share held by Arbora and issued Arbora and its affiliated parties warrants
to purchase up to 750,000 shares of the Company's common stock at $.47 per share
at any time until November 8, 1998. In addition, a voting trust was entered into
which provided the Company's Chairman, President and Chief Executive Officer,
Thomas F. Reiner, with voting rights as to such shares. On April 22, 1996,
250,000 shares of Common Stock were issued to Arbora in connection with the
exercise of 250,000 Common Stock purchase warrants.
On March 11, 1996, FINOVA Capital Corporation ("FINOVA") provided the
Company with a 36-month Revolving Line of Credit of up to $1,500,000 (the
"Loan"). The Company agreed to pay FINOVA interest on the average outstanding
-7-
<PAGE>
principal amount of the Loan at a per annum rate of prime plus 4%. The Loan is
advanced to the Company based on a percentage of eligible assets and is secured
by a first lien on all of the assets of the Company. Accordingly, the amount of
available funds under the Loan may be substantially less than $1,500,000. In
addition, $450,000 of the Loan is personally guaranteed by Thomas F. Reiner, the
Company's Chairman, President and Chief Executive Officer. As of May 31, 1996,
the outstanding balance on the Loan was $536,194 and approximately $14,000 in
credit was available. Approximately $250,000 of the otherwise available line of
credit is considered unavailable until a certain lien against the Company's
assets is released. The Loan is being used to provide additional working capital
for current operations and growth.
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which the
Company will adopt prospectively as required in Fiscal 1997. Pursuant to this
Statement, companies are required to investigate potential impairments of
long-lived assets, certain identifiable intangibles, and associated goodwill, on
an exception basis, when there is evidence that events or changes in
circumstances have made recovery of an asset's carrying value unlikely. An
impairment loss would be recognized when the sum of the expected future net cash
flows is less than the carrying amount of the asset. The adoption of SFAS 121 is
not expected to have a significant impact on the Company's financial position or
result of operations.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard (SFAS) No. 123, "Accounting for Stock-Based
Compensation," SFAS 123 will be adopted by the Company as required for its
Fiscal 1997 financial statements and is not expected to have a material effect
on the Company's financial position or results of operations. Upon adoption of
SFAS 123, the company will continue to measure compensation expense for its
stock-based employee compensation plans using the intrinsic value method
prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees,"
and will provide pro forma disclosures of net income and earnings per share as
if the fair value-based method prescribed by SFAS 123 had been applied in
measuring compensation expense.
The Company may make additional acquisitions of companies, divisions of
companies or products in the future. Acquisitions entail numerous risks,
including difficulties or an inability to successfully assimilate acquired
operations and products, diversion of management's attention and loss of key
employees of acquired businesses, all of which the Company has encountered with
previous acquisitions. Future acquisitions by the Company may require dilutive
issuances of equity securities and the incurrence of additional debt, and the
creation of goodwill or other intangible assets that could result in
amortization expense. These factors could have a material adverse effect on the
Company's business, operating results and financial condition.
The Company's current operations continue to be cash flow negative, further
straining the Company's working capital resources. The Company's capital
requirements will depend on numerous factors, including the acquisition of new
product lines and/or other business operations and the continued development of
existing product sales, distribution and marketing capabilities. In order to
continue its current level of operations, it will be necessary for the Company
to obtain additional working capital, whether from debt or equity sources. If
the Company is unable to obtain additional working capital from the placement of
debt or equity instruments or the sale of some of its assets, it may be
necessary for the Company to restructure its operations to reduce its ongoing
expenditures.
-8-
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
Computation of Primary Earnings per Share (page 12).
Computation of Fully Diluted Earnings per Share (page 13).
Exhibit 27 - Financial Data Schedule.
B. Reports on Form 8-K
The Company filed a Form 8-K dated March 11, 1996 to report the
receipt of a line of credit from FINOVA Capital Corporation.
-9-
<PAGE>
SPARTA SURGICAL CORPORATION
COMPUTATION OF PRIMARY EARNINGS PER SHARE
Three Months Ended
May 31,
-------------------------
1996 1995
---- ----
Shares outstanding at beginning of period .......... 3,846,826 3,228,408
Shares issued during the period (weighted average) . 295,460 299,434
Dilutive shares contingently issuable upon
exercise of options and warrants (weighted average) -- --
Less shares assumed to have been purchased for
treasury with assumed proceeds of stock warrants
and options (weighted average) ..................... -- --
Less shares placed in escrow which are issuable
only if certain income or stock price criteria
are met (weighted average) ......................... -- (187,500)
----------- -----------
Total Primary Shares ............................... 4,142,286 3,340,342
=========== ===========
Net Income Applicable To Common Shareholders ....... $ (277,231) $ 18,558
=========== ===========
Net Income Per Primary Share ....................... $ (.07) $ .01
=========== ===========
-10-
<PAGE>
SPARTA SURGICAL CORPORATION
COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE
Three Months Ended
May 31,
------------------------
1996 1995
---- ----
Shares outstanding at beginning of period ............ 3,846,826 3,228,408
Shares issued during the period (weighted average) ... 295,460 578,896
Dilutive shares contingently issuable upon
exercise of options and warrants (weighted average) .. -- --
Less shares assumed to have been purchased for
treasury with assumed proceeds of stock warrants
and options (weighted average) ....................... -- --
----------- ----------
Total Fully Diluted Shares ........................... 4,142,286 3,807,304
=========== ==========
Net Income Applicable To Common Shareholders ......... $ (277,231) $ 18,558
=========== ==========
Net Income Per Fully Diluted Share .................. $ (.07) $ --
=========== ==========
-11-
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Sparta Surgical Corporation
Thomas F. Reiner
- ---------------------------
Thomas F. Reiner
Chairman of the Board
President & CEO
Wm. Samuel Veazey
- ---------------------------
Wm. Samuel Veazey
Vice President of Finance
and Administration
July 15, 1996
- 12 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FORM 10-QSB FOR SPARTA SURGICAL CORPORATION FOR THE QUARTER ENDED
MAY 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Feb-28-1997
<PERIOD-START> Mar-01-1996
<PERIOD-END> May-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 436,254
<ALLOWANCES> 108,664
<INVENTORY> 2,560,061
<CURRENT-ASSETS> 3,014,728
<PP&E> 563,358
<DEPRECIATION> 246,282
<TOTAL-ASSETS> 5,209,120
<CURRENT-LIABILITIES> 1,315,045
<BONDS> 694,219
0
846,364
<COMMON> 8,807
<OTHER-SE> 1,967,090
<TOTAL-LIABILITY-AND-EQUITY> 5,209,120
<SALES> 584,953
<TOTAL-REVENUES> 584,953
<CGS> 242,651
<TOTAL-COSTS> 242,651
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,779
<INCOME-PRETAX> (273,097)
<INCOME-TAX> 0
<INCOME-CONTINUING> (273,097)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (273,097)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
