UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
October 12, 2001 (Date of earliest event reported)
SPARTA SURGICAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-11047 22-2870438
(State or other juris- (Commission (IRS Employer Identification
diction of incorporation) File Number) Number)
Olsen Centre
2100 Meridian Park Blvd., Concord, CA 94520
(Address of principal executive offices)
Registrant's telephone number, including area code (925) 825-8151
Not Applicable
(Former name or former address, if changed since last report)
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(b) PRO FORMA FINANCIAL INFORMATION
Attached hereto as Exhibit 99.1 are pro forma condensed consolidated financial
statements of Sparta Surgical Corporation ("Sparta") which give effect to the
completion of the sale of substantially all the assets of Sparta's
electrosurgical business to Q2 Medical, all of which events were reported in
Sparta's Current Report on Form 8-K filed October 16, 2001.
(c) EXHIBITS
Exhibit
Number Description
------ -----------
99.1 Sparta Surgical Corporation Pro Forma Condensed
Consolidated Financial Statements.
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SPARTA SURGICAL CORPORATION
Date: November 19, 2001
By /s/ Thomas F. Reiner
-------------------------------------------
Thomas F. Reiner,
Chairman of the Board,
President and Chief Executive Officer
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
99.1 Sparta Surgical Corporation Pro Forma Condensed
Consolidated Financial Statements.
EXHIBIT 99.1
SPARTA SURGICAL CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
Proforma Condensed Financial Statements Summary of Presentation F-2
Proforma Condensed Balance Sheet as of August 31, 2001 F-3
Proforma Condensed Statement of Operations for the six months
ended August 31, 2001 F-4
Proforma Condensed Statement of Operations for the year
ended February 28, 2001 F-5
Notes to Proforma Condensed Financial Statements F-6
F-1
SPARTA SURGICAL CORPORATION AND SUBSIDIARIES
PROFORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited proforma condensed consolidated financial statements
give effect to the sale of substantially all the assets of Sparta Surgical
Corporation's (the "Company's") electrosurgical business to Kentucky Packaging
Service LP, dba Q2 Medical ("Q2 Medical"). The proforma condensed consolidated
financial statements are based on the Company's historical financial statements
and estimates and assumptions set forth below.
The proforma condensed consolidated balance sheet as of August 31, 2001 gives
effect to the sale of substantially all the assets of the Company's
electrosurgical business to Q2 Medical as if the sale took place on August 31,
2001.
The proforma condensed consolidated statement of operations for the six months
ended August 31, 2001 and for the year ended February 28, 2001, includes the
sale of substantially all the assets of the Company's electrosurgical business
as if the transaction was completed at the beginning of the year.
Proforma adjustments are based upon preliminary estimates, available information
and certain assumptions that management deems appropriate. The unaudited
proforma financial information presented herein is not necessarily indicative of
the results of operations or financial position that the Company would have
obtained had such events occurred at the beginning of the year, as assumed, or
of the future results of the Company. The proforma financial statements should
be read in conjunction with the historical financial statements and notes
thereto included in the Company's Annual Report on Form 10-KSB for the year
ended February 28, 2001.
F-2
SPARTA SURGICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AUGUST 31, 2001
ASSETS
------
Proforma Proforma
Adjustments Combined
----------- --------
Current Assets:
Cash $ -- $ 1,816,000 (1) $ 304,000
(1,512,000)(2)
Accounts receivable 293,000 -- 293,000
Inventories 2,334,000 (497,000)(1) 1,837,000
Other 42,000 (36,000)(1) 6,000
-------------- ------------- ---------------
Total Current Assets 2,669,000 (229,000) 2,440,000
-------------- ------------- ---------------
Property and equipment - at cost, net 676,000 (646,000)(1) 30,000
-------------- ------------- ---------------
Other Assets:
Intangible assets, net 621,000 (526,000)(1) 95,000
Other 15,000 (12,000)(1) 3,000
-------------- ------------- ---------------
Total Other Assets 636,000 (538,000) 98,000
-------------- ------------- ---------------
Total Assets $ 3,981,000 $ (1,413,000) $ 2,568,000
============== ============= ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Current portion of long-term debt $ 2,486,000 $ (1,720,000)(2) $ 766,000
Accounts payable - trade 867,000 100,000 (1) 967,000
Accrued expenses 197,000 -- 197,000
Notes payable 150,000 -- 150,000
-------------- ------------- ---------------
Total Current Liabilities 3,700,000 (1,620,000) 2,080,000
-------------- ------------- ---------------
Long-term debt, net of current portion above 58,000 -- 58,000
-------------- ------------- ---------------
Commitments and contingencies -- -- --
Stockholders' Equity:
Preferred stock 441,000 -- 441,000
Common stock 15,000 -- 15,000
Additional paid in capital 14,374,000 -- 14,374,000
(1,000)(1)
Accumulated deficit (14,607,000) 208,000 (2) (14,400,000)
-------------- ------------- ---------------
Total Stockholders' Equity 223,000 207,000 430,000
-------------- ------------- --------------
Total Liabilities and Stockholders' Equity $ 3,981,000 $ (1,413,000) $ 2,568,000
============== ============= ===============
The accompanying notes are an integral
part of these proforma condensed consolidated financial statements.
F-3
SPARTA SURGICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED AUGUST 31, 2001
Proforma Proforma
Adjustments Combined
------------- ----------
Net sales $1,680,000 $ (1,210,000)(3) $ 470,000
Cost of sales 620,000 (408,000)(3) 212,000
------------ ------------- ----------
Gross Profit 1,060,000 (802,000) 258,000
Selling, general and administrative expenses 1,068,000 (735,000)(3) 333,000
Depreciation and amortization expenses 253,000 (181,000)(3) 72,000
Research, development and engineering expenses 183,000 (28,000)(3) 155,000
------------ ------------- -----------
Loss From Operations (444,000) 142,000 (302,000)
------------ ------------ -----------
Other Income (Expense):
Interest expense (214,000) 49,000 (4) (165,000)
----------- ------------- -----------
Total Other Income (Expense) (214,000) 49,000 (165,000)
----------- ------------- -----------
Net loss (658,000) 191,000 (467,000)
Preferred stock dividends (21,000) -- (21,000)
----------- ------------- -----------
Net Loss Applicable to Common Stockholders $ (679,000) $ 191,000 $ (488,000)
=========== ============= ===========
Basic and diluted net loss per common share $ (.09) $ (.06)
=========== ===========
Weighted average shares used to calculate basic and
diluted net loss per common share 7,938,237 7,938,237
============ ============
The accompanying notes are an integral
part of these proforma condensed consolidated financial statements.
F-4
SPARTA SURGICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED FEBRUARY 28, 2001
Proforma Proforma
Adjustments Combined
-------------- ------------
Net sales $ 3,408,000 $ (2,170,000)(3) $ 1,238,000
Cost of sales 1,586,000 (898,000)(3) 688,000
------------ -------------- ------------
Gross Profit 1,822,000 (1,272,000) 550,000
Selling, general and administrative expenses 2,354,000 (837,000)(3) 1,517,000
Depreciation and amortization expenses 577,000 (359,000)(3) 218,000
Research, development and engineering expenses 269,000 (73,000)(3) 196,000
------------ -------------- ------------
Loss From Operations (1,378,000) (3,000) (1,381,000)
------------ -------------- ------------
Other Income (Expense):
Interest expense (366,000) 90,000 (4) (276,000)
------------- -------------- ------------
Total Other Income (Expense) (366,000) 90,000 (276,000)
------------ -------------- ------------
Net Loss (1,744,000) 87,000 (1,657,000)
Preferred stock dividends (42,000) -- (42,000)
------------ -------------- ------------
Net Loss Applicable to Common Stockholders $(1,786,000) $ 87,000 $(1,699,000)
=========== ============= ===========
Basic and diluted net loss per common share $ (.26) $ (.25)
=========== ===========
Weighted average shares used to calculate basic
and diluted net loss per common share 6,898,464 6,898,464
=========== ===========
The accompanying notes are an integral
part of these proforma condensed consolidated financial statements.
F-5
SPARTA SURGICAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PROFORMA CONDENSED FINANCIAL STATEMENTS
1. Basis of Presentation
---------------------
On October 12, 2001, the Company sold substantially all the assets
related to its electrosurgical operations to Q2 Medical for
approximately $1,816,000 in cash. The assets sold consist of the
Company's electrosurgical operations and certain other assets
associated with its electrosurgical business, excluding cash and
accounts receivable. The Agreement also provides for payment of
approximately $71,000 under a Transition Agreement to the Company for
services to be performed to assist in the transfer of the
electrosurgical business to Q2 Medical.
In connection with the sale, the Company paid Bank of America all
amounts required under the terms of a Settlement Agreement between the
Company and Bank of America. The Company owed Bank of America
$1,710,000 as of October 12, 2001 plus accrued interest and settled
its debt for a payment of $1,512,000 which results in forgiveness of
debt income of approximately $198,000 which will be recognized by the
Company in the third quarter.
The proforma condensed consolidated balance sheet as of August 31,
2001 gives effect to the sale of substantially all assets of the
Company's electrosurgical business to Q2 Medical as if the sale took
place on August 31, 2001.
The proforma condensed consolidated statement of operations for the
six months ended August 31, 2001 and for the year ended February 28,
2001 includes the sale of substantially all the assets of the
Company's electrosurgical business as if the transaction was completed
on March 1, 2000. The loss on sale of the electrosurgical business is
not included in the proforma condensed statement of operations. The
estimated loss on sale as if the sale took place on August 31, 2001
would have been approximately $1,000.
2. Proforma Net Income (Loss) Per Share of Common Stock
----------------------------------------------------
The proforma net income (loss) per share of common stock is based on
the weighted average number of common shares outstanding during the
period.
3. Proforma Adjustments
--------------------
Adjustments to present the proforma condensed consolidated financial
statements are as follows:
1. Adjustment to record the sales proceeds for the sale of
substantially all the assets of the Company's
electrosurgical business to Q2 Medical and to remove the
assets sold as of August 31, 2001. Includes payment of
estimated legal, accounting and other estimated costs of the
sale of approximately $100,000.
2. Adjustment to record the removal of the notes payable to
Bank of America which were paid out of the proceeds at
closing.
3. Adjustment to remove the operations of the electrosurgical
business for the period.
4. Adjustment to remove the interest expense incurred on the
notes payable of the electrosurgical business. The notes are
assumed to have been repaid at the beginning of the year for
purposes of the statement of operations.
F-6