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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
February 11, 2002
SPARTA SURGICAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-11047 22-2870438
(State or other juris- (Commission (I.R.S. Employer ID
diction of incorporation) File Number) Number)
Olsen Centre
849 E Stanley Blvd, Livermore, CA. 94550
(Address of principal executive offices)
Registrant's telephone number, including area code (925) 373-0374
not applicable
(Former name or former address, if changed since last report)
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SPARTA SURGICAL CORPORATION
Form 8-K
ITEM 5 - OTHER EVENTS
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On October 10, 2001, Sparta Surgical Corporation's ("Sparta") wholly-owned
subsidiary Neslo Medical Inc., a successor to Sparta Olsen Electrosurgical Inc.
(hereinafter "Neslo"), sold substantially all the assets, (excluding cash and
accounts receivable), including intangible assets of electrosurgical business.
As a result, Neslo has few, if any assets, no employees and has essentially
ceased doing business. However, Sparta and Neslo will continue to have
significant on-going operating expenses and obligations, such as substantial
payments of accounts payable, rent and past due federal and state taxes (which
Neslo received notification from the Internal Revenue Service, that it intends
to levy and file a lien on certain assets of Neslo if payment is not made), and
other obligations, including certain equipment and facility leases under long
term leasing agreements, payable at approximately $28,000.00 per month for the
remaining thirty month facility lease obligation. Neslo vacated the facilities
on December 31, 2001, as it has limited working capital to pay any of its
obligations, including the rent under the leases. At the same time, Neslo
retained an exclusive broker to attempt to sublease the facilities.
On January 30, 2001, Neslo received a Three-Day Notice to Pay Rent or Quit in
it's Concord facility, and the notice states that the landlord has elected to
declare the leases to be forfeited in the event the rent is not paid in full
from the three day notice by Neslo. In the event Neslo is unable to sublet the
facilities, Sparta and Neslo is faced with the possibility that the landlord
will attempt to make a claim and ultimately seek a judgment under the leases and
other costs, which approximates in excess of $810,000.00. Neslo is in discussion
with the landlord to attempt to settle this matter, as it is willing to
surrender possession of the facilities immediately for a release from liability
for all present and future lease obligations. However, there can be no assurance
that Neslo will succeed in any settlement discussion or that Neslo will be able
to defend any potential legal actions from the landlord or from any other
secured and unsecured creditors for all of its obligations, as it has
essentially ceased doing business since October 10, 2001.
With respect to Sparta itself, Sparta's operations continue to be cash flow
negative, further straining their working capital position and therefore will
have a very difficult time to pay the aforementioned and other obligations. In
order to continue Sparta's operations it will be necessary to obtain additional
working capital immediately. There can be no assurance Sparta will obtain
financing in the near future due to Sparta's reduction of approximately 70% of
it's ongoing revenues, which resulted from the selling off substantially all of
the assets and business of Neslo's electrosurgical product line in October 2001,
as well as Sparta's losses from its operations. The failure to finalize
additional financing and these factors and others could have a material adverse
effect on Sparta's business, operating results and financial condition.
On February 1, 2002, Neslo and Thomas F. Reiner, Sparta's Chairman, CEO, as a
guarantor received a demand notice from Wells Fargo Bank for the payment of a
loan obligation in the amount of $44,623.00, with a maturity date of December
15, 2001. The demand notice also includes all legal fees and court costs in
connection with the collection of the loan.
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: February 11, 2002
By /s/ Thomas F. Reiner
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Thomas F. Reiner,
Chairman of the Board,
President and Chief Executive Officer