UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549
                             ----------------------

                                    FORM 10-Q

        X             QUARTERLY REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE
   -----------
                      SECURITIES EXCHANGE ACT OF 1934

                      For the quarterly period ended May 31, 1998

                                       OR

                      TRANSITION REPORT PURSUANT TO SECTION 13 OR
                      15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                      For the transition period from _______ to ______

                      Commission File No. 0-7578

                          ELECTRO-CATHETER CORPORATION
             (Exact name of the Registrant as specified in Charter)

            New Jersey                                     22-1733406
           (State of Incorporation)                 (I.R.S. Employer ID Number)
                                              
           2100 Felver Court, Rahway, New Jersey                       07065   
           (Address of Principal Executive Offices)                  (Zip Code)

               Registrant's Telephone No. including Area Code: 732-382-5600

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the  Securities  Exchange Act of
1934  during  the  preceding  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

     Indicate the number of shares  outstanding of the issuer's common stock, as
of the latest practical date:

     As of July 6, 1998, the number of shares  outstanding  of the  Registrant's
common stock was 6,390,389 shares, $.10 par value


<PAGE>





                          ELECTRO-CATHETER CORPORATION




                                TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION                                      PAGE


Item 1.         Financial Statements (Unaudited):


          Condensed Comparative Balance Sheets
           May 31, 1998 and August 31, 1997                          1

          Condensed Comparative Statements of Operations -
           Three and Nine Months Ended May 31, 1998
            and May 31, 1997                                         2

          Condensed Comparative Statements of Cash Flows -
           Nine Months Ended May 31, 1998 and
            May 31, 1997                                             3

          Notes to Condensed Financial Statements                  4 - 7


Item 2.   Management's Discussion and Analysis of  Financial
           Condition and Results of Operations                     8 - 12

PART II. OTHER INFORMATION

Item 6.         Exhibits and Reports on Form 8-K                     13

SIGNATURES                                                           13

INDEX TO EXHIBITS                                                    14



                                        2

<PAGE>



PART I - FINANCIAL INFORMATION
Item 1. - Financial Statements
<TABLE>
                                                        ELECTRO-CATHETER CORPORATION
                                                    CONDENSED COMPARATIVE BALANCE SHEETS
                                                                (Unaudited)

<CAPTION>

                                                                      May 31,                            August 31,
                                                                         1998                                  1997
<S>                                                 <C>           <C>                    <C>           <C>    
                  ASSETS
Current assets:
  Cash and cash equivalents                                       $         -                          $     98,127
  Accounts receivable, net                                            759,133                               988,859
  Inventories
    Finished goods                                  447,388                              481,660
    Work-in-process                                 575,201                              490,621
    Materials and supplies                          310,497                              270,086
                                                    -------                            ---------

   Total inventories                                                1,333,086                             1,242,367
     Prepaid expenses and
         other current assets                                          64,885                               168,781
                                                                   ----------                            ----------
   Total current assets                                             2,157,104                             2,498,134

Property, plant and equipment, net                                    684,002                               777,663
Other assets, net                                                     276,238                                97,275
                                                                      -------                             ---------
Total assets                                                        3,117,344                             3,373,072
                                                                    =========                             =========

                  LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Current installments of subordinated
          debentures due to T Partnership                             225,000                                     -
   Current installments of capitalized
          lease obligations                                            65,629                                50,734
   Accounts payable and accrued expenses                            1,382,143                             1,045,406
   Accrued litigation expenses                                        288,400                               443,820
                                                                      -------                               -------
Total current liabilities                                           1,961,172                             1,539,960

Subordinated debentures due to T Partnership,
   excluding current installments                                   1,922,125                             1,747,125
Capitalized lease obligation, excluding
   current installments                                               219,285                               222,277
                                                                      -------                             ---------
Total liabilities                                                   4,102,582                             3,509,362
                                                                    ---------                             ---------

Stockholders' deficiency:
   Common stock                                                       639,039                               638,361
   Additional paid-in capital                                      10,683,491                            10,682,008
   Accumulated deficit                                            (12,307,768)                          (11,456,659)
                                                                  -----------                            ----------
   Total stockholders' deficiency                                (    985,238)                             (136,290)
                                                                -------------                             ---------
   Total liabilities and stockholders' deficiency              $    3,117,344                         $   3,373,072
                                                                    =========                             =========

See accompanying notes to condensed financial statements.

</TABLE>

                                                                  1

<PAGE>



<TABLE>


                                                    ELECTRO-CATHETER CORPORATION
                                           CONDENSED COMPARATIVE STATEMENTS OF OPERATIONS
                                                             (Unaudited)

<CAPTION>
                                                    Three Months Ended                              Nine Months Ended
                                                          May 31,                                        May 31,

                                             1998                        1997                1998                   1997
                                             ----                        ----                ----                   ----
<S>                                    <C>                       <C>                   <C>                 <C>    

Net revenues                           $  1,502,537              $    1,718,954        $  4,152,546        $    5,138,259

Cost of goods sold                        1,119,482                   1,082,277           2,836,541             2,858,408
                                          ---------                   ---------           ---------             ---------


           Gross  profit                    383,055                     636,677           1,316,005             2,279,851

Operating expenses:
    Selling, general and administrative     409,404                     561,074           1,525,871             1,759,889
    Research and development                118,734                     225,198             416,224               672,979
                                            -------                     -------             -------               -------

Operating loss                             (145,083)                   (149,595)           (626,090)             (153,017)

Other income (expense):
        Interest expense                    (77,607)                    (70,073)           (225,019)             (185,562)
                                             ------                     -------            --------              --------

        Net loss                        $  (222,690)             $     (219,668)       $   (851,109)       $     (338,579)
                                           ========                   =========            ========              ========

Basic and diluted loss per share            $ (0.03)                     $(0.03)            $ (0.13)              $ (0.05)
                                              =====                        ====               =====                  ====

Dividends per share                            None                        None               None                   None

Weighted average shares outstanding       6,390,389                    6,383,611          6,387,000             6,378,661
    See accompanying notes to condensed financial statements.

</TABLE>


                                                                    2

<PAGE>

<TABLE>


                                                      ELECTRO-CATHETER CORPORATION
                                             CONDENSED COMPARATIVE STATEMENTS OF CASH FLOWS
                                                               (Unaudited)
                                                                                                Nine Months Ended
<CAPTION>
                                                                                                    May 31,
                                                                                           1998                        1997
                                                                                           ----                        ----
<S>                                                                                   <C>                       <C>    
Increase (decrease) in cash: 
Cash flows from operating activities:
    Net loss                                                                          $   (851,109)             $    (338,579)
    Adjustments:
       Depreciation                                                                         95,746                    107,658
       Amortization of deferred charges                                                      6,250                      6,250
    Changes in assets and liabilities:
       Decrease (increase) in accounts receivable, net                                     229,726                   (131,067)
       (Increase) decrease in inventories                                                  (90,719)                   393,392
       Decrease (increase) in prepaid expenses and
           other current assets                                                            103,896                   (174,642)
       (Increase) decrease in other assets                                                (185,213)                    14,105
       Decrease in deferred revenues                                                             -                   (144,293)
       Increase in accounts payable and accrued expenses                                   230,467                    163,563
                                                                                           -------                    -------

    Net cash used in operating activities                                                 (460,956)                  (103,613)
                                                                                           -------                    -------

Cash flows from investing activities:
    Cash purchases of property, plant and equipment                                         (2,085)                   (66,756)
                                                                                            -------                   --------

    Net cash used in investing activities                                                       (2,085)                   (66,756)
                                                                                             -----                    --------

Cash flows from financing activities:

    Proceeds from Stock Purchase Plan                                                        2,161                      3,682
    Proceeds from loan from T Partnership                                                  400,000                    100,000
    Reductions of debt and capitalized lease
       obligations                                                                         (37,247)                  (119,384)
                                                                                            ------                    -------

    Net cash (used in) provided by financing activities                                    364,914                    (15,702)
                                                                                           -------                    --------

Net decrease in cash                                                                       (98,127)                  (186,071)

Cash at beginning of period                                                                 98,127                    275,283
                                                                                            ------                    -------

Cash at end of period                                                                       $  -0-               $     89,212
                                                                                               ===                     ======

Interest paid                                                                          $   221,420               $   185,5610
                                                                                           =======                 ==========

    Property, plant and equipment acquired under
       capitalized lease obligations                                                   $    49,150               $    196,125
                                                                                            ======                    =======
See accompanying notes to condensed financial statements.

</TABLE>
                                                                  3

<PAGE>



                          ELECTRO-CATHETER CORPORATION

                     NOTES TO CONDENSED FINANCIAL STATEMENTS


Note 1  Basis of Presentation
------  ---------------------

     In  the  opinion  of  management,   the  accompanying  unaudited  condensed
financial  statements  contain  all  adjustments   (consisting  only  of  normal
recurring  accruals)  necessary  to present  fairly the  financial  position  of
Electro-Catheter  Corporation  as of May 31, 1998, the results of operations for
the three and nine months ended May 31, 1998 and May 31, 1997 and  statements of
cash flows for the nine months ended May 31, 1998 and May 31, 1997,  but are not
necessarily indicative of the results to be expected for the full year.

     The  financial  statements  have  been  prepared  in  accordance  with  the
requirements of Form 10-Q and consequently do not include  disclosures  normally
made in an Annual Report on Form 10-K.  Accordingly,  the  financial  statements
included herein should be reviewed in conjunction with the financial  statements
and notes thereto  included in the Company's  Annual Report on Form 10-K for the
fiscal year ended August 31, 1997.

Note 2   Other Assets
------   ------------

     In  connection  with the proposed  merger (see Note 4 to Notes to Condensed
Financial Statements), the Company has incurred $174,290 of expenses through May
31,  1998.  These  expenses  are  included in Other  Assets in the  accompanying
balance sheet at May 31, 1998.  Consummation  of the merger is subject to, among
other things, raising capital. Upon consummation of the merger, these costs will
either be charged to additional paid-in capital with equity financing, amortized
over the term of any debt or charged to operations if the merger does not occur.

Note 3  Subordinated Debentures
------  -----------------------

     In September  1997, in December 1997, in January 1998, and in May 1998, the
Company borrowed additional amounts from the T Partnership,  in each case in the
amount of $100,000,  under  substantially  the same terms and  conditions as its
previous borrowings,  without issuing any additional warrants. Under the current
arrangement,  the Company is obligated to comply with a financial covenant to be
tested on a monthly  basis.  Non-compliance  by the Company  with such  covenant
would  allow the T  Partnership  to declare an event of default  and  accelerate
repayment  of  indebtedness.  The Company is currently  in  compliance  with the
covenant.  The total  indebtedness  due to the T Partnership at May 31, 1998 was
$2,147,125.

Note 4   Commitments and Contingencies
------   -----------------------------

FDA Warning Letter
------------------

     The  products  developed  and  manufactured  by the Company  come under the
jurisdiction  of the Food and Drug  Administration  ("FDA") of the United States
Department of Health and Human Services.  Since the devices  manufactured by the
Company are  intended  for "human  use",  as defined by the FDA, the Company and
said devices are subject to FDA regulations,  which,  among other things,  allow
for  the  conduct  of  routine  detailed  inspections  of  device  manufacturing
establishments  and  confirmation  of adherence to "current  good  manufacturing
practices" ("cGMP") in the manufacture of medical devices.


                                        4

<PAGE>



     In  February  1997,  the FDA  conducted  an  inspection  and  audit  of the
Company's facilities and practices as a result of which the FDA issued a Warning
Letter  regarding  non-compliance  by the  Company  with  certain  cGMPs  in the
manufacture of its products.  Electro-Catheter Corporation communicated with the
FDA  its  intentions  to  remedy  the  non-compliance,  established  a plan  and
timetable to effectuate such  remediation and has diligently  worked to take the
necessary  corrective  actions.  A subsequent FDA inspection in September  1997,
indicated  that while  substantial  progress had been made,  not all  corrective
actions  have been  completed.  The  Company  is  continuing  in its  efforts to
complete  such  actions and it is  Electro-Catheter  Corporation's  intention to
inform the FDA by late  September 1998 that it has completed such actions and is
ready for  reinspection.  There can be no assurance,  however,  that the Company
will be ready for such  reinspection in September 1998 nor that it will pass any
such  reinspection  when it  occurs.  While the  Company is  currently  under no
restrictions by the FDA regarding the  manufacture or sale of its products,  the
Company is unable to  precisely  determine  the  short-term  economic  impact of
instituting the required corrective actions,  and there can be no assurance that
the FDA will not take further action including  seizure of products,  injunction
and/or civil penalties, if the necessary corrective actions are not completed on
a timely basis.  At this time, the Company is unable to precisely  determine the
short-term  adverse  economic  impact  which will  result from  instituting  the
corrective  actions,  but the  voluntary  discontinuation  of  manufacturing  of
certain  products  and the  delay in the sale of other  products  has  adversely
affected sales by an estimated 10%.

Litigation
----------

     In September  1997, a Superior Court jury in Middlesex  County,  New Jersey
found  the  Company  liable  for  age  discrimination  in  connection  with  its
termination  of an  employee  in April 1994.  The jury  awarded  the  terminated
employee $283,000 plus attorney's fees and expenses and prejudgment  interest in
the combined amount of  approximately  $47,990.  The Company also incurred legal
costs from September 1996 through  September 1997 in the amount of approximately
$115,665.  All  of the  aforementioned  costs  were  recorded  in the  financial
statements  for the year ended August 31, 1997.  The Company  filed an appeal of
the judgment.

     Pending the Company's appeal,  the plaintiff,  in an effort to execute upon
the  judgment  rendered in his favor,  levied on certain of the  Company's  bank
accounts,  thereby  freezing the available funds.  Notwithstanding  management's
belief that the Company had arguments supporting its appeal,  management weighed
the  considerable  cash  requirements  of an appeal bond, the costs of continued
efforts relative to the appeal, and the need to vacate the levies to satisfy the
Company's  immediate cash  requirements  against the likelihood of prevailing on
its  appeal and the terms of a possible  settlement,  and on April 8, 1998,  the
Company  entered into a Settlement  Agreement with the plaintiff.  Under the key
terms of the  Settlement  Agreement,  the matter has been settled for the sum of
$305,000  payable as follows:  (i) by a lump sum payment of $65,000  within five
business  days of the date of the  Settlement  Agreement  and (ii) the  balance,
bearing interest at the rate of 6% per annum, payable in monthly installments of
$10,000,  plus  interest,  commencing  July 1, 1998.  The  Settlement  Agreement
provides that a default in any monthly payment which remains unpaid for a period
of ten days allows the plaintiff to declare a default and accelerate the payment
of the entire  outstanding  balance  with  interest.  The  Company  has made the
payments due to date on a timely basis.

Merger
------

     On January 20, 1998, the  Company  entered  into an  Agreement  and Plan of
Reorganization   with  Cardiac  Control  Systems,   Inc.,   ("CCS")  a  Delaware
corporation  located  in Palm  Coast,  Florida,  to  effect a merger  of the two
companies  targeted toward the  development and marketing of advanced  specialty
electrophysiology   products.   Currently,  the  structure  of  the  transaction
contemplates the merger of a newly-created,  wholly-owned subsidiary of CCS into
and  with  the  Company  as a  result  of  which  the  Company  shall  become  a
wholly-owned  subsidiary of CCS and the  stockholders of the Company will become

                                        5

<PAGE>


stockholders   of   Catheter   Technology  Group,   Inc.   ("CTG"),  a  Delaware
corporation  and  parent  holding  company  of CCS,  to be  formed  as part of a
restructuring  in  connection  with the merger.  By virtue of the  merger,  each
outstanding  share of common  stock,  $.10 par  value,  of the  Company  will be
converted  into the right to receive  one-fifth  of a share of common stock $.10
par value of CTG. Pursuant to the restructuring,  CTG will succeed to all rights
and  obligations  of CCS and will become the  successor  issuer of CCS such that
stockholders  of  CCS  will  become  stockholders  of  CTG.  Subsequent  to  the
restructuring,  it is  intended  that CTG will  undergo a 1 for 5 reverse  stock
split reducing the number of shares of common stock, $.10 par value, of CTG (the
"CTG Common Stock")  outstanding to approximately  529,748 shares.  By virtue of
the merger,  subsequent to the reverse stock split,  each  outstanding  share of
common stock, $.10 par value, of the Company will be converted into the right to
receive  one-fifth of a share of CTG Common Stock,  effectively equal to an even
exchange of shares prior to such reverse stock split.

     Upon closing of the transaction, $1,000,000 of the Company's senior debt is
intended  to be  redeemed  by:  (a) the  issuance  by the  surviving  subsidiary
corporation in the merger (the  "Surviving  Subsidiary") to the T Partnership of
an aggregate of 1,000 shares of Series A 9% preferred  stock,  no par value (the
"Series A Preferred Stock") of the Surviving Subsidiary, which shares shall have
a liquidation value equal to, and shall be issued in redemption of, $1.0 million
of the  indebtedness and shall be convertible into shares of CTG Common Stock at
a conversion  price equal to 120% of the price per share of the CTG Common Stock
used as the basis for the  consideration  given  (whether  in the form of issued
stock, if any, or warrants,  provided the exercise price of the warrant reflects
the current market value of the CTG Common Stock,  or otherwise) in exchange for
any capital raised in satisfaction  of the financing  contingency to the merger;
(b) the delivery to the T Partnership  of a CTG 9% conditional  promissory  note
pursuant to which CTG is obligated to pay only those  amounts  which are due but
not paid to the  holders of the  Series A  Preferred  Stock,  or in the event of
certain other non-monetary defaults such as bankruptcy,  liquidation,  a sale of
substantially all assets, a change of ownership of the surviving subsidiary,  or
a default in the herein below mentioned secured  promissory note (any payment or
conversion  of the  Series A  Preferred  Stock  shall be deemed a payment on the
conditional note, and any principal or interest payments on the conditional note
shall be deemed  redemptions  and payments  under the Series A Preferred  Stock,
with the result being that CCS shall not be obligated to make aggregate payments
with  respect to both the Series A  Preferred  Stock and  conditional  note,  in
excess of $1.0 million plus interest); and (c) the delivery to the T Partnership
of a secured promissory note made by CTG in an amount not to exceed $1.3 million
(which  amount  shall  be  the  remaining   amount  of  The  Company's   secured
indebtedness  to the T Partnership  exclusive of the amount  redeemed  under (a)
above),  bearing  interest at the rate of 12% per annum payable  quarterly,  the
principal  amount of which shall be due and payable three years from the date of
execution  of such note (the terms of the  security  for the note have yet to be
agreed upon).

     Consummation of the merger is subject,  among other things, to: (i) raising
sufficient capital to support the product development efforts of both companies;
(ii) declaration of the  effectiveness of the registration  statement filed with
the Securities and Exchange Commission in connection with the merger;  (iii) the
approval  of  the  merger  and  the  transactions  contemplated  thereby  by the
stockholders  of  Electro-Catheter  Corporation and CCS; (iv) the receipt of all
required regulatory approvals by the two companies.

     CCS develops,  manufactures  and sells a broad line of implantable  cardiac
pacemakers,  pacemaker  leads and  related  products  which  Company  management
believes are  complementary  to its own product lines.  The Company believes the
merger may allow certain efficiencies to improve operating  performance and that
the  broader  product  line  may  provide  for a more  effective  marketing  and
distribution process.  There can be no assurance,  however, that consummation of
the merger will yield positive operating results in the future.

     From  December 1997 through  March 1998,  the Company also had  discussions
regarding  acquisition by another firm based outside the United States. In early
April 1998,  the  Company's  Board of Directors  terminated  these  discussions,
believing  that  the  terms  proposed  were  not in  the  best  interest  of the
stockholders.

     International  sales should be adversely affected in Europe  (approximately
17% of total revenues) for about the next six months as the Company was not able
to obtain the "CE" Mark on its products on a timely basis,  in order to continue
to sell into this market.  The effort to obtain the "CE" Mark is continuing  and
the  Company is  hopeful of  obtaining  this  designation  before the end of the
calendar  year on its major  products  in order to  continue  selling  into this
market. However, there can be no assurance that the Company will obtain the "CE"
Mark or maintain  the same level of revenue upon  receiving  the "CE" Mark as it
did previously.


                                        6

<PAGE>



Note 5   Reclassifications
------   -----------------

     Certain reclassifications have been made to conform to the fiscal year 1998
presentation.

Note 6   Earnings Per Share
------   ------------------

     In February 1997, the Financial Accounting Standards Board issued Statement
of Financial  Accounting  Standard No. 128 "Earnings Per Share" (SFAS 128). SFAS
128 supersedes  Accounting  Principles  Board Opinion No. 15, Earnings Per Share
and specifies the  computation,  presentation  and disclosure  requirements  for
earnings per share for entities with  publicly  held common  stock.  SFAS 128 is
effective for financial  statements  relating to both interim and annual periods
ending after December 15, 1997.

     Basic loss per share is based on net loss for the relevant period,  divided
by the weighted average number of common shares  outstanding  during the period.
Diluted loss per share is based on net loss for the relevant period,  divided by
the weighted  average  number of common  shares  outstanding  during the period.
Common share equivalents, such as outstanding stock options, are not included in
the calculation since the effect would be antidilutive.

                                        7

<PAGE>




Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
    CONDITION AND RESULTS OF OPERATIONS
    ------------------------------------------------------

General
-------

     The  following  is   management's   discussion   and  analysis  of  certain
significant  factors which have affected the Company's  financial  condition and
results of operations during the periods included in the accompanying  financial
statements.

     Statements contained in and preceding management's  discussion and analysis
include various  forward-looking  information   that  is based on data currently
available to management and management's  beliefs and assumptions.  When used in
this  report,  the words  "anticipates,"  estimates,"  believes,"  "plans,"  and
similar expressions are intended to identify forward-looking statements, but are
not the exclusive  means of identifying  such  statements.  Such  statements are
subject to risks and  uncertainties,  and the Company's  actual results may vary
materially  from those  anticipated,  estimated or projected  due to a number of
factors,  including,  without  limitation,  the competitive  environment for the
Company's  products  and  services,  and other  factors set forth in reports and
other documents filed by the Company with the Securities and Exchange Commission
from time to time.


Results of Operations
---------------------

     On January 20, 1998,  the Company  entered  into an  Agreement  and Plan of
Reorganization   with  Cardiac  Control  Systems,   Inc.,   ("CCS")  a  Delaware
corporation  located  in Palm  Coast,  Florida,  to  effect a merger  of the two
companies  targeted toward the  development and marketing of advanced  specialty
electrophysiology   products.   Currently,  the  structure  of  the  transaction
contemplates the merger of a newly-created,  wholly-owned subsidiary of CCS into
and  with  the  Company  as a  result  of  which  the  Company  shall  become  a
wholly-owned  subsidiary of CCS and the  stockholders of the Company will become
stockholders of Catheter Technology Group, Inc. ("CTG"), a Delaware  corporation
and parent holding  company of CCS, to be formed as part of a  restructuring  in
connection with the merger.  By virtue of the merger,  each outstanding share of
common stock, $.10 par value, of the Company will be converted into the right to
receive  one-fifth of a share of common stock $.10 par value of CTG. Pursuant to
the  restructuring,  CTG will succeed to all rights and  obligations  of CCS and
will  become  the  successor  issuer of CCS such that  stockholders  of CCS will
become stockholders of CTG. Subsequent to the restructuring, it is intended that
CTG will undergo a 1 for 5 reverse stock split  reducing the number of shares of
common stock,  $.10 par value,  of CTG (the "CTG Common  Stock")  outstanding to
approximately 529,748 shares. By virtue of the merger, subsequent to the reverse
stock split,  each  outstanding  share of common stock,  $.10 par value,  of the
Company will be converted into the right to receive  one-fifth of a share of CTG
Common  Stock,  effectively  equal to an even  exchange of shares  prior to such
reverse stock split.

     Upon closing of the transaction, $1,000,000 of the Company's senior debt is
intended  to be  redeemed  by:  (a) the  issuance  by the  surviving  subsidiary
corporation in the merger (the  "Surviving  Subsidiary") to the T Partnership of
an aggregate of 1,000 shares of Series A 9% preferred  stock,  no par value (the
"Series A Preferred Stock") of the Surviving Subsidiary, which shares shall have
a liquidation value equal to, and shall be issued in redemption of, $1.0 million
of the  indebtedness and shall be convertible into shares of CTG Common Stock at
a conversion  price equal to 120% of the price per share of the CTG Common Stock
used as the basis for the  consideration  given  (whether  in the form of issued
stock, if any, or warrants,  provided the exercise price of the warrant reflects
the current market value of the CTG Common Stock,  or otherwise) in exchange for
any capital raised in satisfaction  of the financing  contingency to the merger;
(b) the delivery to the T Partnership  of a CTG 9% conditional  promissory  note
pursuant to which CTG is obligated to pay only those  amounts  which are due but
not paid to the  holders  of the  Series A  Preferred  Stock or in the  event of
certain other non-monetary defaults such as bankruptcy,  liquidation,  a sale of
substantially all assets, a change of ownership of the surviving subsidiary,  or

                                        8

<PAGE>


a  default  in  the  herein  below  mentioned  secured   promissory   note  (any
payment or conversion of the Series A Preferred  Stock shall be deemed a payment
on  the  conditional  note,  and  any  principal  or  interest  payments  on the
conditional  note shall be deemed  redemptions  and payments  under the Series A
Preferred  Stock,  with the result being that CCS shall not be obligated to make
aggregate  payments  with  respect  to both the  Series A  Preferred  Stock  and
conditional note, in excess of $1.0 million plus interest); and (c) the delivery
to the T Partnership of a secured  promissory  note made by CTG in an amount not
to exceed  $1.3  million  (which  amount  shall be the  remaining  amount of The
Company's  secured  indebtedness  to the T  Partnership  exclusive of the amount
redeemed under (a) above), bearing interest at the rate of 12% per annum payable
quarterly,  the  principal  amount of which shall be due and payable three years
from the date of  execution of such note (the terms of the security for the note
have yet to be agreed upon).

     Consummation of the merger is subject,  among other things, to: (i) raising
sufficient capital to support the product development efforts of both companies;
(ii) declaration of the  effectiveness of the registration  statement filed with
the Securities and Exchange Commission in connection with the merger;  (iii) the
approval  of  the  merger  and  the  transactions  contemplated  thereby  by the
stockholders  of  Electro-Catheter  Corporation and CCS; (iv) the receipt of all
required regulatory approvals by the two companies.

     CCS develops,  manufactures  and sells a broad line of implantable  cardiac
pacemakers,  pacemaker  leads and  related  products  which  Company  management
believes are  complementary  to its own product lines.  The Company believes the
merger may allow certain efficiencies to improve operating  performance and that
the  broader  product  line  may  provide  for a more  effective  marketing  and
distribution process.  There can be no assurance,  however, that consummation of
the merger will yield positive operating results in the future.

     From  December 1997 through  March 1998,  the Company also had  discussions
regarding  acquisition by another firm based outside the United States. In early
April 1998,  the  Company's  Board of Directors  terminated  these  discussions,
believing  that  the  terms  proposed  were  not in  the  best  interest  of the
stockholders.

     Net revenues declined $216,417 (12.6%) and $985,713 (19.2%),  respectively,
for the three and nine  months  ended May 31,  1998 as compared to the three and
nine months ended May 31, 1997.  Product revenues  increased  $31,210 (2.1%) for
the three  months  ended May 31, 1998 as compared to the same three month period
in the prior fiscal year.  However,  product revenues decreased $471,238 (10.7%)
for the nine  months  ended May 31,  1998 as  compared to the same period in the
prior fiscal year.  Contract  research and development  declined $240,529 (100%)
and $544,293 (100%),  respectively,  for the three and nine months ended May 31,
1998 as compared to the three and nine months ended May 31, 1997. Licensing fees
and royalty income increased $11,902 for the three months ended May 31, 1998 and
declined  $33,309 for the nine month  period.  For the nine months ended May 31,
1998 sales to an original  equipment  manufacturing  ("OEM") customer  increased
$63,727,  however,  revenues from this customer  declined  $19,000 for the three
month period ended May 31, 1998.

     Domestic sales decreased  $74,266 (7.4%) and $353,934 (11.6%) for the three
and nine  months  ended May 31,  1998,  respectively,  as  compared  to the same
periods in the prior year.  These decreases are primarily due to the Company not
having an approved  electrophysiology ablation catheter, lack of new products, a
continued  decline  in demand for the  Company's  older  products  in pacing and
monitoring,   backorders,   as  well  as  the  impact  of  not  replacing  sales


                                        9

<PAGE>

representatives   who   have left  the Company. International revenues decreased
$117,304 (8.6%) for the first nine months of fiscal year 1998 as compared to the
first nine months of fiscal year 1997. The decline in international revenues for
the nine month period is attributed  to the lack of new  products,  lower demand
for the Company's  electrophysiology  products, product redesign problems, lower
prices due to  competition  and  backorders.  For the three months ended May 31,
1998, international revenues increased $105,476 (23.5%) as compared to the three
months  ended May 31,  1997.  This  increase is  attributed  to new  business in
countries where the Company has had representation and the timing of orders from
distributors.  This  increasing  trend is not  expected  to continue in the near
term.  International sales should be adversely affected in Europe (approximately
17% of total revenues) for about the next six months as the Company was not able
to obtain the "CE" Mark on its products on a timely basis,  in order to continue
to sell into this market.  The effort to obtain the "CE" Mark is continuing  and
the  Company is  hopeful of  obtaining  this  designation  before the end of the
calendar  year on its major  products  in order to  continue  selling  into this
market. However, there can be no assurance that the Company will obtain the "CE"
Mark or maintain  the same level of revenue upon  receiving  the "CE" Mark as it
did previously.

     The Company's  insufficient financing has hampered its ability to introduce
new products to market and to correct the redesign issues,  in order to maintain
sales at its prior levels.

     Gross profit  dollars  decreased  $253,622  (39.8%) and  $963,846  (42.3%),
respectively,  for the three and nine  months  ended May 31, 1998 as compared to
the three and nine  months  ended  May 31,  1997.  This  decrease  is  primarily
attributed to decreased  production levels related to the lower sales volume, in
addition  to  writeoffs  of  certain   inventories   which  were   scrapped  for
sterilization  samples,  evaluation and testing  failures and the increased cost
associated with regulatory compliance.  The lower volume continues to negatively
impact gross profit.

     Selling, general and administrative expenses decreased $151,670 (27.0%) and
$234,018 (13.3%), respectively, for the three and nine months ended May 31, 1998
as compared to the same periods  last year.  The three months ended May 31, 1998
includes an adjustment of $144,068 to reclassify  expenses  associated  with the
merger  to  other  assets  (see  Note  2 to  Notes  to the  Condensed  Financial
Statements).  Excluding this  adjustment,  selling,  general and  administrative
expenses  decreased  only $35,602 (6.3%) for the three months ended May 31, 1998
as compared to the three  months  ended May 31, 1997.  The  decreases  primarily
reflects  lower  domestic  and  international  selling  expenses   substantially
attributable  to the loss  of   field   sales  personnel  that have not yet been
replaced and cutbacks in international activities.

     Research and development  expenses  decreased $106,464 (47.3%) and $256,755
(38.2%),  respectively,  for the three  and nine  months  ended May 31,  1998 as
compared to the same periods in the prior fiscal year.  This  decrease  reflects
the  lower  level of R&D  efforts.  The  decrease  is  primarily  attributed  to
decreased  personnel  and lower  material,  supply,  consulting  and  recruiting
expenses.  In the prior fiscal year, costs associated with billable research and
development activities were charged to cost of revenues.  There were no contract
research and development activities during the nine months ended May 31, 1998.

     Interest expense increased as a result of the increased borrowings from the
T Partnership and interest on capitalized lease obligations.

     

                                       10

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     The Company is reviewing  its computer  programs and systems to ensure that
the programs and systems will function properly and be Year 2000 compliant.  The
Company presently  believes that the Year 2000 problem will not pose significant
operational  problems for the Company's computer systems.  The estimated cost of
these  efforts  are not  expected  to be  material  to the  Company's  financial
position or any year's result of operations,  although there can be no assurance
to this  effect.  In addition,  the Year 2000 problem may impact other  entities
with which the Company  transacts  business,  and the Company cannot predict the
effect of the Year 2000 problem on such entities.  The Company is contacting its
major vendors to ascertain if any potential problems exist.

Liquidity and Capital Resources
-------------------------------

     At May 31, 1998, working capital decreased $762,242 to $195,932 from August
31, 1997. The current ratio was 1.1 to 1 at May 31, 1998 as compared to 1.6 to 1
at August 31, 1997.  Net cash used in operating  activities was $460,956 for the
nine  months  ended May 31,  1998 as  compared  to  $103,613  used in  operating
activities  for the nine  months  ended  May 31,  1997.  This  increase  in cash
required for operations is primarily attributed to the increase in the Company's
losses for the nine month  period,  increase in other  assets which is primarily
associated  with the expenses in  connection  with the proposed  merger,  higher
inventories  and increase in accounts  payable  offset by a decrease in accounts
receivable  and other current  assets.  The Company was able to satisfy its cash
requirements  with  borrowings  from the T  Partnership,  cost saving  measures,
especially in the sales and marketing area,  where sales personnel have not been
replaced, cash on hand and extending its accounts payable.

     In September 1997, a Superior Court jury in Middlesex  County,  New Jersey,
found  the  Company  liable  for  age  discrimination  in  connection  with  its
termination  of an  employee  in April 1994.  The jury  awarded  the  terminated
employee $283,000 plus attorney's fees and expenses and prejudgment  interest in
the combined amount of  approximately  $47,990.  The Company also incurred legal
costs from September 1996 through  September 1997 in the amount of approximately
$115,665.  All  of the  aforementioned  costs  were  recorded  in the  financial
statements  for the year ended August 31, 1997.  The Company  filed an appeal of
the judgement.

     Pending the Company's appeal,  the plaintiff,  in an effort to execute upon
the  judgment  rendered in his favor,  levied on certain of the  Company's  bank
accounts,  thereby  freezing the available funds.  Notwithstanding  management's
belief that the Company had arguments supporting its appeal,  management weighed
the  considerable  cash  requirements  of an appeal bond, the costs of continued
efforts relative to the appeal, and the need to vacate the levies to satisfy the
Company's  immediate cash  requirements  against the likelihood of prevailing on
its  appeal and the terms of a possible  settlement,  and on April 8, 1998,  the
Company  entered into a Settlement  Agreement with the plaintiff.  Under the key
terms of the  Settlement  Agreement,  the matter has been settled for the sum of
$305,000  payable as follows:  (i) by a lump sum payment of $65,000  within five
business  days of the date of the  Settlement  Agreement  and (ii) the  balance,
bearing interest at the rate of 6% per annum, payable in monthly installments of
$10,000,  plus  interest,  commencing  July 1, 1998.  The  Settlement  Agreement
provides that a default in any monthly payment which remains unpaid for a period
of ten days allows the plaintiff to declare a default and accelerate the payment
of the entire  outstanding  balance  with  interest.  The  Company  has made the
payments due to date on a timely basis.

    

                                       11

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     The Company's  ability to continue  with its plans is  contingent  upon its
ability to either obtain sufficient cash flow from operations, obtain additional
financing, or consummate a combination with another company. The Company has had
difficulty in paying its obligations  and, as a result,  has delayed payments to
some  vendors.  The Company  continues  to evaluate  its plans to obtain  funds.
Consummation  of the merger is  subject,  among  other  things,  to: (i) raising
sufficient capital to support the product development efforts of both companies;
(ii) declaration of the  effectiveness of the registration  statement filed with
the Securities and Exchange Commission in connection with the merger;  (iii) the
approval  of  the  merger  and  the  transactions  contemplated  thereby  by the
stockholders  of  Electro-Catheter  Corporation and CCS; (iv) the receipt of all
required regulatory approvals by the two companies.

     Management  believes that this merger can offer  benefits to both companies
by taking advantage of economies of scale and elimination of redundant  efforts.
However,  there can be no assurance  that the merger will be consummated or that
the Company will be able to generate the funding required.

     Inflation  did not have a material  impact on the results of the  Company's
operations for the nine months ended May 31, 1998.


                                       12

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PART II. OTHER INFORMATION

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

               None

Signatures

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                               ELECTRO-CATHETER CORPORATION



Date:  July 15, 1998                            /S/Ervin Schoenblum
                                                -------------------
                                                Ervin Schoenblum
                                                Acting President


Date:  July 15, 1998                            /S/Joseph P. Macaluso
                                                ---------------------
                                                Joseph P. Macaluso
                                                Chief Financial Officer

                                       13

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                                INDEX TO EXHIBITS


27         Financial  data  schedule  which is submitted  electronically  to the
           Securities and Exchange  Commission for  information  only and is not
           filed.

                                       14

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