<PAGE>   1

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON D.C. 20549
                              ---------------------


   
                                    FORM 10-Q/A
                                  AMENDMENT NO. 2
    

( X )       Quarterly report pursuant to Section 13 or 15(d) of the Securities
            Exchange Act of 1934 For the quarter ended March 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 number 0-24540


                                 INCONTROL, INC.
             (Exact name of registrant as specified in its charter)


<TABLE>
<CAPTION>
                     DELAWARE                                                  91-1501619
--------------------------------------------------------------     ---------------------------------------
<S>                                                                <C>
(State or other jurisdiction of incorporation or organization)     (I.R.S. Employer Identification Number)
</TABLE>


                            6675 - 185TH AVENUE N.E.
                             REDMOND, WA 98052-6734
                                 (425) 861-9800
   (Address and telephone number of registrant's principal executive offices)

                              ---------------------


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 shorter periods that the registrant has been
required to file such reports), and (2) has been subject to filing requirements
for the past 90 days. Yes ( X ) No (   )
                           ---      ---


As of June 30, 1998, there were 19,265,381 shares of the registrant's $.01 par
value Common Stock outstanding.





                    Page 1 of 12 sequentially numbered pages

<PAGE>   2

                                 INCONTROL, INC.

                        QUARTERLY REPORT ON FORM 10-Q/A


   
                                 AMENDMENT NO. 2
    


                                TABLE OF CONTENTS

                                     PART I


<TABLE>
<CAPTION>
                                                                                          PAGE NO.
                                                                                          --------
<S>                                                                                      <C>
PART I      FINANCIAL INFORMATION

Item 1.     Financial Statements (unaudited).................................................3

            Consolidated Balance Sheets -
                 March 31, 1998 and December 31, 1997........................................3

            Consolidated Statements of Operations -
                 three months ended March 31, 1998 and 1997..................................4

            Consolidated Statements of Cash Flows -
                 three months ended March 31, 1998 and 1997..................................5

            Notes to Consolidated Financial Statements ......................................6

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

Item 3.     Quantitative and Qualitative Disclosures About Market Risk.......................11


                         PART II

PART II     OTHER INFORMATION

Item 6.     Exhibits and Reports on Form 8-K.................................................11

            Signature........................................................................11
</TABLE>





                    Page 2 of 12 sequentially numbered pages

<PAGE>   3


PART I:     FINANCIAL INFORMATION

ITEM 1:     FINANCIAL STATEMENTS

                                 INCONTROL, INC.

                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS


<TABLE>
<CAPTION>
                                                               MARCH 31,    DECEMBER 31,
                                                                 1998           1997
                                                            -------------   -------------
                                                             (UNAUDITED)             
<S>                                                         <C>             <C>          
Current assets:
     Cash and cash equivalents                              $   4,082,577   $   2,336,703
     Securities available-for-sale                              2,081,859      13,333,038
     Trade accounts receivable, net                             1,125,206         915,285
     Inventories                                                2,943,942       2,492,583
     Prepaid expenses and other current assets                    823,498         964,424
                                                            -------------   -------------
Total current assets                                           11,057,082      20,042,033
Property and equipment, net                                     7,729,315       7,835,514
Notes receivable from employees                                   816,042         801,042
Other assets                                                      225,786         239,716
                                                            -------------   -------------
Total assets                                                $  19,828,225   $  28,918,305
                                                            =============   =============


                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Accounts payable                                       $     719,506   $     608,908
     Accrued expenses                                           1,941,681       1,972,958
     Current portion of long-term obligations                   3,287,444       3,674,333
                                                            -------------   -------------
Total current liabilities                                       5,948,631       6,256,199
Long-term obligations, less current portion                       696,288         525,076
Commitments                                                            --              --
Stockholders' equity:
     Preferred stock, $.01 par value:
            Authorized shares--10,000,000;
            Issued and outstanding shares--none                        --              --
     Common stock, $.01 par value:
            Authorized shares--40,000,000;
            Issued and outstanding shares--
            18,837,371 at March 31,1998 and 18,775,864 at
            December 31, 1997                                 152,559,090     152,505,419
     Accumulated deficit                                     (138,797,868)   (129,688,761)
     Notes receivable from stockholders                          (581,000)       (581,000)
     Accumulated other comprehensive income/(loss)                  3,084         (98,628)
                                                            -------------   -------------
Total stockholders' equity                                     13,183,306      22,137,030
                                                            -------------   -------------
Total liabilities and stockholders' equity                  $  19,828,225   $  28,918,305
                                                            =============   =============
</TABLE>



                             See accompanying notes.



                    Page 3 of 12 sequentially numbered pages

<PAGE>   4

                                 INCONTROL, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)




<TABLE>
<CAPTION>
                                                    THREE MONTHS ENDED MARCH 31,
                                                        1998          1997
                                                    ------------   ------------
<S>                                                <C>             <C>         
Revenues                                           $    895,025    $    310,748
Cost of sales                                           605,699         225,889
                                                   ------------    ------------
Gross profit                                            289,326          84,859

Expenses:
      Research and development                        6,567,026       5,501,995
      Sales and marketing                             1,565,806       1,050,539
      General and administrative                      1,212,665       1,270,540
                                                   ------------    ------------
                                                      9,345,497       7,823,074

Interest income                                         162,235         511,543
Interest expense                                       (215,171)       (104,468)
                                                   ------------    ------------
Net loss                                           $ (9,109,107)   $ (7,331,140)
                                                   ============    ============

Basic and diluted net loss per share (Note 1)      $      (0.48)   $      (0.43)
                                                   ============    ============
Shares used in computation of
      net loss per share:                            18,809,347      16,985,322
</TABLE>



                             See accompanying notes.



                    Page 4 of 12 sequentially numbered pages


<PAGE>   5

                                 INCONTROL, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                      THREE MONTHS ENDED MARCH 31,
                                                                          1998            1997
                                                                      ------------    ------------
<S>                                                                   <C>             <C>          
OPERATING ACTIVITIES:
Net loss                                                              $ (9,109,107)   $ (7,331,140)
Adjustments to reconcile net loss to net cash
     used in operating activities:
       Depreciation and amortization                                       760,485         654,595
       Changes in operating assets and liabilities:
         (Increase) decrease in prepaid expenses
              and other current assets                                     345,779        (369,559)
         (Increase) decrease in inventories                               (451,359)        335,581
         Increase (decrease) in accounts payable, accrued expenses,
                  and sales tax payable                                     95,474         (10,128)
                                                                      ------------    ------------
Net cash used in operating activities                                   (8,358,728)     (6,720,651)

INVESTING ACTIVITIES:
Purchases of property and equipment                                       (635,548)     (1,370,220)
Loans to employees                                                         (15,000)        (15,000)
Proceeds from collection of employee loans                                      --              --
Proceeds from maturity of securities                                     7,731,000       7,470,000
Proceeds from sale of securities                                         3,186,259              --
                                                                      ------------    ------------
Net cash provided by investing activities                               10,266,711       6,084,780

FINANCING ACTIVITIES:
Proceeds from third-party lease financing                                  280,251         793,000
Payments on third-party lease financing                                   (491,813)       (243,758)
Proceeds from collection of stockholders' loans                                 --          36,000
Proceeds from exercise of stock options                                     53,671          44,690
                                                                      ------------    ------------
Net cash (used in) provided by financing activities                       (157,891)        629,932

Effect of exchange rate changes on cash                                     (4,218)        (28,584)
                                                                      ------------    ------------
Net increase (decrease) in cash and cash equivalents                     1,745,874         (34,523)

Cash and cash equivalents at beginning of period                         2,336,703       4,287,617
                                                                      ------------    ------------

Cash and cash equivalents at end of period                            $  4,082,577    $  4,253,094
                                                                      ============    ============

SUPPLEMENTAL DISCLOSURE OF CASH PAID:
Interest                                                              $    161,823    $     91,385
                                                                      ============    ============
</TABLE>



                             See accompanying notes.



                    Page 5 of 12 sequentially numbered pages

<PAGE>   6

                                 INCONTROL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


INTERIM FINANCIAL INFORMATION

The consolidated financial statements included herein have been prepared by
InControl, Inc. ("InControl" or the "Company") without audit, according to the
rules and regulations of the Securities and Exchange Commission (the
"Commission"). Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and regulations. The
financial statements reflect, in the opinion of management, all adjustments,
which include only normal recurring adjustments, necessary to present fairly the
financial position and results of operations as of and for the periods
indicated.

The results of operations for the three-month period ended March 31, 1998 are
not necessarily indicative of results to be expected for the entire year ending
December 31, 1998 or for any other fiscal period.

INVENTORIES

Inventories are valued at the lower of cost (first in, first out method) or
market. Allowances are made for obsolete, unsalable, or unusable inventories.
The components of inventories are as follows:


<TABLE>
<CAPTION>
                                                  MARCH 31,           DECEMBER 31,
                                                    1998                 1997
                                                 ----------           ----------
<S>                                              <C>                  <C>       
Raw materials                                    $1,219,017           $1,498,530
Work in process                                   1,149,545              865,450
Finished products                                 1,155,891              967,714
                                                 ----------           ----------
                                                 $3,524,453           $3,331,694
Reserves                                           (580,511)            (839,111)
                                                 ----------           ----------
                                                 $2,943,942           $2,492,583 
                                                 ==========           ==========
</TABLE>

The Company purchases components and certain related peripheral equipment for
its products from outside vendors, including components from sole source
vendors. The establishment of additional or replacement sources of supply would
require the Company to certify the new vendors, which, in the case of certain
components, would cause a delay in the Company's ability to manufacture the
products.

COMPREHENSIVE LOSS

As of January 1, 1998, the Company adopted Statement No. 130, "Reporting
Comprehensive Income" (FAS 130). FAS 130 establishes new rules for reporting and
display of comprehensive income and its components; however, the adoption of
this Statement had no impact on the Company's net income or stockholders'
equity. FAS 130 requires unrealized gains or losses on the Company's
available-for-sale securities and foreign currency translation adjustments,
which, prior to adoption, were reported separately in stockholders' equity, to
be included in other comprehensive income. Prior year financial statements have
been reclassified to conform to the requirements of FAS 130.

During the first quarter ended March 31, 1998 and 1997, total comprehensive loss
amounted to $9,007,395 and $7,115,740, respectively.




                    Page 6 of 12 sequentially numbered pages


<PAGE>   7

Components of comprehensive loss for the three month periods ended March 31,
1998 and 1997 are as follows:


<TABLE>
<CAPTION>
                                                                              1998           1997
                                                                           -----------    -----------
<S>                                                                        <C>            <C>         
Net loss                                                                   $(9,109,107)   $(7,331,140)
Unrealized gain/(loss) on securities                                           (25,078)       210,536
Foreign currency translation                                                   126,790       (120,516)
                                                                           -----------    -----------
Comprehensive loss                                                         $(9,007,395)   $(7,115,740)
                                                                           ===========    ===========
</TABLE>

Components of accumulated other comprehensive loss at March 31, 1998 and
December 31, 1997 are as follows:


<TABLE>
<CAPTION>
                                                                              1998           1997
                                                                           ---------       ---------
<S>                                                                        <C>             <C>      
Unrealized gain/(loss) on securities                                       $      --       $  25,078
Foreign currency translation                                                   3,084        (123,706)
                                                                           ---------       ---------
Comprehensive loss                                                         $   3,084       $ (98,628)
                                                                           =========       =========
</TABLE>


The Company will incorporate this information into the Consolidated Statement of
Stockholders' Equity for the year ending December 31, 1998. Per share
calculations based upon comprehensive loss are not required.

BASIC AND DILUTED NET LOSS PER SHARE

Basic and diluted net loss per share are computed based upon the weighted
average number of shares of common stock outstanding. The effect of outstanding
options and warrants have been excluded from the calculation because they are
antidilutive.

NEW ACCOUNTING PRONOUNCEMENT

In 1997, the FASB issued Statement No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (FAS 131). FAS 131 replaces FASB Statement
No. 14, "Financial Reporting for Segments of a Business Enterprise" and is
effective for financial statements with fiscal years beginning after December
15, 1997. The Statement requires a company to report segment information based
upon how management internally evaluates operating performance of its business
segments. Segment information is not required to be reported in interim
financial statements in the first year of application. The Company intends to
adopt the disclosure requirements for FAS 131 for the year ending December 31,
1998 and does not expect its provisions to be significant.


ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
RESULTS OF OPERATIONS

This discussion contains forward-looking statements that are subject to certain
risks and uncertainties that could cause actual results to differ materially
from those projected. The words "believe", "expect", "intend", "anticipate",
variations of such words, and similar expressions identify forward-looking
statements, but their absence does not mean that the statement is not
forward-looking. These statements are not guarantees of future performance and
are subject to certain risks, uncertainties and assumptions that are difficult
to predict. Factors that could affect the Company's actual results include,
among other things, the availability of adequate funding, the progress and costs
of preclinical studies and clinical trials, the recruitment of suitable
patients, the timing of regulatory approvals, the rate of market acceptance and
the adoption of the METRIX System and related future products, the availability
of third-party reimbursement for the Company's products, the ability to obtain
and defend patent and intellectual property rights and to market the Company's
products and the status of competing products. Reference is made to the
Company's Annual Report on Form 10-K filed with the Commission for a more
detailed description of such factors. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date of
this report. InControl undertakes no obligation to update publicly any
forward-looking statements to reflect




                    Page 7 of 12 sequentially numbered pages
<PAGE>   8

new information, events or circumstances after the date of this report or to
reflect the occurrence of unanticipated events.


OVERVIEW

InControl is engaged in the design, development and manufacture of implantable
atrial defibrillators and related products, including transvenous defibrillation
leads, and temporary defibrillation catheters. The majority of the Company's
resources have been, and continue to be, devoted to research and development
activities related to the METRIX System, a proprietary system designed to treat
atrial fibrillation. The METRIX System is comprised of an implantable
defibrillator, transvenous leads to connect the defibrillator to the heart, a
system analyzer and a system programmer. The Company is also party to agreements
under which the Company distributes defibrillation and diagnostic catheters and
related products in certain geographic markets.

The design and development of an implantable medical device has required the
Company to make significant investments in research and development activities
and, as a result, the Company has accumulated a deficit of $138.8 million as of
March 31, 1998. InControl expects to incur substantial additional losses in the
near future. The Company expects that revenues from clinical trials and sales of
the Company's products will increase and that these increases will moderate
future deficit growth. The amount and timing of the Company's future revenues
and, accordingly, the amount and timing of the Company's future losses will be
affected by, among other things: the availability of adequate funding, the
progress and costs of preclinical studies and clinical trials, including the
recruitment of suitable patients, the timing of regulatory approvals, the rate
of market acceptance and the adoption of the METRIX System and related future
products, the availability of third-party reimbursement for the Company's
products, the ability to obtain and defend patent and intellectual property
rights and to market the Company's products and the status of competing
products. Future expenses are expected to be primarily due to InControl's
continuing investment in research and development efforts, increases in clinical
trial activities, the maintenance of the European sales organization, the
expansion of domestic marketing and sales capabilities and increasing domestic
manufacturing activity.

The Company believes that it will incur losses at least until the METRIX System
has gained market acceptance in the United States. Market acceptance of the
METRIX System in the United States is dependent on, among other things,
obtaining regulatory approval from the FDA for its commercial release, which is
in turn dependent on the success of the METRIX System clinical trials. There can
be no assurance that clinical trials will be successful. Further, there can be
no assurance that regulatory approval for the METRIX System will be obtained,
or, if such approval is obtained, that the METRIX System will achieve market
acceptance in the United States. In Europe, the Company has received the needed
certifications required in order to affix the CE mark to the METRIX System.
While the CE mark allows the Company to distribute and market the METRIX System
throughout the European Community (EC), the Company will need to complete
studies regarding the cost benefits and quality of life improvements of the
therapy in order to be eligible for reimbursement approvals from the medical
reimbursing authorities in various EC member countries. There can be no
assurance that such approvals from reimbursing authorities will be obtained in a
timely manner, if at all. Even with reimbursement approvals, there can be no
assurance that the METRIX System will achieve market acceptance in Europe.


RESULTS OF OPERATIONS

REVENUES

Net revenues were $895,000 for the quarter ended March 31, 1998. This represents
an increase of $584,000 or 188% over the comparable period in 1997. Of the
$895,000, $354,000 relate to revenues earned in the United States and $541,000
relate to revenues earned outside the United States. Revenues result from the
sale of METRIX devices, leads and accessories and distribution of catheters 
and related products in Europe together with sales of METRIX Systems in 
clinical investigations in the United States.



                    Page 8 of 12 sequentially numbered pages
<PAGE>   9


Revenues in future quarters will be dependent on the timing and outcome of
certain limited clinical studies required for European reimbursement approvals,
the success and timing of the Company's United States clinical trial activities
and the subsequent rate of market acceptance in the United States and Europe.
There can be no assurance, however, that such studies and trials will be
completed successfully or that the METRIX System will achieve market acceptance
in the United States or Europe.

GROSS PROFITS

Gross profits for the quarter ended March 31, 1998 totaled $289,000 or 32% of
net revenues. The 1997 comparable period totaled $85,000 or 27% of net revenues.
The Company's products are at an early stage in their product life cycles;
current cost of sales and gross profits therefore may not be indicative of
future cost of sales or gross profits.

The Company's cost of sales and gross profits are affected by many factors.
Currently, the Company has limited experience in manufacturing and is operating
at volumes well below expected facility capacity. The Company's manufacturing
overhead is allocated to costs of goods sold based on the expected capacity of  
the Company's manufacturing facility and not its actual capacity. The
manufacturing overhead that is not charged to cost of goods sold represents
experience and capacity-related costs that the Company considers part of its
ongoing manufacturing development. Accordingly, the Company has charged these
expenses to research and development. The Company anticipates that in future
years, to the extent its products gain market acceptance, the Company's sales
volume and manufacturing experience will increase. As a result, these
manufacturing development costs will both decrease and be incorporated into
cost of revenues and, to that extent, will be excluded from research and
development. In addition, net revenues and, as a result, gross profits will be
influenced by sales discounts and allowances that the Company may make during
clinical trials or in connection with the initial commercial release of the
Company's products in the United States. The Company's gross profits from
European sales have been influenced by sales discounts and allowances that the
Company has offered on a situational basis in connection with the commercial
release of the METRIX System in Europe. 

RESEARCH AND DEVELOPMENT EXPENSES

Research and development expense was $6.6 million and $5.5 million for the
quarters ended March 31, 1998 and 1997, respectively. The quarter-to-quarter
increase of $1.1 million or 19% over the comparable period last year is due to
the increase in personnel engaged in the design, development and primary
research associated with the current and next generations of atrial
defibrillation systems, the funding of preclinical and clinical trials and
expenditures associated with manufacturing development. Research and development
expenses in future periods will be primarily dependent on the level of personnel
the Company maintains in order to meet its objectives in primary research and
development activities associated with future atrial defibrillation products.
Research and development expense will also be affected by the level of activity
in preclinical studies and clinical trials in the United States and Europe.
Manufacturing development expenditures will continue to be a component of
research and development, but are expected to moderate in future periods as the
Company increases production volume and gains manufacturing experience.

SALES AND MARKETING EXPENSES

Sales and marketing expenses for the quarters ended March 31, 1998 and 1997 were
$1.6 million and $1.1 million, respectively. The increase is primarily related
to increased sales and marketing personnel, particularly in the Company's
European subsidiaries. These additional personnel have been hired to support the
commercial release and ongoing distribution of the Company's products in Europe.
Sales and marketing expenses in future periods will be primarily dependant on
the number of sales and marketing personnel and related activities in both the
United States and Europe that the Company maintains to support the sales and
distribution of the Company's products.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses were $1.2 million and $1.3 million for the
quarters ended March 31, 1998 and 1997, respectively. This quarter-to-quarter
decrease primarily is attributable to a decrease in professional service
expenses. The Company expects general and administrative expense will reflect
overall Company employment and activity levels which will fluctuate from period
to period.



                    Page 9 of 12 sequentially numbered pages

<PAGE>   10


INTEREST INCOME AND INTEREST EXPENSE

Interest income was $162,000 and $512,000 for the quarters ended March 31, 1998
and 1997, respectively. The quarter-to-quarter decrease primarily is
attributable to the decrease in the average balances of cash, cash equivalents,
and securities available-for-sale resulting from the use of cash to fund
operations. Interest income will fluctuate with the average balances of cash,
cash equivalents, and securities available-for-sale, which in turn will
fluctuate with the success and timing of the Company's financing activities and
the rate resources are used to fund operations.

Interest expense was $215,000 and $104,000 for the quarters ended March 31, 1998
and 1997, respectively. The increase is primarily related to the increase in the
Company's average balance of equipment lease financing. Interest expense in
future periods will depend on the rate of capital expenditures and the success
and timing of the Company's efforts to secure additional sources of lease
financing for those expenditures.


LIQUIDITY AND CAPITAL RESOURCES

   
As of March 31, 1998, the Company had cash, cash equivalents, and securities
available-for-sale totaling $6.2 million, compared to a balance of $15.7 million
at December 31, 1997. The decrease of $9.5 million or 61% was used to fund $8.4
million in operating activities, $636,000 in purchases of property and equipment
and $212,000 of payments, net of proceeds, for lease financing. During the
comparable period in 1997, the Company funded $6.7 million in operating
activities and $1.4 million in purchases of property and equipment, both of
which were partially offset by net proceeds from lease financing of $549,000. As
a result of the Company's available cash, the Company has failed to comply with
certain covenants associated with its capital lease agreements. In response to
this issue, the Company has entered into a letter of credit agreement with the
lessor pursuant to which the Company has agreed to maintain an irrevocable
letter of credit in the full amount of $500,000 for the purpose of securing its
obligations under the lease. At the present time the Company believes it is
unlikely the lessor will foreclose under the lease or accelerate rental
payments and has received verbal assurances to that effect. However, if funding
continues to be insufficient in the future, notwithstanding the letter of
credit agreement, the lessor may accelerate the payments due under these 
capital lease arrangements. Accordingly, $1.6 million of the amounts payable 
under these capital lease agreements have been classified as a current 
liability in the accompanying consolidated financial statements. If the lessor 
were to foreclose under the leases or accelerate rental payments, it could 
have a material adverse effect on the Company's business, financial condition 
and results of operations.
    

InControl expects its cash needs will continue at similar levels in future
periods due to the Company's planned investment in research and development,
anticipated increases in spending on clinical studies and trial activities and
expansion of marketing, sales and manufacturing capabilities. The Company's
future capital requirements will depend on many factors, including the progress
and costs of preclinical studies and clinical trials, the recruitment of
suitable patients, the timing of regulatory approvals, the rate of market
acceptance and adoption of the METRIX System and related future products, the
availability of third-party reimbursement for the Company's products, the
ability to obtain and defend patent and intellectual property rights and to
market the Company's products and the status of competing products.

In April, the Company raised $10 million through two private financings. Of the
$10 million, $7.5 million was raised through the sale of convertible preferred
stock, which is redeemable under certain circumstances. For a description of the
rights and preferences of the convertible preferred stock, see "Description of
the Series B Stock" in the Company's Current Report on Form 8-K/A dated as of
April 20, 1998, incorporated herein by reference. The remaining funds were
raised through the private sale of 400,000 shares of common stock.
The Company believes that its existing cash, cash equivalents, securities
available-for-sale and interest thereon, including the proceeds of the April
offerings, will be sufficient to meet its capital requirements into the third
quarter of 1998. The Company will seek additional funding during 1998, through
either public or private sources, to meet its future operational requirements.
There can be no assurance such funds will be available as needed or on terms
that are acceptable to the Company. If the Company is unable to obtain
sufficient funds to satisfy it cash requirements, the Company will be forced to
delay, reduce or eliminate some or all of its research and development
activities, clinical studies and trials and manufacturing and administrative
programs, or dispose of assets or technology.



                    Page 10 of 12 sequentially numbered pages

<PAGE>   11

IMPACT OF YEAR 2000

The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs or products that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
a system failure or miscalculations causing disruptions in the Company's
operations or potential problems with its products.

The Company has begun an assessment of its software, key suppliers and products
to determine whether the Company faces any business or financial risk from the
Year 2000 issue. Inquiries to the Company's software vendors have revealed no
problems and the Company plans to test these vendors' assertions, before the
year 2000. The Company is also planning to inquire with key component suppliers
to verify that supplies of raw material components will not be at risk from this
problem. If tests of the Company's software reveal Year 2000 compliance problems
or any of the Company's key components suppliers do not successfully and in a
timely manner achieve Year 2000 compliance, the Company's business or operations
could be adversely affected. The Company believes its products are not subject
to this problem, with certain Programmers needing only minor adjustments in the
year 2000. These minor adjustments can be done by the Company's field clinical
engineers. Based on these early indications from the Company's assessment, there
appears to be no material business or financial risk to the Company.


ITEM 3:  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.


PART II:    OTHER INFORMATION

ITEM 6:     EXHIBITS AND REPORTS ON FORM 8-K

a)     Exhibits

       Exhibit No.

       27.1  Financial Data Schedule*
       __________
*Previously filed.

b)     Reports on Form 8-K

No reports on form 8-K were filed during the quarter ended March 31, 1998.


                                    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 thereunto duly authorized.

                                         INCONTROL, INC.
                                         (Registrant)

   
Dated:  July 20, 1998                 By:/s/ Philip A. Okeson     
                                         -------------------------------------
                                         Philip A. Okeson
                                         Treasurer and Secretary
                                         (Authorized Officer and Principal
                                         Financial Officer)
    



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<PAGE>   12

               EXHIBIT INDEX

Exhibits

       Exhibit No.

        27.1  Financial Data Schedule*
       __________
       *Previously filed.
















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