<PAGE>
 
===============================================================================

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                  FORM 10-QSB

                          ____________________________ 
                                        
                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
                    OF THE SECURITIES  EXCHANGE ACT OF 1934


FOR THE QUARTER ENDED DECEMBER 31, 1996          COMMISSION FILE NUMBER 0-14653


                         CARDIAC CONTROL SYSTEMS, INC.
             (Exact Name of Registrant as specified in its charter)

                         _____________________________

                DELAWARE                                    74-2119162
     (State or other jurisdiction of                     (I.R.S. Employer
      incorporation or organization)                  Identification Number)


               3 COMMERCE BOULEVARD, PALM COAST, FLORIDA   32164
              (Address of Principal Executive Offices)  (Zip Code)

                         _____________________________


       Registrant's telephone number, including area code: (904) 445-5450
                                        

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
   -----   -----

As of January 31, 1997, 2,579,371 shares of the Registrant's common stock, $.10
par value, were outstanding.

===============================================================================
<PAGE>
 
                         CARDIAC CONTROL SYSTEMS, INC.

                                  FORM 10-QSB
                               DECEMBER 31, 1996

                                     INDEX
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
                                                                       Page No.
-------------------------------------------------------------------------------
<S>                                                                    <C>
PART I. FINANCIAL INFORMATION
    Balance Sheet at December 31, 1996 (Unaudited).....................    3

    Statements of Operations and Accumulated Deficit for the
     Three Months and Nine Months Ended December 31, 1996 and
     1995 (Unaudited)..................................................    4

    Statements of Cash Flows for the Nine Months Ended
     December 31, 1996 and 1995 (Unaudited)............................    5

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

    Management's Discussion and Analysis of Financial Position
     and Results of Operations.........................................    9

PART II. OTHER INFORMATION.............................................   15
</TABLE>

                                       2
<PAGE>
 
                         PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                         CARDIAC CONTROL SYSTEMS, INC.
                                 BALANCE SHEET
                                  (Unaudited)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
                                                                  December 31,
                                                                      1996
-------------------------------------------------------------------------------
<S>                                                              <C>
ASSETS

    CURRENT ASSETS
        Cash and cash equivalents...............................  $    168,834
        Accounts and notes receivable...........................       960,830
        Inventories.............................................     1,508,363
        Prepaid expenses........................................       349,282
                                                                  ------------
                   Total current assets.........................     2,987,309


     PROPERTY, PLANT AND EQUIPMENT, less accumulated
        depreciation of $3,353,120..............................     1,789,623

     OTHER ASSETS...............................................       367,127
                                                                  ------------
                   Total assets.................................  $  5,144,059
                                                                  ============

LIABILITIES AND STOCKHOLDERS' EQUITY

     CURRENT LIABILITIES
         Notes and debt obligations payable within one year.....  $    165,806
         Accounts payable.......................................       438,765
         Accrued interest.......................................           407
         Accrued compensation...................................       161,013
         Accrued compensated absences...........................       107,001
         Deposits payable.......................................       428,594
         Other accrued expenses.................................       346,050
                                                                  ------------
                   Total current liabilities....................     1,647,636
                                                                  ------------

    NOTES AND DEBT OBLIGATIONS PAYABLE AFTER ONE YEAR...........     1,484,671
                                                                  ------------

    OTHER LIABILITIES...........................................        72,968
                                                                  ------------

    DEFERRED ROYALTIES..........................................        42,900
                                                                  ------------

    STOCKHOLDERS' EQUITY
        Common stock, $.10 par value, 30,000,000 shares
              authorized, 2,584,370 shares issued...............       258,437
        Capital in excess of par value..........................    22,179,278
        Accumulated deficit.....................................   (20,525,894)
        Treasury stock at cost 4,999 shares.....................       (15,937)
                                                                  ------------
                   Total stockholders' equity...................     1,895,884
                                                                  ------------

                   Total liabilities and stockholders' equity...  $  5,144,059
                                                                  ============
</TABLE>
                 See accompanying notes to financial statements

                                       3
<PAGE>
 
                         CARDIAC CONTROL SYSTEMS, INC.
                          STATEMENTS OF OPERATIONS AND
                              ACCUMULATED DEFICIT
                                  (UNAUDITED)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
                                                     Three Months Ended                  Nine Months Ended
                                                        December 31,                       December 31,
                                                     1996          1995                 1996          1995
--------------------------------------------------------------------------------------------------------------
<S>                                             <C>            <C>                 <C>            <C>
REVENUE
    Net sales.................................. $  1,109,405   $  1,426,507        $  3,280,579   $  4,013,409
    Royalty income.............................      640,900        722,800           1,854,775      1,711,450
                                                --------------------------------------------------------------
        Total revenue..........................    1,750,305      2,149,307           5,135,354      5,724,859
                                                --------------------------------------------------------------

COSTS AND EXPENSES
    Cost of products sold......................      721,727        643,447           1,911,769      1,868,163
    Selling, general and administrative
     expenses..................................      752,070        951,921           2,301,605      2,690,157
    Engineering, research and
     development expenses......................      421,195        286,810           1,328,342        863,759
                                                --------------------------------------------------------------
        Total cost and expenses................    1,894,992      1,882,178           5,541,716      5,422,079
                                                --------------------------------------------------------------

OPERATING INCOME (LOSS)........................     (144,687)       267,129            (406,362)       302,780
                                                --------------------------------------------------------------
OTHER INCOME (EXPENSES)
    Interest income............................          995          3,128              17,269         11,147
    Interest expense...........................     (114,939)      (195,153)           (380,823)      (465,028)
    Other income...............................            -              -              25,000         62,919
                                                --------------------------------------------------------------
        Total other income (expenses)..........     (113,944)      (192,025)           (338,554)      (390,962)
                                                --------------------------------------------------------------
NET INCOME (LOSS)..............................     (258,631)        75,104            (744,916)       (88,182)

ACCUMULATED DEFICIT - BEGINNING OF
 PERIOD........................................  (20,267,263)   (19,682,758)        (19,780,978)   (19,519,472)
                                                --------------------------------------------------------------

ACCUMULATED DEFICIT - END OF PERIOD............ $(20,525,894)  $(19,607,654)       $(20,525,894)  $(19,607,654)
                                                ==============================================================

NET INCOME (LOSS) PER COMMON SHARE.............       $(0.10)         $0.06              $(0.29)        $(0.07)
                                                ==============================================================

AVERAGE NUMBER OF COMMON SHARES
 OUTSTANDING...................................    2,580,240      1,363,142           2,574,202      1,349,769
                                                ==============================================================
</TABLE>
                 See accompanying notes to financial statements

                                       4
<PAGE>
 
                         CARDIAC CONTROL SYSTEMS, INC.
                           STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
Nine Months Ended, December 31,                           1996         1995
-------------------------------------------------------------------------------
<S>                                                   <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net loss......................................... $ (744,916)  $  (88,182)
    Adjustment to reconcile net loss to
     net cash used for operating
     activities:
         Depreciation and amortization...............    389,021      354,693
         Gain on fixed assets disposals..............                  (4,701)
         Cash provided by (used for):
              Accounts and notes receivable..........    374,526      (73,295)
              Inventories............................    526,082     (435,261)
              Prepaid expenses.......................   (285,209)     (51,767)
              Accounts payable.......................    138,057     (164,630)
              Accrued interest.......................     (8,805)     130,372
              Accrued compensation...................    (21,439)     (87,344)
              Accrued compensation absences..........    (29,769)      16,819
              Deposits payable.......................    (91,000)    (326,147)
              Other accrued expenses.................     90,689       54,793
              Other liabilities......................   (110,423)      21,529
              Deferred royalties.....................   (285,350)    (263,300)
-------------------------------------------------------------------------------
 Net cash provided by (used for)
  operating activities...............................    (58,536)    (916,421)
-------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
    Purchase of property, plant and equipment........   (459,557)    (316,138)
    Proceeds from sale of equipment..................          -       20,891
    Increase in other assets.........................    (46,467)     (13,884)
-------------------------------------------------------------------------------
 Net cash provided by (used for)
  investing activities...............................   (506,024)    (309,131)
-------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
    Proceeds from issuance of common
     stock and stock warrants, net of
     issuance expenses...............................    201,927            -
    Proceeds from notes and debt
     obligations payable.............................    131,534    1,068,490
    Repayment of notes and debt
     obligations payable.............................   (763,936)    (136,757)
    Principal payments under capital
     lease obligations...............................     (3,312)      (2,523)
    Principal payments under
     installment purchase obligations................          -       (2,657)
    Debt issuance costs..............................          -      (22,690)
-------------------------------------------------------------------------------
 Net cash provided by (used for)
  financing activities...............................   (433,787)     903,863
-------------------------------------------------------------------------------

NET INCREASE (DECREASE) IN CASH AND
 CASH EQUIVALENTS....................................   (998,347)    (321,689)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR........  1,167,181      667,490
                                                     --------------------------

CASH AND CASH EQUIVALENTS - END OF PERIOD............ $  168,834   $  345,801
                                                     ==========================
SUPPLEMENTAL CASH FLOW INFORMATION:
    Interest paid during the period.................. $  219,694   $  177,036
SUPPLEMENTAL SCHEDULE OF NONCASH
 INVESTING AND FINANCING ACTIVITIES:
    Reduction in accrued compensation
     in exchange for common stock....................          -   $    2,000
    Reduction in accrued interest in
     exchange for common stock.......................          -   $   84,574
    Reduction in accounts receivable in
     exchange for common stock.......................          -   $   10,938
</TABLE>

                See accompanying notes to financial statements

                                       5
<PAGE>
 
                         CARDIAC CONTROL SYSTEMS, INC.
                         NOTES TO FINANCIAL STATEMENTS


NOTE 1 - GENERAL

The accompanying balance sheet of Cardiac Control Systems, Inc. (the "Company")
as of December 31, 1996, the related statements of operations and accumulated
deficit for the three months and nine months ended December 31, 1996 and 1995,
and the statements of cash flows for the nine months ended December 31, 1996 and
1995 are unaudited. In the opinion of management, such financial statements
reflect all adjustments, consisting only of normal recurring items, necessary to
present fairly the financial position of the Company at December 31, 1996, and
the results of operations for the three months and nine months ended 
December 31, 1996 and 1995 and the cash flows for the nine months ended 
December 31, 1996 and 1995.

Certain reclassifications have been made to the unaudited financial statements
previously reported for the three months and nine months ended December 31, 1995
to conform with classifications used in the unaudited financial statements for
the three months and nine months ended December 31, 1996.

The accompanying unaudited financial statements as of December 31, 1996 and for
the three months and nine months ended December 31, 1996 and 1995 should be read
in conjunction with the Company's audited financial statements for the year
ended March 31, 1996.

The accompanying unaudited financial statements have been prepared assuming that
the Company will continue operations on a going-concern basis, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. However, the Company has a history of net losses
and incurred a net loss of $744,916 for the nine months ended December 31, 1996.
The Company's ability to continue as a going concern is dependent upon the
attainment of a profitable level of operations. The Company believes that sales
growth is critical to attaining a profitable level of operations. Therefore, the
Company is continuing its efforts to expand its sales volume, both domestically
and internationally. Management believes that the Company has the potential to
increase sales and ultimately achieve a profitable level of operations. However,
there is no assurance that the Company will be able to attain profitable
operations and continue operations as a going concern.

NOTE 2 - INVENTORIES

Inventories at December 31, 1996 are summarized as follows:

<TABLE>
<CAPTION>
               ----------------------------------------------- 
                                                  December 31,
                                                      1996
                                                  ------------
                                                  (unaudited)
               <S>                                <C>
               Raw materials and supplies           $  268,287
               Work-in-process                         891,033
               Finished goods                          402,412
                                                  ------------
                                                     1,561,732
               Reserve for obsolescence                (53,369)
                                                  ------------
                                                    $1,508,363
               -----------------------------------------------
</TABLE>

Finished goods inventories include approximately $249,156 of products consigned
to customers and independent sales representatives at December 31, 1996.

                                       6
<PAGE>
 
NOTE 3 - NOTES AND DEBT OBLIGATIONS PAYABLE

Notes and debt obligations consist of the following at December 31, 1996:

<TABLE>
<CAPTION>
         -----------------------------------------------------------
                                                        December 31,
                                                            1996
                                                        ------------
         <S>                                            <C>
         Sirrom mortgage note, net of discount (A)        $1,465,125
         Intermedics loan (B)                                 43,347
         Other                                               142,005
                                                        ------------
                                                           1,650,477
         Amount payable within one  year                     165,806
                                                        ------------
         Amount payable after one year                    $1,484,671
         -----------------------------------------------------------
</TABLE>

(A)  On March 31, 1995, the Company entered into a Loan and Security Agreement
     (the "Loan Agreement") with Sirrom Capital Corporation, a Tennessee
     corporation ("Sirrom") and executed a $1,500,000 secured promissory note.
     Interest on the note is payable monthly at 13.5% and principal is due on
     March 31, 2000. The note is secured by a first mortgage lien on all the
     Company's real and personal property, excluding inventory and accounts
     receivable, but including general intangibles such as its patents and
     royalties. The Loan Agreement restricts the Company from incurring
     additional indebtedness in excess of $200,000 annually without the lender's
     consent. In addition, the Company must give the lender advance notice of
     certain events, such as dividend payments, certain new stock issues,
     reorganizations, and merger or sale of substantially all assets.

     In connection with the Loan Agreement, the Company granted the lender a
     warrant to purchase, initially, 100,000 shares of the Company's common
     stock at $.01 per share. Upon issuance of the warrant in March 1995, the
     Company recorded $279,000 as a discount, representing the difference
     between the estimated fair market value of the underlying stock and $.01
     per share. This resulted in an effective interest rate of 28% on the Sirrom
     debt.

(B)  On October 20, 1995, the Company entered into a Promissory Note and
     Security Agreement (the "Security Agreement") with Intermedics, Inc., a
     Delaware Corporation, ("Intermedics") and executed a $1,000,000 secured
     promissory note. Interest on the note is payable at 24.5% and all principal
     and interest is due September 1, 1998.  Payments of principal and interest
     are made as sales of electrode leads are made from the Company to
     Intermedics. As such sales are made, the amount paid by Intermedics to the
     Company to purchase the leads is reduced by $250 per lead for the first
     4,000 leads and $90 per lead for additional leads.  This reduction in
     payments is offset against the note payable and accrued interest balance
     due to Intermedics. Based upon projected sales of leads to Intermedics, the
     Company anticipates that the entire loan balance will be paid by March 31,
     1997 and, accordingly, the entire balance has been classified as a current
     liability. The security agreement provides for alternative payment methods
     in the event the Company ceases sales of leads to Intermedics. The note is
     secured by a first security interest in the proceeds of all sales of leads
     from the Company to Intermedics after October 15, 1995 as well as a first
     security interest in any royalties received by the Company from Intermedics
     after October 15, 1995. Sirrom consented to subordinate its security
     interest in a portion of these sales proceeds on royalties to facilitate
     this transaction.

Aggregate notes and debt obligations outstanding at December 31, 1996 mature as
follows:  1997 -- $165,806; 1998 -- $6,549; 1999 -- $7,856; 2000 -- $1,470,266.

                                       7
<PAGE>
 
NOTE 4 - STOCKHOLDERS' EQUITY

ISSUANCE OF COMMON STOCK

During the nine months ended December 31, 1996, the Company issued 50,000 shares
of common stock to Sirrom Capital Corporation at a price of $5.00 per share.  In
connection with that transaction, a warrant held by Sirrom, exercisable for
25,000 shares of common stock, was increased to 50,000 shares at $0.01 per 
share, which increase was valued at $81,000. The Company also issued and
repurchased 1,428 shares of common stock in payment and reinstatement of an
accounts payable balance of $5,000.

                                       8
<PAGE>
 
ITEM 2  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS
        OF OPERATIONS

FINANCIAL POSITION AND LIQUIDITY

The Company's continuing efforts towards expanding its engineering, research and
design activities, increased marketing efforts and its capital expenditure and
debt service requirements contributed to negative cash flow during the first
nine months of fiscal 1997.

Cash used by operations during the first nine months of fiscal 1997 was $58,536.
Capital expenditures and repayment of debt and capital lease obligations
additionally utilized $459,557 and $767,248 respectively.  Proceeds from the
issuance of common stock and warrants, net of issuance expenses, was $201,927.
Proceeds of notes and debt obligations payable was $131,534.  Overall, negative
cash flow for the first nine months of fiscal 1997 was $998,347.

The Company has no significant commitments for the acquisition of capital
assets.  It has, however, material commitments pursuant to certain inventory
procurement contracts that aggregate approximately $1,153,000 at December 31,
1996.

The Company is currently pursuing additional working capital from external
financing sources in order to continue its development of new technologies,
continue its efforts in building a domestic sales force and support its
operations.  The ability of the Company to generate adequate amounts of cash
through operations to meet its working capital, capital expenditure and debt
service requirements on a long-term basis is dependent upon the attainment of a
profitable level of operations.  The Company believes that sales growth is
critical to the attainment of a profitable level of operations.  Accordingly,
the Company is continuing its efforts to expand the volume of its business, both
domestically and internationally. The Company believes that it has the potential
to increase its sales and ultimately achieve a profitable level of operations.
However, there is no assurance that the Company's operations will improve and/or
generate the cash flow required to meet the Company's liquidity needs, or that
the Company will be able to continue its operations as a going concern.

RESULTS OF OPERATIONS

Three Months Ended December 31, 1996 versus Three months Ended December 31,
1995.

OVERVIEW.  The Company's total revenues for the third quarter of fiscal 1997
decreased by 19% to $1.75 million as compared to $2.15 million for the third
quarter of fiscal 1996.  Sales decreased from $1.4 million to $1.1 million and
royalties decreased from $0.7 million to $0.6 million for the third quarter of
fiscal 1997 as compared to the third quarter of fiscal 1996. Royalty income
represents royalties from Intermedics Inc. pursuant to a License agreement
between the Company and Intermedics.  The decrease in total revenue was not
matched by a reduction in costs and expenses, specifically in research and
development, resulting in an operating loss of $144,687 in the third quarter of
fiscal 1997 as compared to operating income of $267,129 in the third quarter of
fiscal 1996.

SALES.  Product sales decreased by 22%.  Sales of pacers and electrode leads
decreased by 50% and 10% respectively, but sales of hybrid circuits increased by
152%.  The decline in sales of pacers and leads is due to additional companies
having entered the market with single lead products competitive to the Company's
current technology and because the Company has focused its resources into the
research and development of advanced single lead systems in preparation for
intended long term growth.

                                       9
<PAGE>
 
Sales by geographic area for the third quarters of fiscal 1997 and fiscal 1996
were as follows:

<TABLE>
<CAPTION>
                ----------------------------------------------
                Geographic Area            1997        1996
                ----------------------------------------------
                <S>                     <C>         <C>
                United States.......... $  921,852  $1,314,882
                Europe.................    187,553     111,625
                                        ----------------------
                                        $1,109,405  $1,426,507
                ----------------------------------------------
</TABLE>

ROYALTY INCOME.  Royalty income represents royalty fees from Intermedics Inc.
pursuant to a license agreement between the Company and Intermedics whereby the
Company licensed the technology relating to its single-pass atrial-controlled
ventricular pacing system. The future potential royalties to be recorded over
the remaining life of the agreement are estimated at $2.5 million.

COST OF PRODUCTS SOLD.  The cost of products sold in the third quarter of fiscal
1997 was $721,727, compared to $643,447 in the third quarter of fiscal 1996,
representing an increase of 12% as compared with the decrease of 22% in net
sales, which decreased  the gross margin from 55% to 35%.  This reduction was
due to a change in customer mix, with a higher relative volume of sales to
Intermedics and the international market, where selling prices are lower than in
the domestic market, and , within the overall sales total, the increased
proportion of sales of hybrid circuits, which generate lower margins than pacers
and electrode leads.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  Selling, general and
administrative expenses were $752,070 in the third quarter of fiscal 1997,
representing a decrease of  21% from $951,921 in the third quarter of fiscal
1996.  Selling expenses reduced from $524,590 in the third quarter of fiscal
1996 to $391,623 in the third quarter of fiscal 1997 due to reduced sales
commissions and redirection of sales and marketing resources into research and
development.  General and administrative expenses reduced from $427,331 in the
third quarter of fiscal 1996 to $360,447 in the third quarter of fiscal 1997 due
largely to reduced costs of salaries and external professional services.

ENGINEERING, RESEARCH AND DEVELOPMENT EXPENSES.  Engineering, research and
development costs were $421,195 in the third quarter of fiscal 1997,
representing an increase of 47% from $286,810 in the third quarter of fiscal
1996, due to the planned intensified development activities in the areas of
single pass electrode leads, bipolar dual chamber operation, rate responsive
pacing and a replacement programmer.

OTHER INCOME AND EXPENSES.  Interest income was $995 during the third quarter of
fiscal 1997, representing a decrease of 68% from $3,128 in the third quarter of
fiscal 1996.  Total interest expense decreased from $195,153 in the third
quarter of fiscal 1996 to $114,939 in the third quarter of fiscal 1997.
Interest paid to Sirrom Capital Corporation in respect of a secured loan of
$1,500,000 granted on March 31, 1995 was $51,041 in each of the third quarters
of fiscal years 1997 and 1996. Interest on $2,885,000 5% Convertible Debentures
in the sum of $35,569 was accrued in the third quarter of fiscal 1996 but, as
these Debentures were converted to common stock on March 31, 1996, no Debenture
interest was payable during fiscal 1997. Interest in the sum of $9,557 was paid
to Intermedics Inc. during the third quarter of fiscal 1997 in respect of the
outstanding proceeds of a promissory note in the sum of $1,000,000 executed on
October 20, 1995.  The balances of principal and accrued interest outstanding at
December 31, 1996 pursuant to the Intermedics' promissory note were $43,347 and
$407.  Debt amortization costs decreased from $55,135 in the third quarter of
fiscal 1996 to $54,284 in the third quarter of fiscal 1997.

Nine Months Ended December 31, 1996 versus Nine months Ended December 31, 1995.

OVERVIEW.  The Company's total revenues for the first nine months of fiscal 1997
decreased by 10% to $5.1 million as compared to $5.7 million for the first nine
months of fiscal 1996.  Sales decreased from $4.0 million to $3.3 million but
royalties increased from $1.7 million to $1.8 million for the first nine months
of fiscal 1997 as compared to the first nine months of fiscal 1996. Royalty

                                       10
<PAGE>
 
income represents royalties from Intermedics Inc. pursuant to a license
agreement between the Company and Intermedics.  The decrease in total revenue
was not matched by a reduction in costs and expenses, resulting in an operating
loss of $406,362 in the first nine months of fiscal 1997 as compared to
operating income of $302,780 in the first nine months of fiscal 1996.

SALES.  Product sales overall decreased by 18%.  Sales of pacers and electrode
leads decreased by 32% and 5% respectively.  The decline in sales of pacers and
leads is due to additional companies having entered the market with single lead
products competitive to the Company's current technology and because the Company
has focused its resources into the research and development of advanced single
lead systems in preparation for intended long term growth.  Unit sales of hybrid
circuits increased by 6%, but selling prices declined by 29%, resulting in a
decrease  of 24% in sales values.

Sales by geographic area for the first nine months of  fiscal 1997 and 1996 are
as follows:

<TABLE>
<CAPTION>
                ----------------------------------------------
                Geographic Area            1997        1996
                ----------------------------------------------
                <S>                     <C>         <C>
                United States...........$2,784,326  $3,608,946
                Europe..................   496,253     404,463
                                        ----------------------
                                        $3,280,579  $4,013,409
                ----------------------------------------------
</TABLE>

ROYALTY INCOME.  Royalty income represents royalty fees from Intermedics Inc.
pursuant to a license agreement between the Company and Intermedics whereby the
Company licensed the technology relating to its single-pass atrial-controlled
ventricular pacing system.  The future potential royalties to be recorded over
the remaining life of the agreement are estimated at $2.5 million.

COST OF PRODUCTS SOLD.  The cost of products sold in the first nine months of
fiscal 1997 was $1,911,769 compared to $1,868,163 in the first nine months of
fiscal 1996, representing an increase of  2% as compared to a decrease of 18% in
net sales, which decreased the gross margin from 53% to 42%.  This reduction was
due to customer mix, with a higher relative volume of sales to Intermedics and
the international market, where selling prices are lower than in the domestic
market, and to lower selling prices for hybrid circuits.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.   Selling, general and
administrative expenses were $2,301,605  in the first nine months of fiscal
1997, representing a decrease of 14% from $2,690,157 in the first nine months of
fiscal 1996.  Selling expenses reduced from $1,535,272 in the first nine months
of fiscal 1996 to $1,242,995 in the first nine months of fiscal 1997 due to
reduced sales commissions and redirection of sales and marketing resources into
research and development.  General and administrative expenses reduced from
$1,154,885 in the first nine months of fiscal 1996 to $1,058,610 in the first
nine months of fiscal 1997 due largely to reduced costs of salaries.

ENGINEERING, RESEARCH AND DEVELOPMENT EXPENSES.  Engineering, research and
development costs were $1,328,342 in the first nine months of fiscal 1997,
representing an increase of 54% from $863,759 in the first nine months of fiscal
1996 due to the planned intensified development activities in the areas of
single pass electrode leads, bipolar dual chamber operation, rate responsive
pacing and a replacement programmer.

OTHER INCOME AND EXPENSES.  Interest income was $17,269 during the first nine
months of fiscal 1997, representing an increase of 55% from $11,147 in the first
nine months of fiscal 1996.  Total interest expense decreased from $465,028 in
the first nine months of fiscal 1996 to $380,822 in the first nine months of
fiscal 1997.  Interest paid to Sirrom Capital Corporation in respect of a
secured loan of $1,500,000 granted on March 31, 1995 was $152,569 in each of the
first nine months of 1997 and of 1996.  Interest on $2,885,000 5% Convertible
Debentures in the sum of $104,729 was accrued in the first nine months of fiscal
1996 but, as these Debentures were converted to common stock on March 31, 1996,
no Debenture interest was payable during fiscal 1997.  Interest in the sum of
$71,597 was paid to Intermedics Inc. During the first nine months of fiscal 1997

                                       11
<PAGE>
 
in respect of the outstanding proceeds of a promissory note in the sum of
$1,000,000 executed on October 20, 1995.  The balances of principal and accrued
interest outstanding at December, 1996 pursuant to the Intermedics' promissory
note were $43,347 and $407.  Debt amortization costs increased from $157,620 in
the first nine months of fiscal 1996 to $161,129 in the first nine months of
fiscal 1997.  Other income of $25,000 in the first nine months of fiscal 1997
and $62,919 in the first nine months of fiscal 1996 represented prior year
deposits now taken into income.

OPERATING TRENDS AND UNCERTAINTIES

SALES. The ability of the Company to maintain a profitable level of operations
is dependent upon expansion of sales volume, both domestically and
internationally and continued development of advanced, new products.  The
Company believes that with continued development and the commercial release of
its advanced, new atrial-controlled ventricular pacing systems and the
introduction of its new line of more competitive pacing products, it will have
the potential to improve its sales and the recruitment of additional sales
representatives.

The European Union (EU) nations have adopted universal standards in order to
provide simplified trade among the member nations and to assure free access to
trade while maintaining quality standards for products sold.  All companies
doing business in these nations must be certified to these standards set forth
by the EU which is evidenced by being granted the CE Mark.  Standards for active
implantable medical products were implemented January 1, 1993, with a transition
period ending December 31, 1994.  In order for the Company to continue to sell
its product in the EU, it must obtain certification, the CE Mark. The Company
successfully passed an audit of its Quality System to the ISO 9002 in April/May
1996.  The audit was conducted by a registered Notified Body of the European
Union and represented the completion of a critical step in securing the CE Mark.
The final steps of product testing and review of technical documentation were
subsequently completed, and the CE Mark was issued by the Notified Body during
the second quarter of fiscal 1996. The Company is now shipping product to
Europe.

Until recently, the Company was the only manufacturer commercially marketing
single-lead atrial-controlled ventricular pacemakers.  However, Intermedics
Inc., a competitor of the Company, received FDA clearance to commercially market
a single-lead atrial-controlled ventricular pacemaker that it developed
utilizing the Company's technology  pursuant to license and supply agreements
with the Company.  Intermedics commenced marketing its new pacemakers in March
1995.  Medtronic has also commenced marketing a new single-lead atrial-
controlled pacemaker in the United States.

Although the introduction of the new Intermedics and Medtronic pacemakers pose
competition for the Company, management believes that the Company can benefit
from such competition since they will increase the visibility of single-lead
atrial-controlled ventricular pacemakers in the marketplace and thereby increase
market acceptance of the product.  Further, management  believes that there is a
sufficient market to accommodate both the Company's and competitive pacemakers.
The Company estimates that its market share of pacemakers generally is less than
1% of an estimated total worldwide market of $2 billion per year.

Various factors impact on a firm's ability to increase market share including,
but not limited to the financial strength of the firm, the ability of the firm
and its competitors, and the time involved in obtaining FDA clearance for new or
improved products.  Therefore, although management believes that the Company is
well poised for viable growth, management cannot predict the degree of market
share the Company can obtain.  Factors beyond the Company's control may impede
its progress  and in such event, its business and operations would be adversely
impacted.

The Company's ability to successfully compete with other pacemaker manufacturers
will depend on the Company's ability to supply a competitively featured product,
to recruit and increase a quality sales force, and to continue to develop and
release new advanced products.  The Company historically has been restricted in
its marketing capabilities due to financial constraints impeding its ability to
supply  products and recruit and train a sales force.  As discussed above, the

                                       12
<PAGE>
 
manufacture and sale of leads to Intermedics produce income for the Company.
The Company sells electrode leads to Intermedics for its new systems under an
Amended and Restated Supply Contract that terminates on August 1, 1998.  The
Company also receives royalties from Intermedics sales of  its products
incorporating the licensed technology under an Amended and Restated License
Agreement.  The Company anticipates supplying components to Intermedics under
the supply agreement for the next several years.  An increase in demand for
components by Intermedics will put further demands on the Company to supply the
products; however, with the anticipated cash flow from such orders that would be
generated under the license and supply agreements, plus anticipated positive
cash flow from sales of other products by the Company, management believes that
the Company will be in a position to accommodate an increase in orders.

It is anticipated that Intermedics will eventually develop its own manufacturing
capability for electrode leads necessary for its new pacemakers.  However, any
such development will take time.  Although the Company does not know how long it
will take Intermedics to develop its own manufacturing capability, added to any
such development period would be the time necessary to obtain FDA clearance of
its manufacturing process.  Thus, although the Company cannot guarantee that it
will continue to supply Intermedics with products, the Company anticipates
providing Intermedics with components for the next few years.  However, in the
event Intermedics receives FDA approval in a shorter time-frame than
anticipated, or other events occur which causes a decrease in Intermedics'
orders, the Company's business and operating results would be adversely
affected.

SOURCES OF SUPPLY.  Two of the Company's principal suppliers of materials used
primarily in electrode lead production, Dow Corning Corp. and E.I. DuPont de
Nemours & Company, have indicated that they will no longer supply their
materials to the medical device industry for use in implantable devices.  In
July 1993, the FDA published in the Federal Register a one-time-only requirement
for medical device manufacturers to file a special notification of material
supplier changes resulting from the decision of Dow Corning to discontinue
supplying its materials to medical device manufacturers.  The Company filed the
"Special Silicone Notification" for its products effected by the Dow Corning
decision in September 1993.  In this notification alternate suppliers and
materials were identified and supporting technical biological test data were
provided for the alternate materials.  The FDA acknowledged receiving the
Company's notification and indicated that, unless otherwise notified by FDA, the
alternate materials identified in the notification may be used in the Company's
products in place of the comparable Dow Corning materials.  No further FDA
approvals of the alternate materials of such suppliers were required.

With respect to other material changes resulting from decisions by the material
suppliers to discontinue supplying the medical device industry, e.g. E.I. DuPont
de Nemours, the FDA has indicated that such changes shall be handled on a case-
by-case basis through the established product approval processes within the FDA.
The availability of materials suitable for use in implantable medical devices is
an industry-wide problem and is not unique to the Company or to the
cardiovascular device segment of the industry.  A tentative replacement for the
DuPont supplied material has been identified which meets manufacturing
requirements.  Biocompatibility studies have been initiated on the replacement
candidate.  Since the candidate replacement material is comprised of the same
chemical composition as the DuPont material, it is expected that it will be
comparable with respect to the performance characteristics and biocompatibility
of the current material in use.  Similarly, FDA approval of this replacement
material is anticipated to be forthcoming based upon a satisfactory outcome of
the testing in progress.  The Company believes, however, that it has a
sufficient quantity of the DuPont material on supply to meet the Company's
anticipated demand for the next several years.


Suppliers of custom Application Specific Integrated Circuits (ASIC's) have
advised that the technology used to produce these integrated circuits will no
longer be supported.  As such, the Company placed one last bulk order to ensure
the availability of sufficient integrated circuits  to satisfy projected demands

                                       13
<PAGE>
 
for product.  The new pacing system under development will realize appropriate
ASIC's for the new system obviating the need for perpetual supply of the
currently used ASIC's.

INFLATION AND CHANGING PRICES

In the opinion of Company management, the rate of inflation during the past two
fiscal years has not had any material impact on the Company's operations.
Because of the implementation of cost containment and new Medicare regulations,
any increase in sales revenues is expected to result from an increase in the
volume of business rather than from an increase in selling prices. The Company's
pricing structure may not reflect inflation rates, due to constraints of
Medicare regulations, market conditions and competition.

                                       14
<PAGE>
 
PART II.  OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

On January 4, 1994, a financial brokering and consulting firm filed suit
against the Company in the Circuit Court of the 11th Judicial Circuit in and for
Dade County, Florida (the "Court"), alleging that the Company had breached
certain contractual duties and obligations.  The suit requests a judgment
requiring the Company to deliver warrants to purchase 15% of the Company's
common stock, and damages in excess of $15,000.  The Company denied liability
and filed a counterclaim alleging that the brokering firm fraudulently induced
the Company into the Agreement then breached the Agreement and certain fiduciary
duties.  Management plans to vigorously defend the lawsuit and pursue its
counterclaims. In the opinion of management, this action has no merit and the
ultimate outcome is not expected to materially affect the financial position of
the Company.


ITEM 2.  CHANGES IN THE RIGHTS OF THE COMPANY'S SECURITY HOLDERS

         None


ITEM 3.  DEFAULTS BY THE COMPANY ON ITS SENIOR SECURITIES

         None


ITEM 4.  RESULTS OF VOTES OF SECURITY HOLDERS

The Company held its annual meeting of shareholders on November 13, 1996, for
the purposes of: (1) electing the Company's Board of Directors and 
(2) ratifying the appointment of BDO Seidman LLP as the Company's independent
auditors for the year ended March 31, 1996. Proxies were solicited by the
Company under Regulation 14A of the Securities and Exchange Commission's proxy
rules, and there was no solicitation in opposition to management's nominees for
directors listed in the Proxy Statement. A summary of the votes cast for and
against each of the matters set forth in the Proxy Statement is set forth below:

<TABLE>
<CAPTION>
      ------------------------------------------------------------------
                                            Votes For      Votes Against
                                            ----------------------------
      <S>                                   <C>            <C>
      Election of Directors:
        William H. Burns....................    1,646,646          9,133
        Bart C. Gutekunst...................    1,646,732          9,046
        Larry Haimovitch....................    1,646,703          9,076
        Augusto Ocana.......................    1,572,965         82,814
        Alan J. Rabin.......................    1,646,874          8,904
        Robert T. Rylee.....................    1,646,874          8,904
        Tracey E. Young.....................    1,646,731          9,047
        Ratification of Independent
         Accountants........................    1,647,448          5,177
      ------------------------------------------------------------------
</TABLE>

ITEM 5.  OTHER INFORMATION

         None

                                       15
<PAGE>
 
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
6(A).  EXHIBITS

Exhibits filed in Part II of this Report are as follows:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
Exhibit                                       Sequential Page Number or
Number           Description                Incorporation by Reference to
-------------------------------------------------------------------------------
<C>   <S>                           <C>
 3.0  Certificate of                Exhibit 3.0 to Amendment No. 1 to Form
      Incorporation of the          S-1 Registration Statement filed on
      Company, as amended           February 1, 1988, Registration
                                    No. 33-16490 and Form 10-K for the year
                                    ended March 31, 1990, File No. 0-14653

 3.1  Amendment to Certificate      Exhibit 3.1 to Form S-1 Registration
      of Incorporation              Statement filed on March 2, 1995,
                                    Registration No. 33-89938

 3.2  By-Laws of the Company        Exhibit 3.1 to Form S-18 Registration
                                    Statement filed on October 16, 1985,
                                    Registration No. 33-9208

 3.3  Amendment to Bylaws           Exhibit 3.3 to Form S-1 Registration
                                    Statement filed on March 2, 1995,
                                    Registration No. 33-89938

 4.0  Form of Common Stock          Exhibit 4.0 to Form S-1 Registration
      Certificate                   Statement filed on March 2, 1995,
                                    Registration No. 33-89938

 4.1  Form of Sales                 Exhibit 4.13 to Form 10-Q for the Quarter
      Representative Stock          Ended September 30, 1988, File No. 0-14653
      Option Agreement

 4.2  Cardiac Control Systems,      Exhibit 4.15 to Form 8-K Current Report
      Inc. 5% Convertible           dated October 11, 1994, File No. 0-14653
      Debenture due October 31,
      1999

 4.3  Combined 1987-1992            Exhibit 4.8 to Amendment No. 1 to Form
      Non-Qualified Stock Option    S-1 Registration Statement filed on
      Plan                          April 17, 1995, Registration No. 33-89938

 4.4  Stock Purchase Warrant        Exhibit 4.1 to Form 8-K Current Report,
      dated March 31, 1995 in       dated March 31, 1995, File No. 0-14653
      favor of Sirrom Capital
      Corporation

 4.5  Stock Purchase Warrant,       Exhibit 4.2 to Form 8-K Current Report,
      dated March 31, 1995 in       dated March 31, 1995, File No. 0-14653
      favor of Dow Corning
      Enterprises, Inc.

 4.6  Stock Puchase Warrant,        Exhibit 4.6 to Form 10-KSB for the year
      dated October 15, 1995 in     ended March 31, 1996, File No. 0-14653
      favor of Sirrom Capital
      Corporation

 4.7  Stock Purchase Warrant,       Exhibit 4.7 to Form 10-KSB for the year
      dated March 29, 1996 in       ended March 31, 1996, File No. 0-14653
      favor of Grupo Taper,
      S.A.Exhibit
</TABLE> 

                                       16
<PAGE>
 
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
Exhibit                                       Sequential Page Number or
Number           Description                Incorporation by Reference to
-------------------------------------------------------------------------------
<C>   <S>                           <C>
10.0  License Agreement between     Exhibit 10.1 to Form 10-Q for the Quarter
      Hughes/Bertolet and the       Ended September 30, 1986, File No. 0-14653
      Company

10.1  Settlement Agreement and      Exhibit 10.2 to Form 10-K for the Year
      Release between Applied       Ended March 31, 1990, File No. 0-14653
      Cardiac Electro-physiology
      and the Company

10.2  Amended and Restated          Exhibit 10.19 to Form 8-K Current Report,
      License Agreement between     dated April 2, 1993, File No. 0-14653
      Intermedics Inc. and the
      Company, dated April 2,
      1993

10.3  Amended and Restated          Exhibit 10.20 to Form 8-K Current Report,
      Supply Contract between       dated April  2, 1992, File No. 0-14653
      Intermedics Inc. and the
      Company, dated April 2,
      1993

10.4  Employment Agreement          Exhibit 10.24 to Form 8-K Current Report,
      between Bart C. Gutekunst     dated October 11, 1994, File No. 0-14653
      and the Company, dated
      October 13, 1994

10.5  Employment Agreement          Exhibit 10.25 to Form 8-K Current Report,
      between Alan J. Rabin and     dated October 11, 1994, File No. 0-14653
      the Company, dated
      October 13, 1994

10.6  Employment Agreement          Exhibit 10.12 to Form 10-Q for the
      between Robert S. Miller      Quarter Ended December 31, 1994, File
      and the Company, dated        No.0-14653
      December 12, 1994

10.7  Agreement between LEM         Exhibit 10.13 to Form 10-Q for the
      Biomedica, s.r.l. and the     Quarter Ended December 31, 1994, File
      Company, dated October 1,     0-14653
      1994

10.8  Agreement between the         Exhibit 10.12 to Form S-1 Registration
      Company and Alan J. Rabin     Statement filed on March 2, 1995,
      and Bart C. Gutekunst,        Registration No. 33-89938
      dated July 1, 1994

10.9  Form of Indemnification       Exhibit 10.13 to Form S-1 Registration
      Agreement between the         Statement filed on March 2, 1995,
      Company and each Director,    Registration No. 33-89938
      executed December 1994
</TABLE> 

                                       17
<PAGE>
 
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
Exhibit                                       Sequential Page Number or
Number           Description                Incorporation by Reference to
-------------------------------------------------------------------------------
<C>   <S>                           <C>
10.10 Employment Agreement          Exhibit 10.14 to Form S-1 Registration
      between Robert R. Brownlee    Statement filed on March 2, 1995,
      and the Company dated as      Registration No. 33-89938
      of October 1, 1994

10.11 Loan and Security             Exhibit 10.1 to Form 8-K Current Report,
      Agreement between the         dated March 31, 1995, File No. 0-14653
      Company and Sirrom Capital
      Corporation, dated
      March 31, 1995

10.12 $1,500,000 Secured            Exhibit 10.2 to Form 8-K Current Report,
      Promissory Note in favor      dated March 31, 1995, File No. 0-14653
      of Sirrom Capital
      Corporation, dated
      March 31, 1995

10.13 Mortgage, Assignment of       Exhibit 10.3 to Form 8-K Current Report,
      Rents and Leases, and         dated March 31, 1995, File No. 0-14653
      Security Agreement in
      favor of Sirrom Capital
      Corporation, dated
      March 31, 1995

10.14 Second Mortgage and           Exhibit 10.4 to Form 8-K Current Report,
      Security Agreement in         dated March 31, 1995, File No. 0-14653
      favor of Bart Gutekunst,
      as trustee, dated
      March 31, 1995

10.15 Subordination Agreement       Exhibit 10.5 to Form 8-K Current Report,
      between the Company Sirrom    dated March 31, 1995, File No. 0-14653
      Capital Corporation, and
      the Debentureholders,
      dated March 31, 1995

10.16 Promissory Note and           Exhibit 10.16 to Form 10-QSB for the
      Security Agreement between    Quarter ended September 30, 1995, File
      Intermedics Inc., and the     No. 0-14653
      Company dated October 20,
      1995

10.17 Amendment 2 to Supply         Exhibit 10.17 to Form 10-QSB for the
      Contract between              Quarter ended September 30, 1995, File
      Intermedics Inc., and the     No. 0-14653
      Company, dated October 20,
      1995

10.18 Amendment 2 to License        Exhibit 10.18 to Form 10-QSB for the
      Agreement between             Quarter ended September 30, 1995, File
      Intermedics Inc., and the     No. 0-14653
      Company, dated October 20,
      1995
</TABLE> 

                                       18
<PAGE>
 
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
Exhibit                                       Sequential Page Number or
Number           Description                Incorporation by Reference to
-------------------------------------------------------------------------------
<C>   <S>                           <C>
10.19 Distribution Agreement        Exhibit 10.19 to Form 10-QSB for the
      between Grupo Taper S.A.      Quarter ended December 31, 1995, File
      and the Company, dated        No. 0-14653
      December 20, 1995

10.20 Distribution Agreement        Exhibit 10.20 to Form 10-QSB for the
      between LEM Biomedica         Quarter ended September 30, 1996, File
      s.r.l. and the Company,       No. 0-14653
      dated October 1, 1996

10.21 Security Agreement and        Included herewith
      Secured Promissory Note
      between Bart C. Gutekunst
      and the Company dated
      October 28, 1996.
-------------------------------------------------------------------------------
</TABLE>

Copies of the above described exhibits will be furnished to the stockholders
upon written request, addressed to President and Chief Executive Officer,
Cardiac Control Systems, Inc., 3 Commerce Boulevard, Palm Coast, Florida 32164.

6(B).  REPORTS ON FORM 8-K

    There were no reports on Form 8-K filed by the Company during the nine
months ended December 31, 1996.

                                       19
<PAGE>
 
SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) 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.

CARDIAC CONTROL SYSTEMS, INC.
(Registrant)



Date: 2/12/97                       By: /s/ Alan J. Rabin
      -------                           ---------------------------------------
                                        Alan J. Rabin
                                        President and Chief Executive Officer



Date: 2/12/97                       By: /s/ W. Alan Walton
      -------                           ---------------------------------------
                                        W. Alan Walton
                                        Executive Vice President and 
                                        Chief Operating Officer

                                       20