<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 SEPTEMBER 30, 1998        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            (IRS Employer Identification Number)
  incorporation or organization)



               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 October 31, 1998, 2,648,739 shares of the Registrant's common stock, $.10
par value, were outstanding.

                                       1
<PAGE>
 
--------------------------------------------------------------------------------

                         CARDIAC CONTROL SYSTEMS, INC.
                                        
                                  FORM 10-QSB
                               SEPTEMBER 30, 1998
                                     INDEX

--------------------------------------------------------------------------------
                                                                        Page No.
--------------------------------------------------------------------------------
 
Part I.   Financial Information
 
    Balance Sheet at September 30, 1998 (Unaudited)......................   3
 
    Statements of Operations and Accumulated Deficit for 
        the Three Months and Six Months Ended 
        September 30, 1998 and 1997 (Unaudited)..........................   4
 
    Statements of Cash Flows for the Six Months Ended
        September 30, 1998 and 1997 (Unaudited)..........................   5
 
    Notes to Financial Statements........................................   6
 
    Management's Discussion and Analysis of Financial Position
        and Results of Operations........................................   11
 
PART II.   OTHER INFORMATION.............................................   21 

                                       2
<PAGE>
 
<TABLE>
<CAPTION>
                                           PART I.  FINANCIAL INFORMATION
Item I. Financial Statements
                                            CARDIAC CONTROL SYSTEMS, INC.
                                                    BALANCE SHEET
<S>       <C>                                                                                 <C>
--------------------------------------------------------------------------------------------------------------
                                                                                                 SEPTEMBER 30,
                                                                                                     1998
--------------------------------------------------------------------------------------------------------------
ASSETS                                                                                             (Unaudited)
         CURRENT ASSETS:
              Cash and cash equivalents                                                           $    101,022
              Accounts and notes  receivable                                                           483,134
              Inventories                                                                            1,218,337
              Prepaid expenses                                                                         224,347
--------------------------------------------------------------------------------------------------------------
                         TOTAL CURRENT ASSETS                                                        2,026,840
--------------------------------------------------------------------------------------------------------------
        PROPERTY, PLANT AND EQUIPMENT (NET)                                                          1,864,763
--------------------------------------------------------------------------------------------------------------
        OTHER ASSETS:                                                  
              Deferred financing costs, less accumulated 
                  amortization of $307,444                                                             391,003      
              Deferred license fees, less accumulated
                  amortization of $63,333                                                              136,667
              Deferred  merger costs                                                                   684,538
              Other                                                                                     77,591
                         TOTAL OTHER ASSETS                                                          1,289,799
--------------------------------------------------------------------------------------------------------------
                         TOTAL ASSETS                                                             $  5,181,402
--------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
         CURRENT LIABILITIES:
              Accounts payable                                                                    $  1,199,466
              Due to related party                                                                     101,400
              Accrued compensation                                                                     455,563
              Accrued royalties                                                                        192,468
              Other accrued expenses                                                                   142,567
              Deposits payable                                                                         342,569
              Notes and debt obligations payable within one year                                     1,422,504
--------------------------------------------------------------------------------------------------------------
                         TOTAL CURRENT LIABILITIES                                                   3,856,537
         8% CONVERTIBLE DEBENTURES                                                                     300,000  
         NOTES AND DEBT OBLIGATIONS PAYABLE AFTER ONE YEAR                                           1,502,631
         OTHER LIABILITIES                                                                              87,413        
--------------------------------------------------------------------------------------------------------------
                         TOTAL LIABILITIES                                                           5,746,581
--------------------------------------------------------------------------------------------------------------
         STOCKHOLDERS' EQUITY
              Common stock, $.10 par value, 30,000,000 shares authorized,
                     2,648,739 shares issued                                                           264,874
              Additional paid in capital                                                            22,337,797
              Accumulated deficit                                                                  (23,167,850)
                         TOTAL STOCKHOLDERS' EQUITY                                                   (565,179)
---------------------------------------------------------------------------------------------------------------
                         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                               $  5,181,402
---------------------------------------------------------------------------------------------------------------
</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 September 30     Six Months Ended September 30
                                                      1998               1997             1998              1997
--------------------------------------------------------------------------------------------------------------------
REVENUE
<S>   <C>                                       <C>                  <C>             <C>                <C>
      Net sales                                      $    764,963    $  1,041,490       $  1,385,740    $  1,893,779
      Royalty income                                            -         598,500                  -       1,295,625
                                                     ---------------------------------------------------------------
                      Total revenue                       764,963       1,639,990          1,385,740       3,189,404
                                                     ---------------------------------------------------------------
 
COSTS AND EXPENSES
      Cost of products sold                               451,730         648,245            777,819       1,152,060
      Selling, general and administrative expenses        454,421         613,053            923,513       1,356,125
      Engineering, research and development expenses      317,502         420,419            652,417         878,692
                                                     ---------------------------------------------------------------
                      Total cost and expenses           1,223,653       1,681,717          2,353,749       3,386,877
                                                     ---------------------------------------------------------------
OPERATING LOSS                                           (458,690)        (41,727)          (968,009)       (197,473)
                                                     ---------------------------------------------------------------

OTHER INCOME (EXPENSES)
      Interest income                                         475           1,969                792           7,952
      Interest expense                                   (142,411)       (128,421)          (298,706)       (211,006)
      Other income                                              -             940                  -             940
                                                     ---------------------------------------------------------------
                      Total other expenses               (141,936)       (125,512)          (297,914)       (202,114)
                                                     ---------------------------------------------------------------

NET LOSS                                                 (600,626)       (167,239)        (1,265,923)       (399,587)

ACCUMULATED DEFICIT - BEGINNING OF PERIOD             (22,567,224)    (20,894,565)       (21,901,927)    (20,662,217)
                                                     ---------------------------------------------------------------
 
ACCUMULATED DEFICIT - END OF PERIOD                  $(23,167,850)   $(21,061,804)      $(23,167,850)   $(21,061,804)
                                                     ===============================================================
 
NET LOSS PER COMMON SHARE                                  ($0.23)         ($0.06)            ($0.48)         ($0.15)
 
AVERAGE NUMBER OF SHARES OUTSTANDING                    2,648,739       2,646,866          2,648,739       2,630,405
</TABLE>

                 See accompanying notes to financial statements

                                       4
<PAGE>
 
                         CARDIAC CONTROL SYSTEMS, INC.
                            STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
                                        
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
Six months ended September 30,                                                                 1998                1997
-------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C>                                                                                   <C>                   <C>
    Net loss                                                                                $(1,265,923)       $ (399,587)
    Adjustments to reconcile net loss to net 
     cash used for operating activities:
            Depreciation and amortization                                                       214,994           218,417
            Securities received in lieu of insurance rebate                                           -              (799)
            Stock issued for payment of directors' fees                                               -            34,000
            Cash provided by (used for):
                  Accounts receivable                                                           190,539          (283,781)
                  Inventories                                                                   205,360          (147,400)
                  Prepaid expenses                                                              (16,783)         (142,584)
                  Accounts payable                                                              172,047          (148,405)
                  Due to related parties                                                         (5,622)                -
                  Accrued interest                                                               32,126            11,096
                  Accrued compensation                                                          201,475            13,228
                  Accrued compensated absences                                                   (3,824)           10,111
                  Deposits payable                                                               (9,912)           99,559
                  Other accrued expenses                                                         23,582           (42,749)
                  Other liabilities                                                               8,741            10,243
                                                                                            -----------------------------
Net cash (used for) operating activities                                                       (253,200)         (768,651)
                                                                                            -----------------------------
CASH FLOWS FROM INVESTING ACTIVITIES;
    Purchase of property, plant and equipment                                                      (893)         (288,643)
    Deferred merger costs                                                                      (364,089)                -
    Increase in other assets                                                                          -            (6,124)
                                                                                            -----------------------------
Net cash (used for) investing activities                                                       (364,982)         (294,767)
                                                                                            -----------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from issuance of common stock and exercise                                              
     of stock warrants, net of issuance costs                                                         -             8,928
    Proceeds from notes and debt obligations payable                                                  -           124,343
    Repayment of notes and debt obligations payable                                                   -          (193,983)
    Proceeds from issuance of 8% convertible debenture                                          300,000                 -
    Net borrowings on line of credit                                                             16,529         1,346,282
    Net proceeds from short term debt                                                           385,084                 -
    Repayments of long term debt                                                                 (3,821)           (1,394)
    Deferred financing costs                                                                          -          (226,616) 
                                                                                            -----------------------------
Net cash provided by financing activities                                                       697,792         1,057,560
                                                                                            -----------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                             79,610            (5,858)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                                     21,412           185,463
                                                                                            -----------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                                    $   101,022        $  179,605
                                                                                            -----------------------------
SUPPLEMENTAL CASH FLOW INFORMATION:
    Interest paid during the period                                                         $   182,236        $  148,732
    
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
    Reduction in accrued compensation in exchange for common stock                                    -        $   34,000
    Reduction in accountspayable in exchange for common stock                                         -        $    8,928

</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 September 30, 1998, the related statements of operations and
accumulated deficit for the three months and six months ended September 30, 1998
and 1997, and the statements of cash flows for the six months ended September
30, 1998 and 1997 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 September
30, 1998, and the results of operations for the three months and six months
ended September 30, 1998 and 1997 and the cash flows for the six months ended
September 30, 1998 and 1997.

     Certain reclassifications have been made to the unaudited financial
statements previously reported for the three months and six months ended
September 30, 1997 to conform with classifications used in the unaudited
financial statements for the three months and six months ended September 30,
1998.

The accompanying unaudited financial statements as of September 30, 1998 and for
the three months and six months ended September 30, 1998 and 1997 should be read
in conjunction with the Company's audited financial statements for the year
ended March 31, 1998 contained in the Company's annual report on Form 10-KSB.

     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 for the six months ended September 30, 1998 of
$1,265,923.  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 continual development of new product and resultant sales growth is critical
to attaining a profitable level of operations. Therefore, the Company is
continuing its efforts to invest in development of its single lead technology
and 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. Also, the Company is pursuing
additional working capital to expand its market position and pursue development
of new technologies. However, there is no assurance that the Company will be
able to attain profitable operations and continue operations as a going concern.

NOTE 2 - LOSS PER COMMON SHARE

     Net loss per common share is based on the weighted average number of common
shares outstanding during the period.  Common stock equivalents have not been
included for the three months and six months ended September 30, 1998 and 1997,
as their effect on the loss per share is anti-dilutive.

     The FASB has issued SFAS No. 128, "Earnings per Share," which provides
guidance for computing and presenting earnings per share (EPS).  This statement
simplifies the standards for computing EPS previously found in APB Opinion No.
15, "Earnings per Share."  This statement, when adopted, is not expected to have
a material impact on the Company.

                                       6
<PAGE>
 
NOTE 3 - INVENTORIES

     Inventories at September 30, 1998 are summarized as follows:

         ---------------------------------------------------------------
                                                     September 30, 1998
                                                   --------------------- 
         Raw materials and supplies                         $  707,657
          
         Work-in-process                                       297,785
          
         Finished goods                                        249,843
                                                   ---------------------    
                                                             1,255,285
         
         Reserve for obsolescence                              (36,948)
                                                   ---------------------     
                                                             1,218,337
         ---------------------------------------------------------------

Finished goods inventories include approximately $91,385 of products consigned
to customers and independent sales representatives at September 30, 1998.

NOTE 4 - ACCOUNTS PAYABLE

     On August 27, 1998, the Company executed a Promissory Note in favor of
Greenberg Traurig, P.A. in the sum of $199,000, due and payable, together with
interest at a rate of 9% per annum, at any time on or after the earlier of the
effective time of the merger with Electro-Catheter Corporation, a New Jersey
corporation ("Electro"), or November 10, 1998.  The Company granted to Greenberg
Traurig, P.A. a warrant to purchase 35,000 shares of the Company's common stock
at an exercise price of $0.375 per share, exercisable immediately and expiring
on July 31, 2003 and, in the event that any amount owed under the Promissory
Note shall remain outstanding on August 31, 1998, or on the last day of any
month thereafter, the grant of a right to purchase an additional 35,000 shares
of the Company's common stock expiring five years from the date of grant at an
exercise price per share equal to the average of the bid and asked price on the
date of grant.

NOTE 5 - NOTES AND DEBT OBLIGATIONS PAYABLE

     Notes and debt obligations consist of the following at September 30, 1998:

     -------------------------------------------------------------------------
                                                        September 30 1998
                                                     -------------------------
     Sirrom mortgage note, net of discount (A)                     $1,494,391
     Coast Business Credit (B)                                      1,029,826
     Minrad, Inc. Promissory note (C)                                 200,000
     International Holdings, Inc. (D)                                 165,000
     Other                                                             35,918
                                                     -------------------------
                                                                   $2,925,135
     Amount payable within one year                                 1,422,504
                                                     -------------------------
     Amount payable after one year                                 $1,502,631
     -------------------------------------------------------------------------

                                       7
<PAGE>
 
     (A)  On March 31, 1995, the Company entered into a Loan and Security
          Agreement (the "Loan Agreement") with Sirrom Capital Corporation
          ("Sirrom") and executed a $1,500,000 secured promissory note. Interest
          on the note is payable monthly at 13.5% per annum and principal is due
          on March 31, 2000. The note is secured by a subordinated 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 Sirrom
          warrants to purchase, initially, 100,000 shares of the Company's
          common stock at $.01 per share. An additional 50,000 warrants to
          purchase shares of common stock at $.01 per share will be granted to
          the lender upon each anniversary date, beginning March 31, 1997
          through March 31, 1999, that any amount owed to Sirrom shall be
          outstanding. On March 31, 1997 and, again, on March 31, 1998, the
          Company granted Sirrom 50,000 additional warrants pursuant to the Loan
          Agreement. The Company recorded $279,000 (100,000 shares) in fiscal
          year 1995, $71,376 (50,000 shares) in fiscal year 1997 and $19,550
          (50,000 shares) in fiscal year 1998 as a debt discount with the offset
          to additional paid-in capital, representing the difference between the
          estimated fair market value of the underlying stock at the date of
          grant and $.01 per share. This has resulted in an effective interest
          rate of approximately 30% per annum on the Sirrom debt. The Sirrom
          note includes an unamortized debt discount of $5,609 at September 30,
          1998.

     (B)  On June 13, 1997, the Company entered into a Loan Agreement
          ("Agreement") with Coast Business Credit ("CBC") for a maximum
          borrowing of $3.5 million which includes a line of credit up to $2.7
          million, a $500,000 sub line for capital expenditures ("CAPEX"), and a
          $300,000 term loan ("Term Loan").  The maximum borrowing base
          available under the line of credit is based upon eligible receivables
          and inventory as defined in the Agreement.  The maturity date for the
          Agreement is June 30, 2000.  The CAPEX and the Term Loan are based
          upon a 48 month amortization period.  The interest rate on the line of
          credit is equal to the prime rate plus 2%, and the interest rate for
          the Term Loan and the CAPEX Subline is equal to prime rate plus 2.25%.
          Borrowings under the Agreement are collateralized by a first security
          interest in substantially all of the assets of the Company.  The
          Agreement also contains a minimum tangible net worth requirement.  In
          addition, CBC was granted warrants to purchase 37,500 shares of stock
          at $4 per share, expiring June 30, 2002.

          In conjunction with the Agreement, the Company obtained an
          Intercreditor and Subordination Agreement between CBC and Sirrom.
          This agreement provides that Sirrom subordinate its first security
          interest in the assets of the Company to CBC, however, the priority
          interest of CBC in the Company's real estate is limited to $500,000.
          As consideration for its waiver of its first security interest in the
          assets of the Company, Sirrom was granted warrants to purchase 50,000
          shares of stock at $5 per share, exercisable at any time from June 6,
          1997 and expiring on June 6, 2002.

                                       8
<PAGE>
 
          On June 11, 1998, the Company and CBC executed an amendment to the
          original Loan Agreement whereby CBC agreed to advance the Company a
          further Bridge Loan in the sum of $250,000.  The Bridge Loan is
          repayable on November 30, 1998.  The interest rate on the Bridge Loan
          is equal to prime rate plus 5% per annum, calculated on the basis of a
          360-day year for the actual number of days elapsed.  The exercise
          price of the warrants to purchase 37,500 shares of stock granted under
          the Agreement dated June 13, 1997 was reduced from $4.00 to $0.40 and,
          in addition, CBC was granted warrants to purchase 25,000 shares of
          stock at $0.40, expiring June 30, 2002.

     (C)  On July 30, 1998, and August 13, 1998, the Company executed promissory
          notes in favor of Minrad, Inc. ("Minrad") in the amount of $75,000 and
          $125,000, respectively (collectively, the "Minrad Note").  The Minrad
          Note bears interest at the rate of 15% annually, and the principal
          amount and all interest due thereunder is due and payable, after
          September 29, 1998, within ten (10) days after written demand from
          Minrad.

     (D)  On August 26, 1998, the Company received $134,000 from International
          Holdings, Inc. ("IHI") and executed a promissory note in the amount of
          $165,000 (the "IHI Note") in favor of IHI.  Concurrently with
          execution of the IHI Note, the Company paid Goodbody International,
          Inc., a related company of IHI ("Goodbody"), a $34,000 consulting fee
          for services relating to the obtaining of additional debt financing.
          Pursuant to the terms of the IHI Note, the Company has agreed to repay
          the IHI Note on or before October 25, 1998.  If the Company does not
          repay the IHI Note on or before October 25, 1998, but does so on or
          before November 12, 1998, in addition to repayment of the IHI Note,
          the Company has agreed to pay Goodbody a $25,000 fee (the "Goodbody
          Fee").  If repayment of the IHI Note and the Goodbody Fee have not
          been received by IHI on or before November 12, 1998, an immediate
          penalty fee of $2,500 shall be incurred at 12:01 a.m. on November 13,
          1998, and an additional $2,500 fee will accrue and be imposed at 12:01
          a.m. every 24 hours, until the IHI Note, the Goodbody Fee and all
          penalty fees have been paid in full.

          In connection with the IHI Note, the Company has agreed to issue up to
          four warrants to IHI under certain conditions, each giving IHI the
          right to purchase 50,000 shares of the Company's common stock at an
          exercise price of $.01 per share. If repayment of the IHI Note and the
          Goodbody Fee have not been received by IHI on or before November 12,
          1998, at 12:01 a.m. on November 13, 1998, the first of the four
          warrants will be deemed issued to and earned by IHI. At 12:01 a.m. on
          the 13th of each month thereafter for up to three months, one
          additional warrant shall be issued and deemed earned, if the IHI Note,
          the Goodbody Fee and all penalty fees have not been paid in full.
          Furthermore, if the IHI Note, the Goodbody Fee and all penalty fees
          have not been paid in full by January 1, 1999, IHI will have the
          option to convert any or all of the amounts due into common stock of
          the Company at an exercise price of $.01 per share. As additional
          consideration for the IHI Note, IHI received a warrant to purchase
          330,000 shares of the Company's common stock at an exercise price of
          $0.128 per share, exercisable at any time on or before 5:00 p.m.
          Eastern Standard Time on August 26, 2003.

Aggregate notes and debt obligations outstanding at September 30, 1998 mature as
follows:  1999 - $1,422,504; 2000 - $3,343; 2001 - $1,498,868; 2022 - $420.

                                       9
<PAGE>
 
NOTE 6 - 8% CONVERTIBLE DEBENTURES

  From April 22 through May 4, 1998, the Company obtained $300,000 in interim
financing from selected current investors through the issuance of 8% convertible
debentures, convertible to shares of stock at $0.40 per share.  The debenture
holders include two stockholders of Cardiac Control Systems, Inc., Mr. George
Holbrook and Mr. A. Bruce Brackenridge.  In return for their efforts, the
exercise price of the option controlled by Mr. Holbrook to purchase 3,571 shares
of the Company common stock at $3.50 a share and the exercise price of the
warrant controlled by Mr. Holbrook to purchase 16,811 shares of the Company
common stock at $5.00 a share were each reduced to $0.40 a share and the
exercise price of the warrant held by Mr. Brackenridge to purchase 866 shares of
the Company common stock at $5.00 a share was reduced to $0.40 a share.

NOTE 7 - PROBABLE MERGER

  On October 27, 1997, the Company entered into a letter of intent with Electro
to effect a merger of a wholly-owned subsidiary of the Company ("Sub"), into and
with Electro (the "Merger") as a result of which Electro will become a wholly-
owned subsidiary of the Company.

     To effectuate the Merger, the Company, Electro and Sub executed an
Agreement and Plan of Reorganization dated January 20, 1998, as amended by a
First Amendment to Agreement and Plan of Reorganization, dated May 5, 1998 and a
Second Amendment to Agreement and Plan of Reorganization, dated August 7, 1998
(collectively, the "Merger Agreement").  Prior to consummation of the Merger,
the Company will effectuate a 1 for 5 reverse stock split (the "Reverse Split")
whereby the number of outstanding shares of Company Common Stock will be reduced
to approximately 530,000 shares.  Simultaneously with the consummation of the
Merger, the Company will reorganize into a holding company structure, whereby
the Company will become a direct, wholly-owned subsidiary of Catheter Technology
Group, Inc., a Delaware corporation and a holding company ("CTG").  The
stockholders of the Company will become stockholders of CTG and will continue to
hold their shares of common stock without any change in number, designation,
terms or rights.  The structure of the transaction contemplates that upon
effectiveness of the Merger, holders of Electro's common stock, $.10 par value
per share ("Electro Common Stock"), will receive one-fifth of a share of common
stock, $.10 par value, of CTG for each share of Electro Common Stock held.  No
fractional shares will be issued in the Merger.

     Consummation of the Merger and transactions contemplated thereby are
subject to the satisfaction of certain conditions, including, among other
things: (i) The approval and adoption of the Merger Agreement and the Merger by
the stockholders of Electro; and (ii) the registration under the Securities Act
of 1933, as amended, and all applicable state securities laws, of the shares of
CTG to be issued pursuant to the Merger.

     Electro is based in Rahway, New Jersey, and is engaged in the business of
the design, development, manufacture, marketing and sale of catheters and
related devices utilized in connection with illnesses of the heart and
circulatory system.  The Company believes the Merger may allow certain
efficiencies to improve operating performance and that the broader product line
may provide for a more effective marketing and distribution process.  There can
be no assurance, however, that consummation of the Merger will occur, or that if
it does, it will yield positive operating results in the future.

                                       10
<PAGE>
 
ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS
OF OPERATIONS

     The statements contained in this Form 10-QSB that are not historical are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934,
as amended.  Additional written or oral forward looking statements may be made
by Cardiac Control systems, Inc. (the "Company") from time to time in filings
with the Securities and Exchange Commission or otherwise.  Such statements may
include, but not be limited to, projections of revenues, income, or loss,
capital expenditures, plans for future operations, financing needs or plans, and
plans relating to products or services of the Company, as well as assumptions
relating to the foregoing.  The words "believe," "expect," "anticipate,"
"estimate, " project," and similar expressions identify forward looking
statements, which speak only as of the date such statement is made.  Forward
looking statements are inherently subject to risks and uncertainties, some of
which cannot be predicted or quantified and certain of which are beyond the
Company's control and actual results may differ materially depending on a
variety of important factors including the sources for sufficient capital to
meet the Company's growth and operation, the ability of the Company to
continually develop new, advanced products, the length of the regulatory review
process for new or advanced products, the availability of raw materials,
expansion of sales volume, changes in economic conditions, demand for the
Company's products, and changes in the regulatory and competitive environment.
Statements in this Form 10-QSB, including the Notes to the Financial Statements
and "Management's Discussion and Analysis of Financial Position and Results of
Operations", describe factors, among others, that could contribute to or cause
such differences.

FINANCIAL POSITION AND LIQUIDITY

     The Company's liquidity benefited from a loan from Coast Business Credit, a
division of Southern Pacific Bank ("Coast") under a loan agreement dated June
13, 1997 (the "Coast Loan") whereby Coast agreed to lend the Company an amount
not to exceed $3,500,000, subject to limitations relating to the value of
receivables and inventories and including a capital expenditure sub-line up to
$500,000 and a term loan in the sum of $300,000, of which the latter two are
repayable over a forty-eight month period.  On June 6, 1997, as consideration
for Sirrom Capital Corporation ("Sirrom") subordinating its interests to Coast,
the Company issued to Sirrom a warrant to purchase 50,000 shares of common
stock, $.10 par value per share, of the Company ("Company Common stock")
exercisable commencing immediately and expiring June 6, 2002 at an exercise
price of $5.00 per share.  In connection with the Coast Loan, on June 13, 1997,
the Company issued to Coast a warrant to purchase 37,500 shares of Company
Common Stock exercisable commencing immediately and expiring June 30, 2002 at an
exercise price of $4.00 per share.  On June 11, 1998, the Company and Coast
amended the terms of the Coast Loan, pursuant to which the Company received an
additional $250,000 (the "Bridge Loan").  In connection with the Bridge Loan,
the Company issued to Coast a warrant to purchase 25,000 shares of Company
Common Stock exercisable commencing immediately and expiring June 30, 2002 at an
exercise price of $.40 per share and the exercise price per share of the warrant
issued to Coast in connection with the Coast Loan was reduced from $4.00 per
share to $.40 per share.  As of September 30, 1998, the Company had outstanding
indebtedness of approximately $1,029,826 under the Coast Loan.

     From April 22 through May 4, 1998, the Company obtained $300,000 in interim
financing from selected current investors through the issuance of an 8%
convertible debenture, convertible at the then current market price of $0.40 per
share.  In consideration for this investment the Company lowered the exercise
price of previously issued options to purchase 3,571 shares of Company Common
Stock from 

                                       11
<PAGE>
 
$3.50 per share to $0.40 per share and lowered the exercise price of certain
warrants to purchase 16,811 shares of Company Common Stock from $5.00 per share,
to $.40 per share.

     On July 30, 1998, and August 13, 1998, the Company executed promissory
notes in favor of Minrad, Inc. ("Minrad") in the amount of $75,000 and $125,000,
respectively (collectively, the "Minrad Note").  The Minrad Note bears interest
at the rate of 15% annually, and the principal amount and all interest due
thereunder is due and payable, after September 29, 1998, within ten (10) days
after written demand from Minrad.

  On August 26, 1998, the Company received $134,000 from International Holdings,
Inc. ("IHI") and executed a promissory note in the amount of $165,000 (the "IHI
Note") in favor of IHI. Concurrently with execution of the IHI Note, the Company
paid Goodbody International, Inc., a related company of IHI ("Goodbody"), a
$34,000 consulting fee for services relating to the obtaining of additional debt
financing. Pursuant to the terms of the IHI Note, the Company has agreed to
repay the IHI Note on or before October 25, 1998. If the Company does not repay
the IHI Note on or before October 25, 1998, but does so on or before November
12, 1998, in addition to repayment of the IHI Note, the Company has agreed to
pay Goodbody a $25,000 fee (the "Goodbody Fee"). If repayment of the IHI Note
and the Goodbody Fee have not been received by IHI on or before November 12,
1998, an immediate penalty fee of $2,500 shall be incurred at 12:01 a.m. on
November 13, 1998, and an additional $2,500 fee will accrue and be imposed at
12:01 a.m. every 24 hours, until the IHI Note, the Goodbody Fee and all penalty
fees have been paid in full.

     In connection with the IHI Note, the Company has agreed to issue up to four
warrants to IHI under certain conditions, each giving IHI the right to purchase
50,000 shares of Company Common Stock at an exercise price of $.01 per share.
If repayment of the IHI Note and the Goodbody Fee have not been received by IHI
on or before November 12, 1998, at 12:01 a.m. on November 13, 1998, the first of
the four warrants will be deemed issued to and earned by IHI.  At 12:01 a.m. on
the 13th of each month thereafter for up to three months, one additional warrant
shall be issued and deemed earned, if the IHI Note, the Goodbody Fee and all
penalty fees have not been paid in full.  Furthermore, if the IHI Note, the
Goodbody Fee and all penalty fees have not been paid in full by January 1, 1999,
IHI will have the option to convert any or all of the amounts due into Company
Common Stock at an exercise price of $.01 per share.  As additional
consideration for the IHI Note, IHI received a warrant to purchase 330,000
shares of Company Common Stock at an exercise price of $0.128 per share,
exercisable at any time on or before 5:00 p.m. Eastern Standard Time on August
26, 2003.

     The interest and warrant provisions and other inducements which the Company
is required to offer to obtain capital are becoming increasingly more
burdensome.  Interim financing of the Company pending the consummation of a
merger involving Electro-Catheter Corporation, a New Jersey corporation
("Electro") and an indirect, wholly-owned subsidiary of the Company ("Sub"),
whereby the Sub will merge with and into Electro (the "Merger"), is extremely
difficult to obtain.  If the Company is unable to obtain additional interim
financing it might not be able to survive until the end of November, the
expected time of the consummation of the Merger.

     Cash used by operations during the first six months of fiscal year 1999
approximated $253,200. Deferred merger costs utilized approximately $364,089.
Proceeds of the 8% convertible debenture and notes and debt obligations payable
approximated $300,000 and $385,084 respectively.  Overall, positive cash flow
for the first six months of fiscal year 1999 approximated $79,600.

                                       12
<PAGE>
 
     The Company has no commitments for the acquisition of capital assets.  It
has material commitments pursuant to certain inventory procurement contracts
that aggregated $859,397 at September 30, 1998.

RESULTS OF OPERATIONS

Fiscal Quarter Ended September 30, 1998 Compared To Fiscal Quarter Ended
September 30, 1997

  Overview.  The Company's total revenues for the second quarter of fiscal year
1999 decreased by 53.4% to $764,963 as compared to $1,639,990 for the second
quarter of fiscal year 1998.  Sales decreased from $1,041,490 in the second
quarter of fiscal year 1998 by 26.6% to $764,963 in the second quarter of fiscal
year 1999.  Royalty income, which was $598,500 in the second quarter of fiscal
year 1998, was zero in the second quarter of fiscal year 1999.  Royalty income
represents royalty fees from Sulzer Intermedics, Inc. ("Intermedics") 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.  Royalty fees under this agreement terminated on
January 22, 1998.  Total operating costs in the second quarter of fiscal year
1999 were $458,064 lower than those incurred during the second quarter of fiscal
year 1998, which, combined with the decrease in total revenues, resulted in an
operating loss of $458,690 in the second quarter of fiscal year 1999 as compared
to an operating loss of $41,727 in the second quarter of fiscal year 1998.

  Sales.  Total sales decreased from $1,041,490 in the second quarter of fiscal
year 1998 by 26.6% to $764,963 in the second quarter of fiscal year 1999.
Pacemaker unit sales decreased by 66% and pacemaker dollar sales decreased by
66%.  This decline reflects sales worldwide, and is due to loss of sales to
competition because of the Company's lack of a pacemaker generator with rate
response and other diagnostic features.  Sales of pacing leads decreased in the
domestic market by $274,304, but this was largely offset by increased sales of
defibrillator leads to a new original equipment manufacturer ("OEM") customer
and by increased sales of single-pass atrial-controlled pacing leads used in
conjunction with competitive pacing systems.  The decline in pacing lead sales
was the result of a 66% decline in units reflecting a slight reduction both in
complete systems sold (pacemakers with leads), as well as in leads sold to
Intermedics.  The reduction in sales to Intermedics is perceived to be due to
the reduction of internal inventories maintained by Intermedics, as well as a
reduction of sales of this product by Intermedics through its customers.  Sales
of pacing leads in the international market remained stable.

  Sales by geographic area for the second quarter of  fiscal year 1999 and 1998
are as follows:

          Geographic Area                1999                 1998
          ---------------                ----                 ----  

          United States                $549,817           $  732,400
          International                 215,146              309,090
                                       --------           ----------
                                       $764,963           $1,041,490
                                       ========           ==========
                                                                                

  Sales by product line for the second quarter of  fiscal year 1999 and 1998 are
as follows:

                                       13

<PAGE>
 
          Product Line                  1999                 1998
          ------------                  ----                 ----

         Pacemakers                  $280,424           $  601,022
         Electrode Leads              415,223              436,970
         Other                         69,316                3,498
                                      -------           ----------
                                      764,963           $1,041,490
                                      =======           ==========
                                                                                
  Royalty Income.  Royalty income represents royalty fees from Intermedics
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.  Royalty fees under this agreement terminated on
January 22, 1998.

  Costs of  Products Sold.  The cost of products sold in the second quarter of
fiscal year 1999 was $451,730, compared to $648,245 in the second quarter of
fiscal year 1998, representing a decrease  of 30% as compared with a decrease of
26.6% in sales, which increased the rate of gross margin from 37.8% to 40.9%.
This improvement was due to the substitution in the product mix of defibrillator
leads for pacing leads.

  Selling, General  and Administrative Expenses.  Selling, general and
administrative expenses were $454,421 in the second quarter of fiscal year 1999,
representing a decrease of 26% from $613,053 in the second quarter of fiscal
year 1998.  Selling expenses were $152,778 in the second quarter of fiscal year
1999 compared to $254,926 in the second quarter of fiscal year 1998 as a result
of reduced costs in respect of commissions and royalties.  General and
administrative expenses were $301,643 in the second quarter of fiscal year 1999
compared to $358,127 in the second quarter of fiscal year 1998 representing a
decrease of 16% as a result of reduced costs in respect of salaries, outside
services and professional fees.

  Engineering, Research and Development Expenses.  Engineering, research and
development costs were $317,502 in the second quarter of fiscal year 1999, which
was a decrease of 24% from $420,419 in the second quarter of fiscal year 1998
due to reduced salaries, external costs and travel costs.

  Other Income and Expenses.  Interest income was $475 during the second quarter
of fiscal year 1999 compared to $1,969 during the second quarter of fiscal year
1998.  Total interest expense increased from $128,421 in the second quarter of
fiscal year 1998 to $142,411 in the second quarter of fiscal year 1999 due to
increased borrowings to meet working capital requirements.

Six Months Ended September 30, 1998 Compared To Six Months Ended September 30,
1997.

  Overview.  The Company's total revenues for the first half of fiscal year 1999
decreased by 57% to $1,385,740 as compared to $3,189,404 for the first half of
fiscal year 1998.  Sales decreased from $1,893,779 in the first half of fiscal
year 1998 to $1,385,740 in the first half of 1999.  Royalty income decreased
from $1,295,625 in the first half of fiscal year 1998 to zero in the first half
of fiscal year 1999.  Royalty income represents royalty fees from Intermedics
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.  Royalty fees under this agreement terminated on
January 22, 1998.  Total operating costs in the first half of fiscal year 1999
were $1,033,128 lower than those incurred during the first half of fiscal year
1998, which, combined with the decrease in total revenue, 

                                       14
<PAGE>
 
resulted in an operating loss of $968,009 in the first half of fiscal year 1999
compared to an operating loss of $197,473 in the first half of fiscal year 1998.

  Sales.  Total sales during the first half of fiscal year 1999 decreased from
$1,893,779 in the first half of fiscal year 1998 by $508,039 or 27% to
$1,385,740.  Pacemaker unit sales decreased by 52% and pacemaker dollar sales
decreased by 50%.  This decline reflects sales worldwide, and is due to loss of
sales to competition because of the Company's lack of a pacemaker generator with
rate response and other diagnostic features.  Sales of pacing leads decreased in
the domestic market by $481,119, but this was largely offset by increased sales
of defibrillator leads to a new OEM customer and by increased sales of single-
pass atrial-controlled pacing leads used in conjunction with competitive pacing
systems.  The decline in pacing lead sales in the domestic market was the result
of a 70% decline in units reflecting a slight reduction both in complete systems
sold (pacemaker with leads), as well as in leads sold to Intermedics.  The
reduction in sales to Intermedics is perceived to be due to the reduction of
internal inventories maintained by Intermedics, as well as a reduction of sales
of this product by Intermedics through its customers.  Sales of pacing leads in
the international market remained stable.

  Sales by geographic area for the first half of fiscal year 1999 and 1998 were:

          Geographic Area              1999                 1998
          ---------------              ----                 ---- 
                  
          United States             $1,115,138           $1,513,410
          International                270,602              380,369
                                    ----------           ----------
                                    $1,385,740           $1,893,779
                                    ==========           ==========

  Sales by product line area for the first half of fiscal year 1999 and 1998
were:

          Product Line                 1999                 1998
          ------------                 ----                 ----  
                          
          Pacemakers                $  524,486           $1,050,534
          Electrode Leads              759,247              822,599
          Other                        102,007               20,646
                                    ----------           ----------
                                    $1,385,740            1,893,779
                                    ==========           ==========
                                                                                
  Royalty Income.  Royalty income represents royalty fees from Intermedics
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.  Royalty fees under this agreement terminated on
January 22, 1998.

  Costs of Products Sold.  The cost of products sold during the first half of
fiscal year 1999 was $777,819 compared to $1,152,060 in the first half of fiscal
year 1998, representing a decrease of 32% as compared to a decrease of 27% in
sales, which increased the rate of gross margin from 39% in the first half of
fiscal year 1998 to 44% in the first half of fiscal year 1999. This improvement
was due to the substitution in the product mix of defibrillator leads for pacing
leads.

  Selling, General and Administrative Expenses.  Selling, general and
administrative expenses were $923,513 in the first half of fiscal year 1999,
representing a decrease of $432,612 or 32% from $1,356,125 incurred in the first
half of fiscal year 1998.  Selling expenses decreased from $601,303 in the first
half of fiscal year 1998 by $289,754 or 48% to $311,549 in the first half of
fiscal year 1999 as a 

                                       15
<PAGE>
 
result of reduced costs in respect of commissions and royalties. General and
administrative expenses decreased from $754,822 in the first half of fiscal year
1998 by $142,858 or 19% to $611,964 in the first half of fiscal year 1999 as a
result of reduced costs in respect of salaries, outside services and
professional fees.

  Engineering, Research and Development Expenses.  Engineering, research and
development costs were $652,417 during the first half of fiscal year 1999
compared to $878,692 during the first half of fiscal year 1998 due to reduced
salaries, external costs and travel costs.

  Other Income and Expenses.  Interest income was $792 during the first half of
fiscal year 1999 compared to $7,952 during the first half of fiscal year 1998.
Total interest expense increased from $211,006 in the first half of fiscal year
1998 to $298,706 in the first half of fiscal year 1999 due to increased
borrowings to meet working capital requirements.

Operating Trends and Uncertainties

     Sales.  The ability of the Company to attain a profitable level of
operations is dependent upon expansion of sales volume, both domestically and
internationally, and continued development of new, advanced products.  The
Company believes that with the continued release of new products, its world-wide
market expansion, and the addition of new OEM corporate customers, it will have
the potential to increase sales.

     European Economic Community ("EEC") nations have adopted universal
standards as developed by the International Organization for Standardization
("ISO") 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 EEC 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.  The Company Quality
System received certification to the ISO 9002 on November 19, 1996.  The CE Mark
certification was issued by the Notified Body, TUV Product Services, of Munich,
Germany, during the second quarter of fiscal year 1996 for the Company's
products intended for sale in Europe.  The Company was audited in July 1997 by
TUV Product Services as part of the annual review of the certified Quality
System.  As a result of the TUV Product Services audit, the Quality System
certificate was renewed.  In September, 1998, the Company was subject to an
audit of its design control processes by TUV and received certification to ISO
9001 standards. The ISO 9001 certification means that the Company meets the
highest and most stringent international product quality standards.

     Until March 1995, the Company was the only manufacturer commercially
marketing single-lead atrial-controlled ventricular pacemakers.  However,
Intermedics, a competitor of the Company, received United States Food and Drug
Administration ("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.  In addition,
other competitors have also commenced marketing competitive single-lead
products.

     Although the introduction of the new single-lead pacemakers poses
competition for the Company, management believes that the Company will benefit
from such competition since the new competition 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 

                                       16
<PAGE>
 
there is a sufficient market to accommodate both the Company's and other
competitive pacemakers. the Company estimates its market share of pacing
products to be about 0.25% of an estimated worldwide pacing systems market of
$2.0 billion.

     Various factors impact on a firm's ability to increase market share
including, but not limited to, the financial strength of the firm, the sales
resources 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 product and recruit
a quality sales force and 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.  However, the Company believes that the resources and
products available with the Merger, and the associated funding to be obtained in
connection with the Merger, will position the combined companies to be able to
develop effective sales and marketing, and research and development programs.

     As discussed above, the manufacture and sale of leads to Intermedics
produces income for the Company.  However, the supply agreement under which the
Company sold electrode leads to Intermedics for its new systems expired on
August 1, 1998.  Thus, although the Company cannot guarantee that it will
continue to supply Intermedics with products, the Company anticipates providing
Intermedics with existing or new leads for the next few years without a supply
agreement on the same or similar terms and conditions that the Company sells to
other similar customers.  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. 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 Enterprises, Inc.
("Dow") and E.I. DuPont de Nemours & Co. ("DuPont"), 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 to
discontinue supplying its materials to medical device manufacturers.  The
Company filed the "Special Silicone Notification" for its products effected by
the Dow 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 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.
DuPont, the FDA has indicated that such changes 

                                       17
<PAGE>
 
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. The
Polymer Technology Group produces a product that meets manufacturing
requirements and has been identified as a tentative replacement for the DuPont
supplied material. Biocompatibility studies have been completed. 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 performed. The
Company believes, however, that it has a sufficient supply of the DuPont
material to meet the Company's anticipated demand for the next several years.

     Suppliers of custom Application Specific Integrated Circuits ("ASICs") have
advised the Company that the technology used to produce these ASICs will no
longer be supported.  As such, the Company placed one last bulk order to ensure
the availability of sufficient ASICs to satisfy projected demands for product.
The new pacing system under development will utilize appropriate new ASICs for
the new system obviating the need for perpetual supply of the currently used
ASICs.

     Probable Merger.  On October 27, 1997, the Company entered into a letter of
intent with Electro to effectuate the Merger, as a result of which Electro will
become a wholly-owned subsidiary of the Company.

     To effectuate the Merger, the Company, Electro and Sub executed an
Agreement and Plan of Reorganization dated as of January 20, 1998, as amended by
a First Amendment to Agreement and Plan of Reorganization, dated as of May 5,
1998 and a Second Amendment to Agreement and Plan of Reorganization, dated as of
August 7, 1998 (collectively, the "Merger Agreement").  Prior to consummation of
the Merger, the Company will effectuate a 1 for 5 reverse stock split (the
"Reverse Split") whereby the number of outstanding shares of Company Common
Stock will be reduced to approximately 530,000 shares.  Simultaneously with the
consummation of the Merger, the Company will reorganize into a holding company
structure (the "Restructuring") whereby the Company will become a direct,
wholly-owned subsidiary of Catheter Technology Group, Inc., a Delaware
corporation ("CTG").  The stockholders of the Company will become stockholders
of CTG and will continue to hold their shares of common stock without any change
in number, designation, terms or rights.

     Pursuant to the Merger Agreement, each outstanding share of common stock,
$.10 par value, of Electro ("Electro Common Stock") will be converted into the
right to receive one-fifth of a share of common stock, $.10 par value, of CTG
("CTG Common Stock").  No fractional shares of CTG Common Stock will be issued
in the Merger, but cash will be paid in lieu of such fractional shares.

     Approximately 1,278,000 shares of CTG Common Stock will be issued to
Electro stock holders in connection with the merger (the "Merger Shares").  The
Merger will result in:  (i) the reverse acquisition by Electro stock holders of
CTG (as the successor issuer and parent holding company of the Company as a
result of the Restructuring) due to the fact that immediately after the
consummation of the Merger, the Merger Shares will represent an aggregate of
approximately 55% of the outstanding shares of CTG Common Stock (after giving
effect to the approximately 22% interest in CTG to be issued in connection with
the contemplated public offering to occur simultaneous with and as a condition
to the consummation of the Merger), based on the number of shares of CTG Common
Stock outstanding at the completion of the Reverse Split and the Restructuring;
and (ii) the combination of the current business operations and management of
the Company and Electro.

     Electro is based in Rahway, New Jersey, and is engaged in the business of
the design, development, manufacture, marketing and sale of catheters and
related devices utilized in connection 

                                       18
<PAGE>
 
with illnesses of the heart and circulatory system. The Company believes the
Merger may allow certain efficiencies to improve operating performance and that
the broader product line may provide for a more effective marketing and
distribution process. There can be no assurance, however, that consummation of
the Merger will occur, or that if it does, it will yield positive operating
results in the future.

     Year 2000 Issue.  Many existing computer programs use only a two digit
suffix to identify a year in the date field with an assumed prefix of "19."
Consequently, this limits those systems to dates between 1900 and 1999.  If not
corrected, many computer systems and applications could fail or create erroneous
results by or at the year 2000.

     The Company has undertaken to review the potential impact of the Year 2000
issue to its internal operations.  Such assessment has included a review of the
impact of the issue in primarily four areas:  products, manufacturing systems,
business systems and miscellaneous/ other areas.  Based on the results of its
initial review, the Company does not anticipate that the Year 2000 issue will
impact operations or operating results.  The Company is in the process of
testing its systems which may be affected by the Year 2000 issue and estimates
that all affected systems can be tested, upgraded and replaced before they cause
any operational problems.  This upgrading is estimated to take less than four
man-months of effort.  In order to insure Year 2000 compliance, the Company has
created a task force to periodically review their areas of concern.  This task
force is to meet on a quarterly basis through the middle of year 2000.
Management believes that the incremental costs associated with achieving Year
2000 compliance will not be material to the Company's operating results.

     The Company relies on its customers, suppliers, utility service providers,
financial institutions and other partners in order to continue normal business
operations.  At this time, it is impossible to assess the impact of the Year
2000 issue on each of these organizations.  There can be no guarantee that the
systems of other unrelated entities on which the Company relies will be
corrected on a timely basis and will not have a material adverse effect on the
Company.  The Company's task force has identified the other organizations which
are critical to the Company's continued operations.  The Company intends to
survey these organizations to determine the impact of the Year 2000 on their
operations and their plans for addressing any potential concerns.  The Company
expects that this assessment will be completed in the fourth calendar quarter of
1998 and expects that any issues will be resolved by the end of the second
calendar quarter of 1999.

INFLATION AND CHANGING PRICES

     In the opinion of the Company's management, the rate of inflation during
the past two fiscal year 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.

RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income" ("FAS 130") and No. 131, "Disclosure about Segments of an
Enterprise and Related Information" ("FAS 131").  FAS 130 establishes standards
for reporting and displaying comprehensive income, its components and
accumulated balances.  FAS 131 establishes standards for the way that public
companies report information about operating segments in annual financial
statements and requires reporting of selected 

                                       19
<PAGE>
 
information about operating segments in interim financial statements issued to
the public. Both FAS 130 and FAS 131 are effective for periods beginning after
December 15, 1997. Because of the recent issuance of the standards, management
has been unable to fully evaluate the impact, if any, they may have on future
financial statement disclosures.

  In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("FAS 133").  FAS 133 requires companies to
recognize all derivative contracts as either assets or liabilities in the
balance sheet and to measure them at fair value.  If certain conditions are met,
a derivative may specifically be designated as a hedge, the objective of which
is to match the timing of gain or loss recognition of: (i) the changes in the
fair value of the hedged asset or liability that are attributable to the hedged
risk; or (ii) the earnings effect of the hedged transaction.  For a derivative
not designated as a hedging instrument, the gain or loss is recognized as income
in the period of change.  FAS 133 is effective for all fiscal year quarters of
fiscal year years beginning after June 15, 1999.

     Historically, the Company has not entered into any derivative contracts
either to hedge existing risks or for speculative purposes.  Accordingly, the
Company does not expect adoption of the new standard on January 1, 2000 to
affect its financial statements.

                                       20
<PAGE>
 
PART II.  OTHER INFORMATION


Item 6.  Exhibits

         Exhibits filed as part of this report are as follows:

Exhibit
Number                          Description
------                          -----------

  2.0          Second Amendment to Agreement and Plan of Reorganization, dated
               as of August 7, 1998.(1)

  2.1          Third Amendment to Agreement and Plan of Reorganization, dated as
               of September 4, 1998.(1)

  2.2          Agreement of Merger and Plan of Reorganization, dated as of
               September 23, 1998 by and between Catheter Technology Group,
               Inc., Cardiac Control Systems, Inc. ("Cardiac") and CTG Merger
               Sub, Inc.(1)

  4.0          Cardiac Stock Purchase Warrant, dated August 26, 1998 in favor of
               International Holdings, Inc.(1)

  4.1          Cardiac Stock Purchase Warrant, dated August 27, 1998 in favor of
               Greenberg Traurig, P.A.(1)

 10.0         Promissory Note in favor of Minrad, Inc., dated July 29, 1998.(1)

 10.1         Promissory Note in favor of Minrad, Inc., dated August 13,
               1998.(1)

 10.2         Promissory Note in favor of Greenberg Traurig, P.A., dated 
               August 27, 1998.(1)

 10.3         Promissory Note in favor of International Holdings, Inc., dated
               October 6, 1998.(1)

 10.4         Amendment to Loan and Security Agreement between Cardiac and
               Coast Business Credit, dated September 15, 1998.(1)

 27.0         Financial Data Schedule.(2)

_____________
(1) Incorporated by reference to Catheter Technology Group, Inc.'s Registration
    Statement on Form S-4 filed October 13, 1998 (File No. 333-65603).

(2)  Filed Herewith.

                                       21
<PAGE>
 
                                   SIGNATURES


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

                            CARDIAC CONTROL SYSTEMS, INC.



Date: November 10, 1998     By: /s/ Alan J. Rabin
                                ____________________________________________
                                Alan J. Rabin, President and Chief Executive
                                Officer

                                       22
<PAGE>
 
                               INDEX TO EXHIBITS


Exhibit
Number              Description
------              -----------

27.0         Financial Data Schedule