<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, 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 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, 1996, 2,580,799 shares of the Registrant's common stock, $.10
par value, were outstanding.

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

                                  FORM 10-QSB
                               SEPTEMBER 30, 1996

                                     INDEX
------------------------------------------------------------------------------ 
                                                                      Page No.
------------------------------------------------------------------------------ 

PART I.   FINANCIAL INFORMATION

    Balance Sheet at September 30, 1996 (Unaudited).....................   3
    Statements of Operations and Accumulated Deficit for 
      the Three Months and Six Months Ended 
      September 30, 1996 and 1995 (Unaudited)............................  4
    Statements of Cash Flows for the Six Months Ended
      September 30, 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

                                       2
<PAGE>
 
                         PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                         CARDIAC CONTROL SYSTEMS, INC.
                                 BALANCE SHEET
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------- 
                                                                         September 30,
                                                                              1996
-------------------------------------------------------------------------------------
ASSETS                                                                    (Unaudited)

<S>                                                                    <C>
    CURRENT ASSETS
        Cash and cash equivalents....................................   $    400,948
        Accounts and notes receivable................................        977,078
        Inventories..................................................      1,810,359
        Prepaid expenses.............................................        438,949
                                                                        ------------
                     Total current assets............................      3,627,334

     PROPERTY, PLANT AND EQUIPMENT, less accumulated
        depreciation of $3,289,790...................................      1,645,648

     OTHER ASSETS....................................................        338,550
                                                                        ------------
                     Total assets....................................   $  5,611,532
                                                                        ============

LIABILITIES AND STOCKHOLDERS' EQUITY

     CURRENT LIABILITIES
         Notes and debt obligations payable within one year........     $    318,228
         Accounts payable............................................        379,498
         Accrued interest............................................          2,082
         Accrued compensation........................................        213,691
         Accrued compensated absences................................         93,669
         Deposits payable............................................        453,344
         Other accrued expenses......................................        302,745
                                                                        ------------
                     Total current liabilities.......................      1,763,257
                                                                        ------------

    NOTES AND DEBT OBLIGATIONS PAYABLE AFTER ONE YEAR................      1,437,961
                                                                        ------------

    OTHER LIABILITIES................................................        109,298
                                                                        ------------

    DEFERRED ROYALTIES...............................................        141,500
                                                                        ------------

    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..........................................    (20,267,262)
        Treasury stock at cost 3,571 shares..........................        (10,937)
                                                                        ------------
                     Total stockholders' equity......................      2,159,516
                                                                        ------------

                     Total liabilities and stockholders' equity.....    $  5,611,532
                                                                        ============
</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             Six Months Ended
                                                                  September 30,                 September 30,
                                                               1996           1995           1996          1995
------------------------------------------------------------------------------------------------------------------- 
<S>                                                      <C>            <C>            <C>                 <C>
REVENUE
       Net sales.......................................  $    968,682   $  1,314,899   $  2,171,175   $  2,586,902
       Royalty income..................................       519,350        486,850      1,213,875        988,650
                                                         ---------------------------------------------------------
               Total revenue...........................     1,488,032      1,801,749      3,385,050      3,575,552
                                                         ---------------------------------------------------------

COSTS AND EXPENSES
       Cost of products sold...........................       497,412        591,325      1,190,043      1,224,715
       Selling, general and administrative expenses....       728,195        830,674      1,549,535      1,738,236
       Engineering, research and development expenses..       462,270        317,073        907,147        576,950
                                                         ---------------------------------------------------------
               Total cost and expenses.................     1,687,877      1,739,072      3,646,725      3,539,901
                                                         ---------------------------------------------------------

OPERATING INCOME (LOSS)................................      (199,845)        62,677       (261,675)        35,651

OTHER INCOME (EXPENSES)
       Interest income.................................         5,725          1,492         16,273          8,019
       Interest expense................................      (131,094)      (145,083)      (265,883)      (282,010)
       Other income....................................             -         75,006         25,000         75,054
                                                         ---------------------------------------------------------
               Total other income (expenses)...........      (125,369)       (68,585)      (224,610)      (198,937)
                                                         ---------------------------------------------------------
NET LOSS...............................................      (325,214)        (5,908)      (486,285)      (163,286)

ACCUMULATED DEFICIT - BEGINNING OF PERIOD..............   (19,942,048)   (19,676,850)   (19,780,977)   (19,519,472)
                                                         ---------------------------------------------------------

ACCUMULATED DEFICIT - END OF PERIOD....................  $(20,267,262)  $(19,682,758)  $(20,267,262)  $(19,682,758)
                                                         =========================================================

NET INCOME (LOSS) PER COMMON SHARE.....................         $(.13)          $.00          $(.19)         $(.12)
                                                         =========================================================

AVERAGE NUMBER OF COMMON SHARES OUTSTANDING............     2,580,799      1,343,280      2,571,166      1,343,051
                                                         =========================================================
</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,                                                                   1996        1995
------------------------------------------------------------------------------------------------------------------ 
<S>                                                                                         <C>           <C> 
CASH FLOWS FROM OPERATING ACTIVITIES
    Net loss.............................................................................. $ (486,285)  $(163,286)
    Adjustment to reconcile net loss to net cash used for operating activities:
         Depreciation and amortization....................................................    265,059     233,167
         Gain on fixed assets disposals...................................................       (491)     (4,274)
         Cash provided by (used for):
              Accounts and notes receivable...............................................    358,279     194,488
              Inventories.................................................................    224,086    (355,383)
              Prepaid expenses............................................................   (374,876)    (45,078)
              Other assets................................................................    (39,288)     (2,775)
              Accounts payable............................................................     78,789     (15,725)
              Accrued interest............................................................     (7,130)     71,768
              Accrued compensation........................................................     31,238     (99,170)
              Accrued compensation absences...............................................    (43,100)     11,553
              Deposits payable............................................................    (66,250)   (150,562)
              Other accrued expenses......................................................     47,385     107,539
              Other liabilities...........................................................    (74,093)     10,300
              Deferred royalties..........................................................   (186,750)   (152,100)
--------------------------------------------------------------------------------------------------------------------
 Net cash provided by (used for) operating activities.....................................   (273,427)   (359,538)
--------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
    Purchase of property, plant and equipment.............................................   (244,203)   (252,881)
    Proceeds from sale of equipment.......................................................        491      20,196
--------------------------------------------------------------------------------------------------------------------
 Net cash provided by (used for) investing activities.....................................   (243,712)   (232,685)
--------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
    Proceeds from issuance of common stock and stock warrants, net of issuance expenses...    246,033           -
    Proceeds from notes and debt obligations payable......................................     32,035      68,490
    Repayment of notes and debt obligations payable.......................................   (525,273)    (40,677)
    Principal payments under capital lease obligations....................................     (1,889)     (1,654)
    Principal payments under installment purchase obligations.............................          -      (1,728)
    Debt issuance costs...................................................................          -     (22,634)
--------------------------------------------------------------------------------------------------------------------
 Net cash provided by (used for) financing activities.....................................   (249,094)      1,797
--------------------------------------------------------------------------------------------------------------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS......................................   (766,233)   (590,426)

CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR.............................................  1,167,181     667,490

CASH AND CASH EQUIVALENTS - END OF PERIOD................................................. $  400,948   $  77,064

SUPPLEMENTAL CASH FLOW INFORMATION:
    Interest paid during the period....................................................... $  159,039   $ 107,756

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
    Reduction in accounts payable in exchange for common stock............................ $    5,000           -
    Reduction in accrued compensation in exchange for common stock........................          -   $   2,000
 
</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, 1996, the related statements of operations and accumulated
deficit for the three months and six months ended September 30, 1996 and 1995,
and the statements of cash flows for the six months ended September 30, 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 September 30, 1996, and
the results of operations for the three months and six months ended September
30, 1996 and 1995 and the cash flows for the six months ended September 30, 1996
and 1995.

Certain reclassifications have been made to the unaudited financial statements
previously reported for the three months and six months ended September 30, 1995
to conform with classifications used in the unaudited financial statements for
the three months and six months ended September 30, 1996.

The accompanying unaudited financial statements as of September 30, 1996 and for
the three months and six months ended September 30, 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 $486,285 for the six months ended September 30, 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 September 30, 1996 are summarized as follows:
<TABLE>                                    
<CAPTION>                                  
                                                     
          -------------------------------------------
                                        September 30,
                                            1996     
                                         (unaudited) 
                                        -------------
          <S>                           <C>          
          Raw materials and supplies       $  314,318
          Work-in-process                   1,020,656
          Finished goods                      515,779
                                         ------------
                                            1,850,753
          Reserve for obsolescence            (40,394)
                                         ------------
                                           $1,810,359
          ------------------------------------------- 
</TABLE>
Finished goods inventories include approximately $269,000  of products consigned
to customers and independent sales representatives at September 30, 1996.

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

Notes and debt obligations consist of the following at September 30, 1996:
<TABLE>
<CAPTION>
        ----------------------------------------------------------
                                                      September 30,     
                                                          1996     
                                                      -------------
        <S>                                           <C>          
        Sirrom mortgage note, net of discount (A).....  $1,430,250
        Intermedics loan (B)..........................     282,010
        Other.........................................      43,929
                                                        ----------
                                                         1,756,189
        Amount payable within one year................     318,228
                                                        ----------
        Amount payable after one year.................  $1,437,961
        ---------------------------------------------------------- 
</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 for the first 4,000 leads
     and $90 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 September 30, 1996 mature as
follows:  1997 - $318,228; 1998 - $2,236; 1999 - $5,131; 2000 - $1,430,594.

                                       7
<PAGE>
 
NOTE 4 - STOCKHOLDERS' EQUITY

ISSUANCE OF COMMON STOCK

During the six months ended September 30, 1996, the Company issued 1,428 shares
of common stock in payment of an accounts payable balance of $5,000 and 50,000
shares of common stock to Sirrom Capital Corporation at a price of $5.00 per
share plus the right to exercise a warrant to purchase 25,000 shares of common
stock at $0.01 per share, which was valued at $81,000.

                                       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, building sales and marketing organizations and its capital
expenditure and debt service requirements contributed to negative cash flow
during the first half of fiscal 1997.

Cash used by operations during the first half of fiscal 1997 approximated
$273,000.  Capital expenditures and repayment of debt and capital lease
obligations additionally utilized approximately $244,000 and $527,000
respectively.  Proceeds from the issuance of common stock and warrants, net of
issuance expenses, approximated $246,000.  Overall, negative cash flow for the
first half of fiscal 1997 approximated $766,000.

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 $1,039,000 at September 30,
1996.

The Company is currently pursuing additional working capital 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 either through external financing sources or
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 September 30, 1996 versus Three months Ended September 30,
1995.

OVERVIEW. The Company's total revenues for the second quarter of fiscal 1997
decreased by 17% to $1.5 million as compared to $1.8 million for the second
quarter of fiscal 1996.  Sales decreased from $1.3 million in the second quarter
of fiscal 1996 to $1.0 million in the second quarter of fiscal 1997; royalty
income remained at the $0.5 million level in the second quarter of fiscal 1997,
as in the second quarter of fiscal 1996.  Royalty income represents royalties
from Intermedics Inc. pursuant to a License agreement between the Company and
Intermedics.  Total operating costs in the second quarter of fiscal 1997 were
some $51,000 lower than those incurred during the second quarter of fiscal 1996,
resulting in an operating loss of $200,000 in the second quarter of fiscal 1997
compared to an operating profit of $63,000 in the second quarter of fiscal 1996.

SALES.    Total sales during the second quarter of fiscal 1997 decreased by
$346,217or 26% to $968,682 from the level of $1,314,899 achieved during the
second quarter of fiscal 1996.  The major part of the decrease occurred in sales
of pacers in the domestic market. There were no sales of hybrid circuits to
Europe during the second quarter of fiscal 1997, but an order has been received
for $168,750 of hybrid circuits to be shipped during the second half of fiscal
1997.  Following receipt of the confirmation of the Company's right to use the
European Union CE Mark, sales of pacers to Europe during the second quarter of
fiscal 1997 increased by $94,590 to $140,140 from the level of $45,550 achieved
in the second quarter of fiscal 1996.

                                       9
<PAGE>
 
Sales by geographic area for the second quarters of fiscal 1997 and fiscal 1996
were as follows:
<TABLE>
<CAPTION>
               ---------------------------------------
               Geographic Area      1997       1996   
               ---------------------------------------
               <S>                <C>       <C>       
               United States..... $792,957  $1,145,449
               Europe............  175,725     169,450
                                  --------------------
                                  $968,682  $1,314,899
               --------------------------------------- 
</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, which is expected to terminate in January
1998, are estimated at $2.5 million.

COST OF PRODUCTS SOLD.  The cost of products sold in the second quarter of
fiscal 1997 was $497,412, compared to $591,325 in the second quarter of fiscal
1996, representing a decrease of 16% as compared with the decrease of 26% in
sales, which reduced the gross margin from 55% to 49%.  This reduction was due
to a change in customer mix, with a higher proportion of sales to the
international market, where selling prices are lower than in the domestic
market, and to a reduction in production volumes better to manage inventory
levels, thus having an adverse effect on overhead absorption.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  Selling, general and
administrative expenses were $728,195 in the second quarter of fiscal 1997,
representing a decrease of 12% from $830,674 in the second quarter of fiscal
1996. This reduction is largely due to a decrease of $125,172 in sales
commissions.

ENGINEERING, RESEARCH AND DEVELOPMENT EXPENSES.  Engineering, research and
development costs were $462,270 in the second quarter of fiscal 1997,
representing an increase of 46% from $317,073 in the second 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 $5,725 during the second quarter
of fiscal 1997, as compared to $1,492 in the second quarter of fiscal 1996.
Total interest expense decreased from $145,083 in the second quarter of fiscal
1996 to $131,094 in the second 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 second quarters of fiscal years 1997 and
1996.  Interest in the sum of $27,435 was paid to Intermedics Inc. during the
second 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
balance of principal and accrued interest outstanding pursuant to the
Intermedics' promissory note at September 30, 1996 were $282,010 and $2,082.
Debt amortization costs decreased from $55,135 in the second quarter of fiscal
1996 to $54,284 in the second quarter of fiscal 1997.  Other income of $75,000
during the second quarter of fiscal 1996 represents a prior year deposit taken
into income.

Six Months Ended September 30, 1996 versus Six months Ended September 30, 1995.

OVERVIEW.  The Company's total revenues for the first half of fiscal 1997
decreased by 5% to $3.4 million as compared to $3.6 million for the first half
of fiscal 1996.  Sales decreased from $2.6 million in the first half of fiscal
1996 to $2.2 million in the first half of fiscal 1997; royalty income increased
from $1.0 million in the first half of fiscal 1997 to $1.2 million in the first
half of fiscal 1996.  Royalty income represents royalties from Intermedics Inc.
pursuant to a License agreement between the Company and Intermedics.  Total
operating costs in the first half of fiscal 1997 were some $107,000 higher than
those incurred during the first half of fiscal 1996, resulting in an operating
loss of $262,000 in the first half of fiscal 1997 compared to an operating
profit of $36,000 in the first half of fiscal 1996.

                                       10
<PAGE>
 
SALES.  Total sales during the first half of fiscal 1997 decreased by $415,727
or 16% to $2,171,175 from the level of $2,586,902 achieved during the first half
of fiscal 1996.   Sales of hybrid circuits to Europe during the first half of
fiscal 1997 declined by $147,150 to $60,500 as compared to the level of $207,650
achieved during the first half of fiscal 1996, but an order has been received
for $168,750 of hybrid circuits to be shipped during the second half of fiscal
1997.  Sales of pacers to Europe during the first half of fiscal 1997 increased
by $136,690 to $198,890 from the level of $62,200 achieved in the first half of
fiscal 1996.

Sales by geographic area for the first halves of  fiscal 1997 and 1996 are as
follows:
<TABLE>
<CAPTION>
 
              -----------------------------------------
              Geographic Area       1997        1996   
              -----------------------------------------
              <S>                <C>         <C>       
              United States..... $1,862,475  $2,294,064
              Europe............    308,700     292,838
                                 ----------------------
                                 $2,171,175  $2,586,902
              ----------------------------------------- 
</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, which is expected to terminate in January
1998, are estimated at $2.5 million.

COST OF PRODUCTS SOLD.  The cost of products sold in the first half of fiscal
1997 was $1,190,043 compared to $1,224,715 in the first half of fiscal 1996,
representing a decrease of 3% as compared to a decrease of 16% in sales, which
reduced the gross margin from 53% to 45%.  This reduction was due to a change in
customer mix, with a higher proportion of sales to the international market,
where selling prices are lower than in the domestic market, and to a reduction
in production volumes better to manage inventory levels, thus having an adverse
effect on overhead absorption.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  Selling, general and
administrative expenses were $1,549,535 in the first half of fiscal 1997,
representing a decrease of 11% from $1,738,236 in the first half of fiscal 1996.
This reduction was largely due to a reduction of $177,648 in sales commissions.

ENGINEERING, RESEARCH AND DEVELOPMENT EXPENSES.  Engineering, research and
development costs were $907,147 in the first half of fiscal 1997, representing
an increase of 57% from $576,950 in the first half 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 $16,273 during the first half of
fiscal 1997, as compared to $8,019 in the first half of fiscal 1996.  Total
interest expense decreased from $282,010  in the first half of fiscal 1996 to
$265,883 in the first half 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 $101,527 in the first half of fiscal years 1997 compared to $102,082 in the
first half of 1996.  Interest in the sum of $72,477 was paid to Intermedics Inc.
during the first half 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
balance of principal and accrued interest outstanding pursuant to the
Intermedics' promissory note at September 30, 1996 were $282,010 and $2,082.
Debt amortization costs increased from $102,485 in the first half of fiscal 1996
to $106,845 in the first half of fiscal 1997.  Other income during the first
half of fiscal 1997 and fiscal 1996 represents a prior year deposit taken into
income.

                                       11
<PAGE>
 
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 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. However, the availability
of capital from the Debenture financing and subsequent conversion of the
Debentures and the cash flow generated from Intermedics' orders and royalties
have positioned the Company to increase its research and development
capabilities, expand its sales force and provide an uninterrupted supply of
products.

As discussed above, the 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

                                       12
<PAGE>
 
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 materials 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
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.

                                       13
<PAGE>
 
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

         None


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 Incorporation of      Exhibit 3.0 to Amendment No. 1 to Form S-1 Registration
         the Company, as amended              Statement filed on 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 of          Exhibit 3.1 to Form S-1 Registration Statement filed on
         Incorporation                        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 Statement filed on
         Certificate                          March 2, 1995, Registration No. 33-89938

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

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

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

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

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

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

4.7      Stock Purchase Warrant, dated        Exhibit 4.7 to Form 10-KSB for the year ended March 31,
         March 29, 1996 in favor of           1996, File No. 0-14653
         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 Ended
         Hughes/Bertolet and the              September 30, 1986, File No. 0-14653
         Company

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

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

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

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

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

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

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

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

10.9     Form of Indemnification              Exhibit 10.13 to Form S-1 Registration Statement filed on
         Agreement between the                March 2, 1995, Registration No. 33-89938
         Company and each Director,
         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 between         Exhibit 10.14 to Form S-1 Registration Statement filed on
         Robert R. Brownlee and the           March 2, 1995, Registration No. 33-89938
         Company dated as of October 1,
         1994

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

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

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

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

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

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

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

10.18    Amendment 2 to License               Exhibit 10.18 to Form 10-QSB for the Quarter ended
         Agreement between Intermedics        September 30, 1995, File No. 0-14653
         Inc., and the 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 between       Exhibit 10.19 to Form 10-QSB for the Quarter ended
         Grupo Taper S.A. and the             December 31, 1995, File No. 0-14653
         Company, dated December 20,
         1995

10.20    Distribution Agreement between       Filed herewith
         LEM Biomedica s.r.l. and the
         Company, dated October 1, 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 six
       months ended September 30, 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:         11/7/96                   By:  /s/ Alan J. Rabin
     ---------------------------           ----------------------------------
                                           Alan J. Rabin
                                           President and Chief Executive Officer



Date:         11/7/96                   By:  /s/ W. Alan Walton
     ---------------------------           ---------------------------------
                                           W. Alan Walton
                                           Executive Vice President and Chief
                                           Operating Officer

                                       20