<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-QSB

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

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


 FOR THE QUARTER ENDED DECEMBER 31, 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 January 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
                                DECEMBER 31, 1998
                                      INDEX

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

Part I.   Financial Information

    Balance Sheet at December 31, 1998 (Unaudited) ....................... 3

    Statements of Operations and Accumulated Deficit for 
        the Three Months and Nine Months Ended
        December 31, 1998 and 1997 (Unaudited)............................ 4

    Statements of Cash Flows for the Nine Months Ended
        December 31, 1998 and 1997 (Unaudited)............................ 5

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

    Management's Discussion and Analysis of Financial Position
        and Results of Operations......................................... 12

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>         
----------------------------------------------------------------------------------------
                                                                            December 31,
                                                                                1998
----------------------------------------------------------------------------------------
ASSETS                                                                      (Unaudited)
        Current Assets:
             Cash and cash equivalents                                     $    225,707
             Accounts and notes receivable                                      712,368
             Inventories                                                      1,044,049
             Prepaid expenses                                                   228,789
----------------------------------------------------------------------------------------
                        Total current assets                                  2,210,914
----------------------------------------------------------------------------------------
        Property, plant and equipment (net)                                   1,817,914
----------------------------------------------------------------------------------------
        Other assets:
             Deferred financing costs, less accumulated
                 amortization of $344,553                                       383,460
             Deferred license fees, less accumulated
                 amortization of $73,333                                        126,667
             Deferred merger costs                                              749,964
             Other                                                               77,716
----------------------------------------------------------------------------------------
                        Total other assets                                    1,337,807
----------------------------------------------------------------------------------------
                        Total assets                                       $  5,366,635
----------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
        Current liabilities:
             Accounts payable                                                 1,139,786
             Due to related party                                               101,400
             Accrued compensation                                               550,501
             Accrued royalties                                                  172,612
             Other accrued expenses                                             319,898
             Deposits payable                                                   342,570
             Notes and debt obligations payable within one year               1,870,420
----------------------------------------------------------------------------------------
                        Total current liabilities                             4,497,187
        8% Convertible debentures                                               300,000
        12% Convertible debentures                                              200,000
        Notes and debt obligations payable after one year                     1,503,411
        Other liabilities                                                        82,731
----------------------------------------------------------------------------------------
                        Total liabilities                                     6,583,329
----------------------------------------------------------------------------------------
        Stockholders' equity
             Common stock, $.10 par value, 30,000,000 shares authorized,
                 2,648,739 shares issued                                        264,874
             Additional paid in capital                                      22,501,576
             Accumulated deficit                                            (23,983,144)
----------------------------------------------------------------------------------------
                        Total stockholders' equity                           (1,216,694)
----------------------------------------------------------------------------------------
                        Total liabilities and stockholders' equity         $  5,366,635
----------------------------------------------------------------------------------------
</TABLE>
                 See accompanying notes to financial statements



                                        3
<PAGE>



<TABLE>
<CAPTION>
                          CARDIAC CONTROL SYSTEMS, INC.
                           STATEMENT OF OPERATIONS AND
                               ACCUMULATED DEFICIT
                                   (Unaudited)
<S>                                                       <C>               <C>               <C>               <C>          
----------------------------------------------------------------------------------------------------------------------------
                                                          Three Months Ended December 31       Nine Months Ended December 31
                                                               1998              1997              1998              1997
----------------------------------------------------------------------------------------------------------------------------
Revenue
       Net sales                                          $    795,108      $  1,011,110      $  2,180,848      $  2,904,888
       Royalty income                                                0           604,500                 0         1,900,125
                                                          ------------------------------------------------------------------
             Total revenue                                     795,108         1,615,610         2,180,848         4,805,013
                                                          ------------------------------------------------------------------

Costs and expenses
       Cost of products sold                                   451,992           590,896         1,229,811         1,742,956
       Selling, general and administrative expenses            434,781           582,913         1,358,293         1,939,038
       Engineering, research and development expenses          274,992           427,784           927,409         1,306,475
                                                          ------------------------------------------------------------------
             Total cost and expenses                         1,161,764         1,601,592         3,515,513         4,988,469
                                                          ------------------------------------------------------------------

Operating income (loss)                                       (366,656)           14,017        (1,334,665)         (183,456)
                                                          ------------------------------------------------------------------

Other income (expenses)
       Interest income                                             436             1,018             1,228             8,969
       Interest expense                                       (449,074)         (128,851)         (747,780)         (339,857)
       Other income                                                  0                 0                 0               941
                                                          ------------------------------------------------------------------
             Total other income (expenses)                    (448,638)         (127,833)         (746,552)         (329,947)
                                                          ------------------------------------------------------------------

Net income (loss)                                             (815,294)         (113,816)       (2,081,217)         (513,403)

Accumulated deficit - beginning of period                  (23,167,850)      (21,061,804)      (21,901,927)      (20,662,217)
                                                          ------------------------------------------------------------------

Accumulated deficit - end of period                       $(23,983,144)     $(21,175,620)     $(23,983,144)     $(21,175,620)
                                                          ==================================================================

Net income (loss) per common share                              ($0.31)           ($0.04)           ($0.79)           ($0.20)

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>



<TABLE>
<CAPTION>
                                                      CARDIAC CONTROL SYSTEMS, INC.
                                                         STATEMENTS OF CASH FLOWS
                                                               (Unaudited)
<S>                                                                                        <C>              <C>        
-----------------------------------------------------------------------------------------------------------------------
Nine months ended December 31,                                                                  1998             1997
-----------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities
      Net loss                                                                             $(2,081,216)       (513,403)
      Adjustments to reconcile net loss to net
        cash used for operating activities:
          Depreciation and amortization                                                        310,719         314,921
          Securities received in lieu of insurance rebate                                            0            (799)
          Stock issued for payment of directors' fees                                                0          34,000
          Cash provided by (used for):
               Accounts receivable                                                             (38,695)       (346,884)
               Inventories                                                                     379,648        (121,555)
               Prepaid expenses                                                                (21,226)         (4,696)
               Other assets                                                                       (337)           --
               Accounts payable                                                                112,367          (2,516)
               Due to related parties                                                           (5,622)           --
               Accrued interest                                                                198,802          12,477
               Accrued compensation                                                            301,278         (12,564)
               Accrued compensated absences                                                     (8,689)         13,972
               Deposits payable                                                                 (9,912)         42,180
               Other accrued expenses                                                            6,407         (56,760)
               Other liabilities                                                                12,034          14,811
                                                                                           -----------      ----------
Net cash provided by (used for) operating activities                                          (844,442)       (626,816)
                                                                                           -----------      ----------
Cash flows from investing activities;
      Purchase of property, plant and equipment                                                 (3,355)       (436,033)
      Deferred merger costs                                                                   (429,515)           --
      Increase in other assets                                                                       0          (7,870)
                                                                                           -----------      ----------
Net cash provided by (used for) investing activities                                          (432,870)       (443,903)
                                                                                           -----------      ----------
Cash flows from financing activities:
      Proceeds from issuance of common stock and stock warrants, net of issuance costs         159,833           8,928
      Currency translation adjustment                                                            3,945               0
      Proceeds from notes and debt obligations payable                                         617,443         109,293
      Repayment of notes and debt obligations payable                                          (46,324)       (193,983)
      Proceeds from issuance of 8% convertible debenture                                       300,000            --
      Proceeds from issuance of 12% convertible debenture                                      200,000            --
      Net borrowings on line of credit                                                         278,410       1,318,054
      Repayments of long term debt                                                              (2,133)         (2,885)
      Deferred financing costs                                                                 (29,566)       (310,449)
                                                                                           -----------      ----------
Net cash provided by (used for) financing activities                                         1,481,608         928,958
                                                                                           -----------      ----------
Net increase (decrease) in cash and cash equivalents                                           204,295        (141,761)
Cash and cash equivalents, beginning of year                                                    21,412         185,463
                                                                                           -----------      ----------
Cash and cash equivalents, end of period                                                   $   225,707          43,702
                                                                                           -----------      ----------
Supplemental cash flow information:
      Interest paid during the period                                                      $   268,038         239,723
Supplemental schedule of noncash investing and financing activities:
      Reduction in accrued compensation in exchange for common stock                              --            34,000
      Reduction in accounts payable 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

          These  financial  statements  have been  prepared  on a going  concern
basis,  which  contemplates  the  realization of assets and the  satisfaction of
liabilities  in the  normal  course of  business,  however  without  substantial
additional   finance  and/or  the   completion  of  the  proposed   merger  with
Electro-Catheter  Corporation,  Inc. to support  operational and working capital
requirements,  there is no  assurance  that the Company  will survive as a going
concern.

          The accompanying  balance sheet of Cardiac Control Systems,  Inc. (the
"Company") as of December 31, 1998,  the related  statements  of operations  and
accumulated deficit for the three months and nine months ended December 31, 1998
and 1997,  and the  statements of cash flows for the nine months ended  December
31, 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 December
31,  1998,  and the results of  operations  for the three months and nine months
ended  December  31, 1998 and 1997 and the cash flows for the nine months  ended
December 31, 1998 and 1997.

          Certain  reclassifications  have been made to the unaudited  financial
statements  previously  reported  for the three  months  and nine  months  ended
December  31,  1997  to  conform  with  classifications  used  in the  unaudited
financial  statements  for the three months and nine months  ended  December 31,
1998.

The accompanying  unaudited financial statements as of December 31, 1998 and for
the three months and nine months ended December 31, 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 nine months  ended  December 31, 1998 of
$2,081,217.  The  Company's  ability to continue as a going concern is dependent
upon obtaining  additional  finance to support  operational  and working capital
requirements  and/or the completion of the proposed merger with Electro-Catheter
Corporation,  Inc. and 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.


                                        6
<PAGE>



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 nine months ended  December 31, 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.

NOTE 3 - Inventories

          Inventories at December 31, 1998 are summarized as follows:

        ---------------------------------------------------------------
                                                      December 31, 1998

                                                            -----------

        Raw materials and supplies                          $   666,298
        Work-in-process                                         210,575
        Finished goods                                          204,123
                                                            -----------
                                                              1,080,997

        Reserve for obsolescence                                (36,948)
                                                            -----------
                                                            $ 1,044,049
        ---------------------------------------------------------------

Finished goods inventories include  approximately  $96,093 of products consigned
to customers and independent sales representatives at December 31, 1998.

NOTE 4 - Notes And Debt Obligations Payable

          Notes and debt  obligations  consist of the  following at December 31,
1998:

             ------------------------------------------------------
                                                  December 31, 1998

                                                         ----------
             Sirrom mortgage note, net of discount (A)   $1,493,483
             Coast Business Credit (B)                    1,291,708
             Minrad, Inc. Promissory note (C)               200,000
             International Holdings, Inc. (D)               165,000
             Greenberg Traurig Promissory Note (E)          184,000
             Bart C. Gutekunst Promissory Note (F)            6,000
             Alan J. Rabin Promissory Note (G)                4,000
             Other                                           29,640
                                                         ----------
                                                         $3,373,831
                                                         ----------
             Amount payable within one year               1,870,420
                                                         ----------
             Amount payable after one year               $1,503,411
                                                         ----------

                                        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 $6,517 at December 31, 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 was repayable on November 30, 1998,  but has
                    been extended to date.  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.

          (E)       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 

                                        9
<PAGE>

                    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. As of December
                    31, 1998,  $184,000 remained  outstanding against this note,
                    which  has  been  transferred  in  the  attached   financial
                    statements   from   accounts   payable  to  notes  and  debt
                    obligations payable within one year.

          (F)       On December 15, 1998, the Company  received  $6,000 from Mr.
                    Bart C. Gutekunst and issued a Promissory  Note in his favor
                    due and  payable  with  interest at an annual rate of 15% on
                    completion  of the  proposed  merger  with  Electro-Catheter
                    Corporation,  Inc. If the merger closing date shall not have
                    occurred by December  31, 1998,  the Note is payable  within
                    ten (10) days after written demand from the lender.

          (G)       On December 15, 1998, the Company  received  $4,000 from Mr.
                    Alan J. Rabin and issued a Promissory  Note in his favor due
                    and  payable  with  interest  at an  annual  rate  of 15% on
                    completion  of the  proposed  merger  with  Electro-Catheter
                    Corporation,  Inc. If the merger closing date shall not have
                    occurred by December  31, 1998,  the Note is payable  within
                    ten (10) days after written demand from the lender.

Aggregate notes and debt obligations  outstanding at December 31, 1998 mature as
follows: 1999 - $1,870,420; 2000 - $5,029; 2001 - $1,498,382.

NOTE 5 - 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 6 - 12% Convertible Debenture

          On  December  29,  1998,  the  Company  obtained  $200,000  in interim
financing  from  The  Von  Bulow  Corporation  through  the  issuance  of a  12%
convertible debenture, convertible to shares of stock at $0.1875 per share.

                                        10

<PAGE>


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;  which was effected on November 16, 1998, 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.

                                        11

<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  December  31,  1998,  the  Company  had  outstanding
indebtedness of approximately $1,291,708 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 $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.


                                        12

<PAGE>

          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.

          On December 15,  1998,  the Company  received  $6,000 from Mr. Bart C.
Gutekunst  and  issued a  Promissory  Note in his  favor  due and  payable  with
interest  at an annual rate of 15% on  completion  of the  proposed  merger with
Electro-Catheter  Corporation,  Inc. If the merger  closing  date shall not have
occurred by December  31, 1998,  the Note is payable  within ten (10) days after
written demand from the lender.

          On December 15,  1998,  the Company  received  $4,000 from Mr. Alan J.
Rabin and issued a Promissory Note in his favor due and payable with interest at
an annual rate of 15% on completion of the proposed merger with Electro-Catheter
Corporation, Inc. If the merger closing date shall not have occurred by December
31, 1998, the Note is payable within ten (10) days after written demand from the
lender.

          On  December  29,  1998,  the  Company  obtained  $200,000  in interim
financing  from  The  Von  Bulow  Corporation  through  the  issuance  of a  12%
convertible debenture, convertible to shares of stock at $0.1875 per share.

                                        13

<PAGE>

          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  substantial  additional
finance to support  operational  and working capital  requirements,  there is no
assurance that the Company will survive as a going concern.

          Cash used by  operations  during the first nine  months of fiscal year
1999  approximated  $844,442.   Deferred  merger  costs  utilized  approximately
$429,515.  Proceeds  of  the  8%  and  12%  convertible  debenture  approximated
$500,000;  proceeds less repayments of notes and debt obligations were $571,119,
of which $184,000 represented a net transfer from accounts payable in respect of
the  promissory  note  executed  in favor of  Greenberg,  Traurig  in the sum of
$199,000.  Overall,  positive cash flow for the first nine months of fiscal year
1999 approximated $204,295.

          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 December 31, 1998.

Results of Operations

Fiscal Quarter Ended December 31, 1998 Compared To Fiscal Quarter Ended December
31, 1997

          Overview.  The  Company's  total  revenues  for the second  quarter of
fiscal year 1999  decreased by 51% to $795,108 as compared to $1,615,610 for the
third quarter of fiscal year 1998.  Sales decreased from $1,011,110 in the third
quarter of fiscal year 1998 by 21% to  $795,108  in the third  quarter of fiscal
year 1999.  Royalty  income,  which was $604,500 in the third  quarter of fiscal
year 1998,  was zero in the third  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 third quarter of fiscal year 1999
were $439,828 lower than those incurred  during the third quarter of fiscal year
1998,  which,  combined  with the  decrease  in total  revenues,  resulted in an
operating  loss of $366,656 in the third quarter of fiscal year 1999 as compared
to operating income of $14,017 in the third quarter of fiscal year 1998.

          Sales.  Total sales  decreased from $1,011,110 in the third quarter of
fiscal year 1998 by 21% to  $795,108  in the third  quarter of fiscal year 1999.
Pacemaker unit sales decreased by 20% but pacemaker  dollar sales decreased only
by 15% due to an increased  proportion  of pacemaker  sales in the higher priced
Japanese market than in the comparative  period. The unit 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 $258,318, but this was
partially offset by an increase of $149,649 in sales of defibrillator leads. The
decline in pacing lead sales was the result of a 94% decline in units reflecting
a major 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
declined by 77%.


                                        14

<PAGE>

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

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

                  United States     $  618,663     $  800,609
                  International        176,445        210,501
                                    ==========     ==========
                                    $  795,108     $1,011,110
                                    ==========     ==========


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

                 Product Line            1999           1998
                 ------------            ----           ----

                 Pacemakers          $  296,832     $  422,230
                 Electrode Leads        461,482        588,649
                 Other                   36,794            231
                                     ==========     ==========
                                        795,108     $1,011,110
                                     ==========     ==========

          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 third quarter
of fiscal year 1999 was  $451,992,  compared to $590,896 in the third quarter of
fiscal year 1998,  representing a decrease of 24% as compared with a decrease of
21% in sales,  which  increased  the rate of gross margin from 42% to 44%.  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 $434,781 in the third quarter of fiscal year 1999,
representing a decrease of 25% from $582,913 in the third quarter of fiscal year
1998.  Selling  expenses  were $168,686 in the third quarter of fiscal year 1999
compared  to  $230,077  in the third  quarter of fiscal year 1998 as a result of
reduced  costs in respect of payroll,  commissions  and  royalties.  General and
administrative  expenses  were $266,095 in the third quarter of fiscal year 1999
compared  to $352,836 in the third  quarter of fiscal year 1998  representing  a
decrease of 25% as a result of reduced  costs in respect of  salaries,  external
services and professional fees.

          Engineering,  Research and Development Expenses. Engineering, research
and  development  costs were  $274,992 in the third quarter of fiscal year 1999,
which was a decrease of 36% from  $427,784  in the third  quarter of fiscal year
1998 due to reduced activity.

          Other Income and Expenses.  Interest  income was $436 during the third
quarter of fiscal  year 1999  compared  to $1,018  during  the third  quarter of
fiscal year 1998.  Total interest  expense  increased from $128,851 in the third
quarter of fiscal year 1998 to $449,074 in the third quarter of fiscal year 1999
due to increased  borrowings  to meet working  capital  requirements  and to the
discounts  below  market  value  allowed in respect of the  pricing of issues of
share warrants and debenture conversions required to obtain those borrowings.


                                        15

<PAGE>

Nine Months Ended  December 31, 1998 Compared To Nine Months Ended  December 31,
1997.

          Overview. The Company's total revenues for the first three quarters of
fiscal year 1999  decreased by 55% to $2,180,848  as compared to $4,805,013  for
the first three quarters of fiscal year 1998. Sales decreased from $2,904,888 in
the first three  quarters of fiscal year 1998 to  $2,180,848  in the first three
quarters of 1999.  Royalty income  decreased from  $1,295,625 in the first three
quarters of fiscal year 1998 to zero in the first three  quarters 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 three quarters of fiscal
year 1999 were  $1,472,956  lower than  those  incurred  during the first  three
quarters  of fiscal  year  1998,  which,  combined  with the  decrease  in total
revenue, resulted in an operating loss of $1,334,665 in the first three quarters
of fiscal year 1999 compared to an operating loss of $183,456 in the first three
quarters of fiscal year 1998.

          Sales. Total sales during the first three quarters of fiscal year 1999
decreased  from  $2,904,888  in the first three  quarters of fiscal year 1998 by
$724,040  or 25% to  $2,180,848.  Pacemaker  unit  sales  decreased  by 43%  and
pacemaker  dollar sales decreased by 41%. 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 $793,437,  but this was largely
offset by an increase of $569,399 in sales of  defibrillator  leads. The decline
in pacing lead sales in the  domestic  market was the result of a 77% decline in
units  reflecting  a 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.   Unit  sales  of  pacing  leads  in  the
international market fell by 41%.

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

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

                  United States     $1,733,801     $2,312,253
                  International        447,047        592,635
                                    ==========     ==========
                                    $2,180,848     $2,904,888
                                    ==========     ==========

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

                 Product Line            1999           1998
                 ------------            ----           ----

                 Pacemakers          $  841,318     $1,472,764
                 Electrode Leads      1,220,729      1,411,248
                 Other                  118,801         20,876
                                     ----------     ----------
                                     $2,180,848      2,904,888
                                     ==========     ==========

          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.

                                        16

<PAGE>

          Costs of Products  Sold.  The cost of  products  sold during the first
three quarters of fiscal year 1999 was $1,229,811  compared to $1,742,956 in the
first  three  quarters of fiscal  year 1998,  representing  a decrease of 29% as
compared to a decrease of 25% in sales, which increased the rate of gross margin
from 40% in the first  three  quarters  of fiscal  year 1998 to 44% in the first
three quarters 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  $1,358,293 in the first three  quarters of fiscal
year 1999,  representing a decrease of $580,745 or 30% from $1,939,038  incurred
in the first three quarters of fiscal year 1998. Selling expenses decreased from
$831,380 in the first  three  quarters of fiscal year 1998 by $351,146 or 42% to
$480,234 in the first three  quarters of fiscal year 1999 as a result of reduced
costs  in  respect  of  payroll,   commissions   and   royalties.   General  and
administrative expenses decreased from $1,107,658 in the first three quarters of
fiscal year 1998 by  $229,599 or 21% to $878,059 in the first three  quarters 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 $927,409  during the first three quarters of fiscal
year 1999 compared to $1,306,475  during the first three quarters of fiscal year
1998 due to reduced activity.

          Other Income and Expenses. Interest income was $1,228 during the first
three  quarters  of fiscal year 1999  compared to $8,969  during the first three
quarters of fiscal year 1998. Total interest expense  increased from $339,857 in
the first  three  quarters  of fiscal  year 1998 to  $747,780 in the first three
quarters of fiscal year 1999 due to increased borrowings to meet working capital
requirements  and to the discounts  below market value allowed in respect of the
pricing of issues of share warrants and debenture conversions required to obtain
those borrowings.

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.


                                        17

<PAGE>

          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 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
produced 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 the  Company  cannot  guarantee  that it will  continue to
supply Intermedics with products

          Source of Supply.  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

                                        18

<PAGE>

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  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

                                        19

<PAGE>

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  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 4.   Results of Votes of Security Holders

The Company held a special  meeting of stockholders on November 16, 1998 for the
purposes of:  obtaining  (1) approval of a one for five reverse stock split (the
"Reverse Split"), (2) ratification,  approval and adoption of a merger agreement
among  the  Company,  Electro-Catheter  Corporation,  a New  Jersey  corporation
("Electro"), and CCS Subsidiary, Inc., a New Jersey Corporation and wholly owned
subsidiary of the Company  (Sub),  providing for the merger of Sub into and with
Electro,  as a result of which Electro will become a wholly owned  subsidiary of
the Company, (the "Merger"), (3) approval and adoption of an agreement of merger
and plan of reorganization  among the Company,  Catheter  Technology Group, Inc.
("CTG")  and CTG Merger Sub,  Inc.,  a direct  wholly  owned  subsidiary  of CTG
("Merger  Sub"),  as a result of which the Company will become a direct,  wholly
owned subsidiary of CTG, ( the "Restructuring Merger Agreement"),  (4) authority
for the Board of Directors  to adjourn the special  meeting of  stockholders  to
permit further solicitation of proxies, if necessary  ("Adjournment") and (5) to
transact  any other  business as may  properly  come before the special  meeting
("Other  Business").  Proxies were solicited by the Company under Regulation 14A
of the Securities and Exchange  Commission's proxy rules.  Approval was given to
all  matters set before the special  meeting of  stockholders;  a summary of the
votes cast for and against each of the matters set forth in the Proxy  Statement
is set forth below.

<TABLE>
<S>                                              <C>         <C>          
   -----------------------------------------------------------------------
                                                 Votes For   Votes Against
                                                 -------------------------

   (1)   Reverse Split .......................   1,439,725          83,633
   (2)   Merger ..............................   1,467,979          55,734
   (3)   Restructuring Merger Agreement ......   1,468,061          55,691
   (4)   Adjournment .........................   1,465,042          57,296
   (5)   Other Business ......................   1,451,902          52,866
   -----------------------------------------------------------------------
</TABLE>




Item 6.    Exhibits

           Exhibits filed as part of this report are as follows:

<TABLE>
<CAPTION>
Exhibit
Number                         Description



<S>      <C>
 10.0     Promissory Note in favor of Bart C. Gutekunst dated December 15, 1998.

 10.1     Promissory Note in favor of Alan J. Rabin dated December 15, 1998

 10.2     12% Convertible Debenture in favor of Von Bulow Corporation dated December 29, 1998.

 27.0     Financial Data Schedule.
</TABLE>


                                        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: February 12, 1999             By: /s/ Alan J. Rabin
                                        -------------------------------------
                                        Alan J. Rabin, President and 
                                                       Chief Executive Officer


                                        22

<PAGE>


                                INDEX TO EXHIBITS


           Exhibits filed as part of this report are as follows:

Exhibit                                            Sequential page Number or
Number     Description                           Incorporation by Reference to
-------    -----------                           -----------------------------


 10.0      Promissory Note in favor of                  Filed herewith.
           Bart C. Gutekunst dated
           December 15, 1998

 10.1      Promissory Note in favor of                  Filed herewith.
           Alan J. Rabin dated
           December 15, 1998

 10.2      12% Convertible Debenture                    Filed herewith.
           in favor of Von Bulow Corporation
           dated December 29, 1998

 27.0      Financial Data Schedule.                     Filed herewith.



                                        23