<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 JUNE 30, 1998               COMMISSION FILE NUMBER 0-14653


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

                         _____________________________

            DELAWARE                                    74-2119162
(State or other jurisdiction of          (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 July 31, 1998, 2,648,739 shares of the Registrant's common stock, $.10 par
value, were outstanding.
<PAGE>
 
                         CARDIAC CONTROL SYSTEMS, INC.

                             INDEX TO FORM 10-QSB
                                 JUNE 30, 1998
                                                                       Page No.
-------------------------------------------------------------------------------
 
PART I.  FINANCIAL INFORMATION
 
 
     Item 1.   Financial Statements
 
               Balance Sheet at June 30, 1998 (Unaudited)..................  3
 
               Statements of Operations and Accumulated Deficit for the
                 Three Months ended June 30, 1998 (Unaudited)..............  4

               Statements of Cash Flows for the
                 Three Months ended June 30, 1998 (Unaudited)..............  5
 
               Notes to Financial Statements...............................  6
 
     Item 2.   Management's Discussion and Analysis of Financial Position
               and Results of Operations................................... 10
 
PART II.  OTHER INFORMATION................................................ 18

     Item 5.   Other Information........................................... 18
 
     Item 6.   Exhibits and Reports on Form 8-K............................ 18

SIGNATURES................................................................. 19

                                       2
<PAGE>
 
PART I.  FINANCIAL INFORMATION

                                        
Item 1.  Financial Statements

                                        
                         CARDIAC CONTROL SYSTEMS, INC.
                                 BALANCE SHEET
                                  (Unaudited)


<TABLE>
<CAPTION>
                                                                                JUNE 30,
                                                                                  1998
----------------------------------------------------------------------------------------
ASSETS                                                                        (Unaudited)
      CURRENT ASSETS:
<S>                                                                            <C>
           Cash and cash equivalents.......................................       33,527
           Accounts and notes receivable...................................      560,529
           Inventories.....................................................    1,396,572
           Prepaid expenses................................................      254,710
----------------------------------------------------------------------------------------
                     TOTAL CURRENT ASSETS..................................    2,245,338
----------------------------------------------------------------------------------------
      PROPERTY, PLANT AND EQUIPMENT (NET)..................................    1,918,680
----------------------------------------------------------------------------------------
      OTHER ASSETS:
 
           Deferred financing costs, less accumulated
              amortization of $272,177.....................................      426,270
           Deferred license fees, less accumulated
               amortization of $53,333.....................................      146,667
           Deferred merger costs...........................................      427,372
           Other...........................................................       80,010
----------------------------------------------------------------------------------------
                     TOTAL OTHER ASSETS....................................    1,080,319
----------------------------------------------------------------------------------------
                     TOTAL ASSETS..........................................  $ 5,244,337
----------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
      CURRENT LIABILITIES:
           Accounts payable................................................  $ 1,160,095
           Due to related party............................................      102,522
           Accrued compensation............................................      308,874
           Accrued royalties...............................................      210,111
           Other accrued expenses..........................................       74,285
           Deposits payable................................................      352,481
           Notes and debt obligations payable within one year..............    1,112,862
----------------------------------------------------------------------------------------
                     TOTAL CURRENT LIABILITIES.............................    3,321,230
      8% CONVERTIBLE DEBENTURES............................................      300,000
      NOTES AND DEBT OBLIGATIONS PAYABLE AFTER ONE YEAR....................    1,503,038
      OTHER LIABILITIES....................................................       84,622
----------------------------------------------------------------------------------------
                     TOTAL LIABILITIES.....................................    5,208,890
----------------------------------------------------------------------------------------
      STOCKHOLDERS' EQUITY
           Common stock, $.10 par value, 30,000,000 shares authorized,
                2,648,739 shares issued...................................       264,874
           Additional paid in capital.....................................    22,337,797
           Accumulated deficit............................................   (22,567,224) 
----------------------------------------------------------------------------------------
                     TOTAL STOCKHOLDERS' EQUITY...........................        35,447
----------------------------------------------------------------------------------------
                     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY...........   $ 5,244,337
----------------------------------------------------------------------------------------
                See accompanying notes to financial statements
</TABLE>

                                       3
<PAGE>
 
                         CARDIAC CONTROL SYSTEMS, INC.
                           STATEMENTS OF OPERATIONS
                            AND ACCUMULATED DEFICIT
                                  (Unaudited)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------ 
                                                                            Three Months Ended June 30
                                                                               1998              1997
------------------------------------------------------------------------------------------------------
<S>                                                                        <C>               <C>  
REVENUE
      Net sales.....................................................       $ 620,777         $ 852,288
      Royalty income................................................               0           697,125
                                                                       -------------------------------
            Total revenue...........................................         620,777         1,549,413
                                                                       -------------------------------
COSTS AND EXPENSES                                                     
      Cost of products sold.........................................         326,090           503,815
      Selling, general and administrative expenses..................         469,091           743,072
      Engineering, research and development expenses................         334,915           458,272
                                                                       -------------------------------
            Total cost and expenses.................................       1,130,096         1,705,159
                                                                       -------------------------------
OPERATING INCOME (LOSS).............................................        (509,319)         (155,746)
                                                                       -------------------------------
OTHER INCOME (EXPENSES)                                                
      Interest income...............................................             317             5,983
      Interest expense..............................................        (156,295)          (82,586)
      Other income..................................................                                                          
                                                                       -------------------------------
            Total other income (expenses)...........................        (155,978)          (76,602)
                                                                       -------------------------------
NET INCOME (LOSS)...................................................        (665,297)         (232,348)

ACCUMULATED DEFICIT - BEGINNING OF PERIOD...........................     (21,901,927)      (20,662,217)
                                                                       -------------------------------
ACCUMULATED DEFICIT - END OF PERIOD.................................   $ (22,567,224)    $ (20,894,565)   
                                                                       ===============================
NET INCOME (LOSS) PER COMMON SHARE..................................          $(0.25)           $(0.09)

AVERAGE NUMBER OF SHARES OUTSTANDING................................       2,648,739         2,619,371

                See accompanying notes to financial statements
</TABLE> 

                                       4
<PAGE>
 
                         CARDIAC CONTROL SYSTEMS, INC.
                           STATEMENTS OF CASH FLOWS
                                  (Unaudited)
<TABLE> 
<CAPTION> 
-------------------------------------------------------------------------------------------------------------
Three months ended June 30,                                                        1998                1997
-------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>                  <C> 
Cash flows from operating activities
     Net loss                                                               $     (665,297)    $    (232,348)
     Adjustments to reconcile net loss to net
     cash used for operating activities:
         Depreciation and amortization                                             114,263           104,579
         Gain (loss) on fixed asset disposals                                            -              (671)
         Cash provided by (used for):
             Accounts receivable                                                   113,143          (273,180)
             Inventories                                                            27,124          (118,157)
             Prepaid expenses                                                      (47,147)         (158,281)
             Other assets                                                           (2,026)                -
             Accounts payable                                                      132,677          (199,755)
             Due to related parties                                                 (4,500)                -
             Accrued interest                                                        3,054                 -
             Accrued compensation                                                   50,356            36,253
             Accrued compensated absences                                              606            22,694
             Deposits payable                                                            -           184,011
             Other accrued expenses                                                  6,736            (7,359)
             Other liabilities                                                       1,230            15,456
                                                                            --------------------------------
Net cash provided by (used for) operating activities                              (269,781)         (626,758)
                                                                            --------------------------------
Cash flows from investing activities;
     Purchase of property, plant and equipment                                      (1,180)         (186,640)
     Deferred merger costs                                                        (106,922)                -
     Proceeds from sale of equipment                                                     -             4,260
     Increase in other assets                                                            -            (2,600)
                                                                            --------------------------------
Net cash provided by (used for) investing activities                              (108,102)         (184,980)
                                                                            --------------------------------
Cash flows from financing activities:
     Proceeds from notes and debt obligations payable                                    -
     Repayment of notes and debt obligations payable                                     -          (193,983)
     Proceeds from issuance of 8% convertible debenture                            300,000                 -
     Net borrowings on line of credit                                               56,225         1,138,359
     Proceeds from short term debt                                                  35,745                 -
     Repayments of long term debt                                                   (1,973)           (1,534)
     Debt issuance costs                                                                 -          (165,288)
                                                                            --------------------------------
Net cash provided by (used for) financing activities                               389,998           777,554
                                                                            --------------------------------
Net increase (decrease) in cash and cash equivalents                                12,115           (34,184)
Cash and cash equivalents, beginning of year                                        21,412           185,463
                                                                            --------------------------------
Cash and cash equivalents, end of period                                    $       33,527    $      151,279
                                                                            =================================
Supplemental cash flow information:
     Interest paid during the period                                        $      109,344    $       57,071

                See accompanying notes to financial statements
</TABLE> 

                                       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 June 30, 1998, the related statements of operations and accumulated
deficit for the three months ended June 30, 1998 and 1997, and the statements of
cash flows for the three months ended June 30, 1998 and 1997 are unaudited. In
the opinion of management, such financial statements reflect all adjustments,
consisting only of normal recurring items, necessary to present fairly the
financial position of the Company at June 30, 1998, and the results of
operations and the cash flows for the three months ended June 30, 1998. 

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

The accompanying unaudited financial statements as of June 30, 1998 and for the
three months ended June 30, 1998 and 1997 should be read in conjunction with the
Company's audited financial statements for the year ended March 31, 1998.

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 three months ended June 30, 1998 of $665,297.
The Company's ability to continue as a going concern is dependent upon the
consummation of the proposed merger with Electro-Catheter Corporation (see Note
6 below) 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.

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 ended June 30, 1998 and 1997, as their effect on
the loss per share is anti-dilutive.

                                       6
<PAGE>
 
NOTE 3 - Inventories

Inventories at June 30, 1998 are summarized as follows:

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

                                                          June 30, 1998
                                                          -------------
                                                            (unaudited)

Raw materials and supplies............................    $     812,251
Work-in-process.......................................          341,668
Finished goods........................................          279,601
                                                          -------------
                                                              1,433,520
Reserve for obsolescence..............................           36,948
                                                          -------------
                                                          $   1,396,572
-----------------------------------------------------------------------

Finished goods inventories include approximately $135,427 of products consigned
to customers and independent sales representatives at June 30, 1998.

NOTE 4 - Notes and Debt Obligations Payable

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

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

                                                                  June 30, 1998
                                                                  -------------

Sirrom mortgage note, net of discount (A)........................ $   1,492,950
Coast Business Credit (B)........................................     1,069,523
Other............................................................        53,427
                                                                  -------------
                                                                      2,615,900
Amount payable within one year...................................     1,112,862
                                                                  -------------
Amount payable after one year.................................... $   1,503,038
-------------------------------------------------------------------------------

(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 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 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 1995, $71,376 (50,000

                                       7
<PAGE>
 
         shares) in fiscal 1997 and $19,550 (50,000 shares) in fiscal 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 $7,050 at June 30, 1998.

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

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

         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 repayable on August 31,
         1998. The interest rate on the Bridge Loan is equal to prime rate plus
         5% per annum, calculated on the basis of a 360-day year for the actual
         number of days elapsed. The exercise price of the warrants to purchase
         37,500 shares of stock granted under the Agreement dated June 13, 1997
         was reduced from $4.00 to $0.40 and, in addition, CBC was granted
         warrants to purchase 25,000 shares of stock at $0.40, expiring June 30,
         2002.

Aggregate notes and debt obligations outstanding at June 30, 1998 mature as
follows: 1999 - $1,112,862; 2000 - $4,153; 2001 - $1,497,251; 002 - $1,634.


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 an 8% convertible debenture, 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's 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's 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 

                                       8
<PAGE>
 
the Company's common stock Company's common stock at $5.00 was reduced to $0.40.
The Company is attempting to obtain an additional $250,000 on similar terms.


NOTE 6 - Probable Merger On October 27, 1997, the Company entered into a letter
of intent with Electro Catheter Corporation, Inc (Electro), a New Jersey
corporation, 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 reorganize into a holding company structure, implemented in
accordance with Section 251 (g) of the General Corporation Law of the State of
Delaware, whereby the Company will become a direct wholly-owned subsidiary of
Catheter Technology Group, Inc., a Delaware corporation and a holding company
("CTG"). CTG will succeed to all rights and obligations of the Company and the
stockholders of the Company will become stockholders of CTG and will continue to
hold their shares of common stock without any change in number, designation,
terms or rights. The structure of the transaction contemplates that upon
effectiveness of the Merger, holders of Electro's common stock, $.10 par value
per share ("Electro Common Stock"), will receive one-fifth of a share of common
stock, $.10 par value, of CTG for each share of Electro Common Stock held. No
fractional shares will be issued in the Merger. 

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

                                       9
<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.

Liquidity and Capital Resources

         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 (the "Debenture"), convertible into shares of Company
Common Stock at $0.40 per share. Two of the Debenture holders, Mr. George
Holbrook and Mr. A. Bruce Brackenridge, are also holders of an option and
warrants. In addition to receiving the Debenture, these two individuals also
received a reduction in the exercise prices of their warrants and options. The
exercise price of the option controlled by Mr. Holbrook to purchase 3,571 shares
of 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 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 Company Common Stock
at $5.00 was reduced to $0.40. The Company is attempting to obtain an additional
$250,000 on similar terms.

         On June 11, 1998, the Company and Coast executed an amendment to the
original Coast Loan Agreement whereby Coast agreed to advance the Company a
further bridge loan in the sum of $250,000 (the "Bridge Loan") due and payable
on August 31, 1998. The interest rate on the Bridge Loan is equal to the 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 warrant to purchase 37,500
shares of Company Common Stock granted under the Coast Loan Agreement dated June
13, 1997 was reduced from $4.00 to $0.40 and, in addition, Coast was granted a
warrant to purchase 25,000 shares of Company Common Stock at an exercise price
of $0.40, expiring June 30, 2002.

         Cash used by operations during the first quarter of fiscal 1998 was
$269,781. Capital expenditures, repayment of long term debt and deferred merger
costs additionally utilized $1,180, $1,972 and $106,922, respectively. Proceeds
of debenture financing and short term borrowings were $300,000 and $35,745,
respectively, and net borrowings on the Line of Credit 

                                       10
<PAGE>
 
with Coast were $56,225. Overall, positive cash flow for the first quarter of
fiscal 1998 was $12,115.

         As of June 30, 1998, the Company had no commitments for the acquisition
of capital assets. It had material commitments pursuant to certain inventory
procurement contracts of $859,397 at June 30, 1998.

Results of Operations

Fiscal Quarter Ended June 30, 1998 Compared To Fiscal Quarter Ended June 30,
1997.

         Overview. The Company's total revenues for the first quarter of fiscal
1999 decreased 60% to approximately $621,000 from approximately $1.5 million for
the first quarter of fiscal 1998. Sales decreased from approximately $852,000 to
approximately $621,00 and royalties decreased from approximately $697,000 to
zero. Royalty income represented 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.

         Costs and expenses in the first quarter of fiscal 1999 decreased 32% to
approximately $1.13 million from approximately $1.71 million in the first
quarter of fiscal 1998, which, with the decrease in total revenues, resulted in
an Operating Loss of $509,319 in the first quarter of fiscal 1999 as compared to
an Operating Loss of $155,746 in the first quarter of fiscal 1998. Interest
expense in the first quarter of fiscal 1999 increased to $156,295 from $82,585
in the first quarter of fiscal 1998. The pretax loss in the first quarter of
fiscal 1999 increased to $665,297 from $232,348 in the first quarter of fiscal
1998.

         Sales. Total Sales in the first quarter of fiscal 1999 decreased by
$257,340 or 27% to $620,777 from the level of $852,288 achieved in the first
quarter of fiscal 1998. Pacemaker unit sales decreased by 49% and pacemaker
dollar sales decreased by 46%. Sales of pacing electrode leads decreased by
$208,230, which was largely offset by sales of $166,625 for the Company's newly
introduced defibrillation electrode leads to a new original equipment
manufacturer ("OEM") customer. Penetration of the Japanese market has, so far,
been below expectations, but management believes that the long-term potential of
the Japanese and Asian markets and the more effective marketing and distribution
process intended to result from the proposed Merger warrant further perseverance
in this area.

         Sales by geographic area for the first quarters of fiscal years 1999
and 1998 are as follows:

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

                    United States                $565,321   $781,009

                    International                 $55,456    $71,279
                                                 --------   --------
                                                 $620,777   $852,288
                                                 ========   ========


 

                                       11
<PAGE>
 
         Sales by product line for the first quarters of fiscal years 1999 and
1998 are as follows:

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

                        Pacemakers              $244,062    $449,512

                        Electrode Leads         $344,024    $385,629

                        Other                    $32,691     $17,147
                                                --------    --------
                                                $620,777    $852,288
                                                ========    ======== 


         Royalty Income. Royalty Income represented 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.

         Cost of Products Sold. Cost of products sold in the first quarter of
fiscal 1999 was $326,090, compared to $503,815 in the first quarter of fiscal
1998, representing a decrease of 35% as compared with a sales decrease of 27%,
which improved the rate of gross margin from 41% to 47%. This improvement was
largely due to improved overall selling prices in both the domestic and the
international markets and manufacturing efficiencies.

         Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $469,091 in the first quarter of fiscal 1999,
representing a decrease of 37% from $743,072 in the first quarter of fiscal
1998. Selling expenses were $158,770 in the first quarter of fiscal 1999
compared to $346,377 in the first quarter of fiscal 1998, representing a
decrease of 54%, largely due to a decrease of $137,764 in volume dependent sales
commissions and royalty expenses. General and administrative expenses were
$310,321 in the first quarter of fiscal 1999 compared to $396,695 in the first
quarter of fiscal 1998 representing an decrease of 22% due largely to reduced
employment costs.

         Engineering, Research and Development Expenses. Engineering, research
and development expenses were $334,915 in the first quarter of fiscal 1999,
representing a reduction of 27% from the level of $458,272 in the first quarter
of fiscal 1998 due to reduced activity and employment costs.

         Other Income and Expenses. Interest income was $317 in the first
quarter of fiscal 1999, compared to $5,983 in the first quarter of fiscal 1998.
Total interest expense in the first quarter of fiscal 1999 increased to $156,295
from the level of $82,585 incurred during the first quarter of fiscal 1998, due
largely to additional interest arising the first quarter of fiscal 1999 on the
Coast Loan.

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 Standordigation
("ISO") in order to provide simplified trade among the member nations and to
assure free access to trade while maintaining 

                                       12
<PAGE>
 
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 1996 for 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. The Company is developing design control processes in
preparation for a compliance audit to ISO 9001.

         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
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 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 Intermedics and
other pacemaker manufacturers will depend on the Company's ability to supply
product and recruit and increase 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 for and sale of leads to
Intermedics produces income for the Company. The Company sells electrode leads
to Intermedics for its new systems under an amended and restated supply
agreement that expires on August 1, 1998.

         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 

                                       13
<PAGE>
 
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 existing or new leads for the next few years without a supply agreement on
the same or similar terms and conditions that the Company sells to other similar
customers. However, in the event Intermedics receives FDA approval in a shorter
time-frame than anticipated, or other events occur which causes a decrease in
Intermedics' orders, the Company's business and operating results would be
adversely affected.

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

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

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

         Probable Merger. On October 27, 1997, the Company entered into a letter
of intent with Electro-Catheter Corporation, a New Jersey corporation
("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.

                                       14
<PAGE>
 
         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. Concurrently with the Reverse Split, and prior
to consummation of the Merger, the Company will reorganize into a holding
company structure (the "Restructuring"), implemented in accordance with Section
251 (g) of the General Corporation Law of the State of Delaware, whereby the
Company will become a direct, wholly-owned subsidiary of Catheter Technology
Group, Inc., a Delaware corporation ("CTG"). CTG will succeed to all rights and
obligations of the Company and 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 1,878,000 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;
(ii) the combination of the current business operations and management of the
Company and Electro; and (iii) the creation of a corporate structure, as a
result of the Restructuring, which will facilitate the possible future
acquisitions of or mergers with other companies with complimentary products
which could be manufactured or sold through CTG.

         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 two digits to
identify a year in the date field. These programs were designed and developed
without considering the impact of the upcoming change in the year 2000. Some
older computer systems stored dates with only a two-digit year 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 "Year 2000 Issue").

                                       15
<PAGE>
 
         The Company has undertaken to review the potential impact of the Year
2000 Issue. Such assessment has included a review of the impact of the issue in
primarily four areas: products, manufacturing systems, business systems and
miscellaneous/ other areas. Based on the results of its initial review, the
Company does not anticipate that the Year 2000 Issue will impact operations or
operating results. The Company is in the process of testing its systems which
may be affected by the Year 2000 Issue and estimates that all affected systems
can be tested, upgraded and replaced before they cause any operational problems.
This upgrading is estimated to take less than four man-months of effort. In
order to insure Year 2000 compliance, the Company has created a task force to
periodically review their areas of concern. This task force is to meet on a
quarterly basis through the middle of year 2000. Management believes that the
incremental costs associated with achieving Year 2000 compliance will not be
material to the Company's operating results.

         The Company relies on its customers, suppliers, utility service
providers, financial institutions and other partners in order to continue normal
business operations. At this time, it is impossible to assess the impact of the
Year 2000 Issue on each of these organizations. There can be no guarantee that
the systems of other unrelated entities on which the Company relies will be
corrected on a timely basis and will not have a material adverse effect on the
Company. The Company's task force has identified the other organizations which
are critical to the Company's continued operations. The Company intends to
survey these organizations to determine the impact of the Year 2000 on their
operations and their plans for addressing any potential concerns. The Company
expects that this assessment will be completed in the fourth 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 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 FASB issued SFAS No. 130, "Reporting Comprehensive
Income" ("SFAS 130") and No. 131, "Disclosure about Segments of an Enterprise
and Related Information" ("SFAS 131"). SFAS 130 establishes standards for
reporting and displaying comprehensive income, its components and accumulated
balances. SFAS 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 SFAS 130 and SFAS 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 Financial Accounting Standards Board issued SFAS 133
Accounting for Derivative Instruments and Hedging Activities. SFAS 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 

                                       16
<PAGE>
 
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. SFAS 133 is effective for all
fiscal quarters of fiscal 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.

                                       17
<PAGE>
 
PART II.  OTHER INFORMATION


Item 5.  Other Information

         In order to amend certain provisions of the 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, the Company, Electro and
Sub executed a Second Amendment to Agreement and Plan of Reorganization dated
August 7, 1998 (the "Amendment"). The Amendment provides, among other things,
that: (i) the Company will effectuate the Reverse Split prior to consummation of
the Merger and as a consequence, the holders of Electro Common Stock will
receive one-fifth of a share of CTG Common Stock; (ii) an additional condition
to the consummation of the Merger is that the affirmative vote of the holders of
a majority of the shares of the Company Common Stock present in person or
represented by proxy and entitled to vote at a special meeting of the
stockholders of the Company shall have approved the Reversed Split and the
Restructuring, and approved and adopted the Merger Agreement; (iii) the
condition that the ratio of the closing bid price of a share of Company Common
Stock to a share of Electro Common Stock shall not be greater than 2.00 nor less
than .50 was deleted; and (iv) the date by which the Merger Agreement may be
terminated by any party if the conditions to the consummation of the Merger are
not met was extended to October 31, 1998. The Company still plans to consummate
the merger after the occurrence of all conditions precedent.


Item 6.  Exhibits and Reports on Form 8-K

         (a)    Exhibits filed in Part II of this report are as follows:
              
                2.0    First Amendment to Agreement and Plan of Reorganization
                       dated May 5, 1998.
                      
                4.0    8% Convertible Debenture due April 24, 2003.
                      
                10.0   Amendment to Loan Documents and Secured Promissory Note
                       between the Company and Coast Business Credit.
                      
                27.0   Financial Data Schedule.
              
         (b)    Reports on Form 8-K

                  A First Amendment to Agreement and Plan of Reorganization
between the Company, Electro, and Sub was executed on May 5th, 1998, and such
event was reported on Form 8-K on May 21, 1998.

                                       18
<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:    August 13, 1998            By: /s/ Alan J. Rabin
                                       ---------------------------------------
                                       Alan J. Rabin, President and 
                                       Chief Executive Officer

                                       19
<PAGE>
 
                               INDEX TO EXHIBITS

Exhibits
--------

2.0               First Amendment to Agreement and Plan of Reorganization dated
                  May 5, 1998.

4.0               8% Convertible Debenture due April 24, 2003.

10.0              Amendment to Loan Documents and Secured Promissory Note
                  between the Company and Coast Business Credit.

27.0              Financial Data Schedule.

                                       20